The Portfolio pursues current income and modest growth potential consistent with the preservation of capital, while seeking to manage overall portfolio volatility.
The Portfolio pursues current income and modest growth potential consistent with the preservation of capital, while seeking to manage overall portfolio volatility. The Portfolio seeks to achieve its objectives by investing in exchange-traded funds (“ETFs”) representing a broad range of asset classes and employing derivatives to manage overall portfolio volatility. Under normal market conditions, the Portfolio invests at least 80% of its net assets in ETFs and various derivatives, such as futures contracts and options. The portion of the Portfolio that is invested in ETFs is structured like a fund-of-funds that targets an asset allocation emphasizing fixed-income ETFs over equity ETFs. The Portfolio also seeks to stabilize the volatility of annualized portfolio returns around a predetermined target level and reduce the potential for portfolio losses during periods of significant and sustained market declines, while providing opportunity for growth during periods when markets are appreciating. The Portfolio generally targets an annualized return volatility level of 8%, however, over any particular time horizon the Portfolio may experience return volatility that is higher or lower than its target return volatility.
Investment in mutual funds involves risk, including possible loss of principal invested. The Portfolio shares the principal risks of the ETFs in which it invests and pays a proportionate share of the operating expenses of those ETFs as well as the direct expenses of investing in the Portfolio. The Portfolio is also subject to the risk that the Sub-advisors' selection of, and allocation of Portfolio assets to, ETFs and futures contracts may cause the Portfolio to underperform. The Portfolio's greater allocation to fixed-income ETFs makes it more susceptible to risks associated with fixed-income securities than equity securities. ETFs that invest in sectors that provide exposure to real estate investment trusts or natural resources involve risks that are unique to those sectors and may respond differently to financial and market conditions because they have a historically low correlation to financial assets. Foreign investment entails special risks such as currency, political, economic and foreign market risks. The volatility management models may not accurately represent risk and projected market performance, in which case the Portfolio may underperform. The use of futures may increase the Portfolio's volatility and may involve a small cash investment relative to the magnitude of risk assumed. If changes in the value of a futures contract do not correspond to changes in the value of the Portfolio's ETF investments, the Portfolio may not fully benefit from or could lose money on the futures position. Futures may also be less liquid and more difficult to value than other investments and may involve counterparty credit risk. Asset allocation and volatility management do not ensure a profit and may not protect against a loss. There is no assurance that a diversified portfolio, the asset allocation strategy or the volatility management strategy will enable the Portfolio to achieve a better return than a portfolio that does not employ these strategies.