Shield Plus Diamond Horizon

  • Investment Objective & Portfolio Management: To simultaneously provide the potential for capital appreciation and preservation by employing a market-neutral investment approach. Such an approach combines two opposing positions, such as a long put & long call, and may make money as one position’s gain more than offsets the other’s loss regardless of market direction. Under such combined call & put positions, a loss may be realized if the market remains stable; similarly, any position executed by Shield Plus may lose money. To enhance the likelihood of capital appreciation, the investment approach pursues market-neutral positions in volatile markets. This strategy focuses only on the volatility in US stocks, ETF’s and options thereon. Emphasis will be placed on achieving protected, absolute returns over a rolling two-year horizon rather than superior performance relative to an index or other benchmarks.
  • Protection: To maintain protection of principal, the market-neutral approach uses only fully-covered U.S. exchange-traded options. As a means of achieving added protection, this strategy does not borrow uncovered cash/securities to lever returns and risk. Further, unlike a long/short equity fund, where the long and short positions have two different underlying companies and unlimited risk, this strategy’s market-neutral positions typically have the same underlying market and calculable limited risk.
  • Performance: The Shield Plus Diamond Horizon has achieved a cumulative net total return that exceeds the S&P 500 index from 10/31/07 to 1/29/10. Accredited investors can request updated performance by contacting Shield Plus.

Reasons to Invest

  • The strategy is potentially non-correlated to traditional assets because the market-neutral approach creates a non-linear return pattern engineered to limit risk to a certain dollar amount over the rolling two-year horizon. Further, the approach is also bottom-up where our focus is on security selection and not on market timing.
  • Extreme equity price volatility is likely to continue; dislocating market events occur almost every 5-10 years.
  • Balance or imbalance of monetary & fiscal stimulus, global debt, commercial & residential real estate, and inflation (deflation) may invigorate or test the economic recovery.
  • War and terrorism may disrupt markets.
  • Investors need options to minimize the risk and to capitalize on volatility over a 3-5 year market cycle.

This S&P 500 index chart shows equity prices can dramatically climb and fall. The Shield Plus Diamond Horizon strategy capitalizes on such price volatility by being net long options.