Playing the Field with This Fund

Dating is usually the first thing that comes to mind when hearing the phrase “playing the field,” but today, we are playing the field with this uncorrelated exchange-traded fund (ETF).

The expression often refers to dating multiple people at once, to see what works and what doesn’t work. The goal is to minimize risk and maximize reward — essentially, it boils down to not putting all your eggs in one basket.

Not putting all of its eggs in one basket is exactly what Core Alternative ETF (NYSE: CCOR) seeks to do. The fund utilizes a combination of several strategies with the purpose of producing capital appreciation, while reducing risk exposure across market conditions.

CCOR invests primarily in U.S. equities, specifically focusing on high-quality companies across all industries and sectors that have the potential for long-term total returns stemming from their ability to grow earnings and willingness to increase dividends over time.

In normal market conditions, at least 80% of the value of the fund’s net assets will be invested in equity securities. The fund’s goal is to then invest the remaining value of its net assets into options where the pricing provides favorable risk versus reward models and where gains can be attained independent of the direction, or volatility, of the broader U.S. equity market.

Using proprietary models and portfolio analysis of historical funds, CCOR is then able to identify appealing option-trading opportunities, including favorable call and put option spreads.

However, it is true that this option strategy may cause the fund to sacrifice some upside, but in return, it also shields the fund from excessive downside risk exposure… a bit like playing the field.

CCOR has $496.53 million in net assets and a weighted average market cap of $309.15 billion. Now, while I agree that the fund has taken a plunge, that’s not too unbelievable given the current market conditions, and uncertain Fed and varying U.S. debt-ceiling chatter. However, if you look at the beginning of November, it’s clear that this fund can reach new highs and hold its strength.

Chart courtesy of StockCharts.com.

CCOR’s top 10 holdings include JPMorgan Chase & Co. (JPM), 3.02%; PepsiCo, Inc. (PEP), 2.95%; Johnson & Johnson (JNJ), 2.83%; Walmart, Inc. (WMT), 2.82%; Eli Lilly and Co. (LLY), 2.80%; Fiserv Inc. (FISV), 2.28%; Morgan Stanley (MS), 2.76%; Microsoft Corp. (MSFT), 2.76%; Merck & Co. Inc. (MRK), 2.73% and Genuine Parts Co. (GPC), 2.70%.

Ultimately, CCOR is playing the field, which is a game full of risk and reward. But unlike in the dating world, there is a precision to it. The fund’s option strategy allows it to navigate the choppy market waters and remain a bit further away from the hazards of a volatile market.

No one wants to have their heart broken or their gains lost, so maybe playing the field isn’t such a bad idea after all. However, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You may just see your question answered in a future ETF Talk.