Courtney Rosenberger
Portfolio Manager

OETV Interview with Courtney Rosenberger 10/06/2022

Strategas Asset Management Portfolio Manager Courtney Rosenberger appeared on OETV with Mehdi Sunderji to talk all things midterms, including the impact of midterm elections on market trends and investment implications to keep in mind as well as how those ideas coincide with the Strategas Global Policy Opportunities ETF (NYSE: SAGP)

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The Fund may trade securities actively, which could increase its transaction costs (thereby lowering its performance) and could increase the amount of taxes you owe by generating short-term gains, which may be taxed at a higher rate. Holdings are subject to change. The linked video represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the fund or any security in particular. This research is provided for educational purposes only. Strategas claims no responsibility for its accuracy or the reliability of the data provided. This information is not intended to provide legal and/or tax advice. Please consult your financial advisor for further information. For fund holdings click herehttp://strategasetfs.com/sagp  Holdings are subject to change.

Jerry Hendricks
Portfolio Manager

OETV Interview with Jerry Hendricks 09/29/2022

Strategas Asset Management Portfolio Manager Jerry Hendricks sits down with Open Exchange TV’s Scott Duxbury to discuss ETF tax efficiencies, how taxes are managed when an ETF needs to be rebalanced and how it relates to the Strategas Global Policy Opportunities ETF (NYSE: SAGP) and Strategas Macro Thematic Opportunities ETF (NYSE: SAMT)

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The Fund may trade securities actively, which could increase its transaction costs (thereby lowering its performance) and could increase the amount of taxes you owe by generating short-term gains, which may be taxed at a higher rate. The linked video represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the fund or any security in particular. This research is provided for educational purposes only. Strategas claims no responsibility for its accuracy or the reliability of the data provided. This information is not intended to provide legal and/or tax advice. Please consult your financial advisor for further information. Diversification does not ensure a profit or guarantee against a loss. For fund holdings and performance, click here http://strategasetfs.com/sagp  http://strategasetfs.com/samt. Holdings are subject to change.

Investment comparisons are for illustrative purposes only and not meant to be all-inclusive. To better understand the similarities and differences between investments, including investment objectives, risks, fees, and expenses, it is important to read the products' prospectuses.

ETFs and mutual funds each hold baskets of securities. ETFs trade on exchanges intraday at market price, which may be greater or less than net asset value. ETFs shares are not individually redeemed from the fund. Transactions in shares of ETFs result in brokerage commissions and generate tax consequences. Mutual funds are accessed directly from the fund company or through a select broker, pricing generally occurs once a day, and investors buy or redeem shares at the end-of-day net asset value, less any applicable fees. Some mutual funds may charge sales loads or redemption fees.

Mutual funds and ETFs are obliged to distribute portfolio gains to shareholders. Trading shares of ETFs will also generate tax consequences and transaction expenses. This material is not intended to be tax advice. The tax consequences of distributions may vary by individual taxpayer. Please consult your tax professional or financial adviser for more information with regard to your specific situation.

Diversification and asset allocation may not protect against market risk.

Ryan Grabinski
Portfolio Manager

Market Update with Ryan Grabinski and Todd Sohn 09/23/2022

Strategas Asset Management Portfolio Manager Ryan Grabinski sits down with Strategas ETF Strategist Todd Sohn to update on the market, discuss the Communication Services and Energy sector and how the sectors relate the Strategas Macro Thematic Opportunities ETF (NYSE: SAMT)

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The Fund may trade securities actively, which could increase its transaction costs (thereby lowering its performance) and could increase the amount of taxes you owe by generating short-term gains, which may be taxed at a higher rate. The linked video represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the fund or any security in particular. This research is provided for educational purposes only. Strategas claims no responsibility for its accuracy or the reliability of the data provided. This information is not intended to provide legal and/or tax advice. Please consult your financial advisor for further information. Diversification does not ensure a profit or guarantee against a loss. For fund holdings and performance, click here http://strategasetfs.com/samt. Holdings are subject to change.

