Risk Managed Investing With Randy Swan

Strategic Investor Radio Charley WrightIn this episode of Strategic Investor Radio, host Charley Wright interviews Randy Swan of the eponymous Swan Global Investments. Randy is the founder and president of the Durango, Colorado-based firm, as well as a portfolio manager. He started the company in 1997 after beginning his career as a CPA, but his interest in investing runs much deeper: Randy says he has been an “avid investor” since he was 14 years old, and his experience through the market’s ups and downs – including the 1987 crash – helped him develop the risk-mitigation strategies he implements at Swan Global Investments.

Randy Swan Swan Wealth
Randy Swan, Founder and President, Swan Global Investments

Swan strategies start with an underlying asset, such as the S&P 500. Around 90% of each strategy’s capital is invested in ETFs to gain long exposure to the underlying asset, while the remaining 10% is used to buy insurance through the options market. Swan prefers long-dated put options for insurance, and the strategy also calls for selling short-dated, quicker decaying options to generate income and offset the expense of the long puts. Randy says the strategy more than pays for itself over a full market cycle, and his S&P 500 strategy has outperformed the underlying index by around 200 basis points per year, while the firm’s gold strategy outperformed the GLD ETF by 6% per year in each of the past three years.

The GLD strategy isn’t currently available in mutual fund format, but Swan does have a total of four funds, including the flagship S&P 500 strategy, as well as strategies focusing on emerging markets, developed foreign markets, and U.S. small cap stocks. Swan’s funds and their A-class tickers are listed below:

One of the unique features of Swan’s strategies is that they turn massive selloffs into “re-hedging” opportunities. Randy says that if emerging markets sold off by 50%, he’d probably lose some money – but the re-hedging process that followed would position Swan for future gains. To put it in simple terms, Randy says a big selloff would allow strategists to sell their expensive insurance policies, buy cheaper insurance policies, and use the differential to invest in more shares.

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Past performance does not necessarily predict future results.
Jason Seagraves contributed to this article.

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