Hedged Equity Peer Comparison Update

By Derek Moore

Today we present the latest Hedged Equity peer comparison release. This is where we illustrate the numbers behind our Buy and Hedge Retirement strategy versus others resembling ours. An interesting point is that after all the volatility, drawdowns, the strategy as of the end of Q2 is sitting at a +3.80% vs the S&P 500 Index at -3.08%.

The 1-year look-back also has outperformed the general market (aka S&P 500 Index) as well. Remember, Buy and Hedge Retirement is not actually trying to beat the market. Rather it looks to capture around 75% of the upside while materially missing most equity drawdowns.

If we pull back for a longer view, we see at the 5-year trailing returns, it captured almost 77% of the market’s upside. All the while the same or better Sharpe Ratio over 3-year and 5-year periods, with less volatility as measured by the standard deviation over those same time frames.

Looking at the list above, (you can also double click to get the full PDF version), Buy and Hedge outperformed against much of the peer group. We will let you review the numbers yourselves. Before closing this out, it is worth noting that the key use case for this strategy is for clients that do not want full equity exposure and risk.

Rather they need growth but want to do so with downside protection. Beating the market in up years is not the goal. If you think Hedged Equity Strategies may help you and your clients, schedule some time to chat.

 Note: Returns are expressed in US Dollars net of actual management fees and actual wrap fees. Performance includes reinvestment of dividends and other earnings. All data for this supplemental report is sourced from Morningstar as reported by each advisor. Hedged equity Strategies selected from Morningstar's hedged and options categories based on description and tactics.

ZEGA Financial is a SEC registered investment adviser and investment manager that specializes in derivatives. ZEGA is a separate accounts manager and all returns expressed herein are solely from the separate accounts business within ZEGA. ZEGA Financial claims compliance with the Global Investment Performance Standards (GIPS®). To receive a full list of composite descriptions of ZEGA Financial and/or a presentation, contact Jay Pestrichelli at 1-800-380-9342, ext 101 orjay.pestrichelli@zegafinancial.com.

All investments involve the risk of potential investment losses as well as the potential for investment gains. Prior performanceis noguarantee of future results and there can be no assurance, and clients should not assume, that future performance of any of the model portfolios will be comparable to past performance.Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's portfolio.

These results should not be viewed as indicative of the advisor’s skill. The prior performance figures indicated herein represent portfolio performance for only a short time period, and may not be indicative of the returns or volatility each portfolio will generate over a long time period. The performance presented should also be viewed in the context of the broad market and general economic conditions prevailing during the periods covered by the performance information. The actual results for the comparable periods would also have varied from the presented results based upon the timing of contributions and withdrawals from individual client accounts. Employee accounts do not pay advisory fees, so the returns illustrated for the strategy are higher than they would be if employee accounts paid similar fees.

The Buy & Hedge Retirement strategy is designed to provide broad market exposure while limiting the downside risk in the event of a material market correction. The product utilizes index-based options and ETFsTo qualify as fully discretionary, at least 70% of the account must be dedicated to the composite strategy and no more than 20% of the account may be invested at discretion of a party other than ZEGA Financial. The position is created using a combination of options to build synthetic exposure as well as creating an income portion designed to generate a low risk 3-4% of annual return. The income portion may be constructed using fixed income or protected equity with a defined risk. The benchmark is the S&P 500. This benchmark does not use derivatives. The S&P 500 Index is a collection of 500 of the largest publicly traded Us Equity large cap companies. Historical performance results for investment indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. There are no assurances that a portfolio will match or outperform any particular benchmark.