Targeting investors looking for better returns but lower risk, USAA is planning to roll out the USAA Global Managed Volatility Fund on July 12, according to a registration filing. The fund seeks to attain long-term capital appreciation while attempting to reduce volatility during unfavorable market conditions.
Expenses are 150 basis points for fund shares; 97 bps for institutional shares.
The fund’s principal strategy is to combine a portfolio of domestic and foreign equity and debt securities with the use of alternative investment strategies to provide growth with greater downside risk controls, according to the filing. The fund may invest in multiple asset classes including U.S. stocks, non-U.S. stocks in developed and emerging markets, global real estate securities, and fixed-income securities. The fund will move its allocation between these asset classes to take advantage of opportunities and to manage risk, the filing says.
This new fund is intended to be primarily invested in stocks and ETFs that invest primarily in stocks. However, there are times when bond markets will provide opportunities for what the adviser believes to be stock-like returns with equal or less market risk.
These bond market opportunities (including opportunities in the high-yield bond markets) will be considered along with stocks in seeking to enhance the performance of the fund.
In an attempt to reduce the fund’s volatility over time, the fund may implement an option-based risk-management strategy. This strategy involves purchasing and selling options on component indices or corresponding ETFs. The combination of the diversified stock portfolio with the index call and put options is designed to provide the fund with fairly consistent returns over a wide range of equity market environments, according to the filing.