A BlackSwan event is one that is rare, unpredictable, impactful and difficult to attribute to reason, even after its occurrence.
The S-Network BlackSwan Core Index is 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 on the S&P 500). The goal is to achieve capital appreciation above inflation while minimizing volatility as compared to standard asset-allocated investments.
Key defining factors include:
The index allocates 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 S&P 500.
The index liquidates and replaces half of its options each June and December, while rebalancing a barbell basket of treasuries as needed to maintain a 10-year duration. The index entered live production on October 17, 2018. Due to the National Day of Mourning on December 5, 2018, the Index reconstitution will occur at the close of trading on Friday, December 7, 2018.
The index depends on a clearly defined rules-based methodology, which is overseen by an impartial Index Committee. Little discretion is exercised in compiling the Index, and the pre-defined screening protocol should ensure a consistent, transparent and arms-length compilation process.