Applying the DRS to Emerging Markets
Investing for growth, Seeking protection of capital.
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 seeks consistent long-term returns while protecting portfolios from large market declines.
Class A: SDFAX | Class C: SDFCX | Class I: SDFIX
Based on our Defined Risk Strategy, the Swan Defined Risk Emerging Markets Fund seeks long-term growth of capital with superior risk-adjusted returns over a full market cycle with potentially less downside risk and volatility than the MSCI Emerging Markets Index. See the disclosures below for more information.
The goal: is to achieve long-term growth of capital, while minimizing the downside risk of U.S. 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
> Always hedged using long-term put options
> Aims to protect client assets during major market downturns
Defined Risk Strategy
Other Defined Risk Funds
Invest in Equities
- Always Invested in ETFs or a basket of stocks that closely represent the MSCI Emerging Markets Index
Hedge the Equities
- Always Hedged by actively managing long-term put options (LEAPs), generally one to two years to expiration, initially.
- Purchased at, or near-the -money
Seek Additional Return
- Actively managing shorter-term options portfolio
- Utilizing a disciplined, times-tested approach
Performance shown is historical and does not guarantee future results. Current performance may be lower or higher. Because share price, principal value, and return will vary, you may have a gain or loss when you sell fund shares. Performance assumes the reinvestment of dividends and capital gains. There is no assurance the fund will pay dividends or capital gains in the future. “Without sales charge” performance does not reflect the current maximum sales charge. Had the sales charge been included, the Fund’s returns would have been lower. Class I shares have no sales charge and may be purchased by specified classes of investors. The MSCI (Morgan Stanley Capital International) Emerging Markets Index is designed to measure equity market performance in global emerging markets. You cannot invest directly in an index or average. For performance information current to the most recent month end, please call (877) 896-2590. Maximum sales charge for Class A Shares is 5.50%. * The fund’s investment advisor has contractually agreed to reduce its fees and/or absorb expenses of the Fund, at least until October 31, 2021 (exclusive of any taxes, interest, brokerage commissions, dividend expense on securities sold short, acquired fund fees and expenses, or extraordinary expenses such as litigation or reorganization costs). The Fund’s total gross annual fund operating expenses are 2.28% for Class A; 3.03% for Class C; 2.03% for Class I. After the fee waiver these expenses are 1.65% for Class A, 2.40% for Class C, and 1.40% for Class I shares, respectively.. Please review the fund’s prospectus for more information regarding the fund’s fees and expenses. These fee waivers and expense reimbursements are subject to possible recoupment from the Fund within the three years after the fiscal year end during which the fees have been waived or reimbursed, if such recoupment can be achieved within the foregoing expense limits. These agreements may be terminated only by the Fund’s Board of Trustees, on 60 days’ written notice to the Fund’s adviser.
Lead Portfolio Manager, Founder, President
Portfolio Manager, Chief Operations Officer
Micah Wakefield, CAIA®
Portfolio Manager, Director of Research & Product Development
Chris Hausman, CMT®
Portfolio Manager, Managing Director-Risk
Randy Swan and Rob Swan have been managing the Funds since inception.
Swan Capital Management
1099 Main Avenue, Suite 206
Durango, Co 81301
Gemini Fund Services, LLC
PO Box 541150
Omaha, Ne 68154
ETFs are subject to investment advisory and other expenses, which will be indirectly paid by the Fund. As a result, the cost of investing in the Fund will be higher than the cost of investing directly in ETFs and may be higher than other mutual funds that invest directly in stocks. ETFs are subject to specific risks, depending on the nature of the Fund.
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