Precious Metals High Yield Bull Fund

The Precious Metals High Yield Bull Fund aims to offer a high-yield, portfolio volatility-reducing strategy, by opportunistically benefiting from the ongoing sales of 1-3 month PM ETF and PM equity index options. Further, on an intermediate term basis, time premiums (implied volatility) are low today and set to grow.

While the market is searching for yield as inflation accelerates, therefore, the Strategy is expected to provide increasing yields due to the growth in underwritten time premiums that, in a PM Bull market, rally along with their underlying securities. This scenario represents a highly favorable double whammy

Specifically, by exploiting the high yield sales of options of 1 - 3 months in duration, the Fund seeks to provide ongoing income, as well as leveraged insurance against a potential bear market in the broad equity indices by taking advantage of the historically asymmetric performance of the PMs versus the major stock groups. It is in these two classes’ historically asymmetric performance that we find the leverage in the strategy, option writing for yield, notwithstanding

When common stocks advance, their yields decline unless dividends increase; this represents a distinct advantage for the Fund versus other financial instruments.

Assuming inflation-adjusted negative yields of ~4.00%, competition is poor against the PMs, while the Strategy aims to also provide the high yielding product that investors seek.

The Manager believes that global equities are at major highs, viewing 2000 as having marked the summit of equities’ “real” inflation-adjusted peaks, in both financial and economic terms; this view is coupled with the outlook that a secular bull market in the PMs began in 2001-2002, while still being in their nescient stages today. Meanwhile, the stock market faces several formidable tailwinds, not the least of which being stock valuations

The manipulation of global asset prices via currency printing and interest rate suppression has created unsustainable, artificially inflated equity valuations that are expected to cause much higher PM prices, all while investors seek value, diversification, and protection in an ever-worsening long term inflationary environment

August 15, 2021

The Fund's rules-based strategy seeks to benefit from favorable pricing in equity index options (implied volatility) vis-a-vis their historic volatilities. Specifically, by exploiting the relationship between shorter and longer-dated contracts, the Strategy aims to provide ongoing income, as well as leveraged insurance against sharp equity index declines.

The Strategy demonstrated respectable gains after positive quarters, along with 65-95% profits after sharp bear market-style declines. Importantly, the Strategy deploys only 20% of the fund's book value (profits are not reinvested). This speaks to an unusual risk/reward ratio.

Therefore, since positive quarters all but assure a gain, the vehicle does not represent a holding which is dependent on bad markets, while seeking to hedge portfolios during today's dangerous period for equity investment.

Having subjected the trade program to stress tests within the post-2009 bull market, the Manager was able to conclude that the fund should be profitable in all markets over any reasonable period of time. The Strategy was not simply run through back-testing scenarios utilizing 'cherry picked' periods. Analysis was conducted on how the Strategy behaved from 'trough to peak,' as well as 'peak to trough' periods within the decade-long bull market (research available upon request).

To maintain superior pricing when repositioning after sizeable gains are realized as a result of a sharp market decline, the Strategy's rules-based criteria includes a VIX component.

The Strategy is the perfect response to the Manager's belief that global equities are at magjo highs, viewing 2000 as having marked the summit of equities' "real" inflation-adjusted peaks in both financial, as well as economic terms.

Consistent with peaking equity markets, volatility premiums returned to historically low levels in 2019. The manipulation of global asset markets via currency printing and interest rate suppression has created unsustainable, artificially inflated equity valuations.

U.S. Equity Index Income & Protection Fund