Precious Metals High Yield Bull Fund – GAI
Company: Global Alternative Investments
Asset Type: Finance
The Precious Metals (PM) High Yield Bull Fund offered by Global Alternative Investments aims to offer a high-yield, portfolio volatility-reducing strategy, by opportunistically benefitting from the sale of historically high PM ETF and PM equity index option time premiums. These premiums are set to grow from levels that are low on an intermediate basis, thereby providing increasingly higher yields resulting from the receipts of the ongoing option sales.
Overview
The Precious Metals (PM) High Yield Bull Fund offered by Global Alternative Investments aims to offer a high-yield, portfolio volatility-reducing strategy, by opportunistically benefitting from the sale of historically high PM ETF and PM equity index option time premiums. These premiums are set to grow from levels that are low on an intermediate basis, thereby providing increasingly higher yields resulting from the receipts of the ongoing option sales.
Minimum Expected Returns of 20-30% per annum (gross basis).
In all cases in this document, PM ETFs refer to the SPDR Gold Shares (GLD) and iShares Silver Trust (SLV); PM equity index refers to VanEck Vectors Gold Miners ETF (GDX), VanEck Vectors Junior Gold Miners ETF (GDXJ), Global X Silver Miners ETF (SIL) and Prime Junior Silver Miners ETF (SILJ).
Fund Strategy:
The Strategy’s active management is based on GAI’s proprietary formula, which includes the quantitative analysis-based selection of option sales for premium generation, within the context of the technical analyses of the PM ETFs and their equity indices.
Against long PM ETFs and PM equity index cash positions, generate income by selling options with expiry durations of 1 to 3 months, in any of the PMs or PM equity indices.
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.
Option prices and implied volatility should advance geometrically to mirror the PM’s own anticipated acceleration higher, thereby causing higher fund yields; generally, when common stocks advance, their yields decline unless dividends increase; this represents a distinct advantage for the Fund versus other financial instruments.
Fund Investment Thesis:
The market is searching for a yield as inflation accelerates. This strategy is expected to provide increased yields due to the growth in underwritten time premiums that, in a PM bull market, rally along with their underlying securities.
Assuming an inflation rate of 4.99% and long-term yields of 1.37%, the negative 3.62% return is poor competition for PMs, while the Strategy also aims to 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.
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.
Essentials
Strategy Overview – Key Factors (Active management of the Fund takes the following factors into account)
- Fundamental
- Inflationary currency printing
- Negligible-to-negative inflation-adjusted interest rates make PMs a favored alternative for capital gains and wealth preservation
- Artificially suppressed PM prices versus other asset classes, while the PM indices are undervalued versus other markets
- Quantitative
- Historically undervalued PM prices versus the monetary base
- PM undervaluation versus ongoing and future expectations for USD devaluation
- Geometric and exponential advances in PM options’ implied volatility in longer-dated versus shorter-dated contracts are expected to coincide with acceleration in the PMs and PM indices; Strategy’s option yields could accelerate alongside higher capital gains
- Technical
- Resistance levels as related to discounted fundamentals
- Trend reversal, moving averages, Wave Theory, and volumes confirming quantitative conclusions
- The long-term asymmetric performance versus other asset classes and markets
Strategy Overview – Key Inputs
Options/option combinations written (sold) against PM ETF and/or PM index positions; cash index positions comprise 0-80% of fund
- PM ETFs / PM equity indices
- Charts of both prices and indicators
- Charts and indicators of intra and inter-market levels (i.e – GDX:SLV, GLD:Dow)
- Near, short, intermediate, and long-term time horizons
- GDZ & VXSLV
- Higher volatility equates to higher option premiums and is, therefore, a key determinant in portfolio construction
- The sale of 1-month options is preferred when the chart of the spread between 1 and 3-month options is flatter, whereas the sale of 2 or 3-month options is preferred when the curve steepens; these considerations are vital in attempting to capture the best-annualized yield while considering the technical analysis of expected short-to-intermediate term trends
- Options
- Short put positions are smaller when PM ETF and PM equity index positions are greater
- Short put positions enhance portfolio income and cause accumulation of underlying at cheaper prices if options are exercised
- Short call positions are higher when PM ETF and PM equity index positions are greater
- Short call positions enhance portfolio income and are greater when PM ETF and PM equity index positions represent a greater portfolio weighting; they also enhance sale prices if exercised
Founder and Chief Investment Officer – Sid Klein
Mr. Klein has 39 years of experience, including extensive expertise in precious metals, equity, and currency markets, as well as advanced knowledge of option pricing theory.
- Competitive Advantage
- Aptitude for collecting and evaluating macro-economic and financial data pertaining to US, Asian, and European equity markets, currencies, and precious metals
- Ability to generate efficient investment strategies that seek to benefit from premium mispricing, including analysis of volatility premium inefficiencies to hone favored opportunities
- Capacity to employ heightened leverage and tailor the investment strategy to smooth and limit investor portfolio volatility
- Field of Expertise
- Superior track record of issuing price forecasts and market calls across multiple asset classes and markets
- Mr. Klein’s macro skills are comprehensive and used in conjunction with demanding criteria in volatility premium analysis and portfolio construction of actively managed, efficient option spread and combination strategies
- Applies fundamental, valuation, quantitative, and highly sophisticated technical analyses to equity markets in the US, Asia, and Europe, including the precious metals and the major currencies
- Seasoned experience to deal with market scenarios that have no historical precedents from which to draw
- Extensive Experience
- Investment advisor 1982-2000; US equities, Asia, and precious metals focus since 1988
- Specialized, in-depth derivative skills
- On-ground Japanese, Asian research
- Written commentary since 1988
Mr. Sid Klein has forecasted several major market turning points within a 48-hour window
- Key Market Forecasts
- Dow 2000 peak
- Dow 2002 low
- August 2003 Nikkei bottom
- January 2008 Dow peak confirmation
- December 2008 Precious Metals bottom
- Dow 2009 low
- KeyPress Recognition
- Barron’s
- Globe and Mail
- CNBC
- Financial Times
- Individual Investor
- Nikkei Net
Disclaimer
This is a test the waters page. Please register your interest via the button included on this page to receive additional information.
