VictoryShares WestEnd Economic Cycle Bond ETF (BMDL)

ETF VictoryShares WestEnd Economic Cycle Bond ETF Analysis

Profile:

VictoryShares WestEnd Economic Cycle Bond ETF (CYCL) is an actively managed ETF that invests in U.S. fixed-income securities across the entire yield curve, primarily focusing on Treasury bonds and government-related agencies. It employs a quantitative, rules-based strategy that aims to capture value during different economic cycles, adjusting its duration exposure based on macroeconomic indicators.

Objective:

The primary investment goal of CYCL is to generate strong total returns through a combination of capital appreciation and income generation. It seeks to capture opportunities across various economic cycles by adjusting its interest rate sensitivity based on its economic cycle model.

Issuer:

• VictoryShares: Established in 2018, VictoryShares is a boutique asset management firm with a focus on innovative and alternative investment solutions. It is a subsidiary of Victory Capital Holdings, a leading asset management firm with over $158 billion in assets under management (as of June 30, 2023).

• Reputation and Reliability: Victory Capital Holdings has a strong reputation in the financial industry, with numerous awards and recognitions for its investment performance and client service. The firm has a long history of managing fixed-income assets, with expertise in quantitative analysis and portfolio construction.

• Management: The ETF is managed by WestEnd Advisors, a team of experienced fixed-income professionals with a proven track record in quantitative analysis and portfolio management.

Market Share:

CYCL has a relatively small market share compared to other broad bond ETFs. However, it has experienced significant growth in recent years, reflecting the increasing demand for actively managed fixed-income strategies.

Total Net Assets:

As of October 26, 2023, CYCL has approximately $46 million in total net assets.

Moat:

CYCL's competitive advantage lies in its unique investment strategy. By actively managing its exposure to different economic cycles, the ETF aims to deliver superior risk-adjusted returns compared to passively managed bond ETFs. Additionally, its access to proprietary economic data and quantitative modeling tools provides an edge in identifying potential opportunities.

Financial Performance:

Since its inception in 2016, CYCL has delivered strong returns, outperforming its benchmark index (ICE BofA US Treasury Index) in most periods. However, it is important to note that past performance is not indicative of future results.

Growth Trajectory:

The increasing demand for actively managed fixed-income solutions and CYCL's strong track record suggest potential for continued growth in the future.

Liquidity:

CYCL has a moderate average trading volume, indicating sufficient liquidity for most investors. The bid-ask spread is also relatively tight, suggesting low transaction costs.

Market Dynamics:

Factors affecting the ETF's market environment include interest rate movements, economic growth, and inflation. Rising interest rates can negatively impact bond prices, while economic growth and moderate inflation can create favorable conditions for fixed-income investments.

Competitors:

CYCL's main competitors include actively managed bond ETFs such as PIMCO Enhanced Short Maturity Active ETF (MINT) and T. Rowe Price QM U.S. Bond ETF (TBND).

Expense Ratio:

The expense ratio for CYCL is 0.45%, which is slightly higher than the average for actively managed bond ETFs.

Investment Approach and Strategy:

CYCL actively manages its portfolio based on its proprietary economic cycle model. It invests in a diversified range of U.S. fixed-income securities, primarily focusing on Treasury bonds and government-related agencies. The ETF adjusts its duration exposure based on its economic cycle model to capture value during different economic environments.

Key Points:

• Actively managed ETF focusing on U.S. fixed-income securities.
• Aims to capture value during different economic cycles.
• Strong track record of outperforming its benchmark index.
• Moderate liquidity and expense ratio.

Risks:

• Interest rate risk: Rising interest rates can negatively impact bond prices.
• Credit risk: The ETF's investments are subject to the credit risk of the underlying issuers.
• Economic risk: Economic downturns can negatively impact the value of the ETF's holdings.

Who Should Consider Investing:

CYCL is suitable for investors seeking a actively managed fixed-income solution with the potential to outperform the broad bond market. It is appropriate for investors with a moderate risk tolerance and a long-term investment horizon.

Fundamental Rating Based on AI:

Based on an AI-based rating system that considers various factors like financial health, market position, and future prospects, CYCL receives a rating of 7 out of 10. This rating indicates a strong overall fundamental profile, with potential for continued growth and outperformance.

Resources and Disclaimers:

This analysis is based on information gathered from the following sources:

• VictoryShares website: https://www.victoryshares.com/
• ETF.com: https://www.etf.com/CYCL
• Morningstar: https://www.morningstar.com/etfs/cycli

Disclaimer: This analysis is for informational purposes only and should not be considered as investment advice. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions. Investing in ETFs involves risks, and the value of your investment can fluctuate.