AADR: 1st 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 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.  Holding 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 start to 2021 has been filled with change, as trends that were born of the Covid recovery began to fade and investors moved to new areas and sectors of the market.  This quarter, the strategy lagged slightly behind the benchmark, which is to be expected during periods of high turnover in the strategy as it seeks to identify new leaders in the market that are sustainable. Overall, the portfolio performed well and continues to be ahead of the broad market benchmark over the past 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 ~1% to ~5% with the top 10 holdings comprising roughly 40.4% 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 %
NICE NICE LTD – SPON ADR 5.37%
ASML ASML HOLDING NV-NY REG SHS 5.27%
ARGX ARGENX SE – ADR 5.26%
MELI MERCADOLIBRE INC 4.49%
SBSW SIBANYE-STILLWATER LTD-ADR 4.15%
LVMUY LVMH MOET HENNESSY-UNSP ADR 3.77%
LOGI LOGITECH INTERNATIONAL-REG 3.24%
DAC DANAOS CORP 3.09%
VNET 21VIANET GROUP INC-ADR 2.89%
TX TERNIUM SA-SPONSORED ADR 2.87%

As of 03.31.2021.

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 almost 20% higher than the benchmark. This is largely due to the portfolio’s higher allocations in countries such as India, China, and Argentina. South America tends to be a smaller allocation in the benchmark while the portfolio often holds close to double digit exposure. This quarter the Emerging Market exposure was responsible for most of the portfolios returns and almost doubled the returns of the benchmark’s allocation, while developed markets were positive, they still lagged the benchmark.

As of 03.31.20201.

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 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 10% to the sector at the end of the quarter. Sector returns saw mixed results this quarter as high flying areas that had previously led the portfolio like Technology, Healthcare and  Consumer Discretionary lagged the market and posted a negative return, while Materials and Consumer Staples saw the bulk of the portfolios positive returns.


As of 03.31.2021.

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.