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New TCW Gargoyle Fund Aims To Outperform BXM Buy-Write Strategy

By DailyAlts Staff For investors looking for long-term results superior to the S&P 500 but with reduced risk, TCW and the Gargoyle Group may have a new solution: The TCW/Gargoyle Dynamic 500 Fund (MUTF: TFDIX ), which launched on December 1. The is the second alternative mutual fund to be launched by the two groups in combination with each other (the first was a reorganization of an existing fund ). The new fund seeks to outperform U.S. equities with less risk by selling covered calls against a long position in the S&P 500, with a target net-long market exposure of 50%. The strategy is similar to the well-known BXM Index Buy-Write strategy, but with a “crucial difference” that, according to Gargoyle, can give investors a significant edge. Dynamic Exposure Management The big difference? Unlike the BXM Index, which has a static options position that is re-written each month, Gargoyle dynamically adjusts its options hedge to maintain consistent market exposure between 35% and 65% net long. These adjustments can result in greater downside protection and increased upside participation relative to static buy-write strategies, according to Gargoyle. According to Gargoyle’s website , the investment strategy (not the fund) significantly outperformed the BXM Index since being calculated as the D500 Client Portfolio in August 2012. Through February 2015, the ending period shown on the website, the portfolio returned 29.54% through February 2015, compared to BXM’s 20.33%. The D500’s standard deviation of 4.61% was lower than BXM’s 5.66%, resulting in a Sharpe ratio advantage of 2.19 to 1.29, and a Sortino Ratio edge of 5.26 to 2.72. Fund Details The fund is officially advised by TCW Investment Management, and sub-advised by Gargoyle. Joshua B. Parker and Alan L. Salzbank, both Managing Members at Gargoyle, are the fund’s portfolio managers. Shares of the new fund are available in I (TFDIX) and N (MUTF: TFDNX ) classes, with respective initial minimum investments of $100,000 and $5,000. The investment management fee for both share classes is 0.80%, while the net-expense ratios run 1.00% and 1.25%, respectively, after fee waivers. Past performance does not necessarily predict future results.

Fund Liquidations: AB, Visium And Thomas Crown

By DailyAlts Staff In this edition, filings from: AB Market Neutral Strategy U.S. Fund (MUTF: AMUIX ) Visium Event Driven Fund (MUTF: VIDVX ) Thomas Crown Global Long/Short Equity Fund (MUTF: TCLSX ) AB Market Neutral Strategy U.S. Fund The Board of Directors of AB Cap Fund, Inc. voted to liquidate the AB Market Neutral Strategy U.S. Fund at a meeting held on September 24. The next day, the fund suspended most sales of its shares pending the liquidation. Existing shareholders had until November 30 to redeem their shares, according to a filing with the Securities and Exchange Commission (“SEC”). Liquidations were expected to be complete by December 2. According to Bloomberg , shares of the AB Market Neutral Strategy U.S. Fund stopped trading at $9.85 on December 1. The fund’s 52-week range was $9.41 to $10.17, with its all-time high of $10.49 dating back to June 2012. Visium Event Driven Fund In a November 19 supplementary filing with the SEC, the Board of Trustees for Visium Asset Management announced their decision to terminate the Visium Event Driven Fund ( VIDVX ). The fund stopped taking new investments as of November 19 and was fully liquidated as of November 27. The fund, which originally launched in December 2000, closed its final day of trading at $9.03, according to Bloomberg , down from a high of $11.04 set in July 2014. Thomas Crown Global Long/Short Equity Fund On November 4, Thomas Crown Capital announced the liquidation of its Thomas Crown Global Long/Short Equity Fund ( TCLSX ), which we wrote about upon its launch. The fund stopped taking on new investors the following day and planned to be fully liquidated by November 13. Shares of the fund traded for the final time at $9.03 on November 27, according to Bloomberg . It had only launched on New Year’s Eve 2014, and reached a high of $10.27 in March. From August 14 to October 30, TCLSX fell from $10.14 to $9.35 and never recovered.

