A STEALTH CONTRIBUTOR TO THE MARKETS EXPLOSIVE RISE??
The decline of Catalyst Hedged Futures Strategy fund, a $3.4 billion fund employing complex derivatives, is topic du jour on trading desks fixated on the surprising resilience of the post election U.S. stock rally and the long decline of volatility, or price swings. It is now down 17% for the year and almost 20% in the past 3 months. What has stripped $1 billion of AUM from this fund in a short time and dragged the 3 year total return to -2.1% per annum?? Here’s how Catalyst got into troubleT The Catalyst fund’s strategy uses options on the S&P 500 index, contracts that allow investors to buy or sell at set prices over fixed time frames. In this case, the fund employed a “butterfly spread” that benefits the fund if the market remains stable, rises slightly or declines in any magnitude.
CONCLUSION: The strategy of 'overwriting' is a big influence on the current market