Schafer Cullen Enhanced Equity Income


Strategy Overview

Portfolio Managers: Jim Cullen, Jennifer Chang, Timothy Cordle, Mike Kelly  Firm Strategy AUM: $779 million as of 12/31/2019 Benchmarks: CBOE S&P500 BuyWrite Index (BXM); Bloomberg Global High Yield Corporate Bond Index (BHYC); SPDR Barclays High Yield Bond ETF (JNK) 

The Enhanced Equity Income strategy was launched in 2010, not as another equity strategy, but rather as an alternative to fixed income. 

This strategy applies the same value investment discipline as the Schafer Cullen High Dividend Value Equity strategy, but adds selectively-written calls on a portion of the stock portfolio. It invests in high dividend stocks and sells short-term call options on  25-40% of the portfolio to generate increased income for investors. 

The portfolio yield target is 6.5%+ (net), which is generated through a 3.25%+ dividend yield and a 3.25%+ call premium yield.   Investors participate in the long-term appreciation of equities while realizing reduced volatility from disciplined value investment and income generation. 

The covered call overlay is designed to enhance income and risk-adjusted total return. Call options are sold based on quantitative factors such as equity valuation and fundamentals, and quantitative factors such as premium return thresholds. Call options are short in duration to maximize time-value-of-money receipt and visibility of equity-market catalysts.