August 2018 Portfolio Manager Review
- During the month of August, the AdvisorShares Core Reserves (NYSE Arca: HOLD) returned 25 basis-points (NAV) vs.16 basis-points on the Bloomberg Barclays US Treasury Bill 1-3 Month Index.
- The Fund paid out income of 17.9 cents per share, with a Bloomberg indicated yield of 2.16%.
- The Bloomberg Barclays US Corporate 1-3 Year average option adjusted spread (OAS) was 1 basis-point tighter on the month, ending at 0.55%.
- All corporate subsectors had excess returns on the month, however Industrials had the best performance, returning 29 basis-points. Among the better performing positions were the Warner Media 2020’s which benefited from a full call, and the Becton Dickinson 2020’s which benefited from spread tightening. One of the poorer performing positions was the Bayer US Financial 2021’s, which only returned 4 basis-points on the heels of some spread widening.
- Financials were the second best corporate subsector, returning 24 basis-points. The Humana 2019’s was the best performing position within that subsector, returning 42 basis-points. The Sumitomo 2021’s and the Citigroup 2021’s, both floating rate securities, returned 39 and 35 basis-points. The American Express 2020’s were the worst performing position within Financials, returning -18 basis-points.
- Asset-backed securities, which comprise nearly 25% of the fund, returned 19 basis-points.
- During the month of August the portfolio had $2.1mm in maturities and $1.2mm in structured product paydowns, representing a turnover of over 6%, based on month end fund values.
- Some noteworthy corporate purchases include Moody’s 2019’s, and HP Enterprise 2020’s
- The market is fully anticipating the Fed to hike rates during their September meeting, however the path of rate hikes after that are much less certain. The market expects one more hike after the September meeting, either in December or the first part of the year, but hikes beyond that seem to be in doubt. With the 2’s/10’s curve ending the month 5 basis-points flatter at 23 basis-points, there is worry about a flat or inverted curve. The shape of the curve continues to fight against the Fed as they attempt to hike rates. How aggressive the Fed wants to be in it’s desire to increase rates will be seen in the coming months.
- While there has been some progress on international trade issues, there is still some tension as President Trump is considering adding more tariffs to Chinese goods. While the market has, in large part, been able to shrug off much of the tariff tension, there is a risk that this will put pressure on the market. We will look for clarification on the extent of these policies in the coming weeks.
Sage Advisory Services
Portfolio Manager of HOLD
Top 10 Holdings
|T 0 7/8 04/15/19||99.13||4.31%|
|WFC 2 1/8 04/22/19||99.71||2.12%|
|COMET 2016-A3 A3||98.98||2.07%|
|TAOT 2016-D A3||99.29||1.82%|
|DCENT 2013-A6 A6||100.04||1.61%|
|SO 2.45 09/01/18||100.00||1.56%|
|ROP 2.05 10/01/18||99.96||1.46%|
|Portfolio Characteristics||YTW||Coupon||Maturity (Yrs)||Eff Dur|
Credit quality ratings are primarily sourced from Moody’s but in the event that Moody’s has not assigned a rating the Fund will use Standard & Poor’s (the “S&P”). If these ratings are in conflict the most conservative rating will be used. If none of the major rating agencies have assigned a rating the Fund will assign a rating of NR (nonrated security). The ratings represent their (Moody’s and S &P) opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality.
The credit ratings are published rankings based on detailed financial analyses by a credit bureau specifically as it relates the bond issue’s ability to meet debt obligations. The highest rating is Aaa, and the lowest is D. Securities with credit ratings of BBB and above are considered investment grade.
|Sector Allocation as of 08.31.2018||Allocation|
|Mortgage Backed Securities||0.7%|
|Asset Backed Securities||27%|