Rational Funds, a family of funds rooted in the investment philosophy of applying a rational approach to investing, has launched the Rational Equity Armor Fund (HDCTX). HDCTX pairs investments in dividend paying US equities with a distinct volatility hedge overlay that utilises the same methodology as the Equity Armor Investments VOL 365 Index (the EAVOL Index).
The Fund primarily invests in common stock of dividend paying companies included within the S&P 500 Index, with an objective to seek total return on investment, with dividend income an important component of that return. The management team employs a rules-based quantitative strategy to invest in common stock that they believe offers the best return potential and low volatility under the current economic environment. The proprietary model looks at specific factors such as domestic unemployment rate, corporate cash flow, housing starts, auto sales and new durable goods, in addition to monetary factors, interest rates, various index levels including gold index, energy prices, consumer price index and international factors such as euro exchange rates, FTSE 100, Tokyo stock exchange and agricultural exports.
In addition to common stock, HDCTX’s strategy includes a distinct volatility overlay strategy which seeks to maintain long correlation to volatility with the goal of offsetting equity market declines. It does so in a manner that avoids the price decay that often comes with traditional volatility-based strategies and reflects the methodology of the EAVOL Index. This portion of the Fund’s strategy will seek to achieve approximately two-thirds of the return of the EAVOL Index.
“We believe the Rational Equity Armor Fund offers a distinct opportunity to leverage a rules-based, macroeconomic strategy,” says David Miller, CIO of Rational Funds. “Combined with the volatility hedge overlay, this strategy gives investors the opportunity to invest in the rising stock market while seeking to limit risk exposure. With volatility on the uptick, this type of risk mitigation may prove critical for any downturn in equities.”