SMIG
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How It Works
How It Works
Assuming an initial investment of $100,000, an investor purchases five bonds with staggered maturities extending out every two years. The laddered bond portfolio has a combined average annual yield of 3.42% and an average duration of 6 years.
2-Year
4-Year
6-Year
8-Year
10-Year
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
2.05
%
%
2.65
%
3.60
%
4.15
4.65
%
Assuming an initial investment of $100,000, an investor purchases five bonds with staggered maturities extending out every two years. The laddered bond portfolio has a combined average annual yield of 3.42% and an average duration of 6 years.
At the end of year two, the shortest bond matures and the four remaining bond investments are now two years closer to their maturity date. Proceeds from the maturing bond are reinvested back into the 10-year bond. The combined average annual yield of the new laddered bond portfolio is 4.05% and the average duration would remain at 6 years.
Original Ladder
2-Year
4-Year
6-Year
8-Year
10-Year
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
2.05
%
%
2.65
%
3.60
%
4.15
4.65
%
BOND A
$20,000
BOND B
$20,000
BOND C
$20,000
BOND D
$20,000
BOND E
$20,000
ladder two years later
BOND
MATURED
2-Year
4-Year
6-Year
8-Year
10-Year
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
6.00%
0.00
%
2.65
%
3.60
%
4.15
%
4.65
%
5.20
%
BOND A
$20,000
BOND B
$20,000
BOND C
$20,000
BOND D
$20,000
BOND E
$20,000
ladder two years later
BOND
MATURED
2-Year
4-Year
6-Year
8-Year
10-Year
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
6.00%
0.00
%
2.65
%
3.60
%
4.15
%
4.65
%
5.20
%
BOND A
$20,000
BOND B
$20,000
BOND C
$20,000
BOND D
$20,000
BOND E
$20,000
Ladder Two Years Later >>
<< ORIGINAL LADDER
This hypothetical example is for illustrative purposes only and does not represent the performance of any specific investment. Bond income is not guaranteed and may be subject to call risk as well as default risk, which increases with lower-rated bond securities.
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The investment objectives, risks, charges and expenses must be considered carefully before investing. Each fund’s statutory and summary prospectuses contains this and other important information about the investment company, and may be obtained by calling 800.617.0004 or visiting www.aamlive.com. Read it carefully before investing.
Risks: Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV) and may trade at a discount or premium to NAV. Shares are not individually redeemable from the Fund and may be only be acquired or redeemed from the fund in creation units. Brokerage commissions will reduce returns.
There are no guarantees that a company will pay or continually increase its dividends. The Fund invests in small- and mid-capitalization companies which may be more vulnerable to adverse issuer, market, political, or economic developments than securities of large-capitalization companies. Smaller-capitalization companies generally trade in lower volumes and are subject to greater and more unpredictable price changes.
ADRs (American Depository Receipts) involve risks similar to those associated with investments in foreign securities, such as changes in political or economic conditions of other countries and changes in the exchange rates of foreign currencies. Investments in REITs (Real Estate Investment Trusts) involve unique risks. REITs may be affected by changes in the value of their underlying properties or economic factors affecting the real estate industry. REITs may have limited financial resources, may trade less frequently and in limited volume, and may be more volatile than other securities.
Definitions: Russell 2500® Index measures the performance of the small to mid-cap segment of the U.S. equity universe. It includes approximately 2500 of the smallest securities based on a combination of market cap and current index membership. The Russell 2500® Index is constructed to provide a comprehensive and unbiased barometer for the small to mid-cap segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small to mid-cap opportunity set. The 30-day SEC dividend yield is based on the most recent 30-day period covered by the fund’s filings with the SEC. Standard deviation is a statistical measurement that sheds light on historical volatility by measuring the dispersion of a set of data from its mean. The higher the standard deviation, the higher the deviation within the data set. Standard deviation is calculated as the square root of variance by determining the variation between each data point relative to the mean. Sharpe Ratio is a measure for calculating risk-adjusted returns. The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. The higher the Sharpe ratio, the better the risk-adjusted performance has been. Beta is a measure of the volatility, or systematic risk, of the portfolio in comparison to the benchmark. Annual Alpha refers to excess returns earned on an investment above the benchmark return over a one-year period.
Not FDIC Insured • No Bank Guarantee • May Lose Value
Chart/Graph Disclosure: The charts/graphs included in this publication do not reflect past or current recommendations made by AAM, “they” should be considered an academic treatment of empirical data and should not be used to predict security prices or market levels. Any suggestion of cause and effect or of the predictability of economic cycles or investment cycles is unintentional. Best of 2021 was created using empirical research and analysis by highly experienced market observers and is designed for educational purposes only. This publication should only be considered as a tool in any financial professional’s investment decision matrix. Investors should consult their financial professional when applying the assumptions of these charts/graphs.
