Table of Contents

The Alger ETF Trust

 

The funds utilize the ActiveShares® methodology licensed from Precidian Investments, LLC (Precidian). Precidian's products and services are protected by domestic and international intellectual property protections, including, without limitation, the following issued patents and pending patent applications: 7813987, 8285624, 7925562, 13011746, 14528658, 14208966, 16196560.

Shareholders’ Letter (Unaudited)

June 30, 2022

Dear Shareholders,

 

Many Investors Shun Powerful Wealth Creator

 

In 1924, economist John Maynard Keynes wrote that companies that reinvest profits can create “an element of compound interest operating in favour of a sound industrial investment.” At Alger, we believe reinvesting profits and producing compounding earnings growth is a powerful wealth creator. To that end, we seek companies that we believe have strong potential for compounding earnings growth, and we seek to avoid cyclical companies, including “short-duration” companies, or businesses with high current earnings that return most of their profits to shareholders. In most instances, these companies, in our view, have little or no potential for future long-term earnings growth.

 

As Warren Buffett has observed, investors “occasionally do crazy things,” which can create opportunities for investors who “disregard mob fears or enthusiasms….and focus on a few simple fundamentals.” We believe recent concerns about interest rates, inflation and valuations have caused many investors to act irrationally by focusing on cyclical short- duration companies while shunning the “sound industrial investment” identified by Keynes. Some of these same investors are so focused on current cash flows or income that they may be overlooking the potential for companies that are gaining market share at very fast rates but have not yet scaled their businesses to exhibit strong profitability.

 

Setting the Stage for a Difficult Six-Month Period

 

The recent trend of investors rejecting the appeal of long-term earnings growth, in our view, played a major role in the disappointing performance during the fiscal six-month period ended June 30, 2022. The fiscal period included a dramatic rotation by many investors who appeared to have sought instant gratification by favoring companies with high current earnings. It is our view that this rotation was initially fueled by rising interest rates, causing investors to question whether equity valuations were too high, and has more recently been propelled by risk aversion and recession fears.

 

These concerns were supported by the following developments:

 

 

 

 

Interest Rates Initially Support Rotation Away from Quality

 

The rotation to short-duration companies was also partially supported by investors reacting to higher interest rates in a fairly typical fashion—they adjusted their cash flow modeling by increasing the rate at which they discount future cash flows back to the present, thereby lowering the value of long-duration companies. This process is similar to how long-term bonds are impacted by rising rates more than short-term bonds.

 

The Fed rate hikes, combined with growing concerns that economic growth may be weakening, eventually sparked a reversal in investors’ preference for value stocks, which started on May 24, 2022. From that date until June 30, 2022, the Russell 3000 Growth Index declined 3.44%, outperforming the 5.80% decline of the Russell 3000 Value Index. The strong relative performance of value stocks earlier in the year, however, resulted in the Russell 3000 Value Index’s -13.1% return substantially outperforming the -28.2% return of the Russell 3000 Growth Index.

 

Not Just Growth, But High-Quality Growth, Underperforms

 

Many small cap growth companies may exhibit little or no current earnings, while maintaining strong potential for significant sales and earnings growth. Within the Russell 2000 Growth Index, for example, we believe many Healthcare companies are high-quality businesses even though they may not be currently generating profits due to their investments in new initiatives, among other things. However, their products or potential products can have high gross margins and potential for capturing market share. We believe, as a result of investors dismissing the appeal of potential earnings growth, the Healthcare sector was one of the worst performing sectors within the small cap growth category. From a broader perspective, sectors that generally consist of companies that provide dividends and appear to be less susceptible to inflation, such as Energy and Consumer Staples, tended to outperform their benchmarks.

 

Irrational Behavior Creates Opportunity

 

As a result of investors’ rotation out of long duration companies, growth equities, we believe, are trading at attractive valuations. Notably, the Russell 2000 Growth Index price-to- earnings (P/E) ratio based on the consensus of 12-month earnings estimates from analysts at financial services firms and provided by FactSet declined from 31x to approximately 21x during the six-month fiscal reporting period, while the Russell 1000 Growth Index declined from 44x to 23x.

 

Navigating Fed Rate Hikes

 

Investors who are concerned about monetary policy may want to consider that, historically, the later phases of monetary tightening periods have been accompanied by growth equities outperforming value equities. The six-month period starting approximately three months after the beginning of Fed tightening cycles initiated in 1994, 1999, 2004 and 2015 illustrate this point. Based on the returns of the Russell 3000 Growth and Russell 3000 Value indices, the median outperformance of growth companies during those periods was 400bps. During later phases of such rate hike periods, economic growth has typically slowed, so investors may be more willing to pay a premium for companies that can increase their earnings.

