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Flagship (Index/RA)
Equity exposure with bond-like volatility
Pioneered in 1988, Gateway’s flagship strategy is a low-volatility equity strategy that combines a broadly diversified portfolio of common stocks with an actively managed portfolio of written index call and purchased index put options. Selling index call options and buying index put options helps protect the overall value of the stock portfolio by generating option premium cash flow and limiting losses caused by sharp market declines over a short period of time1.
The strategy capitalizes on the implied volatility versus realized volatility relationship, and reduces equity volatility in a robust, repeatable way. Consistent and attractive cash flow from this index option strategy creates potential for portfolio returns in excess of those available from other investments comparable in volatility.
Low-Volatility Equity Profile
The flagship strategy has consistently exhibited characteristics of high equity correlation combined with reduced beta and standard deviation, which can help mitigate losses during down markets while maintaining the potential to capture a majority of the equity market’s return over a full cycle.
Portfolio Application
The flagship strategy is multi-faceted with the flexibility to support many applications. Within a portfolio, the flagship strategy can act as:
- A core equity strategy
- A complement to a fixed income portfolio
- A component to an alternative program
1 Selling index call options can reduce the risk of owning stocks, but it limits the opportunity to profit from an increase in the market value of stocks in exchange for up-front cash at the time of selling the call option.
Gateway has discretion to reduce put coverage and deviate from these guidelines.
