ck0001432353-20221130
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Global
X Alternative Income ETF
NASDAQ:
ALTY |
Global
X MLP & Energy Infrastructure ETF NYSE
Arca: MLPX |
Global
X S&P 500®
Quality Dividend ETF NYSE
Arca: QDIV |
Global
X Conscious Companies ETF
NASDAQ:
KRMA |
Global
X U.S. Preferred ETF NYSE
Arca: PFFD |
Global
X Adaptive U.S. Factor ETF NYSE
Arca: AUSF |
Global
X Variable Rate Preferred ETF NYSE
Arca: PFFV |
Global
X Adaptive U.S. Risk Management ETF
NYSE
Arca:
ONOF |
Global
X MLP ETF NYSE
Arca: MLPA |
Global
X Founder-Run Companies ETF
Cboe
BZX: BOSS |
Prospectus
April 1,
2023
The
Securities and Exchange Commission ("SEC") has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
Shares
in a Fund (defined below) are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other agency of the U.S. Government, nor are shares
deposits or obligations of any bank. Such shares in a Fund involve investment
risks, including the loss of principal.
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As
permitted by regulations adopted by the SEC, paper copies of the Funds’
shareholder reports will no longer be sent by mail, unless you
specifically request paper copies of the reports from your financial
intermediary (such as a broker-dealer or bank). Instead, shareholder
reports will be available on the Funds’ website (www.globalxetfs.com/explore),
and you will be notified by mail each time a report is posted and provided
with a website link to access the report. If you already elected to
receive shareholder reports electronically, you will not be affected by
this change and you need not take any action. You may elect to receive
shareholder reports and other communications from the Funds electronically
anytime by contacting your financial intermediary. You may elect to
receive all future Fund shareholder reports in paper free of charge.
Please contact your financial intermediary to inform them that you wish to
continue receiving paper copies of Fund shareholder reports and for
details about whether your election to receive reports in paper will apply
to all funds held with your financial
intermediary. |
TABLE
OF CONTENTS
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FUND
SUMMARIES |
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ADDITIONAL
INFORMATION ABOUT THE FUNDS |
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A
FURTHER DISCUSSION OF PRINCIPAL RISKS |
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A
FURTHER DISCUSSION OF OTHER RISKS |
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PORTFOLIO
HOLDINGS INFORMATION |
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FUND
MANAGEMENT |
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DISTRIBUTOR |
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BUYING
AND SELLING FUND SHARES |
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FREQUENT
TRADING |
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DISTRIBUTION
AND SERVICES PLAN |
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DIVIDENDS
AND DISTRIBUTIONS |
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INVESTMENTS
BY INVESTMENT COMPANIES |
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TAXES
FOR THE GLOBAL X MLP ETF |
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TAXES
FOR EACH FUND OTHER THAN THE GLOBAL X MLP ETF |
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DETERMINATION
OF NET ASSET VALUE |
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PREMIUM/DISCOUNT
AND SHARE INFORMATION |
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TOTAL
RETURN INFORMATION |
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INFORMATION
REGARDING THE INDICES AND THE INDEX PROVIDERS |
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OTHER
SERVICE PROVIDERS |
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ADDITIONAL
INFORMATION |
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FINANCIAL
HIGHLIGHTS |
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OTHER
INFORMATION |
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FUND
SUMMARIES
Global X
Alternative Income ETF
Ticker:
ALTY
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The
Global X Alternative Income ETF ("Fund") seeks to track, before fees and
expenses, the price and yield performance of the Indxx SuperDividend®
Alternatives Index ("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
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Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
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One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 18.10% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Indxx
SuperDividend®
Alternatives Index (the "Underlying Index") and in American Depositary Receipts
("ADRs") and Global Depositary Receipts ("GDRs") based on the securities in the
Underlying Index. The Fund's 80% investment policy is non-fundamental and
requires 60 days prior written notice to shareholders before it can be changed.
The Fund may lend securities representing up to one-third of the value of the
Fund’s total assets (including the value of the collateral received).
The
Underlying Index is intended to provide exposure to five income-producing
categories: Master Limited Partnerships ("MLPs") and Infrastructure, Real
Estate, Preferreds, Emerging Market Bonds and Covered Calls. The MLPs and
Infrastructure categories primarily consist of units of MLPs and shares of
infrastructure companies. The Real Estate category provides exposure to global
real estate investment trusts ("REITs"), and gains this exposure through
investing directly in the Global X SuperDividend®
REIT ETF. The Preferreds category provides exposure to U.S. preferred
securities, and gains this exposure through investing directly in the Global X
U.S. Preferred ETF. The Emerging Markets Bonds category provides exposure to
emerging markets debt, and gains this exposure through investing directly in the
Global X Emerging Markets Bond ETF. The Covered Call category provides exposure
to a covered call strategy, and gains this exposure through investing directly
in the Global X Nasdaq 100 Covered Call ETF. At the annual reconstitution, each
of the five categories is equally weighted at 20%.
