At its core, Return Stacking™ is the idea of layering one investment return on top of another, achieving more than $1.00 of exposure for each $1.00 invested.

The strategy or investments layered on top are often called the “overlay.”

Return Stacking^TM can allow investors to maintain their target market exposure while introducing new, potentially diversifying sources of return.  If thoughtfully selected, these new return streams have the potential to increase portfolio returns and reduce portfolio risk.

To achieve more than $1 of exposure for every $1 invested, Return Stacking™ uses leverage.  This leverage is commonly achieved through derivatives such as futures or swaps. 

These instruments usually require only a small outlay of cash to serve as collateral and come with a financing cost, which is usually tied to the short-term money market rate.

There are tax considerations to be aware of when implementing Return Stacked^TM strategies.  For example, daily gains and losses in futures contracts may need to be calculated as realized for tax purposes, which may affect ordinary income or capital gains depending upon the contract.

You should consult your tax advisor before investing.

Return Stacked^TM strategies may exhibit greater losses or lesser gains versus a non-stacked portfolio if the overlay underperforms the cost of financing.

Furthermore, market-linked instruments, like futures and swaps, may not perfectly track underlying benchmarks or exposures over time.