New TCW Gargoyle Fund Aims To Outperform BXM Buy-Write Strategy
By DailyAlts Staff For investors looking for long-term results superior to the S&P 500 but with reduced risk, TCW and the Gargoyle Group may have a new solution: The TCW/Gargoyle Dynamic 500 Fund (MUTF: TFDIX ), which launched on December 1. The is the second alternative mutual fund to be launched by the two groups in combination with each other (the first was a reorganization of an existing fund ). The new fund seeks to outperform U.S. equities with less risk by selling covered calls against a long position in the S&P 500, with a target net-long market exposure of 50%. The strategy is similar to the well-known BXM Index Buy-Write strategy, but with a “crucial difference” that, according to Gargoyle, can give investors a significant edge. Dynamic Exposure Management The big difference? Unlike the BXM Index, which has a static options position that is re-written each month, Gargoyle dynamically adjusts its options hedge to maintain consistent market exposure between 35% and 65% net long. These adjustments can result in greater downside protection and increased upside participation relative to static buy-write strategies, according to Gargoyle. According to Gargoyle’s website , the investment strategy (not the fund) significantly outperformed the BXM Index since being calculated as the D500 Client Portfolio in August 2012. Through February 2015, the ending period shown on the website, the portfolio returned 29.54% through February 2015, compared to BXM’s 20.33%. The D500’s standard deviation of 4.61% was lower than BXM’s 5.66%, resulting in a Sharpe ratio advantage of 2.19 to 1.29, and a Sortino Ratio edge of 5.26 to 2.72. Fund Details The fund is officially advised by TCW Investment Management, and sub-advised by Gargoyle. Joshua B. Parker and Alan L. Salzbank, both Managing Members at Gargoyle, are the fund’s portfolio managers. Shares of the new fund are available in I (TFDIX) and N (MUTF: TFDNX ) classes, with respective initial minimum investments of $100,000 and $5,000. The investment management fee for both share classes is 0.80%, while the net-expense ratios run 1.00% and 1.25%, respectively, after fee waivers. Past performance does not necessarily predict future results.