QUARTERLY FUND REVIEW | As of June 30, 2025

By Shawn Gibson on Jul 30, 2025

<span id="hs_cos_wrapper_name" class="hs_cos_wrapper hs_cos_wrapper_meta_field hs_cos_wrapper_type_text" style="" data-hs-cos-general-type="meta_field" data-hs-cos-type="text" >QUARTERLY FUND REVIEW | As of June 30, 2025</span>

 

FUND OVERVIEWS


­­­­­­­­­­­­­­­­­­The Overlay Shares suite of ETFs seeks to provide incremental yield on top of low-cost market beta ETFs by utilizing a highly risk-controlled put spread writing strategy ("the Overlay Strategy") on the S&P 500 Index. If successful, the ETFs have the ability to provide higher yield and higher total return than holding the underlying ETFs alone. The Overlay Strategy is applied and managed the same way in six of the seven Overlay Shares funds:

FUND NAME BETA EXPOSURE INCEPTION DATE
Overlay Shares Large Cap Equity ETF (OVL) US Large Cap Equity 09/30/2019
Overlay Shares Small Cap Equity ETF (OVS) US Small Cap Equity 09/30/2019
Overlay Shares Foreign Equity ETF (OVF) International Equity 09/30/2019
Overlay Shares Core Bond ETF (OVB) Broad Investment Grade Bond 09/30/2019
Overlay Shares Municipal Bond ETF (OVM) Municipal Bond 09/30/2019
Overlay Shares Short Term Bond ETF (OVT) Short Term Corporate Bond 01/14/2021
Overlay Shares Hedged Large Cap Equity ETF (OVLH) Hedged US Large Cap Equity 01/14/2021

 

The Overlay Shares Hedged Large Cap ETF (OVLH) maintains laddered downside hedges to protect the portfolio against significant market drawdowns.

PERFORMANCE OVERVIEW

The 2nd Quarter of 2025 got off to a tough start over concerns that the U.S.-imposed tariffs could set off a full-blown trade war that could cause an inflation spike and economic contraction. At one point, the S&P 500 Index was down more than 20% on an intra-day basis from the all-time high set in February, but a sharp rally lead the Index to a 10.57% gain for the quarter. This equity rally was widespread with most sectors participating and the NASDAQ and international stocks leading the way.

These “V” markets (rapid falls followed by rapid recoveries) can be challenging for the Overlay Strategy, but a relatively muted drawdown in the Strategy allowed it to generate a positive contribution of about 0.77% for the quarter. The gain in the quarter directly contributed to the outperformance of the six funds that utilize the Strategy. The Overlay Shares Hedged Large Cap (OVLH) does not utilize the Overlay Strategy but was able to benefit from monetizing the portfolio hedges in early April, positioning the Fund to better participate in the subsequent rally. As a result, the Fund finished up 10.77% for the quarter and up 7.83% for 2025, both of which are better than the S&P 500 Index despite the use of portfolio hedges.

FUND PERFORMANCE

  Q1 25 YTD 1 YEAR 5 YEARS Inception to Date
OVL NAV Returns 11.45% 4.83% 13.41% 19.88% 15.79%
OVL Market Price Returns 11.38% 4.57% 13.39% 19.99% 15.78%
S&P 500 Total Return Index 10.94% 6.20% 15.16% 19.71% 15.43%

OVS NAV Returns 5.47% -5.52% 3.24% 7.88% 8.20%
OVS Market Price Returns 5.62% -5.27% 3.59% 8.09% 8.26%
S&P 600 Total Return Index 4.90% -4.46% 4.60% 7.65% 7.85%

OVF NAV Returns 13.10% 19.00% 17.06% 13.54% 6.30%
OVF Market Price Returns 13.05% 19.08% 17.18% 13.65% 6.32%
MSCI All Country World ex USA Index 12.03% 17.90% 17.72% 13.99% 8.16%

OVB NAV Returns 1.94% 3.27% 5.25% 3.13% 1.10%
OVB Market Price Returns 1.60% 2.95% 5.03% 3.10% 1.06%
Bloomberg US Aggregate Bond Index 1.21% 4.02% 6.08% 2.55% 0.43%

OVM NAV Returns  0.51% -1.52% 0.04% 2.72% 1.53%
OVM Market Price Returns 0.26% -1.72% -0.11% 2.72% 1.51%
Bloomberg Municipal Bond Index -0.12% -0.35% 1.11% 2.50% 0.93%

OVT NAV Returns 2.37% 2.89% 6.21% 5.51% 2.12%
OVT Market Price Returns 2.55% 3.10% 6.59% 5.61% 2.18%
Bloomberg US Corporate 1-5 Years TR Index 1.80% 3.80% 7.26% 4.97% 1.91%

OVLH NAV Returns 10.77% 7.83% 14.92% 14.40% 9.63%
OVLH Market Price Returns 11.04% 8.04% 15.17% 14.56% 9.68%
S&P 500 Total Return Index 10.94% 6.20% 15.16% 19.71% 13.34%

 Source: U.S. Bank & Liquid Strategies.

*Inception for OVL, OVS, OVF, OVB, OVM is 09/30/2019. Inception for OVLH and OVT is 01/14/2021.

 Performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the most recent month-end performance, please call 1-866-704-OVLS.