The
Underlying Index may rebalance quarterly if any one category deviates more than
3% from its target weight, in which case each category is rebalanced back to
equal weight of 20%. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by Indxx, LLC (the “Index Provider”), which is an
organization that is independent of, and unaffiliated with, the Fund and Global
X Management Company LLC, the investment adviser for the Fund ("Adviser"). The
Index Provider determines the relative weightings of the securities in the
Underlying Index and publishes information regarding the market value of the
Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
"outperform" the Underlying Index and does not seek temporary defensive
positions when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental to
shareholders, such as when there are practical difficulties or substantial costs
involved in compiling a portfolio of equity securities to follow the Underlying
Index, in instances in which a security in the Underlying Index becomes
temporarily illiquid, unavailable or less liquid, or as a result of legal
restrictions or limitations (such as tax diversification requirements) that
apply to the Fund but not the Underlying Index.
The Adviser expects that, over time, the
correlation between the Fund's performance and that of the Underlying Index,
before fees and expenses, will exceed 95%. A correlation percentage of 100%
would indicate perfect correlation. If the Fund uses a replication strategy, it
can be expected to have greater correlation to the Underlying Index than if it
uses a representative sampling strategy. The Fund
concentrates its investments (i.e., hold 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was not concentrated in any
industry.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Actively
Managed Portfolios Investment Risk:
Certain of the Underlying Index constituents are actively managed portfolios,
and their success depends upon the investment skills and analytical abilities of
the investment adviser to that constituent to develop and effectively implement
strategies to achieve the Underlying Index constituent’s investment objective.
Subjective decisions made by the investment adviser may cause the Underlying
Index constituent to incur losses or to miss profit opportunities on which it
may otherwise have capitalized.
Bond
Investment Risk:
Investments in debt securities are generally affected by changes in prevailing
interest rates and the creditworthiness of the issuer. Prices of debt securities
fall when prevailing interest rates rise. The Fund’s yield on investments in
debt securities will fluctuate as the securities in the Fund are rebalanced and
reinvested in securities with different interest rates. Investments in bonds are
also subject to credit risk. Credit risk is the risk that an issuer of debt
securities will be unable to pay principal and interest when due, or that the
value of the security will suffer because investors believe the issuer is less
able to make required principal and interest payments. This is broadly gauged by
the credit ratings of the debt securities in which the Fund invests. However,
credit ratings are only the opinions of the rating agencies issuing them, do not
purport to reflect the risk of fluctuations in market value and are not absolute
guarantees as to the payment of interest and the repayment of principal.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
ETF
Investment Risk:
While the risks of owning shares of an underlying ETF generally reflect the
risks of owning the underlying securities of the index the ETF is designed to
track, lack of liquidity in the underlying ETF can result in its value being
more volatile than the underlying portfolio securities. Because the value of an
underlying ETF's shares depends on the demand in the market, the Adviser may not
be able to liquidate the Fund’s holdings in those shares at the most optimal
time, thereby adversely affecting the Fund’s performance. An underlying ETF may
experience tracking error in relation to the index tracked by the underlying
ETF, which could contribute to tracking error for the Fund. In addition, an
underlying ETF's shares may trade at a premium or discount to NAV.
In
addition, investments in the securities of underlying ETFs may involve
duplication of advisory fees and certain other expenses. The Fund will pay
brokerage commissions in connection with the purchase and sale of shares of the
underlying ETFs, which could result in greater expenses to the Fund. By
investing in an underlying ETF, the Fund becomes a shareholder thereof. As a
result, Fund shareholders indirectly bear the Fund’s proportionate share of the
fees and expenses indirectly paid by shareholders of the underlying ETF, in
addition to the fees and expenses Fund shareholders indirectly bear in
connection with the Fund’s own operations.
If
the underlying ETF fails to achieve its investment objective, the value of the
Fund’s investment may decline, adversely affecting the Fund’s performance.
Additionally, some ETFs are not registered under the Investment Company Act of
1940 (“1940 Act”) and therefore, are not subject to the regulatory scheme and
investor protections of the 1940 Act.
Leveraged
Portfolios Investment Risk:
Certain of the Underlying Index components may engage in transactions that give
rise to leverage. Such transactions may include, among others, reverse
repurchase agreements, securities lending, forward commitment transactions,
short sales and certain derivative transactions. The use of leverage may cause
the Underlying Index components to liquidate portfolio positions when it may not
be advantageous to do so to satisfy its obligations or to meet segregation
requirements. Leverage may cause the Underlying Index component’s share price to
be more volatile than if it had not been leveraged, as certain types of leverage
may exaggerate the effect of any increase or decrease in the value of the
Underlying Index component’s portfolio securities. The loss on leveraged
investments may substantially exceed the initial investment.
Master
Limited Partnerships Investment Risk: Investments
in securities of an MLP involve risks that differ from investments in common
stock, including risks related to limited control and limited rights to vote on
matters affecting the MLP, risks related to potential conflicts of interest
between the MLP and the MLP’s general partner, and cash flow risks. MLP common
units and other equity securities can be affected by changes in macro-economic
and other factors affecting the stock market in general, including changes in
growth, unemployment, and inflation rates, as well as expectations of interest
rates. MLP common units and other equity securities can also be affected by
investor sentiment towards MLPs or the energy sector, changes in a particular
issuer’s financial condition, or unfavorable or unanticipated poor performance
of a particular issuer (in the case of MLPs, generally measured in terms of
distributable cash flow). Prices of common units of individual MLPs and other
equity securities also can be affected by fundamentals unique to the partnership
or company, including earnings power and coverage ratios.
