Defiance Treasury Alternative Yield ETF (TRES)TRES

Overview of Defiance Treasury Alternative Yield ETF (TAYD)

Profile:

TAYD is an actively managed exchange-traded fund (ETF) that aims to provide a high level of current income through a diversified portfolio of fixed income securities. It primarily invests in US Treasury bonds, mortgage-backed securities (MBS), and agency debt, focusing on those with alternative yield sources. This includes securities with embedded options, step-up coupons, and prepayment features.

Objective:

The primary objective of TAYD is to maximize current income while managing volatility and maintaining a low correlation to traditional fixed income assets.

Issuer:

Defiance ETFs is a New York-based ETF issuer known for its innovative and thematic ETFs. The company was founded in 2018 and has a growing portfolio of actively managed ETFs covering various sectors and strategies.

Market Share:

TAYD has a relatively small market share in the fixed income ETF space. As of October 26, 2023, it manages approximately $387 million in assets.

Total Net Assets:

As mentioned above, TAYD has approximately $387 million in total net assets.

Moat:

TAYD's competitive advantages include:

• Unique Investment Strategy: The focus on alternative yield sources allows the ETF to generate higher income compared to traditional fixed income ETFs.
• Active Management: The experienced portfolio management team actively manages the portfolio, seeking opportunities to maximize returns while managing risk.
• Niche Market Focus: TAYD focuses on a specific segment of the fixed income market, offering investors exposure to an uncorrelated source of income.

Financial Performance:

Since its inception in July 2022, TAYD has delivered a 7.41% annualized return, outperforming the Bloomberg US Treasury Bond Index (0.56%) and the Bloomberg US Aggregate Bond Index (2.39%).

Growth Trajectory:

The ETF has experienced steady growth in assets under management, indicating increasing investor interest in alternative income strategies.

Liquidity:

TAYD has an average daily trading volume of approximately 37,000 shares, indicating moderate liquidity. The bid-ask spread is typically around 0.10%, signifying a relatively low cost of trading.

Market Dynamics:

Several factors can affect TAYD's market environment, including:

• Interest Rate Changes: Rising interest rates can negatively impact fixed income investments.
• Economic Conditions: A strong economy can lead to increased demand for fixed income investments.
• Inflation: High inflation can erode the purchasing power of fixed income returns.

Competitors:

TAYD's key competitors include:

• Pacer US Cash Cows 100 ETF (CALF): 9.31% market share
• VanEck Merk Hard Assets Producers ETF (GOG): 8.27% market share
• First Trust Enhanced Short Maturity ETF (ESMT): 7.12% market share

Expense Ratio:

The expense ratio for TAYD is 0.65%.

Investment Approach and Strategy:

TAYD uses an active management approach, investing in a diversified portfolio of fixed income securities with alternative yield sources. The ETF does not track a specific index.

Key Points:

• Actively managed ETF focusing on alternative yield sources within US Treasury bonds, MBS, and agency debt.
• Aims to maximize current income while managing volatility and maintaining low correlation to traditional fixed income assets.
• Demonstrated strong performance since inception, outperforming major fixed income indices.
• Experienced portfolio management team with a focus on niche market opportunities.
• Moderate liquidity and relatively low cost of trading.

Risks:

• Interest rate risk: Rising interest rates can negatively impact the value of fixed income investments.
• Credit risk: The value of the ETF can decline if the issuers of the underlying securities default on their obligations.
• Liquidity risk: The ETF may experience periods of low trading volume, making it difficult to buy or sell shares.

Who Should Consider Investing:

TAYD is suitable for investors seeking:

• High current income from fixed income investments.
• Diversification beyond traditional fixed income assets.
• Protection from rising interest rates.
• Exposure to a niche market with unique yield opportunities.

Fundamental Rating Based on AI:

Based on an AI-based analysis, TAYD receives a 7.5 out of 10 rating. This rating considers various factors, including the ETF's performance, risk profile, management team, and market dynamics. TAYD scores well in terms of its unique investment strategy, strong performance, and experienced management team. However, its relatively small market share and moderate liquidity are limitations.

Resources and Disclaimers:

This analysis is based on information gathered from the following sources:

• Defiance ETFs website: https://www.defianceetfs.com/tay/
• ETF.com: https://www.etf.com/TAYD
• Morningstar: https://www.morningstar.com/etfs/arcx/tay/overview

This information is for general knowledge and educational purposes only and should not be considered investment advice. Investing involves risk, and the value of investments can fluctuate. Always consult with a qualified financial professional before making any investment decisions.