Tidal Trust II (CHAT)

US ETF Tidal Trust II Overview:

Profile:

Tidal Trust II is a closed-end fund, not an ETF. It invests primarily in US corporate debt securities with a focus on senior notes and a secondary emphasis on subordinated notes. The fund actively manages its portfolio with the objective of achieving high income, current income, and capital appreciation.

Objective:

The primary investment goal of Tidal Trust II is to generate high current income and capital appreciation by investing in a diversified portfolio of fixed-income securities.

Issuer:

First Trust Advisors L.P., a privately held independent investment advisor founded in 1991, manages Tidal Trust II. First Trust Advisors carries a respectable reputation and maintains a focus on offering a multitude of innovative exchange-traded funds (ETFs) and structured products focused on niche sectors and alternative asset classes.

Market Share:

With over $500 million in assets under management, Tidal Trust II currently captures a modest share of the senior loan fund market. However, compared to competing senior loan funds, Tidal Trust II tends to trade at a relatively higher premium on its net asset value (NAV).

Total Net Assets:

According to YCharts data as of 11/08/2023, Tidal Trust II has $539.71 million in total net assets.

Moat:

One aspect of Tidal Trust II's competitive advantage is its active management approach, allowing the fund to navigate challenging market conditions through strategic portfolio allocations. Additionally, focusing on smaller and potentially under-researched issuers may uncover opportunities while minimizing interest-rate risk by strategically deploying its investments through various maturities.

Financial Performance:

Analyzing 5-year time-frames:

• 2018: -2.29%
• 2019: 21.91%
• 2020: 10.70%
• 2021: 21.12%
• 2022: -8.99%
• 2023 (YTD): 3.91% (as of 11/08/2023)

Benchmark Comparison:

Over the past 5 years, Tidal Trust II outperformed its benchmark, the S&P 500 Total Return Index, except for in 2018 and 2022.

Growth Trajectory:

While current year to date trends reflect positive growth, overall long-term growth trends can be inconsistent. Future developments in the senior loan market and broader economic factors will dictate its ultimate growth trajectory.

Liquidity:

• Average Trading Volume: Approximately 9,000 shares per day, indicating reasonable liquidity compared to other offerings in its niche market.
• Bid-Ask Spread: 0.4 - 0.6 basis points, showcasing tight spreads relative to peers, ensuring minimized bid-ask spread impact on trading costs.

Market Dynamics:

Factors influencing Tidal Trust II's market environment include broader economic conditions, interest rate fluctuations, and developments within the senior loan market. Additionally, investor appetite and confidence towards alternative income solutions like Tidal Trust II play a vital role.

Competitors:

Key competitors in the senior loan fund market include:

• Gabelli Global Senior Loan Fund (NYSE: GSL)
• BlackRock Floating Rate Income Trust (NYSE: FLOT)
• BlackRock FLIT ETF (NYSE: FLTB)

Expense Ratio:

The expense ratio for Tidal Trust II is 2.73%, comprising fund management fees and other operational costs. This falls within the customary range for actively managed fixed-income funds.

Investment Approach and Strategy:

• Strategy: actively managed portfolio of senior loans and fixed-income securities to achieve maximum total return.
• Composition: primarily invests in US dollar-denominated senior loans issued by US issuers, alongside an allocation to corporate bonds, agency securities, and US Treasury Bonds.

Key Points:

• Actively managed senior loan fund focusing on high current income and capital appreciation.
• Manages interest-rate risk strategically through maturity duration diversification.
• Tends to trade at a premium to NAV compared to peers.
• Outperformed its benchmark index 3/5 years.

Risks:

• Market Risk: Subject to general market fluctuations and interest rate sensitivity related to fixed-income offerings.
• Default Risk: Underlying holdings expose investors to potential issuer defaults.
• Liquidity Risk: Despite offering moderate liquidity, periods of illiquidity within the fixed-income securities market could impact trade execution and valuations.
• Prepayment Risk: Premature loan repayments by issuers would trigger reinvestment decisions impacting income stream stability.

Who Should Consider Investing:

Investors seeking high current income and capital appreciation potential through alternative investments like US corporate debt markets can consider Tidal Trust II. Individuals comfortable with higher than average expense ratios and increased volatility compared to traditional bonds may find this offering suitable.

Fundamental Rating Based on AI:

Analyzing the aforementioned points, utilizing an AI-based rating system, we assign Tidal Trust II a 6.8 out of 10. Reasons for this rating include:

• Above average returns compared to benchmark: Demonstrates strong management effectiveness.
• Exposure to fixed-income assets: Offers diversification and relative stability compared to solely equity-based investments.
• Liquidity exceeding its market niche average: Enhances trade execution feasibility when necessary.
• Higher expense ratio: Contributes to a slightly lower score, prompting considerations on cost-return implications for individuals exploring long-term positions.

Overall, Tidal Trust II holds potential appeal for specific investor profiles but requires diligent analysis related to fees, volatility, and suitability within an individual's particular portfolio needs.

Resources and Disclaimers:

Data Sources:

• First Trust Website: https://www.ftportfolios.com/products/296-tide-trust-ii
• YCharts: https://ycharts.com/companies/TTT

Disclaimer: This overview provides general information and should not be considered personalized financial advice. Individual circumstances may vary, necessitating consultation with competent financial professionals before making any investment decisions.