HOLD: 3rd Quarter 2021 Portfolio Manager Review
During the third quarter of 2021, the AdvisorShares Core Reserves (NYSE Arca: HOLD) returned 0.06% vs 0.01% on the 1-3 month T-bill Index. The most recent dividend was 4.9 cents per share, for an indicated yield of 0.60%. The Bloomberg US Corporate 1-3 Year Average OAS was 1 basis-point wider on the quarter, ending at 32 basis-points.
While all corporate credit had positive return during the quarter, the Industrials sector had the best performance, returning 24 basis-points (0.24%).
Some of the better performing names included ADT 2022’s, United Airlines 2022’s, and Delta Airlines 2022’s, which returned 1.27%, 0.67% and 0.39%, repsectively. The worst performing name in that sector was QVC 2023’s which returned -0.06%.
Financial institutions, which make up about 26% of the fund’s holdings, returned 13 basis-points (0.13%) during the quarter. Some of the better performing positions included AirCastle 2023’s, Host Hotels 2023’s, and Humana 2022’s, which returned 0.47%, 0.31%, and 0.222%, respectively. There were no significant outliers to the downside.
Asset-Backed Securities (ABS), which make up 13% of the fund’s holdings, returned 0.04%. While ABS spreads were only marginally weaker during the time period, spreads have compressed so much that returns are limited.
|Security Description||Price $||Portfolio Weight %|
|US TREASURY N/B 0.125 6/30/2022||100.03||6.43%|
|US TREASURY N/B 1.125 2/28/2022||100.44||5.89%|
|US TREASURY N/B 1.375 1/31/2022||100.44||3.98%|
|US TREASURY N/B 1.875 4/30/2022||101.05||3.73%|
|WELLS FARGO & COMPANY 3.45 2/13/2023||104.10||2.95%|
|CRED SUIS GP FUN LTD 3.8 9/15/2022||103.29||2.75%|
|BANK OF AMERICA CORP 3.004 12/20/2023||103.08||2.61%|
|MORGAN STANLEY 4.875 11/1/2022||104.77||2.44%|
|CENTERPOINT ENERGY RES FRN 3/2/2023||100.02||2.31%|
|AMERICAN EXPRESS CO FRN 5/20/2022||100.34||2.14%|
As of 09.30.202. Cash is excluded.
|Portfolio Characteristics||Maturity (Yrs)||Effective Duration|
|as of 09.30.2021||1.780||0.650|
As of 09.30.2021.
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
The most recent Federal Reserve meeting confirmed the consensus opinion, that Fed taper is near at hand. The market is now expecting tapering to begin in either November or December of 2021 and end in mid-2022. These expectations caused Treasury rates to jump significantly, with the 5 year Treasury now at 97 basis-points (0.97%), up 20 basis-points on the month. The 10 year Treasury followed a similar pattern, up 18 basis-points, while long-end of the curve only increased by 11 basis-points. This sudden jump in rates has caused risk-assets to stall, with credit marginally weaker. Equities did not respond well either, down nearly 5% on the month. As we look ahead, it would seem that inflation is becoming a hot topic once again. Supply chain issues continue to cause problems, from shipping ports to local stores. Coinciding with this, commodity prices continue to increase, specifically natural gas and crude oil. How transitory it is remains to be seen, but it could add further pressure to already-rising interest rates.