Durango financial firm to start mutual fund

In downturn, Swan Wealth Advisors finds way to keep money flowing

Jim Pitchard is the director of sales and marketing at Swan Wealth Advisors. The company started in Durango in 1997 and manages $150 million for clients across the country. Enlarge photo

EMERY COWAN/Durango Herald

Jim Pitchard is the director of sales and marketing at Swan Wealth Advisors. The company started in Durango in 1997 and manages $150 million for clients across the country.

The historic brick house sits at the end of East Third Avenue overlooking the Durango & Silverton Narrow Gauge Railroad’s railyard. Built in 1898, it was once an assay house used to weigh and measure ore during the area’s mining days. More than 100 years later, the house has been remodeled and refurbished, but its use has remained strikingly similar.

The building now houses Swan Wealth Advisors, an investment firm that manages $150 million for clients across the U.S.

“We’re the new assayers of wealth in Durango,” said Rob Swan, the company’s director of technology and trading.

If the company’s growth plans continue, millions dollars more will (virtually) pass through the old brick house’s walls.

After 15 years of handling money in more than 800 separately managed accounts, the firm is launching a mutual fund – the first to be managed from Durango. If the company’s growth projections are correct, it could be managing as much as $2 billion by the end of 2013.

Much of the company’s growth can be attributed to its Defined Risk Strategy, a unique combination of long-term investments and short-term selling strategies that the company touts for its ability to minimize investor losses during stock market declines.

While the company may trail the stock market during up years, “we do a lot better in loss prevention in bear markets,” said Jim Pritchard, the company’s director of sales and marketing.

The firm hangs its hat on its unique hedging strategy and a basket approach that, like compartments in a ship, minimizes the risk of any one event bringing down the entire portfolio.

While the company has grown steadily since it began, the company gained nationwide attention after the stock market plunged in 2008. Investors saw that Swan’s Defined Risk Strategy helped prevent big losses, Pritchard said.

The stock market fell by 37 percent that year while annual returns on accounts managed by Swan fell only 4.5 percent. In the stock market’s four most recent down years (2000 through 2002 and 2008) the S&P 500 was down an average of 80 percent while Swan’s offerings were up an average of 18 percent, according to company data.

The company was rated five stars by Morningstar, an investment resource that provides data on investment offerings. The rating was based on past data provided by the company that hasn’t been independently verified, a company official said.

In the years since the 2008 stock-market crash, the company has seen increasing interest from investors looking for a safer option that will protect their clients’ portfolios, Pritchard said.

“People are afraid to invest in the stock market because 2008 was so bad,” he said.

So while the stock market’s rapid decline sent other businesses scrambling, Swan saw it spur the growth it needed to start a mutual fund.

With the mutual fund, the company’s wealth-management strategies will be open to a much broader range of clients, Pritchard said.

Instead of a $250,000 minimum account size for separately managed accounts, the mutual fund requires only a $2,500 minimum account size and doesn’t require nearly the same paperwork or logistics.

Steve Pease, an investment advisor with Oxford Wealth Management, said he intends to invest in Swan’s mutual fund. Pease has worked with the company for nine months and complimented the Defined Risk Strategy.

“It fits well for us especially in volatile times,” he said. “There’s quite a number of firms that do long-short strategy like they do, but not quite the way they do it. It feels like they’re putting an awful lot more science into it rather than just basic long-short strategy.”

If the company hits its goal of managing $2 billion by the end of next year, it expects to double its staff of seven,Pritchard said.

Local clients would have the advantage of visiting Swan’s offices “to see what we’re doing with their money,” Pritchard said. And while living in Durango means Pritchard has to travel more than if he were working on Wall Street, he said the views from his office window and the small-town life make traveling a small price to pay.