CIO Insights: November

By Jordan Waldrep, CFA

As with most things in 2020, this past October was anything but ‘normal’. As I write this, we are a few days away from concluding the most contentious election season of my lifetime while the United States is experiencing its worst days of COVID-19 in terms of daily infections. With that backdrop, the market started the month strongly before a sell off, finishing down -2.66% on the S&P 500.1 This marks the first back to back losing months for the index since the market bottomed out in March 2020. I could argue that there was some economic or earnings issue related to the sell off, but I believe that this fundamentally comes down to a desire for some level of certainty. The sooner the election is settled, and the markets can understand what they can expect from the U.S. Government over
the next 2-4 years, the better. Whatever the outcome of the vote, a quick resolution and smooth retention or transition of power is what we believe will ultimately prove appealing to the markets.

October was an exciting month for the TrueShares line up despite the market volatility. We ended the month by launching our fifth Structured Outcome Product, this one with a November reset date. NVMZ had an initial 10% downside buffer on the first losses of the S&P 500 Price Index2 and 81-83% upside market participation on that index’s returns over the next year3. Given what we face over the next twelve months, these structured outcome funds provide controlled exposure to the S&P 500. If the market is up or down as a result of catalysts like this election, COVID, fires in California or a massive stimulus package, these funds should provide reduced volatility for
investors. We believe they are an ideal way to position in this market.

Our equity funds also performed as one would expect in this environment. The TrueShares Technology, AI & Deep Learning ETF (LRNZ) has had an impressive start to its history. Through September, it outperformed the NASDAQ Composite by 26.07% (at NAV) before giving back 1.43% of that relative performance difference in October. This fund is investing in companies that have long-term opportunities on the true cutting edge of technology. We believe that these companies will drive a transformation of business similar to the way the Internet and computers have in the past; if we are correct, there is a long cycle of opportunity ahead of LRNZ.

The TrueShares ESG Active Opportunities Fund (ECOZ) trailed the market by about 0.87% (at NAV) during the month as that fund experienced some profit taking in names after outperforming the S&P 500 by 8.44% since inception (at NAV) through September. ECOZ is designed to invest in companies that are leading the transition in Environmental, Social, and Governance issues. ESG funds have been growing AUM in 2020, with that positive momentum reflecting emerging catalysts supportive to impact investing during the pandemic. We believe many of those catalysts are longer-term themes that will help drive performance in these equities for the foreseeable future.

As we look forward to the conclusion of 2020 and on to 2021, I can continue to say with reasonable certainty that no one knows how this market is going to react to the news over the next 6 months. Good or bad, the TrueShares team will continue to develop and manage innovative ETFs that seek to provide investors the tools they need to weather the uncertainty ahead.

1. Source: Bloomberg, as of 10/30/20. One cannot invest directly in an index.

2. Fund management will target a 10% downside buffer, with expectations that it will generally fall between 8-12%. 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.


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.

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