For stocks, there is a bias toward European equities compared to the United States, based on valuations and the potential for multiple expansion. In this environment, the following strategies may offer opportunities for pursuing returns while mitigating risks across the portfolio.
AlphaSimplex – Managed Futures Strategy
- Based on a classic trend-following approach enhanced by the application of several proprietary models designed to identify trends over multiple time horizons.
- The strategy seeks to help investors manage the risk in their portfolios, and to provide a source of crisis alpha – the potential for positive returns even when other asset classes fall.
- The AlphaSimplex Managed Futures Strategy employs a systematic, diversified approach using multiple models, time frames, and assets, with a focus on volatility management to help investors manage their potential outcomes and provide capital appreciation over the long term.
- The strategy may hold long or short positions in a variety of markets using highly liquid futures, forwards, and other instruments.
- Portfolio volatility is monitored and actively managed in an effort to maintain a moderate level of long-term annualized volatility.
- Gateway has used index options to consistently reduce the risk of equity investing for more than 40 years. Gateway’s flagship strategy combines an index-like portfolio of underlying securities with an actively managed portfolio of written index call options and purchased index put options, designed to maintain a consistent level of equity market exposure and relative risk profile.
- Option writing strategies like Gateway’s typically aim to deliver better risk-adjusted returns over the long term than equity-only strategies through exposure to the volatility risk premium (VRP). VRP expresses itself in index option markets through the pricing of implied volatility relative to the realized volatility the underlying index experiences. Cboe® Volatility Index (VIX) levels consistently price above the realized volatility of the S&P 500®, a trend that continued through 2019. Richer-than-normal option pricing combined with low realized volatility creates the potential for option-writing strategies to deliver attractive returns with lower-than-normal volatility. If low, rangebound or rising yields keep bond returns low, investors may benefit from an allocation to Gateway’s strategies as they do not have interest rate sensitivity and can complement bonds’ historical profile of low volatility and attractive risk-adjusted returns.
- For investors who anticipate that recent market tranquility is temporary, Gateway’s approach, which seeks to consistently deliver lower risk and less downside than the equity market, may be an appealing way to reduce exposure to equity market risk.
- Mirova’s global equity team builds concentrated portfolios from the bottom up, using deep fundamental and sustainability research with the aim of producing positive impact relative to the UN Sustainable Development Goals.
- The outlook for 2020 includes a number of potential risks that could bubble up, but Mirova believes that focusing on strong businesses that are well-positioned to benefit from global long-term trends related to environmental, technological, demographic, and governance transitions can help investors tune out the noise and stay invested through short-term volatility. Mirova’s belief is that the market continues to underappreciate these long-term trends and is underpricing key ESG risks that face companies going forward.
- The team remains prudently optimistic for global equity returns in 2020 but sees better valuation opportunities outside the US. The global portfolio entered 2020 with a relative underweight position in the US, and both portfolios are expressing a preference for opportunities in Europe.
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Investing involves risk, including the risk of loss.
Futures and forward contracts, like other derivatives, can involve a high degree of risk and may result in unlimited losses. Because they depend on the performance of an underlying asset, they can be highly volatile and are subject to market, credit, and counterparty risks.
Options may be used for hedging purposes, but also entail risks related to liquidity, market conditions and credit that may increase volatility. The value of the fund's positions in options may fluctuate in response to changes in the value of the underlying asset. Selling call options may limit returns in a rising market.
Sustainable investing focuses on investments in companies that relate to certain sustainable development themes and demonstrate adherence to environmental, social and governance (ESG) practices; therefore the universe of investments may be limited and investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria. This could have a negative impact on an investor's overall performance depending on whether such investments are in or out of favor.