VEGA: 2nd 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

Portfolio Update

  2nd Qtr. 2021 YTD
VEGA NAV 4.92% 8.14%
MSCI All County World Index 7.39% 12.30%
Cboe S&P 500 Buy Write Index (BXM) 5.08% 11.10%
Bloomberg Barclays U.S. Aggregate Bond Index (AGG) 1.83% -1.60%

As of 06.30.2021.

Second quarter 2021 was yet another very positive quarter in terms of performance. U.S. equites, as represented by S&P 500, were up 8.55%, bring the YTD performance to 15.25%. Non-U.S. developed markets equities also had a great second quarter with the MSCI All Country World Index up 7.39%, Year-to-date performance now totals 12.30%. Fixed income did not fair as well as equities, though was still positive. Fixed income, as represented by Bloomberg Barclays Capital U.S. Aggregate Bond Index, was up 1.83%


The best performing Asset Classes for the AdvisorShares Star Global Buy-Write ETF (VEGA) in the second quarter 2021 were mid cap (IWP) and U.S. technology (XLK), with performance of 10.92 and 11.18%, respectively. VEGA’s global technology exposure (IXN) also did well with a return of 9.68%


As noted above, fixed income did not fair was well as equities during the quarter which resulted in the worst performance being attributed to Core Total Bond represented by IUSB and U.S. Treasuries represented by GOVT, with returns of 1.40% and 1.57%, respectively.

Top Holdings

Ticker Security Description Portfolio Weight %

As of 06.30.2021. Cash not included.


Covered Calls: During the second quarter of 2021, Covered Call writing was fairly quiet for the VEGA ETF. During April, the Covered Calls that were set in March went significantly “In-The-Money” (when the underlying price is well above the strike price). This resulted in a repurchase of the Covered Calls five days prior to expiration. This was not unexpected as SPY rose 6.93% from 3/25/2021 (when the Covered Calls were established) to 4/12/2021 (when the Covered Calls were closed), which was $26.67 total rise in price. Given the extraordinary price appreciation during March through early April, VEGA withheld initiating new calls for April until well into May 2021 and proved to be a beneficial move. As SPY rose another 2.6% from 4/12/2021 through 5/10/21, VEGA was able to participate unencumbered. In early May 2021, new Covered Calls were established for June 2021 and ultimately expired worthless. As the market continues to move in an upward trajectory, VEGA will continue to be conservative with Covered Call writing to allow for more upside participation.

Protective Puts: VEGA continues to hold the Protective Puts established in the first quarter of 2021. At the time the Protective Puts were established, they represented 20% of the portfolio’s notional value. During the quarter, VEGA’s AUM grew and the Protective Puts were not adjusted for this increase in AUM. It appears that the Protective Puts will expire during August 2021 and will be replaced at their expiration.   

Tactical Shifts: VEGA experienced a large tactical shift at the end of the first quarter. As a result, VEGA made no additional tactical shifts during the second quarter. VEGA is currently satisfied with its global equity exposure, as well as its fixed income allocation.

Volatility-Based Reinvestment (VBR): There had not been a Volatility-Based Reinvestment since June 2020. Going into April, the 200-day moving average on the CBOE Volatility Index (VIX) was 25.34. VEGA would still need to have a significant increase in the VIX before deploying another Volatility-Based Reinvestment. VEGA would wait for the 200-day moving average to double, which roughly means spiking to a value of 60 before putting cash back to work in the portfolio.

Beta: As VEGA closed out the first quarter, the beta of the portfolio was approximately 0.67 compared to the S&P 500. This is a larger than typical deviation away from a long-term target beta of 0.60. Given the continued strong performance in equity markets coupled with the introduction of vaccines to the broad population and reopening of most economies, there is a strong outlook going forward.

Fixed Income: VEGA continues to hold its duration around 7.1. This reflects an increase in risk exposure to fixed income from the tactical shift made in the first quarter of 2021.

