The Defined Risk Strategy (DRS) is designed to help investors navigate and capitalize on market cycles.
The following materials are intended to help investors understand our full-market cycle strategy and form reasonable expectations for how the DRS may perform in various market sell-offs.
“It’s tough to make predictions, especially about the future.” — Yogi Berra
In the wake of the Global Financial Crisis of 2007-09, numerous statistical tools became available that attempt to quantify the risk to a portfolio under adverse scenarios. Broadly speaking, these types of tools attempt to estimate future risk following one of two methods:
Holdings-based
Returns-based
Each has their relative strengths and weaknesses. Neither is perfect.
Beyond the two traditional tools for return generation used in portfolio construction, bonds and stocks, other “options” have arisen for investors – option-based strategies.
Option-based strategies seek to define the risk and reward over a particular time frame and/or seek to generate cashflow; they have proved themselves a useful tool in market environments that were difficult for equities, bonds, and other liquid assets.
The market is unpredictable, making it difficult to time the markets or consistently pick outperforming stocks. That’s why we believe that the key to wealth creation is to remain invested while reducing downside risk.
By defining the risk with a hedging strategy, we seek to redefine the risk/return profile of the portfolio.
Learn more about our distinct investment process, review performance, explore available DRS structures, and more.
*Source: Swan Global Investments and Morningstar; the S&P 500 index in an unmanaged index, and cannot be invested into directly. Past performance is no guarantee of future results. The performance numbers referenced above are used for illustrative purposes to indicate the DRS’s performance during Bear Market conditions.