Liquid Strategies Insights & Commentary

Manager Commentary - Q2 2020

Author: Shawn Gibson

 

After a historic collapse in the 1st quarter of 2020, the U.S. equity markets staged a dramatic recovery, finishing with the best quarterly return (+20.54% for the S&P 500 Index) since Q4 1998. This strong market recovery coupled with high but falling equity volatility served as significant tailwinds for our strategies, which were able to benefit both from the gains in risk assets as well as gains from our income-based Overlay Strategy. For the quarter, the Overlay Strategy generated gross income of 1.80% bringing the annualized gross income produced by the Strategy to 2.83% since inception in 2013.

Overlay Strategy Returns through 6/30/20
Q2 2020 Annualized Since Inception (11/1/2013)
1.80% (Gross) 2.83% (Gross)
1.61% (Net) 2.06% (Net)

Net of fees assumes a 0.75% management fee applied monthly.

ANNUALIZED SEPARATE ACCOUNT ILLUSTRATIVE RETURNS (Net1)

11/01/2013 - 06/30/2020

  1 YEARS 3 YEARS 5 YEARS Inception to Date
Large Cap Equity Strategy 8.14% 9.66% 12.22% 13.04%
S&P 500 Index  7.50% 10.72% 10.72% 11.14%

Small Cap Equity Strategy -10.64% -0.35% 5.90% 7.56%
S&P 600 Index -11.31% 0.51% 4.42% 5.73%

Foreign Equity Strategy -5.47% 0.72% 4.58% 5.61%
MSCI ACWI ex US -4.80% 1.13% 2.26% 1.85%

 

Core Bond Strategy 10.01% 4.78% 6.11% 6.08%
Bbg Barc US Agg Index 8.74% 5.32% 4.30% 3.95%

 

Municipal Bond Strategy  9.80% 4.96% 5.46% 6.25%
Bbg Barc Muni Bond Index 7.54% 4.72% 3.53% 4.23%

 1Net of fees assumes a 0.75% management fee applied monthly. These returns are illustrative, hypothetical numbers representative of two actual return streams (Liquid Strategies Overlay and the underlying index ETF). The numbers illustrate what would have happened had we taken the underlying index ETF returns and added Liquid Strategy Overlay returns to them. Source: Morningstar, Liquid Strategies.

OVERLAY STRATEGY ANNUALIZED PERFORMANCE

11/01/2013-06/30/2020

  1 YEAR 3 YEARS 5 YEARS Inception to Date
Overlay Strategy (Gross) 1.75% 0.26% 2.51% 2.83%
Overlay Strategy (Net) 0.99% -0.49% 1.74% 2.06%

Net of fees assumes a 0.75% management fee applied monthly.

*Hypothetical/Illustrative performance is not an indicator of future actual results. The results reflect performance of a strategy not offered to investors during the time indicated in the analysis  and do not represent returns that any investor actually attained. Hypothetical/Illustrative results are calculated by the retroactive application of the Overlay strategy constructed on the basis of historical data combined with other existing independently-managed ETFs and based on assumptions integral to this presentation which may or may not be testable and are subject to losses. General assumptions include: The manager would have been able to purchase securities in a single portfolio with similar characteristics to the Overlay Strategy and the Index ETFs recommended by the illustration, and the markets were sufficiently liquid to permit all trading. Indexes used for comparative purposes cannot be traded, however there are securities, funds, and similar investments that can be purchased to obtain similar results and include no fees. Changes in these assumptions may have a material impact on the hypothetical returns presented. No representations and warranties are made as to the reasonableness of the assumptions. This information is provided for illustrative purposes only. Actual performance may differ significantly from hypothetical/illustrative performance. Source: Morningstar, Bloomberg, L.P., Liquid Strategies.

Read More

Topics: Overlay, ETF

Understanding Fees – Mutual Funds and ETFs

Author: Justin Boller

 

I was recently watching a news program in which a commentator generalized Exchange Traded Funds (ETFs) as “cheap” and mutual funds as “expensive”. Too often, we dismiss all ETFs as index following and therefore “cheap” and all mutual funds as being actively managed and therefore “expensive”. In reality, an ETF or a mutual fund is simply a packaging solution that can contain a variety of assets and styles of investing. In order to properly assess whether a particular solution is priced appropriately, we must first dissect the package to understand which investments are included and how they are managed.

Read More

Topics: Overlay, Volatility, ETF, mutual fund

Active vs. Passive Management

Author: Brad Ball

 

The battle has raged for years…a quick internet search will yield mounds of data arguing when active will or will not outperform. It seems the opinions so often reflect the vantage point of the author.  The old expression by Mark Twain seems to hold true “Figures don’t Lie, But Liars Figure”. Here we are again, right in the middle of a major selloff when “Active Management” is supposed to outperform so…how have active managers performed?