Mortgage
Real Estate Investment Trusts (Mortgage REITs) Investment Risk:
Mortgage REITs are exposed to the risks specific to the real estate market as
well as credit risk, interest rate risk, leverage risk and prepayment risk.
Non-Hedging
Foreign Currency Trading Exposure Risk:
Certain of the Underlying Index constituents may engage in forward foreign
currency transactions for speculative purposes. The Underlying Index
constituents' advisors may purchase or sell foreign currencies through the use
of forward contracts based on the applicable advisors’ judgment regarding the
direction of the market for a particular foreign currency or currencies. In
pursuing this strategy, the advisors seek to profit from anticipated movements
in currency rates by establishing “long” and/or “short” positions in forward
contracts on various foreign currencies. Foreign exchange rates can be extremely
volatile and a variance in the degree of volatility of the market or in the
direction of the market from the advisors’ expectations may produce significant
losses to the Underlying Index constituent.
Option
Trading Strategies Exposure Risk:
Options are generally subject to volatile swings in price based on changes in
value of the underlying instrument, and the options written by an Underlying
Index constituent may be particularly subject to this risk because of the
volatility of the underlying stocks selected by an Underlying Index
constituent.
An Underlying Index constituent may incur a form of economic leverage through
its use of options, which will increase the volatility of an Underlying Index
constituent’s returns and may increase the risk of loss to an Underlying Index
constituent. While an Underlying Index constituent will collect premiums on the
options it writes, an Underlying Index constituent’s risk of loss if one or more
of its options is exercised and expires in-the-money may substantially outweigh
the gains to an Underlying Index constituent from the receipt of such option
premiums. Moreover, the options sold by an Underlying Index constituent may have
imperfect correlation to the returns of their underlying stocks.
Real
Estate Stocks and Real Estate Investment Trusts (REITs) Investment
Risk:
The Fund may have exposure to companies that invest in real estate, such as
REITs, which exposes investors in the Fund to the risks of owning real estate
directly, as well as to risks that relate specifically to the way in which real
estate companies are organized and operated. Real estate is highly sensitive to
general and local economic conditions and developments and characterized by
intense competition and periodic overbuilding. Many real estate companies,
including REITs, utilize leverage (and some may be highly leveraged), which
increases risk and could adversely affect a real estate company's operations and
market value in periods of rising interest rates.
Associated
Risks Related to Investing in Infrastructure Companies:
Infrastructure companies may be subject to a variety of factors that could
adversely affect their business or operations, including high interest costs in
connection with capital construction programs, high degrees of leverage, costs
associated with governmental, environmental and other regulations, the level of
government spending on infrastructure projects, and other factors. The stock
prices of transportation companies may be affected by supply and demand for
their specific product, government regulation, world events and economic
conditions. The profitability of energy companies is related to worldwide energy
prices, exploration, and production spending. Utility companies face intense
competition, which may have an adverse effect on their profit margins, and the
rates charged by regulated utility companies are subject to review and
limitation by governmental regulatory commissions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Commodity
Exposure Risk:
To the extent that its Underlying Index has exposure to securities and markets
that are susceptible to fluctuations in certain commodity markets, any negative
changes in commodity markets could have a great impact on the Fund. Commodity
prices may be influenced or characterized by unpredictable factors, including,
where applicable, high volatility, changes in supply and demand relationships,
weather, agriculture, trade, military conflict, changes in interest rates and
monetary and other governmental policies, action and inaction. Securities of
companies held by the Fund that are dependent on a single commodity, or are
concentrated on a single commodity sector, may typically exhibit even higher
volatility attributable to commodity prices.
Credit
Risk: Credit
risk refers to the possibility that the issuer of the security will not be able
to make principal and interest payments when due. Changes in an issuer’s credit
rating or the market’s perception of an issuer’s creditworthiness may also
affect the value of the Fund’s investment in that issuer. Securities rated in
the four highest categories by the rating agencies are considered investment
grade but they may also have some speculative characteristics. Investment grade
ratings do not guarantee that bonds will not lose value.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change
quickly
and unpredictably. As a result, the Fund's NAV may change quickly and without
warning, which could have a significant negative impact on the Fund.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Foreign
Financial Institution Risk:
Certain of the securities that comprise the Underlying Index, while traded on
U.S. exchanges, may be issued by foreign financial institutions. Therefore, the
Fund may be subject to the risks of investing in securities issued by foreign
companies, which may not be subject to the same regulations as companies
domiciled in the U.S. The health of many foreign financial institutions is often
tied closely with the financial stability of the local economy in which they are
domiciled, and therefore are subject to additional risks including but not
limited to: policy changes, slow or decelerating economic growth, and high
levels of debt.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets:
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic
conditions
than more developed markets. Emerging market economies’ exposure to specific
industries, such as tourism, and lack of efficient or sufficient health care
systems, could make these economies especially vulnerable to global crises,
including but not limited to, pandemics such as the global COVID-19 pandemic.
Certain emerging market countries may have privatized, or have begun the process
of privatizing, certain entities and industries. Privatized entities may lose
money or be re-nationalized.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
High
Dividend Yield Stocks Risk:
High-yielding stocks are often speculative, high risk investments. These
companies may be paying out more than they can support and may reduce their
dividends or stop paying dividends at any time, which could have a material
adverse effect on the stock price of these companies and the Fund’s performance.
