The Emles Protective Allocation ETF (DEFN) seeks investment results that correspond, before fees and expenses, to the price and yield performance of the Emles Protective Allocation Index, an index that seeks to provide exposure to securities that can preserve capital and protect portfolios through a longer and more persistent economic downturn.
Performance summary of Q4 2020
Since the Fund’s inception on November 24, 2020, the Emles Protective Allocation ETF (DEFN) gained 0.38% as of December 31, 2020. This return compares unfavorably to S&P 500 Index and Barclays US Aggregate Bond Index returns over the same time period as U.S. equities finished a volatile year on a high note and fixed income markets were propped up by fiscal stimulus.
- Contributors: An allocation to commodities — as expressed in futures contracts — paced portfolio performance
- Detractors: The Funds’ allocation to put options on ETFs that track major U.S. equity indexes detracted from results
- Outlook: We believe the Federal Reserve’s policy will remain accommodative for the foreseeable future. As such, corporate credit securities represent the top asset exposure. Put options on ETFs that track major U.S. equity indexes have lowest allocation by asset type
Quarter in review
- An allocation to commodities (4%), as expressed by future contracts, was the top contributor to performance as investors added to safe havens positions, such as silver and gold, given elevated socio-economic risks and historically high asset valuations.
- The put option exposure (3%) on ETFs representing major U.S. indexes was the largest detractor to performance as the S&P 500, NASDAQ and Russell 200 Index closed the calendar year with very strong performance, especially since the date of DEFN’s launch.
- Corporate credit (53% portfolio weighting) remains the top asset class exposure given our continued belief in an accommodative Federal Reserve policy for the foreseeable future, coupled with strengthening cash flows of the underlying companies within this sleeve.
- The put option exposure (3% portfolio weighting) is an asset class we continue to have conviction, as we are concerned about lofty risk asset valuations, especially in the technology sector.