RiverNorth Patriot ETF (BATS: FLDZ) reported a net total return on market price of +16.01% for the year versus +24.37% for the S&P 900 Index during the same period. Historical performance is below:
3 Month | 6 Month | 1 Year | Since Inception | |
RiverNorth Patriot ETF (Market Price) | -0.27% | 9.21% | 16.01% | 4.66% |
RiverNorth Patriot ETF (NAV) | -0.21% | 9.18% | 16.04% | 4.68% |
S&P 900 Index Total Return | 2.29% | 8.37% | 24.37% | 8.71% |
Performance data quoted represents past performance, which is not a guarantee of future results. Current performance may be lower or higher than the performance quoted. The principal value and investment return of an investment will fluctuate so that your shares may be worth more or less than their original cost. You can obtain performance data current to the most recent month end by calling 877.774.8783 or clicking here. Total return measures net investment income and capital gain or loss from portfolio investments. All performance shown assumes reinvestment of dividends and capital gains distributions.
RiverNorth Capital Management’s Chief Executive and Chief Investment Officer, Patrick Galley, was first introduced to the Folds of Honor upon visiting its headquarters at the Patriot Golf Club near Tulsa, Oklahoma. At the Club, Taps is played each day at 1300 hours followed by 13 chimes of the bell, all in deference to the 13 folds of Old Glory. At this emotional moment, ALL activity stops to give honor to our fallen heroes. Experiencing first-hand the dedication and clarity of vision that the leadership team at Folds of Honor has for its mission and hearing of their vow to leave no family behind, Patrick was deeply moved. His response to their call to action was the creation of the RiverNorth Patriot ETF, a first of its kind, non-profit impact ETF.
We are proud to announce that in 2024, and for the 3rd consecutive year, we gave more than 100% of our sub-advisory fee to the Folds of Honor, a 501(c)(3) charitable organization that provides educational scholarships to the families of military service men and women and first responders killed or disabled while serving and defending our great nation. Rated 4/4 by Charity Navigator, the Folds of Honor has awarded over 52,000 educational scholarships since its founding in 2007 – That equates to nearly $250 million in educational impact!
During RiverNorth Patriot ETF’s third year in operation, the strategy performed well, returning +16.01% on market price, net of fees. Despite earning a mid-double-digit return while avoiding many of the frothier names in the market, FLDZ fell short of its benchmark, the S&P 900 Index, which returned +24.37%. It is important to note the stark differences in composition of the Fund versus the benchmark in order to dissect the divergence in performance between the two.
Harkening back to our previous annual shareholder letters, there are some unique portfolio characteristics that are the result of FLDZ’s active approach and overarching mission. In order to offer true all-American exposure to its investors, FLDZ focuses on the subset of domestically listed companies that are domiciled in the United States, generate at least 90% of their revenues here and have a market capitalization of at least $5 billion. Due to this mandate, FLDZ ended the year with an estimated 99.5% look-through revenue exposure to the United States while we estimate the benchmark only had about 59.7%. This equates to an active exposure of +39.8%.
To add, many of the largest constituents in the S&P 900 index are multinational technology companies. This not only contributes to the relatively low observed U.S. revenue exposure delivered by the Index but also drives relative sector differences between FLDZ and the Index. The most notable example of this is that FLDZ ended the year with only 1.9% Technology sector exposure while we estimate the S&P 900 had 37.6% — an active weight of -35.7%. This is highlighted in the exhibit below, where we show the top 10 constituents of the benchmark and their associated U.S. revenue exposure levels at year end:
S&P 900 Index Top 10 Constituents
Ticker | Name | % Revenue from USA |
AAPL | Apple Inc. | 36.4% |
NVDA | Nvidia Corp | 44.3% |
MSFT | Microsoft Corp | 50.9% |
AMZN | Amazon.com Inc | 68.8% |
META | Meta Platforms, Class A | 36.9% |
TSLA | Tesla, Inc | 46.7% |
GOOGL | Alphabet Inc A | 47.6% |
AVGO | Broadcom Inc | 25.0% |
GOOG | Alphabet Inc C | 47.6% |
BRK.B | Berkshire Hathaway B | 83.4% |
In sum, we can arrive at the conclusion that the portfolio trailed its benchmark in 2024 likely due to the outperformance of large-to-mega cap technology companies that do not meet criteria for inclusion in FLDZ. This result is to be generally expected in periods when the technology sector outperforms the broader market, which has been the case across much or all of the post-COVID regime.
