SDFAX — Swan Defined Risk Emerging Markets Fund
Data updated: 2025-02-28
SDFAX — Swan Defined Risk Emerging Markets Fund. United States Multi-Cap / All-Cap Blend / Core Equity. Holdings, fees, performance and SEC filings.
SDFAX Fund Overview
SDFAX — Swan Defined Risk Emerging Markets Fund is a US mutual fund managed by Northern Lights Fund Trust III, categorised as United States Multi-Cap / All-Cap Blend / Core Equity. ABC INVEST provides holdings, performance, costs, cashflows, risk data, prospectus documents and SEC filings, sourced from SEC filings.
- Type: US mutual fund
- Manager: Northern Lights Fund Trust III
- Category: United States Multi-Cap / All-Cap Blend / Core Equity
- Assets under management: $13.55M
- 1-year return: 1.5%
- Ticker: SDFAX
- SEC CIK: 0001537140
- SEC series ID: S000047421
- Share class ID: C000148875
SDFAX Investment Objective and Strategy
Swan Defined Risk Emerging Markets Fund describes its objective and strategy as follows, from its latest prospectus filed with the SEC by Northern Lights Fund Trust III.
Investment objective
The Fund seeks income and growth of capital.
Principal investment strategy
Using the sub-advisers proprietary Defined Risk Strategy (DRS) to select the Funds investments, the Fund seeks to achieve its investment objective by investing directly, or indirectly through ETFs, in: foreign (including emerging markets) equity securities, including American depository receipts, of any market capitalization, exchange-traded long-term put options on U.S. exchanges for hedging purposes, and buying and selling exchange-traded put and call options on various ETFs and foreign equity indices to generate additional returns. The DRS seeks to provide risk-managed growth of capital by matching or exceeding the long-term performance of the stock market to minimize the traditional losses incurred during bear markets. Under normal market conditions, the Fund will invest at least 80% of its assets (defined as net assets plus any borrowing for investment purposes) in securities economically tied to emerging markets.
Securities considered to be economically tied to emerging market countries include, without limitation: (1) an issuer organized under the laws of or maintaining a principal office or principal place(s) of business in one or more emerging markets; (2) an issuer of securities that are principally traded in one or more emerging markets; (3) an issuer that derives or is currently expected to derive 50% or more of its total sales, revenues, profits, earnings, growth, or another measure of economic activity from, the production or sale of goods or performance of services or making of investments or other economic activity in, one or more emerging markets, or that maintains or is currently expected to maintain 50% or more of its employees, assets, investments, operations, or other business activity in one or more emerging markets; (4) a governmental or quasi-governmental entity of an emerging market; (5) any other issuer that the sub-adviser believes may expose the funds assets to the economic fortunes and risks of emerging markets or (6) options on securities of any of the above described issuers.
The sub-adviser may consider an issuer to be economically tied to emerging markets even though it may be based in a developed market such as the United States. Emerging markets are generally those with a less-developed economy and per-capital income significantly lower than the U.S. Emerging market countries are those represented in the MSCI Emerging Markets Index. Representative emerging market countries are China (Asia), Brazil (South America), Russia (Europe and Asia), India (Asia) and/or Taiwan (Asia). The sub-adviser anticipates income from dividend payments made by ETFs and individual securities, as well as income from short term trades and option premiums, although option income is also described as capital appreciation for tax and accounting purposes. The sub-adviser executes ETF trades through an exchange rather than trading directly with a fund.
The ETFs in which the Fund will invest may also invest in small and medium capitalization companies. The DRS philosophy is based upon the sub-advisers research indicating that market timing and/or stock selection is extremely difficult, may produce volatile returns and that asset allocation is limited in its risk reduction. Using DRS, the sub-adviser seeks to define risk by seeking to protect against large losses by hedging the equity securities in the Funds portfolio through investments in protective long-term index or ETF put options. Additionally, the sub-adviser seeks to increase returns by buying and selling call and put options on several ETFs or indices using hedging strategies. Defined Risk Strategy The DRS was created in 1997 by Randy Swan, President of the sub-adviser. The objective of the DRS is to provide risk-managed growth of capital by offering a strategy that seeks to match or exceed the long-term performance of the stock market without the traditional losses incurred during bear markets.