 

Chasing Yield

 

Yield hungry investors, furthermore, may want to broaden their search for income beyond dividends. For example, during the 12-month period ended March 31, 2022, the value of S&P 500 Index company share buybacks reached $985 billion, compared to only $525

billion for dividends. Buybacks reduce the number of shares outstanding at companies, effectively increasing the value of remaining shareholders’ interests. Because investors can choose when to sell their shares, they have discretion over when to realize the effective return of capital as capital gains. This can make share repurchases more tax efficient than dividends. We also believe that innovative companies that are growing by capturing market share may be candidates for share buyback programs. As they grow their sales and earnings, they may accumulate a cash “war chest” for buying back their shares.

 

Going Forward

 

We continue to believe that unprecedented levels of innovation, such as healthcare advancements in genetic science, and digital technologies including artificial intelligence, ecommerce, the metaverse, streaming entertainment, and cloud computing are providing opportunities for leading companies to reward investors by generating long-term earnings growth. We continue to focus on conducting in-depth fundamental research as we seek leaders of innovation rather than take short-term bets on the fickle nature of investor sentiment. We believe doing so is the best strategy for helping our valued shareholders reach their investment goals.

 

Portfolio Matters Alger 35 ETF

For the fiscal six-month period ended June 30, 2022, the share price (market price) of the Alger 35 ETF returned -30.88% and the net asset value returned -30.78% compared to the

-19.96% return of the Fund’s benchmark, the S&P 500 Index. During the reporting period, the largest portfolio sector weightings were Information Technology and Healthcare. The largest sector overweight was Information Technology and the largest sector underweight was Consumer Staples.

 

Contributors to Performance

 

The Consumer Discretionary and Materials sectors contributed to relative performance. Among individual positions, 908 Devices Inc.; Diamondback Energy, Inc.; Palo Alto Networks, Inc.; Vail  Resorts, Inc.; and Alibaba Group Holding Ltd. Sponsored ADR  were among the top contributors to absolute performance. Diamondback Energy is an independent oil and natural gas company focused on the acquisition, development, exploration and exploitation of onshore oil and natural gas reserves in the Permian Basin in West Texas. This basin, which is one of the major producing basins in the United States, is characterized by an extensive production history, a favorable operating environment, mature infrastructure, long reserve life, multiple producing horizons, enhanced recovery potential and a large number of operators. Diamondback performed strongly as the continued rise in crude oil price drove higher revenues, profits and cash flow generation.

 

Detractors from Performance

 

The Information Technology and Healthcare sectors were among the sectors that detracted from relative performance. Among individual positions, Shopify, Inc. Class A; Applied Materials, Inc.; Amazon.com, Inc.; Apple Inc.; and Advanced Micro Devices, Inc. were among the top detractors from absolute performance. Shopify provides a full-service, cloud-based software platform for small and medium-sized businesses to establish and conduct e-commerce. Shopify enables merchants to run their businesses across a multitude of channels by facilitating merchants’ ability to manage products and inventory, process orders and payments, build customer relationships, automate marketing campaigns and

leverage analytics and reporting. We believe Shopify is an innovation led technology company realizing high unit volume growth as it benefits from the positive dynamic change of consumer adoption of e-commerce. Shopify’s share price declined after the company announced plans to reinvest gross profits into research and development, hire more engineers and salespeople and introduce new marketing programs in order to expedite the realization of what it believes are its growth opportunities. The level of investment was more than many investors had contemplated.

 

Alger Mid Cap 40 ETF

 

For  the fiscal six-month period ended June 30, 2022, the share price (market price) of    the Alger Mid Cap 40 ETF generated a -34.78% return and the net asset value generated   a -35.65% return compared to the -31.00% return of the Fund’s benchmark, the Russell Midcap Growth Index. During the reporting period, the largest sector weightings were Information Technology and Industrials. The largest sector overweight was Industrials and the largest sector underweight was Information Technology.

 

Contributors to Performance

 

The Information Technology and Real Estate sectors contributed to relative performance. Regarding individual positions, Seagen, Inc.; Grocery Outlet Holding Corp.; CF Industries Holdings, Inc., Alkermes Plc; and Expedia Group, Inc. were among the top contributors to absolute performance. Seagen is an emerging multi-product, global biotechnology company that develops and commercializes transformative cancer-targeting therapies. It has pioneered a new modality called antibody drug conjugates (ADCs), which has been recognized as a major advance in cancer treatment. Recently, the company’s CEO and founder retired, which led to recent reports that the company may be an acquisition target by a large biopharmaceutical company, which supported the performance of Seagen shares.

