structurALPHA® Global Hedged PLUS

a globally allocated, broadly diversified, balanced and hedged portfolio

Inception: September 30th, 2011

Strategy Description

The structurALPHA® Global Hedged PLUS strategy is a globally diversified and hedged managed ETF portfolio consisting of four separate, single-market, hedged-equity strategies, PLUS a diverse global allocation to traditional long-only exposures for additional risk management and market participation, with a strong emphasis on valuation discipline. Underlying long positions are whole-market ETFs, and approximately half (by weight) of the global equity portfolio holdings are hedged by short one-month at-the-money call options. The short hedges are rolled at or before expiration to the next month. The underlying long index exposures and the short option hedges are maintained at all times, regardless of market action or volatility environment, with no tactical adjustments. Re-balancing is strategic.


Objective

The structurALPHA® Global Hedged PLUS strategy is to help investors meet their objectives with greater certainty and less risk through the superior return and risk characteristics of this globally diversified and hedged portfolio.


Suitability

The structurALPHA® Global Hedged PLUS strategy is suitable for investors who seek a globally diversified and hedged portfolio with superior structural return and risk characteristics. Also suitable for investors who wish to retain equity exposure with significantly reduced risk. It is also suitable for investors seeking to enhance portfolio returns—especially in low-return environments—through the cash premium captured by the methodical sale of the option hedge. It is a perfect alternative for investors who seek to include hedged or risk-modified exposures in their asset mix, and prefer them in a low-cost, transparent and liquid vehicle.


Rationale

The structurALPHA® Global Hedged PLUS strategy is the logical extension of the structurALPHA® single and multi-market hedged equity strategies. It combines the structurALPHA® Global Hedged strategy with a full global allocation to traditional long-only market exposures: equities, fixed income and real estate.

The result is a broadly diversified, globally allocated, balanced and hedged portfolio. Including our rules-based hedged strategies within a global allocation increases diversification and portfolio efficiency, as well as conferring their intrinsic and structural return ehnancing, risk mitigating and positive market capture asymmetry characteristics.

Occupying the sweet-spot on the risk-return efficient frontier, the structurALPHA® Global Hedged PLUS strategy is a robust, multi-asset, multi-risk (hedged & long-only), globally allocated portfolio delivering superior characteristics and risk-adjusted returns (Alpha). As a rules-based strategy, these characteristics are a function of portfolio structure, not frequent trading and active management activities.

The strategy is appropriate for private and institutional investors seeking enhanced returns and managed risk from broad diversification, positive market capture asymmetry, global market and rules-based hedged exposures in a single low-cost, liquid and transparent portfolio.


From the Portfolio Manager:

Preempting the SPY ex-Div

Rolled the short September 243 call options a day early to preempt getting called away as the SYP goes ex-dividend tomorrow (9/15). We closed the short September calls and re-established a short position at the October 250 strike. Volatility and option premium are at historic low levels...still, we follow the strategy protocols and sell the option hedge regardless of volatility levels. For reference, the first striking price our Large Cap Buy-Write strategy sold in July of 2010 was 109.

Thomas F. McKeon, CFA | 2017-09-14

Raising Cash for SEP Expiration

Raised a little cash in selected accounts today to make sure there is enough cash to roll the hedges this coming Friday at the September option expiration. The market has rallied strongly since the August expiration and all of our underlying hedged exposures are well in-the-money. As such, we will be spending money to close the short option positions and collecting a little bit less as we re-establish a hedge on the October expiration. Also, the StateStreet S&P 500 ETF (SPY) goes ex-dividend this expiration Friday and our protocol is to roll the hedge a day early in order not to get called away, when our short option hedges are in-the-money. That way, our portfolios get to collect the healthy SPY quarterly dividend. An added bonus is that covering the hedges at a loss creates short-term losses....this can be useful at tax time.

Thomas F. McKeon, CFA | 2017-09-12

Buying Straw Hats

Owing to the wide divergence in performance relative to several factors, we have and will continue to trim portfolio exposures based on momentum factors and add to exposures based on dividend yield in the U.S. equity markets. Yield-based equity exposures in the U.S. have lagged momentum exposures by roughly 1,800 basis points (18%) over the past twelve months. You may have seen some activity in your portfolio already. Discipline, logic and relative valuations drive this basic re-balancing action.

