SENT: 3rd 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/sent.

Portfolio Review

Our AdvisorShares Alpha DNA Equity Sentiment ETF (SENT) delivered -3.09% returns for the 3rd quarter 2021. The markets delivered mixed returns by asset class as the Large Caps were up +0.6% (S&P 500) and the Mid/Small Cap was down -4.4% (Russell 2000).  Our overall equity exposure was 40% large cap and 60% mid-small cap. Our equity portfolio delivered -2.5% contribution for the quarter. This performance is in-line with the market performance of those market cap indices as the index returns at 40/60 allocation would have delivered -2.4% returns.

However, the performance within our market caps was divergent from the indices. The mid-small cap portfolio was down -3.5% for the quarter which represents out-performance to the Russell 2000 which was down -4.4.% for the quarter. Meanwhile, our large cap portfolio was down -0.8% which represents under-performance to the S&P 500 index which was up +0.6%.

The relative performance to benchmark by market cap represents a continued theme in our portfolio as our Mid-Small Cap exposure continues to out-perform its benchmark while large cap lagged in 2021. It is also important to note the relative under-performance of the mid-small cap market indices to the larger cap market indices. The large cap space is the only index that continues to make new highs in the 2nd half of 2021. Meanwhile, indices like the Russell 2000 peaked in Q1 2021.

The sideways to down move in the Russell 2000 has also been material to the hedging performance. Sideways to down markets are not going to produce any profits in our hedges as our hedges are built to pay off on material market downdrafts only. In fact, a sideways market for a hedge is the worst outcome as we will continue to pay the time value of the index option with no tailwind benefit in the underlying index. It makes the relative cost of the hedge even worse on a comparative basis.

This last quarter, the hedge was not a significant drag but did cost us about 30 basis points. The remaining -25 basis points of return is the fees of the ETF. 

In the equity portfolio,  the five biggest winners in Q3 were ZScaler, PureStorage, Paylocity, Dick’s Sporting Goods, and Victoria Secret. Each of these stocks delivered returns in excess of +23% for the quarter. The top 5 biggest losers were Abercrombie & Fitech, Alpha & Omega Semiconductor, RingCentral, The RealReal, and Urban Outfitters. Each of these stocks was down at least -21%.

We will always be happy with those kind of outcomes!

Top Holdings

Ticker Security Description Portfolio Weight %
CRTO CRITEO SA-SPON ADR 1.15%
ENV ENVESTNET INC 1.14%
DVN DEVON ENERGY CORP 1.13%
SGMS SCIENTIFIC GAMES CORP 1.13%
AAN AARON’S CO INC/THE 1.11%
CCRN CROSS COUNTRY HEALTHCARE INC 1.10%
VECO VEECO INSTRUMENTS INC 1.10%
DENN DENNY’S CORP 1.09%
NVT NVENT ELECTRIC PLC 1.09%
HAYW HAYWARD HOLDINGS INC 1.09%

As of 09.30.2021. Cash is not included.

Respectfully,

Wayne Ferbert
Alpha DNA
AdvisorShares Alpha DNA Equity Sentiment ETF (SENT) Portfolio Manager

 

Past Commentary

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.

Investing involves risk including possible loss of principal. The Sub-Advisor continuously evaluates the Fund’s holdings, purchases and sales with a goal of achieving its investment objective, which is not guaranteed, and judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance. Security prices of small and mid-cap companies may be more volatile than those of larger companies and therefore the Fund’s share price may be more volatile than those of funds that invest a larger percentage of their assets in securities issued by larger-cap companies.

 Options Risk. Selling (writing) and buying options are speculative activities and entail greater than ordinary investment risks. The Fund’s use of put options can lead to losses because of adverse movements in the price or value of the underlying asset, which may be magnified by certain features of the options. When selling a put option, the Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is below the strike price by an amount equal to or greater than the premium. Purchasing of put options involves the payment of premiums, which may adversely affect the Fund’s performance. Purchasing a put option gives the purchaser of the option the right to sell a specified quantity of an underlying asset at a fixed exercise price over a defined period of time. Purchased put options may expire unexercised, resulting in the Fund’s loss of the premium it paid for the option.   

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 commentary are 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.