Published by Debra Taylor, | May 16, 2016
I have always said that I try to invest alongside my clients, as I would never recommend a strategy that I don’t believe in. At Taylor Financial Group, we also try to explain, as best as we can, why certain strategies make sense for our clients. In this instance, we are discussing Swan Defined Risk, a newer addition to the portfolios that uses hedges that seek to protect investor capital and even out returns. So when Swan Defined Risk was recently covered in Barron’s, it provides another opportunity for us to more fully explain our thought process (click HERE to read the Barron’s article).
Swan Defined Risk tries to eliminate the risk of major losses in a bear market, while simultaneously trying to earn gains in a bull market—which is basically the investment equivalent of having your cake and eating it too! For example, in 2008 investors lost only 4.5% compared to the 37% decline for the S&P 500 and a 22% decline for the 60/40 benchmark. Then, during the 2009 market revival, Swan finished the year up 25%, benefiting from the return of stocks (without the prior year’s pitfalls) while the S&P 500 was up 26.5%. and the 60/40 benchmark was up 18.4%. Moreover, this 19-year-old strategy is not only good for bear markets, as it has returned about 8.5% per year since its inception in 1997 (regardless of market conditions) while the S&P 500 averaged 6.57%. For clients concerned about risk, yet still desirous of potential gains (or clients who are looking for an entry point to the market), Swan Defined Risk is an option to consider because it seeks to reduce risk, while still creating opportunity for growth. Feel free to contact our office with any questions that you may have.
Throughout the last 19 years, Swan Global has grown to manage more than $2.5 billion, and the word is clearly getting out now that Barron’s profiled them. The Swan Defined Risk Strategy is definitely worth considering for the risk-sensitive investor.
Swan Global Investments is not affiliated with LPL Financial. Swan Global Investments, LLC is a SEC registered Investment Advisor that specializes in managing money using the proprietary Defined Risk Strategy (“DRS”). Historical numbers presented are based on the performance of Swan’s DRS Select Composite and include nonqualified discretionary accounts invested since inception, July 1997. These figures are net of fees and expenses and reflect the reinvestment of dividends and capital gains as of 3/31/16. The performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or higher than the performance information quoted. To obtain current month-end performance information, please call our office. Investing involves risk, including possible loss of principal. The S&P 500 Index is a market cap weighted index of 500 widely held stocks often used as a proxy for the overall U.S. equity market. The 60/40 benchmark is 60% S&P 500 and 40% Barclays U.S. Aggregate Index which is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds. Indexes are unmanaged and have no fees or expenses. An investment cannot be made directly in an index. Historical performance results for market indices do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. There is no guarantee any investment or the DRS will meet its objectives. All investment strategies have the potential for profit or loss.