Market Outlook

The Market

The S&P 500 Index continues to climb in June as it finished the month up 2.22% leading to a 14.41% increase on the year. The technology heavy NASDAQ led the way during the second quarter as it was up 9.50% on the quarter following a strong June, and it is now up 12.50% on the year. The Dow Jones Industrial Average (DJIA) did not follow suit during the month of June as it was down 0.08%, but the index is still up nearly 13% on the year.1

Index Returns (as of 6/30/2021) Closing Price Level $  June Qtr to Date Year to Date
S&P 500 4,297.50 2.22% 8.17% 14.41%
Dow Jones Industrial Average 34,502.51 -0.08% 4.61% 12.73%
NASDAQ Composite 14,504.00 5.50% 9.50% 12.50%
Russell 2000 2,310.55 2.32% 4.05% 17.00%
MSCI EAFE 2,304.92 -1.25% 4.37% 7.33%
MSCI Emerging Markets 1,374.64 -0.11% 4.42% 6.46%
U.S. Aggregate Bond 0.70% 1.83% -1.48%


The Russell 2000 small cap index continues to lead during 2021 as it is now up 17.00% on the year after a 2.32% increase for the month of June. Both the MSCI international and emerging market indices were down during the month of June, but the MSCI EAFE is still up 7.33% on the year and the MSCI Emerging Markets Index is up 6.46% for 2021. Fixed income continued a steady second quarter as the Bloomberg Barclays US Aggregate Bond TR index was up 0.70% for the month leading to an increase of 1.83% during the quarter. The U.S. Aggregate Bond index is still down 1.48% on the year.1

The Economy

The Pandemic

As we enter the second half of 2021, the economy is experiencing a rapid reopening process. This, along with fiscal policy, will be drivers for economic numbers in 2021 and 2022 according to Dr. David Kelly, the Chief Global Market Strategist for J.P. Morgan.2 The rapid reopening process is a testament to how the United States handled the coronavirus pandemic in the first half of 2021. As you can see from the left image on the next page, fatalities and case numbers have dramatically decreased since January of this year; both by over 90%.


There is the new, more contagious Delta variant of the virus that has caused concern, but much of that concern is related to unvaccinated individuals. There is much more to learn about the Delta variant, but the best protection against the virus has proved to be the vaccine.4 As of July 5th, 2021, over 157 million people in the United States were considered fully vaccinated.5 When you combine that number with those that have been previously infected by the virus, it is estimated that nearly 75% of the United States population is considered immune to the virus which is shown in the right image above.3 It is not a coincidence that the rapid decrease in cases and fatalities shown in the left image above is a direct result of the rise in vaccinations shown in the right image. Nearly all COVID-19 deaths in the U.S. are now people who were not vaccinated. Of the 18,000 deaths from the virus that occurred in May, only 150 of those individuals were vaccinated.6

As the vaccination numbers go up and the case numbers go down, the economy continues to experience a rapid reopening. The image below shows economic activity in the United States since the start of the pandemic. Starting in March of 2021, the graph changes to a year over “2 years ago” number to represent current monthly activity compared to monthly activity prior to the pandemic. The image on the next page shows that activity continues to steadily increase with the number of people eating in restaurants, navigation app usage, and TSA traveler traffic representing the largest bounce backs from their lows last year.7


Fiscal Policy

The other main driver to the U.S. economy will be fiscal and monetary policy. Fiscal policy, which is reflected by government decisions, will be represented more in the near term while monetary policy decisions by the Fed will continue to play out over time. On Thursday, June 24th, President Joe Biden announced “we have a deal” related to a major infrastructure initiative after meeting with a group of bipartisan Senators resulting in nearly $600 million of new spending. Of the nearly $600 million, over $300 million will go towards transportation such as roads, railroads, and public transit.8 As of July 6th, a Bipartisan group from the House of Representatives backed the Biden-Senate infrastructure deal.9 Many Democrats believe the bill is too small, but Biden believes that if he will be able to get his party to pass the bill. Some believe that Biden agreed to the trimmed down version of his infrastructure plan in order to get some form of his American Families Plan through Congress.10 This is important as it could lead to even more fiscal stimulus finding the pockets of Americans by making the Dependent Care Tax Credit permanent, extending the Child Tax Credits for another five years, and making the Earned Income Tax Credit permanent as well.11 Fiscal policy is important to monitor this year. It will become more difficult to pass items through Congress as we approach the midterm elections in November of 2022, and it is unlikely that the Democrats maintain complete control. In the meantime, more fiscal stimulus in 2021 will continue to be reflected in GDP numbers.


