Absolute Return Strategy (ARS)

The IPS Strategic Capital Absolute Return Strategy (ARS) is a low-risk alternative which has delivered consistent returns while adding excellent portfolio diversification.  The IPS team uses exchange-traded options to define tomorrow’s risk today and utilizes strict risk management parameters, actively monitoring and rebalancing market exposure.  We manage money structurally, which allows us to protect against unexpected market events as well as benefit from volatility, as evidenced by our impressive downside performance.

The ARS is a long/short alternative option-based strategy that offers defined downside risk, uncapped upside and convexity with a positive carry.  We manage money structurally, which means to you that we do not use technical, fundamental, or econometric triggers to manage money; this allows us to keep a completely agnostic view on market direction.  Our primary goal is to generate consistent, asymmetric returns, i.e. an upside capture ratio that is greater than our downside capture ratio.  We do this by always being long calls and long puts in the portfolio while generating a positive carry on that structure so as not to lose value in flat markets.

Unlike other option based strategies, which use excessive leverage to generate alpha, the IPS ARS uses zero leverage on the downside to generate an asymmetrical return.  The benefit of not using leverage on the downside and always holding long puts gives us peace of mind knowing that we should always lose less than the market on the downside and, in substantial market declines, our portfolio should show significant downside hedging against the benchmark.

Although we began the ARS in 2011, it is important to take the current strategy and backtest it through periods of extreme stress.  For example, here is the result for the current strategy, as it would have performed during the 2008-9 market downturn.

The Absolute Return Strategy is available as a mutual fund (IPSAX).  For more information, please click here to visit our fund website.

DISCLAIMER: The information on this website should not be misconstrued as an offer to buy or sell, or a solicitation to buy or sell securities. Any historical, non-hypothetical performance contained within this website is representative of net-of-fees performance. The past performance of any investment(s) does not necessarily indicate the future performance of any investment(s). No client, current or prospective, should assume the future performance of their investments will be profitable based on the historical performance. All investments have the potential for profit and the potential risk of loss. Changes in investment strategies, contributions or withdrawals may cause the performance results of one’s portfolio to differ materially from the reported composite performance. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s portfolio. One should always consult an investment advisor before making any investment decisions.

Please click here to read our Disclosure Notice.