Nicholas Bohnsack
Chief Executive Officer

Q&A with the Strategas Team 09/22/2022

Strategas Asset Management CEO & Portfolio Manager Nicholas Bohnsack, Portfolio Manager Courtney Rosenberger and ETF Strategist Todd Sohn, sit down to discuss investor questions, give their take on the current market, and how the Strategas Global Policy ETF (NYSE: SAGP) and Strategas Macro Thematic ETF (NYSE: SAMT) are positioned

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The Fund may trade securities actively, which could increase its transaction costs (thereby lowering its performance) and could increase the amount of taxes you owe by generating short-term gains, which may be taxed at a higher rate. The linked video represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the fund or any security in particular. This research is provided for educational purposes only. Strategas claims no responsibility for its accuracy or the reliability of the data provided. This information is not intended to provide legal and/or tax advice. Please consult your financial advisor for further information. Diversification does not ensure a profit or guarantee against a loss. Sources for data: Fixed Income Mutual fund flows sourced from ICI Database, ETF flow information sourced from Bloomberg.  For fund holdings click here http://strategasetfs.com/samt http://strategasetfs.com/sagp. Holdings are subject to change.

Jason Trennert
Chief Investment Officer

Market Update with Strategas Asset Management's Chief Investment Officer Jason Trennert 09/22/2022

Strategas Asset Management Chief Investment Officer Jason Trennert  reviews our base case for the economy and the market and its impact on the Strategas Macro Thematic ETF (NYSE: SAMT) and the Strategas Global Policy Opportunities ETF (NYSE: SAGP)

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The Fund may trade securities actively, which could increase its transaction costs (thereby lowering its performance) and could increase the amount of taxes you owe by generating short-term gains, which may be taxed at a higher rate. The linked video represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the fund or any security in particular. This research is provided for educational purposes only. Strategas claims no responsibility for its accuracy or the reliability of the data provided. This information is not intended to provide legal and/or tax advice. Please consult your financial advisor for further information. Diversification does not ensure a profit or guarantee against a loss. At 1:15 minute mark, “Terminal Rate- The terminal growth rate is the constant rate that a company is expected to grow at forever (Investopedia). At 1:51, "TINA" - defined as "TINA is an acronym for "there is no alternative." (Investopedia). For fund holdings click here http://strategasetfs.com/samt http://strategasetfs.com/sagp . Holdings are subject to change.

Nicholas Bohnsack
Chief Executive Officer

TD Ameritrade Interview with Nicholas Bohnsack 09/19/2022

Strategas Asset Management CEO and Portfolio Manager Nicholas Bohnsack was on TD Ameritrade’s “Market on Close” to talk market weakness, expectations of the Federal Reserve's monetary policy and how the Strategas Macro Thematic Opportunities ETF (NYSE: SAMT) is positioned to potentially benefit

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The Fund may trade securities actively, which could increase its transaction costs (thereby lowering its performance) and could increase the amount of taxes you owe by generating short-term gains, which may be taxed at a higher rate. The linked video represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the fund or any security in particular. This research is provided for educational purposes only. Strategas claims no responsibility for its accuracy or the reliability of the data provided. This information is not intended to provide legal and/or tax advice. Please consult your financial advisor for further information. Diversification does not ensure a profit or guarantee against a loss. For fund holdings and performance, click here http://strategasetfs.com/samt. Holdings are subject to change.

Nicholas Bohnsack
Chief Executive Officer

NYSE's ETF Rundown featuring Nicholas Bohnsack 09/15/2022

Strategas Asset Management CEO and Portfolio Manager Nicholas Bohnsack was featured on NYSE's ETF Rundown to discuss the Strategas brand, thematic investing, his take on the markets and how the Strategas Macro Thematic Opportunities ETF (NYSE:SAMT) and Strategas Global Policy Opportunities (NYSE:SAGP) is positioned to potentially benefit

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The Fund may trade securities actively, which could increase its transaction costs (thereby lowering its performance) and could increase the amount of taxes you owe by generating short-term gains, which may be taxed at a higher rate. The linked video represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the fund or any security in particular. This research is provided for educational purposes only. Strategas claims no responsibility for its accuracy or the reliability of the data provided. This information is not intended to provide legal and/or tax advice. Please consult your financial advisor for further information. Diversification does not ensure a profit or guarantee against a loss. http://strategasetfs.com/samt  http://strategasetfs.com/sagp Holdings are subject to change.

