Why ClearShares OPER ETF?
Since the “Great Recession” of 2008, short-term fixed income and cash like funds have for years provided a nominal return – close to zero percent. Banks have been notorious for paying low rates of interest on savings and time deposit accounts. Even though the U.S. Federal Reserve has raised short term interest rates by 1.25% since December 2015, and could raise rates by another 1.25% over the next two years, banks are still paying as low as 0.1% to 0.5% on client cash accounts.
The OPER ETF seeks to fill the return void and provide an alternative to low yielding money market and non-yielding cash positions through short-term fixed income securities. These high-grade securities adjust the interest they pay accordingly as the U.S. Federal Reserve changes market interest rates. As such, OPER ETF investors could benefit from a rise in return as rates increase, and will not be left behind as witnessed from the low returns paid on savings and time deposit accounts.
- The OPER ETF portfolio consists high-quality fixed income collateral securities such as U.S. Treasuries, U.S. Government Agency and Mortgage Backed securities.
- The level of return on the OPER ETF will track prevailing short term rates. As interest rates rise so could the return paid on OPER.
- The OPER ETF is daily priced, daily liquid and is traded on the New York Stock Exchange.
- The ETF is suitable for all investors seeking a higher return on their cash assets, particularly high-net-worth, small to mid-sized corporations and institutions.
- Investors can purchase the OPER ETF with a $100 investment.
What is a Repo
Repurchase agreements (repos) are short-term investments widely used by, banks, securities firms, insurance companies and hedge funds. They utilize this vehicle for its liquidity and safety. A repo is the sale of a security with a simultaneous commitment by the seller to repurchase the security from the buyer at a future date and at a predetermined price. This transaction allows one party (the seller) to obtain financing from another party.
A repo is backed by collateral, protecting the buyer against the possible risk that the seller is unable to repurchase the security as promised. A repo transaction may also be thought of as a collateralized loan to the seller of the repo. Repurchase agreements are strictly short-term investments and their maturity period is called the “rate,” the “term” or the tenor.
What is it?
The tri-party repo is the most common type of repo making up over 90% of the repo market. In this type of arrangement, the clearing agent or bank, conducts the transactions between buyer and seller protecting the interest of each, handling all settlement and operational issues.
Tri-party repos are popular because of their operational efficiency. When the buyer (lender of cash) and a broker/dealer (seller of collateral or borrower of cash) execute a transaction, the collateral and loan flows through one custodial bank. With the OPER Fund, The Bank of New York, that specializes in these types of transactions, will provide clearing services, be responsible for trade settlement, collateral pricing, and help facilitate collateral substitution.
Most of the tri-party repo market is transacted with an overnight maturity – the collateral is sold back to the broker/dealer the next business day, qualifying as an overnight investment in portfolios.
The Tri-Party Repo Process
Past performance is not indicative of future results. References to efforts to mitigate or “control” risk reflect an effort to address risk, but do not mean that the portfolio risk can be completely controlled. All investment has risk, including the risk of loss of principal.
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. The Fund invests in fixed income securities, that involves certain risks including call risk, credit risk, event risk, extension risk, interest rate risk & prepayment risk. Repurchase agreements may be construed to be collateralized loans by the Fund, and if so, the underlying securities relating to the repurchase agreement will only constitute collateral for the seller’s obligation to pay the repurchase price. If the seller defaults on its obligation under the agreement, the Fund may suffer delays and incur costs or lose money in exercising its rights under the agreement. A seller failing to repurchase the security coupled with a decline in the market value of the security may result in the Fund losing money. The Fund may invest in repurchase agreements that are deemed illiquid due to having a term of more than seven days. Please refer to the prospectus for additional risks of investing in the fund.
Before investing you should carefully consider the Fund's investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by clicking here. Please read the prospectus carefully before you invest.
ClearShares LLC is the investment advisor to ClearShares OPER ETF. The ClearShares ETFs are distributed by Quasar Distributors, LLC.
Investment Company Risk. The risks of investing in investment companies, such as the Underlying Funds, typically reflect the risks of the types of instruments in which the investment companies invest. By investing in another investment company, the Fund becomes a shareholder of that investment company and bears its proportionate share of the fees and expenses of the other investment company. The Fund may be subject to statutory limits with respect to the amount it can invest in other ETFs, which may adversely affect the Fund’s ability to achieve its investment objective. Investments in ETFs are also subject to the following risks: (i) the market price of an ETF’s shares may trade above or below their net asset value (“NAV”); (ii) an active trading market for an ETF’s shares may not develop or be maintained; and (iii) trading of an ETF’s shares may be halted for a number of reasons.
Management Risk. The Fund is actively-managed and may not meet its investment objective based on the Adviser’s success or failure to implement investment strategies for the Fund.
New Fund Risk. The Fund is a recently organized, diversified management investment company with no operating history. As a result, prospective investors have no track record or history on which to base their investment decision. Additionally, the Adviser has not previously managed a registered investment company, which may increase the risks associated with investments in the Fund.