Securities that pay dividends, as a group, can fall out of favor with the
market, potentially during periods of rising interest rates, causing such
companies to underperform companies that do not pay dividends.
High
Yield Securities Risk:
Securities that are rated below investment grade (commonly referred to as "junk
bonds", including those bonds rated lower than "BBB-" by Standard &
Poor’s®
(a division of the McGraw-Hill Companies, Inc.) ("S&P") and Fitch, Inc.
("Fitch"), "Baa3" by Moody’s®
Investors Service, Inc. ("Moody’s"), or "BBB (low)" by Dominion Bond Rating
Service Limited("DBRS"), or are unrated but may be judged to be of comparable
quality, at the time of purchase, may be more volatile than higher-rated
securities of similar maturity. Investing in junk bonds is speculative.
Income
Risk:
Income
risk is the risk that the Fund’s income will decline because of falling interest
rates.
Interest
Rate Risk: Interest
rate risk is the risk that prices of fixed income securities generally increase
when interest rates decline and decrease when interest rates increase. The Fund
may lose money if short-term or long-term interest rates rise
sharply.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
MLP
Tax Risk:
Subject to the application of the partnership audit rules, MLPs that elect to be
taxed as partnerships do not pay U.S. federal income tax at the partnership
level. Rather, each partner is allocated a share of the partnership’s income,
gains, losses, deductions and expenses. A change in current tax law, or a change
in the underlying business mix of a given MLP, could result in an MLP that
previously elected to be taxed as a partnership being treated as a corporation
for U.S. federal income tax purposes, which would result in such MLP being
required to pay U.S. federal income tax on its taxable income. The
classification of an MLP as a corporation for U.S. federal income tax purposes
would have the effect of reducing the amount of cash available for distribution
by the MLP. Thus, to the extent that any of the MLPs to which the Fund has
exposure are treated as a corporation for U.S. federal income tax purposes, it
could result in a reduction in the value of the Fund’s investment and lower the
Fund’s income. The Fund may also invest in MLPs that elect to be taxed as
corporations, which taxes would have the effect of reducing the amount of cash
available for distribution by the MLP. Additionally, as a result of the Fund's
exposure to MLPs taxed as partnerships, a portion of the Fund’s distributions
are expected to be treated as a return of capital for tax purposes. Return of
capital distributions are not taxable income to you, but reduce your tax basis
in your Fund Shares. Such a reduction in tax basis will result in larger taxable
gains and/or lower tax losses on a subsequent sale of Fund Shares. Shareholders
who sell their Shares for less than they bought them may still recognize a gain
due to the reduction in tax basis.
Shareholders
who periodically receive the payment of dividends or other distributions
consisting of a return of capital may be under the impression that they are
receiving net profits from the Fund when, in fact, they are not. Shareholders
should not assume that the source of the distributions is from the net profits
of the Fund. To the extent that the distributions paid to you constitute a
return of capital, the Fund's assets will decline. A decline in the Fund's
assets may also result in an increase in the portion of a Fund's expense ratio
that is not subject to a unitary fee or any other form of contractual cap, and
over time the distributions paid in excess of net distributions received could
work to erode the Fund's net asset value.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a
national
securities exchange and may, therefore, have a material upward or downward
effect on the market price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
25.60% |
Worst
Quarter: |
3/31/2020 |
-39.48% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (07/13/2015) |
Global
X Alternative Income ETF: |
|
|
|
·Return
before taxes |
-12.12% |
1.56% |
3.95% |
·Return
after taxes on distributions1 |
-14.17% |
-0.80% |
1.62% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-7.03% |
0.59% |
2.40% |
Indxx
SuperDividend®
Alternatives Index (net)
(Index
returns do not reflect deduction for fees, expenses, or
taxes) |
-12.01% |
1.75% |
4.37% |
S&P
500®
Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.11% |
9.42% |
10.47% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers: The
professionals primarily responsible for the day-to-day management of the Fund
are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager
of
the Fund since March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund
since March 1, 2019. Ms. Chan has been a Portfolio Manager of the Fund since
June 10, 2019. Ms. Yang has been a Portfolio Manager of the Fund since December
2020. Mr. Lu has been a Portfolio Manager of the Fund since April
2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global
X S&P 500®
Quality Dividend ETF
Ticker:
QDIV
Exchange: NYSE Arca
INVESTMENT
OBJECTIVE
The
Global X S&P 500®
Quality Dividend ETF ("Fund") seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the S&P
500®
Quality
High Dividend Index ("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.20% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.20% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$20 |
$64 |
$113 |
$255 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 78.73% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the
S&P
500®
Quality
High Dividend Index ("Underlying Index"). The Fund's 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed.
