The Gargoyle Group has launched a new fund it believes to be the industry’s first market neutral fund to hedge with a continually-monitored index options overlay. 

The Fund attempts to produce superior long-term investment returns with low correlation to the US stock market. The Fund uses many of the components of the proprietary methodology employed successfully by its flagship fund for the last 12 years.

The underlying equity portfolio is selected from among the top 2000 capitalised US-listed companies. The options overlay portfolio typically sells near-term call options on indexes that are highly correlated to the underlying stock portfolio. The management company seeks to produce alpha via both stock selection and cumulative excess premiums gained from the sale of overpriced call options.



Josh Parker (pictured) and Alan Salzbank, co-founders of the management company, explained that an index options-based hedge avoids the risk of individual equity positions being “called away” early before they have a chance to outperform and also eliminates many of the risks inherent in shorting “overvalued” equities as a hedge.