Jerry Hendricks
Portfolio Manager

Addressing the ETF Illiquidity Illusion 09/15/2022

One of the most sought-after answers requested from us regarding our Exchange Traded Funds is on the topic of liquidity.  Definitionally, liquidity refers to the ease of being able to exchange an investment from property into cash. As investors, we all want to know what kind of market will exist should we need to offload an investment – be it art, classic cars, or a stock.  Essentially the less liquid a security, the higher the transaction cost and more time it may require selling it.   If an investor owns a large portion of an illiquid stock, it could take more than a day to sell out of their position and often the price fluctuations do not move in the investors favor.  However, equating common stock liquidity with ETF liquidity does not tell the whole story.

Certainly, given their common characteristics of intraday pricing and secondary market trading, exchange traded funds and stocks have a lot of parallels.  But despite their commonalities, the liquidity of the two security types is not determined in the same manner.  Stocks, and other closed-end funds for that matter, have a fixed number of shares outstanding.  Thus, the focus for stocks is normally on trading volume or simply the number of shares trading during a defined period of time.  For an ETF, trading volume is less important given their creation / redemption process. 

Source ETF.com

 

Reviewing the exchange traded fund creation and redemption process as noted in the above diagram, you can see that during an in-kind creation the AP is delivering a basket of securities representing the underlying ETF security in return for shares of the ETF.  It is this creation and redemption process that plays out in the primary market.  In the redemption of ETF shares, the AP would receive the underlying basket of securities in exchange for the ETF shares, removing them from the secondary market.  It is this direct exchange of the underlying securities that plays a prominent role in determining liquidity of the ETF.  ETFs have the benefit of multiple avenues from which liquidity can be provided and, as such, often can often have better liquidity than many investors assume.   Should an investor want to make a large ETF trade where overall volume flow may seem light, they can engage with the authorized participants (AP) in the primary market to create or redeem shares directly.

But what if you simply do not have the access to an AP to transact in the primary market?  While the spreads in the secondary market may not be as tight as you could receive in the primary market, the AP is still providing some cover behind the scenes as they are constantly monitoring the secondary market. In fact, one of their main functions is to help ensure that the market price of the ETF is in line with the underlying net asset value (NAV) of the underlying securities.  It once again comes down to the liquidity of the underlying securities.  Strong liquidity in the underlying names should translate into a liquid exchange traded product.

 

 

This information is not meant to be investment advice. Investing involves risk, including the possible loss of principal.

Carefully consider each Fund’s investment objectives, risk, and charges and expenses. This and other information can be found in the Fund’s summary or full prospectus which can be obtained by calling 855-457-3637 or by visiting strategasetfs.com. Please read the prospectus carefully before investing.

Strategas Asset Management, LLC serves as the investment advisor for each Fund and Vident Investment Advisory, LLC serves as a sub advisor to each Fund. The Funds are distributed by SEI Investments Distribution Co. (SIDCO), which is not affiliated with Strategas Asset Management, LLC or any of its affiliates.

