AADR: 3rd Quarter 2021 Portfolio 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.
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.
The third quarter of the year was not kind to global momentum strategies. The first two months the strategy was able to hold up well in the face of turbulence, but the sell off in September hit the portfolio harder than the broad markets. Overall, the portfolio was only behind the benchmark by a marginal amount and given the environment the strategy held up better than we would have anticipated. Most of the losses came from select areas of the portfolio, while a significant portion of the portfolio was able to perform well helping to mitigate losses.
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 37 securities with weights ranging from ~1% to ~6.0% with the top 10 holdings comprising roughly 37% of the portfolio. BioNTech was the best performing stock for the quarter and its breakout performance helped to mitigate downside performance in the strategy cause by a majority of the portfolio’s holdings.
Top 10 Holdings
|Ticker||Security Description||Portfolio Weight %|
|ASML||ASML HOLDING NV-NY REG SHS||6.19%|
|LVMUY||LVMH MOET HENNESSY-UNSP ADR||3.96%|
|ERJ||EMBRAER SA-SPON ADR||3.60%|
|TX||TERNIUM SA-SPONSORED ADR||3.07%|
|SSL||SASOL LTD-SPONSORED ADR||2.91%|
|CX||CEMEX SAB-SPONS ADR PART CER||2.88%|
|IBN||ICICI BANK LTD-SPON ADR||2.85%|
As of 09.30.2021.
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 16% higher than the benchmark. This is largely due to the portfolio’s higher allocations in Greece along with Latin American countries such as Brazil 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 positive portfolio returns while Emerging Markets was the cause of downside performance. Brazil was the largest detractor this quarter, while Germany was once again the strongest area of the portfolio.
As of 09.30.20201.
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 13% overweight to Materials and a 6.7% underweight to financials. Information Technology and Materials were the largest drags on performance this month, with almost all of Information Technologies negative attribution coming from Himax technologies, which had been one of the strongest performers last month.
As of 09.30.2021.