HDGE: 3rd Quarter 2026 Portfolio Review
Performance
For the third quarter of 2026, the AdvisorShares Active Bear ETF (NYSE ARCA: HDGE) returned -4.92% (NAV) | -4.90% (market) while the S&P 500 Index returned +2.30%.
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| FG | F&G ANNUITIES & LIFE INC | -3.13% |
| AGO | ASSURED GUARANTY LTD | -2.72% |
| CVNA | CARVANA CO | -2.71% |
| OZK | BANK OZK | -2.58% |
| WAL | WESTERN ALLIANCE BANCORP | -2.41% |
| BAH | BOOZ ALLEN HAMILTON HOLDINGS | -.2.23% |
| PTC | PTC INC | -.2.03% |
| PUK | PRUDENTIAL PLC-ADR | -1.99% |
| CTSH | COGNIZANT TECH SOLUTIONS-A | -1.85% |
| RDDT | REDDIT INC-CL A | -1.83% |
As of 09.30.2026. Cash not included. Holdings subject to change.
Markets Review
Following the shift from oversold to overbought conditions earlier in the year, market internals have continued to deteriorate even as major broad indexes hover near high levels. Beneath the surface, current technical and fundamental metrics indicate that equity markets are increasingly fragile and exposed to heightened downside risk.
- Historic Breakdown in Market Breadth S&P 500 market breadth—measured as the difference between the aggregate index and median stock distance from 52-week highs—has plunged sharply. Current market breadth stands at its narrowest level since the Dot-Com era of 2000. This extreme lack of participation demonstrates that market advances are being driven by a select few mega-cap names while the broader universe of equities is already showing underlying structural weakness.
Source: Goldman Sachs ; ‘What equity investors are paying for today’, 1985 to 2030. September 30th, 2026.
2. Tightening Capital Costs & Sovereign Yield Pressures Fixed income markets reflect similar distress. The iShares 20+ Year Treasury Bond ETF (TLT) continues its downward trajectory, breaking below key moving averages. Foreign investors in particular are demanding a higher risk-free rate of return to hold U.S. sovereign debt. Rising long-term yields translate into an elevated cost of capital across the corporate sector. This tightening in financial conditions poses a direct threat to heavy corporate capital expenditure programs, notably the massive investments supporting AI infrastructure.
Source: StockCharts; January 2026 through October 6, 2026
3. Emerging Stress in Private Credit Cracks are also appearing in non-public lending markets. According to Moody’s Analytics estimates, private credit realized default rates have steadily trended higher, with soft default rates nearing 8%. As leverage costs increase and debt service requirements grow, default risk among lower-quality balance sheets is accelerating.
Source: Moody’s Analytics ; ‘Hard vs Soft Default Rates’, 2021 to 2026 Estimated. September 30th, 2026.
4. Exhausted Buying Power & Extreme Bullish Sentiment Despite these underlying vulnerabilities, investor positioning remains heavily overextended:
-
- Asset Allocation: Bank of America Global Wealth & Investment Management (GWIM) client equity allocation sits at 66% of AUM, matching the record peak seen in October 2021. With capital heavily committed, sidelined buying power is largely exhausted.
Source: Bank of America Global Research; ‘Private Equity Holdings as % of AUM’; January 2025 to September 2026. September 30th, 2026.
-
- Extreme Bullish Positioning: The Bank of America Bull & Bear Indicator registered an extreme reading of 9.3. Historically, readings in this territory signal an overextended, crowded bull market ripe for a reversal.
Source: Bank of America Global Research, EPFR Global, FMS, CFTC, MSCI.; ‘Bull and Bear Indicator since 2002; January 2002 to September 2026. September 30th, 2026.
Outlook & Portfolio Positioning
The combination of record-narrow market breadth, rising corporate cost of capital, deteriorating credit conditions, and euphoric investor sentiment creates a compelling short environment.
In response to these conditions, HDGE anticipates remaining aggressively short. Positioning will focus specifically on vulnerable small- and mid-cap growth equities displaying low earnings quality, aggressive accounting practices, and deteriorating technical momentum.
Respectfully,
Brad Lamensdorf Jon DelVecchio
AdvisorShares Active Bear ETF (HDGE) Portfolio Strategists
Past Commentary
Definitions:
Beta – a financial metric that measures how much a specific stock’s price moves in relation to the overall market. It is a key indicator of volatility, how wildly a stock swings, and helps investors understand the risk of adding a position to their portfolio.
P/E 10 ratio – a valuation indicator, commonly used with major equity indexes, factoring in real per-share earnings over a 10-year period. It is also known as the cyclically adjusted price earnings ratio.
Crestmont P/E ratio – a valuation metric that compares the price of a stock or the overall market to its earnings, specifically using the average earnings over a ten-year period.
Q Ratio – a valuation method that divide the market value of a company by the replacement value of the firm’s assets; also known as Tobin’s Q.
Equity risk premium – represents the additional return stocks offer over risk-free investments like Treasury bills, compensating investors for higher risks.
The S&P 500 Index is a free-float capitalization-weighted index based on the common stock prices of 500 American companies. It is one of the most commonly followed equity indices and many consider it the best representation of the market and a bellwether for the U.S. economy.
A Bear Market (Bearish) is a market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor’s 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market.
A Bull Market (Bullish) is a financial market of a group of securities in which prices are rising or are expected to rise. The term “bull market” is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities.
The Dow Jones Industrial Average (DJIA) is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes.
The Nasdaq 100 Index is a stock index of the 100 largest companies by modified market capitalization trading on Nasdaq exchanges, excluding companies in the financial sector.
A short position is the sale of a borrowed investment with the expectation that it will decline in value.
Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.
Implied Volatility is the estimated volatility of a security’s price. In general, implied volatility increases when the market is bearish and decreases when the market is bullish. This is due to the common belief that bearish markets are more risky than bullish markets.
The Volatility Index (VIX) is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge”. The VIX is a contrarian sentiment indicator that helps to determine when there is too much optimism or fear in the market.
Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus or summary 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. The Fund may invest in (or short) ETFs, ETNs and ETPs. In addition to the risks associated with such vehicles, investments, or reference assets in the case of ETNs, lack of liquidity can result in its value being more volatile than the underlying portfolio investment. Other Fund risks include market risk, equity risk, short sales and leverage risk, large cap risk, early closing risk, liquidity risk and trading risk. Short sales involve leverage because the Fund borrows securities and then sells them, effectively leveraging its assets. The use of leverage may magnify gains or losses for the Fund. See prospectus for specific risks and details.
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.