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BTS HEDGED INCOME PORTFOLIOS

The BTS Hedged Income Portfolios seek to enhance returns, preserve capital in down markets, reduce bond portfolio volatility and provide client-selected distributions.

Diversified Income Portfolio

Investment Strategy

This hybrid investment solution enables investors to not only have regular exposure to the bond market, but also have the ability to preserve capital to some degree during downturns. BTS allocates assets among funds that represent four strategically diverse categories, as shown in the chart at right.

Approach

Hedged Income seeks to enhance investment returns on the Core High Yield and total return bond funds by allocating additional assets to either

  • long High Yield bond funds and/or long U.S. Government bond funds when BTS believes these market sectors will appreciate, or
  • short (inverse) High Yield bond funds and/or short (inverse) U.S. Government bond funds when BTS believes these market sectors will decline.

To manage the long/short strategies, BTS uses its proprietary Market Trend Indicators, a broad range of market data, technical analysis and economic factors used by BTS since 1981.

1 Investing in bond funds carries some risks including; credit risk, which is the risk that the issuers of the bonds owned by a fund may default (fail to pay the debt that they owe on the bonds that they have issued), prepayment risk, which is the risk that the issuers of the bonds owned by a fund will prepay them at a time when interest rates have declined, and interest rate risk, which is the risk that the market value of the bonds owned by a fund will fluctuate as interest rates go up and down.

2 Investing in short or inverse mutual funds (funds designed to profit from declining securities prices) involves certain risks that may include increased volatility due to the fund's possible use of short sales of securities and derivatives such as options and futures. The use of leverage by a mutual fund increases risk to the fund. The more a fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments.