For decades, bonds were the ballast of credit union investment portfolios — the reliable anchor that promised stability. But after the sharp and unexpected rate increases beginning in 2022, that anchor has started to drag. What was once considered the safest corner of the balance sheet has quietly become the biggest source of losses, limiting flexibility and eroding confidence.
Even with recent rate cuts, those embedded paper losses remain stubbornly high. Moving from near‑zero rates to 5.25% in record time created a deep mark on portfolios, and modest easing has barely chipped away at it. No one expects a return to zero rates, which means patience alone is not a strategy.
A Modern Framework For Safety
Elite Capital Management Group employs structured protection within the framework of the long‑standing zero‑cost collar strategy. At its core, this means owning the underlying exposure, buying a put to establish a floor, and selling a call to fund that protection. The result is a defined loss threshold with participation in upside returns up to a predetermined cap.
For decades, this framework has successfully established floors and ceilings, allowing institutions to participate in equity growth while insulating against declines. Today, it has been packaged into a daily liquid investment vehicle, bringing transparency, liquidity, and accessibility to a proven concept.
Why This Is A Big Deal For Credit Unions
Many credit unions rely heavily on bonds across multiple investment account types. Although fixed income plays an important role, over-allocating to bonds presents meaningful challenges:
- Limited Long-Term Total Return Potential — Bonds have historically underperformed other asset classes over long time horizons. Although they tend to exhibit lower volatility, excessive reliance on fixed income increases the risk of “growing poor safely.” In an environment of persistent inflation uncertainty, institutional investors must prioritize real returns — returns after inflation.
- Concentrated Interest Rate Risk — As a financial institution, most components of a credit union’s balance sheet are sensitive to interest rates. Over-allocating to bonds provides little diversification from this risk and can amplify balance sheet vulnerability during rate shifts.
Structured protection strategies offer credit unions the potential for higher long-term total returns than bonds while muting the volatility and downside risk traditionally associated with equities. Importantly, these strategies are not interest rate sensitive, providing meaningful diversification across risk exposures.
Not Insurance, Not Annuities
Structured protection is entirely market‑driven. Unlike insurance‑based products such as BOLI or annuities, it offers transparency, liquidity, and audit‑friendly implementation — qualities that matter for boards and regulators. As an SEC‑registered fiduciary, Elite Capital focuses exclusively on strategies that credit unions can evaluate, model, and trust.
The Path Ahead
Rate cuts alone won’t erase embedded losses, and waiting for a return to zero is not realistic. Structured protection offers a modern way forward: equity participation with defined downside protection, diversification beyond bonds, and a transparent, liquid format that aligns with fiduciary duty.
Since 2007, Elite Capital has provided credit unions access to the kind of institutional investment strategies available to large financial institutions without being tied to insurance products or hidden commissions. As a pioneer of employee benefits pre-funding, its goal is to deliver purpose-built portfolios that align with the mission, regulatory structure, and accounting needs of credit unions. Learn more at elitecapgroup.com.