Read More

Topics: Overlay, ETF

Manager Commentary - Q1 2020

Author: Shawn Gibson

 

While there is much to discuss from a markets perspective, first and foremost we hope you and all of your loved ones are safe and healthy. In previous letters, we laid out a number of potential catalysts for ending the historic bull market and starting a global recession, including the possibility for events that at the time no one could anticipate. COVID-19 turned out to be that great unknown, sending shockwaves throughout the financial system as investors attempted to find the “right” discount to apply to risk assets given the high level of uncertainty for the economy, earnings and even solvency for many companies and industries. The end result was one of the most violent equity market declines in U.S. history, with the S&P 500 Index losing over 35% in just the course of a few weeks, bringing with it historic levels of market volatility. Despite such extreme market conditions, the Overlay Strategy (utilized as an income generation tool within our six main strategies), actually generated a positive 0.37% return for March with the S&P 500 Index -12.35%, and -1.99% YTD compared to -19.60% for the S&P 500 Index. The Strategy continues to demonstrate the ability to generate positive long-term incremental income to underlying beta sources while protecting capital during times of market stress. For investors that would have been invested in these various strategies since the inception of the firm, below are the illustrative long-term performance results:

*Hypothetical/Illustrative performance is not an indicator of future actual results. The results reflect performance of a strategy not offered to investors during the time indicated in the analysis  and do not represent returns that any investor actually attained. Hypothetical/Illustrative results are calculated by the retroactive application of the Overlay strategy constructed on the basis of historical data combined with other existing independently-managed ETFs and based on assumptions integral to this presentation which may or may not be testable and are subject to losses. General assumptions include: The manager would have been able to purchase securities in a single portfolio with similar characteristics to the Overlay Strategy and the Index ETFs recommended by the illustration, and the markets were sufficiently liquid to permit all trading. Indexes used for comparative purposes cannot be traded, however there are securities, funds, and similar investments that can be purchased to obtain similar results and include no fees. Changes in these assumptions may have a material impact on the hypothetical returns presented. No representations and warranties are made as to the reasonableness of the assumptions. This information is provided for illustrative purposes only. Actual performance may differ significantly from hypothetical/illustrative performance. Source: Morningstar, Bloomberg, L.P., Liquid Strategies.

Read More

Topics: Overlay, ETF

ETF’s – Part of the Solution or Part of the Problem?

Author: Justin Boller

 

With all areas of the market in turmoil, there has been extra scrutiny placed on ETFs and their role in the financial markets. ETFs have seen exponential growth over the past decade, as investors have gravitated towards typically lower costs, tax advantages, and intra-day trading capabilities. With this meteoric rise, investors who are not familiar with this structure can get spooked and fear a bubble building in the market.

Read More

Topics: Overlay, ETF

Navigating Uncertainty in Fixed Income

Author: Justin Boller

The Federal Reserve has indicated both through their actions (lowering the Fed Funds Rate three times in 2019) and through their commentary that they intend to keep rates relatively low in the near-medium term. While this is intended to be accommodating to the economy, it poses a challenge for institutions and individuals seeking to generate distributive income through their investments.

Read More

Topics: Overlay, ETF, Fixed Income

Overlay Shares ETFs Cross $200 Million in Assets Since October Launch

Author: Megan Delaney

 

ATLANTA—February 18, 2020 —Liquid Strategies, the parent of Overlay Shares exchange-traded funds (ETFs), announced today the recently launched ETF “Ovals” have surpassed $200 million in assets under management since they began trading on the NYSE Arca in October. Access to overlay strategies has traditionally been reserved for ultra-high net worth individuals and institutions through separate accounts. Ovals are breaking down those barriers by packaging index ETFs with an active overlay focused on enhancing income into an easily accessible investment option for all investors.

Read More

Topics: Overlay, ETF

ETF Liquidity

Author: Adam Stewart

 

ETFs trade like stocks with market makers posting quotes on various exchanges. Much like stocks, ETFs can be bought or sold throughout the day. Many investors express concern over perceived illiquidity of smaller or newer ETFs. They see an ETF that might have volume of only a few thousand shares per day and trade with extremely wide spreads. A major difference in trading stocks and ETFs is the create/redeem process. 

Read More

Topics: Overlay, ETF

Liquid Strategies Blog

This is where our team takes the opportunity to discuss Market Observations, as well as Portfolio Manager Commentary.

To receive our insights in your inbox, please subscribe below.

Featured White Paper

New call-to-action

Recent Insights

Subscribe Form