The objective of the Enhanced Index approach is to generate consistent excess returns over the equity market of approximately 50 – 100 basis points while maintaining a risk profile comparable to that of the S&P 500 Index.  The strategy uses S&P 500 Index futures to gain equity market exposure while investing the portfolio’s underlying assets in investment-grade fixed income securities.  Through this portfolio combination, we are able to provide the high correlation benefits of index fund management, but with the potential for excess returns typically associated with active equity management.  The approach is segmented into two components:  synthetic replication of the equity market through an unleveraged futures position and a short duration bond portfolio.  The futures contracts are used to track the price movements of the S&P 500 Index (beta), but the key to outperforming the index is the value added from the bond portfolio (alpha).



This approach to equity index management is sophisticated yet highly transparent and allows us to add excess return by building on the firm’s core competency in fixed income management.