Performance of the Defined Risk Strategy

Proven Track Record

The DRS was launched in 1997 to provide investors with a better way to invest over full-market cycles—generate consistent returns and protect irreplaceable capital.

 

So how’d we do?

Consistency and Smoothing of Returns

Consistent Outcomes - Swan Global Investments - 2019-750x290

Source: Zephyr StyleADVISOR and Swan Global Investments. All data based on historical performance of the S&P Total Return Index and the Swan DRS Select Composite. Prior performance is not a guarantee of future results.

Looking at rolling returns, especially over longer periods of time may, is an effective way to determine the ability for a manager to provide consistent returns going forward.

 

The graphs show an investment of $100,000 over twelve successive, 10-year investment periods. The first period is 1/1998 to 12/2007; the last period is 1/2009 to 12/2018. Each period contains at least one bull market and one bear market.

 

By reducing volatility and avoiding major losses, the DRS has a dramatic impact on rolling returns that span full market cycles—timing not necessary.

Maximize Wealth by Minimizing Losses

Annual Returns - Swan DRS, S&P 500, 60/40 Portfolio

Source: Swan Global Investments and Morningstar; the Barclays U.S. Aggregate Bond Index and the S&P 500 Index are unmanaged indices, and cannot be invested into directly. Past performance is no guarantee of future results. DRS results are from the Swan Defined Risk Select Composite, net of fees, as of 12/31/2018. Structures mentioned may not be available within your Broker/Dealer.

Our Defined Risk Strategy (DRS) has performed admirably in protecting capital during bear markets.

 

The DRS can serve as a core hedge equity allocation, an alternative allocation, or complement to fixed income in a capital preservation role.

Fact Sheets

The Defined Risk Strategy is available in various structures and across major asset classes.

Rolling Returns vs Trailing Returns

Rolling returns are most useful in building long-term financial plans and portfolio construction, as not every client invests at the same time.

 

As such, rolling returns are a more comprehensive way of viewing return stream than fixed period returns.

 

Rolling Returns are Revealing

Source: Swan Global Investments and Zephyr StyleADVISOR. Data based on historic returns of a 60/40 blended composite and the Swan DRS Select Composite net of fees, from 7/1997 to 12/31/2018, and assume no portfolio withdrawals. The 60/40 blended composite, weighted 60% in the S&P 500 Index, , which consists of approximately 500 large cap stocks, and 40% in the Barclays US Aggregate Bond Index. The 60/40 is rebalanced monthly. The Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency). Results in the table are the best, worst, and average annualized returns, based on month-end returns, for every rolling period listed within the overall time frame of July 1st, 1997 to December 31st, 2018. Prior performance is not a guarantee of future results and there can be no assurance, and investors should not assume, that future performance will be comparable to past performance.

The Defined Risk Strategy was launched in July of 1997.

 

So we began there, looking at rolling returns of 1, 2, 3, 4, 5, 6, 7 10, and 15-year periods. Then we moved to August 1997, and looked at those same rolling return periods.

 

The result: a table that shows the best, worst, and average returns investors would have experienced over those given holding periods, regardless of which month they began investing.

 

By reducing volatility and avoiding major losses, the DRS has a dramatic impact on rolling returns (experiences of your clients) through market cycles.

 

The takeaway—the longer a position in the DRS is held, the better their overall returns on a relative and risk-adjusted basis.

Smoothing the Ride - Performance of the Defined Risk Strategy

Rolling 1, 3, 5 and 10-year Returns


Source: Zephyr StyleADVISOR and Swan Global Investments. All data based on historical performance of the S&P Total Return Index and the Swan DRS Select Composite net of fees, as of 12/31/2017. Prior performance is not a guarantee of future results.

The Right Benchmark for DRS Performance

The Target Return Band is our benchmark—measuring actual results versus return expectations.

Our goal is for any given annual return by a given asset class or index (represented by the grey diagonal line), that the return for our corresponding Defined Risk solution is within or above the blue-shaded Target Return Band.

 

Targeted Return Band - ALL SMAs vs Benchmarks - Annual Returns 1997-2018

Source: Zephyr StyleADVISOR and Swan Global Investments; Indexes are unmanaged and one cannot be invested into directly. Past performance is no guarantee of future results. NOTE – this chart is for illustration purposes, not a guarantee of future performance. The charts and graphs contained herein should not serve as the sole determining factor for making investment decisions. The results above refer to the DRS U.S. Small Cap Composite, the DRS Foreign Developed Composite, and the DRS Emerging Markets Composite respectively, and include a 1% fee, from their inception through 6/30/2018. Structures mentioned may not be available within your Broker/Dealer. Composites on other asset classes not shown. See disclosures at the end of this presentation for more information about benchmarks and indexes.

Across the four major asset classes shown above, our strategy has met or exceeded our Target Return Band over 98% of the time.

Defined Risk Investing

The success of our Defined Risk Strategy prompted us to apply it across multiple products and assets, providing our clients with additional opportunities to use this time-tested approach.

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DRS SMA

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DRS FUNDS

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SWAN CITs

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DRS OVERLAY

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Learn more about the various types of investment structures or contact a Swan investment consultant for more information.