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Okay, thanksALWAYS INVESTED and ALWAYS HEDGED.
The Defined Risk Strategy (“DRS”) is a hedged equity strategy designed to remain invested through, and capitalize on, market cycles while actively managing the risk that conventional portfolios leave unaddressed.
Our founder and lead PM, Randy Swan, launched the Defined Risk Strategy in 1997 – before hedged equity was a category – to be a genuine all-weather holding. The strategy is distinct because it wasn’t built to look like other strategies or fit into a ‘style box’.
The Defined Risk Strategy is an institutional-grade strategy made available to all investors through various investment vehicles: ETFs, mutual funds, and separately managed accounts.
Combining passive investing with active risk management, the DRS offers uncapped equity participation while directly hedging drawdown risk — Always Invested, Always Hedged.
The Swan Defined Risk Strategy (DRS) is a hedged equity strategy that pairs uncapped S&P 500 equity participation with a continuous, actively-managed, put option hedge. The vast majority of hedged equity and defined outcome strategies use collar structures that cap upside gains to pay for downside protection. The DRS trade structure is fundamentally different. The hedge is funded separately, so equity participation remains uncapped. There is no outcome period and no calendar-driven reset. When markets move, the hedge is actively adjusted: lifted after rallies, seeking to lock in gains; or monetized during drawdowns (sell high), reset at lower levels, and the remaining proceeds buy additional equity at market lows (buy low). Most competitors hold their hedge passively to expiration and never adjust mid-cycle. The Defined Risk Strategy has been in continuous operation since July 1997, through five full market cycles, and is available in various structures: ETF, mutual fund, and separately managed accounts. Always Invested, Always Hedged.
Conventional diversification assumes bonds will offset equity losses when markets fall.
That assumption has repeatedly broken down — precisely when investors needed it most.
The Defined Risk Strategy takes a different approach. Rather than relying on an assumed stock-bond relationship to manage risk, the DRS utilizes long-term put options, which are inversely correlated to equities, to directly hedge market risk.
Uncapped upside. Active risk mitigation.
Two keys to building long-term wealth — staying invested and managing drawdowns — in one strategy since 1997.
The DRS follows a transparent, repeatable process applied continuously across five full market cycles:
Our distinct investment philosophy drives our ALWAYS INVESTED and ALWAYS HEDGED approach.
A HEDGE IS NOT INSURANCE AGAINST LOSSES
The effectiveness of the hedge and degree of downside risk mitigation varies with market conditions. The Defined Risk Strategy can and does have periods of losses.
Differentiated in Structure & Style
Most options-based hedged equity strategies are passive: the hedge is set at inception, held to expiration, and adjusted on arbitrary intervals.
Meanwhile, most strategies cap your gains: Buffer ETFs cap your upside. Collar strategies sell it away.
The DRS differs in both structure and style: it uses separately funded long-term put options for hedging risk and an actively managed hedge that adjusts with market levels, seeking to capitalize on opportunities as they arise. Uncapped upside. No fixed reset intervals.
For decades, conventional portfolio construction has relied on a simple formula: hold equities for growth, hold bonds as a buffer when equities decline. That relationship has grown less dependable as bond and equity returns have increasingly moved together during periods of market stress, leaving traditionally diversified portfolios more exposed than expected at exactly the wrong times.
In 2022, the 60/40 portfolio lost 15.79% — its worst calendar year since 1937 — as bonds fell alongside stocks rather than offsetting them. A strategy that manages risk directly within a hedged equity position, rather than depending on a separate asset class to offset losses, addresses this gap at its source.
The best portfolio is one investors can stick with through an entire cycle. That requires managing the drawdowns that break investor discipline — not just the asset allocation that looks right on paper.
Diversification manages what you own. It doesn’t manage how much you can lose. Market risk — systematic risk — cannot be eliminated through diversification. It can be hedged against.
The DRS was designed to address that structural gap: maintain full equity participation through the compounding periods that create long-term wealth, while actively mitigating the drawdowns that destroy it.
“By actively seeking to not lose big, we believe that investors will be better off in the long run.”
Equity Sleeve with Guardrails
Replace unhedged large-cap equity exposure. Maintain upside participation with meaningfully reduced volatility and drawdown severity.
Bond Sleeve Alternative
Serve the risk-mitigation role traditionally assigned to fixed income — without the duration, credit, or inflation risk that made bonds fail in 2022.
Disciplined Market Entry
A systematic entry vehicle for investors sitting in cash at elevated valuations. Remain invested. Remain hedged. Remove the behavioral barrier.
Actively managed. Structurally uncapped. In continuous operation since July 1997.
The DRS was launched in 1997 to provide investors with a better way to invest over full-market cycles.
The track record that matters is not three years. It is five full market cycles — including the worst environments for conventional portfolios in a generation.
So how’d we do?
| Period | Event | Result |
|---|---|---|
| 2000–02 | Dot-Com Bust | S&P 500: cumulative loss of ~49% / DRS: positive over period |
| 2008 | Global Financial Crisis | S&P 500: lost 38.54% / DRS: lost -4.57% in calendar year |
| 2020 | COVID Crash & Rally | DRS Navigated sharpest drawdown and fastest recovery on record |
| 2022 | Rate Shock / 60/40 Bear | DRS −10.98% vs. S&P 500 −18.11% vs. 60/40 −15.79% |
| 2023-26 | Easy Money & AI Rally | DRS participated fully in the subsequent rally |
Source: Zephyr StyleADVISOR, Swan Global Investments, LLC. DRS results from Swan Defined Risk U.S. Large Cap Composite, net of fees, July 1997 – June 2026. Past performance does not guarantee future results. All investments involve the risk of loss.
Key Investor Insights
Math Matters – See why and how you benefit from uncapped upside participation while dampening losses.
Passive structures with capped upside dominate the hedged equity category.
The DRS is distinct in both structure and style.
| Swan DRS / HEGD | Buffer ETFs | Collar / Put Spread | |
|---|---|---|---|
| Upside Po | Uncapped | Capped | Capped |
| Hedge Man | Active | Passive / Calendar | Passive / Calendar |
| Reset Dep | None | Annual Outcome Period | Quarterly / Annual |
| Hedge Dur | 1–2 Yrs (LEAPS) | 12 Months | 30–90 Days |
| Operating | Since 1997 (28+ yrs) | Most post-2018 | Varies |
Category-level comparison. Not a comparison to any specific named product.
That is active hedge management — adjusted based on market levels, guided by a disciplined, time-tested process that seeks to capitalize on market moves, not predict them or simply adjust based on a set calendar.
See how the structure of the Defined Risk Strategy differs from buffered ETFs, put spread collar, or collar strategies.
The DRS is available across multiple investment structures — each built on the same hedged equity process, the same active hedge management, and the same discipline in operation since 1997.
The ETF expression of the DRS. Exchange-traded, daily-liquid, available at all major brokerages and directly in model portfolios.
Direct ownership, customizable, tax management. Same Defined Risk methodology with the flexibility of a separately managed account.
Mutual fund access to the Defined Risk Strategy. Flagship fund in operation since June 2012.
Learn more about the various types of investment structures we make available and be sure to consult with your investment advisor about the suitability of these different vehicles.