HOLD: May 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 May, the AdvisorShares Core Reserves (NYSE Arca: HOLD) returned 0.73% vs 0.01% on the 1-3 month T-bill Index. The fund paid out income of 11.86 cents per share, for a Bloomberg indicated yield of 1.44%. The Bloomberg Barclays US Corporate 1-3 Year Average OAS was 48 basis-points tighter on the month, ending at 1.03%.
Industrials, which represent over 40% of the portfolio, were the best performing corporate sub-sector, and returned 94 basis-points on the month. This sector benefited from the rally in oil during the month. Some of the better performing positions include Occidental Petroleum 2021’s, Delta Air Lines 2020’s, and Sabine Pass 2020’s, which returned 3.0%, 2.90%, and 2.41%.
Financials, which represent 20% of the portfolio, returned 79 basis-points on the month. Some of the better performing positions include the Air Lease 2021’s, International Lease Finance 2020’s, and HSBC 2022’s, which returned 2.17%, 1.81%, and 1.23%. Among the poorer performing names was the Wells Fargo 2020’s, which returned -.09%.
Asset-backed securities followed a similar pattern of positive performance and returned 36 basis-points on the month. This sector benefited from better than expected collateral performance as well as increased demand for short-term, high-quality paper.
During the month of May, there were 3,583m in maturities and structured product paydowns. Some of the larger corporate purchases include the Bank of America 2022’s, Wells Fargo 2020’s, and Gilead Sciences 2020’s.
Recent Headlines / Looking Ahead
The month of May took a risk-on tone that drove nearly all risk-assets tighter, including corporates, ABS, and CMBS. Equities, as measured by the S&P 500 Index, also rallied to the tune of 4.76%. This was due to several factors, the most relevant of all being the Federal Reserve. With the Fed buying significant amounts of debt, including agency MBS, Treasuries, and even corporates, there has been too little supply to match the large inflows into investment grade bond funds. This is in spite of a record amount of corporate new issuance in the first half of 2020. Whether these spread levels hold is yet to be seen and will depend in part on the pace of the economic recovery. There are still over 20 million people unemployed, and the weight of the global pandemic still weighs heavily upon our consumer-based economy. The coming weeks will likely provide a great deal of insight as states and businesses re-open.
CRED SUIS GP FUN LTD 3.125 12/10/2020$101.171.98%
|Security Description||Price $||Portfolio Weight %|
|US TREASURY N/B 1.25 3/31/2021||$100.88||5.77%|
|US TREASURY N/B 1.125 2/28/2021||$100.70||5.77%|
|US TREASURY N/B 1.375 4/30/2021||$101.08||3.85%|
|BANK OF AMERICA CORP 3.499 5/17/2022||$102.43||2.94%|
|EDISON INTERNATIONAL 2.4 9/15/2022||$100.76||2.48%|
|OCCIDENTAL PETROLEUM COR 2.6 8/13/2021||$96.80||2.23%|
|AMXCA 2017-6 A 2.04 5/15/2023||$100.63||2.20%|
|US TREASURY FRN FRN 4/30/2022||$100.05||1.99%|
|US TREASURY N/B 1.75 10/31/2020||$100.64||1.99%|
|CRED SUIS GP FUN LTD 3.125 12/10/2020||$101.17||1.98%|
As of 05.31.2020. Excludes cash and money markets.
|Portfolio Characteristics||Yield-to-Worst||Coupon||Maturity (Yrs)||Effective Duration|
|as of 05.31.2020||1.8100||2.860||1.290||0.790|
Source: Sage Advisory Services; All data as of 05.31.2020.
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.