We have seen a little negative volatility recently in our portfolio, and we wanted to explain why. It is from two factors, the first is the fact the market, or the S&P 500, has been hitting new highs recently, while the average stock in the S&P 500 is down over 7% from its recent high. This is a rather unusual event, and generally speaking it’s associated with the later part of a bull market, or in other words, the beginning of a bear market. As we hedge our portfolio primarily with inverse S&P 500 ETFs, this has caused some underperformance, as the market has been stronger than the average stock. More significantly, our income tranche has had some negative volatility. We wanted to give our investors more detail as to why the income tranche has been weak of late. We are down a little less than 2% from our recent high, which is not much relative to the volatility of both the stock and bond market, but it is high for us.
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