VEGA: 4th Quarter 2023 Portfolio Review
Portfolio Update
| as of 12.31.2023 | 4Q2023 | YTD |
| VEGA (NAV) | 8.99% | 15.49% |
| MSCI AC World Index | 11.03% | 22.02% |
| CBOE S&P 500 BuyWrite Index | 4.09% | 11.82% |
| Barclays U.S. Aggregate Bond Index | 6.82% | 5.53% |
VEGA posted positive fourth quarter and year-to-date returns driven by the strong performance of the underlying globally diversified asset allocation. Overall, the portfolio allocation remained relatively stable throughout the quarter, adhering to a structural overweight to the domestic equity market represented by a core allocation to domestic large cap and mid cap growth. Furthermore, our third quarter rebalance into a more intermediate duration fixed income allocation also benefited the portfolio as the 10-year Treasury yield peaked at just over 5% in October of 2023 creating a strong tailwind to core fixed income through year-end.
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| SPY | SPDR S&P 500 ETF TRUST | 38.52% |
| EFA | ISHARES MSCI EAFE ETF | 19.21% |
| IUSB | ISHARES CORE TOTAL BOND ETF | 17.92% |
| IWP | ISHARES RUSSELL MID-CAP GROWTH ETF | 9.51% |
| MBB | ISHARES MBS ETF | 3.97% |
| GOVT | ISHARES US TREASURY BOND ETF | 3.96% |
| EEM | ISHARES MSCI EMERGING MARKET ETF | 3.92% |
As of 12.31.2023. Cash not included.
Activity
Covered Calls: A strong November surge in the S&P 500 led to an early close of the November 17th calls just three days short of expiration as the underlying moved into the money. The S&P led a multi-day rally fueled by increased expectations of a Federal Reserve pause on interest rates and favorable inflation data, rising 3.68% the week of November 13th. Volatility subsided in December leading us to lower our coverage from 70% back down to 60% on the December calls, which had an OTM of 3.3%. The December calls followed a similar pattern as November and were closed early during the week of expiration as a continued rally in the S&P led the underlying back in the money prior to expiration. Lastly, we purchased April 2024 puts in November as insurance on 20% of the underlying SPY allocation given favorable pricing and current market positioning.
Market Outlook
MARKETS
| Index Total Returns (%) | December | YTD | 1 Year | 3 Year | 5 Year |
| S&P 500 Index TR | 4.54 | 26.29 | 25.97 | 10.30 | 15.89 |
| DJ Industrial Average TR | 4.93 | 16.18 | 15.93 | 9.71 | 12.73 |
| NASDAQ Composite TR | 5.58 | 44.64 | 44.48 | 6.15 | 18.94 |
| Russell 2000 Index TR | 12.22 | 16.93 | 16.60 | 2.50 | 10.15 |
| MSCI Emerging Markets Index GR | 3.95 | 10.27 | 10.14 | -4.10 | 4.14 |
| MSCI EAFE Index GR | 5.33 | 18.85 | 18.15 | 4.35 | 8.79 |
| Bloomberg US Aggregate Bond Index TR | 3.83 | 5.53 | 5.28 | -3.27 | 1.15 |
As of 12.31.2023. Data is from Morningstar. Returns over one year are annualized. TR = total return. GR = gross return.
It is not possible to invest directly in an index.
The fourth quarter started off slow with most major asset classes posting negative returns in the month of October. The S&P 500 fell below its 200-day moving average, which is typically a bearish technical indicator for the market. The yield on 10-year US Treasuries peaked at just over 5% on October 19th weighing heavily on core fixed income markets for the month.
The Federal Reserve held rates steady at their November 1st meeting, marking the second consecutive meeting with rate pauses. The Fed’s dovish pivot ultimately kicked off a strong year-end rally in both equity and fixed income markets as participants turned to pricing in rate cuts starting as early as March of 2024.
The market rally continued into December, led by small cap stocks which posted a monthly gain of 12.22% outpacing most major asset classes on the back of lower inflation prints and the prospect for lower rates. After peaking in October, the 10 year Treasury yield ended the year exactly where it started at 3.87%.
Thank you for your continued trust in VEGA.
Respectfully,
Ken Hyman
CreativeOne Wealth,
AdvisorShares STAR Global Buy-Wrtie ETF (VEGA) Co-Portfolio Manager
Past Commentary
Returns are based on the S&P 500 Total Return Index, an unmanaged, capitalization-weighted index that measures the performance of 500 large capitalization domestic stocks representing all major industries. Indices do not include fees or operating expenses and are not available for actual investment. The hypothetical performance calculations are shown for illustrative purposes only and are not meant to be representative of actual results while investing over the time periods shown. The hypothetical performance calculations for the respective strategies are shown gross of fees. If fees were included returns would be lower. Hypothetical performance returns reflect the reinvestment of all dividends. The hypothetical performance results have certain inherent limitations. Unlike an actual performance record, they do not reflect actual trading, liquidity constraints, fees and other costs. Also, since the trades have not actually been executed, the results may have under- or overcompensated for the impact of certain market factors such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. Returns will fluctuate and an investment upon redemption may be worth more or less than its original value. Past performance is not indicative of future returns. An individual cannot invest directly in an index.
