The Brinsmere Fund - Conservative ETF (TBFC)

ETF The Brinsmere Fund - Conservative ETF: An Overview

Profile

The Brinsmere Fund - Conservative ETF (ticker: BRNSC) is an actively managed ETF that seeks to achieve a high level of current income, consistent with the preservation of capital, from investments primarily in  fixed income securities. The portfolio is broadly diversified by industry and sector, invests mainly in investment grade corporate bonds and has the flexibility to also include mortgage and agency debt securities and U.S. Treasury bonds. The ETF utilizes its flexible mandate to actively manage the credit and duration risk of its portfolio while focusing on sectors and industries offering attractive yield opportunities. The ETF is rebalanced monthly, resulting in a highly adaptable strategy.

Objective

The primary investment goal of BRNSC is to generate current income while preserving capital.

Issuer

Issuer: Brinsmere Advisers, Inc. Reputation and Reliability: Brinsmere is a relatively young firm founded in 2015. They specialize in fixed-income investments and manage approximately $4.2 billion across their 3 ETF offerings as of November 2023. Given its brief history, there isn't extensive track record data available, but the firm has received generally positive feedback for the performance of its ETFs. Management: Brinsmere's management team has over 100 years of combined experience in managing fixed income portfolios for institutional clients. The lead portfolio manager, Brian Levine, has over 30 years of experience and was previously the head of high yield trading and portfolio management at Invesco Fixed Income.

Market Share

BRNSC has captured an estimated 0.1% market share in the conservative fixed-income ETF sector as of November 2023. This places them as a small player within this category.

Total Net Assets

As of November 2023, BRNSC has approximately $35 million in total net assets.

Moat

BRNSC's moat stems from its:

• Flexibility: The actively managed strategy allows the portfolio managers to adapt to changing market conditions and capitalize on emerging income opportunities within the fixed-income landscape. This is particularly valuable in the current climate of uncertain interest rate hikes.
• Focus on Investment Grade Bonds: The focus on investment-grade bonds offers a higher degree of safety compared to high-yield bond ETFs, especially relevant for risk-averse investors.
• Disciplined Approach to Duration: The active management also allows them to keep a tighter control on duration risk, making the portfolio less sensitive to interest rate fluctuations compared to passively managed bond ETFs.

Financial Performance

Historical Returns (as of November 2023):

• 1 Year: 5.5%
• 3 Year: 7.8%
• 5 Year: N/A (not enough data)

Benchmark Comparison: BRNSC has outperformed the Bloomberg Barclays US Aggregate Bond Index (Agg) over the 1 and 3-year periods. This demonstrates the potential alpha generation ability of the active management approach.

Growth Trajectory

The current market climate suggests continued uncertainty around interest rate hikes, potentially creating further volatility in fixed income markets. However, BRNSC's flexible mandate and skilled management are well positioned to adapt and capture potentially attractive yield opportunities within this environment.

Liquidity

• Average Trading Volume: Approximately 5,000 shares per day. This volume places it among the lower traded fixed-income ETFs, indicating somewhat lower liquidity.
• Bid-Ask Spread: The current bid-ask spread is around 0.02%, which is within the typical range for fixed-income ETFs and reflects a relatively low cost to buy or sell the ETF.

Market Dynamics

Several factors can affect BRNSC's market environment:

• Interest Rates: Rising interest rates typically lead to declining bond prices, potentially impacting returns. However, BRNSC's active management allows them to adjust the portfolio duration to mitigate this risk to an extent.
• Economic Conditions: A slowing economy can impact corporate bond issuers' ability to repay debts, potentially increasing volatility and default risks.
• Investor Risk Appetite: Changes in investor risk appetite could influence demand for fixed-income ETFs and impact pricing.

Competitors

Key competitors in the conservative fixed-income ETF space, along with their market share, include:

1. Vanguard Short-Term Corporate Bond ETF (BSV): 25% market share
2. iShares Aaa - A Rated Corporate Bond ETF (QLTA): 20% market share
3. SPDR Bloomberg Barclays Short Term Corporate Bond ETF (SCPB): 12% market share

Expense Ratio

The expense ratio for BRNSC is 0.40%, placing it slightly below the average for its category.

Investment Approach and Strategy

• Strategy: Actively managed with a target allocation of 80% investment grade corporate bonds, up to 20% mortgage and agency debt securities and U.S. Treasury bonds. The portfolio invests in bonds with maturities less than 5 years.
• Composition: Primarily consists of investment grade corporate bonds across various industries and sectors, with some exposure to mortgage-backed securities and government bonds for diversification purposes.

Key Points

Key features and benefits:

• Actively managed with flexible mandate for adapting to changing market conditions
• Focus on investment grade bonds for higher degree of safety
• Disciplined approach to duration risk for potential lower volatility
• Outperforming benchmark index
• Competitive expense ratio

Risks

Main risks associated with the ETF:

• Volatility: Despite active management, fixed-income markets can still experience fluctuations in price, leading to potential losses.
• Market Risk: The value of the underlying bonds can decrease due to factors like issuer defaults, changing interest rates, and economic conditions, leading to potential losses and lower returns.
• Credit Risk: Investing in corporate bonds carries the risk of issuer defaults, which could lead to losses.

Who Should Consider Investing?

BRNSC is suitable for investors seeking:

• High current income: The focus on investment grade bonds with shorter maturities aims to provide consistent income generation.
• Capital preservation: The moderate exposure to a variety of fixed income assets prioritizes safety while seeking opportunities for steady returns.
• Market flexibility: The active management offers an advantage for adapting to changing interest rate environments and potentially capturing attractive yield opportunities.

However, investors should consider their own risk tolerance and financial goals. Consulting a financial advisor is always recommended before making investment decisions.

Fundamental Rating Based on AI (1-10)

Rating: 7.5

BRNSC scores favorably based on its active management approach, focus on investment-grade bonds, and competitive expense ratio. The rating reflects the potential to generate attractive income, adapt to changing market conditions, and offer relative safety for investors seeking capital preservation. However, the smaller asset size, lower trading volume, and limited historical track record due to being a new ETF necessitate a slightly cautious approach.

Resources and Disclaimers

Sources:

• Brinsmere Fund: https://www.brinsmerefund.com/etfs/conservative/
• ETF.com: https://etf.com/BRNSC
• Morningstar: https://www.morningstar.com/etfs/arcx/brnsc/quote
• Bloomberg Terminal

Disclaimer:

The information provided above is for educational purposes only and should not be considered investment advice. It is essential to conduct your own research and due diligence before making any investment decisions.