Nicholas Bohnsack
Chief Executive Officer

Unmoved by the Countertrend Rally 08/23/2022

Stick to the plan…

The equity market has provided a welcomed reprieve from 2Q weakness as investors are increasingly drawn in by the “peak inflation” narrative and the view the Fed will soon soften the intensity of – or even reverse – its policy rate normalization scheme.  As we noted last month, we remain suspicious.  A month on, however, and a notable number of clients are calling b/s.  Hard to lay blame.  The tape is strong.  The labor market, while a pinch off its 1H flex, remains robust.  Growth, while still tepid relative to a self-sustaining recovery, is projected to be positive (the Atlanta Federal Reserve’s “GDPNow” tracker for third quarter 2022  is 1.6%).  The pull is real.  Most importantly, investors appear conditioned to anticipate all recoveries to be “v-shaped.”  History suggests the opposite.  While posting peak year over year rates of change in the various price indexes is mathematically probable, as Strategas’s Chief Economist, Don Rissmiller reminds us, the Fed appears mindful of the effect its “stop-and-go” approach to fighting inflation had in the 1970s, i.e. a decade long stagflationary malaise they are keen to not repeat.  While late to the game, the Fed can catch-up quickly.  Chair Powell and other FOMC members have been consistent in their stated desire to see both the level of inflation move lower and the volatility of inflation expectations to become “anchored” before making material changes to their prescribed policy course.  By our lights this suggests additional rate increases through 3Q under the cover of the aforementioned strength in the labor market and slightly-stronger-than-1H’22 economic growth, even if at a less aggressive pace (i.e. 50bps) than they’ve implemented at recent meetings (i.e. 75bps).  We struggle to reconcile a policy rate below 3.5 or 4% with an inflation rate hovering at, or above 6, 7 or 8%, even if directionally “correct.” What’s more, the knock on – and lagged – effect of an increasingly restrictive policy rate coupled with just underway balance sheet reductions (i.e. quantitative tightening) is likely – in our view – to result in weaker growth in CY’23.  This would not appear to be the environment to back the truck up, particularly if looking to add the long duration, pre-profit darlings that have caught a summer bid on low volume and the hope the Fed will pivot on policy.

 

Source: FactSet Financial Data and Analytics (As of 8/17/2022)

 

As we look through Labor Day, in addition to the current battery of issues, the U.S. mid-term elections loom large.  Historically, the mid-term has served as a referendum on the incumbent president and his Administration.  It’s never as easy as it seems from the steps of the Capitol on Inauguration Day.  As our policy ace, Dan Clifton, reminds us that this explains the tight correlation between a president’s approval rating and the number of House seats their party generally loses in the mid-term.  (On average a sitting president’s party loses 29 House seats in their first term midterm election.)  Only two presidents have seen their party gain seats in last hundred years: FDR during the Great Depression and George W. Bush following 9/11. In both instances the president’s had strong approval ratings preventing an anti-incumbent wave from forming.  Irrespective of one’s politics, President Biden does not hold this advantage; his approval rating is as low as any president at this point in their presidency and is consistent with a 50 seat House loss.  Democrats appear, however, to be narrowing the gap.  Wherever credit is due, despite a double bout with Covid the President has enjoyed a few good weeks.  In addition to the broad market’s advance, gasoline prices have fallen from their highs (as reflected in July inflation data) and the Supreme Court ruling overturning Roe has energized voters (and donors) on the left.  While the House still appears poised to fall back into Republican control, even if less of a stranglehold than a wave 50 seat majority, the probability of the Senate remaining in Democratic hands has increased.  If you’re not sick of the political discourse now, gird yourself for the next few months.  The impact of the market may be particularly acute given the general environment. 

The yield curve remains inverted near historical lows (U.S. 2s/10s -30bps) as of 8/19/22.  With demand appearing to slow, corporate operating margins under pressure and consumer sentiment uninspired – though painful – we remain unconvinced by the recent rebound in equities.  We see little incentive to shift broad allocations among the major asset classes: in our Tactical Asset Allocation model, we remain neutral Equities (60% in our 60/40 benchmark allocation portfolio), a position we established earlier this year.  The decision point to reduce our Equities exposure below benchmark has, admittedly, been held hostage by the market’s insistence that the Fed will reverse course next spring.  We are, with this writing, increasing to Overweight portfolio exposure to Consumer Staples and reducing to Neutral exposure to Materials, deepening our move toward a more defensive U.S. equity sector allocation.  We continue to make tactical shifts with our fixed income sleeve of our Tactical Asset Allocation model: trimming exposure to Dollar-denominated EM debt and increasing exposure to short duration investment grade credit. 

Thematically, in our view, intermediate-term momentum, remains in four areas: Inflation for Longer; Quantitative Tightening; Less Cyclical, More Defensive; and, De-Globalization.

