The recent financial crisis has left a challenging investment environment for fund managers. With interest rates hovering at record lows and equities only having recently regained levels set 14 years ago, the typical buy-and-hold strategy may not cut it. At the public pension level, the situation is especially dire, as unemployment remains stubbornly high, as does the need for public assistance at the state and local levels. In order to keep budgets balanced, municipalities have historically underfunded pensions. Meanwhile, an aging population is projected to further strain defined benefit plans.
Many have turned to alternative investments such as hedge funds, private equity and managed futures funds. Others may choose to enhance yield by employing alternative strategies, either in-house or through a third-party investment management firm.
Xerxes Bhote has spent nearly three decades in the institutional investment space. In his current role at TJM Investments, he manages portfolio enhancement and protection strategies for institutional clients using options. He sat down with John Lothian News editor-at-large Doug Ashburn to discuss the current investment challenges faced by pension funds, the ins-and-outs of options-base yield enhancement strategies, and the challenges of using options in a low-volatility environment.
This video is intended for Institutional Investors. OPTIONS ARE NOT SUITABLE FOR ALL INVESTORS. Please ensure that you have read and understand the current options risk disclosure document before entering into any option transaction. The options disclosure document can be obtained from your Broker, on-line at http://www.optionsclearing.com/about/publications/character-risks.jsp or by calling 1-888-OPTIONS. Any strategies discussed are strictly illustrative for educational purposes and are not to be construed as an endorsement, recommendation or solicitation to buy or sell securities.