AdvisorShares, a sponsor of 25 actively-managed exchange-traded funds (ETFs), has been awarded a four-star rating by Morningstar for two of its ETFs for both their three-year and overall risk-adjusted performances.
The ETFs are:
AdvisorShares Madrona Domestic ETF (FWDD) – out of 1,338 funds in the Large Blend category for both its three-year and overall risk-adjusted performance from inception up to 30 June 2014.
AdvisorShares Madrona Global Bond ETF (FWDB) – out of 277 funds in the World Bond category for both its three-year and overall risk-adjusted performance from inception up to 30 June 2014.
FWDD and FWDB are managed by Madrona Funds, a Washington-based SEC registered investment advisor that specialises in both fixed income and equity strategies for its clients. With FWDD and FWDB reaching their three-year milestones, half of the AdvisorShares actively managed ETFs eligible for Morningstar ratings have been recognised with four stars or higher based on the three-year and overall risk adjusted performances.
Morningstar compares each ETF’s risk-adjusted return, with at least a three-year history, to the open-end mutual rating breakpoints for each category. Consistent with the open-end mutual fund ratings, FWDD and FWDB earned four-star rankings as being in the top 32.5 per cent of funds – that includes both ETFs and mutual funds – in their respective Large Blend and World Bond categories.
“As more actively managed ETFs reach their three-year track records, we believe investors and advisors will increasingly take notice of that risk-adjusted performance and expertise exhibited by Madrona’s Brian Evans and other active portfolio managers,” says Noah Hamman, chief executive officer of AdvisorShares. “We appreciate Morningstar’s recognition and believe this is further testament that active management with the daily transparency, intra-day liquidity and overall efficiency of an ETF structure can work very well both in fixed income and equity strategies.”
Unlike passively managed ETFs that simply track indexes or custom-weight indexes according to various factors such as size and past performance, the actively managed FWDD and FWDB take different investment approaches without rules-based restrictions. FWDD’s forward-looking investment strategy uses investment data based on consensus analyst estimates of stocks’ present values and allocates to companies with the best expected future earnings relative to a security’s current share price.
FWDB constantly seeks worldwide bond diversification by maintaining at least a 3 per cent exposure to over 12 distinct global bond classes at all times, using an active investment strategy anchored in historical class-by-class yield curve analysis and mean reversion strategy.
“Since I’m originally a CPA by trade, my DNA automatically leans me toward thoroughly analysing what one is paying for,” says Brian Evans, founder and portfolio manager of Madrona Funds. “Most index-based equity ETFs allocate their holdings by simply buying the most of the biggest companies without regard to valuations. Many index-based bond ETFs buy the most bonds from the biggest borrowers while not providing access to every major global bond category, even when billed as a total strategy. I believe that Madrona’s forward-looking approach provides a distinct advantage that ultimately can benefit our shareholders and their investment goals.”
