The market is unpredictable, making it difficult to plan long-term outcomes. That’s why we believe reducing downside risk can help smooth out returns over market cycles and significantly impact wealth creation over the long term.
With this in mind, we developed our Defined Risk Strategy in 1997 as a way to offer our clients a distinctive, innovative tool that is always invested for consistent long-term returns while remaining always hedged to protect portfolios from large market declines.
Notice To Advisors and Shareholders,
Our suite of Swan Defined Risk Funds offers investors the opportunity to benefit from qualified tax treatment on a portion or all of the dividends, depending on the fund.
It has been brought to our attention that while some broker-dealers and custodians timely and accurately reported the dividends on investor 1099s, others are delayed in issuing consolidated 1099s, while others did not pick up on this potential tax benefit and incorrectly reported the Swan Fund dividends as non-qualified.
- Swan Global Investments did not create or contribute to any delays or incorrect reporting of dividends in 1099s, nor did and Ultimus Fund Solutions, the Swan Funds’ administrator.
- Swan Global Investments confirmed with Ultimus’s Dealer Services group that the correct qualified dividend income (“QDI”) data was sent to broker-dealers and reporting agencies on January 24, 2020.
- Currently, Ultimus’s Dealer Services group is actively working with broker-dealers and reporting agencies such as Wall Street Concepts and Broadridge to ensure the Swan Fund distribution data was received and transcribed correctly.
Broker-dealers are responsible for communicating any 1099 corrections to investors, which is typically done once per week or once every other week after the initial IRS deadline for consolidated 1099s of Tuesday, February 18th, depending on the broker-dealer.
We have seen statements from custodian and broker dealers indicating they will issue updated 1099s, which should include the corrected fund information as early as February 21st.
Contact your broker-dealer or custodian with questions.
For further information, please contact Ultimus Fund Solutions, 877.896.2590
Swan Funds’ 2019 QDI Rates
The qualified dividend income (“QDI”) rates are the percentages of the fund distributions that are treated as qualified dividends, receiving the preferential tax rate. The QDI rates or the Swan Funds for the distributions on December 26, 2019 were as follows:
- Swan Defined Risk Fund: 100% qualified
- Swan Defined Risk Emerging Markets Fund: 51.56% qualified
- Swan Defined Risk Foreign Developed Fund: 66.88% qualified
- Swan Defined Risk Growth Fund: 91.29% qualified
- Swan Defined Risk U.S. Small Cap Fund: N/A – no distribution
Please double check the information on the 1099 against the QDI rates provided below to confirm accuracy of the data reported by the broker-dealer.
Based on our Defined Risk Strategy (DRS), Swan Defined Risk Funds are an absolute return type, risk-managed approach to asset allocation designed for growth investors.
The goal: to achieve consistent long-term returns while minimizing the downside risk of the equity markets.
Key elements of our Always Invested, Always Hedged strategy include:
> Always invested using low-cost ETFs
> Designed to seek consistent long-term rolling returns
> Aims to protect client assets during major market downturns
> Always hedged using long-term put options
Invest in Equities
To participate in equity markets.
• ALWAYS INVESTED in low-cost, cap-weighted equity ETFs.
No stock picking or market timing.
Hedge the Equities
To mitigate risks of bear markets.
• ALWAYS HEDGED using long-term put options to mitigate risks of bear markets.
Seek Additional Return
To offset the cost of the hedge.
• Actively managing a shorter-term options portfolio, utilizing a disciplined, rules-based approach.
Swan Defined Risk Fund = CLASS A: SDRAX | CLASS C: SDRCX | CLASS I: SDRIX
Swan Defined Risk Growth Fund = CLASS A: SDAAX | CLASS C: SDACX | CLASS I: SDAIX
Swan Defined Risk Emerging Markets Fund = CLASS A: SDFAX | CLASS C: SDFCX | CLASS I: SDFIX
Swan Defined Risk U.S. Small Cap Fund = CLASS A: SDCAX | CLASS C: SDCCX | CLASS I: SDCIX
Swan Defined Risk Foreign Developed Fund = CLASS A: SDJAX | CLASS C: SDJCX | CLASS I: SDJIX
Swan Defined Risk Fund
Swan Defined Risk Growth Fund
Swan Defined Risk U.S. Small Cap Fund
Swan Defined Risk Emerging Markets Fund
Swan Defined Risk Foreign Developed Fund
Swan Capital Management
1099 Main Avenue – Suite 206
Durango, Co 81301
Gemini Fund Services, LLC
PO Box 541150
Omaha, Ne 68154
Important Disclosures- Please read:
Investors cannot directly invest in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. Swan may invest in index ETFs as an underlying asset within each mutual fund, such as:
SPY: The SPDR® S&P 500® ETF Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500® Index.
EEM: The iShares MSCI Emerging Markets ETF seeks to track the investment results of an index composed of large- and mid-capitalization emerging market equities.
IWM: The iShares Russell 2000 ETF seeks to track the investment results of an index composed of small-capitalization U.S. equities.
EAFE: The iShares MSCI EAFE ETF seeks to track the investment results of an index composed of large- and mid-capitalization developed market equities, excluding the U.S. and Canada.
The use of leverage, such as that embedded in options, could magnify the Fund’s gains or losses. Written option positions expose the Fund to potential losses many times the option premium received.
The adviser’s dependence on its Defined Risk Strategy process and judgments about the attractiveness, value and potential appreciation of particular ETFs and options in which the Fund invests or sells may prove to be incorrect and may not produce the desired results.
Purchased put options may expire worthless and may have imperfect correlation to the value of the Fund’s sector ETFs. Written call and put options may limit the Fund’s participation in equity market gains and may amplify losses in market declines. The Fund’s losses are potentially large in a written put or call transaction. If un-hedged, written calls expose the Fund to potentially unlimited losses.
Investments in underlying funds that own small and mid-capitalization companies may be more vulnerable than larger, more established organizations. Investments in foreign securities could subject the Fund to greater risks including, currency fluctuation, economic conditions, and different governmental and accounting standards. In addition to the risks generally associated with investing in securities of foreign companies, countries with emerging markets also may have relatively unstable governments, social and legal systems that do not protect shareholders, economies based on only a few industries, and securities markets that trade a small number of issues.
Investors should carefully consider the investment objective, risks, charges and expenses of the Swan Defined Risk Funds. Mutual funds involve risk, including possible loss of principal. There is no guarantee the Fund will meet its objective. This and other information is contained in the prospectus and should be read carefully before investing. For a prospectus please call Swan Defined Risk Funds at (877) 896-2590. The Funds are distributed by Northern Lights Distributors, LLC, member FINRA / SIPC. Northern Lights Distributors, LLC is not affiliated with Swan Capital Management, LLC, Swan Global Management, LLC, or Swan Global Investments, LLC. Swan Capital Management, LLC, Swan Global Management, LLC, and Swan Global Investments, LLC are affiliated entities. 6002-NLD-1/6/2016