At Gateway, we believe that:
- While the equity market is the most reliable source of long-term real returns, we do not believe equities become less risky over the long-term
- Investors must endure a series of short-term risks in order to stay invested for the long-term
- Index options can be used strategically to:
- Reliably reduce the risks associated with equity market exposure
- Potentially enhance risk-adjusted returns by accessing the implied volatility risk premium
- Our strategies are active, but not tactical – because options are dynamic, our team makes active decisions to maintain consistent market exposure, but we do not tactically adjust market exposure in anticipation of market direction
- Our approach is quantitative, but not systematic – because each market environment presents a unique combination of opportunities and risks, decision making based on vigilant application of judgment and experience is more reliable than quantitative triggers or rigid rules-based approaches
Why Index Options?
- Equity risk premium exposure - a reliable source of long-term real returns
- Volatility risk premium exposure - a reliable source of potential alpha
- European-style expiration - maintains control of options portfolio
- Cash-settled - maintains control of underlying equity portfolio
- Exchange-traded - avoids counterparty risk
- Robust liquidity - minimizes illiquidity risks
- Deep, competitive market - enables low transaction costs
- For taxable accounts - facilitates loss harvesting and tax efficient returns
We believe that consistency is key to long-term success
At Gateway, we are focused on applying decades of experience in low-volatility equity investing to meet our clients' specific investment needs. Our approach seeks to capture the majority of equity market returns over a full market cycle, while exposing investors to less risk than broad equity market indexes.
We believe that the consistency fostered by our team-oriented approach is one key to our long-term success. Our portfolio management team facilitates regular coordination and sharing of information and fosters a collaborative approach to portfolio management.
Risk management is a core tenet of our investment philosophy
Gateway takes a comprehensive approach to investment risk management.
Index-based options are our investment risk management instrument, embodying our overall risk management philosophy. The hedging overlay relationship between index options and diversified equity portfolios removes an element of uncertainty that is often associated with risk management approaches based on asset class diversification or long-only/long-short individual security selection. This relationship gives our risk profile analytics a level of reliability that facilitates real-time decision making. It also allows for stress testing the entire portfolio in different market and volatility environments and enables us to measure the effects of changes in the portfolio prior to implementation.