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October 28, 2003 at 07:00 PM
NEW YORK (HedgeWorld.com)–A division of Zacks Investment Research Inc., a provider of investment information and quantitative consulting, expects to launch Zacks Market Neutral Option Income Fund on Dec. 1 in collaboration with Rockville, Md.-based Lighthouse Partners Ltd. The company is not affiliated with Lighthouse Partners, LLC the hedge fund of fund manager.
The vehicle, managed by Ben Zacks, combines dividend income from a core equity portfolio with premium income from option writing, consisting primarily of covered calls on the portfolio. This is a modified version of a long/short strategy used by Zacks Investment Management for other accounts, with the option overlay added to enhance return.
“The core holdings are the same, the basic strategy is the same, but they’re going to add a little return without adding any risk,” said Bob Pellicoro of Lighthouse. Covered calls do not increase the portfolio’s risk but are expected to add around 5% to performance, he explained.
Zacks’ long/short strategy is dollar and sector neutral. It invests in approximately 200 stocks, with 100 long and 100 short positions. No position is allowed to exceed 2% of the total portfolio.
Bond Fund Substitute
The new fund is designed for conservative investors who focus on current income and long-term capital appreciation and is meant mostly for institutions. “This is for somebody who is looking for stability and current income,” says Mr. Pellicoro.