Overlay Shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Total Returns are calculated using the daily 4:00pm EST net asset value (NAV). Market price returns reflect the midpoint of the bid/ask spread as of the close of trading on the exchange where Fund shares are listed. Market price returns do not represent the returns you would receive if you traded shares at other times.

MARKET OVERVIEW

After the historically rapid decline in the global equity markets through early April, equity indices powered back to lock in a strong quarter.

Picture1-Jul-28-2025-02-43-31-5002-PM

A big driver of this move was continued tame inflation readings coupled with a resilient job market.

newPicture.jpg

Picture3-Jul-28-2025-02-44-50-4952-PM

Shorter-term interest rates came down a bit while longer-dated yields bumped higher, leading short duration bonds to generally outperform longer-dated.

Picture5-1

Credit spreads also retreated to historical lows, providing a further boost to bonds, particularly high yield.

Picture6-1

The rising equity markets and falling volatility served as a tailwind for the Overlay Strategy.   As the charts below show, the Strategy has allowed our core funds (Overlay Shares Large Cap Equity ETF and Overlay Shares Core Bond ETF) to outperform their respective benchmarks since inception.

Screenshot 2025-07-28 at 12.30.18 PM

Picture8-1

The market path in the 1st half of 2025 is a reminder that one of the biggest mistakes that investors can make is getting out of the markets at the wrong time during periods of high stress. We have solutions that can help your clients stay invested in the market during the next round of turbulence that may come at some point in the future. As always, we are happy to not only do calls and meetings to discuss the performance and outlook for the Overlay, but we are also happy to serve as a resource for general questions on market volatility.

We appreciate your continued support and interest.

Screen Shot 2024-01-30 at 9.45.48 AM

Shawn Gibson, Founding Member
Adam Stewart, CFA, Portfolio Manager


View Full Prospectus

Important Disclosures

Past performance is no indication of future results. Inherent in any investment is the potential for loss. The adviser may not achieve the stated annual return objective. This commentary is not meant as a general guide to investing, nor as a source of any specific investment recommendations. This commentary makes no implied nor express recommendations concerning the manner in which any client’s accounts should or would be handled.

With regard to indices presented herein, please note the volatility of the indices may be materially different from the individual performance attained by a specific investor. In addition, the portfolio’s holdings may differ significantly from the securities that comprise the indices. The indices have not been selected to represent an appropriate benchmark to compare an investor’s performance, but rather are disclosed to allow for comparison of the investor’s performance to that of certain well-known and widely recognized indices. You cannot invest directly in an index.

Performance is presented net of fees and was calculated using standard management fees of 1.00% annually. For further details on fees, please refer to Part 2A of Adviser’s Form ADV. Inherent in any investment is the potential for loss. Past performance results are not necessarily indicative of future performance results.

The account’s performance has been compared to the following indices. Index returns illustrated would be lower if transaction costs and fees for asset management were deducted. Information regarding the index contained in this report is from sources deemed to be reliable however; the Adviser does not guarantee the accuracy or completeness of such information.

 The investments and services to which this presentation relates are only available to persons with a categorization as a qualified client, as defined under Rule 205-3 of the Investment Adviser Act of 1940, and other persons should not act or rely on it.

 The Overlay Shares ETFS are distributed by Foreside Fund Services, LLC, which is not affiliated with the Adviser.

 S&P 500 Total Return Index - An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of large cap stocks. All cash distributions (e.g. dividends and income) are reinvested. Used as a proxy for "Stocks" above.

Barclay’s U.S. Aggregate Bond Index - A broad-based index of bond securities used to represent investment-grade bonds traded in the U.S. The index was formerly known as the “Lehman Aggregate Bond Index”. Used as a proxy for "Bonds" above.

CBOE Volatility Index ("VIX") - An index sponsored by the Chicago Board of Options Exchange (CBOE) that shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of various option expirations and various strike prices of S&P 500 index options.

Correlation (R2) - A statistical measure of how two financial instruments (e.g. securities, indices, etc.) move in relation to each other. A correlation of +1 implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction. Alternatively, the closer correlation is to 0, the less the movements of two securities are related to one another.

Beta - A measure of the portfolio’s sensitivity to changes in the benchmark. A beta of 1 indicates the portfolio has historically moved with the benchmark. A portfolio beta greater than 1 indicates the portfolio has been more volatile than the benchmark and a portfolio beta less than one indicates the portfolio has been less volatile than the benchmark. Beta in this presentation is calculated using monthly historical returns.

Sharpe Ratio - A measure for calculating risk-adjusted return. The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return, the performance associated with risk-taking activities can be isolated. Sharpe ratio = (Mean portfolio return − Risk-free rate)/Standard deviation of portfolio return.  For Sharpe Ratio calculations in this presentation, the “risk free rate” is represented by the annualized monthly returns of the 3 Month US T-Bill.

Max Drawdown - A measure of the largest single drop from peak to trough based on monthly portfolio returns

HFRX Absolute Return Index - A stock index designed to measure absolute returns. The absolute return index is actually a composite index made up of five other indexes. This index is used to compare the absolute returns posted by the hedge fund market as a whole against individual hedge funds.

 Standard Deviation - A measure of the dispersion of a set of data from its mean