Within the portfolio itself, notable contributors to performance include the Finance, Utilities, Energy and Consumer Cyclicals sectors, which we estimate added about 2-4% each. None of the sectors in the analysis appear to have detracted materially from absolute performance although the Healthcare and Consumer Non-Cyclicals sectors struggled a bit this year, posting slightly negative but close-to-zero numbers at the fund level.
We continue to view this strategy as a diversifier to traditional equity market beta and believe it can serve an important role in one’s portfolio. In the next exhibit, we will further examine some of FLDZ’s characteristics that are the result of its mandate yet act as value-additive properties in the context of a broader equity allocation.
Characteristics | FLDZ | S&P 900 |
Number of securities | 344 | 904 |
Weighted average market cap ($M) | 27,740 | 1,040,157 |
Median market cap ($M) | 12,002 | 15,064 |
30-day SEC yield | 1.3% | — |
Weighted average dividend yield | 2.0% | 1.3% |
Price/earnings | 18.8% | 27.4% |
Estimated 3–5-year EPS growth | 11.0% | 14.0% |
Price/cash flow | 10.3% | 17.8% |
Price/book | 2.4% | 4.7% |
Price/sales | 1.5% | 3.0% |
ROE (Return on Equity) | 15.3% | 28.3% |
Source: RiverNorth, FactSet Figures are estimates and are subject to change. Please see definitions on the next page. |
In comparing the figures in the above table, you might notice the Fund’s higher dividend yield, lower price-to-book, and lower price-to-earnings ratios versus the benchmark. We view these differences as indicators of the Fund’s slight tilt to what are traditionally known as value stocks. As mentioned in previous editions of this letter, we believe the portfolio’s incremental tilt toward the value factor will likely reduce risk to the portfolio should a U.S. recession occur. In theory, this provides investors with a potential avenue for loss mitigation within their equity portfolios in the event of a downturn.
Furthering the notion that the portfolio is somewhat defensive, it maintains an equal-weight tilt in its allocation. In practice, this means that we weight all stocks within a given sector the same – unlike the Index. We believe that this provides investors with an additional layer of protection by diversifying away the idiosyncratic risks associated with concentrating exposure to any one company.
Looking back on 2024, we saw inflation pressures continue to subside, interest rates fall from their peak as the Fed began its cutting cycle, and equity markets reach new all-time highs as crypto and meme manias returned to prominence as the hottest topics among retail investors. While many of the concerns about the trajectory of the U.S. economy and global stability were put to the wayside this year, there were some notable bouts of volatility that reignited fear in investors and reminded us of what might be bubbling below the surface. In the end, those fears were overcome with euphoria as markets ultimately charged higher.
While we are not prognosticators of the future and we don’t know what lies ahead for our beloved country, we are optimistic that 2025 will be another strong year for our mission to fund scholarships and generate positive returns for our shareholders. RiverNorth and the Folds of Honor Foundation continue to appreciate your investment in our effort to give back to those that have given us everything. We encourage you to share the message of hope and opportunity that the Folds of Honor organization has brought to us and wish you a wonderful year ahead.
Definitions
S&P 900 Index: S&P U.S. indices are designed to reflect the U.S. equity markets and, through the markets, the U.S. economy. The S&P 900 combines the S&P 500 and the S&P MidCap 400 to form a benchmark for the mid- to large-cap segment of the U.S. equity market. It is not possible to invest directly in an index.
30 day SEC yield: A calculation based on a 30-day period ending on the last of the month. It is computed by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period.
Weighted average dividend yield: Weighted average of all portfolio constituent dividend yield ratios based on each constituent’s weight in the portfolio.
