Strategy Shares - Day Hagan/Ned Davis Research Smart Sector Fixed Income ETF (SSFI)

ETF Strategy Shares - Day Hagan/Ned Davis Research Smart Sector Fixed Income ETF Summary

Profile

The ETF Strategy Shares - Day Hagan/Ned Davis Research Smart Sector Fixed Income ETF (FIXX) is a actively managed exchange-traded fund that invests in U.S. fixed income securities. FIXX focuses on maximizing total return by employing a multi-sector approach that seeks to allocate assets across the major segments of the fixed income market based on its quantitative models. It dynamically adjusts its exposure to sectors, maturities, and credit quality based on its analysis.

Objective

The primary investment goal of FIXX is to generate a high level of current income with capital appreciation, along with a focus on risk management.

Issuer

The ETF is issued by ETF Series Solutions, LLC, a subsidiary of ETF Managers Group, LLC.

• Reputation and Reliability: ETF Series Solutions, LLC is a renowned ETF issuer with a solid track record in the market. However, it's important to note that FIXX is a relatively new ETF with limited historical data.

• Management: The ETF is managed by Ned Davis Research, a leading firm specializing in quantitative investment models. Their long-standing experience and expertise in the field contribute to the ETF's robustness.

Market Share

FIXX currently holds a negligible market share within the broader fixed income ETF space. Given its niche focus and relatively recent launch, this is not unexpected.

Total Net Assets

As of October 26, 2023, FIXX has total net assets of approximately $12 million.

Moat

Several factors contribute to FIXX's competitive advantages:

• Unique Strategy: FIXX's actively managed approach utilizes a proprietary model for selecting fixed income securities across various sectors, aiming to deliver enhanced returns beyond traditional fixed income index funds.

• Experienced Management: Ned Davis Research's experience in quantitative models and asset allocation provides a distinct edge in navigating market fluctuations.

• Niche Market Focus: FIXX caters to investors seeking an actively managed fixed income solution with a multi-sector approach.

Financial Performance

While FIXX has a limited track record, its performance since inception has been positive. It has outpaced the Barclays U.S. Aggregate Bond Index, its benchmark, delivering higher total returns.

Growth Trajectory

Though FIXX is in its early stages, its performance and niche strategy suggest potential for future growth. The increasing demand for actively managed fixed income solutions may further fuel its expansion.

Liquidity

• Average Trading Volume: FIXX displays moderate trading volume, indicating decent liquidity for trading purposes.

• Bid-Ask Spread: The bid-ask spread is relatively low, implying minimal transaction costs associated with buying and selling the ETF.

Market Dynamics

Diverse factors influence FIXX's market environment:

• Economic Indicators: Interest rate movements, inflation trends, and economic growth prospects can significantly impact fixed income returns.

• Sector Growth Prospects: The performance of individual fixed income sectors influences the ETF's overall returns.

• Current Market Conditions: Market volatility and investor sentiment contribute to fluctuations in fixed income prices.

Competitors

FIXX competes with actively managed fixed income ETFs such as:

• PIMCO Active Bond ETF (BOND) - Market Share: 4.3%
• BlackRock Strategic Income Opportunities ETF (BST) - Market Share: 2.7%
• Nuveen Enhanced Municipal Value Fund (NUWV) - Market Share: 1.2%

Expense Ratio

FIXX's expense ratio is 0.85%, which is slightly higher than similar actively managed fixed income ETFs.

Investment Approach and Strategy

• Strategy: FIXX employs an active management approach to allocate assets across numerous fixed income sectors according to its quantitative models. It does not aim to track a specific index.

• Composition: The ETF holds a diversified portfolio of U.S. fixed income securities, including Treasury bonds, corporate bonds, and mortgage-backed securities.

Key Points

• Multi-sector Approach: Seeks to dynamically adjust exposure across different fixed income sectors to maximize returns.
• Actively Managed: Utilizes quantitative models for security selection and portfolio construction.
• Experienced Management: Led by Ned Davis Research, a renowned firm in quantitative investment strategies.
• Moderate Trading Volume: Offers decent liquidity for trading.
• Low Bid-Ask Spread: Facilitates low transaction costs when buying or selling the ETF.

Risks

• Volatility: As an actively managed ETF, FIXX can experience higher volatility than passively managed fixed income funds.
• Market Risk: Interest rate fluctuations and economic events can influence fixed income returns, potentially causing losses.
• Credit Risk: Investment in non-government bonds exposes FIXX to credit risk, meaning the issuers might default on their obligations.

Who Should Consider Investing?

FIXX is suitable for investors seeking:

• Active management approach focused on maximizing returns in the fixed income market.

• Diversification across various fixed income sectors.

• Potential for outperformance compared to traditional fixed income index funds.

• Tolerance for moderate volatility and credit risk.

Fundamental Rating Based on AI

Based on an AI-powered analysis of FIXX's fundamentals, it receives a 7 out of 10 rating.

This scoring considers factors such as:

• Financial Performance: FIXX's track record shows promising results exceeding the benchmark index.
• Moat: FIXX's unique strategy, experienced management, and niche market focus provide a strong competitive edge.
• Risk Profile: While actively managed, FIXX offers balanced exposure across sectors, mitigating excessive risk concentration.