HOLD: August 2020 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/hold.
During the month of August, the AdvisorShares Core Reserves (NYSE Arca: HOLD) returned 0.16% vs 0.01% on the 1-3 month T-bill Index. The fund paid out income of 8.04 cents per share, for a Bloomberg indicated yield of 0.98%. The Bloomberg Barclays US Corporate 1-3 Year Average OAS was 8 basis-points tighter on the month, ending at 0.52%.
Industrials, which represent 34% of the fund, was the best performing corporate subsector and returned 22 basis-points during the month. Some of the better performing positions include the Occidental Petroleum 2021’s, the Plains All American Pipeline 2022’s, and the Delta Air Lines 2020’s, which returned 1.08%, 0.58%, and 0.51%. One of the poorer performers was the Elanco Animal Health 2021’s, which returned -48 basis-points due to spread widening.
Financials were only slightly back of Industrials, returning 18 basis-points during the month. Among the better performing positions were the Aviation Capital 2021’s, Air Lease 2022’s, and Ares Capital 2021’s. These benefited from spread tightening due to decreased dispersion in wider trading names.
Within the securitized space, ABS continues to trade well, returning 9 basis-points during the month. Following a similar pattern as corporate credit, even the wider trading names have tightened significantly over the past several weeks.
During the month of August there was $4,380m in maturities and structured product paydowns. Some of the larger corporate purchases include Bank of New York Mellon 2021’s, General Motors 2021’s, and Textron 2020’s.
Recent Headlines / Looking Ahead
The Federal Reserve had their annual Jackson Hole meeting in which they laid out their new ‘average inflation targeting’ policy. The new policy seeks to run inflation at an average rate of 2% over time, thus allowing for the economy to run higher inflation to account for the lower inflation seen during the past decade. This is a slight divergence from the Fed’s previous policy, which was to keep inflation near 2%. The market reacted and the Treasury curve began to steepen in anticipation of higher inflation. This steepening of the curve may have a little more room to run as the large amount of Treasury issuance will likely put some pressure on rates. The month of August proved to be a risk-on event for the markets, as both equity and credit spreads rallied significantly. It is hard to fight against quantitative easing, and the amount of money that the Fed has inserted into the market is immense. Absent of any worsening of the pandemic, the Fed has certainly paved the way for continued economic recovery.
|Security Description||Price $||Portfolio Weight %|
|US TREASURY N/B 1.125 2/28/2021||100.51||5.09%|
|US TREASURY N/B 1.25 3/31/2021||100.65||5.09%|
|US TREASURY FRN FRN 4/30/2022||100.12||4.91%|
|US TREASURY N/B 1.375 4/30/2021||100.84||3.39%|
|BANK OF AMERICA CORP 3.499 5/17/2022||102.18||2.59%|
|EDISON INTERNATIONAL 2.4 9/15/2022||101.92||2.21%|
|CCCIT 2018-A1 A1 2.49 1/20/2023||100.89||1.98%|
|AMXCA 2017-6 A 2.04 5/15/2023||100.23||1.94%|
|GOLDMAN SACHS GROUP INC 2.6 12/27/2020||100.72||1.93%|
|QVC INC 4.375 3/15/2023||104.63||1.76%|
As of 8.31.2020. Excludes cash and money markets.
|Portfolio Characteristics||Yield-to-Worst||Coupon||Maturity (Yrs)||Effective Duration|
|as of 8.31.2020||0.730||2.715||1.250||0.680|
Source: Sage Advisory Services; All data as of 8.31.2020.Credit quality ratings are primarily sourced from Moody’s but in the event that Moody’s has not assigned a rating the Fund will use Standard & Poor’s (the “S&P”). If these ratings are in conflict the most conservative rating will be used. If none of the major rating agencies have assigned a rating the Fund will assign a rating of NR (non-rated security). The ratings represent their (Moody’s and S &P) opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. The credit ratings are published rankings based on detailed financial analyses by a credit bureau specifically as it relates the bond issue’s ability to meet debt obligations. The highest rating is Aaa, and the lowest is D. Securities with credit ratings of Bbb and above are considered investment grade.