Why choose this strategy?
- Reduce volatility and downside risk within a diversified portfolio by replacing a portion of the existing equity allocation.
- Gain equity exposure for risk-averse investors seeking higher long-term return potential than that offered by bond investments.
- As a complement to plan immunization/liability matching.
Investment strategy
- A low volatility equity strategy that uses an index options-based approach with the goals of reducing the volatility of long-only equity exposure and enhancing risk-adjusted return.
- Actively manage a portfolio of written index put options to monetize volatility.
- Portfolio of written index put options is secured with a portfolio of short-term, high quality cash securities.
- Index option contracts can provide risk reduction and risk-adjusted return enhancement from exposure to the implied volatility risk premium (the volatility priced into index option contracts is consistently overpriced relative to realized volatility).
