CRYP: 1st Quarter 2023 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/cryp.
Lenin famously quipped that “there are decades where nothing happens and there are weeks where decades happen” and after a very challenging 2022 for investors across all assets, the first quarter of 2023 invoked this sentiment, as it was a very good year for investors in the first three months of the New Year. Investors convinced themselves that Chairman Powell was going to pivot and end his relentless string of rate hikes and poured capital back into stocks and bonds, interest rates fell, and equities surged, returning nearly their average annual return in just a quarter. After the worst year for the traditional 60/40 portfolio in history in 2022, Q1 produced one of the strongest returns for that same portfolio, despite the fact nothing much had really changed (economic and corporate data was still weak and the Fed was still raising rates). As you might expect, digital assets surged significantly in the “risk-on” environment, and Bitcoin in particular, was once again the best performing asset across all major asset classes.
During the very challenging market environment in 2022, the benefits of an actively managed strategy with a disciplined risk management framework to gain exposure to the highly volatile returns of Bitcoin was quite evident as the trend following strategy mitigated downside volatility and helped the fund outperform simple long exposure to Bitcoin. One of the aspects of trend following strategies, however, is they tend to underperform during phase shifts or transitions between trends and Q1 was no exception. While CRYP’s return of nearly 40% was indeed impressive, the transition from partially invested to fully invested during the quarter created some degree of underperformance relative to the price return of long-only Bitcoin’s gain of 72%. Despite the short-term lag, the disciplined process of moving between Bitcoin futures exposure and cash, utilizing a proven trend following model, has added significant value since the inception of the fund last April.
We are very pleased with how the fund has helped investors navigate through a very complex, and challenging, investment environment over the past year and that the fund has achieved the primary objective of reducing the volatility inherent in the Bitcoin asset class. We hear from many Advisors that volatility is one of the primary reasons why clients as hesitant to deploy capital into Bitcoin, and we believe that our actively managed strategy mitigates that risk, which enables Advisors to confidently include Bitcoin exposure in well-diversified portfolios.
|Ticker||Security||Portfolio Weight %|
|BITO||PROSHARES BITCOIN STRAT ETF||75.11%|
|BLACKROCK TREASURY TRUST INSTL 62||12.56%|
|BTF||VALKYRIE BITCOIN STRATEGY||7.69%|
As of 03.31.2023. Subject to change.
Mark Yusko | Morgan Creek Capital, CEO and CIO
Portfolio Model Manager AdvisorShares Managed Bitcoin Strategy ETF (CRYP)
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. I
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.
There is no guarantee the fund will achieve its investment objective. This ETF may not be suitable for all investors. Bitcoin is a relatively new asset with a limited history. It is subject to unique and substantial risks, and historically has been a highly speculative asset and has experienced significant price volatility. While the Fund will not invest directly in bitcoin, the value of the Fund’s investments in Bitcoin Futures and Bitcoin ETFs is subject to fluctuations in the value of the bitcoin, which may be highly volatile. Investors may lose entire principal.
When models and data prove to be incorrect or incomplete, any decisions made in reliance thereon expose the Fund to potential risks. In addition, the use of predictive models has inherent risk. Because predictive models are usually constructed based on historical data supplied by third parties, the success of relying on such models may depend heavily on the accuracy and reliability of the supplied historical data.Through its investments in Bitcoin ETFs, the Fund is subject to the risks associated with their investments and structure as ETFs. The price and performance of bitcoin futures should be expected to differ from the current “spot” price of bitcoin. These differences could be significant. Bitcoin futures are subject to margin requirements, collateral requirements and other limits that may prevent the ETF from achieving its objective. Margin requirements for futures and costs associated with rolling (buying and selling) futures may have a negative impact on the fund’s performance and its ability to achieve its investment objective.Bitcoin is largely unregulated and bitcoin investments may be more susceptible to fraud and manipulation than more regulated investments.
As futures contracts approach expiration, they may be replaced by similar contracts that have a later expiration. This process is referred to as “rolling.” If the price of a long-term futures contract is greater than the short-term futures contract price, the market is considered to be in “contango.” If the price of a long-term futures contract is less than the short-term futures contract price, the market is considered to be in “backwardation.”