By Jillian Baker
Many advisors who utilize ZEGA’s Buffered Indexed Growth saw some movement towards the end of 2018 into short-duration high-yield vehicles. Remember, we shift equity risk for short duration high-yield hold to maturity risk, which enables the strategy to buffer against equity losses through the first 25% down.
As a large component of the portfolio, any change in short-term market values can impact account performance. One of the things we observed was that high-yield assets were seeing outflows, which caused bond prices to drop. Jay Pestrichelli noted during that time that he expected the values of our exchange traded funds to revert higher – a change that is already taking place.
Jay also noted in a recenthow a reduction in fear has abated, drawing investors back into equities and the high-yield space. More details can be found in the Bloomberg link, and the graph above shows the sharp reversal of flows back to high-yield assets.