Gateway’s Unique Approach to Managing Volatility and Taxes

gateway fund buys and sells options to limit volatilityIn this video, Morningstar‘s Philip Guziec discusses some of the key features of the Gateway Fund with Gateway’s Chief Investment Strategist, Harry Merriken. Some of the key topics of the video include a discussion of how Gateway limits volatility in the fund by collecting premiums from the sale of call options and protecting the downside by buying put options. Merriken also discusses how the fund implements tax management strategies by offsetting capital gains and losses across the underlying stock portfolio and the options positions. By not fully replicating the S&P 500 Index in the underlying equity portfolio (they use an optimization technique instead), Gateway’s portfolio managers can more effectively buy or sell equity positions and generate capital gains or losses depending on the overall tax status of the fund, thus reducing the long-term tax impact to investors.

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