AADR: 4th Quarter 2020 Portfolio Manager Review

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For the fund’s most recent standardized and month-end performance, please click www.advisorshares.com/etfs/aadr.

Strategy

​2020 will be a year that is burned in our collective consciousness as one of trials and triumphs. In 2020 we saw a record decline in the global markets that ended the longest U.S. bull market in history as Covid began to devastate the globe. We also saw one of the sharpest rebounds off of the bottom in history, and by the end of the year we had made several new highs in U.S. Equity markets. While not all markets responded in such a resound way, equities as a whole had a strong year.

The strategy was able to capitalize in the pockets of strength around the globe, allowing it to outpace the broad market for the year. This was largely due to strong companies that were able to continue their trend of strong momentum through the crisis and into the recovery.

Performance

Equity markets both domestically and abroad rose again this quarter, spurred by improving economic indicators and the reopening of businesses across the globe. This recover was impacted in September as seemingly over night investor confidence stalled after reach all time highs in the U.S. While September was negative, over all the quarter was positive thanks to a strong start. The strategy over the quarter was able to add over 4% to the year to date return bringing it back into positive territory, while the benchmark remains negative for the year.

Holdings

The portfolio continues to be allocated to securities that we believe to display favorable relative strength characteristics. At any given time, the portfolio will be comprised of 30-40 US traded ADR’s from our universe of 300-450 ADR’s. Currently the portfolio consists of 34 securities with weights ranging from ~2% to ~7.0% with the top 10 holdings comprising roughly 43.77% of the portfolio. Over the past year, we have continued to see several names continue to lead the portfolio, particularly Nice and argenx SE. Both of these names have been among the top names for the year, and thanks to strong performance they were responsible for a large portion of this year’s positive return.

Top 10 Holdings

Ticker Security Description Portfolio Weight %
NICE NICE LTD – SPON ADR 7.14%
ARGX ARGENX SE – ADR 5.75%
MELI MERCADOLIBRE INC 5.22%
GFI GOLD FIELDS LTD-SPONS ADR 4.37%
ASML ASML HOLDING NV-NY REG SHS 4.25%
SBSW SIBANYE-STILLWATER LTD-ADR 3.77%
LVMUY LVMH MOET HENNESSY-UNSP ADR 3.59%
TAL TAL EDUCATION GROUP- ADR 3.43%
VNET 21VIANET GROUP INC-ADR 3.18%
LOGI LOGITECH INTERNATIONAL-REG 3.08%

As of 12.31.2020.

Geography

The portfolio continues to be allocated much differently geographically than the benchmark thanks to the selective nature of the investment process. The portfolio has an emerging market allocation that is nearly twice the weight of the benchmark and has historically been one of the driving factors behind its outperformance. Selective country allocation is a bi-product of our investment process, however se often see trend emerge from our allocations. The trend this year was a large exposure across developed markets, which have continued to lead the portfolio from a performance and weighting. This was largely due to an overweight in developed markets along with strong security selection.

As of 12.31.2020.

Sector

The buy/sell process of the strategy starts with a look at the strongest sectors within the universe, overweighting strength and underweighting or eliminating relative weakness. The portfolio has continually had an underweight to financials relative to the benchmark over the past several years and this year the trend continued, with the portfolio allocating under 5% to the sector at the end of the year and averaging just over 1% for the past 12 months. Largely sector returns were positive, with Industrials being the largest outlier and the largest drag on performance for the year. While Consumer Discretionary and Technology powered the positive returns for the year. 


As of 12.31.2020.

Respectfully,

John G. Lewis
Nasdaq Dorsey Wright
AdvisorShares Dorsey Wright ADR ETF (AADR) Portfolio Manager

 

Past Manager Commentary

Definitions:

An American Depositary Receipt (ADR) is a negotiable U.S. Security that generally represents a company’s publicly traded equity or debt. Depositary Receipts are created when a broker purchases a non-U.S. company’s shares on its home stock market and delivers the shares to the depositary’s local custodian bank, and then instructs the depositary bank to issue Depositary Receipts.

The MSCI All Country World Ex-U.S. Index is a free float adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.


Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by visiting www.advisorshares.com. Please read the prospectus carefully before you invest. Foreside Fund Services, LLC, distributor.

There is no guarantee that the Fund will achieve its investment objective. An investment in the Fund is subject to risk, including the possible loss of principal amount invested. Emerging Markets, which consist of countries or markets with low to middle income economics can be subject to greater social, economic, regulatory and political uncertainties and can be extremely volatile. Other Fund risks include concentration risk, foreign securities and currency risk, ADRs which may be less liquid, large-cap risk, early closing risk, counterparty risk and trading risk, which can increase Fund expenses and may decrease Fund performance. The Fund is, also, subject to the same risks associated with the underlying ETFs, which can result in higher volatility. This Fund may not be suitable for all investors. See prospectus for detail regarding risk.

Shares are bought and sold at market price (closing price) not NAV and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00 pm Eastern Time (when NAV is normally determined), and do not represent the return you would receive if you traded at other times.

Holdings and allocations are subject to risks and to change.

The views in this commentary are those of the portfolio manager and may not reflect his views on the date this material is distributed or anytime thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.