NEW YORK (TheStreet) -- The new AdvisorShares STAR Global Buy-Write ETF (VEGA) - Get AdvisorShares STAR Global Buy-Write ETF Report, 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) - Get SPDR S&P 500 ETF Trust Report

, 15.0%,

iShares MSCI Emerging Markets

(EEM) - Get iShares MSCI Emerging Markets ETF Report

, 14.9%,

iShares DJ US Real Estate

(IYR) - Get iShares U.S. Real Estate ETF Report

, 7.4%, and

Energy Select Sector SPDR

(XLE) - Get Energy Select Sector SPDR Fund Report

, 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) - Get iShares iBoxx $ High Yield Corporate Bond ETF Report


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


AdvisorShares overview page

TheStreet Recommends

, where you can also find a PDF fact sheet and prospectus.


: 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.

    The STAR acronym holds a prominent position in the fund's name. It is assumed to be an acronym since it is written in all caps, but no description is provided. It could be an allusion to the star named "Vega." Someone suggested it means that investors seeking answers to three unknowns above should look to the stars.

    VEGA faces entrenched competition. Current products in the covered-call space include:

    PowerShares S&P 500 BuyWrite

    (PBP) - Get Invesco S&P 500 BuyWrite ETF Report

    has a 0.75% expense ratio, a one-year return (as of 6/30/12 to allow a proper comparison) of +7.5%, and a 12-month yield of 9.7%.

    iPath CBOE S&P 500 BuyWrite Index ETN


    has a 0.75% expense ratio, a 1-year return (as of June 30) of 6.8%, and no distribution yield because it tracks a total return index.

    Gateway Fund

    (GATEX) - Get Gateway Fund A Report

    has a 0.94% expense ratio, a one-year return (as of June 30) of 3.5%, a nearly 35-year record of supplying superior risk-adjusted performance (as outlined in

    this Invest With An Edge article

    ), and a yield of 1.3%. This mutual fund is available in three share classes (A-GATEX, C-GTECX, and Y-GTEYX) with different fee and expense structures. Consult your advisor as to which is the best choice for your particular situation.

    At the time of publication, the author was long GATEX.

    This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

    Ron Rowland is the founder and president of Capital Cities Asset Management, a fee-based registered investment adviser in Austin, Texas. He is also the founder and publisher of Invest With An Edge and All Star Investor, where he has been providing market commentary and active investment advice since 1991. Opinions expressed in this article should not be considered personal recommendations to buy or sell any security.