Strategy Review – March 2025
Monthly Strategy Commentary
By Kensington Asset Management Team
ADJUSTING TO NEW RISKS
March delivered a stark reminder of how swiftly market sentiment can shift. Trade concerns, rising volatility, and hawkish Federal Reserve commentary all contributed to a more defensive tone across asset classes. While the S&P 500 and Nasdaq 100 fell -5.75% and -7.69%, respectively, fixed income posted modest gains, led by short-term and floating rate exposures. Against this backdrop, Kensington’s strategies made timely adjustments to protect capital and position for the evolving landscape. Below is a summary of how each strategy responded.
MANAGED INCOME STRATEGY
Author: Kensington Asset Management PM Team
Fixed income cooled in March following a strong start to the year. The Bloomberg US Aggregate Bond Index returned just 0.04%, with longer-duration and high-yield sectors falling amid heightened global trade tensions.
Managed Income remained fully “Risk-On” for the eleventh straight month, with a core high-yield allocation complemented by floating rate and senior loan satellite positions. These satellite holdings outperformed in March as high yield declined. However, subsequent to month-end, the model shifted defensively into cash equivalents following a sharp high-yield selloff. We believe this risk-managed approach will position the strategy for attractive reentry opportunities as market volatility resets.
DYNAMIC GROWTH STRATEGY
Author: Kensington Asset Management PM Team
March’s equity selloff, driven by renewed trade fears and rising volatility, pushed markets to fresh year-to-date lows. The S&P 500 and Nasdaq 100 declined sharply, underscoring the fragility of recent gains.
Dynamic Growth remained in a fully defensive posture throughout the month, finishing Q1 well ahead of its benchmark, S&P 500. The strategy was allocated to cash equivalents and short-term Treasuries, delivering a competitive yield while mitigating equity risk.
Following month-end, the model re-entered equities for the first time in 11 weeks, based on an oversold reading from one of Kensington’s indicators – a rare signal last seen in March 2020. While we anticipate this move will be brief, it highlights the value of systematic processes in responding to sharp market dislocations.
ACTIVE ADVANTAGE STRATEGY
Author: Kensington Asset Management PM Team
The Active Advantage Strategy started March fully “Risk-On” with a balanced equity and fixed income mix. Mid-month, the model exited equity positions, helping to buffer against late-March volatility. Nonetheless, losses in higher-yielding fixed income contributed to a negative monthly result.
At month-end, the portfolio consisted primarily of cash equivalents and short-term Treasuries, with a reduced allocation to high-yield credit. Post month-end, the model initiated a tactical allocation to growth equities amid deeply oversold conditions. While caution remains warranted, we continue to let the data guide us.
DEFENDER STRATEGY
Author: Elio Chiarelli – Lead Portfolio Manager, Liquid Strategies
Global markets were mixed, with US equities falling and international markets under pressure from geopolitical and macro headwinds. The Strategy’s diversified exposure – including gold, real estate, Treasuries, and select international equities – supported a stable result.
As momentum signals begin to weaken across several asset classes, the Strategy will look to reduce risk heading into April. The targeted distributions and dynamic allocation framework remain central to our approach in navigating this uncertain environment.
HEDGED PREMIUM INCOME STRATEGY
Author: Shawn Gibson – Lead Portfolio Manager, Liquid Strategies
The Hedged Premium Income Strategy faced significant turbulence in March. Tariff-related fears temporarily drove the S&P 500 into the downside buffer range, only for a late-month rebound to push the index just above that level at option expiration (3/21/25). As a result, the downside buffer expired worthless, creating a modest drag on returns.
However, the short call spreads – which generate income – also expired worthless, helping the Strategy outperform the S&P 500’s -5.75% return for the month. The option structure was reset on 3/21/25 with a 0-3% upside cap (1-month) and a -5% to -20% downside buffer (3-month), fully funded by call premiums.
The Strategy remains on track to deliver its targeted 9% distribution rate and is well-positioned for continued market volatility. Portfolio risk management remains our top priority as equity volatility moves toward historically elevated levels.
Disclaimers:
Investing involves risk, including loss of principal. Past performance does not guarantee future results. There is no guarantee any investment strategy will generate a profit or prevent a loss. Targeted distributions are not guaranteed. For the most recent strategy performance, please visit our website: www.kensingtonassetmanagement.com.
This is for informational purposes only and is not a recommendation nor solicitation to buy, sell or invest in any investment product or strategy. Our materials may contain information deemed to be correct and appropriate at a given time but may not reflect our current views or opinions due to changing market conditions. No information provided should be viewed as or used as a substitute for individualized investment advice. An investor should consider the investment objectives, risks, charges, and expenses of the investment and the strategy carefully before investing.