As the economy continues to reopen, estimates for 2021 second quarter US GDP are coming in just shy of 10% at an annualized rate. This follows 4.3% growth in the fourth quarter of 2020 and 6.4% growth in the first quarter of 2021.12 Dr. David Kelly of J.P. Morgan stated that if this does hold true, it will place US GDP over 1% higher than it was after the fourth quarter of 2019 and the country will have recovered all of its pandemic losses. GDP growth can be attributed to a myriad of things including the economic reopening, pent up savings, production increases due to low inventory, and child tax care credits starting to pay out on July 15th as a result of the American Rescue Plan.2


Monetary Policy

The Federal Reserve Board (Fed) is set to meet at the end of July and then again in September with their annual Jackson Hole meeting between the two.14 As the Fed continues to meet, the focus remains on two items: bond purchases and interest rates. When the Fed purchases bonds, it increases bond prices thus lowering interest rates, and therefore stimulating the economy. The same effect is had when they target a lower federal funds rate which makes the cost of borrowing lower and again, stimulates the economy. The Fed has been pulling these two levers for quite some time as the economy heals, but as GDP continues to increase and unemployment continues to decrease, many believe things could start to change. The Fed has stated before that they plan to keep interest rates as is at 0.00 to 0.25 % until 2023, but it’s possible that they could start tapering bond purchases at the end of this year. These lower interest rates lead to inflation which seems to be the headline fear for consumers today. The target inflation rate for the Fed is typically 2%, but most believe that the Fed will allow it to run higher before they pull levers attempting to lower it. Previous comments made by the Fed lead the public to believe that they think this current inflation is transitory, or temporary in nature, and that is why they have yet to do anything to lower it.15 However, as wage growth continues, the public begins to expect inflation. As they expect inflation, they will demand higher wages, and inflation may end up being less temporary than initially thought.2 Currently the Fed purchases $120 billion in bonds each month. Most experts believe that after one of their next three meetings, they will announce the tapering of bond purchases potentially ending all purchases by the end of 2022 before they begin to raise their target interest rates.16 All of this is to say that the Fed will likely continue to let inflation run doing their part to support the economy until they believe unemployment has reached a low enough level.


The United States economy is reopening, GDP is growing back above pre-pandemic levels, more fiscal stimulus could be on the horizon, and monetary policy continues to be easy. These have all attributed to markets reaching all time highs and continuing to grow. Because of this, it is important to look at the fundamentals and valuations in the equity market. United States growth stocks have been on quite the run as we saw a flight to quality during the pandemic and the introduction of a mass amount of younger, lower income retail investors. It’s possible this continues as the stimulus continues but valuations are high, and there is merit in leaning towards value stocks over growth stocks. As the rest of the world catches up to the United States in terms of vaccinations and economies reopening, there is value to be had internationally, specifically in select emerging market countries. This all leads to a globally diversified balanced equity portfolio. However, equity markets have been on quite the uninterrupted bull run since November of 2020, but the S&P 500 has experienced an average intra-year drop of 14.3% each year since 1980.2 Volatility is present and possible as retail investors continue to flood the markets. Portfolios may need something to offset equity markets should a correction occur and that is where high quality fixed income will fit. In order to achieve yield through fixed income, portfolios may need to move down in credit quality with a portion of the fixed income allocation. There are countless scenarios that could play out through the remainder of the year related to the virus, fiscal decisions, monetary decisions, and unexpected market events. We continue to emphasize a balanced approach given the state of the market based on your risk tolerance. As David Lebovitz from J.P. Morgan states, “It’s important to focus on a diversified approach as it leads to a more comfortable ride. If you are comfortable, you are likely to remain invested, and staying invested gives you the best chance to achieve a successful retirement.” 2 If you’d like to revisit your portfolio and discuss your risk tolerance, investment objectives and expectations, please reach out to schedule a conversation today.

