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.
