NEW YORK (TheStreet) -- The new AdvisorShares STAR Global Buy-Write ETF (VEGA), launched Sept. 18, is an actively managed fund of funds that intends to provide consistent, repeatable returns across all market cycles. VEGA's targeted outcome is managed by a proprietary strategy, which happens to have the same name as its ticker symbol: VEGA ("Volatility Enhanced Global Appreciation"). Partnervest Advisory Services serves as the fund's subadvisor and portfolio manager.
VEGA's VEGA is a global asset allocation strategy with covered call and put option overlays. The new ETF writes (sells) call options against each position seeking price appreciation and consistent income. The strategy also employs sales of cash-secured put options. When volatility is low, the portfolio manager buys protective put options to manage downside risk.
I could not locate a description of the global asset allocation process, although the current holdings include cash at 54.5%, SPDR S&P 500 (SPY), 15.0%, iShares MSCI Emerging Markets (EEM), 14.9%, iShares DJ US Real Estate (IYR), 7.4%, and Energy Select Sector SPDR (XLE), 7.3%. Current option overlays include calls sold against the four equity positions along with purchased puts on SPY and iShares iBoxx $ High Yield Corporate Bond (HYG).
Partnervest has been managing similar accounts since October 2008. As of June 30, its VEGA Composite has a one-year return of -0.5%, vs. the S&P 500's 5.4%, and an annualized three-year return of 7.7% compared to 16.5% for the S&P 500. No risk metrics for the composite are provided.VEGA has an expense ratio of 2.01%, consisting of a 1.35% management fee, 0.42% in acquired fund fees and 0.24% of other expenses. Additional information is located in the press release on PRNewsire and AdvisorShares overview page, where you can also find a PDF fact sheet and prospectus. Analysis/Opinion: Despite all that available information, there is an abundance of unknowns about VEGA. Here are my top three concerns:
- The marketing literature states "VEGA can structure a target outcome" but fails to tell us what that target is. Not even a hint.
- Most investors embark on a covered call strategy as a means of increasing income or reducing risk. VEGA's literature does not provide any insight as to what investors should expect with regard to yield and distributions, other than distributions are planned to occur only once per year. No volatility, drawdown or other risk measurements were provided for the manager's VEGA Composite.
- The underlying global asset allocation is currently 54.5% in cash and money market, yet the strategy used to determine this allocation is not described or even mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV