Build Bond Innovation ETF (BFIX)

AI Summary

The Fund is an actively managed ETF that seeks capital appreciation and risk mitigation through two strategies: a Fixed Income Strategy and an Equity Option Overlay Strategy.

The Fixed Income Strategy invests at least 80% of assets in investment-grade U.S. and non-U.S. bonds, either directly or through other bond ETFs. The portfolio aims for a moderate duration of 1-8 years and an average credit quality of BBB- or higher.

The Equity Option Overlay Strategy seeks additional returns by investing up to 10% of assets in long call or put options linked to an equity, ETF, or index reference asset. The options are selected based on cost, strike price, expiration, and sensitivity to the reference asset. This strategy aims to capture upside from rising markets through call options or downside from falling markets through put options, while limiting downside risk through the fixed income holdings.

Strategy Narrative (Prospectus)

The Fund is an actively managed exchange-traded fund (ETF) that seeks to achieve its investment objective through investing in a non-diversified portfolio of U.S. dollar-denominated, investment-grade bonds of U.S. and non-U.S. issuers either directly or indirectly via unaffiliated ETFs (Underlying Funds), (the Fixed Income Strategy) and long call or long put options linked to the performance of an equity, ETF, or index (collectively, the Reference Asset), (the Equity Option Overlay Strategy). Under normal market conditions, the Fund invests 80% or more of its assets (defined as net assets plus any borrowing for investment purposes, if any) in bond instruments (80% investment policy), directly or by investing in Underlying Funds which invest primarily in bond instrument securities. The Fund defines bond instruments to include: (i) bonds, (ii) bills, (iii) notes, (iv) debentures, (v) mortgage-backed securities (MBS), (vi) consumer asset-backed securities (ABS), such as credit card and auto loan receivables, (vii) commercial mortgage-backed securities (CMBS) (viii) or any other debt or debt-related securities of any maturities, whether issued by U.S. or non-U.S. governments, agencies or instrumentalities thereof or corporate entities, and having fixed, variable, floating or inverse floating rates. The Fund seeks to achieve its capital appreciation objective via two sources: (1) total return on the Fixed Income Strategy, and (2) total return on the Equity Option Overlay Strategy. The Fund seeks to achieve its risk mitigation objective by: (1) maintaining a moderate duration, investment grade (BBB-equivalent or better) average credit quality risk profile of its holdings in the Fixed Income Strategy, and (2) maintaining the Funds allocation to the Equity Option Overlay Strategy to between 0% and 10% of its holdings. Fixed Income Strategy The Fixed Income Strategy invests in U.S. dollar denominated fixed income instruments of investment grade quality - i.e., recognized as BBB- or higher by at least one Nationally Recognized Statistical Rating Organizations (NRSRO) (e.g., Standard & Poors, Moodys, or Fitch), directly or by investing in Underlying Funds which invest primarily in bonds and bond instrument securities. The Funds adviser considers potential bond instrument investments, or investment in an Underlying Fund by evaluating credit quality, nominal yield and spread. With respect to credit quality, the adviser utilizes its own research, as well as third-party investment research, ratings, and analyses provided by credit ratings agencies (e.g., Moodys, Standard & Poors and Fitch) and other investment research publishers. In forming a portfolio of holdings that make up the Fixed Income Strategy, the adviser selects a portfolio of securities it believes best maximizes the Funds expected total return potential while maintaining a risk profile consistent with a moderate duration and investment grade average credit quality. In analyzing individual securities for inclusion or removal from the Fixed Income Strategys holdings, the adviser evaluates individual fixed income securities or Underlying Funds on a relative value basis in a manner that the adviser believes to be most consistent with the Funds stated objectives. Under normal circumstances, the Fund will maintain an investment portfolio with a weighted average duration of no less than 1 year and no more than 8 years. The Fund anticipates an average maturity of holdings in the Fixed Income Strategy of no less than 1 year and no more than 10 years, with no constraint on maturity for any individual fixed income security. Equity Option Overlay Strategy Under normal market circumstances, the Fund uses call and put option strategies to seek to obtain total return within the desired risk profile. The Fund ordinarily will implement call or put option strategies on the Reference Asset. Call options give the Fund the right but not the obligation to buy the Reference Asset at a specified price (the strike price) within a specific time period. Put options give the Fund the right but not the obligation to sell the Reference Asset at a specified price (the strike price) within a specific time period. The Fund pays a fee to purchase a call or put option, which is called the premium. In return for the payment of the premium, the Fund is entitled to purchase (sell) the Reference Asset from the writer of the call (put) option at a value equal to the difference between the market price of the Reference Asset and the exercise price of the option, if the value of the call (put) option is above (below) its exercise price. When the call (put) option expires and the Fund has not exercised the call option because the value of the call (put) option is below (above) its exercise price, the Fund loses the premium paid. The Fund may sell call or put options but only to close out an existing call option the Fund owns (sell to close). Pursuant to the Funds option strategy, the Fund invests in a series of call or put options on the Reference Asset. The Adviser selects an option based upon its evaluation of the options cost, strike price, expiration and price sensitivity to the Reference Asset. The Adviser may purchase an option on the Reference Asset that has a strike price above, at or below the price of the Reference Asset. Through the purchases of a series of call options, the Adviser is seeking total return for the Fund to the extent the price of the Reference Asset rises less the premium paid by the Fund for the call options. When the price of the Reference Asset declines and the call options go unexercised, the Funds total return declines as the return is reduced by the premium the Fund paid for the call option. Through the purchases of a series of put options, the Adviser is seeking total return for the Fund to the extent the price of the Reference Asset decreases less the premium paid by the Fund for the put options. When the price of the Reference Asset rises and the put options go unexercised, the Funds total return declines as the return is reduced by the premium the Fund paid for the put option. The adviser employs a risk management process to mitigate the risks associated with the option strategy. In addition, under normal market conditions, no more than 10% of the value of the Funds net assets will be subject to the Funds option strategy and no more than 2.5% of the Funds net assets will be subject to any single option. In addition, the Adviser considers the impact of transaction costs associated with implementing the Funds option strategy, including whether the potential benefits achieved in rising markets exceeds the negative impact of transaction costs associated with purchasing call or put options. Under conditions of extreme stress or volatility in broader financial markets, including those in the Reference Asset, the Fund will incur increased transaction costs.