Positive Fixed Income Returns AND Low Volatility?

Posted on 4/26/2022

By Frank Codey, Portfolio Manager, ClearShares OPER ETF

Some investors may have seen an April 19 tweet from Eric Balchunas that summarized the current state of the fixed income ETF market in a lot fewer than 280 characters. His tweet calls out that a great majority of fixed income ETFs now have negative returns YTD, except for 10.

The ClearShares Ultra-Short Maturity ETF (OPER) came in at #8 on the list shown in the tweet, which was a screencap of the Bloomberg query run by Eric.

While the ClearShares team is very pleased with the performance of OPER ETF, the tweet does not reflect the whole story. No investment can be evaluated on return without a corresponding analysis of risk.

The chart below shows the market price history for OPER ETF from March 1, 2020, through April 22, 2022. (Note: View standardized performance here. The performance data quoted represents past performance. Performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted.)

Source: Bloomberg

From the chart, OPER shows an average price of $100.1035, with the largest change to the downside of less than 7 basis points in just over two years, which includes the significant volatility from the early days of the pandemic.

The portfolio management team believes that OPER can be a strong addition to client portfolios by providing positive returns with very limited volatility. We expect OPER to be a beneficiary of a rising rate environment, unlike other fixed income ETFs with direct yield curve exposure.

Please let us know if you would like to discuss OPER ETF in more detail and how it can add value to your clients’ portfolios.

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References to other securities is not an offer to buy or sell.

Past performance is not indicative of future results. References to efforts to mitigate or “control” risk reflect an effort to address risk, but do not mean that the portfolio risk can be completely controlled. All investment has risk, including the risk of loss of principal.

Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV) and may trade at a discount or premium to NAV. Shares are not individually redeemable from the Fund and may only be acquired or redeemed from the fund in creation units. Brokerage commissions will reduce returns. The Fund invests in fixed income securities, that involves certain risks including call risk, credit risk, event risk, extension risk, interest rate risk & prepayment risk. Repurchase agreements may be construed to be collateralized loans by the Fund, and if so, the underlying securities relating to the repurchase agreement will only constitute collateral for the seller’s obligation to pay the repurchase price. If the seller defaults on its obligation under the agreement, the Fund may suffer delays and incur costs or lose money in exercising its rights under the agreement. A seller failing to repurchase the security coupled with a decline in the market value of the security may result in the Fund losing money. The Fund may invest in repurchase agreements that are deemed illiquid due to having a term of more than seven days. Please refer to the prospectus for additional risks of investing in the fund.

Before investing you should carefully consider the Fund's investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by clicking here. Please read the prospectus carefully before you invest.

Past performance is not indicative of future results. The material above has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation.

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Before investing you should carefully consider the Fund's investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by clicking here for OCIO, OPER, and PIFI. Please read the prospectus carefully before you invest.

Investing involves risk, including the possible loss of principal.

The ClearShares OCIO, OPER, and PIFI ETFs are distributed by Quasar Distributors, LLC.

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