Kensington Asset Management, LLC (“KAM”) relies on third party sources for some of its information that we believe is reliable. However, we make no representation, warranty, endorse or affirm as to its accuracy or completeness. The information provided is current as of the date of publication and may be subject to change. We are not responsible for updating this information to reflect any subsequent developments or events.
Any indices and other financial benchmarks shown are provided for illustrative purposes only, are unmanaged, reflect reinvestment of income and dividends and do not reflect the impact of advisory fees. Investors cannot invest directly in an index. Comparisons to indexes have limitations because indexes have volatility and other material characteristics that may differ from a particular strategy such as the types of securities being substantially different.
Certain information contained herein constitutes “forward-looking statements,” which can be identified using forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events, results, or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Nothing contained herein may be relied upon as a guarantee, promise, assurance, or a representation as to the future.
Advisory services offered through Kensington Asset Management, LLC, Barton Oaks Plaza, Bldg II, 901 S Mopac Expy – Ste 225, Austin, TX 78746.
Managed Income Strategy
Risks specific to the Managed Income Strategy include Management Risk, High-Yield Bond Risk, Fixed-Income Security Risk, Loans Risk, Market Risk, Underlying Funds Risk, Derivatives Risk, Non-Diversification Risk, Turnover Risk, US Government Securities Risk, Models and Data Risk.
Dynamic Growth Strategy
Risks specific to the Dynamic Growth Strategy include Management Risk, Equity Securities Risk, Market Risk, Underlying Funds Risk, Derivatives Risk, Non-Diversification Risk, Turnover Risk, US Government Securities Risk, Models and Data Risk.
Active Advantage Strategy
Risks specific to the Active Advantage Strategy include Management Risk, High-Yield Risk, Fixed-Income Security Risk, Equity Securities Risk, Loans Risk, Market Risk, Underlying Funds Risk, Derivatives Risk, Non-Diversification Risk, Turnover Risk, US Government Securities Risk, Models and Data Risk.
Defender Strategy
Risks specific to the Defender Strategy include Management Risk, High-Yield Bond Risk, Fixed-Income Securities Risk, Equity Securities Risk, Foreign Investment Risk, Market Risk, Emerging Markets Risk, Real Estate and REITs Risk, Commodities Risk, Tax Risk, Underlying Funds Risk, Derivatives Risk, Non-Diversification Risk, Turnover Risk, US Government Securities Risk, Models and Data Risk, Momentum Risk, and Limited History of Operations Risk.
Hedged Premium Income Strategy
The Strategy invests in options that derive their performance from the performance of the S&P 500 Index. Selling (writing) and buying options are speculative activities and entail greater than ordinary investment risks. The Strategy’s use of put options can lead to losses because of adverse movements in the price or value of the underlying asset, which may be magnified by certain features of the options. When selling a put option, the Strategy will receive a premium; however, this premium may not be enough to offset a loss incurred by the Strategy if the price of the underlying asset is below the strike price by an amount equal to or greater than the premium. Purchased put options may expire worthless and the Strategy would lose the premium it paid for the option. The Strategy may lose significantly more than the premiums it receives in highly volatile market conditions.
The Strategy will invest in short term put options which are financial derivatives that give buyers the right, but not the obligation, to sell (put) an underlying asset at an agreed-upon price and date. The Strategy’s use of options may reduce the Strategy’s ability to profit from increases in the value of the underlying asset. The Strategy could experience a loss or increased volatility if its derivatives do not perform as anticipated or are not correlated with the performance of their underlying asset or if the Strategy is unable to purchase or liquidate a position.
Definitions:
Call Spread: An options trading strategy where the Strategy buys and sells call options on the same asset with different strike prices or expiration dates. The strategy helps manage risk and profit from small price changes.
Put Spread: An options strategy where the Strategy buys and sells put options with different strike prices but the same expiration date. This strategy can be used to limit potential losses while still allowing for profit if the underlying asset’s price declines.
S&P 500: A capitalization weighted index of 500 stocks representing all major domestic industry groups. Index assumes the reinvestment of dividends and capital gains.
Nasdaq 100 Index: A market index that comprises of the 100 largest, most actively traded companies listed on the Nasdaq stock exchange.
Bloomberg US Aggregate Bond Index: An unmanaged index comprised of US Investment grade fixed rate bond market securities, including government agency, corporate and mortgage-backed securities. Investors cannot invest directly in an index. It is also known as US Aggregate Bond Index.
KAM20250416A
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