May of 2019 saw domestic equity markets fall for the first time since Q418 as the S&P 500 Index returned -6.35% for the month. A drop in oil prices contributed to Energy being the worst performing sector for the month. Technology also suffered this month as trade concerns have ramped up again between the US and China. Rates dropped across the yield curve in May as Fixed Income acted as a safe haven. The Bloomberg Barclays U.S. Total Return Aggregate Bond Index returned +1.78% for the month.
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 based options to assist in dampening volatility and ideally temper the risk in the portfolio from large sustained drawdowns in equity markets.
The equities in the fund were down in absolute terms but outperformed broader US equity indices for the month. The S&P 500 Index based collar was a contributor to performance for the month and helped to lessen the drag from equities. The contribution of steps 1 and 2 for the portfolio was -.73%. In step 3 of the fund's process we employ an option selling strategy to both potentially generate premium but also to reset exposure to the equity market on a monthly basis. This portion of the fund did well during the month as we were able to remove the trade at a profit early in the month. The contribution effect of this portion of the fund was +.84%.
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.