 

Detractors from Performance

 

Financials and Industrials were among the sectors that detracted from relative performance. Regarding individual positions, Signature Bank; MGM Resorts International; Herc Holdings, Inc.; TaskUs, Inc. Class A; and Natera, Inc. were among the top detractors from absolute performance. Signature Bank provides business and personal banking products and services. Signature Bank offers deposit products, including commercial checking accounts, money market accounts, escrow deposit accounts and cash concentration accounts. The company also offers loan products, including commercial and industrial loans and real estate loans, among others. Over the past couple of years, Signature Bank has realized significant growth in deposits across many areas of the business. The company’s blockchain enabled “Signet” platform has been a particularly strong source of deposit growth due to its use by various institutional participants in the cryptocurrency ecosystem. Although Signature Bank owns no cryptocurrencies and is not reliant upon that industry for asset growth, its involvement in the space has resulted in the recent stock price weakness.

As always, we strive to deliver consistently superior investment results to you, our shareholders, and we thank you for your continued confidence in Alger.

 

Sincerely,

Daniel C. Chung, CFA Chief Investment Officer

Fred Alger Management, LLC

 

These ETFs are different from traditional ETFs.

 

 

 

 

 

The differences between these ETFs and other ETFs may also have advantages. By keeping certain information about the ETFs confidential, these ETFs may face less risk that other traders can predict or copy their investment strategies. This may improve the ETFs’ performance. If other traders are able to copy or predict the ETFs’ investment strategies, however, this may hurt the ETFs’ performance. For additional information regarding the unique attributes and risks of these ETFs, please refer to the prospectus.

 

The Funds are actively managed ETFs that do not seek to replicate the performance of specified indexes. The Funds do not provide daily disclosures of portfolio holdings, but instead provide verified intraday indicative values (“VIIVs”) calculated and disseminated every second throughout the trading day. The VIIVs are designed to be a highly correlated per share values of the underlying portfolios, but there is a risk that market prices of the Funds may vary significantly from their NAVs. The VIIV Calculation Methodology and historical daily comparisons of the Funds’ VIIVs to their NAVs are available on www. alger.com. The Funds’ trading on the basis of VIIVs may result in trade at wider bid/ask spreads than ETFs that publish their portfolios on a daily basis, especially during periods of market disruption or volatility, and, therefore, may cost investors more to trade. Although the Funds seek to benefit from keeping their portfolio information confidential, market participants may attempt to identify the Funds’ trading strategies, which, if successful, could result in such market participants engaging in certain predatory trading practices that may have the potential to harm the Funds and their shareholders. The Funds’ shares trade in the secondary market on NYSE Arca, Inc. and therefore may experience associated risks,

such as the potential lack of  an active market for the Funds’ shares, losses from trading   in secondary markets, periods of high volatility, and disruptions in the creation and/or redemption process of the Funds. Any of these factors may cause the Funds’ shares to trade at premiums or discounts to NAVs. Creations and redemptions in the Funds occur through an agent called an “AP Representative” which is not obligated to engage in creations or redemptions. The Funds may have a limited number of AP Representatives and if AP Representatives are not able to proceed with creations and/or redemptions, the Funds’ shares may trade at discount to their NAVs and possibly face trading halts and/or delisting, and investors could experience significant losses as a result.

 

Investors cannot invest directly in an index. Index performance does not reflect the deduction for fees, expenses, or taxes.

 

This report and the financial statements contained herein are submitted for the general information of shareholders of the Alger 35 ETF and the Alger Mid Cap 40 ETF. This report is not authorized for distribution to prospective investors in either ETF unless preceded or accompanied by an effective prospectus for the applicable ETF. The ETFs’ returns represent the since inception return of the applicable ETFs’ share price and NAV returns. Returns include reinvestment of dividends and distributions.

 

The performance data quoted in these materials represent past performance, which is not an indication or guarantee of future results.

 

Standard performance results can be found on the following pages. The investment return and principal value of an investment in an ETF will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance data current to the most recent month-end, visit us at www.alger.com, or call us at (800) 223-3810.

