has launched a new mutual fund for institutional investors. The Market Plus Strategy
is will use swaps and futures to replicate the return of the S&P 500 while investing in a short-duration fixed-income portfolio, said James M. Heaton
, senior vice president, Federated Institutional Retirement Sales Division.
Heaton said that the strategy is intended to provide the opportunity for consistent outperformance over the S&P 500, while reducing volatility.
"Federated's Market Plus connects the alpha generated by the firm's Active Cash Broad Strategy to the market exposure achieved through derivative securities," Heaton said.
The strategy uses a short-duration bond portfolio based on Federated's Active Cash Broad Strategy to outperform the cost of funding the derivative position, typically the London Interbank Offered Rate (LIBOR), thereby separating alpha, or portfolio manager skill, from beta (market risk) via the portfolio management process.
Portfolio managers Christopher J. Smith and Donald T. Ellenberger will make multiple small, uncorrelated interest rate and credit bets with the goal of generating more yield than available from money market funds, according to Heaton.
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