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Target income series
- 1. 623 Fifth Avenue,15th Floor Ÿ New York Ÿ NY 10022 torosoinv.com 1 Toroso Investments, LLC About Toroso Investments Toroso is an SEC registered investment advisory firm whose investment philosophy is focused on a simple diversified asset allocation approach which strives for consistent performance while accommodating the client’s economic point of view, risk tolerance and investment time horizon. Clients include Private Wealth Management, Corporate, Endowment, and Retirement accounts. With over 80 years of combined investment- related experience, Toroso’s management team is focused on developing investment portfolios that allow clients to express their economic point of view and prosper accordingly. The Toroso Target Income Series uses exchange-traded products (ETPs) to create three distinct fixed income portfolios intended to behave more like traditional bonds. The goal is to target a specific yield while returning principal at a target date. While it is impossible to guarantee the receipt of income or the return of principal, the proliferation of ETPs has created the opportunity to build synthetic bond portfolios that simulate traditional bond characteristics, but reduce risk through greater diversification. Target Income Series 3 Portfolios 3% - 5 years • Strives for a consistent annual yield of 3% • Anticipates a return of principal in 5 years • Minimize fluctuations of a volatile bond market 5% - 10 years • Strives for a consistent annual yield of 5% • Anticipates a return of principal in 10 years • Balances yield and safety components 7% - 15 years • Strives for a consistent annual yield of 7% • Anticipates a return of principal in 15 years • Longer term allows for recovery from higher volatility The Problem Bond investor focus has shifted to total return from traditional fixed income characteristics of yield and return of principal. This change in focus has resulted in: • Investors moving in and out of fixed income securities more quickly, thereby creating volatility • Arbitrary premiums or discounts created by over buying and over selling of fixed income securities. • Increased correlations • Chasing of returns • Increased concentration The Theory Using ETPs, bring back into focus traditional components of fixed income securities: • A stable flow of income • Return of principal at maturity date While it is impossible to guarantee income or principal, the proliferation of fixed income ETPs and high yielding fixed income surrogates has created the opportunity to build portfolios for this purpose. Volatility Expected Return Total Return? Short-term Treasuries High Yield Corporates Intermediate Bonds
- 2. 623 Fifth Avenue,15th Floor Ÿ New York Ÿ NY 10022 torosoinv.com 2 Toroso Investments, LLC Selection screens for 2 components Same characteristics, reverse order of importance Striving for additional yield by avoiding premiums and capturing discounts. Institutional Caused by large institutions trading in specific bonds or strategies Holdings Happens when securities within the ETP trade above or below par value NAV When the price of the ETP is greater or less than the value of the underlying securities Disclosure The Toroso Target Income Series of Portfolios are subject to underlying expenses such as the annual expense ratios of the ETPs used to construct the portfolios, which generally include an embedded investment management fee paid to the investment adviser of the ETP. In addition, trading and transaction fees and other expenses such as custody and clearing are incurred in the management of these strategic multi-asset allocation portfolios. The market price for a share of an ETP may fluctuate from the value of its underlying securities. Consequently, ETPs can trade at a discount or premium to their net asset value. Certain equity and commodity ETPs are often more volatile and less liquid and present greater risks of loss of capital. Furthermore, certain ETPs employ strategies such as leverage or have the investment goal of performing opposite to a particular benchmark and may not be suitable for investment periods longer than one day due to the high volatility in their market price. Investments in fixed income ETPs are subject to the risks associated with debt securities including credit risk and interest rate risk. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS, WHICH MAY VARY. The investment process and strategies described above reflect Toroso Investments LLC's ongoing efforts to monitor and manage various risks in its clients’ portfolios, but does not imply, and no representation is made, that client portfolios are low risk. The investment strategies presented and/or discussed may not be suitable for all types of prospective investors or clients and Toroso Investments, LLC’s investment advisory services may not be available in all states or countries. All investing involves risk, including the possible loss of all principal invested. The information and statements presented above should not be construed as investment advice and should not be relied upon solely as the basis for evaluating the investment strategies presented or Toroso Investments LLC’s advisory services. Prospective clients should perform an independent review of all facts and information prior to making a determination as to whether Toroso Investments LLC’s advisory services are appropriate for them based on their individual circumstances. Registration with the SEC does not imply a certain level of skill or training. Key Advantages • Yield Focused è Allows the investor to keep focused on the income need and ignore the market volatility • Correlation Agnostic è Keeping an appropriate allocation in cash equivalents allows the portfolio to “buy low and sell high” during its rebalancing. • Quicker Recovery è When market turbulence strikes, the portfolio can recover more quickly due to some allocation to “cash equivalent” securities. • Fundamental Security Selection è Getting under the hood of ETP construction to avoid concentrated and uncompensated risks.