This material has been prepared for information and educational purposes and should not be construed as a solicitation for the purchase or sell of any investment. The content is developed from sources believed to be reliable. This information is not intended to be investment, legal or tax advice. Investing involves risk, including the loss of principal. No investment strategy can guarantee a profit or protect against loss in a period of declining values.
Investment advisory services offered by duly registered individuals on behalf of CreativeOne Wealth, LLC a Registered Investment Adviser.
Information is from sources deemed to be reliable, but accuracy is not guaranteed.
Definitions:
bp or Basis point is one hundredth of a percentage point (0.01%).
Beta measures the sensitivity of an investment to the movement of its benchmark. A beta higher than 1.0 indicates the investment has been more volatile than the benchmark and a beta of less than 1.0 indicates that the investment has been less volatile than the benchmark.
The Bloomberg US Aggregate Bond Index broadly tracks the performance of the U.S. investment-grade bond market. and is comprised of investment-grade government and corporate bonds.
The BXM Index or CBOE S&P 500 BuyWrite Index is designed to measure the total rate of return of a hypothetical “buy-write”, or “covered call”, strategy on the S&P 500 Index.
A covered call option involves holding a long position in a particular asset, in this case shares of an ETP, and writing a call option on that same asset with the goal of realizing additional income from the option premium.
The Dow Jones Industrial Average is a stock market index that tracks 30 large, publicly-owned blue-chip companies trading on the New York Stock Exchange and Nasdaq.
The MSCI All Country World Index (ACWI) is is an unmanaged free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.
The MSCI EAFE Index is a broad market index of over 900 stocks located within 21 countries in Europe, Australasia, and the Middle East and is often used as a benchmark for global developed market equities.
The MSCI Emerging Markets Index is used to measure the financial performance of mid- and large-cap companies in fast-growing economies in 25 countries throughout the world.
The Nasdaq Composite Index is a market capitalization-weighted index of more than 3,700 stocks listed on the Nasdaq stock exchange which is heavily weighted to the technology sector.
An option is a privilege, sold by one party to another that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed upon price within a certain period or on a specific date.
Exercising an option means to put into effect the right specified in the option contract.
An option premium is income received by an investor who sells or “writes” an option contract to another party.
A call option is considered Out Of The Money when the call option’s strike price is higher than the prevailing market price of the underlying stock. A put option is considered Out Of The Money when the put option’s strike price is lower than the prevailing market price of the underlying stock.
A protective put is an option strategy which entails buying shares of a security and, at the same time, enough put options to cover those shares. This can act as a hedge on the invested security, since matching puts with shares of the stock can limit the downside (due to the nature of puts).
A put option is a contract that gives the owner of the option the right to sell a specified amount of the asset underlying the option at a specified price within a specified time.
The Russell 2000 Index refers to a stock market index that measures the performance of the 2,000 smaller companies included in the Russell 3000 Index and is widely regarded as a bellwether of the U.S. economy because of its focus on smaller companies that focus on the U.S. market.
The S&P 500 Index is a broad-based, unmanaged measurement of changes in stock market conditions based on the average of 500 widely held common stocks.
A short position is the sale of a borrowed investment with the expectation that it will decline in value.
Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.
Implied Volatility is the estimated volatility of a security’s price. In general, implied volatility increases when the market is bearish and decreases when the market is bullish. This is due to the common belief that bearish markets are more risky than bullish markets.
The Volatility Index (VIX) is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge”. The VIX is a contrarian sentiment indicator that helps to determine when there is too much optimism or fear in the market.
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. An investment in the Fund is subject to risk, including the possible loss of principal amount invested. Other Fund risks included: allocation risk; derivative risk; early closing risk; Exchange Traded Note risk; liquidity risk, market risk; trading risk; commodity risk; concentration risk; counterparty risk; credit risk; emerging markets and foreign securities risk; foreign currency risk; large-, mid- and small- cap stock risk. Please see the prospectus for detailed information regarding risk. The Fund is also subject to options risk. Writing and purchasing call and put options are specialized activities and entail greater than ordinary investment risk. The value of the Fund’s positions in options fluctuates in response to the changes in value of the underlying security. The Fund also risks losing all or part of the cash paid for purchasing call and put options. The Fund may not be suitable for all investors.
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 change.
The views in this commentary are those of the portfolio manager and many not reflect his views on the date this material is distributed or any time thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.