-NB 

 

This information should not be relied upon by the reader as research or investment advice regarding the fund or any security in particular. This research is provided for educational purposes only. Strategas claims no responsibility for its accuracy or the reliability of the data provided. This information is not intended to provide legal and/or tax advice. Please consult your financial advisor for further information. Diversification does not ensure a profit or guarantee against a loss. Holdings are subject to change

Nicholas Bohnsack
Chief Executive Officer

NYSE's The Exchange featuring Nicholas Bohnsack 08/11/2022

Strategas Asset Management CEO and Portfolio Manager Nicholas Bohnsack was featured on NYSE's, The Exchange with Doug Yones to discuss his take on the current market dynamics, his thoughts on macroeconomic factors such as inflation and thus how the Strategas Macro Thematic Opportunities ETF (NYSE: SAMT) is positioned to benefit

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The Fund may trade securities actively, which could increase its transaction costs (thereby lowering its performance) and could increase the amount of taxes you owe by generating short-term gains, which may be taxed at a higher rate. The linked video represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the fund or any security in particular. This research is provided for educational purposes only. Strategas claims no responsibility for its accuracy or the reliability of the data provided. This information is not intended to provide legal and/or tax advice. Please consult your financial advisor for further information. Diversification does not ensure a profit or guarantee against a loss. Holdings are subject to change.

Jerry Hendricks
Portfolio Manager

Exploring Tax Efficiencies Within Our ETFs 08/02/2022

(in)KIND ETF Tax Treatment

For all the research and analysis behind a portfolio managers’ insight, their main focus, for the most part, is to provide investment opportunities for clients via their end products.  These portfolio managers along with numerous do-it-yourself investors continuously put forth tremendous efforts with the belief (and hope) that their hard work will provide them with notable appreciation on their investments.  The catch-22 here is that the more you earn the greater the potential taxable event.  Any transaction that results in taxes owed to a government entity is deemed a taxable event and can keep investors and portfolio managers up at night.  The most common taxable event scenarios we encounter include receiving dividends and interest or selling a stock for a gain.  So how does one maximize their appreciation on an investment while also minimizing their potential tax burden? One method could be to hire a competent fund or tax account, whose expertise focuses on tax-efficient strategies.  A second, more cost-effective option could be to invest in products that are deemed more tax efficient.  Exchange Traded Funds have frequently been touted as more tax efficient than their comparable brethren, the mutual fund.  But what exactly does it mean to be more tax efficient and how do the mechanics work?  We at Strategas, believe we have created two new products which will provide the normal tax efficiencies of the aforementioned exchange traded fund (ETF), while adding an additional level of consideration.  Let’s first explore the two main reasons ETFs are believed to be so tax efficient.

The First Benefit - Cashing out concern

For most investors, the realization that ETFs are more tax efficient than mutual funds (in terms of creation and redemptions) is not a new concept.  If an investor owns a mutual fund and decides to redeem the investment, the mutual fund must sell securities to raise cash to meet the redemption request. The resulting transaction, should it create a capital gain, would then cause all those invest in the mutual fund to be responsible for that tax liability.   If this redemption transaction results in a capital gain, the tax liability would be shared by all mutual fund investors.  This means that even investors who did not sell shares would be burdened by the capital gains tax.  On the other hand, with ETFs, when an investor redeems their shares, they can simply sell them in the open market.  This transaction, while a taxable event to the investor who is cashing out, would not impact other investors who opted to hold their security.  But what happens when the Authorized Participant (AP) needs to reduce the number of outstanding ETF shares in the market?  This is an additional tax efficiency of ETF investments.  In this scenario, the AP and the ETF issuer can simply do an “in kind” redemption whereby the issuer simply provides the underlying holdings for the ETF basket in exchange for ETF shares.  Because there has not been a sale or taxable event, there are no capital gain implications. 