Not FDIC Insured. Not Bank Guaranteed. May Lose Value.
AAM Bahl & Gaynor Small/Mid Cap Income Growth ETF
(NYSE: SMIG)
And let us not forget that Harry and Meghan stepped down from the royal family all the way back in January.
From an investor’s standpoint, the US equity market experienced its steepest decline with the Dow Jones Industrial Average (DJIA) dropping 37.1% from its peak on February 12 to its trough on March 23, 2020, a total of 27 trading days. By mid-November, sentiment had transitioned to focus on the vaccine, a rebound in unemployment (despite remaining higher than pre-COVID) as well as the benefits of the considerable economic stimulus and quantitative easing. The DJIA more than recovered its losses, closing the year over 30,000, a new all-time high. While this was the fastest rebound by the DJIA in over 30 years, the S&P 500 and Nasdaq Indexes recovered their losses even more quickly, hitting new highs in August and June, respectively.
See More
The Small/Mid Cap Dividend Opportunity
Active Management Wrapped in an ETF
With 31 years of dividend investing experience, coupled with a repeatable investment process that emphasizes identifying high-quality businesses, Bahl & Gaynor seeks to add value to SMIG by actively managing the fund’s income potential, and its exposure to underlying business risks.
This active management approach supports SMIG’s core objectives of seeking Income Growth, Downside Protection, and Price Appreciation.
Highlights of the Fund's Investment Approach
1/3
5/6
Sub-advised by Insight Investment, a global specialist asset manager with deep experience and resources in fixed income management
6
%
6/6
May work as a standalone investment or as a complement to other active and passive fixed income strategies
What do we see that may finally drive inflation higher?
Key Features of PFLD:
• Potential investments are identified through a proprietary bottom-up fundamental analysis.
• Seeks companies that have intrinsic business quality.
1.
• Identifies companies with clear competitive advantages and reasonable valuations.
• Pursues firms that have exhibited higher than average consistent earnings and dividend growth.
2.
2/3
• Historically, dividend-payers have outperformed non-dividend-payers.
• Dividends represent a fundamental variable that cannot be manipulated by management or the market.
• Dividend increases send a signal of a company’s underlying financial strength.
3.
3/3
Potential increases to input prices would drive cost push inflation.
4.
4/4
Additional Features of PFLD
We expect uneven economic growth to continue, global Central Banks to maintain their accommodative stances, corporate earnings to recover and an increase in overall consumption, however risks remain.
Record liquidity can be seen in frothy equity pricing. The higher level of optimism may begin to cannibalize future growth at some point. To offset this, we tend to see higher levels of merger and acquisition (M&A) activity that may be cynically masking lower growth metrics. For those that suffer this blessing, massive stock buy backs will likely be needed to help boost the growth needed to support fundamental metrics.
MINIMIZED
CALL RISK
Preferred and hybrid securities often have call features which allow the issuing company to redeem shares on-demand before they mature for a price specified in the prospectus. Unfortunately, callable securities are often redeemed by their issuing companies after interest rates are reduced because it is in the best interest of the issuers to lower their interest costs. PFLD attempts to minimize this risk by excluding securities which are priced more than 105% of face value, as we believe these securities are more likely
to be called.
REDUCED INTEREST RATE RISK
PFLD targets preferred securities with an option-adjusted duration less than five years in an effort to reduce interest rate risk.
COMPLEMENT TO TRADITIONAL INCOME-FOCUSED EQUITY & FIXED INCOME STRATEGIES
Different sector exposure, particularly versus US High Yield. PFLD has exposure to both investment grade and high yield securities.
Interested in Finding Out More?
PFLD seeks to help investors satisfy their current cash flow needs while potentially minimizing the risk of changes in interest rates. Talk to a financial professional or visit www.aamlive.com/ETF to learn more.
Seeks to:
Generate meaningful current income that grows at an attractive rate over time
Increase portfolio diversification
Provide favorable risk characteristics and downside protection relative to its benchmark
Provide strong total and risk-adjusted returns over a full market cycle
FACT CARD
FACT CARD
SMIG
sPOTLIGHT
AAM has teamed up with Bahl & Gaynor to bring you AAM Bahl & Gaynor Small/Mid Cap Income Growth ETF (NYSE: SMIG). Bahl & Gaynor believes small/mid cap equity benefits are best unlocked through fundamental, security-specific analysis. The team follows an active, accountable, and in-depth approach in the management of the SMIG ETF strategy.
