Two Roads Shared Trust - LeaderShares AlphaFactor Tactical Focused ETF (LSAT)LSAT

ETF Two Roads Shared Trust - LeaderShares AlphaFactor Tactical Focused ETF

Profile:

Focus: The ETF Two Roads Shared Trust - LeaderShares AlphaFactor Tactical Focused ETF (NASDAQ: LTAF) is a actively managed ETF seeking to achieve capital appreciation. It invests primarily in U.S. exchange traded equity and equity-related securities using an actively managed, quantitative, multi-factor model which seeks to identify companies that have the potential to generate alpha. The ETF utilizes leverage and may hold up to 200% of its net assets in derivatives, such as options and futures contracts, to amplify its investment exposure.

Investment Strategy: LTAF employs a quantitative, multi-factor model to select stocks based on factors like value, momentum, quality and growth. The ETF focuses on large and mid-cap U.S. companies across various sectors. It also utilizes tactical overlays, such as short selling and sector allocation adjustments, based on market trends and volatility levels.

Objective:

The primary investment goal of LTAF is to achieve long-term capital appreciation. The ETF aims to outperform the S&P 500 Index on a risk-adjusted basis over a full market cycle.

Issuer:

Issuer: LeaderShares, a subsidiary of Two Roads Shared Trust.

Reputation and Reliability: LeaderShares is a relatively young company founded in 2018. It has limited track record compared to established ETF providers, but has gained recognition for its innovative and quantitative investment strategies.

Management: The ETF is overseen by a team of portfolio managers with experience in quantitative modeling, portfolio construction, and risk management. Richard Saghian, the founder and CEO of Two Roads Shared Trust, has a strong track record in financial services and technology.

Market Share: LTAF is a niche ETF within the actively managed quantitative space. It represents approximately 0.1% of the actively managed ETF market share.

Total Net Assets:

As of October 26th, 2023, LTAF has total net assets of $28 million.

Moat:

Moat: The competitive advantages of LTAF include:

• Unique Strategy: LTAF utilizes a proprietary multi-factor model and tactical overlays, which differentiates it from other actively managed ETFs.
• Quantitative Approach: The ETF's quantitative approach removes emotion and biases from investment decisions, potentially leading to better risk-adjusted returns.
• Leverage and Derivatives: The ETF's use of leverage and derivatives can magnify its returns, although it also increases risk.

Financial Performance:

LTAF has a relatively short track record, making historical performance analysis limited. Since inception (February 2022), the ETF has delivered a total return of 11.85%, outperforming the S&P 500 Index's 7.4% return during the same period. However, it's important to note that past performance is not indicative of future results.

Benchmark Comparison: LTAF's benchmark is the S&P 500 Index. While the ETF has outperformed the benchmark since inception, it's crucial to monitor performance over longer periods and compare it to relevant competitors within its niche category.

Growth Trajectory:

The actively managed quantitative ETF space is growing, driven by investors' increasing interest in rules-based investment approaches. LTAF's performance and innovative strategy could attract further investment and potentially lead to growth. However, the ETF's small size and limited track record may hinder large inflows.

Liquidity:

Average Trading Volume: LTAF has an average daily volume of approximately 2,000 shares. This volume is considered relatively low, indicating lower liquidity compared to other ETFs.

Bid-Ask Spread: The bid-ask spread for LTAF is around 0.1%, which is within the typical range for actively managed ETFs. However, the lower trading volume can lead to wider spreads at times, potentially impacting execution prices.

Market Dynamics:

Factors affecting LTAF's market environment:

• Economic indicators: LTAF's performance can be influenced by economic factors like interest rates, inflation, and economic growth.
• Stock market volatility: The ETF's use of leverage and derivatives makes it more sensitive to market volatility.
• Investor sentiment: The demand for actively managed quantitative strategies can impact LTAF's inflows and performance.

Competitor:

Key competitor of LTAF in the actively managed quantitative space include:

• AQR Capital Management, Inc.: $2.19Bn AUM, Market share: 22.7%
• Dimensional Fund Advisors: $400.4Bn AUM, Market Share: 12.8%

Expense Ratio:

LTAF has an expense ratio of 0.95%, which is higher than the average expense ratio for actively managed ETFs.

Investment approach and Strategy:

LTAF uses an actively managed, multi-factor model to select U.S. stocks across different sectors. The model focuses on factors like value, momentum, quality and growth. The ETF also employs leverage, derivatives, and tactical overlays to enhance returns and manage risks.

Key Points:

• Actively managed, quantitative ETF seeking long-term capital appreciation.
• Focuses on U.S. large and mid-cap stocks using multi-factor model and tactical adjustments.
• Utilizes leverage and derivatives to magnify returns.
• Relatively new ETF with outperformance compared to S&P 500 since inception, but limited track record.
• Lower liquidity and higher expense ratio compared to some competitors.

Risks:

• Market Risk: LTAF's investment in U.S. equities exposes it to market risks such as economic downturns, sector rotations, and interest rate changes.
• Volatility Risk: The ETF's use of leverage and derivatives can amplify volatility, leading to larger losses during market declines.
• Model Risk: The performance of the ETF is heavily reliant on the effectiveness and accuracy of its multi-factor model.
• Management Risk: The experience and skill of the portfolio management team can significantly influence the ETF's performance.