Defensive By Design Series Part 5: Limiting volatility
In this multi-part series, our UK Business Development Manager, Tara Pain, describes how the Levendi Thornbridge Defined Return Fund is truly defensive by design. This approach allows the Fund to generate positive real returns in all but significant and sustained market declines, offering investors meaningful protection for their portfolios.
Limiting volatility
The Fund’s Portfolio Managers target maintaining the Levendi Thornbridge Defined Return Fund’s 90-day volatility below 10%. In doing so, the Fund aims to generate positive real returns of 7-8% p.a. in all but significant and sustained market declines, while exhibiting lower volatility and market beta than major global equity markets. Ultimately, they want the Fund to provide equity market exposure, but not at the expense of increased volatility.
The most dominant factor influencing the Fund’s volatility is changes in the level of the underlying equity market indices within each holding in the Fund. This factor is so dominant that, for all practical purposes, the volatility of the Fund can be approximated by multiplying the volatility of the underlying markets by the Fund’s delta, which represents how much the Fund’s NAV will move if there is a 1% change in the level of the underlying markets.
The Fund’s Portfolio Managers use a risk analysis tool to control the Fund’s volatility by limiting the direct market exposure. This helps keep the volatility of the Fund’s holdings significantly lower than the maximum volatility of the index and reduces the maximum drawdown of the holdings during periods of market stress.
Overall, the Fund offers investors a significant degree of capital protection, designed to support both wealth preservation and growth, all while limiting volatility. Investors gain equity market exposure that generates positive real returns in all but significant and sustained market declines. Consequently, the Levendi Thornbridge Defined Return Fund is truly defensive by design.
If you want to learn more about this Fund and our other defined outcome funds, email us at funds@causeway-securities.com
Important information
This is a marketing communication, not a contractually binding document. Please refer to the Fund Supplement and to the KIID, and do not base any final investment decision on this communication alone.
This publication is intended to be Causeway Securities own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell, or trade-in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price, or income of any non-sterling denominated investment. Nothing in this document constitutes advice to undertake a transaction, and if you require professional advice, you should contact your financial adviser.
As with all forms of investment, there are risks involved with structured products, including those on our website.
It should always be understood that:
- Structured products are not suitable for everyone
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Causeway Securities incorporates Causeway Securities Ltd, authorised by the UK Financial Conduct Authority, and Causeway Securities LLC, a subsidiary of Causeway Securities Ltd, granted FINRA membership in July 2022 to conduct business in the US.
Causeway Securities Limited is authorised and regulated by the Financial Conduct Authority (FCA FRN 749440) in the UK and is an authorised financial services provider in terms of the Financial Advisory and Intermediary Services Act (Act No. 37 of 2002) in South Africa. Causeway Securities Limited is registered in England and Wales with company number 10102661. Registered address Causeway Securities, 60 Cannon Street, London, England, EC4N 6NP. Causeway Securities Ltd is the parent company of Levendi Investment Management. Levendi Investment Management Ltd (FRN: 783607) is an appointed representative of the Investment Manager Thornbridge Investment Management LLP (FRN: 713859), which is authorised and regulated by the Financial Conduct Authority.
