Payden & Rygel's Enhanced Equity strategy seeks to outperform the broad stock market (e.g. the S&P 500 Index). This strategy uses stock index futures in attempt to beat the S&P 500 Index with a different source of alpha. Returns are enhanced with a short-term bond portfolio.
The additional return is added with a bond portfolio where we invest in short-maturity, investment-grade and non-investment grade debt, including sovereign debt, agencies, corporate debt, and mortgage-backed and asset-backed securities. Enhanced equity portfolios use a short bond portfolio and stock-index futures to track the Stock Index. We do not use futures to lever the portfolio. Payden & Rygel’s expertise in short-maturity bonds provides real value to the portfolio and enhanced index strategies can be implemented for any major equity index, using one or more liquid futures contracts.
This "stocks plus alpha" strategy has been employed successfully as a core equity holding by institutional investors for many years. The enhanced equity index strategy works well for large and mid-cap stock portfolios.