The Second Benefit - The Custom Creation Around a Rebalance

In the Fall of 2019, the Securities and Exchange Commission (SEC) passed Rule 6c-11.  This ruling, more commonly known as the ETF Rule, lowered the barrier of entry for new and smaller issuers.  But that wasn’t the only benefit to this rule.  The ETF Rule also allowed the use of custom baskets for creations and redemptions that may differ from the underlying portfolio.  These new custom baskets must be in the best interests of investors. The use of these baskets has provided an extra benefit when trying to manage against capital gain distributions.  In fact, many of our investors often ask us how we manage capital gains when rebalancing our portfolio.  Well, we are fortunate enough to have partnered with Vident Investment Advisory, LLC.  Our sub-adviser’s tax expertise related to these custom creation units in an invaluable partnership that looks to achieve both investing and tax planning goals.  

One might question how the use of custom baskets helps mitigate capital gains?  The best way to describe this is with the following diagram provided by our experts at Vident.  Let’s start with the assumption that an ETF has been created with a standard or initial creation unit and has been trading for in the open marekt.  Next, let’s assume that the portfolio manager (PM) communicates with their sub-adviser that they are looking to change a portion of the underlying constituents via a rebalance.  The sub-adviser then takes the following steps to help mitigate the capital gains consequences via the use of a custom creation unit as noted below.

Portfolio managers also have the benefit of utilizing unrealized losses within the redemption process by marking those securities with losses as “cash in lieu” in their portfolio files. This will enable a portfolio manager to record those losses on the books to offset any future gains that may have (or will) occur, which can also be an advantageous tax strategy.

Tax Efficiency via In-Fund Thematic Rotation

Most of the 250 thematic ETFs we found on Bloomberg are of the single theme variety - disruptive innovation, inflation, or environmental impact.  There is even an ETF that tracks a natural disaster recovery index.  Therefore, while these funds could be very well run and true to their mandate, investors will still have to decide if the impact of a particular theme wanes over time. For example, do we sell our holdings in the open market in order to switch to a new investment - possibly creating a taxable event?  Or do we hold on to the product even though the underlying theme is losing momentum?  We believe our thematic rotation within the funds themselves provides a third element of tax efficiency other funds simply cannot provide due to their investment objective. Backstopped by our team of Institutional Investor ranked analysts, each of our ETFs has a component whereby we rotate in and out of themes over time as: 1) existing themes mature into new or revised themes, e.g. “Work From Home” moves to “Pent-Up Demand for Travel”; 2) themes age out with no natural related successor; or 3) an existing theme loses momentum relative to a new, more impactful theme.  We believe this element of thematic rotation can provide an added layer of tax efficiency as investors need not trade in and out ETFs in order to rotate into a new theme present in the market.

Our Strategas Global Policy Opportunities ETF (Ticker SAGP) is derived from the belief that corporate lobbying can produce positive benefits through successful policy outcomes.   An active ETF, SAGP uses publicly available lobbying data to consider investments in both domestic and international companies potentially set to benefit from periods of intense lobbying of the U.S. federal government.  The result is a politically agnostic portfolio leveraged to successful public policy outcomes which naturally shifts over time as new parties come into power and agendas adjust.  As the constituents change based on their lobbying intensity, so do the underlying themes these lobbying efforts represent.  It is this automatic thematic rotation that helps the fund stay relevant with respect to the policy issues corporations feel are the most impactful on the business landscape.

Our second product, the Strategas Macro Thematic Opportunities ETF (Ticker SAMT) is also an actively managed fund built around the underlying themes which our research-driven approach gives us the highest conviction in.  The fund invests in three to five macro themes at any given time based on analysis prepared by our firm’s research team which is documented and readily available.  Our thematic positioning is adjusted based on shifts in macro trends to ensure both the integrity of each theme’s investment thesis and the relevancy of its constituents.  Once a theme is deemed to lose momentum or another theme comes along that we believe has a better investable conclusion, we rotate out of one theme into another.  Again, we believe it is this thematic rotation that provides an added benefit and limits an investor’s need to sell an entire ETF when a current theme loses momentum which may occur in single-themed ETF scenarios.

Any investment an individual adds to their portfolio should be viewed in a holistic manner with respect to their analysis and underlying holdings.  That said, we believe our two exchange traded products provide an extra benefit with respect to tax treatment that could be extremely advantageous when considering your investment options.