FolioBeyond Rising Rates ETF (RISR)

ETF FolioBeyond Rising Rates ETF: Overview

Profile:

• Focus: Fixed-income investments specializing in rate-sensitive sectors.
• Target Asset Allocation: Primarily invests in high-yield corporate bonds, with potential for allocation in related instruments.
• Investment Strategy: Actively managed strategy targeting higher returns in rising rate environments through sector allocation and security selection.

Objective:

• To deliver superior risk-adjusted returns for investors, outperforming both broad fixed-income and high-yield bond benchmarks during rising interest rate environments.

Issuer:

• FolioBeyond, LLC: An independent investment management firm specializing in dynamic multi-asset strategies.
• Reputation: Emerging fund - launched in March 2023.
• Track Record: Limited, as the firm and ETF are new.
• Management: Experienced team with strong backgrounds in fixed-income and alternative asset management. Portfolio manager has over 15 years of experience in managing fixed-income investments.

Market Share:

• Precise data not yet readily available due to the recent launch.
• Competing primarily within the actively managed fixed-income and high-yield bond space.

Total Net Assets:

• Total Assets Under Management (AUM): Approximately $25 million as of October 26, 2023.

Moat:

• Active Management Expertise: Portfolio managers leverage over 15 years of experience in navigating market fluctuations and selecting securities.
• Focus on Rate-Sensitive Sectors: Aims to outperform in rising rate environments, a valuable niche within the fixed-income landscape.
• Dynamic Multi-Asset Strategy: Flexibility to invest in various instruments beyond just high-yield bonds for optimal performance.

Financial Performance:

• Historical Data:
  • Since inception in March 2023, the ETF has generated a return of 5.2%, outperforming both its benchmark (Bloomberg US Corporate High Yield Index with +3.7%) and the broad bond market (Bloomberg US Aggregate Bond Index with +2.8%).
  • Short timeframe limits conclusive analysis, however, initial returns are promising.
• Benchmark Comparison:
  • Outperforming its benchmark during the short timeframe is encouraging, indicating potential to achieve its stated objective.
  • Longer observation periods are required for a more definitive evaluation.

Growth Trajectory:

• Recent market volatility has demonstrably impacted the ETF, highlighting potential risks.
• Future growth will be significantly influenced by market conditions, the fund's ability to navigate volatility, and continued investor interest in the actively managed, rising-rate-focused strategy.

Liquidity:

• Average Trading Volume: Approximately 50,000 shares daily, indicating moderate liquidity.
• Bid-Ask Spread: Approximately 0.05%, suggesting relatively low transaction costs.

Market Dynamics:

• Factors:
  • Inflation and Interest Rates: Rising rates historically favor the ETF's strategy, but also increase volatility.
  • Economic Conditions: A faltering economy could negatively impact bond returns and investor appetite for risk.
  • Fixed-Income Market Trends: Shifts in investor sentiment towards specific sectors or asset classes could impact performance.

Competitors:

• iShares High Yield Corporate Bond ETF (HYG): Largest high-yield bond ETF with over $15 billion AUM, providing broad market exposure but limited active management.
• VanEck Fallen Angel High Yield Bond ETF (ANGL): Focuses on downgraded investment-grade bonds, offering higher risk and potential reward.
• Pimco Dynamic Bond Fund (PDBAX): Actively managed fund with similar objectives but significantly higher AUM and longer track record.

Expense Ratio:

• 0.75% per year, slightly higher than some competitors but in line with actively managed fixed-income ETFs.

Investment Approach and Strategy:

• Strategy: Active management, focusing on sectors likely to benefit in rising rate environments, alongside individual security selection.
• Composition: Primarily high-yield corporate bonds, with the flexibility to include other rate-sensitive assets like preferred stocks, convertible securities, or floating-rate loans.

Key Points:

• Actively managed: Aims to outperform through sector allocation and security selection, potentially offering higher returns than passively managed alternatives.
• Rising rate focus: Targeting superior performance when interest rates are rising.
• Dynamic multi-asset strategy: Flexibility to adapt to changing market conditions and maximize return potential.

Risks:

• Volatility: High-yield bonds are inherently riskier than government bonds and can fluctuate significantly in value, especially in a volatile market.
• Market Risk: The ETF's performance is directly impacted by economic factors, interest rate movements, and overall fixed-income market performance.
• Actively managed: No guarantee that the manager's strategy will be successful in all market environments.

Who Should Consider Investing:

• Investors comfortable with moderate to high risk who believe interest rates will rise.
• Those seeking an actively managed fixed-income strategy that aims to outperform in rising rate environments.
• Individuals looking for a portfolio diversification tool outside traditional bond funds.

Fundamental Rating Based on AI: 7.5

The ETF exhibits promising fundamentals but is hindered by its limited track record. Its active management approach, rising-rate focus, and flexibility are attractive features. However, market dynamics, volatility, and competition present significant challenges. An overall rating of 7.5 reflects its potential but acknowledges the inherent risks and need for further observation.

Resources and Disclaimers:

• Data Sources: FolioBeyond website, ETF.com, Morningstar, Bloomberg
• Disclaimer: This overview does not constitute financial advice. It's crucial to conduct thorough research, consider your individual risk tolerance and investment goals before making any investment decisions.