| Investment Objective: |
The ETF seeks to hedge interest rate movements arising from falling long-term interest rates, and to benefit from market stress when fixed income volatility increases, while providing the potential for income. The fund primarily holds a position in long-term expiry (5-year to 7-year) over-the-counter (OTC) interest rate options intended to provide a direct, transparent, and convex exposure to downward moves in interest rates. Using OTC derivatives, RFIX is designed to be functionally similar to owning a position in long-dated call options on US Treasury bonds. The adviser seeks to achieve the interest rate hedging aspect of the Fund's investment objective by investing long in swaptions, interest rate options, and Treasury futures. These instruments have positive price sensitivity to falling interest rates. The derivatives are selected to protect against falling long-term interest rates on high-quality instruments such as U.S. government securities and high quality corporate debt. To select a derivative that it believes will produce the most effective hedge against falling interest rates, the adviser assesses the interaction of maturity, strike price, reference interest rate, the risk-free rate, and volatility on the price of swaptions and interest rate options. |