 

The views and opinions of the ETFs’ management in this report are as of the date of the Shareholders’ Letter and are subject to change at any time subsequent to this date. There  is no guarantee that any of the assumptions that formed the basis for the opinions stated herein are accurate or that they will materialize. Moreover, the information forming the basis for such assumptions is from sources believed to be reliable; however, there is no guarantee that such information is accurate. Any securities mentioned, whether owned in an ETF   or otherwise, are considered in the context of the construction of an overall portfolio of securities and therefore reference to them should not be construed as a recommendation or offer to purchase or sell any such security. Inclusion of such securities in an ETF and transactions in such securities, if any, may be for a variety of reasons, including without limitation, in response to cash flows, inclusion in a benchmark, and risk control. The reference to a specific security should also be understood in such context and not viewed as a statement that the security is a significant holding in an ETF. Please refer to the Schedule of Investments, which is included in this report, for a complete list of the ETFs’ holdings as of June 30, 2022. Securities mentioned in the Shareholders’ Letter, if not found in the Schedule of Investments, may have been held by an ETF during the six-month fiscal period.

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The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

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The Russell Midcap Growth Index measures the performance of the mid- cap growth segment of the U.S. equity universe. It includes those Russell Midcap Index companies with higher growth earning potential as defined  by Russell's leading style methodology. The Russell Midcap Growth Index is constructed to provide a comprehensive and unbiased barometer of the mid-cap growth market.

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Earnings per share (EPS) is calculated as a company’s profit divided by the outstanding shares of its common stock.

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The price-to-book ratio is the ratio of a company’s market price to its book value.

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Price-to-earnings is the ratio for valuing a company that measures its current share price relative to its EPS.

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Free cash flow is the cash a company generates after taking into consideration cash outflows that support its operations and maintain its capital assets.

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FactSet provides software and market data to financial professionals. FactSet is an independent source, which Alger believes to be a reliable source. Alger, however, makes no representation that it is complete or accurate.

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The S&P 500 Index tracks the performance of 500 large companies listed on stock exchanges in the U.S.

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The Russell 1000 Growth Index is an unmanaged index designed to measure the performance of the largest 1000 companies in the Russell 3000 Index with higher price to book ratios and higher forecasted growth values.

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The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price to book ratios and lower forecasted growth values.

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The Russell 2000 Index is a small cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index.

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The Russell 2000 Growth Index measures the performance of the small cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher growth earning potential as defined by Russell's leading style methodology.

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The Russell Microcap Growth Index consists of the smallest 1,000 securities in the Russell 2000 Growth Index, plus the next 1,000 smallest eligible securities based on a combination of their market capitalization and current index membership weight.

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The Russell 3000 Growth Index combines the large-cap Russell 1000 Growth, the small-cap Russell 2000 Growth and the Russell Microcap Growth Index. It includes companies that are considered more growth oriented relative to the overall market as defined by Russell's leading style methodology. The Russell 3000 Growth Index is constructed to provide a comprehensive, un- biased, and stable barometer of the growth opportunities within the broad market.

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The Russell 3000 Value Index measures the performance of the broad value segment of the U.S. equity value universe. It includes those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 3000 Value Index is constructed to provide a comprehensive, unbiased and stable barometer of the broad value market.

PERFORMANCE COMPARISON AS OF 6/30/22
AVERAGE ANNUAL TOTAL RETURNS
		1 YEAR				5 YEARS				10 YEARS				Since 5/3/2021
Alger 35 ETF – Net Asset Value (Inception 5/3/21)			(33.40	)%			n/a				n/a				(25.95	)%
Alger 35 ETF – Market Value (Inception 5/3/21)			(33.55	)%			n/a				n/a				(26.04	)%
S&P 500 Index			(10.62	)%			n/a				n/a				(7.07	)%

The chart above illustrates the change in value of a hypothetical $10,000 investment made in Alger Mid Cap 40 ETF and the Russell Midcap Growth Index (an unmanaged index of common stocks) from February 26, 2021, the inception date of the Alger Mid Cap 40 ETF, through June 30, 2022. Figures for the Alger Mid Cap 40 ETF and the Russell Midcap Growth Index include reinvestment of dividends. Figures for the Alger Mid Cap 40 ETF also include reinvestment of capital gains. Investors cannot invest directly in any index. Index performance does not reflect deduction for fees, expenses, or taxes.

ALGER 35 ETF

Fund Highlights Through June 30, 2022 (Unaudited) (Continued)

 

The performance data quoted represents past performance, which is not an indication or a guarantee of future results. The Fund’s returns include changes in share price and reinvestment of dividends and capital gains. The chart and table above do not reflect the deduction of taxes that a shareholder would have paid on Fund distributions. Market price is determined using the bid/ask midpoint at 4:00 P.M. Eastern Time, when the net asset value (NAV) is typically calculated. Market performance does not represent the returns you would receive if you traded shares at other times. NAV prices are used to calculate market price performance prior to the date when the Fund first traded on NYSE Arca, Inc. Current performance may be higher or lower than the performance quoted. For updated performance, visit us at www.alger.com or call us at (800) 223-3810.

