- War in Ukraine paired with rising interest rates, record inflation and strict sanctions on Russia that helped drive oil above $100 per barrel drove the market decline from January 3 through March 8. As investors digested their growing list of concerns, the equity market staged a late-quarter rally and partial recovery from March 8 through quarter-end. The Cboe® S&P 500 PutWriteSM Index (the PUTSM) was significantly aided by the timing of when it wrote its index call options throughout the quarter which led to less market exposure than usual during the steepest portions of the market’s decline and greater market exposure than usual during the quarter-end market rally.
- Since its 2015 inception, the Composite* has averaged 72% capture of the S&P 500® Index’s loss when the equity market has had a drawdown of greater than 10%. Active management to maintain typical market exposure resulted in a typical level of down-market capture during the recent market drawdown period. The PUTSM, however, captured 38% of the S&P 500® Index’s first quarter drawdown, much better than its 60% average capture of double-digit equity market drawdowns since its inception in 1986.
- In achieving its low-volatility objective, the Composite’s* annualized standard deviation of daily returns for the quarter was 14.58% compared to 21.48% and 13.25% for the S&P 500® Index and the PUTSM, respectively. The Composite* exhibited a beta to the S&P 500® Index of 0.67 for the quarter.
- As the equity market trended down through March 8, Gateway’s investment team focused on written index put option portfolio adjustments that lowered 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 PUTSM performance characteristics are not reflective of Gateway’s strategies or performance. Returns less than one-year are not annualized. Past performance is not indicative of future results. Data as of March 31, 2022, unless noted otherwise. See definitions in appendix. 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 oldest account in the Composite.