- Record-high inflation persisted, accelerating the Federal’s Reserve’s monetary tightening schedule while souring investor sentiment, resulting in a 19.69% decline for the S&P 500® Index from April 4 to June 16, at which time it officially entered a bear market.
- Throughout the quarter, the Gateway Active Index-Option Overwrite Composite (the Composite) provided equity market participation and consistent loss mitigation. From April 4 through June 16, the Composite* provided 559 bps of loss mitigation, net of fees, relative to the S&P 500® Index. During the year-to-date maximum drawdown from January 3 through June 16, the Composite provided 632 bps of loss mitigation, net of fees, relative to the equity market. As the S&P 500® Index advanced from June 16 through quarter-end, the Composite provided equity market participation although it slightly lagged the rapid advance of the market, as expected.
- Most of the Composite’s outperformance versus the BXMSM in the second quarter came during the brief equity market advance during the end of May. The Composite’s active and diversified approach resulted in a typical amount of market exposure over the course of the market advance while the rules-based timing of the BXMSM’s replacement of its single written index call contract resulted in the BXMSM having less exposure to the market than usual.
- In achieving its low-volatility objective, the Composite’s annualized standard deviation of daily returns for the quarter was 21.68% compared to 28.32% and 20.77% for the S&P 500® Index and the BXMSM, respectively. The Composite exhibited a beta to the S&P 500® Index of 0.76 for the quarter.
- As the equity market declined throughout the quarter, adjustments to the written index call option portfolio focused on lowering the weighted-average strike price to maintain market exposure that is consistent with the Composite’s typical profile while taking advantage of elevated implied volatility to enhance cash flow potential.
The BXMSM performance characteristics are not reflective of Gateway’s strategies or performance. Data as of June 30, 2022, unless noted otherwise. Past performance is not indicative of future results. Data sources: Morningstar DirectSM and Bloomberg, L.P. *The portfolio statistics reflected for the Composite are those measured by a representative account. This information represents supplemental information to the GIPS® Composite Report. This representative account was selected as it is the largest account in the Composite.