About EPO
Rampart’s Equity Program Overlay (EPO) investment program, driven by the Rampart Options Management System (ROMS®), can help institutions monetize stock and market volatility. It provides for increased utilization of the underlying investment vehicles, whether it is a passive investment vehicle or a collection of active managers, by identifying and selling call options appropriate to the underlying asset(s) in a systematic and disciplined manner to generate additional income. (If the institution has sufficient equity assets, call options can be sold on individual positions—effectively implementing CSO at the portfolio level.)
An interactive dialogue with institutional investors and their consultants is an important aspect of our investment approach. Each institutional investor has unique risk/return requirements and is exposed to different investment vehicles based on the structure and equity allocations of their investment program. Therefore, each prospective institutional client typically requires customized modeling of their existing investments to aid in determining an appropriate Equity Program Overlay.
The Equity Program Overlay strategy can help increase the productivity or utilization of an investor’s diversified equity portfolio. Selling index options against the underlying portfolio assets generates premium income in addition to any dividends received ftom that portfolio. An investor must be willing to forego, at least temporarily, potential upside appreciation beyond the Target Price in exchange for the benefits of added incremental income.
The first step of our investment approach is an analysis of the institution’s investments. In cases where institutions seek to gain the beta exposure to various equity classes passively, Rampart reviews the institution’s holdings information and analyzes the optionability of the particular exposures using a ROMS-generated Indicative Program Opportunity (IPO) projection. These exposures are generally static and expressed relative to widely recognized benchmarks, like the S&P 500, Russell 2000, MSCI EAFE, or MSCI Emerging Market Free indexes. This is ideal for an Equity Program Overlay.
Equity Program Overlay Factsheet