The Managed Volatility and Income Strategy (MVIS) offers investors exposure to equity market returns and enhanced yield while hedging market volatility.
The MVIS portfolio maintains broad diversification by investing in 75+ U.S. traded stocks. No single company has more than a 2.25% weight in the portfolio, and the portfolio is diversified among sectors. As a way to reduce net exposure, we sell call options on every stock in the portfolio. The strategy’s net exposure typically ranges from 50 – 65%.
The portfolio has well-defined construction parameters, with fundamental analysis performed on each company. Equity selection focuses on historical dividend records and the probability of sustained and growing dividends.
We have two objectives:
(1) Lower volatility and reduced net stock market exposure achieved by selling covered calls on each holding
(2) Above-average portfolio cash flow provided by dividends and option premiums
Portfolio cash flow is the dominant source of return and is achieved by investing in relatively high-quality, high dividend-yielding equities and selling “out-of-the-money” covered call options against those equities.
The Managed Volatility and Income Strategy is a relatively defensive way to own equities and is a less complex strategy compared to alternative strategies such as hedge funds. This strategy is suitable as an equity component, a fixed income component, or a hedged strategy. It is used by foundations, endowments, family offices, corporations, and high-net worth individuals.
For more information about this strategy, please read Alternative to Alternatives.