Colorado-based investment advisor Swan Global Investments has made its ETF debut with the launch of a risk-managed US equity strategy.
Randy Swan, Founder and Lead Portfolio Manager of Swan Global Investments.
The Swan Hedged Equity ETF (HEGD US) has listed on Cboe BZX Exchange and commands an expense ratio of 0.87%.
The fund is based on Swan’s proprietary Defined Risk Strategy, which comprises three stages.
Firstly, the fund invests in low-cost S&P 500 ETFs to obtain its beta exposure.
Secondly, the fund purchases long-term put options on the S&P 500 to mitigate the risk of severe market losses. Swan believes that the timing of significant market falls is unpredictable and, as such, the ETF will be always invested and always hedged.
Finally, the fund seeks to enhance returns through tactical option spread overlays. The option spread strategies will consist of buying and selling short-term call and put options and will include a hedging element so that the fund is not exposed to significant losses on written options.
According to Swan, the combined Defined Risk Strategy delivers equity exposure with lower volatility and more consistent returns compared to the broad market.
Randy Swan, Founder and Lead Portfolio Manager of Swan Global Investments, commented: “Twenty years ago, we sought to fill a white space in the market with our Defined Risk Strategy which has helped many investors reach their long-term goals despite market swings. Today, we are once again directly addressing the needs of both investors and their advisors with the launch of our Hedged Equity ETF.
“The culmination of the current low-yield environment, an aging population, and the significant shift toward options-based strategies have led us to create an easy-to-utilize ETF that will further democratize access to Swan’s DRS and continue our mission of helping investors stay on track by remaining always invested and always hedged.”
Swan added: “The time is now for advisors to reconsider how they can best allocate clients’ irreplaceable capital to seek real, after-tax returns while attempting to mitigate risks. The typical 60-40 portfolio of stocks and bonds is ill-positioned going forward to repeat its returns of previous decades with bond yields near historic lows. Many investors may be unwilling to settle for low yields or high levels of unprotected risk. Our new ETF is a potential solution for the new investing landscape.”