Domestic equities continued to perform well during April and the S&P 500 Index finished the month up 4.05%. This is just the latest positive sign that make recent routs seem like years ago. Fixed income rates were slightly higher across the majority of the curve for the month though the very front end of the curve was mostly unchanged. As such the Bloomberg Barclays Capital U.S. Aggregate Total Return Bond Index was mostly flat, as the yield offset small rises in rates.
The Stadion Alternative Income fund takes a diversified approach towards income and risk management. In steps 1 and 2 of the fund's process we establish a portfolio of dividend paying, flight-to- quality equities and then collar them with S&P 500 Index based options to help dampen volatility and mitigate the risk of large sustained drawdowns in equity markets. The equity portion of the fund contributed to performance as our flight to quality equities participated in the rally, but at a lesser amount than broader equities. The S&P 500 Index based collar that the fund employs in an attempt to hedge the risk of prolonged market selloffs was a natural drag as equities continued higher. The contribution of steps 1 and 2 for the portfolio was .24%. In step 3 of the fund's process we employ an option selling strategy to both potentially generate premium but also as a way to reset exposure to the equity market on a monthly basis. This portion of the fund struggled as equity markets continued to move in a singular direction for the year. The contribution effect of this portion of the fund was -1.34%.
To view the most recent performance for the Stadion Alternative Income Fund, click here.
The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices.
An option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the corresponding obligation to fulfill the transaction. The price of an option derives from the difference between the reference price and the value of the underlying asset (commonly a stock, a bond, a currency or a futures contract) plus a premium based on the time remaining until the expiration of the option.
A collar is an option strategy that limits the range of possible positive or negative returns on an underlying security to a specific range.
Flight-to-quality is the action of investors moving their capital away from riskier investments to safer ones.
Bloomberg Barclays Capital U.S. Aggregate Total Return Bond Index is an unmanaged index of prices of U.S. dollar-denominated investment-grade fixed income securities with remaining maturities of one year and longer.
One cannot invest directly in an index.
The Reports’ commentary, analysis, opinions, advice, and recommendations represent the personal and subjective views of the author and are subject to change at any time without notice.
There are additional costs and potential risks associated with investing in domestic and international Exchange Traded Funds (ETFs). Investment in the Fund is subject to investment risks, including, without limitation, market risk, management style risk, risks related to “fund of funds” structure, sector risk, fixed income risk, tracking risk, risks related to ETF net asset value and market price, foreign securities risk, risks related to portfolio turnover and small capitalization companies’ risk. Since each Stadion Fund is a “fund of funds,” an investor will indirectly bear fees and expenses charged by the underlying ETFs and investment companies in which a Stadion Fund invests in addition to a Stadion Fund’s direct fees and expenses. More information about these risks and other risks can be found in the Fund’s prospectus.
Diversification does not eliminate the risk of experiencing investment losses. There are risks associated with the potential investment of the Fund’s assets in fixed income investments, which include credit risk, interest rate risk, and maturity risk among others. These risks could affect the value of investments of the Fund, possibly causing the Fund’s share price and total return to be reduced and fluctuate more than other types of investments. Additional information about fixed income risks can be found in the Fund’s SAI. Investment Objective: Seek long-term capital appreciation.
The Fund’s foreign investments generally carry more risks than funds that invest strictly in U.S. assets, including currency risk, geographic risk, and emerging market risk. Risks can also result from varying stages of economic and political development; differing regulatory environments trading days, and accounting standards; and higher transaction costs of non-U.S. markets.
An investor should consider the investment objectives, risks, and charges and expenses of the Stadion Funds carefully before investing. The prospectus contains this and other information about the Funds. A copy of the prospectus is available by calling Stadion Funds directly at (866) 383-7636 or Stadion Money Management, LLC., the investment advisor, at (800) 222-7636. The prospectus should be read carefully before investing.
The Stadion Funds are distributed by ALPS Distributors, Inc. An investment in the Funds involves risk, including loss of principal.