Peer Comparison: How Is ZEGA’s Buy and Hedge Retirement Strategy Giving Your Clients an Edge?

ZEGA’s hedged equity edge is combining downside protection, upside capture, and leveraging material market downturns to use avoided losses to buy more at lower prices.

When your clients ask “how does my strategy compare with others” below are some discussion points.

Positive Risk Adjusted Returns Compared to Peers

• ZEGA’s Buy and Hedge Retirement strategy had the highest gross return percentage.
• This includes the YTD (year to date), 1yr, 3yr, 5yr return spectrum.
• Only ZEGA and one other manager produced a Sharpe Ratio greater than 1.
• Sharpe calculates the risk adjusted return after accounting for volatility (standard deviation).

Market Environment for Hedged Equity

• While markets are once again at all-time highs, they have been in some sideways chop.
• Hedged equity tends to produce best when markets are moving higher or significantly down.
• At the same time, hedged equity lets your clients be “in” the market instead of on the sidelines.
• Reason being is having a floor in the portfolio takes away the anxiety and fear of market timing.

 The Hedger’s Opportunity

• In 2020 ZEGA was able to avoid a material portion of the market downturn.
• While markets were down, we increased the upside capture without adding more risk.
• This led to Buy and Hedge Retirement outperforming the S&P 500 Index by nearly 400 basis points
• 2020 was a good example of the strategy operating in challenging market environments

 We know that you have choices in the marketplace and wanted to thank our advisors and clients for choosing ZEGA. As always hit up the ZEGA team with questions on where this and other strategies fit in your clients’ portfolios.

 The composite returns shown above include ZEGA’s Buy and Hedge ETF Symbol: ZHDG

Note: ZEGA Financial 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 or jay.pestrichelli@zegafinancial.com.

 All investments involve the risk of potential investment losses as well as the potential for investment gains. Prior performance is no guarantee 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. Certain portfolios may incur additional advisor directed fees. As a result, ZEGA’s returns for these accounts are net of the additional fees due to our subadvisor agreements.

 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 is deployed in an SMA format and utilizes index-based utilizes index-based options and ETFs. Purchases Index call options to synthetically create long market exposure. The underlying index is U.S. large cap and typically one that represents the S&P 500. The investor has long-term market exposure in the equity markets but attempts to reduce downside risk by limiting the actual capital invested in equity positions. 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. Buy & Hedge accounts are designed to limit downside exposure with a targeted cost of hedging ranging from 1 to 3% per year. While this may cause underperformance in up years, the protection is meant to help avoid losses during market corrections. All portfolios that are at least 70% allocated to this strategy are included.

 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.