The DRS philosophy is based upon the sub-advisers research indicating that market timing and/or stock selection is extremely difficult and that asset allocation is limited in its risk reduction properties. Hedging Process The sub-adviser applies a put hedging strategy to hedge the Funds equity exposure. The Fund invests in long-term put options (referred to as paying a premium) that gives the Fund the right to sell a security or index at a set (strike) price or sell the long-term put option on an option exchange. The put strategy is executed using exchange-traded index and ETF put options to hedge the portfolio and to reduce volatility. The put strategy seeks to limit downside loss. Generally, index and ETF put options have an inverse relationship to the applicable underlying index or security.
Option Writing To generate additional returns, the sub-adviser buys and sells short-term (generally 1-3 month) put and call options on (i) ETFs, (ii) foreign equity indices, (iii) foreign equity securities, and (iv) futures on a regular basis. Additionally, the sub-adviser will regularly engage in various spread option strategies. Spread option strategies involve, for example, selling a 1-month call option while buying a 2-month call option. Rebalancing The sub-adviser may rebalance the portfolio monthly to avoid excessive exposure to one economic sector or foreign country/region. Long-term protective put options are typically traded annually to protect capital and/or allow for profit potential, by re-establishing a current-market strike price which depends on whether or not the market has increased or decreased.
As discussed further below, the sub-adviser intends on having very little portfolio turnover since most of the equity portfolio will be held indefinitely. Written options are bought back when the sub-adviser believes they present an unfavorable risk and reward profile. Purchased options are sold when the sub-adviser believes they present an unfavorable risk and reward profile or when more attractive investments are available.
SDFAX Holdings
Top 2 holdings of Swan Defined Risk Emerging Markets Fund by percentage of net assets, from the fund's latest SEC N-PORT filing.
| Holding | % of net assets |
|---|---|
| Ishares Inc | 92.96% |
| First American Funds Inc. | 1.28% |
SDFAX Portfolio Allocation
Asset-class allocation of Swan Defined Risk Emerging Markets Fund by percentage of net assets, from the latest SEC N-PORT filing.
| Asset class | Allocation |
|---|---|
| Equity | 93.0% |
| Derivatives | 6.9% |
| Cash & Equivalents | 1.3% |
SDFAX Performance
Total returns for SDFAX (as of 2026-10-01), from SEC filings.
| Period | Total return |
|---|---|
| 1 year | 1.5% |
| 3 years (annualised) | -1.0% |
| 5 years (annualised) | -0.0% |
SDFAX Risk Information
Risk metrics for SDFAX, derived from monthly returns in SEC filings.
- 1-year volatility (annualised): 6.0%
SDFAX Costs and Fees
SDFAX costs about $173 per $10,000 invested per year in fund expenses.
- Net expense ratio: 1.73%
- Gross expense ratio: 2.01%
- Portfolio turnover: 15%
- Brokerage commissions: 40.26 bps of average net assets (SEC N-CEN)
SDFAX Cashflows
Over the 12 months to 2024-12, Swan Defined Risk Emerging Markets Fund had net outflows of $14.08M, from monthly SEC N-PORT filings.
| Month | Net flow |
|---|---|
| 2024-12 | −$52.59K |
| 2024-11 | −$6.17M |
| 2024-10 | −$1.82M |
| 2024-09 | −$49.02K |
| 2024-08 | −$3.01M |
| 2024-07 | −$828.94K |
SDFAX Debt Constituents
No individual debt constituents are reported in Swan Defined Risk Emerging Markets Fund's latest SEC N-PORT filing.
SDFAX Prospectus and SEC Filings
Official Swan Defined Risk Emerging Markets Fund filings on SEC EDGAR — prospectus, portfolio holdings and annual reports.
- Prospectus (485BPOS) — filed 2024-10-25
- Prospectus (485BPOS) — filed 2023-10-26
- Prospectus (485BPOS) — filed 2022-10-26
- Portfolio holdings (N-PORT) — filed 2025-02-28
- Portfolio holdings (N-PORT) — filed 2024-11-27
- Portfolio holdings (N-PORT) — filed 2024-08-28
- Annual census (N-CEN) — filed 2024-09-13
- Annual census (N-CEN) — filed 2023-09-13
Related Funds
Other United States Multi-Cap / All-Cap Blend / Core Equity funds tracked on ABC INVEST:
Data Sources
ABC INVEST compiles this page from public filings made to the U.S. Securities and Exchange Commission (SEC) through EDGAR: portfolio holdings and monthly cashflows from Form N-PORT, expenses and returns from fund prospectuses (Form 485BPOS) and the SEC DERA Risk/Return Summary data sets, annual data from Form N-CEN, and shareholder reports from Form N-CSR.