In between the consensus forecast, and black swans no one has even considered, are gray swans- high impact events that are unlikely but still possible. Forward looking investors need to consider the full range of possibilities, not just focus on historical returns. This requires taking a long term, big picture view, and structuring unique portfolios to navigate unexpected events.
It seems a lot of possible gray swans(but not all) are related to geopolitics. One particular example of a geopolitical gray swan event would be the collapse of China. Of course this could take many forms. Some sort of shakeup in the leadership could certainly happen. Personally, I was in China at the height of Bo Xilai’s power and remember his sudden downfall. Some sort of gray swan seems likely this fall when the US has an election while the entire nation is suffering from a pandemic, and major cities are experiencing civil unrest. Regardless of your political persuasion, you want to protect your wealth.
Entoro Gray Swan Fund
Entoro Wealth has designed the Gray Swan Portfolio as a potential way of protecting against market downside.
The standard gray Swan allocation is as follows:
- Up to 50% Short S&P 500 holdings via an inverse ETF.
- Up to 25% and in a combination of physical gold and digital assets, such as bitcoin and ethereum,
- The remaining 25% allocated to short term US treasuries.
According to their website, Entoro offers the gray Swan Portfolio as a separately managed account for clients with a minimum of $1 million to invest. Entoro has also registered an interval fund following the same strategy. The inverse ETF portion of the portfolio could include leveraged inverse products. The fund will get exposure to digital assets through the futures market. If it is able to get regulatory approval to invest directly in digital assets, it would still need to seek shareholder approval.
This is a sign of the growing institutional acceptance of cryptocurrency. Most investors aren’t going to get their own digital wallet, but many would like exposure to digital assets. Investing in a fund provides investors exposure without the logistical and operational difficulties.
Based on the draft prospectus, Entoro Gray Swan Fund is available in one share class with a minimum investment of $25,000
The management fee is 1.5% per annum. The maximum sales load allowed by the draft prospectus is 5.75%. Additionally the fund may charge 0.25% shareholder servicing fee, and a 0.75% distribution fee. Note that the SMA version of the Gray Swan Portfolio charges 1.5% per annum with a 5% performance fee.
Entoro Wealth LLC serves as the investment adviser. Entoro Wealth LLC is the RIA subsidiary of Entoro, a Houston based investment bank focused on high growth businesses. It offers three different portfolio strategies incorporating digital assets with gold and broad market short positions.
Kingdon Trust will serve as the Primary custodian. UMB will also serve as the transfer agent, administrator and distributor.
Entoro Gray Swan Fund is one of over 20 interval funds in the fund launch pipeline that have filed initial registration statements. Click here to access a full list of interval funds pending registration.