The
Underlying Index is designed to provide exposure to U.S. equity securities
included in the S&P 500®
Index that exhibit high quality and dividend yield characteristics, as
determined by Standard & Poor's Financial Services LLC, the provider of the
Underlying Index (the "Index Provider"). All constituents of the Underlying
Index are members of the S&P 500®
Index and follow the eligibility criteria for that index. From this starting
universe, eligible constituents are screened to include only securities that
rank within the top 200 of the S&P 500®
Index universe by both quality score and dividend yield. The Underlying Index is
equal weighted and is reconstituted and rebalanced semi-annually. At each
semi-annual rebalance, a sector capping methodology is applied to reduce sector
concentration and increase diversification of the Underlying Index. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index. As of
January 31, 2023, the Underlying Index had 77
constituents.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was not concentrated in any
industry.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Dividend-Paying
Stock Risk:
The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks
may fall out of favor with investors and underperform the broader market. Also,
a company may reduce or eliminate its dividend, and dividends may become the
subject of scrutiny from central governments.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its
methodology
may occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2020 |
19.86% |
Worst
Quarter: |
3/31/2020 |
-31.00% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (07/13/2018) |
Global
X S&P 500®
Quality Dividend ETF: |
|
|
·Return
before taxes |
-0.53% |
8.69% |
·Return
after taxes on distributions1 |
-1.25% |
7.87% |
·Return
after taxes on distributions and sale of Fund Shares1 |
0.17% |
6.67% |
S&P
500®
Quality
High Dividend Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-0.31% |
9.01% |
S&P
500®
Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.11% |
9.20% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
the Fund's inception. Mr. Xie has been a Portfolio Manager of the Fund since
March 1, 2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10,
2019. Ms. Yang has been a Portfolio Manager of the Fund since December 2020. Mr.
Lu has been a Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X U.S.
Preferred ETF
Ticker:
PFFD
Exchange: NYSE Arca
INVESTMENT
OBJECTIVE
The Global X U.S. Preferred ETF ("Fund") seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the ICE BofA Diversified Core U.S. Preferred
Securities Index ("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.23% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.23% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$24 |
$74 |
$130 |
$293 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 33.20% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the ICE BofA
Diversified Core U.S. Preferred Securities Index ("Underlying Index"). The Fund
also invests at least 80% of its total assets in preferred securities that are
domiciled in, principally traded in or whose revenues are primarily from the
U.S. The Fund's 80% investment policies are non-fundamental and require 60 days
prior written notice to shareholders before they can be changed. The Fund may
lend securities representing up to one-third of the value of the Fund’s total
assets (including the value of the collateral received).
The
Underlying Index is designed to track the broad-based performance of the U.S.
preferred securities market. The Underlying Index includes different categories
of preferred stock, such as floating, variable and fixed-rate preferreds,
cumulative and non-cumulative preferreds, and trust preferreds. Qualifying
preferred securities must be listed on a U.S. exchange, denominated in U.S.
dollars, and have a minimum amount outstanding of $50 million. Qualifying
securities must meet minimum price, liquidity, maturity and other requirements
as determined by ICE Data Indices, LLC (the "Index Provider").
Constituents
in the Underlying Index are capitalization-weighted based on their current
amount outstanding times the market price plus accrued interest. A weighting cap
of 10% is applied at the issuer level to limit the aggregate weight of a single
issuer to 10% at each rebalance. The Underlying Index may include large-, mid-
or small-capitalization companies. Components of
the
Underlying Index primarily include financials, real estate, telecommunications
and utility companies. The Underlying Index is rebalanced quarterly. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally uses a representative sampling strategy with respect to the
Underlying Index. "Representative sampling" is an indexing strategy that
involves investing in a representative sample of securities that collectively
has an investment profile similar to the Underlying Index in terms of key risk
factors, performance attributes and other characteristics. These include country
weightings, market capitalization and other financial characteristics of
securities. The Fund may or may not hold all of the securities in the Underlying
Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the banking industry and had significant
exposure to the financials
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Fixed-to-Floating
Rate Securities Risk:
The Fund invests in fixed-to-floating rate preferred securities, which are
securities that have an initial term with a fixed dividend rate and following
this initial term bear a floating dividend rate. Securities which include a
floating or variable interest rate component can be less sensitive to interest
rate changes than securities with fixed interest rates, but may decline in value
if their interest rates do not rise as much, or as quickly, as interest rates in
general. Although floating rate preferred securities can be less sensitive to
interest rate risk than fixed-rate preferred securities, they are subject to the
risks applicable to preferred securities more generally.
Hybrid
Securities Investment Risk:
Hybrid securities are subject to the risks of equity securities and risks of
debt securities. The claims of holders of hybrid securities of an issuer are
generally subordinated to those of holders of traditional debt securities in
bankruptcy, and thus hybrid securities may be more volatile and subject to
greater risk than traditional debt securities and may, in certain circumstances,
even be more volatile than traditional equity securities. At the same time,
hybrid securities may not fully participate in gains of their issuer and thus
potential returns of such securities are generally more limited than traditional
equity securities, which would participate in such gains.
LIBOR
Transition Risk: The
Fund invests in financial instruments that utilize London Interbank Offered Rate
(“LIBOR”) as the reference or benchmark rate for variable interest rate
calculations. On July 27, 2017, the head of the United Kingdom’s Financial
Conduct Authority ("FCA") announced a desire to phase out the use of LIBOR by
the end of 2021. In March 2021, the FCA and LIBOR's administrator, ICE Benchmark
Administration, announced that most LIBOR settings will no longer be published
after the end of 2021 and a selection of widely used U.S. dollar LIBOR rates
will continue to be published until June 2023 in order to assist with the
transition. There remains uncertainty regarding the effect of the LIBOR
transition process and therefore any impact of a transition away from LIBOR on
the Fund or the instruments in which the Fund invests cannot yet be determined.
