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March 27, 2020

Beacon Investment Funds Update

As you are well aware, the financial markets have been reacting violently to the spread of the novel coronavirus, COVID-19, throughout the globe.

Beacon investment funds have fared relatively well during this volatile period.  As of the time of this writing, Planned Return Strategy is down -11.66% year-to-date and 693 basis points ahead of the S&P 500 index return of -18.59%, while Accelerated Return Strategy is down -16.94%, 165 basis points ahead of the S&P 500 index year-to-date.  When measured from the 2/19/20 market peak to the 3/23/20 market trough, Planned Return Strategy added 10.49% alpha, while Accelerated Return Strategy added 3.00% alpha.  We expect the relative outperformance to continue as our monthly tranches mature at their par values, delivering downside protection and upside enhancement.

We are not market timers and have remained fully invested through this volatile period as per our mandate, which is to provide disciplined, rules-based equity strategies with downside protection, upside participation/enhancement, and options income.

The recent volatility provided us with a great opportunity to reset our monthly exposure at much higher payoff levels than historical averages.  Our March re-investment which we implemented on 3/16/20 included a 25% annualized cap for Planned Return Strategy and 33% annualized cap for Accelerated Return Strategy, well above the long-term averages.  Since we trade the most liquid index in the world, S&P 500, we experienced no issues from a liquidity standpoint in putting a large amount of capital to work during this unprecedented liquidity crisis which impacted even the safe investments such as high-credit corporate bonds negatively.

As a reminder, Beacon’s rules-based strategies attempt to add value through intelligent portfolio design and implementation, not through individual security or sector selection.  They seek to offer a diversified portfolio of domestic equity exposure with contractually defined outcomes and stable returns, taking the emotion out of investing.

One final important point on the spread of the virus, is that Beacon employees have remote access capabilities.  While we have not been impacted by an office closure, if one were to occur, Beacon will remain open.  You have complete access to your team in all aspects of communication such as email, phone, text message, etc.  We will keep you informed of the rapidly changing environment, but please be assured, our priority of servicing clients and managing investments is fully intact.

Beacon Funds Portfolio Management Team

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