PORTFOLIO SUMMARY†

June 30, 2022 (Unaudited)

THE ALGER ETF TRUST	ALGER 35 ETF
Schedule of Investments (Unaudited) June 30, 2022

 

 

See Notes to Financial Statements.

 

 

See Notes to Financial Statements.

 

 

(i)	Ratios have been annualized; total return and portfolio turnover rate have not been annualized.

 

 

NOTE 1 — General:

The Alger ETF Trust (the “Trust”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and organized as a business trust under the laws of the Commonwealth of Massachusetts on March 24, 2020. The Alger 35 ETF and the Alger Mid Cap 40 ETF are each separate non-diversified series of  the Trust (each, a “Fund” and together, the “Funds”). The   Trust qualifies as an investment company as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 946-Financial Services – Investment Companies. Each Fund’s investment objective is to seek long-term capital appreciation. Under normal circumstances, each Fund invests primarily in equity securities. Shares of each Fund are listed for trading on NYSE Arca, Inc.

 

NOTE 2 — Significant Accounting Policies:

 

p.m. Eastern Time).

 

Investments in money market funds and short-term securities held by the Funds with maturities of 60 days or less are valued at their amortized cost which does not take into account unrealized capital gains or losses and approximates market value.

 

Equity securities are valued at the last quoted sales price or official closing price on the primary market or exchange on which they are traded as reported by an independent pricing service. In the absence of quoted sales, such securities are valued at the bid price or, in the absence of a recent bid price, the equivalent as obtained from one or more of the major market makers for the securities to be valued.

 

Securities for which market quotations are not readily available are valued at fair value pursuant to procedures approved by the Board and described further herein.

 

FASB Accounting Standards Codification 820 – Fair Value Measurements and Disclosures (“ASC  820”) defines fair value as the price that the Funds would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. ASC 820 established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability and may be observable or unobservable. Observable inputs are based on market data obtained from sources independent of the Funds. Unobservable inputs are inputs  that reflect the Funds’ own assumptions based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.

 

 

 

The Funds’ valuation techniques are generally consistent with either the market or the income approach to fair value. The market approach considers prices and other relevant information generated by market transactions involving identical or comparable assets to measure fair value. The income approach converts future amounts to a current, or discounted, single amount. These fair value measurements are determined on the basis of the value indicated by current market expectations about such future events. Inputs for Level 1 include exchange-listed prices and broker quotes in an active market. Inputs for Level 2 include the last trade price in the case of a halted security, an exchange-listed price which has been adjusted for fair value factors, and prices of closely related securities. Additional Level 2 inputs include an evaluated price which is based upon a compilation of observable market information such as spreads for fixed income and preferred securities. Inputs for Level 3 include, but are not limited to, revenue multiples, earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples, discount rates, time to exit and the probabilities of success of certain outcomes. Such unobservable market information may be obtained from a company’s financial statements and from industry studies, market data, and market indicators such as benchmarks and indexes. Because of the inherent uncertainty and often limited markets for restricted securities, the valuations assigned to such securities by the Funds may significantly differ from the valuations that would have been assigned by the Funds had there been an active market for such securities.

 

Valuation processes are determined by a Valuation Committee (“Committee”) authorized by the Board and comprised of representatives of the Trust’s investment adviser and officers of the Trust. The Committee reports its fair value determinations and related valuation information to the Board. The Board is responsible for approving the valuation policy and procedures.

 

While Committee meetings are held on an as-needed basis, the Committee generally meets quarterly to review and evaluate the effectiveness of the procedures for making fair value determinations. The Committee considers, among other things, pricing comparisons between primary and secondary price sources, the outcome of  price challenges put to    the Funds’ pricing vendor, and variances between transactional prices and the previous day’s prices.

 

In December 2020, the Securities and Exchange Commission (the “SEC”) adopted Rule 2a-5 under the 1940 Act, which is intended to address valuation practices and the role of the board of Trustees with respect to the fair value of the investments of a registered investment company. Among other things, Rule 2a-5 will permit the Board to designate the Trust’s investment adviser, Fred Alger Management, LLC (“Alger Management” or the “Investment Manager”), to perform the Funds’ fair value determinations, which will be

THE ALGER ETF TRUST

NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)

subject to the Board’s oversight and certain reporting and other requirements intended to ensure that the Board receives the information it needs to oversee the Investment Manager’s fair value determinations. Compliance with Rule 2a-5 will not be required until September 2022. The Trust, the Board, and the Investment Manager are currently in the process of implementing the requirements of Rule 2a-5 by the deadline.

