Conservative Indexed Risk Control™

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A New Approach to Conservative Allocation

The Conservative Indexed Risk Control™ strategy has a primary objective of capital preservation with a secondary objective of capital appreciation. Unlike traditional stock/bond allocation funds, it achieves these objectives using an investment-grade fixed income core with a long-only call options overlay. Backtested over a 28-year period, highlights include:

  • Annualized Total Return: 7.17%
    1yr: 11.2%, 3yr: 8.3%, 5yr: 5.1%, 10yr: 6.7%
  • Best Year: 34.58%
  • Worst Year: -2.49%
  • Note: Backtest reviewed and verified by an independent 3rd party auditor through 6/30/2019. Results 7/1/2019 onward pending verification.

Figure 1: Hypothetical Growth of $10MM Since 1991

Hypothetical Growth of $10MM Since 1991


Figure 2: Hypothetical Yearly Performance, 1992 – 2005

Hypothetical Yearly Performance
* Note: The benchmark SPTGCUT Index did not exist prior to 2001.

Figure 3: Hypothetical Yearly Performance, 2006 – 2020

Hypothetical Yearly Performance


Actual Strategy Performance

Actual strategy performance started at strategy inception on January 28th, 2020 with a baseline NAV of $10.00. Comparisons to S&P Target Risk Conservative Index and S&P 500 Index are facilitated by setting a NAV for $10.00 each on 1/28/2020.

Figure 4: Actual Strategy Performance, January 28th 2020 to Present

Actual Strategy Performance, January 28th 2020 to Present


Figure 5: Actual Strategy Performance Summary, January 28th 2020 to Present

Actual Strategy Performance Summary, January 28th 2020 to Present


Indexed Risk Control™: A New Asset Class for Retirement Savers

Many conservative allocation funds and near-dated target date funds contain between 30% and 60% equity exposure. This means that despite the “conservative” label, these funds can be susceptible to double-digit losses in market downturns. To solve this problem, we’ve invented a new asset class called Indexed Risk Control™, which brings the sophistication of structured products into a daily-liquid strategy. Instead of holding 30% to 60% of equities directly, our strategy is made up of more than 90% investment grade fixed income to preserve capital in down markets. We then seek to achieve upside growth through the use of a long-only call options overlay linked to the S&P 500 index. Strategy features include:

  • A structured product approach with daily liquidity
  • Seeking downside protection via an investment grade fixed income core
  • Seeking upside potential via a long-only S&P 500 call option overlay
  • Eligible investors include: 401(k), 403(b)(9), 457(b), Defined Benefit, Profit Sharing, Taft-Hartley, State Municipal or Government, Money Purchase Plans, Cash Balance Plans

Strategy Details

The fund invests in fixed income securities and call options on the S&P 500™ Index and/or its member constituents. The fixed income assets of the fund may invest in investment grade fixed income securities including US Treasury and agency bonds, corporate bonds, mortgage-backed securities, commercial mortgage-backed securities, and asset-backed securities. The Fund is expected to maintain a dollar-weighted average duration of under 6 years. The fixed income core accounts for the majority of assets in the portfolio, with a maximum target allocation of 97.5% to fixed income assets in the portfolio. The fund utilizes an option overlay to provide exposure to positive returns in US Large Cap equities while establishing a known level of maximum downside risk exposure. The Investment Manager applies its proprietary risk management algorithms to achieve the dual objectives of: 1) minimizing the contribution to the Fund’s aggregate level of downside risk from the options overlay portfolio, and 2) maximizing the fund’s participation in future positive returns of the S&P 500™ Index.


Hypothetical Backtest Disclaimers

The performance results shown reflect hypothetical, back-tested results that were achieved by means of the retroactive application of a back-tested portfolio and, as such, the corresponding results have inherent limitations, including: 1) results do not reflect actual trading using investor assets, 2) certain portfolio aspects may have been designed with the benefit of hindsight, 3) back-tested performance may not reflect the impact of any material market or economic factors, and 4) investors may have experienced investment results during the corresponding time periods that were materially different from those portrayed in the hypothetical portfolio. The performance shown is net of a 75 basis point fee. The hypothetical back-tested period ranges from December 19, 1991 through January 29, 2020. Results of the backtest through 6/30/2019 have been independently verified by a third-party auditor. Any subsequent results are preliminary and will be independently verified and are subject to change. S&P 500 returns do not include dividend reinvestment. S&P CAGR over same time period is 7.72%, with a best year of 34.11% and a worst year of –38.49%.

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