January was an interesting month during which we saw domestic equities reach new highs early on and then observed a late month drop in global equities as the spread of Coronavirus in China stoked fears of a pandemic. The S&P 500 Total Return Index finished the month mostly flat with a -.04% return. Rates dropped significantly during the month as is often the case during an equity selloff. The Bloomberg Barclays U.S. Aggregate Total Return Bond Index finished the month +1.92%.
In January, we saw our dividend paying flight-to-quality equities struggle on a relative basis to the broader U.S. equity market. It was an interesting month as technology was one of the top performing sectors and catapulted growth stocks to highs where they massively outperformed value stocks. This action occurred despite the overall U.S. equity market remaining relatively flat for the month. The S&P 500 based collar that we have in place to help mitigate the risk of a large, prolonged drawdown in U.S. equity markets mirrored the broader market and remained mostly flat. The contribution effect of this portion of the fund was -.56%.
The option income portion of the fund was a bright spot for the month as our fixed income did well and so did most fixed income portfolios during the month. The option selling strategy that we employ in this portion of the fund was slightly negative but mostly flat for the month. This strategy struggled early in the month as we were buying options back at higher prices given the overall move from December into January but did well as the S&P 500 reverted later in the month. The contribution effect of this portion of the fund was +.17%. The market movement bucket was slightly negative for the month as both the long and short strategies employed in this component lost a small amount of money as the S&P 500 was roughly flat. The contribution effect of this portion of the fund was -.37%.
To view the most recent performance for the Stadion Trilogy Alternative Return Fund, click here.
The S&P 500 Total Return Index is an unmanaged index of 500 common stocks chosen for market size, liquidity and industry group representation. It is a market-value weighted index. As a total return index, it assumes reinvestment of all cash distributions.
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.
Flight-to-quality is the action of investors moving their capital away from riskier investments to safer ones.
A collar is an option strategy that limits the range of possible positive or negative returns on an underlying security to a specific range.
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.
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