 

 

 

 

 

Dividends from net investment income, if available, are declared and paid annually. Dividends from net realized gains, offset by any loss carryforward, are declared and paid annually after the end of the fiscal year in which they were earned.

 

The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules. Therefore, the source of the Funds’ distributions may be shown in the accompanying financial statements as either from, or in excess of, net investment income, net realized gain on investment transactions, or return of

capital, depending on the type of book/tax differences that may exist. Capital accounts within the financial statements are adjusted for permanent book/tax differences. Reclassifications result primarily from the differences in tax treatment of net operating losses, passive foreign investment companies, and foreign currency transactions. The reclassifications are done annually at year-end and have no impact on the net asset values of the Funds and are designed to present the Funds’ capital accounts on a tax basis.

 

 

 

FASB Accounting Standards Codification 740  –  Income  Taxes  (“ASC  740”)  requires the Funds to measure and recognize in their financial statements the benefit of a tax position taken (or expected to be taken) on an income tax return if such position will more likely than not be sustained upon examination based on the technical merits of the position. No tax years are currently under investigation. The Funds file income tax returns in the U.S. Federal jurisdiction, as well as the New York State and New York City jurisdictions. The statute of limitations on the Funds’ tax returns remains open for three years. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

 

 

 

NOTE 3 — Investment Management Fees and Other Transactions with Affiliates:

 

 

Alger Management has contractually agreed to waive fees or reimburse Fund expenses (excluding acquired fund fees and expenses, taxes, brokerage and extraordinary expenses) for the Funds through April 30, 2023, to the extent necessary to limit the total annual fund operating expenses from exceeding the rates, based on average daily net assets, listed below.

 

 

Alger Management may, during the term of the expense limitation contract, recoup any fees waived or expenses reimbursed pursuant to the contract; however, a Fund will only make repayments to Alger Management if such repayment does not cause the Fund's expense ratio, after the repayment is taken into account, to exceed both (i) the expense cap in place at the time such amounts were waived or reimbursed, and (ii) the Fund's current expense cap. Such recoupment is limited to two years from the date the amount is initially waived or reimbursed. For the six months ended June 30, 2022, there were no recoupment payments made by the Funds to Alger Management.

 

 

 

Effective January 1, 2022, the Board adopted a policy requiring Trustees to receive a minimum of 10% of their annual compensation in shares of one or more of the funds in the Alger Fund Complex.

 

During the six months ended June 30, 2022, the Funds did not incur interfund loan interest expense.

 

 

 

NOTE 4 — Securities Transactions:

 

The following summarizes the securities transactions of each Fund, other than U.S. Government securities, in-kind transactions and short-term securities, for the six months ended June 30, 2022:

 

 

The following summarizes the securities in-kind transactions of each Fund for the period ended June 30, 2022. Alger 35 ETF and the Alger Mid Cap 40 ETF had realized gains on in-kind transactions of $22,257 and $219,093, respectively. Net gains (losses) on in-kind redemptions are not considered taxable for federal income tax purposes.

 

 

NOTE 5 — Borrowings:

 

The Funds may borrow from the Custodian on an uncommitted basis. Each Fund pays the Custodian a market rate of interest, generally based upon a rate of return with respect to each respective currency borrowed, taking into consideration relevant overnight and short- term reference rates and the range of distribution between and among the interest rates paid on deposits to other institutions, less applicable commissions, if any. The Funds may

 

also borrow from other funds in the Alger Fund Complex, as discussed in Note 3(d). For the six months ended June 30, 2022 the Funds had the following borrowings from the Custodian and other funds in the Alger Fund Complex:

 

 

The highest amount borrowed from the Custodian and other funds in the Alger Fund Complex during the six months ended June 30, 2022, by each Fund was as follows:

 

 

The Alger Mid Cap 40 ETF had no borrowings for the six months ended June 30, 2022. On September 7, 2021, BBH announced that it had entered into an agreement with State

 

Street Bank and Trust Company (“State Street”) to sell BBH’s Investor Services business to State Street (the “Transaction”). The completion of the Transaction is subject to customary closing conditions and regulatory approvals. If the Transaction is finalized, it is expected that State Street will replace BBH as the Fund’s custodian. The timing for completion of the Transaction is not currently known.

