Cache Exchange Funds are designed to seek exposure that approximates the characteristics of a designated benchmark index. The applicable benchmark varies by fund. Current examples include the S&P 500, S&P 500 Growth, and Nasdaq-100. Investors should refer to the applicable fund materials for the benchmark associated with a particular fund.
When we say that each Cache Exchange Fund “approximates a specific index,” it means that the fund aims to mimic the investment characteristics and performance of that index, though not by directly replicating it stock-for-stock.
Instead, the Cache Investment Team uses a strategy that involves:
Portfolio Diversification: We create a portfolio that includes a variety of securities which, when combined, aim to have similar risk and return characteristics to those of a specific index. This will likely include many of the same stocks that are prominent in that index.
Targeted Exposure: Instead of replicating the exact composition of a specific index, the fund targets a similar exposure through a diversified approach. This means investing in a mix of assets that aligns with each index's dominant themes and sectors but may also include additional assets designed to enhance diversification and manage risk.
Investment Algorithm: By employing an investment algorithm that considers factors like benchmark weights, factor exposures, correlation, beta considerations, and sub-sector allocations, we are able to craft a portfolio that aims to behave similarly to a specific index in terms of overall market movements and returns.
The goal is to provide investors with a similar growth trajectory and investment experience to what they desire from an index fund tracking the S&P 500, S&P 500 Growth, or Nasdaq-100, but with the potential tax efficiencies of an exchange fund. This approach allows each fund to be flexible in its asset selection while still aligning closely with the performance and risk profile of each exchange fund's benchmark index.
Learn more about the benefits of diversifying from a concentrated position.