HOLD: 2nd Quarter 2021 Portfolio Manager Review
During the second quarter of 2021, the AdvisorShares Core Reserves (NYSE Arca: HOLD) returned 0.13% (NAV and market price) vs 0.00% on the Bloomberg Barclays 1-3 Month U.S Treasury Bill Index. The most recent dividend was 5.649 cents per share, for a Bloomberg indicated yield of 0.69%. The Bloomberg Barclays US Corporate 1-3 Year average OAS was 10 basis-points wider on the quarter, ending at 0.30%.
Within corporate credit, Industrials had the best performance, returning 40 basis-points during the quarter. Some of the better performing names include Occidental Petroleum 2022’s, QVC Inc 2023’s, and Qwest Corp 2021’s, which returned 2.54%, 1.15%, and 0.88%. Among the poorer performing positions were the Bayer 2021’s, and ADT 2022’s, which returned a positive 0.09%.
Financials, which represent nearly 25% of the fund, returned 27 basis-points. Some of the better performers were the Molina Healthcare 2022’s, Aircastle 2023’s, and Onemain Finance 2022’s, which returned 1.12%, 0.93% and 0.91%.
Asset-backed securities returned 11 basis-points. Spreads within the sector are now near historic tights resulting in limited upside potential. However, they still offer a small amount of incremental yield vs Treasuries.
|Security Description||Price $||Portfolio Weight %|
|US TREASURY N/B 1.125 2/28/2022||100.71||5.49%|
|US TREASURY N/B 1.375 1/31/2022||100.76||4.73%|
|US TREASURY N/B 1.875 4/30/2022||101.48||2.67%|
|AIR LEASE CORP 3.5 1/15/2022||101.66||2.45%|
|VMWARE INC 2.95 8/21/2022||102.60||2.24%|
|EDISON INTERNATIONAL 2.4 9/15/2022||101.79||2.19%|
|PLAINS ALL AMER PIPELINE 3.65 6/1/2022||102.12||2.18%|
|CENTERPOINT ENERGY RES FRN 3/2/2023||100.03||2.15%|
|HART 2020-C A2 0.26 9/15/2023||100.05||2.12%|
|VZOT 2019-A A1A 2.93 9/20/2023||101.20||2.05%|
|ECOPETROL SA 5.875 9/18/2023||108.36||2.03%|
As of 06.30.202. Cash is excluded.
|Portfolio Characteristics||Yield-to-Worst||Coupon||Maturity (Yrs)||Effective Duration|
|as of 06.30.2021||0.590||2.657||1.770||0.660|
As of 06.30.2021.
Source: Sage Advisory Services. 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.
Recent Headlines / Looking Ahead
As we look ahead, all eyes are on the upcoming Fed meetings, with the anticipation of them tapering purchases beginning in the first half of 2022. The market is currently pricing in Fed rate hikes late in 2022 following the completion of the taper. While limited Treasury issuance and the drawdown of the Treasury General Account has resulted in a rally in long-end rates, taper talk and an increase in Treasury issuance later in the year should provide some relief and allow rates to drift higher. Inflation has also been a hot topic this year and will likely continue to be going forward. Whether or not inflation will indeed be transitory is yet to be seen, but there are a few signs indicating it may slow down. One of the larger contributors to inflation has been used car prices, a result of the global chip shortage. How quickly this shortage can be filled will certainly play a significant role in inflation expectations.