 

NOTE 6 — Share Capital:

 

Each Fund offers and issues shares at its NAV per share only in aggregations of a specified number of  shares (a “Creation Unit”), generally in exchange for a designated portfolio    of securities (including any portion of such securities for which cash may be substituted) (“Deposit Securities”), together with the deposit of a specified cash payment (“Cash Component”). Shares of the Funds are listed for trading on NYSE Arca, Inc., a national securities exchange. Shares of the Funds are traded in the secondary market and elsewhere at market prices that may be at, above or below each Fund’s NAV. Shares of each Fund are redeemable only in Creation Units, generally in exchange for Deposit Securities and a Cash Component. Creation Units are typically a specified number of shares, generally 12,500 or multiples thereof, for each Fund. All orders to purchase Creation Units must be placed by or through authorized participants (“APs”) who have entered into agreements with Alger LLC, a registered broker-dealer. Each AP will establish and maintain a confidential brokerage account with an agent (known as an AP Representative), for the benefit of the AP, in order to engage in in-kind creation and redemption activity with the Funds.

 

* Inception date May 3, 2021.

** Includes in-kind purchases as shown in Note 4.

*** Includes in-kind sales as shown in Note 4.

**** Inception date February 26, 2021.

NOTE 7 — Income Tax Information:

 

At December 31, 2021, the Funds had no capital loss carryforwards utilized for federal income tax purposes.

 

The difference between book-basis and tax-basis unrealized appreciation (depreciation) is determined annually and is attributable primarily to the tax deferral of losses on wash sales, U.S. Internal Revenue Code Section 988 currency transactions, tax treatment of partnership investments, realization of unrealized appreciation of passive foreign investment companies, and return of capital from real estate investment trust investments.

 

NOTE 8 — Fair Value Measurements:

 

The major categories of  securities and their respective fair value inputs are detailed in the Funds’ Schedules of Investments. Based upon the nature, characteristics, and risks associated with their investments as of June 30, 2022, the Funds have determined that presenting them by security type and sector is appropriate.

 

Certain of the Funds’ assets and liabilities are held at carrying amount or face value, which approximates fair value for financial reporting purposes. As of June 30, 2022, such assets were categorized within the ASC 820 disclosure hierarchy as follows:

 

 

NOTE 9 — Risk Disclosures:

 

 

trade on the basis of a VIIV, it may trade at a wider bid/ask spread than ETFs that publish their portfolios on a daily basis, especially during periods of market disruption or volatility, and, therefore, may cost investors more to trade. Although the Fund seeks to benefit from keeping its portfolio information confidential, market participants may attempt to identify the Fund’s trading strategy, which, if successful, could result in such market participants engaging in certain predatory trading practices that may have the potential to harm the Fund and its shareholders. The Fund’s shares trade in the secondary market on NYSE Arca, Inc. and therefore may experience associated risks, such as the potential lack of an active market for Fund shares, losses from trading in secondary markets, periods of high volatility, and disruptions in the creation and/or redemption process of the Fund. Any of these factors may cause the Fund’s shares to trade at a premium or discount to NAV. Creations and redemptions in the Fund occur through an agent called an “AP Representative” who is not obligated to engage in creations or redemptions. The Fund may have a limited number of AP Representatives and if AP Representatives are not able to proceed with creations and/ or redemptions the Fund’s shares may trade at a discount to NAV and possibly face trading halts and/or delisting, and investors could experience significant losses as a result.

 

Investing in the stock market involves risks, including the potential loss of principal. Your investment in Fund shares represents an indirect investment in the securities owned by  the Fund. The value of these securities, like other investments, may move up or down, sometimes rapidly and unpredictably. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. Local, regional or global events such as environmental or natural disasters, war,  terrorism, pandemics, outbreaks   of infectious diseases and similar public health threats, recessions, or other events could have a significant impact on investments. A significant portion of assets may be invested  in securities of companies in related sectors, and may be similarly affected by economic, political, or market events and conditions and may be more vulnerable to unfavorable sector developments. Investing in companies of small and medium capitalizations involves the risk that such issuers may have limited product lines or financial resources, lack management depth, or have limited liquidity. Each Fund is classified as a “non-diversified fund” under federal securities laws because it can invest in fewer individual companies than a diversified fund. Assets may be focused in a small number of holdings, making them susceptible to risks associated with a single economic, political or regulatory event than a more diversified portfolio. Active trading may increase transaction costs, brokerage commissions, and taxes, which can lower the return on investment.

 

NOTE 10 — Subsequent Events:

 

Management of each Fund has evaluated events that have occurred subsequent to June  30, 2022, through the issuance date of the financial statements. No such events have been identified which require recognition and/or disclosure.

Shareholder Expense Example

As a shareholder of a Fund, you incur two types of costs: transaction costs, such as brokerage commissions paid on purchases and sales of Fund shares, if applicable; and ongoing costs, including management fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other funds.