Thomas F. McKeon, CFA | 2017-09-08

Welcome to PM Insights

Here we will be sharing our thoughts and insights on recent market action and any portfolio activity we have taken across our suite of strategies or particular to this strategy. Topics will include: valuations, allocation tilts, volatility, premium captured at the monthly hedge roll and anything else the portfolio manager feels is relevant.

Thomas F. McKeon, CFA | 2017-09-05

Investment Performance

Performance through: August 31, 2017

Trailing Returns: Period structurALPHA Global Hedged PLUS MSCI ACWI AGG Bond Global
Hedge Fund
Year to Date 8.52 15.48 3.64 3.81
One Month 0.63 0.43 0.90 0.29
Three Month 2.48 3.79 1.23 1.44
Six Month 5.48 9.27 2.75 2.15
One Year 8.10 17.75 0.50 5.59
Two Year 17.54 27.01 6.53 3.57
Two Year (Ann.) 8.42 12.70 3.21 1.77
Three Year 13.54 19.65 8.18 -0.02
Three Year (Ann.) 4.32 6.16 2.66 -0.01
Four Year 29.08 45.50 14.30 5.32
Four Year (Ann.) 6.59 9.83 3.40 1.30
Five Year 32.92 68.94 11.49 10.09
Five Year (Ann.) 5.86 11.06 2.20 1.94
Inception 54.31 99.19 17.09 12.08
Inception (Ann.) 7.61 12.35 2.70 1.95

Inception: September 30th, 2011

 

Annual Returns structurALPHA Global Hedged PLUS MSCI ACWI AGG Bond Global
Hedge Fund
2016 6.93 8.49 2.66 2.50
2015 -1.10 -1.84 0.57 -3.64
2014 4.55 4.71 5.96 -0.58
2013 10.11 23.44 -2.02 6.72
2012 7.27 16.80 4.23 3.51

 

All performance figures are percents. Performance composites and calculations are Global Investment Performance Standards (GIPS) compliant results from actual client accounts. Performance figures are net of CSCM maximum annual fee and all transaction costs. Past performance does not guarantee future returns. All investments involve risk. The use of options in a portfolio may not be suitable for all investors.

 

Top Twenty Holdings

As of: August 31, 2017

Ticker Security Risk Weight
SPY SPDR S&P 500 hedged 9.84%
EEM iShares MSCI Emerging Markets hedged 8.42%
EFA iShares MSCI EAFE hedged 6.45%
VTEB Vanguard Tax-Exempt Bond long-only 5.71%
MUB iShares National AMT-Free Muni Bond long-only 5.03%
HYD Market Vectors High-Yield Municipal Index long-only 4.61%
IWM iShares Russell 2000 hedged 4.33%
PFF iShares US Preferred Stock long-only 3.78%
SHYD Market Vectors Short High-Yield Municipal long-only 3.39%
VWOB Vanguard Emerging Mkts Govt Bond long-only 3.24%
JNK SPDR Barclays High Yield Bond long-only 2.95%
VYMI Vanguard International High Dividend Yield long-only 2.72%
HYMB SPDR Nuveen S&P High Yield Municipal Bond long-only 2.62%
VNQI Vanguard Global ex-US Real Estate long-only 2.41%
VEA Vanguard FTSE Developed Markets long-only 2.08%
EMB iShares J.P. Morgan USD Emerging Markets Bond long-only 2.02%
SPYD SPDR S&P 500 High Dividend long-only 2.00%
VWO Vanguard FTSE Emerging Markets long-only 1.83%
EDIV SPDR S&P Emerging Markets Dividend long-only 1.81%
HDV iShares Core High Dividend long-only 1.72%
    Top Twenty Total 76.95%

 

Risk: Hedged refers to a market exposure combining a long exposure hedged with a short, one-month, at-the-money call option, known as a buy-write or covered call. Long-only refers to traditional long market exposures.