Obra Defensive High Yield ETF (ODHY)

Overview

ODHY is a fund that actively manages investments primarily in high-yield corporate bonds, specifically those denominated in USD, commonly referred to as junk bonds. The investment approach adopted by ODHY is rooted in a meticulous, bottom-up, value-driven selection of securities. The fund strategically targets larger companies exhibiting substantial cash flow and invests in higher-rated bonds, classified as B3/B or better, to mitigate risk while maximizing returns.

The advisor employs a proprietary method for assessing credit risk, known as the default risk rating (DRR). This rating takes into account various factors, including the probability of default, potential loan recovery rates, and critical financial metrics such as audited financial statements and restricted payments covenants. To enhance its flexibility, ODHY allows for an allocation of up to 10% of its portfolio to government securities, higher-rated bonds, or unrated/lower-rated bonds, provided they meet established DRR criteria. The fund is adept at conducting frequent trading, particularly during times of market volatility, to either optimize returns or curtail potential losses.

To maintain a balanced investment profile, ODHY implements specific limits on industry exposure, capping it at 15%. Additionally, issuer holdings are restricted to a maximum of 1.5% of the portfolio. The overall quality of investments is managed by maintaining a weighted average rating that does not dip below B2/B.

Products and Services

• High-Yield Corporate Bonds:

  ODHY primarily focuses on investing in high-yield, USD-denominated corporate bonds. These bonds, often referred to as junk bonds, offer a higher potential return compared to investment-grade bonds due to their lower credit ratings. The fund selectively invests in those with substantial cash flow and financial stability.

• Credit Risk Assessment:

  The fund utilizes a proprietary default risk rating (DRR) to evaluate potential investment opportunities. This assessment includes analyzing factors such as default probability, the likelihood of loan recovery, and crucial elements like financial statements and industry classification.

• Strategic Asset Allocation:

  Up to 10% of ODHY's investments can be allocated to government securities, higher-rated bonds, and unrated/lower-rated bonds if they meet specified DRR criteria. This flexible approach allows the fund to adapt to market conditions while aiming to optimize returns.

• Active Trading:

  ODHY engages in frequent trading, especially during periods of market volatility. This strategy is designed to enhance returns or limit losses, showcasing the fund's proactive management style and responsiveness to changing market dynamics.

• Industry and Issuer Limits:

  The fund maintains strict investment limits, capping industry exposure at 15% and issuer holdings at 1.5%. This disciplined approach helps to reduce risk concentration and preserve portfolio integrity.

• Weighted Average Rating Management:

  ODHY strives to keep its weighted average rating at B2/B or higher. This requirement ensures that the fund invests in bonds that meet a certain level of credit quality, balancing risk and return effectively.