HOLD: 1st 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 first quarter of 2021, the AdvisorShares Core Reserves (NYSE Arca: HOLD) returned 0.11% vs 0.02% on the Bloomberg Barclays 1-3 Month U.S Treasury Bill Index. The most recent dividend was 5.52 cents per share, for a Bloomberg indicated yield of 0.67%. The Bloomberg Barclays US Corporate 1-3 Year Average OAS was 6 basis-points wider on the quarter, ending at 0.41%.

Attribution

​During the second half of 2020 risk-assets did very well, driving spreads on both securitized products and corporate credit near historic tights. While short-dated spreads were relatively well-behaved in the first quarter of 2021, they did leak slightly wider.

Within the corporate credit sector, Industrials represent the largest portion of the fund at roughly 33%. During the first quarter it returned 18 basis-points. Some of the better performing positions include the QVCN 2023’s, TEVA 2021’s, and NGPLCO 2022’s, which returned 1.18%, 1.15%, and 0.55%. Some of the poorer performing positions were the Boston Scientific 2022’s, Occidental Petroleum 2022’s, and the Abbvie 2022’s which returned -0.40%, -0.28%, -0.06%.

Financial Institutions tracked Industrials very closely, returning 0.17% on the quarter. Among the better performing names were Aviation Capital 2021’s, and Air Lease 2022’s, which returned 1.03% and 0.41%. The Barclays 2023 floating rate position was one of the poorer performing positions, returning -.10%.

Within the securitized space, ABS also performed well, returning 0.11%.

Top Holdings

Security Description Price $ Portfolio Weight %
US TREASURY N/B 1.375 1/31/2022  101.08 5.13%
US TREASURY N/B 1.125 2/28/2022  100.96 4.98%
US TREASURY N/B 1.25 10/31/2021  100.70 3.98%
US TREASURY N/B 1.75 11/30/2021  101.13 3.48%
AMERICAN EXPRESS CO FRN 5/20/2022  100.59 2.83%
VZOT 2019-A A1A 2.93 9/20/2023  101.37 2.76%
VMWARE INC 2.95 8/21/2022  103.15 2.50%
BANK OF AMERICA CORP 3.499 5/17/2022  100.37 2.47%
ARES CAPITAL CORP 3.625 1/19/2022  102.08 2.46%
AIR LEASE CORP 3.5 1/15/2022  102.27 2.23%

As of 03.31.202. Cash is excluded.

Portfolio Characteristics Yield-to-Worst Coupon Maturity (Yrs) Effective Duration
as of 03.31.2021 0.630 2.600 1.840 0.730

 

As of 03.31.2021.

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

The first quarter of 2021 marked a dramatic shift in the rates market. Long-end Treasury yields rose as the market anticipated increased Treasury issuance in the face of stimulus and infrastructure deals. This coincided with improving economic data which caused the market to begin pricing in rate hikes sooner than had previously been anticipated. This caused the Treasury curve to bear-steepen, with the long end of the curve over 75 basis-points higher, and the belly of the curve over 50 basis-points higher. The front-end of the curve continues to be pinned near zero and will likely remain there for some time. With the most recent jobs number coming in exceptionally strong, and the vaccine rollout continuing to be effective, there is a lot of economic optimism. However the rates market will likely remain volatile while discussions remain focused on the timing of Fed rate hikes and purchase tapers.

 

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%).
  • 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.