The Low Volatility Fund came under pressure this week after Friday’s sharp volatility spike pushed markets deeper into correction territory. While that move was significant, I believe it is important to keep it in context. The broader market has also been under heavy pressure, and relative to major indexes, the fund has held up well in what has been an unusually difficult environment for short-volatility positioning.
In response, I have reduced most of our volatility exposure and am taking a more disciplined, patient approach before reestablishing positions. Option premiums remain extremely elevated, which may create attractive opportunities once conditions begin to normalize. For now, with uncertainty around oil prices, geopolitical risk, and continued market stress, I believe caution and flexibility are the right approach while we wait for a clearer signal that volatility is beginning to break lower.
The Synthetic Fund has faced similar headwinds as volatility moved sharply higher late in the week and broader markets fell further into correction territory. This type of environment can create short-term pressure, particularly when volatility remains elevated, and the market is reacting to both technical stress and geopolitical uncertainty. Even so, I believe the current setup is creating conditions that may lead to opportunities once the market begins to stabilize.
At this stage, I have stepped back from most of our short-volatility exposure and am waiting for better confirmation before reentering more aggressively. Premiums remain unusually high, which is encouraging from an opportunity standpoint, but I do not want to force trades while volatility is still being driven by unresolved risks. If we begin to see signs of stabilization or a relief rally, I believe the Synthetic Fund may be positioned to participate more effectively in that environment.
The Volatility Advantage Fund, which carries our highest beta exposure, has seen the most pressure during this recent market selloff. That is consistent with how the strategy is designed to behave in more severe volatility events, especially when the VIX moves into the 30s and market stress is being amplified by uncertainty in oil and global geopolitics. While the recent move has been sharp, I believe it is also setting up a potentially compelling environment that may create future opportunities if volatility begins to normalize.
Because of that, I have closed most of our short-volatility positions and am staying patient rather than rushing back into the market. We are watching closely for a clear break in volatility or a major news-driven shift in sentiment. If tensions escalate, that could create one type of opportunity. If conditions improve and volatility starts to come down, that creates another. My focus right now is on preserving flexibility so we can respond decisively when the market gives us a clearer path.
The Insiders Fund has declined alongside the broader market this month, but I remain encouraged by how the portfolio has held up under the circumstances. Most of the recent downside remains unrealized, and our use of covered calls has helped reduce some of the pressure while allowing us to continue holding positions we believe in over the long term. In a declining market, that kind of discipline matters.
I believe this environment is creating some of the most attractive opportunities we have seen in the last couple of years. With insider buying temporarily limited by blackout periods and many investors raising cash for tax payments, we are seeing price pressure that is creating value in a number of high-quality companies. I have been selectively putting cash to work, and while I do not expect immediate results, I believe the fund is being positioned well for the next phase of the market as insider activity begins to return and valuations become harder to ignore.
The views expressed herein reflect current market commentary and portfolio observations as of the date published and are subject to change without notice. Statements made by portfolio managers represent current opinions based on prevailing market conditions and should not be interpreted as guarantees, forecasts, or assurances of future performance or market direction.
Any performance information shown is preliminary, unaudited, and may reflect results before applicable fees, expenses, or final administrator reporting where noted. Actual investor results may differ based on fee structure, timing of contributions or withdrawals, and other account-specific factors.
This material is provided for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security, fund, or investment strategy. Past performance is not indicative of future results. All investments involve risk, including possible loss of principal.