There is no assurance that the composition or characteristics of any alternative
reference rate (e.g., the Secured Overnight Financing Rate (“SOFR”), which is
intended to replace the U.S. dollar LIBOR) will be similar to or produce the
same value or economic equivalence as LIBOR or that instruments using an
alternative rate will have the same volume or liquidity. As a result, the
transition process might lead to increased volatility and reduced liquidity in
markets that currently rely on LIBOR to determine interest rates; a reduction in
the value of some LIBOR-based investments; increased difficulty in borrowing or
refinancing and diminished effectiveness of any applicable hedging strategies
against instruments whose terms currently include LIBOR; and/or costs incurred
in connection with temporary borrowings and closing out positions and entering
into new agreements. Any such effects of the transition away from LIBOR and the
adoption of alternative reference rates could result in losses to the Fund.
Preferred
Stock Investment Risk:
Preferred stock may be subordinated to bonds or other debt instruments in an
issuer’s capital structure, meaning that an issuer’s preferred stock generally
pays dividends only after the issuer makes required payments to holders of its
bonds and other debt. Additionally, in certain situations, an issuer may call or
redeem its preferred stock or convert it to common stock. Preferred stock may be
less liquid than many other types of securities, such as common stock, and
generally provides no voting rights with respect to the issuer. Preferred stock
is subject to many of the risks associated with debt securities, including
interest rate risk. As interest rates rise, the value of the preferred stocks
held by the Fund are likely to decline.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Credit
Risk: Credit
risk refers to the possibility that the issuer of the security will not be able
to make principal and interest payments when due. Changes in an issuer’s credit
rating or the market’s perception of an issuer’s creditworthiness may also
affect the value of the Fund’s investment in that issuer. Securities rated in
the four highest categories by the rating agencies are considered investment
grade but they may also have some speculative characteristics. Investment grade
ratings do not guarantee that bonds will not lose value.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Banking Industry:
The performance of stocks in the banking industry may be affected by extensive
governmental regulation which may limit both the amounts and types of loans and
other financial commitments they can make, and the interest rates and fees they
can charge and the amount of capital they must maintain. Profitability is
largely dependent on the availability and cost of capital funds and can
fluctuate significantly when interest rates change. Credit losses resulting from
financial difficulties of borrowers can negatively impact
banking
companies. Banks may also be subject to severe price competition. Competition is
high among banking companies and failure to maintain or increase market share
may result in lost market value. The impact of changes in capital requirements
and recent or future regulation of any individual banking company, or of the
financials sector as a whole, cannot be predicted. In recent years, cyberattacks
and technology malfunctions and failures have become increasingly frequent in
this sector and have caused significant losses to companies in this sector,
which may negatively impact the Fund.
Risks
Related to Investing in the Financials Sector: Performance
of companies in the financials sector may be adversely impacted by many factors,
including, among others, government regulations, economic conditions, credit
rating downgrades, changes in interest rates, and decreased liquidity in credit
markets. This sector has experienced significant losses in the past, and the
impact of more stringent capital requirements and of current or future
regulation on any individual financial company or on the sector as a whole
cannot be predicted. In recent years, cyber-attacks and technology malfunctions
and failures have become increasingly frequent in this sector and have caused
significant losses to companies in this sector, which may negatively impact the
Fund.
Foreign
Financial Institution Risk:
Certain of the securities that comprise the Underlying Index, while traded on
U.S. exchanges, may be issued by foreign financial institutions. Therefore, the
Fund may be subject to the risks of investing in securities issued by foreign
companies, which may not be subject to the same regulations as companies
domiciled in the U.S. The health of many foreign financial institutions is often
tied closely with the financial stability of the local economy in which they are
domiciled, and therefore are subject to additional risks including but not
limited to: policy changes, slow or decelerating economic growth, and high
levels of debt.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
High
Yield Securities Risk:
Securities that are rated below investment grade (commonly referred to as "junk
bonds", including those bonds rated lower than "BBB-" by Standard &
Poor’s®
(a division of the McGraw-Hill Companies, Inc.) ("S&P") and Fitch, Inc.
("Fitch"), "Baa3" by Moody’s®
Investors Service, Inc. ("Moody’s"), or "BBB (low)" by Dominion Bond Rating
Service Limited("DBRS"), or are unrated but may be judged to be of comparable
quality, at the time of purchase, may be more volatile than higher-rated
securities of similar maturity. Investing in junk bonds is speculative.
Income
Risk:
Income
risk is the risk that the Fund’s income will decline because of falling interest
rates.
