(VEGA) STAR GLOBAL BUY-WRITE ETF

VEGA

Overview

The AdvisorShares STAR Global Buy-Write ETF (NYSE Arca: VEGA) is a low volatility, moderate risk, global balanced portfolio that strategically allocates to the capital markets, tactically overweights regions, sectors, or securities and employs option strategies to create additional sources of income for total return and enhancements to risk management. The Portfolio Manager writes (sells) covered call options against a portion of its underlying holdings creating option premium; generally, 50% to 75% of VEGA’s positions will have covered options. This extra source of income, along with the bond interest and equity dividends collected on the portfolio, can assist in hedging downside risk. This collective income stream also serves as the “funding source” for an internal systematic reinvestment strategy called Volatility Based Reinvestment (VBR). When equity volatility is high, as gauged by the VIX’s 200-day moving average, VEGA reinvests its cash positions back into the capital markets. When volatility is low, the Portfolio Manager may allocate a portion of VEGA’s cash position to protective put options for downside risk management. Over a market cycle, VEGA’s risk objective is 0.6 beta of the S&P 500 Index. While VEGA isn’t managed to a specific benchmark, the MSCI All Country World Index (ACWI) and the Bloomberg Barclays Aggregate Bond Index are appropriate for comparison purposes for the equity and fixed income portions of the portfolio, respectively.

Symbol Exchange Inception Date CUSIP Indicative Value
VEGA NYSE Arca 9/17/2012 00768Y768 VEGA.IV
<strong>Why Invest in VEGA?</strong>
  • A Lower Volatility, Risk Managed Solution – VEGA’s global balanced approach achieves its low volatile mandate by 1) developing a strategic asset allocation to the equity and fixed income markets; 2) tactically overweighting the portfolio to regions, sectors, or securities; and 3) employing multiple option strategies to enhance income streams and manage downside risk. VEGA targets a 0.6 beta of the S&P 500 Index over a market cycle. Decisions on whether to write covered calls (to enhance income) or buy protective puts (to manage risk) are driven by market volatility as measured by the VIX.
  • Total Return Solution – Performance for VEGA is driven by collecting multiple sources of income from bond interest, equity dividends, and option premium, as well as from potential capital appreciation of its portfolio allocations. Additionally, VEGA’s option strategies for managing risk during market drawdowns is intended to contribute to its total return over a market cycle.
  • Alternatives Solution – Highlighting the varying option strategies, VEGA can be part of an alternative sleeve within a portfolio. Selling covered calls creates an additional source of portfolio income and buying protective puts may enhance a portfolio’s risk metrics.
<strong>Key Attributes</strong>
  1. Asset Allocation – The strategy’s global balanced approach strategically allocates to bonds, equities, and alternatives through broad market ETFs and tactically overweights regions, sectors, or individual securities. Asset allocation is the first step in managing the portfolio’s overall risk metric to a 0.6 beta of the S&P 500 Index over a market cycle.
  2. Option Strategies for Income – The Portfolio Manager actively manages a covered call strategy on the portfolio’s holdings to add an additional income source to the bond interest and equity dividends. The cash collected from the combined income sources accumulates and serves as a second component to VEGA’s overall risk management mandate of 0.6 beta to the S&P 500 Index over a market cycle. It also “self -funds” VEGA’s internal Volatility Based Reinvestment (VBR) strategy, which is a systematic dollar cost average strategy triggered by market volatility, as measured by the VIX.
  3. Option Strategies for Protection – Using the cash position that accumulates from the collection of bond interest, equity dividends, and option premium, the Portfolio Manager may purchase “protective puts.” This is a third step towards managing the portfolio’s overall risk metric to a 0.6 beta of the S&P 500 Index over a market cycle.
  4. Harnessing Volatility – Movements in price, whether in an upward or downward manner, can be captured through the use of option contracts and be additive to total return. When volatility is high, option premiums rise and writing contracts (sell) can add to the portfolio’s income stream by collecting premium. When volatility is low, purchasing long term protective puts can be a risk management tool designed to reduce the portfolio’s downside participation.
  5. Total Return Solution – Performance for VEGA will be driven by collecting multiple sources of income from bond interest, equity dividends, and option premium and from capital appreciation of its portfolio holdings. Additionally, VEGA’s option strategies for managing risk during market drawdowns is intended to contribute to its total return over a market cycle.
<strong>About the Portfolio Managers</strong>

