HOLD: 2nd Quarter 2021 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.

Performance

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%.

Attribution

​The second quarter of 2021 can be characterized in the same way as most of the past 12 months, meaning risk-on and tighter spreads.

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.

Top Holdings

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.

Respectfully,

Sage Advisory Services
AdvisorShares Sage Core Reserves ETF (HOLD) Portfolio Manager

Past Commentary

DEFINITIONS:

  • basis point is one hundredth of a percentage point (0.01%).
  • The Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index is designed to measure the performance of public obligations of the U.S. Treasury that have a remaining maturity of greater than or equal to 1 month and less than 3 months. This index includes all publicly issued zero coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and at least 1 month, are rated investment-grade, and have $300 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed rate and non-convertible. Excluded from this index are certain special issues, such as flower bonds, targeted investor notes, state and local government series bonds, inflation protected public obligations of the U.S. Treasury, commonly known as “TIPS,” and coupon issues that have been stripped from bonds included in the Index. This index is market capitalization weighted.
  • The Bloomberg Barclays U.S. 1-3 Year Corporate Bond Index is designed to measure the performance of the short term U.S. corporate bond market. This index includes publicly issued U.S. dollar denominated corporate issues that have a remaining maturity of greater than or equal to 1 year and less than 3 years, are rated investment grade and have $300 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars, fixed rate and nonconvertible. This index includes only corporate sectors. The corporate sectors are Industrial, Utility, and Financial Institutions, which include both U.S. and non-U.S. corporations. The following instruments are excluded from this index: structured notes with embedded swaps or other special features; private placements; floating rate securities; and Eurobonds. This index is market capitalization weighted.
  • Bloomberg indicated yield is the most recently announced dividend amount, annualized based on the payment frequency, then divided by the last price.
  • Coupon is the interest rate stated on a bond when it’s issued. The coupon is typically paid semi-annually.
  • Credit spread is the spread between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating.
  • Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices.
  • The Fed Funds rate is the interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight. The rate may vary from depository institution to depository institution and from day to day.
  • London Interbank Offered Rate (LIBOR) is an interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market. The LIBOR is fixed on a daily basis by the British Bankers’ Association. The LIBOR is derived from a filtered average of the world’s most creditworthy banks’ interbank deposit rates for larger loans with maturities between overnight and one full year.
  • The option adjusted spread (OAS) is a measurement of the spread of a fixed-income security rate and the risk-free rate of return, which is adjusted to take into account an embedded option. Typically, an analyst would use the Treasury securities yield for the risk-free rate. The spread is added to the fixed-income security price to make the risk-free bond price the same as the bond.
  • Spread is the difference between the bid and the ask price of a security or asset.
  • A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates. The curve is also used to predict changes in economic output and growth.
  • Yield-to-worst is the lowest potential yield that can be received on a bond without the issuer actually defaulting. The yield to worst is calculated by making worst-case scenario assumptions on the issue by calculating the returns that would be received if provisions, including prepayment, call or sinking fund, are used by the issuer. This metric is used to evaluate the worst-case scenario for yield to help investors manage risks and ensure that specific income requirements will still be met even in the worst scenarios.

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. Diversification and sector asset allocation do not guarantee a profit, nor do they eliminate the risk of loss of principal. An investment in the Fund is subject to risk, including the possible loss of principal amount invested. The Fund’s investment in fixed income securities will change in value in response to interest rate changes and other factors, such as the perception of the issuer’s creditworthiness. Fixed income securities with longer maturities are subject to greater price shifts as a result of interest rate changes than fixed income securities with shorter maturities. The Fund’s investments in high-yield securities or “junk bonds” are subject to a greater risk of loss of income and principal than higher grade debt securities. In addition the Fund is subject to leveraging risk which tends to exaggerate the effect of any increase or decrease in the value of the portfolio securities. The Fund is also subject to liquidity risk, issuer risk, foreign currency and investment risk, prepayment risk and trading risk. See prospectus for details regarding specific risks.

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 to change.

The views in this material were those of the Portfolio Manager and may not reflect his views on the date this material is distributed or anytime thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.