Interest
Rate Risk: Interest
rate risk is the risk that prices of fixed income securities generally increase
when interest rates decline and decrease when interest rates increase. The Fund
may lose money if short-term or long-term interest rates rise
sharply.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market
volatility
or other unusual market conditions. Tracking error also may result because the
Fund incurs fees and expenses, while the Underlying Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart and table that
follow show how the Fund performed on a calendar year basis and provide an
indication of the risks of investing in the Fund by showing changes in the
Fund's performance from year to year and by showing the Fund's average annual
total returns for the indicated periods compared with the Fund's benchmark index
and a broad measure of market
performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
8.71% |
Worst
Quarter: |
3/31/2020 |
-11.89% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (09/11/2017) |
Global
X U.S. Preferred ETF: |
|
|
|
·Return
before taxes |
-20.47% |
0.54% |
0.66% |
·Return
after taxes on distributions1 |
-21.84% |
-1.10% |
-1.05% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-11.46% |
0.20% |
0.22% |
ICE
BofA Diversified Core U.S. Preferred Securities Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes)
|
-20.42% |
0.72% |
0.84% |
S&P
500®
Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.11% |
9.42% |
10.46% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
Variable Rate Preferred ETF
Ticker:
PFFV
Exchange: NYSE Arca
INVESTMENT
OBJECTIVE
The Global X Variable Rate Preferred ETF ("Fund") seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the ICE U.S. Variable Rate Preferred Securities
Index ("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.25% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.25% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$26 |
$80 |
$141 |
$318 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 74.41% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the ICE U.S. Variable Rate Preferred
Securities Index ("Underlying Index") and in American Depositary Receipts
("ADRs") and Global Depositary Receipts ("GDRs") based on the securities in the
Underlying Index. The Fund's 80% investment policy is non-fundamental and
requires 60 days prior written notice to shareholders before it can be changed.
The Fund may lend securities representing up to one-third of the value of the
Fund’s total assets (including the value of the collateral
received).
The
Underlying Index is designed to track the broad-based performance of the
U.S.-listed variable rate preferred securities market. Qualifying preferred
securities must be listed on a U.S. exchange, denominated in U.S. dollars, have
floating or variable dividends or coupons, and have a minimum amount outstanding
of $50 million. Qualifying preferred securities may, however, be issued by
non-U.S. companies. Qualifying securities must be issued in $25, $50, $100, or
$1000 par/liquidation preference increments, must have a traded market value of
greater than $6 million in each of the previous three calendar months, and must
have at least one year remaining to maturity, as determined by ICE Data Indices,
LLC (the "Index Provider").
Constituents
in the Underlying Index are capitalization-weighted based on their current
amount outstanding times the market price plus accrued interest. A weighting cap
of 10% is applied at the issuer level to limit the aggregate weight of a single
issuer
to
10% at each rebalance. The Underlying Index may include large-, mid- or
small-capitalization companies. Components of the Underlying Index primarily
include financials companies. The Underlying Index is rebalanced quarterly. The
Underlying Index may include securities that are rated below investment grade or
that are unrated but may be deemed to be of a comparable quality. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally uses a representative sampling strategy with respect to the
Underlying Index. "Representative sampling" is an indexing strategy that
involves investing in a representative sample of securities that collectively
has an investment profile similar to the Underlying Index in terms of key risk
factors, performance attributes and other characteristics. These include country
weightings, market capitalization and other financial characteristics of
securities. The Fund may or may not hold all of the securities in the Underlying
Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the banking industry and had significant
exposure to the financials
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Fixed-to-Floating
Rate Securities Risk:
The Fund invests in fixed-to-floating rate preferred securities, which are
securities that have an initial term with a fixed dividend rate and following
this initial term bear a floating dividend rate. Securities which include a
floating or variable interest rate component can be less sensitive to interest
rate changes than securities with fixed interest rates, but may decline in value
if their interest rates do not rise as much, or as quickly, as interest rates in
general. Although floating rate preferred securities can be less sensitive to
interest rate risk than fixed-rate preferred securities, they are subject to the
risks applicable to preferred securities more generally.
Hybrid
Securities Investment Risk:
Hybrid securities are subject to the risks of equity securities and risks of
debt securities. The claims of holders of hybrid securities of an issuer are
generally subordinated to those of holders of traditional debt securities in
bankruptcy, and thus hybrid securities may be more volatile and subject to
greater risk than traditional debt securities and may, in certain circumstances,
even be more volatile than traditional equity securities. At the same time,
hybrid securities may not fully participate in gains of their issuer and thus
potential
returns
of such securities are generally more limited than traditional equity
securities, which would participate in such gains.
LIBOR
Transition Risk: The
Fund invests in financial instruments that utilize London Interbank Offered Rate
(“LIBOR”) as the reference or benchmark rate for variable interest rate
calculations. On July 27, 2017, the head of the United Kingdom’s Financial
Conduct Authority ("FCA") announced a desire to phase out the use of LIBOR by
the end of 2021. In March 2021, the FCA and LIBOR's administrator, ICE Benchmark
Administration, announced that most LIBOR settings will no longer be published
after the end of 2021 and a selection of widely used U.S. dollar LIBOR rates
will continue to be published until June 2023 in order to assist with the
transition. There remains uncertainty regarding the effect of the LIBOR
transition process and therefore any impact of a transition away from LIBOR on
the Fund or the instruments in which the Fund invests cannot yet be determined.
There is no assurance that the composition or characteristics of any alternative
reference rate (e.g., the Secured Overnight Financing Rate (“SOFR”), which is
intended to replace the U.S. dollar LIBOR) will be similar to or produce the
same value or economic equivalence as LIBOR or that instruments using an
alternative rate will have the same volume or liquidity. As a result, the
transition process might lead to increased volatility and reduced liquidity in
markets that currently rely on LIBOR to determine interest rates; a reduction in
the value of some LIBOR-based investments; increased difficulty in borrowing or
refinancing and diminished effectiveness of any applicable hedging strategies
against instruments whose terms currently include LIBOR; and/or costs incurred
in connection with temporary borrowings and closing out positions and entering
into new agreements. Any such effects of the transition away from LIBOR and the
adoption of alternative reference rates could result in losses to the Fund.
