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Cavanal Hill Funds offers new hope for yield seekers

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·7 min read
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Cavanal Hill launches new Hedged Income Fund

TULSA, Okla., Jan. 11, 2021 (GLOBE NEWSWIRE) -- Cavanal Hill announces the creation of a new yield focused fund, the Hedged Income Fund (the Fund).

Traditional income investments like corporate and government bonds have historically been logical investments for retirees and risk-adverse investors. Given the current environment of diminished yields, however, many investors are now struggling to find alternative strategies for generating income for their portfolios while still protecting their hard-earned savings.

“Over the past few years a challenge for fixed income investing has developed,” said Matt Stephani, President of Cavanal Hill Investment Management, Inc. “Yields on traditional sources of investment income have steadily declined, leaving investors grasping for yield from other, often riskier types of assets.”

In response, Cavanal Hill Funds developed the Fund which has the following characteristics:

  • Attractive Yield: Targeting a yield higher than that of the S&P 500

  • Downside Price Protection: Price hedging is in place to protect the portfolio from large downward moves in the market

  • Reduced Volatility: Volatility of returns that are significantly lower than the S&P 500

  • Tax-advantaged Income: Dividends on stocks are currently taxed at a lower rate than the top marginal rate on interest income

The Cavanal Hill Hedged Income Fund utilizes Cavanal Hill Investment Management’s experience in designing attractive, dividend-paying equity portfolios with Lavaca Capital, LLC’s expertise in options investing. Cavanal Hill Investment Management has developed a proprietary process of identifying companies with strong and growing cash flows and consistent dividend growth. Products utilizing this process were previously only available to ultra-high net worth clients and institutions until now. Lavaca adds a custom options overlay to the Cavanal Hill process by writing covered calls on securities held in the Fund and utilizing some of the premium income to purchase broad-based puts. As a result, the Hedged Income Fund provides an attractive yield for investors via dividend income and net call premiums while also protecting the Fund from significant downside. This creates an innovative and timely product solution for a low yield environment.

The Fund is managed by:

Brandon Barnes, Senior Equity Portfolio Manager, Cavanal Hill Investment Management, Inc.
Mike Schloss, Equity Portfolio Manager, Cavanal Hill Investment Management, Inc.
Scott Phillips, Founder, CEO, and CIO, Lavaca Capital LLC
Jacob Johnson, Portfolio Manager, Lavaca Capital LLC

The fund’s three share classes will be listed on the NASDAQ exchange under the following symbols:

Institutional Share Class:

AILIX

Investor Share Class:

APLIX

A Share Class:

AALIX

Disclosures

Cavanal Hill Investment Management, Inc. is an SEC registered investment adviser and a wholly-owned subsidiary of BOKF, NA, a wholly-owned subsidiary of BOK Financial Corporation, a financial holding company (“BOKF”). Cavanal Hill Distributors, Inc., member FINRA, is a wholly-owned subsidiary of BOK Financial Corporation, and an affiliate of BOKF, NA and Cavanal Hill Investment Management, Inc.

Past performance does not guarantee future results. Investment are subject to risks, including the possible loss of the principle amount invested. An investor should consider the Fund’s investment objectives, risks, and charges and expenses carefully before investing or sending money. This and other important information about the investment company can be found in the Fund’s prospectus or summary prospectus. To obtain a prospectus or summary prospectus online, please visit cavanalhillfunds.com or call 800-762-7085. Please read the prospectus or summary prospectus carefully before investing.

Investment Risks

The market value of a security may move up and down, sometimes rapidly and unpredictably. The value of a security may decline for a number of reasons which directly relate to the issuer, such as management performance, earnings and sales trends, investor perceptions financial leverage or reduced demand for the issuer’s goods or services. The risk of investing in derivative instruments, including liquidity, interest rate, market, credit and management risks, mispricing or improper valuation. Changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index, and the Fund could lose more than the principal amount invested. The risk of potential losses if equity markets or an individual security do not move as expected and the potential for greater losses than if these techniques had not been used. By writing covered call options, a fund will not benefit from any potential increases in the value of a fund asset above the exercise price, but will bear the risk of declines in the value of the asset. Writing call options may expose a fund to additional costs. Writing of covered call options are also subject to the risk that the counterparty to the transaction will not fulfill its obligations. As a large percentage of a Fund’s assets may be invested in a limited number of securities, each investment has a greater effect on a Fund’s overall performance and any change in the value of those securities could significantly affect the value of your investment in the fund. Investments of a “non-diversified” mutual fund are not required to meet certain diversification requirement under Federal law. Compared with “diversified” portfolios, a non-diversified fund may invest a greater percentage of its assets in the securities of an issuer. A decline in the value of those investments would cause the Fund’s overall value to decline to a greater degree than if the Fund held more diversified holdings. There is no guarantee that the investment techniques and risk analyses used by the Fund’s portfolio managers will produce the desired results. The fund’s investment in dividend-paying stocks could cause the fund to underperform similar funds that invest without consideration of a company’s track record of paying dividends. Stock of companies with a history of paying dividends may not participate in a broad market advance to the same degree as most other stocks, and a sharp rise in interest rates or economic downturn could cause a company to unexpectedly reduce or eliminate its dividend. The risk associated with higher transaction costs, delayed settlements, currency controls or adverse economic and political developments. Foreign securities may be affected by incomplete or inaccurate financial information on companies. There is a risk of loss attributable to social upheavals, unfavorable governmental or political actions, seizure of foreign deposits, changes in tax or trade statutes, and governmental collapse and war. These risks are more significant in emerging markets. The risk that the stocks of mid-capitalization companies often have greater price volatility, lower trading volume, and less liquidity than the stocks of larger, more established companies. Small cap companies may be more of larger companies or the market averages in general. Small cap companies may be adversely affected during periods when investors prefer to hold securities of large capitalization companies. If positions held by the Fund were treated as “straddles” for federal income tax purposes, or a Fund’s risk of loss with respect to a position was otherwise diminished as set forth in Treasury Regulations, dividends on stocks that are a part of such positions would not constitute qualified dividend income subjects to such favorable income tax treatment or qualify for the dividends received deduction for corporate shareholders. In addition, generally, straddles are subject to certain rules that may affect the amount, character and timing of the Fund’s gains and losses with respect to straddle positions by requiring, among other things, that 1) any loss realized on disposition of one position of a straddle may not be recognized to the extent that the Fund has unrealized gains with respect to the other position in such straddle; 2) the Fund’s holding period in straddle positions be suspended while the straddle exists (possibly resulting in a gain being treated as short-term capital gain rather than long-term capital gain); 3) the losses recognized with respect to certain straddle positions that are part of a nixed straddle and that are non-section 1256 contracts to be treated as 60% long-term and 40% short-term capital loss; 4) losses recognized with respect to certain straddle positions that would otherwise constitute short-term capital losses be treated as long-term capital losses; and 5) the deduction of interest and carrying charges attributable to certain straddle positions may be deferred.

Media contact:
Cody McAlester
cmcalester@bokf.com