Thank you for your continued trust in VEGA.



Rebecca Valdez
ChangePath, Portfolio Manager
AdvisorShares STAR Global Buy-Wrtie ETF (VEGA) Co-Portfolio Manager


Robert Kellogg, CFA
ChangePath, Investment Officer
AdvisorShares STAR Global Buy-Wrtie ETF (VEGA) Co-Portfolio Manager

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3 – Source: Centers for Disease Control and Prevention, Johns Hopkins CSSE, Our World in Data, J.P. Morgan Asset Management. *Share of the total population that has received at least one vaccine dose. **Est. Infected represents the number of people who may have been infected by COVID-19 by using the CDC’s estimate that 1 in 4.6 COVID-19 infections were reported. ***Est. Infected & vaccinated assumes those infected equally likely to be vaccinated as those not infected. On 5/6/21, we moved up our threshold for herd immunity from 60-80% to 70-90% based on the comments by Dr. Anthony Fauci that the prevalence of more contagious variants have pushed up the target herd immunity threshold for the U.S. – J.P. Morgan – Guide to the Markets – U.S. Data are as of June 30, 2021.
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7 – Source: App Annie, Chase, Mortgage Bankers Association (MBA), OpenTable, STR, Transportation Security Administration (TSA), J.P. Morgan Asset Management. *Beginning 3/15/21, all indicators compare 2021 to 2019. Prior to 3/15/21, figures are year-over-year. Consumer debit/credit transactions, U.S. seated diners and TSA traveler traffic are 7-day moving averages. App Annie data is compared to 2019 average and includes over 600 travel and navigation apps globally, including Google Maps, Uber, Airbnb and Consumer spending: This report uses rigorous security protocols for selected data sourced from Chase credit and debit card transactions to ensure all information is kept confidential and secure. All selected data is highly aggregated and all unique identifiable information—including names, account numbers, addresses, dates of birth and Social Security Numbers—is removed from the data before the report’s author receives it. – J.P. Morgan – Guide to the Markets – U.S. Data are as of June 30, 2021
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13 – Source: BEA, FactSet, J.P. Morgan Asset Management. Values may not sum to 100% due to rounding. Forecasts are not a reliable indicator of future performance. – J.P. Morgan – Guide to the Markets – U.S. Data are as of June 30, 2021.
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Past Manager Commentary

Information is from sources deemed to be reliable, but accuracy is not guaranteed.

*Performance and pricing data used for VEGA is based on the indicated value of the ETF at the close of the day.


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 Barclays Capital U.S. Intermediate Government Bond Index measures the performance of U.S. Dollar denominated investment grade U.S. corporate securities that have a remaining maturity of greater than one year and less than ten years.

The Cboe S&P 500 BuyWrite Index (BXM) is a benchmark index designed to track the performance of a hypothetical buy-write strategy on the S&P 500 Index.

The Consumer Sentiment Index is a monthly survey of U.S. consumer confidence levels conducted by the University of Michigan. It is based on telephone surveys that gather information on consumer expectations regarding the overall economy.

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.

Delta represents the rate of change between an option’s price and a $1 change in the underlying asset’s price. In other words, the price sensitivity of an option relative to the underlying.

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 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.

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.

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).

The Purchasing Managers’ Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. A reading above 50 indicates expansion in the sector; below 50 indicates contraction.

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.

A short position is the sale of a borrowed investment with the expectation that it will decline in value.

Theta is a measure of the rate of decline in the value of an option due to the passage of time.

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 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.