The song remains mostly the same for U.S. equities as most domestic equity indices grinded higher for the month of June on extraordinarily low volatility. The S&P 500 Total Return Index returned 0.62% for the month. However, it’s interesting to note that the FAAMG stocks (Facebook, Apple, Amazon, Microsoft, and Google), which led the recent rally, all rolled over last month. If the FAAMG cannot keep dragging the S&P 500 higher, which equities will step in to keep up the pace? In June, it was Financials that helped float broad U.S. indices. The new slightly higher rates likely pushed Banks higher, while having an adverse impact on fixed income. The Barclays US Total Return Index returned -0.10% for the month.
In the collared equity portion of the Stadion Trilogy Alternative Return Fund, we saw gains in the equities that followed U.S. equities higher for the month of June. The protective collar in place to both dampen volatility and protect from bear markets was a slight drag on performance given the move higher for equities. The contribution effect of this portion of the Fund was +0.10%.
The option income portion of the Fund created a bit of a grind for the month of June. The fixed income that serves as collateral was mostly flat; the option writing portion of the fund was just slightly negative. Writing options in a low volatility environment presents challenges as the amount collected for selling options is low and gives very little room for error. However, as the realized movement in equities has also been low, we have seen this trade profitable in other months with low volatility. The contribution effect of this portion of the Fund was -0.06%.
The market movement portion of the Stadion Trilogy Alternative Return Fund contributed to performance for the month with the continued trend higher of equity indices. The long side of market movement, made up of long dated S&P calls and an alternative long position, generated the majority of the returns for the month. The put spread we own for protection and the short calls that help finance the long dated S&P calls were slight drags. The contribution effect of this portion of the Fund was +0.08%.
To view the most recent performance for the Stadion Trilogy Alternative Return Fund, click here.
Performance data quoted represent past performance. Past performance is no guarantee of future results. Investments are subject to risk, and any of Stadion’s investment strategies may lose money. Stadion’s actively managed portfolios may underperform in bull markets. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance data may be lower or higher than the performance data quoted. To review our most recent monthly performance, please visit www.stadionfunds.com.
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 indexes shown are defined as follows. 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. One cannot invest directly in an index. Bloomberg Barclays US Aggregate 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. All Benchmarks composite data supplied by third party vendors, assumes re-investment of all dividends.
The Stadion Trilogy Alternative Return Fund will consist of an equity component (“Collared Equity”), an income component (“Option Income”) and a trend component (“Market Movement”).
Collar: A protective option strategy created by purchasing an out of the money put option while simultaneously writing an out of the money call option. Call: An option which conveys the right to buy something at a specific price. Put: An option which conveys the right to sell something at a specific price.
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.
Performance numbers as of June 30, 2017.
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.
Other associated risks: Market risk inside collar, tracking risk, path dependency risk.
Derivative instruments can be volatile and the potential loss to the Fund may exceed the Fund’s initial investment. Derivative instruments may be difficult to value and may be subject to wide swings in valuations caused by changes in the value of the underlying instrument. The use of these instruments requires special skills and knowledge of investment techniques that are different than those normally required for purchasing and selling securities. The Fund could also experience losses if it is unable to close out a position because the market for an instrument or position is or becomes illiquid.
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. Investment objective: Total return, with an emphasis on lower risk and volatility than the U.S. equity markets.
The Stadion Funds are distributed by ALPS Distributors, Inc.
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.