AdvisorShares, the Bethesda, Maryland-based issuer better known for its offerings in actively-managed exchange-traded funds, has expanded its portfolio range with the launch of the AdvisorShares YieldPro ETF (YPRO).
The new fund provides investors a new play in the high yield space while controlling volatility. California-based investment advisory firm The Elements Financial Group LLC, which is also advisor for the AdvisorShares EquityPro ETF (EPRO), will be managing the new fund.
YPRO is a “fund of funds” and aims to achieve attractive current yield and capital appreciation by allocating majority of the portfolio to both long and short investments across the entire fixed-income market spectrum.
The fund managers will follow a structured investment process and aim to manage volatility through a quantitative approach to risk budgeting, which includes the use of derivative instruments such futures, options and structured notes in order to hedge residual interest rate and equity risks. This ensures diminished correlation to stock market risks while giving more flexibility to manage interest rate risk.
The investment manager first screens bond ETFs for factors such as yield, trading volume, relative strength and volatility while seeking exposure across multiple fixed income segments for diversification purposes.
Next, a bottom up quantitative method is used for selecting securities that also considers how prevailing top down factors could impact the fundamental characteristics of the fund. The actively managed fund can establish a market neutral position in times of elevated bond market volatility to mitigate downside risks.
At debut, YPRO had a well diversified portfolio with over two dozen long ETF positions and the top five holdings included the PowerShares Preferred Portfolio (PFX), AdvisorShares Peritus High Yield ETF (HYLD), Vanguard Intermediate Term Corporate Bond ETF (VCIT), PowerSahres Senior Loan (BKLN) and iSahres iBoxx Investment Grade ETF (LQD).
YPRO has a net annual expense ratio of 1.42 percent, which is on the high side compared to its passively managed counterparts.
Disclosure: No holdings