Active PutWrite Performance Summary – Q3 2021

  • After advancing in the first two months of the quarter, the culmination of concerns over coronavirus variants, the outlook for inflation, potential negative impacts of China’s largest property developer falling short on its debt obligations and the struggle of U.S. lawmakers to agree to terms that would avoid a government shut down led to a new year-to-date max drawdown for the equity market. From September 2 through quarter-end, the S&P 500® Index returned -4.97%. 
  • The Gateway Active Index-PutWrite Carve-Out Composite and the Cboe® S&P 500 PutWriteSM Index (the PUTSM) provided equity market participation during the S&P500® Index advance from the beginning of the quarter through September 2. Over the remainder of the quarter, the PUTSM was better positioned for downside protection due to the strong month-end market advance in August. The Composite’s active approach resulted in a typical amount of market exposure while the PUTSM had less market exposure than usual because the option it wrote in August was significantly out-of-the-money due to the market move in August.
  • The Cboe® Volatility Index (the VIX®), averaged 18.29 in the third quarter of 2021. Consistent with its normal relationship, average implied volatility exceeded realized volatility, as measured by the standard deviation of daily returns for the S&P 500® Index, which was 11.16% for the quarter. Implied volatility was generally rangebound until September when it shifted higher on an array of growing investor concerns.
  • As the market advanced in July and August, Gateway’s index put option activity focused on trading contracts well in advance of their expiration dates to take advantage of elevated implied volatility priced into longer-dated contracts. Index put option activity in September was selective, with a focus on patiently earning the time premium priced into the longer-dated written index put options in the Composite’s portfolio.

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 September 30, 2021, 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.