RiverFront Investment Group, begun trading the RiverFront Dynamic Unconstrained Income ETF (NYSE Arca: RFUN) and the RiverFront Dynamic Core Income ETF (NYSE Arca: RFCI) on Thuesday, June 14, 2016.

1.
FUND INFORMATION:

Symbol: RFUN	Exchange: NYSE ARCA
Name: RiverFront Dynamic Unconstrained Income ETF	Net Expense Ratio: 0.51%

 

FUND OBJECTIVE:
The RiverFront Dynamic Unconstrained Income ETF is an actively managed fund which seeks total return, with an emphasis on income as the source of that total return.
The Fund seeks to achieve its investment objective by investing in a global portfolio of fixed income securities of various maturities, ratings and currency denominations. The Fund utilizes various investment strategies in a broad array of fixed income sectors. The Fund allocates its investments based upon the analysis of RiverFront Investment Group, LLC (Sub-Adviser) of the pertinent economic and market conditions, as well as yield, maturity, credit and currency considerations.

The Fund’s portfolio is constructed through a 2-step process:
The first step is setting the strategic allocation among different fixed income asset classes, with the objective being to construct an allocation that is designed to balance the probability of upside returns with downside risks for investors with a 5-year time horizon for their investments. The second step is tactically adjusting these allocations as market conditions warrant and determining security selection within those asset classes in order to maximize potential returns over time. The strategic allocation across long-term, medium-term and short-term investment grade securities, long-term and short-term high yield securities, and emerging market debt is adjusted at least annually or as market conditions warrant and is determined by a quantitative methodology. This methodology models historical returns as a function of initial valuation conditions and creates estimates of potential returns and downside risks consistent with historical market behavior. The capital market assumptions produced by this methodology are then incorporated into a proprietary Mean Reversion Optimization (MRO) process to produce the model weighting for each of the major fixed income asset classes. The Fund may purchase fixed income securities issued by U.S. or foreign corporations or financial institutions, including debt securities of all types and maturities, convertible securities and preferred stocks. The Fund also may purchase securities issued or guaranteed by the U.S. Government or foreign governments (including foreign states, provinces and municipalities) or their agencies and instrumentalities (government entities) or issued or guaranteed by international organizations designated or supported by multiple government entities to promote economic reconstruction or development (supranational entities). The Fund may invest in mortgage-backed securities (MBS) issued or guaranteed by federal agencies and/or U.S. government sponsored instrumentalities, such as the Government National Mortgage Administration (Ginnie Mae), the Federal Housing Administration (FHA), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). The Fund may invest up to 20% of its total assets in MBS (which may include commercial MBS (CMBS) or asset-backed securities (ABS) issued or guaranteed by private entities. The MBS in which the Fund may invest may also include collateralized mortgage obligations (CMOs). The Fund may purchase or sell securities on a when issued, delayed delivery or forward commitment basis. The Fund may also invest in other ETFs and/or closed-end funds which invest in fixed income securities.

The Fund has not established any credit rating criteria for the fixed income securities in which it may invest, and it may invest entirely in high yield securities (junk bonds). Junk bonds are debt securities that are rated below investment grade by nationally recognized statistical rating organizations (NRSROs), or are unrated securities that the Sub-Adviser believes are of comparable quality. The Sub-Adviser considers the credit ratings assigned by NRSROs as one of several factors in its independent credit analysis of issuers. The Fund may invest without limitation in U.S. dollar denominated securities of foreign issuers in developed markets. The Fund may invest up to 50% of its assets in securities denominated in foreign currencies and up to 50% of its assets in securities of issuers located in emerging markets. In certain circumstances, the Sub-Adviser may attempt to offset a portion
or all of the foreign currency exposure in these securities by entering into contracts with banks, brokers or dealers to purchase or sell securities or foreign currencies at a future date (forward contracts). The Fund may elect to enter into swap contracts that effectively bundle the purchase of foreign bonds and the hedging of foreign currency into a single transaction.The average maturity or duration of the Fund’s portfolio of fixed income securities will vary based on the Sub-Adviser’s assessment of economic and market conditions, as well as current and anticipated changes in interest rates; however, the Sub-Adviser intends to manage the Fund’s portfolio so that it has an average duration of between 2-10 years, under normal circumstances.
Duration measures the price sensitivity of a security to interest rate changes. The longer the duration, the more sensitive the Fund’s portfolio will be to a change in interest rates. A 1% change in interest rates is typically estimated to change the price of a fixed income security by 1% for each year of the security’s duration. For example, if a fixed income security has a duration of three years, a 1% rise in interest rates would typically be expected to reduce the price of the security by approximately 3%. Similar estimates would typically apply to a portfolio of fixed income securities, such as the Fund’s, based on the portfolio’s average duration. As the value of a security changes over time, so will its duration, which in turn will  affect the Fund’s duration.

