A New Approach to Moderate Allocation Objectives

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

  • Annualized Total Return: 8.40%
    1yr: 11.52%, 3yr: 8.54%, 5yr: 7.23%, 10yr: 8.20%
  • Best Year: 44.17%
  • Worst Year: -9.61%
  • Note: Reviewed and verified by an independent 3rd party auditor through 3/31/2020. Backtest results beyond 3/31/2020 use the same methodology but are pending further verification.

Figure 1: Hypothetical Growth of $10MM Since 1991

Hypothetical Growth of $10MM Since 1991

Note: The S&P Target Risk Growth Index (SPTGGUT) is a 60%/40% stock-to-bond weighted index.

Figure 2: Hypothetical Yearly Performance, 1992 – 2005

Hypothetical Yearly Performance

Figure 3: Hypothetical Yearly Performance, 2006 – 2020

Hypothetical Yearly Performance


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

We believe that modern portfolio construction is outdated. Current asset allocation methods are failing the American worker/investor because sequence of return risk is not properly being addressed. 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. Indexed Risk Control™ is built from the best aspects of structured solutions, passive equity indexed investing, and active fixed income management. Using contractual holdings comprised of bonds and options we operate where the rules are known at the beginning, the middle and the end, allowing for repeatable outcomes. The Moderate Indexed Risk Control™ strategy seeks to achieve levels of returns consistent with a moderate risk tolerance with lower volatility and drawdown exposure than a competing “60/40” equity and fixed income-based asset allocation.

Strategy features include:

  • A structured product approach with daily liquidity
  • Seeking upside potential via a long-only S&P 500 call option overlay
  • Seeking downside protection via a fixed income core
  • 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 an options overlay to manage risk as well as participate in positive long-term performance in equity markets. The fixed income assets of the Fund may invest in fixed income securities—including U.S. Treasury and agency bonds, corporate bonds, mortgage-backed securities, commercial mortgage-backed securities, and asset-backed securities. The fixed income core accounts for the majority of assets in the portfolio, with a target allocation of 90% 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 target 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 in the aggregate investment portfolio, and 2. maximizing the Fund’s participation in future positive returns of S&P 500™ Index over a long-term investment cycle.


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 June 30th, 2020. Results of the backtest through March 31st, 2020 have been reviewed and verified by a 3rd party auditor. Results after 3/31/2020 use the same methodology but are pending verification.