RATIONAL EQUITY ARMOR FUND
Fund Overview
An attractive opportunity for individual investors, the Fund’s investment objective is to seek total return on investment, with dividend income an important component of that return.
Key Fund Characteristics
EAI seeks to achieve its investment objective by investing primarily in common stock of dividend paying companies included within the S&P 500 Index.
The Strategy may also invest up to 20% of its net assets in volatility themed futures contracts using the Cboe Volatility Index® Futures; symbol VX, and in cash and cash equivalents, including U.S. Treasury obligations, as a hedge against the common stock held in the Fund’s portfolio, using the EAVOL Index methodology.
Stocks are selected based on a proprietary model comprised of the following factors:(i) domestic factors such as unemployment rate, corporate cash flow, housing starts, auto sales, and new durable goods; (ii) monetary factors; (iii) interest rates; (iv) various index levels including gold index, energy prices, consumer price index; and (v) international factors such as euro exchange rates, FTSE 100, Tokyo stock exchange, and agricultural exports.
Why the Rational Equity Armor Fund?
Investment Strategy
The Fund primarily invests in common stock of dividend paying companies included within the S&P 500 Index. The Fund may also invest up to 20% of its assets in volatility themed futures contracts using either the Cboe Volatility Index Futures; symbol VX, and in cash and cash equivalents as a hedge against the common stock.
The managers use a rules-based quantitative strategy to create a portfolio composed of common stock that they believe offers the best return potential and low volatility under the current economic environment.
Stocks are selected based on a proprietary model comprised of the following factors (i) domestic factors such as unemployment rate, corporate cash flow, housing starts, auto sales, and new durable goods; (ii) monetary factors; (iii) interest rates; (iv) various index levels including gold index, energy prices, consumer price index; and (v) international factors such as euro exchange rates, FTSE 100, Tokyo stock exchange, and agricultural exports.
The Fund will invest in VIX futures utilizing the same methodology as the EAVOL Trading Strategy, a CTA program that seeks to correlate to 2/3 the daily return of the EAVOL index.
Get Started: Turn Strategy Into Action
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METHODOLOGY:
Equity Armor Hedged Dividend Index
The Rational Equity Armor fund strategy is informed by the Equity Armor Hedged Dividend Index Methodology:
The value of the internally calculated index strategy is an algorithmic trading program that combines a notional net position across 30-50 stocks within the S&P 500, chosen based on macroeconomic analytical correlations, along with using the EAVOL Index methodology, which trades VIX futures, in order to act as a volatility overlay to the long beta position in the stock market. The methodology is licensed to the Rational Equity Armor Fund, and the value also gives a hypothetical view for prior years using the firm’s proprietary EAVOL Index to hedge risk when taking long beta bets to the S&P 500 index.
The stock returns used are those reflective of a private fund operable since 2014 using the equity research methodology described above to select the stocks.
The EAVOL Index methodology, which is the volatility overlay, has been used for clients and proprietary accounts since 2014 as well. The Cboe has disseminated the EAVOL Index value since September 2018, with a live performance maintained throughout the trading day, and the Cboe also provides indicative values of the index dating back to 2007, of which such indicative values along with live values are used to reflect the hedge portion of the Equity Armor Hedged Dividend Index.