 

Fund Top Holdings (06/14/16):

Name	Symbol	Weight
Weatherford International Ltd. Sr. Unsec.	947075AF	3.32%
Sprint Communications Inc.	852061AK	3.20%
T-Mobile USA Inc. Sr. Unsec.	87264AAG	3.12%
ArcelorMittal	03938LAX	3.11%
United States Steel Corp.	912909AK	3.09%
Clear Channel Worldwide Holdings Inc.	18451QAM	3.04%
Newfield Exploration Co. Sr. Unsec.	651290AP	3.01%
United Rentals NA	911365BE	3.00%
Iron Mountain Inc.	46284PAP	3.00%
NRG Energy Inc.	629377BZ	2.97%

 

 

Useful Links:
RFUN Home Page

 
2.
FUND INFORMATION:

Symbol: RFCI	Exchange: NYSE ARCA
Name: RiverFront Dynamic Core Income ETF	Net Expense Ratio: 0.51%

 

FUND OBJECTIVE:
The RiverFront Dynamic Core Income ETF is an actively managed fund which seeks total return, with an emphasis on income as the source of that total return. The Fund seeks to achieve its investment objective by investing in a global portfolio of fixed income securities of various maturities, ratings and currency denominations. The Fund utilizes various investment strategies in a broad array of fixed income sectors. The Fund allocates its investments based upon the analysis of RiverFront Investment Group, LLC (Sub-Adviser) of the pertinent economic and market conditions, as well as yield,
maturity, credit and currency considerations.

The Fund’s portfolio is constructed through a 2-step process. The first step is setting the strategic allocation among different fixed income asset classes, with the objective being to construct an allocation that is designed to balance the probability of upside returns with downside risks for investors with a five-year time horizon for their investments. The second step is tactically adjusting these allocations as market conditions warrant and determining security selection within those asset classes in order to maximize potential returns over time.
The strategic allocation across long-term, medium-term and short-term investment grade securities, long-term and short-term high yield securities and emerging market debt is adjusted at least annually or as market conditions warrant and is determined by a quantitative methodology. This methodology models historical returns as a function of initial valuation conditions and creates estimates of potential returns and downside risks consistent with historical market behavior. The capital market assumptions produced by this methodology are then incorporated into a proprietary Mean Reversion Optimization (MRO) process to produce the model weighting for each of the major fixed income asset classes.The Fund may purchase fixed income securities issued by U.S. or foreign corporations or financial institutions, including debt securities of all types and maturities, convertible securities and preferred stocks. The Fund also may purchase securities issued or guaranteed by the U.S. Government or foreign governments (including foreign states, provinces and municipalities) or their agencies and instrumentalities (government entities) or issued or guaranteed by international organizations designated or supported by multiple government entities to promote economic reconstruction or development (supranational entities). The Fund may invest in mortgage-backed securities (MBS) issued or guaranteed by federal agencies and/or U.S. government sponsored instrumentalities, such as the Government National Mortgage Administration (Ginnie Mae), the Federal Housing Administration (FHA), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). The Fund may invest up to 20% of its total assets in MBS (which may include commercial MBS (CMBS)) or asset-backed securities (ABS) issued or guaranteed by private entities. The MBS in which the Fund may invest may also include collateralized mortgage obligations (CMOs). The Fund may purchase or sell securities on a when issued, delayed delivery or forward commitment basis. The Fund may also invest in other ETFs and/or closed-end funds which invest in fixed income securities.

The Fund has established a credit rating criteria for the fixed income securities in which it may invest, and it may invest up to 15% in high yield securities (junk bonds). Junk bonds are debt securities that are rated below investment grade by nationally recognized statistical rating organizations (NRSROs), or are unrated securities that the Sub-Adviser believes are of comparable quality. The Sub-Adviser considers the credit ratings assigned by NRSROs as one of several factors in its independent credit analysis of issuers. The Fund may invest without limitation in U.S. dollar-denominated securities of foreign issuers in developed markets. The Fund may invest up to 10% of its assets in securities denominated in foreign currencies and up to 10% of its assets in securities of issuers located in emerging markets. In certain circumstances, the Sub-Adviser may attempt to offset a portion or all of the foreign currency exposure in these securities by entering into contracts with banks, brokers or dealers to purchase or sell securities or
foreign currencies at a future date (forward contracts). The Fund may elect to enter into swap contracts that effectively bundle the purchase of foreign bonds and the hedging of foreign currency into a single transaction.The average maturity or duration of the Fund’s portfolio of fixed income securities will vary based on the Sub-Adviser’s assessment of economic and market conditions, as well as current and anticipated changes in interest rates; however, the Sub-Adviser intends to manage the Fund’s portfolio so that it has an average duration of between two and eight years, under normal circumstances.
Duration measures the price sensitivity of a security to interest rate changes. The longer the duration, the more sensitive the Fund’s portfolio will be to a change in interest rates. A 1% change in interest rates is typically estimated to change the price of a fixed income security by 1% for each year of the security’s duration. For example, if a fixed income security has a duration of three years, a 1% rise in interest rates would typically be expected to reduce the price of the security by approximately 3%. Similar estimates would typically apply to a portfolio of fixed income securities, such as the Fund’s, based on the portfolio’s average duration. As the value of a security changes over time, so will its duration, which in turn will affect the Fund’s duration.

 

Fund Top Holdings (06/14/16):

Name	Symbol	Weight
Petroleos Mexicanos	71654QAU	4.44%
Verizon Communications Inc.	92343VBQ	4.41%
PepsiCo Inc.	713448CM	4.41%
Charter Communications Operating LLC	161175AR	4.18%
The Home Depot Inc.	437076BG	4.17%
Enterprise Products	29379VAZ	4.13%
Ford Motor Credit Co. LLC	345397XW	4.12%
CIT Group Inc.	125581GL	4.12%
GE Capital International Funding Co. Unlimited Co	36164NFF	4.11%
Anheuser-Busch InBev Finance Inc.	035242AJ	4.10%

 
Useful Links:
RFCI Home Page