Kenneth R. Hyman, President and Chief Executive Officer
Kenneth R. Hyman founded Partnervest in 2001 and is responsible for the direction and oversight of Partnervest’s business, financial, and operational affairs. He also serves as Co-Portfolio Manager and member of the Investment Management Committee overseeing the STAR Asset Management program. Established in 2001, the Sub-Advisor provides investment management solutions to investors and the advisors that serve them. Prior to establishing Partnervest, Mr. Hyman was the Senior Executive and Financial Officer for Integral Securities, Inc. and Integral Securities Europe Ltd. Prior to Partnervest and Integral, Mr. Hyman was the Managing Principal and Chief Operating Officer of Mercer Global Securities and the Director of Operations for Mercer Global Advisors, one of the nation’s largest fee-only financial planning and investment management firms. He was also the Vice-President of Trading for Associated Financial Group, a financial services company providing support to more than 328 representatives in over 179 branch and satellite offices.

Rebecca M. Valdez, Director of Investments
Mrs. Valdez joined Partnervest Advisory Services in 2007 and currently serves as its Director of Investments, portfolio manager and a member of the Investment Management Committee. Mrs. Valdez has 9 years of investment management experience with a specialty in option strategies. At Partnervest her responsibilities include trading, account maintenance, strategy review and trade analysis and portfolio management. Mrs. Valdez is a Level III Chartered Financial Analyst candidate and has a degree in Economics with a concentration in Finance from California Polytechnic University, San Luis Obispo.

Robert Kellogg, CFA, Investment Officer and Head of Financial Planning
Mr. Kellogg oversees the firm’s case design process and takes part in monitoring and researching current/prospective investment managers for the firm. He has experience in both sales and analytical roles from an internal and external perspective in the financial industry. Prior to joining the Sub-Advisor in December 2018, Mr. Kellogg was an Associate Client Portfolio Manager for Nuance Investments in Kansas City, Missouri. He has also worked for Ivy Investments (formerly Ivy Funds) in Mission, Kansas, and LaSalle Investment Management based out of Chicago, Illinois. Robert received a B.A. in Economics from Northwestern University in Evanston, Illinois. He obtained his CFA designation in 2018.

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Fund

Price History

As of 9/23/2021

NAV $40.46 Closing Price $40.77
Change $0.34 Close Change $0.80
Shares Outstanding 480,000 Volume 805
4PM Bid/Offer Midpoint $40.75 Premium Discount $0.29
Assets Under Management $19,422,006.27 30-Day Median bid-ask Spread 0.2458815
Premium/Discount Historical Data | NAV Historical Data | Daily Premium/Discount Historical Data
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.

FUND

Performance

As of 8/31/2021

NAV Market Price Return MSCI World Index MSCI ACWI Index
1 Month 1.41 1.55 2.49 2.5
3 Months 3.77 3.97 5.88 4.57
YTD 10.47 10.53 17.94 15.91
1 Year 16.1 16.48 29.76 2.5
3 Years 8.62 8.57 14.96 4.57
5 Years 8.67 8.68 14.83 14.29
Since Inception (9/17/2012, Annualized) 5.92 5.9 12.05 11.27

As of 6/30/2021

  NAV Market Price Return MSCI World Index MSCI ACWI Index
1 Month 1.58 1.92 1.49 1.32
3 Months 4.92 4.98 7.74 7.39
YTD 8.14 8.35 13.05 12.3
1 Year 24.04 23.86 39.04 39.27
3 Years 9.15 9.13 14.99 14.57
5 Years 8.71 8.71 14.83 14.61
Since Inception (9/17/2012, Annualized) 5.78 5.78 11.76 11.1

Performance data quoted represents past performance and is no guarantee of future results. All Fund data and performance data quoted is believed to be accurate, and unless otherwise stated, is sourced from the Fund administrator, the Advisor’s or Sub-Advisor’s proprietary data, and Morningstar. 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.

