December of 2019 was a microcosm of the whole year for U.S. Equities. The domestic market rally continued this month and the S&P 500 Total Return Index returned 3.01% for the month and 31.48% on the year. Fixed Income was mostly flat for the month with the Bloomberg Barclays U.S. Aggregate Bond Index Total Return finishing -.07% for the month but also finishing an impressive year where the index posted a +8.72% return; the best year for the Aggregate Bond Index since 2002. The Trilogy Alternative Return fund also had a decent year in 2019 as the fund’s Class A shares rose +3.13% for the year.
With the rally in equities, our collared equity portion also performed well for the month. Our stocks rose with equities, but these gains were tempered by our S&P 500 Index based collar. We employ this collar to help mitigate the risk of prolonged down moves in equity markets. The contribution effect of this portion of the fund was +.55%
The option income portion of the fund was a slight drag on performance. Fixed Income did well and outperformed the Bloomberg Barclays U.S. Aggregate Bond Index for the month slightly. The option selling strategy inside the fund was a slight drag as equity markets moved in a singular direction for the month, which means we must buy options back at higher prices than we are able to sell them. The contribution effect of this portion of the fund was -.27%.
The market movement portion of the fund had a great month as the trend continues higher. The long call portion of the strategy did particularly well as equities rose and the put spreads that we own for risk mitigation against large drops in equity markets were a slight drag as expected. The contribution effect of this portion of the fund was +.44%.
To view the most recent performance for the Stadion Trilogy Alternative Return 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.
The Bloomberg Barclays Global Aggregate Bond Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.
A collar is an option strategy that limits the range of possible positive or negative returns on an underlying security to a specific range.
A long (or long position, AKA exposure) is the buying of a security such as a stock, commodity or currency with the expectation that the asset will rise in value.
A put spread is an option spread strategy that is created when equal number of put options are bought and sold simultaneously.
One cannot invest directly in an index.
The Report’s 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 subjective 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.
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 statement of additional information (“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.
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The Stadion Funds are distributed by ALPS Distributors, Inc. An investment in the Funds involves risk, including loss of principal.