CIO Insights: October
By Jordan Waldrep, CFA
Though I think we could all use a little less excitement in our lives at this point, September didn’t want to cooperate. Facing the continued mix of challenges that 2020 has thrown at us, the markets delivered their first down month since March, with the S&P 500 posting a -3.80% loss in the month1. At this point, there are so many factors pushing and pulling the market that anyone who tells you what is driving this ship is likely fooling themselves. But what we do know is that there is a pandemic, an election, pent up consumer demand, and a tremendous amount of stimulus that has been put into the system.
With this amount of uncertainty facing the market, and based on the intent of the underlying strategy, we are excited to continue launching the TrueShares Structured Outcome series of ETFs. Our October fund, (ticker: OCTZ), listed on the Cboe BZX on October 1st and is structured to deliver a return based off the S&P 500 Price Index performance over a one-year period. OCTZ is expected to provide an 8-12% downside buffer (with the advisor targeting 10%)2 on the first of that index’s losses if things turn sour in the market during the 12-month investment period, yet will provide an uncapped 80-82% participation on the index’s upside performance3. All while providing liquidity throughout the year. OCTZ is trading now and TrueShares November Structured Outcome ETF (ticker: NVMZ) will list on Monday, November 2nd.
Despite the uncertainty out in the market, our thematic equity funds were able to deliver outstanding returns relative to their benchmarks during the 3rd quarter. The TrueShares Technology, AI and Deep Learning ETF (LRNZ) delivered 16.69% (at NAV) during the quarter, easily beating the NASDAQ Composite Index benchmark’s return of 11.24% by +5.45%. LRNZ offers a unique approach to investment in the Artificial Intelligence (“AI”) space as it is the only fund that we are aware of that has all the components that we believe are driving this technological revolution: the algorithms that are the basis of AI, the hardware needed to process it, and the highest level application of this technology are all represented in LRNZ and each aspect helped to deliver the fund’s outperformance in the quarter. It is our view that we are still in the very early stages of the Artificial Intelligence revolution and look forward to seeing how this exciting new sector potentially changes every aspect of the economy in the coming years.
The TrueShares ESG Active Opportunities ETF (ECOZ) was no less exciting during the 3rd quarter. ECOZ delivered 13.26% (at NAV) during the quarter, besting its benchmark S&P 500 Index’s 8.93% return by +4.33%. ECOZ’s distinct approach of viewing ESG risk factors as long-term impacts on company operations, income, and ultimately shareholders has allowed it to avoid some areas like traditional Energy companies that have faced difficulties during the pandemic. However, the real driving force of performance has been the companies we believe are leading the way in the changes occurring in business operations and consumer choices as a result of some larger trends such as solar and financial technology. The continued innovation we are seeing adds to our conviction about these spaces.
2020 has not gotten any easier and January 1, 2021 is not some magical date that everything will get better. The team here at TrueShares ETFs are committed to bringing innovative and unique ETF’s to market. We hope that these funds give our investors the tools they need to weather the uncertainty ahead.
1. Source: Bloomberg, as of 9/30/20. One cannot invest directly in an index.
2. In the event an investor purchases Shares after the date on which the options were entered into or sells Shares prior to the expiration of the options, the buffer that the Fund seeks to provide may not be available and there may be limited to no upside potential. The Fund does not provide principal protection and an investor may experience significant losses on its investment, including the loss of its entire investment.
3. Estimated upside market participation rate represents the relative exposure of the fund’s call options to participate (gross of fees) in the potential upside movement of the S&P 500 Price Index. This will be determined by the relative price of call and put options at the start of the investment period (12-month period). There is no guarantee that the fund will be successful in providing these outcomes or objectives in any period
ABOUT THE AUTHOR
JORDAN C. WALDREP, CFA
Principal & Chief Investment Officer
Mr. Waldrep has been in the investment management industry for over 16 years. Prior to joining TrueMark Investments, Mr. Waldrep was most recently at USA Mutuals, working as a portfolio manager for multiple funds. Prior to that, Mr. Waldrep was the portfolio manager for a pair of long equity portfolios at Blackfin Capital and a principal at Hourglass Capital providing research for a long-short hedge fund. Mr. Waldrep received his MBA in Finance from the University of Texas, McCombs School of Business in 2004 and his bachelor’s degree in Biology and History from Texas A&M University in 1999. Mr. Waldrep is also a Chartered Financial Analyst.