HOLD: 2nd Quarter 2022 Portfolio Review

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The Advisor Shares North Square McKee Core Reserves ETF returned -0.20% in the second quarter and -0.98% for the year-to-date.  The Bloomberg U.S. Treasury Bills 1-3-months Total Return Index returned 0.12% for the quarter and 0.15% year-to-date.

Bond market volatility remained at levels last seen during the height of COVID as the Fed ramped up its rhetoric with respect to fighting inflation.  Increases in the Fed Funds Rate accelerated from the initial 25 basis point bump in March, rising 50 basis points in May and an additional ¾ point in June.  The outlook for the yearend 2022 Funds rate stands at 3.45%, versus 0.82% on January 1st, having briefly topped 3.9% just a few weeks ago. 

An abrupt reversal lower in market interest rates occurred in late June as investors’ focus on inflation concerns were quickly supplanted by growing recession fears.  The most recent reports on consumer and business sentiment and retail sales suggested inflation, rising interest rates and lower stock prices were a drag on spending in real terms.  These signs of economic weakness exposed outsized bets on further declines in bond prices, fueling a short-covering bounce into quarter end.  Ultimately, the tenor of the recent bounce in bond prices is highly dependent on upcoming readings on “sticky” components of inflation and longer-term concerns over de-globalization. 

The specter of inflation, slowing growth and elevated volatility impacted every spread sector in Q2, pressuring yield spreads higher and leading to underperformance versus Treasuries.  The impact was particularly evident in corporates and asset-backed securities, where yield spreads widened in the quarter’s market selloff due to credit concerns and bouts of market illiquidity, even in high-quality holdings.  As expected, market liquidity improved as we moved into the third quarter.

On a positive note, we saw a return to more negative correlation between stocks and bonds as we approached the end of the quarter.  The signs of an economic slowdown have also shortened the expected tenure of the Fed’s restrictive policy moves, with the forecast peak in the Funds rate now occurring in March of next year.  Portfolio duration, which has targeted the 6-month to 8-month range in the first half, will likely be extended as we see confirmation of a peak in inflation in the coming months.

Top Holdings

Security Description Price $ Portfolio Weight %
US TREASURY N/B 0.125 10/31/2022        99.34 5.66%
US TREASURY N/B 1.5 8/15/2022      100.01 4.27%
WELLS FARGO & COMPANY 3.45 2/13/2023      100.13 3.18%
FHR 4614 PA 3 12/15/2043        99.47 3.11%
CRED SUIS GP FUN LTD 3.8 9/15/2022      100.09 2.99%
BANK OF AMERICA CORP 3.004 12/20/2023        99.72 2.84%
MORGAN STANLEY 4.875 11/1/2022      100.72 2.64%
ATHENE GLOBAL FUNDING FRN 1/7/2025        96.91 2.28%
EDISON INTERNATIONAL 2.4 9/15/2022        99.80 2.09%
OSCAR 2022-1A A2 1.6 3/10/2025        98.30 1.93%

As of 06.30.2022. Cash is excluded.


CS McKee
AdvisorShares North Square McKee Core Reserves ETF (HOLD) Portfolio Manager

On November 1, 2021, the AdvisorShares Sage Core Reserves ETF (the “Predecessor Fund”) was renamed the AdvisorShares North Square McKee Core Reserves ETF. On that same day, CS McKee Advisors took over management of the fund from Sage Advisory.



  • basis point is one hundredth of a percentage point (0.01%).
  • 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.

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.

Fixed Income Securities Risk. The market value of fixed income investments in which the Fund may invest may change in response to interest rate changes and other factors. During periods of falling interest rates, the value of outstanding fixed income securities generally rise. Conversely, during periods of rising interest rates, the value of fixed income securities generally decline. Mortgage-Backed and Asset-Backed Securities Risk. The Fund could lose money if the issuer or guarantor of a debt instrument in which the Fund invests becomes unwilling or unable to make timely principal and/or interest payments, or to otherwise meet its obligations.

The impairment of the value of collateral underlying a mortgage-backed or asset-backed security (for example, due to non-payment of loans) may result in a reduction in the value of such security. In addition, early payoffs in the loans may result in the Fund receiving less income than originally anticipated.

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.