AADR: 2nd Quarter 2021 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

The AdvisorShares Dorsey Wright ADR ETF’s (AADR) strategy uses relative strength to allocate towards the strongest performing ADR’s in the Developed and Emerging Markets. The strategy starts with a top down approach, first ranking each sector based on its relative strength scores and then setting the weighting of each sector. Holdings are scored daily based on an in-house momentum score which compares each security to the peers in the universe. if a securities rank fall below our sell threshold, it is removed. The strategy is not constrained to holding a set allocation to Emerging or Developed Markets, rather the process identifies areas of strength across the globe regardless of geographical location. This allows the portfolio to over or underweight regions and markets to concentrate on areas of strength, often pushing the portfolio to vary dramatically from international benchmarks.

Performance

The second quarter of 2021 has largely been a continuation of what we saw in the first quarter of the year. Market trends continue to be choppy, resulting in higher than average turnover in the portfolio as global markets attempt to establish new leadership in the changing Covid landscape. Even in the face of this choppiness the portfolio was able to outpace the benchmark for the quarter and the year. Choppy or trendless periods are often difficult for the strategy, so it is encouraging that it has been able to keep pace with broad markets for the month.

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 36 securities with weights ranging from ~1% to ~6% with the top 10 holdings comprising roughly 39% of the portfolio. Unlike 2020, which saw outsized returns from the top of the holdings list, this quarter the middle of the portfolio was responsible for the bulk of the positive returns, while the top three names caused the portfolio to lag the benchmark.

Top 10 Holdings

Ticker Security Description Portfolio Weight %
ASML ASML HOLDING NV-NY REG SHS 5.52%
BNTX BIONTECH SE-ADR 4.57%
DAC DANAOS CORP 4.49%
LVMUY LVMH MOET HENNESSY-UNSP ADR 4.16%
HIMX HIMAX TECHNOLOGIES INC-ADR 3.80%
SBSW SIBANYE-STILLWATER LTD-ADR 3.64%
LOGI LOGITECH INTERNATIONAL-REG 3.51%
CX CEMEX SAB-SPONS ADR PART CER 3.22%
ERJ EMBRAER SA-SPON ADR 3.06%
PKX POSCO- SPON ADR 2.85%

As of 06.30.2021.

Geography

The portfolio’s process of focusing on sectors and the strength of holdings allows the portfolio to look much different than the broad market benchmark. Emerging markets is one of the areas that we see this difference, with the portfolio 17% higher than the benchmark. This is largely due to the portfolio’s higher allocations in Latin American countries such as Brazil, Chile, and Mexico. South America tends to be a smaller allocation in the benchmark while the portfolio often holds a double-digit exposure. This quarter the Developed Market exposure was responsible for the majority of the portfolios returns. Germany was the largest single contributor in developed markets and the rest of the portfolio and was responsible for nearly a third of the quarters return.

As of 06.30.20201.

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 portfolios continues to be actively allocated to sectors in a materially different way than the benchmark. Notably the portfolio has a nearly 20% overweight to Materials and over 7% underweight to financials. This quarter however it was sectors with a small difference that drove the portfolio, as Health Care, industrials and Information Technology drove the quarters return. If we continue to see the markets maintain its choppiness over the course of the summer, we can expect the sector weights and holding to change along with the new trends.


As of 06.30.2021.

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.