A reader left a comment on a very old post about a relatively new fund called The Collar Fund which has ticker COLLX. The fund is intended to be a low octane product. Somewhere in the literature it says that it will correlate closely to the broad market but will have a much lower beta than the market. Elsewhere is suggests the fund as a possible substitute for part of the bond portion of a portfolio.The website talks a lot about using collars but I did not see anywhere where the term collar was defined until I looked at the prospectus and it is what you think; buy a stock, sell a call and buy a put. There appears to be flexibility in which options it can trade and they seem to care about the dividend date in selecting options (the reason here is that ITM and even ATM call options are often assigned early so that the call buyer can collect the dividend). There is also a line in there about being hedged "most of the time" which might mean buy a stock this week and put the collar on next week but it does not spell it out as clearly as that.
The fund can use individual stocks (including ADRs) and ETFs. They provide a fact sheet that has the top 30 holdings, but no breakout of the options collaring those holdings, along with the sector decisions that the fund makes--note that this is an actively managed fund. As of November 30 the fund was heaviest in Rambus (RMBS) at 2.67% along with nine other stocks with similar weightings.
There are some interesting sector decisions including 18% in materials versus 3.6% for the S&P 500, big underweights in healthcare and staples and 20% in cash.
The fund has only been around since June. It has been very un-volatile, it has gone up very slowly since its debut, up 5% in an up 20% world. I'm not sure if that would be in line with what they would hope to do or not. As perhaps a middle ground comparison the PowerShares BuyWrite ETF (PBP) is up 15% in the time that COLLX is up 5% and SPX up 20%. BTW some clients own PBP.
To be clear I do not own the fund and am not considering the fund any time soon. According to Yahoo Finance it had not quite $11 million in assets as of November 30 which is a microscopic number. At $11-ish million I am not sure if the fund is "working" or not compared to what they have in mind but maybe I can get someone there to talk to me so I can find out because I do find the concept interesting. If it really can be a fixed income proxy then it could become very popular if rates start to rise. If it is better thought of as a broad equity proxy then up 5% in an up 20% world may not be so hot.
The reason for that last comment is that while over very long periods of time stocks may go up 9-10% per year the actual year to year returns are much lumpier. Look at the previous bull cycle, look how much of the run from the low to the high came in just one year, that being 2003. Maybe one very simplistic idea could be own SPY when the S&P 500 is above the 200 DMA and then own COLLX when it is below. Do not take that as a recommendation, it is more of a rhetorical question.
The Winter Classic hockey game at Fenway Park did not disappoint. The Bruins tied it 1-1 with 2:18 left in regulation and then won it, under the lights no less, in overtime. Awesome.
7 comments:
Roger,
in your previous post you mentioned that in the prev.4year cycle the returns looked like:
2003 up 26.4%
2004 up 9.0%
2005 up 3.0%
2006 up 13.6%
2007 up 3.5%
2008 down 38.4%
So we will not have such adramatic move upward. I am still looking for S&p to hit 1166 and then go down to 800 area. What has been intersting is that I am finding profitable positions on the short side.
Best,
Jeff from Milan, Italy
Hey Roger--I think I heard that there were some 300K ticket requests for the hockey game. I wonder how the P&L works out for these kinds of one-off events?
Are you planning to do a 2009 performance retrospective? I always learn something, even if you have to just use hand signals.
Thanks much.
Jeff I would expect or hope there is less drama in 2010
anon i should do a recap, thanks for the reminder.
I want my performance to look like the Gator chomp, not that silly Oregon duckbill :)
Amazingly serendipitous Roger as I have been looking at this fund the past week for exactly the reasons you state about bonds looking vulnerable.
Most of my fixed income is in TIAA Traditional annuity (came into my marriage with my wife) and a bunch more in a stable value fund. These will be fine but we have some bond funds and I generally dislike bond funds. I would prefer another source of low SD and will watch this along with my RYMFX. Unlike RYMFX, this one will ebb and flow with stocks which isn't perfect but according to Morningstar, this bunch has been using this strategy in private accounts for four years and they only lost 8% in 2008.
DE
DE, helpful context to know the strategy is not new for them even if the fund is.
not intended to be a sarcastic comment--in case it reads that way.
Roger, "up 5% in an up 20% world may not be so hot", true, but up 5% in a sideways market (that lasts another decade?), not so bad.
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