Fund

Holdings

As of

Excel    CSV

Date Account Symbol Stock Ticker Security Number Security Description Shares/Par (Full) Price (Base) Traded Market Value (Base) Portfolio Weight % Asset Group
09/24/2021 VEGA SPY 78462F103 SPDR S&P 500 ETF TRUST 15,747.00 443.91 6,990,250.77 36.06% MF
EFA 464287465 ISHARES MSCI EAFE ETF 50,311.00 80.3 4,039,973.30 20.84% MF
IUSB 46434V613 ISHARES CORE TOTAL BOND ETF 25,369.00 53.51 1,357,495.19 7.00% MF
IWP 464287481 ISHARES RUSSELL MID-CAP GROW 10,165.00 117.86 1,198,046.90 6.18% MF
IWM 464287655 ISHARES RUSSELL 2000 ETF 3,469.00 223.05 773,760.45 3.99% MF
TIP 464287176 iShares TIPS Bond ETF 6,014.00 127.82 768,709.48 3.97% MF
EEM 464287234 ISHARES MSCI EMERGING MARKET 14,744.00 50.78 748,700.32 3.86% MF
IYE 464287796 ISHARES U.S. ENERGY ETF 21,653.00 27.64 598,488.92 3.09% MF
XLK 81369Y803 TECHNOLOGY SELECT SECT SPDR 3,799.00 156.71 595,341.29 3.07% MF
GOVT 46429B267 ISHARES US TREASURY BOND ETF 21,790.00 26.62 580,049.80 2.99% MF
IXG 464287333 ISHARES GLOBAL FINANCIALS ET 7,217.00 79.27 572,091.59 2.95% MF
SPYX21360 SPY US 12/17/21 P360 107 1.99 21,239.50 0.11% O
EFAJ2182 EFA US 10/15/21 C82 -302 0.32 -9,664.00 -0.05% O
SPYJ21453 SPY US 10/15/21 C453 -92 1.32 -12,144.00 -0.06% O
X9USDBLKR BLACKROCK LIQUIDITY T 60 1,193,704.26 1 1,193,704.26 6.16% MM
CASH -28,952.75 100 -28,952.75 -0.15% CA
Holdings and allocations are subject to risks and to change. A holding identified with an “MM” at the end of its name indicates it is a Money Market fund.

FUND

Characteristics

As of 7/31/2021

VEGA Sector Allocation

FUND

Fees & Expenses

Management Fee 1.35%
Other Expenses 0.85%
Acquired Fund Fees 0.17%
Gross Expense Ratio 2.37%
Fee Waiver and/or Expense Reimbursement -0.35%
Net Expense Ratio 2.02%

*The Advisor has contractually agreed to keep net expenses from exceeding 1.85% of the Fund’s average daily net assets for at least one year from the date of the prospectus and for successive one-year periods thereafter unless the agreement is terminated. This agreement is limited to the Fund’s direct operating expenses and, therefore, does not apply to “Acquired Fund Fees and Expenses.”

Last Ten

Fund Distributions

    • 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 the Fund’s website at 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.       
    •  
    • Overall VEGA Morningstar rating is derived from a weighted average of the fund’s 3-, 5-, and 10- year (if applicable) risk-adjusted returns as of 8/31/2021. The Derivative Income Category consists of 43 funds in 3 year and 25 in 5 year. VEGA received a 3 star rating for the 3-year period and a 4 star rating for the overall and 5-year periods.   
    •    
    • The Morningstar Rating™ for funds, or “star rating,” is calculated for managed products with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive five stars, the next 22.5% receive four stars, the next 35% receive three stars, the next 22.5% receive two stars, and the bottom 10% receive one star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three- and five-year Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns.   
    •    
    • © 2021 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
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    • Definitions
    •  
    • Covered Call percentage is derived from taking the total amount of Covered Calls sold over the total amount of Covered Calls available to be sold on the current shares in the portfolio. Covered Calls must be sold on lots of 100 (referred to as a round lot), so any shares that do not fit into an even lot are excluded from the calculation. Protective Put percentage is the Notional Value of the Protective Puts over the current value of the total portfolio. Notional Value is calculated by taking the strike of the Protective Put multiplied the number of contracts held multiplied 100.
    •  
    •  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. 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.   
    •    
    • Exercising an option means to put into effect the right specified in a contract.
    •    
    • 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.
    •    
    •  An option premium is income received by an investor who sells or “writes” an option contract to another party.
    •    
    •  A protective put is an option strategy which entails buys 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).