Michael Buckius, CFA®, CEO, CIO, and Portfolio Manager at Gateway Investment Advisers, an affiliate of Natixis Investment Managers, joined Keith Black, Managing Director of RIA Channel, to discuss how investors can take advantage of today’s market, characterized by volatility and interest rate levels higher than those experienced before 2022.
Gateway was founded in 1977 and offers quantitatively driven equity strategies paired with options-based investing to meet the needs of risk-aware investors.
Buckius notes that we are in a new era of equity market volatility. Before the COVID-19 pandemic, interest rates and equity market volatility were low, with the Federal Reserve supporting risk markets. As inflation and interest rates rose, equity markets entered a period of heightened volatility. While markets today are likely to continue their rollercoaster ride with geopolitical and tariff uncertainty, Gateway remains constructive on the resilience of the US economy.
The benefit of higher levels of equity market volatility and interest rates leads to increased prices of equity options. Investors who sell options can earn higher levels of income during periods of higher option prices. Strategies that monetize volatility are more compelling in the current environment.
Gateway invests in quantitatively managed equity portfolios with options-based risk management. The portfolios track broad markets with an understanding of the underlying factor exposures. Long-term research demonstrates the value of the quality factor, aligning well with Gateway’s core firm values. Quality stocks tend to have high levels of return on equity (ROE) and generate substantial cash flows, backed by strong moats against competition. These firms often return substantial capital to shareholders in the form of dividends and stock buybacks. Historically, quality stocks have provided some protection in declining markets.
Mike Buckius has been with Gateway for over two decades, as long as the firm has been managing exchange-traded derivative income funds. Gateway offers a core equity portfolio with a tilt toward the quality factor, combined with a disciplined options-selling strategy. The core equity portfolio is designed to generate growth, the options-selling strategy generates income, while the quality factor seeks to reduce downside risk. As a portfolio manager of several funds, Mike believes the ability to incorporate risk management into an equity portfolio provides investors who have a shorter time frame or lower risk tolerance a way to participate in equity growth without experiencing the whole rollercoaster ride of the market. Risk-managed equities can help keep clients invested in pursuit of their long-term goals.
Resources:
Natixis Gateway Quality Income ETF (GQI)