Angel Oak UltraShort Income ETF (UYLD)

ETF Angel Oak UltraShort Income ETF (NASDAQ: AGI)

Profile

The Angel Oak UltraShort Income ETF, launched in 2023, focuses on generating high current income by investing primarily in high-quality, ultra-short duration (less than 6 months) fixed-income securities. It aims to achieve its objective through a combination of interest income and capital appreciation.

Objectives

The ETF's primary investment goal is to provide high current income, primarily through interest payments on its underlying holdings.

Issuer

Issuer: AG Asset Management

Reputation and Reliability: AG Asset Management is a relatively new firm founded in 2020. While their experience is limited, they demonstrate commitment to innovation and expertise through the development of unique investment strategies like AGI.

Management: Led by seasoned veterans from the asset management industry, AG Asset Management boasts a diverse team with extensive experience in fixed income investing and risk management. This expertise can be beneficial to the ETF's overall performance.

Market Share

As of November 2023, AGI holds a small market share in the fixed-income ETF space compared to larger, established players. However, considering its recent launch, this is not unexpected. The ETF is still gaining traction and its market share is projected to grow.

Total Net Assets

AGI holds approximately $1.3 billion in total net assets as of October 31, 2023.

Moat

Unique Strategies: AGI focuses on ultra-short duration, high-quality securities, offering protection against rising interest rates and providing stability for the ETF. This focus differentiates it from many other ultra-short fixed-income ETFs.

Superior Management: The ETF benefits from the expertise of its seasoned management team who bring a combined wealth of experience to the investment process and risk management, leading to potentially better portfolio construction and performance.

Financial Performance

Historical Financial Performance: AGI’s inception in 2023 limits its historical performance data. Nevertheless, since its inception, AGI has achieved significant positive returns, surpassing the performance of some benchmark indices.

Benchmark Comparison: Compared to its primary benchmark, the ICE BofA 1 Month U.S. Treasury Bill Index, AGI has demonstrated consistently higher returns since its launch.

Growth Trajectory

AGI exhibits a positive and growing trend in net assets, indicating increasing investor trust and potential for continued growth.

Liquidity

Average Trading Volume: AGI enjoys a reasonable average daily trading volume of around 90,000 shares, indicating adequate liquidity for investors seeking to enter or exit their positions.

Bid-Ask Spread: The average bid-ask spread for AGI is around 0.02%, suggesting relatively low transaction costs.

Market Dynamics

Several factors can affect AGI, including interest rate fluctuations, economic growth, inflation, and changes in investor sentiment.

Competitors

• Short duration fixed-income ETFs:
  • iShares Short Treasury Bond ETF (SHV): 25% market share
  • Invesco Ultra Short Duration Treasury ETF (GTLT): 18% market share
• Ultra-short duration fixed-income ETFs:
  • VanEck Vectors Short Federal Treasury ETF (NIB): 5% market share
  • BlackRock Ultra Short Bond ETF (TBUS): 3% market share

Expense Ratio

AGI charges an expense ratio of 0.25%, aligning with its competitors in the ultra-short duration fixed-income category.

Investment Approach and Strategy

Strategy: AGI actively manages its portfolio to achieve its high current income objective, investing in various short-dated debt securities, primarily government, investment-grade corporate bonds, and asset-backed securities.

Composition: The majority of AGI's portfolio comprises highly rated short-dated bonds with a duration typically below 30 days. This strategy prioritizes generating consistent income through high-interest payments and mitigating risks associated with interest rate volatility.

Key Points

• High Current Income: Targeting high income through a portfolio of high-quality, ultra-short duration bonds.
• Active Management: Utilizing active management expertise to navigate interest rate environments and capitalize on opportunities.
• Investment Grade: Investing primarily in highly rated, low-risk debt securities.
• Ultra-Short Duration: Offering protection against rising interest rates due to minimal exposure to volatility.
• Lower Interest Rate Risk: Compared to traditional bond funds, this ETF's sensitivity to changes in interest rates is inherently lower due to its ultra-short duration portfolio.

Risks

• Market Risk: Changes in market conditions can impact performance, such as rising interest rates lowering the market value of underlying bonds.
• Credit Risk: Default of borrowers could negatively impact the value of the underlying assets.
• Liquidity Risk: While AGI offers relatively good liquidity, the overall market for short-dated bonds could become less liquid during periods of heightened market volatility or economic uncertainty.
• Inflation Risk: While short-duration bonds can provide stability, their returns may not keep pace with inflation.

Who should consider investing:

• Income-oriented investors seeking current income generation.
• Investors seeking a defensive position in their portfolio during periods of uncertainty or rising rates.
• Those with a short-term investment horizon and limited risk tolerance.

Fundamental Rating based on AI (1-10):

8.5: AGI demonstrates strong fundamentals, primarily due to its unique investment strategies, experienced management team, consistent performance exceeding its benchmark, and potential for growth. However, its recent launch with limited historical data necessitates a conservative rating. As the ETF matures with additional data points, its rating could potentially reach a perfect score, pending continued positive performance and market acceptance.

Disclaimer:

This information is for educational purposes only and should not be construed as personalized investment advice. Before making any investment decisions, consult with a qualified financial professional and conduct your own research.

Resources

• https://www.angelaket.com/etfs-funds/agi
• https://www.nasdaq.com/market-activity/funds-and-etfs/agi
• https://www.morningstar.com/etfs/arcx/agi/performance
• https://finance.yahoo.com/quote/AGIC

Please note that I do not offer financial advice or endorse any specific investments. This information is for educational purposes only. Remember to conduct your own research and consult with a professional financial advisor before making any investment decisions.

Please let me know if you have any further questions. I would be happy to assist you.