Gadsden Dynamic Multi-Asset ETF (GDMA)
AI Summary
This is an actively managed ETF that seeks attractive risk/return opportunities across global asset classes like equities, fixed income, currencies, commodities, and REITs. The fund takes both strategic and tactical approaches, making long-term and short-term allocation decisions based on macroeconomic factors and the projected attractiveness of each asset class. The portfolio is constructed through direct investments as well as other pooled vehicles like ETFs.
A unique feature is the fund’s ability to take short positions in overvalued asset classes based on fundamental analysis. The sub-adviser uses a macro-focused investment process to identify short opportunities across sectors, countries, and asset classes that appear mispriced relative to their economic sensitivities. Short positions are implemented through derivatives, ETFs, and direct shorting of securities, with a typical 1-6 month outlook but adjusted based on events, risk management, and the macro outlook.
Strategy Narrative (Prospectus)
The Fund is an actively managed exchange-traded fund (ETF) that seeks to achieve its investment objective by investing in asset classes that the Funds portfolio managers believe offer the most attractive combined risk/return opportunities. The term asset classes generally includes, among others, U.S. equities, foreign securities, currencies, bonds, and real estate investment trusts (REITs). Generally, Gadsden (defined below) selects investments for the Funds portfolio based on its long-term view of macroeconomic factors. That is considered a strategic approach. Through that approach, the Funds portfolio will generally have exposure to a variety of asset classes, geographies, and market capitalizations. Additionally, for a portion of the Funds portfolio, Gadsden may seek to change the Funds investment portfolio based on its short-term view of the markets, which is referred to as a tactical approach.The Funds risk or return is not managed relative to any securities index or securities benchmark. Rather, the portfolio managers make allocation decisions based on their view of the projected investment environment, attractiveness, and future return for a particular asset class or securities. The Fund may invest globally in any asset class or security and may at times have significant exposure to a single asset class. The Fund may focus its investments in particular asset classes, sectors, regions, or countries, and in companies of any market capitalization, which allocations may change over time. Additionally, the Fund may invest in assets classes that are considered lower-risk (e.g., inflation-linked bonds or fixed income securities), higher-risk (e.g., equities or REITs), or a mix of both groups.The Funds investment adviser, Empowered Funds, LLC (the Adviser) has engaged Gadsden, LLC (Gadsden or the Sub-Adviser) as investment sub-adviser to support management of the Fund. Gadsden will perform its services as a non-discretionary sub-adviser, which means that Gadsden will not be responsible for selecting brokers or placing the Funds trades. Rather, Gadsden will provide trade recommendations to the Adviser and, in turn, the Adviser will be responsible for selecting brokers and placing the Funds trades. It is anticipated that the Adviser will generally adhere to Gadsdens recommendations.Regardless of whether the portfolio managers are using a tactical approach or a strategic approach, the portfolio managers evaluate potential investments using both fundamental analyses and quantitative methods. A fundamental analysis is a method of measuring a securitys intrinsic value. Through a fundamental analysis, the portfolio managers seek out securities priced below their real worth. Gadsden also uses a proprietary investment model that generates signals based on a quantitative analysis, which together with the results of the Sub-Advisers fundamental analysis, is then used to determine in which securities to buy, sell, or hold. The Sub-Advisers model is based on whether the model anticipates a market advance, correction, or decline. The Adviser will generally sell securities or other instruments when, based on Gadsdens recommendations, better opportunities have become available.The Funds portfolio construction typically includes investments across a variety of global asset classes, including corporate, government (U.S. or foreign), inflation-linked, and high-yield debt instruments (also known as junk bonds); cash and cash equivalents; commodity interests (including foreign currencies, precious metals, and other physical or nonphysical commodities); and REITs. The Funds investments in fixed income instruments may include those of any maturity or credit quality. The Funds portfolio may also utilize inverse, leveraged, and inverse leveraged exchange-traded vehicles (such as ETFs) to obtain exposure to one or more asset classes.For each asset class in which the Fund invests, Gadsden will recommend to the Adviser whether the Fund should invest directly in securities or other instruments of that asset class or indirectly through one or more pooled vehicles that seeks to track the performance of the asset class (including ETFs, exchange-traded notes, and exchange-traded commodities). Consequently, the Funds investments in other exchange-traded vehicles may range from 0% to 100% of the Funds portfolio.The Fund may invest in futures contracts to gain long or short exposure to one or more asset classes. Investments in derivative instruments, like futures, have the economic effect of creating financial leverage in the Funds portfolio because those investments may give rise to losses that exceed the amount the Fund has invested in those instruments. Financial leverage will magnify, sometimes significantly, the Funds exposure to any increase or decrease in prices associated with a particular reference asset resulting in increased volatility in the value of the Funds portfolio. To the extent the Fund invests in derivative instruments, the value of the Funds portfolio is likely to experience greater volatility over short-term periods. While financial leverage has the potential to produce greater gains, it also may result in greater losses, which in some cases may cause the Fund to liquidate other portfolio investments at a loss to comply with limits on leverage requirements imposed by the Investment Company Act of 1940, as amended (the 1940 Act) or to meet redemption requests.The Fund may take short equity positions in one or more asset classes (i.e., diversified collections of stocks, bonds, commodities) based on the Sub-Advisers fundamental analysis. The Sub-Adviser believes these asset classes tend to share reliable and unique sensitivities to economic macro factors, such as rising and falling economic growth expectations, inflation expectations or liquidity expectations. When in the Sub-Advisers opinion an asset class is trading above its real worth the Fund may take a short position in the asset class. The Sub-Advisers investment process is macro focused looking to add value through targeted but diversified exposures to, among others, sectors, specific countries, and currencies. When selecting the Funds investments for short selling the Sub-Adviser attempts to identify those investments that provide the lowest shorting expense, highest liquidity and the specificity/sensitivity to the short exposure being sought. The Sub-Adviser attempts to avoid short selling securities that are considered hard to borrow and/or have liquidity restraints. Similar to the Funds long portfolio the Sub-Adviser will make asset allocation decisions based on its view of the projected investment environment, attractiveness (or lack thereof), and future return for a particular asset class or securities. The Sub-Adviser uses a broad array of signal and research inputs (e.g., momentum signals, risk related signals, stress test simulations, and third-party research recommendations) to identify short exposure opportunities for the Fund. The Fund may take short positions in any asset class or security that is believed to be overvalued or in an attempt to isolate a specific factor or to refine the Funds broader exposure to the market (e.g., short U.S, treasuries vs. U.S. TIPs to isolate the Funds exposure to inflation). This may result in the Fund taking short positions in equities, such as sector ETFs, size and style ETFs and ETFs representing certain geographic regions. The Fund may seek short exposure to fixed income securities by short selling Treasury ETFs, corporate bonds, emerging market bonds and Treasury TIPs, currency ETFs, commodity ETFs and thematic ETFs. The Sub-Adviser generally implements its short positions with a 16-month outlook but will add or reduce exposure based on event driven considerations, such as changes in interest rates. When taking a short equity position, the Fund borrows the security from a third party and sells it at the then current market price. A short equity position will benefit from a decrease in price of the security and will lose value if the price of the security increases. The Fund will generally look to close a short position when the Sub-Adviser believes any of the following: 1) a favorable repricing of the shorted exposure lowersuggesting that the macro risk is now adequately priced; 2) for stop-loss or risk mitigation reasons (i.e., if the price action moves substantially the opposite way the Sub-Adviser expected and the risk and/or size of the position goes beyond the Sub-Advisers risk or loss tolerance); or 3) the macro outlook changes and the Sub-Adviser no longer perceives a benefit for the short position.