In response to the continued positive returns in the equity markets, Horizon has implemented a strategy in several of our Risk Assist model portfolios designed to help account holders protect their recent gains.

Stocks have delivered impressive results of late. For example, the S&P 500 is up almost 15% since hitting its low for the year on February 11. That performance has been driven by factors such as relatively impressive first quarter corporate earnings, rising oil prices, and the Fed’s cautious interest rate stance.

Due to recent gains, the sensitivity levels that guide the hedging decisions in the Horizon Risk Assist portfolios have been reset. This is a mechanism focused on protecting portfolio gains, which we call ratcheting. This ratcheting occurs at the model account level rather than at the individual account level, but is nonetheless designed to benefit all Risk Assist account holders.

Here’s how ratcheting seeks to protect portfolio gains:

• As markets rise, we expect the underlying value of Risk Assist portfolios to rise as well.

• Whenever a Risk Assist portfolio’s value increases by approximately 3% to 6% (depending on the underlying model), the portfolio value we seek to protect is raised.

• This establishes a new and higher limit to the maximum loss of value in the portfolio—that is, a value that the portfolio will not fall below (assuming the hedging strategies are successful).

• From that point, investment and hedging decisions in the portfolio are designed to maintain a value that is higher than that current maximum loss threshold.

• As future gains are generated in the portfolio, the maximum loss threshold is raised once again—creating a newer, higher floor that the portfolio’s value will not breach if the hedging strategies are successful.

Consider this hypothetical example. Say a Risk Assist portfolio’s current value is $100. If the maximum loss threshold for that portfolio is set at $85, the hedging strategies would be designed to ideally keep the value from falling below $85. (Note that the maximum loss limits are set below, rather than at, high water marks, in recognition of the day-to-day portfolio volatility that occurs under normal market conditions.)

Now assume strong performance in equity markets causes the portfolio’s value to increase by 5%, to $105. At that point, a new and higher maximum loss limit would be established—$90, for example. Future hedging strategies would then seek to ensure that the portfolio’s value stays above $90.

Ultimately, this ratcheting process seeks to continually protect gains in the Risk Assist portfolios, on a rolling basis, for as long as account holders are invested in the portfolios.

Risk Assist® is NOT A GUARANTEE against loss or declines in the value of your portfolio; it is an investment strategy that supplements a more traditional strategy by periodically investing assets in a portfolio of fixed income securities based on Horizon Investments’ view of market conditions.