The Current VIX ETP Landscape

I have been writing about VIX ETPs since the launch of the initial duo of the iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA: VXX ) and the iPath S&P 500 VIX Mid-Term Futures ETN (NYSEARCA: VXZ ) back in January 2009 and from 2010 onward I have been plotting all of them on a leverage/maturity grid like the one below. It is amazing how often various VIX ETP investors mentioned one of these charts when I talk to them. Even through the VIX ETP space has been relatively stable as of late, I have not updated this graphic since early 2014, so a refresh is long overdue. For those who have not been following along over the years, I have plotted every VIX-based ETP using leverage on the Y-axis and maturity on the X-axis. With the advent of what I am calling VIX strategy ETPs, I have isolated in their own box in the lower right hand corner a half dozen of these products whose characteristics do not necessarily imply a fixed point on Cartesian coordinate system. The key at the bottom highlights various salient features of each of these products. From previous incarnations, I have retained the presence of non-VIX legs (typically positions in SPX or the SPDR S&P 500 Trust ETF ( SPY)), the combination of both long and short legs, dynamic allocation of the legs and optionability. I have also shaded areas where there is high leverage/compounding risk as well as high roll yield risk. Not surprisingly, these risks converge at the VelocityShares Daily 2x VIX Short-Term ETN (NASDAQ: TVIX ) and the ProShares Ultra VIX Short-Term Futures ETF (NYSEARCA: UVXY ) , two of the more infamous VIX ETPs. Another carryover is font color, where black indicates ETFs and blue is for ETNs. This time around I have also added yellow stars for those ETPs with an average daily volume of 1,000,000 or higher and pink stars for ETPs with an average daily volume between 100,000 and 1,000,000. Note that while the C-Tracks ETN on CVOL (NYSEARCA: CVOL ) technically makes the cut, at today’s closing price of 0.40, any sort of meaningful reverse split to raise the price about 5 or 10 would highlight just how illiquid this issue is. In fact, only six VIX ETPs pass the one million share screen: TVIX, UVXY, the ProShares VIX Short-Term Futures ETF (NYSEARCA: VIXY ) , VXX, the ProShares Short VIX Short-Term Futures ETF (NYSEARCA: SVXY ) and the VelocityShares Daily Inverse VIX Short-Term ETN (NASDAQ: XIV ) . (click to enlarge) [source(s): VIX and More] There are three new additions to this graphic. The most notable of these are th e AccuShares Spot CBOE VIX Up Shares ETF (NASDAQ: VXUP ) and the AccuShares Spot CBOE VIX Down Class Shares ETF (NASDAQ: VXDN ), which were launched by AccuShares back in May. These products deserve a post (or series of posts) dedicated to some of the issues surrounding them, but the short version is that high complexity, frequent distributions and consistent tracking errors resulted in a product that investors decided was not worth their trouble. The other “new” products is, the UBS ETRACS S&P 500 VEQTOR Switch ETN (NYSEARCA: VQTS ) , the first ETP that tracks the SPX VEQTOR Switch Index , making it a relative of the Barclays ETN+ VEQTOR S&P 500 Linked ETN (NYSEARCA: VQT ) and the PowerShares S&P 500 Downside Hedged Portfolio ETF (NYSEARCA: PHDG ) , but one which uses a dynamic allocation to VIX futures to achieve a 10% target realized (historical) volatility. VQTS was launched in December 2014 and like most VIX ETPs, has struggled to reach critical mass. While the VIX ETP market is showing some signs of maturing, there are many new and exciting developments in terms of low volatility ETPs and more broadly in the ETP space in general. As I am currently at the IMN 20th Annual Global Indexing & ETF Conference – and scheduled to speak on a panel, “Trading the VIX: Riding Today’s Waves of Volatility” with Larry McDonald , Mark Shore and Matt Moran tomorrow – this seems like a good time to devote more time to writing and in particular to resurrecting the “and More” portion of this blog. Disclosure(s): net short VIX, VXX, UVXY and TVIX; net long SVXY, XIV and ZIV at time of writing