FWDB: April 2020 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/fwdb.

Commentary

FolioBeyond’s algorithm underlying the AdvisorShares FolioBeyond Smart Core Bond ETF (FWDB) returned +0.56% in April versus +1.78% for the Bloomberg Barclays U.S. Aggregate Bond Index (“AGG”). Year-to-date and over longer time periods, FWDB continues to outperform Morningstar’s US Fund Multisector Bond category as shown in the table below. Although risk levels declined somewhat relative to extreme volatility levels of March, risk measures still remain elevated by historical standards. Consequently, FWDB continued to maintain a conservative portfolio allocation.

The primary drivers of returns for FWDB in April were intermediate duration Agency Bonds, short dated TIPs and short duration High Yield Corporate Bonds. The Federal Reserve’s initial intervention in the markets focused on Agency Mortgage Backed Securities and Investment Grade Corporate Bonds which quickly drove yield spreads in those sectors to tighter, less attractive levels. This has created some compelling relative value opportunities in various sub-sectors of the market that will come into play for FWDB’s strategy as volatility levels subside. While implied volatility levels have come off their highs from March, we are still at two times historical levels, which makes it premature for FWDB’s optimization model to include many riskier sub-sectors given the model’s volatility constraint.

PERFORMANCE SUMMARY FOR APRIL 2020

  1-Month Return YTD 2020 Return 1-Yr Return 3-Yr Return 5-Yr Return
FWDB (NAV) 0.56% -1.97% 4.24% 3.56% 3.43%
Bloomberg Barclays
U.S. Aggregate Bond Index (“AGG”)
1.78% 4.98% 10.84% 5.17% 3.806%
Morningstar Multisector Bond Category Average 3.12% -6.20% -1.79% 1.40% 2.19%
FWDB’s Morningstar Category Percentile Rank 12 12 15
Morningstar Multisector Bond Category Universe 336 332 318 282 229

Source: BNY Mellon, Morningstar.

Performance data quoted represents past performance and is no guarantee of future results. All Fund data and performance data quoted is believed to be accurate, and unless otherwise stated, is sourced from the Fund administrator, the Advisor’s or Sub-Advisor’s proprietary data, and Morningstar. 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.

Morningstar rankings are based on a fund’s average annual total return relative to all funds in the same Morningstar category. Fund performance used within the rankings, reflects certain fee waivers, without which, returns and Morningstar rankings would have been lower. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100.

Although information herein is believed to be reliable, FolioBeyond makes no representation or warranty as to its accuracy, and information and opinions reflected herein are subject to change at any time without notice. The past performance information presented herein is not a guarantee of future results.

From a correlation perspective, FolioBeyond’s FWDB strategy has historically exhibited low correlation to commonly followed market benchmarks. One of the primary reasons for this low correlation behavior is the dynamic, multi-factor, sector rebalancing approach that utilizes an advanced modeling framework. In contrast, market benchmarks are quite static with limited periodic changes to their  index composition. This low correlation benefit can be taken advantage of in a portfolio context by complementing investors existing core fixed income bond portfolios with FWDB’s alpha generating, multisector bond strategy.

Looking forward, we anticipate that FWDB’s strategy will take advantage of the richer opportunity set of expected returns created by the recent market volatility. Whether there is a U-shaped, V-shaped, or the recently adopted Nike swoosh recovery, the FWDB’s model will continue to update the underlying analytical measures daily to capture the most relevant value and risk measures and optimize sector allocations appropriately. We believe this dynamic, algorithmic approach is likely to extract significant sector rotation alpha over intermediate and long-term holding periods, similar to how FolioBeyond’s alg

Please contact us to explore how FWDB – a low-cost, efficiently executed, and tax-efficient algorithmic strategy packaged into an ETF – can fit into your Fixed Income bucket to match your overall investment goals.

Top Holdings

Ticker Security Description Portfolio Weight %
SHV ISHARES SHORT TREASURY BOND 30.46%
AGZ ISHARES AGENCY BOND ETF 27.66%
SHY ISHARES 1-3 YEAR TREASURY BO 21.25%
STIP ISHARES 0-5 YEAR TIPS BOND E 8.87%
SJNK SPDR BBG BARC ST HIGH YIELD 7.99%
SHYG ISHARES 0-5 YR HY CORP BOND 3.37%

As of 04.30.2020. Cash is not included.

Respectfully,

Yung Lim
CEO of FolioBeyond
AdvisorShares FolioBeyond Smart Core Bond ETF (FWDB) Research Strategist

 

Past Commentary

 


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. ETNs have a maturity date and generally, are backed only by the creditworthiness of the issuer. The value of an ETN may be influenced by time to maturity, level of supply and demand for the ETN, volatility and lack of liquidity in the underlying market (e.g., the commodities market), changes in applicable interest rates, and changes in the issuer’s credit rating and economic, legal, political or geographic events that affect the market. Other Fund risks include market risk, equity risk, early closing risk, liquidity risk and trading risk. The Fund will be subject to the risks associated the Underlying ETFs’ or ETP’s investments such as commodity risk, concentration risk, credit risk, fixed income risk, high yield risk, income risk, interest rate risk, and investment 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 change.

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