Sustainable Dividend Achievers+
Investment Objective
Sustainable Dividend Achievers+ (SDA+) is a target return strategy designed to deliver capital preservation with low volatility, reliable high income and growth.
It’s actively managed using a long equity (primarily US large cap) and short volatility approach.
SDA+ applies a systematic, evidence-based framework designed to maximize the probability of achieving its three stated objectives.
- Preserve capital over the long term with short-term volatility comparable to Bloomberg US Aggregate Bond Index.
- Generate sustainable and tax-advantaged annual income (>8%).
- Achieve long-term total return comparable to the long-term average of the S&P 500 (»10%).
Methodology
SDA+ is a systematic two-stage process powered by two complementary algorithms—long-equity selection and short-volatility overlay—working together through a consistent, rules-based framework to maximize the probability of achieving its three stated objectives.
Long Equity Algorithm
Uses a proprietary quantamental screening process to create an underlying long equity portfolio with measurably superior growth and sustainability attributes.
– The potential underlying long equity exposure is derived from an equally weighted list of the top 25-30 (best of the best) companies that have passed a multi-factor quantamental screening process. The best of the best list is dynamic and regenerated quarterly.
– This dynamic sub-set of highest rated companies only serves to identify potential equity exposure. Actual exposure to the targeted underlying stocks is only ever realized, or disposed of, via the application of a systematic, revenue generating, short-option buy/sell discipline.
– Consequently there is no fixed minimum equity exposure for SDA+. Permitted range is from 0% to 135% long-equity. Historical maximum long equity exposure is 59.4%, minimum is 0%, and average is 19% (see Volatility Responsive Equity Exposure chart below).
Short volatility process
Applies a short option overlay process to, serve as a buy/sell discipline, mitigate long-only risk, and enhance yield.
– The investment objectives of risk mitigation and yield enhancement are met by selling market volatility against the potential underlying long equity exposure identified above.
– Cash covered put options are sold to capture excess negative volatility and serve as a buy discipline that always results in long exposure being acquired at a discount, and generates yield.
– Conversely, covered call options are sold to capture excess positive volatility, generating yield and automating profit taking when the rate of growth is statistically unsustainable.
– Permitted range of potential underlying exposure from put options is from 0% to 135%.
*Options are only used in SDA+ for risk reduction & yield enhancement, not speculative purposes.
This is not an offering of investment advice or solicitation and should not be used as a basis for making investment decisions. It is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be prohibited by law or regulation or which would subject NCP to a registration requirement within such jurisdiction or country. We do not guarantee accuracy or completeness, although we attempt to update information on a timely basis. Neither NCP Capital Partners nor any of its directors, officers, employees or agents shall have any liability, howsoever arising, for any error or incompleteness of fact or opinion in it or lack of care in its preparation or publication; provided that this shall not exclude liability to the extent that this is impermissible under securities laws. All statements and opinions are liable to change without notice.