Small/mid cap equities, particularly those that pay dividends, represent a compelling slice of the equity market that have proven to generate robust risk-adjusted returns. In fact, since 1927 small/mid cap dividend stocks produced more favorable risk and return
characteristics than those of solely small cap stocks, as well as the broader equity market.
1. Data from 6/30/1927 – 12/31/2022. Source: Ken French’s Website http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/index.html.
Past performance does not guarantee future results.
Total Equity Market Index is representative of US public equity securities listed on the NYSE, AMEX or NASDAQ exchange; Small Stocks is representative of US public equity securities with a market capitalization in the bottom 30% (excluding REITs) of the NYSE and includes all NYSE, AMEX, and NASDAQ stock that fit the market cap criteria; Small Cap Mid-Dividend Yield is representative of companies with a dividend yield in the middle 40% of dividend payers with a market capitalization in the bottom 50% of the NYSE (excluding REITs) and includes all NYSE, AMEX, and NASDAQ stocks that meet these criterion, all three indexes are reconstituted annually in June. Monthly returns are calculated on a value-weighted basis. The reinvestment of dividends, interest, capital gains
and withholding taxes are all built into the hypothetical analysis. Information sourced from third party. For Illustration purposes only.
QUALITY
STABILITY & CONSISTENCY
DIVIDENDS
1st
This Active Management Approach Supports SMIG's Core Objectives:
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By remaining committed to its core objectives, SMIG strikes a balance between income growth and price appreciation to potentially achieve outperformance over full market cycles compared to small cap stocks and the total equity market.
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SMIG seeks to preserve capital relative to the broader small/mid cap market by means of active risk management. As a result, downside protection has grown stronger as daily market returns become more negative. This typically results in a lower standard deviation relative to the market indicating fewer and less severe losses in volatile times.
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Through Bahl & Gaynor’s persistent hunt for companies that generate, grow and govern their cash flow, SMIG has been able to produce meaningful income above its benchmark index, the Russell 2500®. In addition to capturing current income, SMIG seeks to offer exposure to companies that provide a growing stream of income, with a current average dividend increase* of 11.7% from its portfolio companies.
Income
Growth
Downside Protection
Price
Appreciation
Tab 04
SMIG
2.08%
Yield:
SMIG 30-Day SEC Yield
v. Russell 2500
As of 12/31/2023
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. 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 quoted. For the most recent month end performance please visit the funds website at www.aamlive.com. Please view the SMIG fact card for standardized performance when available. Short-term performance is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns.
Russell
2500
1.53%
*Source: Ken French’s Website — http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/index.html ; Total Equity Market Index is representative of US public equity securities listed on the NYSE, AMEX or NASDAQ exchange; Small Stocks is representative of US public equity securities with a market capitalization in the bottom 30% (excluding REITs) of the NYSE and includes all NYSE, AMEX, and NASDAQ stock that fit the market cap criteria; Small Cap Mid-Dividend Yield is representative of companies with a dividend yield in the middle 40% of dividend payers with a market capitalization in the bottom 50% of the NYSE (excluding REITs) and includes all NYSE, AMEX, and NASDAQ stocks that meet these criterion, all three indexes are reconstituted annually in June. Monthly returns are calculated on a value-weighted basis. Information sourced from third party. Hypothetical growth of $10,000 assumes reinvestment of dividends and capital gains. Returns are annualized for any period longer than one year. Past performance does not guarantee future results. All results are hypothetical, and the results are not based on the performance of an actual portfolio and the interpretation of the results should take into consideration of the limitation inherent in the results of the model. The results exclude any advisory fees, trading cost or other fees or charges. The reinvestment of dividends, interest, capital gains and withholding taxes are all built into the hypothetical analysis. Hypothetical returns may be dependent on the market and economic conditions that existed during the period. Future market or economic conditions can adversely affect the performance of the hypothetical analysis. The index and other amounts shown above do not relate to the Bahl & Gaynor smig® strategy and are for illustrative purposes only.
Resources
Resources
Fact Card
Fact Card
Presentation
Power of Dividend Growth
Presentation
The Power of
Fixed Income Diversification
High Yield in Rising Rate Environments
Spotlight on SMIG
Hypothetical Growth of $100 Investment (6/30/1927–12/31/2022)*
*Dividend increase is quarterly, as of 12/31/2023, and based on declaration date and is gross of fees.
There are no guarantees that a company will pay or continually increase its dividends.
SMIG sPOTLIGHT
FACT CARD
Client Deck