A BlackSwan event is one that is rare, unpredictable, impactful and difficult to attribute to reason, even after its occurrence.
The S-Network BlackSwan Indexes are designed to potentially protect capital against BlackSwan events.
With the majority of assets in historically low-volatility Treasuries, remaining assets are used to purchase “in-the-money” calls (options with a strike price below the market price). The goal is to achieve capital appreciation above inflation while minimizing volatility as compared to standard asset-allocated investments. The S-Network BlackSwan Core Index (SWANXT) allocates to SPY options; the S-Network International BlackSwan Index (ISWNXT) allocates to EFA options; and the S-Network BlackSwan Tech & Treasury Index (QSWNXT) allocates to QQQ options.
Key defining factors include:
The Indexes allocate 90% to US Treasuries in order to minimize volatility, while seeking higher returns by using the remaining portion to purchase long-dated call options (LEAPs) on the SPY, the EFA and the QQQ.
The Indexes liquidate and replace half of their options each June and December, while rebalancing a barbell basket of treasuries as needed to maintain a 10-year duration. SWANXT, ISWNXT and QSWNXT entered live production on October 17, 2018, November 25, 2020, and November 30, 2021, respectively.
The Indexes depend on clearly defined rules-based methodologies, which are overseen by an impartial Index Committee. Little discretion is exercised in compiling the Indexes, and the pre-defined screening protocols should ensure consistent, transparent and arms-length compilation processes.