Swan Consulting, Inc.
Defined Risk Strategy
because asset allocation is not enough...
New
Asset Allocation - Polishing the Turd (July 30, 2010)
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DRS Brochure
Defined Risk Strategy: Performance
Since July 1997, Swan Consulting, Inc.'s proprietary and unique Defined Risk Strategy (DRS) has delivered in both performance and risk reduction (12.5 year inception-to-date) with independently verified GIPS® compliant annualized returns of 11.14% at a Standard Deviation of only 7.8%.
During this same period the benchmark S&P 500 yielded 3.60% with a Standard Deviation of 20.4%. On a risk adjusted basis, the DRS has outperformed the market by a factor of 9 (i.e. Sharpe Ratios of 0.93 versus .10, respectively).
From July 1997 investments in the DRS:
- Grew by 274%
- Beat the S&P 500 by 219%
- Kept pace with investor with perfect timing on an annual basis
- Accumulated 319% new shares with no new capital
- Averaged 11.14% annualized returns (before fees)
Swan Consulting, Inc. is a registered investment advisor that specializes in index-based strategies that allow investors to participate in the upward price movement in a particular stock index while reducing most of the downside risk. The Defined Risk strategy focuses on delivering defined risk strategies that allow our clients to grow wealth while protecting capital. Swan Consulting, Inc. claims compliance with the Global Investment Performance Standards (GIPS®). To receive a complete list and description of Swan Consulting Inc.’s composites and/or a presentation that adheres to the GIPS standards, contact Drew Kehoe, 512 468 4578 or write Swan Consulting, Inc. 277 E 3rd Ave, Suite A, Durango, CO 81301, or drew.kehoe@swanconsultinginc.com
Performance Details: click here
Swan Consulting, Inc.: Mission & Investment Philosophy
Swan Consulting, Inc. is a registered investment advisor that specializes in index-based strategies that allow investors to participate in upward price movement in a particular stock index while reducing most of the downside risk.
Swan Consulting, Inc. was founded in 1997 by Randall W. Swan, CPA to provide investment management services not available to most investors. Specifically, Swan Consulting, Inc. provides superior risk adjusted returns to investors via various hedging and income generating techniques.
Swan's primary focus is to protect and accumulate wealth for its clients. To do that, Swan is guided by two core rules.
To meet these goals, Swan delivers superior customer service through defined risk strategies that allow our clients to grow wealth while protecting capital (i.e. Never Lose Money).
Swan Consulting, Inc. was founded in 1997 by Randall W. Swan, CPA to provide investment management services not available to most investors. Specifically, Swan Consulting, Inc. provides superior risk adjusted returns to investors via various hedging and income generating techniques.
Swan's primary focus is to protect and accumulate wealth for its clients. To do that, Swan is guided by two core rules.
- Never lose money
- Don't forget rule # 1
To meet these goals, Swan delivers superior customer service through defined risk strategies that allow our clients to grow wealth while protecting capital (i.e. Never Lose Money).
More Information: click here
Asset Allocation: Asset allocation is not enough. It works until it doesn't.
"The great claim of asset allocation is that risk can be adequately reduced by diversifying over several broad asset classes (i.e. stocks, bonds, cash and real estate) without a significant reduction in returns. This risk reduction is, however, strictly theoretical (typically based upon relationships that existed over a particular period with no guarantee that these same relationships will continue in the future). This is the crux of where asset allocation (modern portfolio theory) breaks down. Risk is not defined; instead it is merely expressed in historical standards." (Swan, 1997) There are several significant problems with Modern Portfolio theory as a primary investment strategy.
- There is no guarantee that historical patterns will continue in the future
- Different asset classes do not always move in opposite directions
- Asset allocation, by definition, does not provide protection from systematic risk (i.e. inherent market risk)
- Risk is not adequately defined or limited; instead it is merely expressed in historical standards
- Overall returns are significantly reduced in bull markets due to little or no appreciation in fixed income securities
Swan Consulting, Inc.’s unique and proprietary "Defined Risk Strategy" (DRS) was developed to address the primary flaws of Asset Allocation while maximizing returns in the broadest range of market conditions.
More Information: click here
What happened to your portfolio in 2008?: What are you doing about it?