- Dividend Yield = Divi/Pi
- Divi := Annual dividends per share (DPS) for security i as of the report date
- Pi := Closing price of security i as of the report date
Price/earnings: Weighted average of all portfolio constituent price to earnings ratios based on each constituent’s weight in the portfolio.
- Price to Earnings = Pi/EPSi
- Pi := Price for security i as of the report date
- EPSi := Last 12 months EPS of security i as of the report date
Estimated 3–5-year EPS growth: Weighted average of all portfolio constituent estimated 3–5-year EPS growth rates based on each constituent’s weight in the portfolio. FactSet, First Call, I/B/E/S Consensus, and Reuters provide FactSet with a pre-calculated mean long-term EPS growth rate estimate, which is calculated using each individual broker’s methodology.
Price/cash flow: Weighted average of all portfolio constituent price to cash flow ratios based on each constituent’s weight in the portfolio.
- Price to Cash Flow = Pi/CFi
- Pi := Price for security i as of the report date
- CFi := Cash flow per share of security i as of the report date
Price/book: Weighted average of all portfolio constituent price to book ratios based on each constituent’s weight in the portfolio.
- Price to Book Value = Pi/BVi
- Pi := Price for security i as of the report date
- BVi := Book value per share of security i as of the report date
Price/sales: Weighted average of all portfolio constituent price to sales ratios based on each constituent’s weight in the portfolio.
- Price to Sales = Pi/Salesi
- Pi := Price for security i as of the report date
- Salesi := Sales per share for security i as of the report date
ROE (Return on Equity): Weighted average of all portfolio constituent return on equity figures based on each constituent’s weight in the portfolio.
- Return on Equity (ROE) = NIi/TEi
- NIi := Net income of security i as of the report date
- TEi := Total equity of security i as of the report date
Before investing you should carefully consider the Fund’s investment objectives, risks, charges, and expenses. This and other information is in the prospectus. This material must be preceded or accompanied by a prospectus. Please read the prospectus carefully before you invest. For a prospectus or summary prospectus with this and other information about the Fund, please call 877-774-TRUE or visit www.true-shares.com/fldz.
The Fund may not achieve its objective and/or you could lose money on your investment in the Fund. The Fund is recently organized with no operating history for prospective investors to base their investment decision which may increase risks. Some of the Fund’s key risks include but are not limited to the following risks. Please see the Fund’s prospectus for further information on these and other risk considerations.
ETF Risks. As an ETF, the Fund is exposed to the additional risks, including: (1) concentration risk associated with Authorized Participants, market makers, and liquidity providers; (2) costs risks associated with the frequent buying or selling of Fund shares; (3) market prices may differ than the Fund’s net asset value; and (4) liquidity risk due to a potential lack of trading volume.
The TrueShares RiverNorth Patriot ETF is also subject to the following risks: Equity Market Risk – securities held in the Fund’s portfolio may experience sudden, unpredictable drops in value or long periods of decline in value. Market Events Risk – markets have experienced significant periods of volatility in recent years due to a number of economic, political and global macro factors, including the impact of the coronavirus (COVID-19) pandemic and related public health issues, growing concerns and uncertainties regarding interest rates, trade tensions and the threat of tariffs resulting in volatility and negative impacts on asset prices, liquidity of certain securities and normal operations of the securities markets. New Fund Risk – The Fund is a recently organized investment company with no operating history. Other Potential Risks – The Fund may invest in “when-issued” securities; preferred stocks; rights/warrants; tracking stocks; investment company securities/pooled investments; REITs; and repurchase agreements.
An investment in True-Shares is subject to numerous risks, including possible loss of principal. The ETFs are subject to the following principal risks: Authorized Participants, Market Makers, and Liquidity Providers Concentration Risk associated with ETFs; Equity Market Risk; Management Risk; Market Capitalization Risk (Large Cap; Mid Cap, Small Cap Stock); Market Risk; New Fund Risk; and Cyber Security Risk.
The ETF is benchmark agnostic and corresponding portfolios may have significant non-correlation to any index. Foreside Fund Services LLC, distributor.
NOT FDIC INSURED — NO BANK GUARANTEE — MAY LOSE VALUE