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6 Meridian

Market Neutral Equity

as of March 31, 2020

The Approach

The Hedged Equity – Market Neutral portfolio seeks to capture positive absolute returns with low correlation to broad equity market risk. The portfolio is comprised of between 40 and 60 large cap stocks with call options sold against the SPDR S&P 500 exchange traded fund to decrease volatility associated with equity market risk. The stocks are selected utilizing our quantitative models and the options are selected based on our proprietary option selling model. The strategy is designed to be market neutral, targeting a portfolio beta of zero over time.

The Features

Market neutral strategies provide an alternative to traditional, long-only equity strategies by providing positive exposure to factors such as value, yield, quality, and momentum, while neutralizing exposure to the overall equity market. Such strategies have the potential to deliver positive absolute returns in a variety of market environments, though they may underperform while the market is trending upward, or if the underlying factors underperform the broad market.

In addition to selling call options, the manager may also hedge the portfolio by using inverse ETFs to provide additional protection against declining markets.