As any asset manager attempting to outperform the market we must find securities that provide a higher than average risk-reward ratios. Our investing philosophy starts with the classification of the risks in the market place. By far, the largest risk is the "Market Risk"—that is the risk we are generally trying to mitigate with the strategy of covered calls. The second largest risk, or rather a group of risks—the "Sector" and "Industry" risks—are the risks we do take.
Vega Equity Programs invest primarily in common stocks and other equity securities of U.S. companies. There is no particular capitalization bias in our selections, but as a general rule, we do not buy micro-cap companies.
It is our belief that the macro and aggregate microeconomic factors largely define the economic well-being of industrial groups. We also believe that earnings ultimately drive the stock prices. Our deep understanding of industries' economics allows us to find groups of securities that are poised to deliver superior performance. The judgments we make are most often not related to individual equities—general prediction of individual stock's behavior is a fruitless exercise because of the sheer amount of noise built into equity prices. Instead, we make judgments on the whole industries and sectors of the economy—using the law of large numbers to eliminate much of the noise—a much more sound approach based on scientifically derived and backtested models. We may or may not assume smaller risks, such as capitalization, growth/value and interest rate. While our methods allow us to analyze these, the assumption of these risks is often a difficult task that involves high degree of leverage and the use of complex and illiquid derivatives—practices we generally avoid.
Depending on our macro-view of the market, we might be fully invested, or have significant portion of the client's equity portfolio in money market funds. We do not believe in timing the markets in the conventional sense, but we strongly believe in the theory of reasonable returns. We monitor our equity exposure very carefully, and make the necessary adjustments. Such dynamic allocation of capital is an additional instrument of controlling the risk in the portfolio.
Vega Equity * ™ attempts to outperform the market while minimizing market exposure at the same time. Vega Equity * ™ strategy uses covered calls, options on Exchange Traded Funds (ETF) and indices, etc. Traditionally, the use of these instruments has been reserved for ultra-wealthy clients with tens of millions of dollars in equity accounts. Due to our new technology investments, and our continuous work on mathematical modeling of the stock market, we are now able to bring these refined techniques to equity accounts as small as $250,000.
Note: due to government regulations, Vega Equity * ™ is only suitable to qualified clients.