You ever asked yourself why vola in S&P 500 has been dampened over the course of the last 10 years? Don´t look further: https://www.wsj.com/articles/pensions-play-with-puts-for-protection-1471777202 Quote: " The CBOE S&P 500 PutWrite Index, a benchmark for the strategy, has returned 4.4% this year through Friday, versus an 8.4% total return for the S&P 500, which includes dividends. The PutWrite index didn’t fall as sharply as the market during the selloff of early 2016, but has lagged behind the rallies. In 2008, during the financial crisis, the put-write strategy returned minus-27% compared with the S&P 500’s return of minus-37%. CBOE’s calculations of how the index would have performed before its 2007 creation estimate that annualized returns over the 30 years through this June were 10%, narrowly topping the S&P 500. Risk mitigation was behind a decision by the Hawaii Employees’ Retirement System to invest $1.6 billion of its $15 billion portfolio in a put-writing strategy, which it expects to be fully invested by October. Based on how the options would have been priced last week, Hawaii could generate about $19 million a month in income if it wrote puts on the full amount and the options weren’t exercised, according to Neil Rue, a managing director at Pension Consulting Alliance, an independent firm that works with the pension fund. Hawaii wanted to diversify market exposure after the financial crisis hit many assets at once, according to Vijoy Chattergy, chief investment officer at the pension fund. “After the great financial crisis, we recognized that there was a lot of risk in our portfolio,” he said. “We’ve been in an ongoing effort to address those concerns and understand them.” Pension Consulting Alliance first suggested Hawaii use the strategy and currently advises on it, Mr. Chattergy said. In a January 2015 presentation prepared for the pension fund, the consultant described put writing as offering “favorable risk-adjusted returns,” because buyers of put options tend to overpay for insurance. South Carolina’s goals were similar. The approach is a complement to the traditional equities risk in other parts of the commission’s $28 billion portfolio, said Geoff Berg, acting chief investment officer for the South Carolina Retirement System Investment Commission. It has committed about half of a $1.4 billion equity options allocation to the strategy. South Carolina Treasurer Curtis Loftis, who is a member of the pension fund’s investment commission, has been critical of the fund’s decisions in the past. He voted to approve the put-writing strategy, but remains cautious about it. “l think it’s difficult to assess the true risk of these strategies,” Mr. Loftis said. He added, “one of the great untold stories of the pension world is how we have underestimated risk.”" PutWrite FactSheet: http://www.cboe.com/micro/put/putwrite-fact-sheet.pdf Methodology: http://www.cboe.com/framed/pdfframe...Methodology+for+the+PUT/PWT+Index+(July+2014) GL+GT Nighthawk
Oh, and here is reason Number 2 for low vola S&P 500: Goldman Rips Into U.S. ‘Misconceptions’ About Share Buybacks https://www.bloomberg.com/news/arti...public-discourse-gets-it-wrong-about-buybacks Quote: The tax-law changes did sharply boost cash spent on buybacks, with a 52 percent jump in 2018 to $819 billion for S&P 500 companies, the report said. Goldman estimates that will rise to $940 billion this year. “Much of the cash that firms repatriated in 2018 has been recycled back into the domestic economy through a combination of both buybacks and dividends,” the report said.