Swan Consulting, Inc. doesn’t believe that anyone can predict the market over the long run. With this being said, however, personal, corporate, and government debt are at an all-time high. A tidal wave of baby-boomers is poised to retire. Equity stocks are overvalued by historical standards. Are you willing to continue to use or recommend strategies which did not prevent recent large losses in portfolio values?
Swan Consulting, Inc.'s DRS gives you an alternative. The DRS is designed to be market neutral with dedicated components designed to profit in Up, Flat, and Choppy markets.
Most important, however, are its features designed to minimize and limit both unsystematic and systematic risk. Unsystematic risk is minimized by diversification of component strategies, markets, and, investment time-horizons. Systematic risk is minimized and defined by hedging. Oliver Wendell Holmes said it best, “Prophesy as much as you like but always hedge”.
Swan Consulting, Inc.'s DRS gives you an alternative. The DRS is designed to be market neutral with dedicated components designed to profit in Up, Flat, and Choppy markets.
Most important, however, are its features designed to minimize and limit both unsystematic and systematic risk. Unsystematic risk is minimized by diversification of component strategies, markets, and, investment time-horizons. Systematic risk is minimized and defined by hedging. Oliver Wendell Holmes said it best, “Prophesy as much as you like but always hedge”.
Market Outlook: Is your portfolio protected?
Things do not seem to be getting better for most Americans. We think the economic and market "pressure" is building. The United States government has artificially propped up the markets. Financial instruments (dominoes) are teetering on the edge. Investors need to prepare for the worst case scenario.
When the last of the dominoes (Corporate and/or Municipal bonds) fall, 2008 may look good in comparison! We may even be in danger of a repeat of the 1929-1932 bear market crash in which the Dow fell 89%. Nobody knows what will happen in this scenario. Hoping for economic and market recovery is not good enough. Asset Allocation has demonstrated its ineffectiveness to protect against significant losses.
A new paradigm is upon us with more turbulent markets. Advisors and investors must adopt proven risk reduction strategies. The good news is that since it has been proven that stock investments can be protected on the downside, a higher allocation to stocks can and probably should be made to increase overall portfolio returns. Diversifying into bonds or increasing your portfolio's allocation to bonds is not the answer since bond defaults on corporate and/or municipal debt are real possibilities. Interest rates are at historic lows and have nowhere to go but up. As rates rise, bond values fall. Your 2% bond is not worth as much if new bonds are paying 4%. Real estate may not have even bottomed yet. And cash, well, cash is paying virtually nothing. After taxes and inflation, bonds and cash give you a negative return.
Relying on archaic asset allocation techniques which are not able to protect against market risk will yield the same or worse results as shown in 2002 and 2008. If you prepare, you can protect your investments. The old adage "better safe than sorry" could not be more apropos. Find a manager who will manage market risk in your investment portfolio. Don't settle for outdated strategies which simply "polish the turd." You have investment options.
When the last of the dominoes (Corporate and/or Municipal bonds) fall, 2008 may look good in comparison! We may even be in danger of a repeat of the 1929-1932 bear market crash in which the Dow fell 89%. Nobody knows what will happen in this scenario. Hoping for economic and market recovery is not good enough. Asset Allocation has demonstrated its ineffectiveness to protect against significant losses. A new paradigm is upon us with more turbulent markets. Advisors and investors must adopt proven risk reduction strategies. The good news is that since it has been proven that stock investments can be protected on the downside, a higher allocation to stocks can and probably should be made to increase overall portfolio returns. Diversifying into bonds or increasing your portfolio's allocation to bonds is not the answer since bond defaults on corporate and/or municipal debt are real possibilities. Interest rates are at historic lows and have nowhere to go but up. As rates rise, bond values fall. Your 2% bond is not worth as much if new bonds are paying 4%. Real estate may not have even bottomed yet. And cash, well, cash is paying virtually nothing. After taxes and inflation, bonds and cash give you a negative return.
Relying on archaic asset allocation techniques which are not able to protect against market risk will yield the same or worse results as shown in 2002 and 2008. If you prepare, you can protect your investments. The old adage "better safe than sorry" could not be more apropos. Find a manager who will manage market risk in your investment portfolio. Don't settle for outdated strategies which simply "polish the turd." You have investment options.
What are you doing about it?