Swan ETF: Is This Fund the Key to Protecting Your Investments in Times of Crisis?

In New York City, NY, investors are closely monitoring the Amplify BlackSwan Growth & Treasury Core ETF (NYSEARCA: SWAN), an exchange-traded fund designed to minimize risks during unexpected market events. With questions arising about the timing of the next rate cut, rather than whether rates will increase or decrease, the focus shifts to the effectiveness of funds like SWAN amidst a backdrop of volatile markets.

The fund’s structure includes long-dated S&P 500 options and a selection of treasury bonds, providing a balance of exposure to equities and fixed income securities. The use of Long-Term Equity Anticipation Securities (LEAP) options allows for long-term equity exposure without the full impact of owning the index outright. Additionally, the treasury bonds held by the fund, with maturities of 5-7 years, contribute to its overall stability in times of crisis.

During the Covid-19 crisis, SWAN demonstrated its resilience by experiencing a modest -5% drawdown compared to the S&P 500’s close to -30% decline. The fund’s performance was supported by the surge in bond prices, showcasing its ability to protect investors during market downturns. This dual approach of investing in equities and treasuries serves as a strategic hedge against unexpected events, aligning with the fund’s core objective of mitigating risks.

Looking ahead, the fund’s performance drivers rely on intermediate rates and equity returns within the S&P 500. While the bond component may have weighed down returns in recent years due to a bear market in bonds, the potential for rate cuts and subsequent bond price increases bodes well for SWAN’s future performance. In scenarios of unforeseen black swan events, treasury bonds are expected to experience heightened demand, further benefiting the fund’s overall returns.

In 2024, SWAN has outperformed traditional bond ETFs like the iShares Core U.S. Aggregate Bond ETF (AGG), showcasing its resilience and potential for favorable returns. As the Federal Reserve adjusts rates and market conditions shift, the fund’s unique composition positions it as a valuable investment choice for those seeking a balance of stability and growth in their portfolios. Investors are advised to consider SWAN’s performance track record and composition when evaluating opportunities in the current market landscape.