The GMG Defensive Beta Fund is designed to lower overall portfolio volatility without hampering the potential for long-term investment returns. By providing investors with a fund that incorporates alternative asset classes such as long / short commodities strategies and currency hedging strategies with more traditional investments like stocks and bonds, the portfolio management team of the GMG Defensive Beta Fund believe they have developed an investment methodology that may be the best way for individual investors to achieve long-term positive returns, while reducing short-term market volatility.
Equity Based Strategy
- The portfolio managers will take a diversified approach to investing in equities that will include exposure to various market sectors, and capitalization, both domestically and internationally.
- In an effort to extract additional performance from the stock market, the portfolio managers will also employ a covered call writing strategy, as well as utilize various hedging techniques – including assuming “short” positions in the fund.
Commodity Based Strategy
- This strategy aims to protect the value of money by investing in the very assets which contribute a substantial proportion of inflation risk exposure. Investing in inflation bonds could be a viable solution – however the expected return of these bonds at best only covers overall CPI inflation.
- This strategy aims to outperform overall CPI inflation.
- This strategy may provide a relative safe haven in periods of financial market shocks.
Fixed Income Strategy
- This portion of the strategy is designed to balance out the volatility that is often associated with equity and commodity investment strategies.
- The portfolio managers of the fund will use a strategic approach to selecting various bonds and fixed income exposure. Dependent on the teams’ outlook and thematic view, this portion of the portfolio may focus on either or both capital appreciation opportunities as well as yield maximization strategies.
Currency Hedging Strategy
- Over the long run, equities outperform other asset classes. However, due to the increasing complexities and inter-dependence of the world's economies, the portfolio managers believe that currency risks could substantially increase overall portfolio volatility and risks. This strategy is designed to neutralize the negative impact that a declining currency may have on a portfolio. At times, this strategy may attempt to extract extra US Dollar denominated performance from international markets.
- This strategy aims to balance out the portfolio in a manner that will provide investors with a more stable absolute positive return in different market conditions.
Seeking positive returns with low volatility
Montebello Partners, LLC was formed in 2008 with the goal of addressing some of the fundamental investment shortcomings the portfolio managers of the fund believe existed at the end of the decade and will permeate beyond 2010. As money managers, we view the current investment environment as particularly challenging for investors who are seeking capital appreciation that should outperform inflation, without exposing themselves to the volatility individual asset classes such as commodities or stocks are historically subject to.