The Dual Dilemma

The risks to capital in equities and fixed income have rarely been higher with rates so low and stock valuations so high. Consistency of returns, portfolio resiliency and sustainable income are of premium concern, yet solutions seem scarce.

The State of Fixed Income Markets
  • Bond bull market appears out of gas
  • Traditional role of bonds is in peril
  • Yields low, but appear set to rise
  • Quantitative easing – elephant in the room
  • Massive flows into spread products
The State of Equity Markets
  • S. & foreign markets near all-time highs
  • Valuations priced for perfections
  • 2nd-longest bull market in history
  • Uncertainty regarding Trump
  • Market expectations are low

Striking the balance between risk asset exposure to generate returns and providing sustainable income is critical to funding the mission or meeting obligations over full market cycles.

 

In the midst of the second longest equity bull market in history, coupled with historically low yields, many institutions are tempering return expectations.

 

Meanwhile, many institutions are facing rising costs, so the margin for error is diminishing.

Addressing Market Risk and Seeking Consistent Returns

The Swan Defined Risk Strategy (DRS), launched in 1997, is a rules-based, hedged-equity approach with a track record of generating consistent returns while minimizing losses during large equity market declines.