Since the initial launch of the Overlay Shares, our team has worked to help solve major investor problems, utilizing tools and strategies typically only available to large investors. The initial five funds sought to generate supplemental income above and beyond the total return provided by the largest equity and bond asset classes. As we move into the New Year, investors are facing two key risks born out of the turmoil of 2020.
First, the unprecedented monetary and fiscal stimulus in 2020, along with further possible stimulus in 2021, has the potential to further fuel the economic recovery, and with that comes the risk of rising interest rates for bond investors. The potential duration risk relative to current yields could create an unfavorable risk/return profile. Second, a continued rise in the equity markets will eventually lead to stretched valuations and sentiment, leaving the equity markets vulnerable to an “air pocket” that has the potential to create another round of extreme volatility.
In response to these key risks, we are expanding our suite of Overlay Shares ETFs to provide two additional ways to address these problems:
Overlay Shares Short Term Bond ETF (OVT) – Seeks to combine the benefits of owning short-duration bonds with the same income potential from the income Overlay Strategy utilized in the existing suite of Overlay Shares. This combination has the ability to provide sufficient income potential for investors to meaningfully improve the risk/reward profile for bond investors concerned about duration risk. The Fund is ideally suited for investors seeking increased yield from a bond portfolio without increasing duration or credit risk.
Overlay Shares Hedged Large Cap Equity ETF (OVLH) – Aims to combine the benefits of owning the S&P 500 Index with long-term bear market hedges that are financed by the income generated through the Overlay Strategy. This combination allows investors the opportunity to participate in future market appreciation without the typical caps created by covered calls, while having the peace of mind to stay fully invested even during times of stress due to the bear market hedges. The Fund is ideally suited for investors seeking to maintain or increase equity allocations with less downside risk during times of extreme market stress.
In addition to the ETFs, we also offer the Short Term Bond Strategy and the Hedged Large Cap Equity Strategy on a separate account basis, providing even more tools to allow advisors and their clients to adapt to changing market risks and opportunities as we move into a very uncertain 2021.
Learn more about Overlay Shares and our offerings.
RISK FACTORS: The Funds invest in options that derive their performance from the performance of the S&P 500 Index. Selling (writing) and buying options are speculative activities and entail greater than ordinary investment risks. The Fund’s use of put options can lead to losses because of adverse movements in the price or value of the underlying asset, which may be magnified by certain features of the options. When selling a put option, the Funds will receive a premium; however, this premium may not be enough to offset a loss incurred by the Funds if the price of the underlying asset is below the strike price by an amount equal to or greater than the premium. Purchased put options may expire worthless and the Funds would lose the premium they paid for the option. The Funds may lose significantly more than the premiums they receive in highly volatile market conditions.
The Funds will invest in short term put options which are financial derivatives that give buyers the right, but not the obligation, to sell (put) an underlying asset at an agreed-upon price and date. The Funds’ use of options may reduce the Funds’ ability to profit from increases in the value of the underlying asset. The Funds could experience a loss or increased volatility if its derivatives do not perform as anticipated or are not correlated with the performance of their underlying asset or if the Funds are unable to purchase or liquidate a position. OVT is subject to the same risks as the underlying bonds in the portfolio such as credit, call and interest rate risk. As interest rates rise the value of bond prices will decline.
The Funds were recently organized and has no operating history. As a result, investors have a limited track record on which to base their investment decision. Investments involve risk including the possible loss of principal.
Investors should consider the investment objectives, risks, charges and expenses of the Overlay Shares ETF carefully before investing. For a prospectus or summary prospectus with this and other important information about the Fund, please visit overlayshares.com or call (866) 704-OVLS. Read the prospectus carefully before investing.
Shareholder Services: 1-866-704-OVLS
Investment Professionals: 770-350-8700 or info@overlayshares.com
Distributed by Foreside Fund Services, LLC, which is not affiliated with the Adviser.
