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Posted by on Jan 21, 2016 in AdvisorShares, ETF Education

ETF Mechanics and Liquidity

ETF Mechanics and Liquidity

By Rob Parker, CFA, Director of Capital Markets   When a stock or a bond is traded, the traded price is the value of the security.  This is due to the fact that stocks and bonds are non-derivative securities.  Their value is driven solely by supply and demand at the moment of the trade.1  The supply of the security is fixed.2 There exists a whole array of derivatives in the marketplace, such as futures, options, and exchange-traded products (ETPs).  One such ETP of note is a closed-end fund (CEF).  In this structure, the issuer creates a static amount of shares that are traded on an exchange.  This unique structure can lead to differences between price and value (discount or premium).  Because CEFs are derivatives, their value is easily calculated by summing the values of the underlying holdings.  However, they are subject to their own demand paired with an inelastic supply. Moving further along the spectrum are exchange-traded funds (ETFs).  Like CEFs, the value of an ETF is easily quantified. ...

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Posted by on Dec 10, 2015 in ETF Education, ETF Strategist, Market Insight

Understanding Covered Call CEFs

Understanding Covered Call CEFs

By Roger Nusbaum, AdvisorShares ETF Strategist   Barron’s recently had a favorable write up on closed end funds that one way or another use a covered call strategy as a means of providing income. Where the article focused on CEFs, the yields can be quite high because of the leverage that CEFs often use as well as returning capital, when necessary to maintain a payout. It is also worth noting that there are traditional funds that sell calls and ETFs that sell calls and puts too for that matter. I wrote about these quite a few times in the early days of Random Roger. The history of them shows long stretches where they do very well then long periods where they get pounded and then repeats. Based on chart below they got crushed in 2008 and the dividends were cut on many of them and neither the prices or payouts have recovered since. The article tries to make the case that volatile markets like now are a good environment...

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Posted by on Oct 21, 2015 in ETF Education, ETF Strategist

Yieldcos or Yieldnos?

Yieldcos or Yieldnos?

By Roger Nusbaum, AdvisorShares ETF Strategist   A little over a year ago we looked at a new income vehicle called a yieldco which was highlighted in Barron’s. Over the weekend Barron’s provided an update on the still small niche and basically they’ve had a rough go in the last three or four months although I should note that for the six months prior they were white hot. Along the way GlobalX listed a fund that tracks the space and although not charted below it has also gone down considerably in the last few months. The following chart from Google Finance (symbols erased for compliance reasons) gives a sense of what has gone on since early June.     As a refresher that first Barron’s article defined yieldcos as “a spinoff of renewable-energy companies, principally solar-power outfits, that is supposed to offer a solid dividend supported by stable cash flows and a high payout ratio.” A yield oriented niche that may not be directly sensitive to rising interest rates...

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Posted by on Oct 14, 2015 in Community Capital Management, ETF Education

The Life Cycle of Place-Based Investments and CCM’s Role

The Life Cycle of Place-Based Investments and CCM’s Role

By Community Capital Management, Co-Portfolio Manager (Impact Fixed Income) of the AdvisorShares Global Echo ETF (NYSE Arca: GIVE)   A few reasons why we think this is significant: (1) we get asked all the time how we are involved in place-based investments; (2) many investors still don’t understand the stages involved in place-based investing; and (3) we are always looking to assist our clients and prospects with more information so they can make informed decisions. So let’s review. While each place-based investment opportunity has unique characteristics, there are certain themes that tend to be repeated in the life cycles and evolution of the investments that end up in CCM’s client portfolios: First, the private or public sector funds and builds a property for market-related use that is appropriate at time of construction. Second, with the passage of time and changes in neighborhoods and local economies, a property’s original purpose is no longer relevant or economically viable. Third, subsequent neglect and sometimes abandonment create an eyesore, safety hazard and contribute...

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Posted by on Sep 10, 2015 in ETF Education, Peritus Asset Management

Closed End Funds versus Exchange Traded Funds

Closed End Funds versus Exchange Traded Funds

By: Heather Rupp, CFA, Director of Research for for Peritus Asset Management, Sub-Advisor of the AdvisorShares Peritus High Yield ETF (HYLD)   There are currently a number of fund-based options available to investors looking for yield. In addition to traditional open-ended mutual funds, investors are also turning toward closed end funds (CEFs) and exchange traded funds (ETFs) to generate yield, including in the high yield bond market. Both CEFs and ETFs have continuous trading and pricing throughout the day, making them very liquid options for investors. While CEFs tend to be actively managed, there are both index-based options and actively managed options in the ETF space. However CEFs and ETFs have some dramatic differences that investors should consider when making a decision as to what structure is best for them. Share Creation/Redemption A closed end fund has a set number of shares, raising initial capital through an IPO. With this structure, shares are not created or redeemed based on market demand, but rather shares are purchased or sold within...

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