 

The example below is based on an investment of $1,000 invested at the beginning of the six-month period starting January 1, 2022 and ending June 30, 2022 and held for the entire period.

 

Actual Expenses

 

The first line for each Fund in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Six Months Ended June 30, 2022” to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes

 

The second line for each Fund in the table below provides information  about  hypothetical account values and hypothetical expenses based on the actual expense ratio for the Fund’s shares and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions paid on purchases and sales of Fund shares or deduction of insurance charges against assets or annuities. Therefore, the second line under each Fund in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Privacy Policy

 

U.S. Consumer Privacy Notice

Rev. 6/22/21

 

 

 

 

 

 

Proxy Voting Policies

 

A description of the policies and procedures the Funds use to determine how to vote proxies relating to portfolio securities and the proxy voting record is available, without charge, by calling (800) 223-3810 or online on the Funds’ website at http://www.alger.com or on the SEC’s website at http://www.sec.gov.

 

Fund Holdings

 

The Board has adopted policies and procedures relating to disclosure of the Funds’ portfolio securities. These policies and procedures recognize that there may be legitimate business reasons for holdings to be disclosed and seek to balance those interests to protect the proprietary nature of the trading strategies and implementation thereof by the Funds.

 

Generally, the policies prohibit the release of information concerning portfolio holdings, which have not previously been made public, to individual investors, institutional investors, intermediaries that distribute the Funds’ shares and other parties which are not employed by the Investment Manager or its affiliates except when the legitimate business purposes for selective disclosure and other conditions (designed to protect the Funds) are acceptable.

 

The Funds file their complete schedules of portfolio holdings with the SEC semi-annually in shareholder reports on Form N-CSR and after the first and third fiscal quarters as an exhibit to their reports on Form N-PORT. The Funds’ Forms N-CSR and N-PORT are available online on the SEC’s website at www.sec.gov.

 

In addition, the Funds make publicly available their month-end top 10 holdings (with respect to Alger Mid Cap 40 ETF) and month-end top 5 holdings (with respect to Alger 35 ETF) with a 10 day lag and their month-end full portfolios with a 60 day lag on their website www.alger.com and through other marketing communications (including printed advertising/sales literature and/or shareholder telephone customer service centers). No compensation or other consideration is directly received for the non-public disclosure of portfolio holdings information.

 

In accordance with the foregoing, the Funds provide portfolio holdings information to third parties including AP Representatives, financial intermediaries and service providers who need access to this information in the performance of their services and are subject  to duties of confidentiality (1) imposed by law, including a duty not to trade on non-public information, and/or (2) pursuant to an agreement that confidential information is not to be disclosed or used (including trading on such information) other than as required by law. From time to time, the Funds will communicate with these third parties to confirm that they understand the Funds’ policies and procedures regarding such disclosure. These agreements must be approved by the Trust’s Chief Compliance Officer.

 

The Board periodically reviews a report disclosing the third parties to whom each Fund’s holdings information has been disclosed and the purpose for such disclosure, and it considers whether or not the release of information to such third parties is in the best interest of the Fund and its shareholders.

In addition to material the Funds routinely provide to shareholders, the Investment Manager may make additional statistical information available regarding the Alger Family of Funds. Such information may include, but not be limited to, relative weightings and characteristics of a Fund versus an index (such as P/E ratio, alpha, beta, capture ratio, maximum drawdown, standard deviation, EPS forecasts, Sharpe ratio, information ratio, R-squared, and market cap analysis), security specific impact on overall portfolio performance, month-end top  ten contributors to and detractors from performance, portfolio turnover, and other similar information. Shareholders should visit www.alger.com or may also contact the Funds at (800) 223-3810 to obtain such information.

THE ALGER ETF TRUST

 

100 Pearl Street, 27th Floor

New York, NY  10004

(800) 223-3810

www.alger.com

 

Investment Manager

Fred Alger Management, LLC

100 Pearl Street, 27th Floor

New York, NY 10004

 

Distributor

 

Fred Alger & Company, LLC

100 Pearl Street, 27th Floor

New York, NY 10004

 

Custodian, Transfer Agent and Dividend Disbursing Agent

Brown Brothers Harriman & Company

50 Post Office Square 

Boston, MA 02110

 

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

30 Rockefeller Plaza

New York, NY 10112

 

This report is submitted for the general information of the shareholders of The Alger ETF Trust. It is not authorized for distribution to prospective investors unless accompanied by an effective Prospectus for the Trust, which contains information concerning the Trust’s investment policies, fees and expenses as well as other pertinent information.

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