Preferred
Stock Investment Risk:
Preferred stock may be subordinated to bonds or other debt instruments in an
issuer’s capital structure, meaning that an issuer’s preferred stock generally
pays dividends only after the issuer makes required payments to holders of its
bonds and other debt. Additionally, in certain situations, an issuer may call or
redeem its preferred stock or convert it to common stock. Preferred stock may be
less liquid than many other types of securities, such as common stock, and
generally provides no voting rights with respect to the issuer. Preferred stock
is subject to many of the risks associated with debt securities, including risks
associated with floating rate debt.
Variable
and Floating Rate Securities Risk: During
periods of increasing interest rates, changes in the coupon rates of variable or
floating rate securities may lag behind the changes in market rates or may have
limits on the maximum increases in coupon rates. Alternatively, during periods
of declining interest rates, the coupon rates on such securities will typically
readjust downward resulting in a lower yield. Floating rate securities may trade
infrequently, and their value may be impaired when the Fund needs to liquidate
such securities. A downward adjustment in coupon rates may decrease the Fund's
income as a result of its investment in variable or floating rate
securities.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk: Compared
to mid- and large-capitalization companies, small-capitalization companies may
be less stable and more susceptible to adverse developments, and their
securities may be more volatile and less liquid.
Credit
Risk: Credit
risk refers to the possibility that the issuer of the security will not be able
to make principal and interest payments when due. Changes in an issuer’s credit
rating or the market’s perception of an issuer’s creditworthiness may also
affect the value of the Fund’s investment in that issuer. Securities rated in
the four highest categories by the rating agencies are considered investment
grade but they may also have some speculative characteristics. Investment grade
ratings do not guarantee that bonds will not lose value.
Focus
Risk
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Banking Industry:
The performance of stocks in the banking industry may be affected by extensive
governmental regulation which may limit both the amounts and types of loans and
other financial commitments they can make, and the interest rates and fees they
can charge and the amount of capital they must maintain. Profitability is
largely dependent on the availability and cost of capital funds and can
fluctuate significantly when interest rates change. Credit losses resulting from
financial difficulties of borrowers can negatively impact banking companies.
Banks may also be subject to severe price competition. Competition is high among
banking companies and failure to maintain or increase market share may result in
lost market value. The impact of changes in capital requirements and recent or
future regulation of any individual banking company, or of the financials sector
as a whole, cannot be predicted. In recent years, cyberattacks and technology
malfunctions and failures have become increasingly frequent in this sector and
have caused significant losses to companies in this sector, which may negatively
impact the Fund.
Risks
Related to Investing in the Financials Sector: Performance
of companies in the financials sector may be adversely impacted by many factors,
including, among others, government regulations, economic conditions, credit
rating downgrades, changes in interest rates, and decreased liquidity in credit
markets. This sector has experienced significant losses in the past, and the
impact of more stringent capital requirements and of current or future
regulation on any individual financial company or on the sector as a whole
cannot be predicted. In recent years, cyber-attacks and technology malfunctions
and failures have become increasingly frequent in this sector and have caused
significant losses to companies in this sector, which may negatively impact the
Fund.
Foreign
Financial Institution Risk:
Certain of the securities that comprise the Underlying Index, while traded on
U.S. exchanges, may be issued by foreign financial institutions. Therefore, the
Fund may be subject to the risks of investing in securities issued by foreign
companies, which may not be subject to the same regulations as companies
domiciled in the U.S. The health of many foreign financial institutions is often
tied closely with the financial stability of the local economy in which they are
domiciled, and therefore are subject to additional risks including but not
limited to: policy changes, slow or decelerating economic growth, and high
levels of debt.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed
countries
tend to represent a significant portion of the global economy and have generally
experienced slower economic growth than some less developed countries. Certain
developed countries have experienced security concerns, such as terrorism and
strained international relations. Incidents involving a country’s or region’s
security may cause uncertainty in its markets and may adversely affect its
economy and the Fund’s investments. In addition, developed countries may be
impacted by changes to the economic conditions of certain key trading partners,
regulatory burdens, debt burdens and the price or availability of certain
commodities.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
High
Yield Securities Risk:
Securities that are rated below investment grade (commonly referred to as "junk
bonds", including those bonds rated lower than "BBB-" by Standard &
Poor’s®
(a division of the McGraw-Hill Companies, Inc.) ("S&P") and Fitch, Inc.
("Fitch"), "Baa3" by Moody’s®
Investors Service, Inc. ("Moody’s"), or "BBB (low)" by Dominion Bond Rating
Service Limited("DBRS"), or are unrated but may be judged to be of comparable
quality, at the time of purchase, may be more volatile than higher-rated
securities of similar maturity. Investing in junk bonds is
speculative.
Interest
Rate Risk: Variable
and floating rate securities generally are less sensitive to interest rate
changes than fixed rate securities but may decline in value if their interest
rates do not rise as much, or as quickly, as interest rates in general. When the
Fund holds variable or floating rate securities, a decrease in market interest
rates will adversely affect the income received from such securities, which may
also impact the net asset value of the Fund’s Shares.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security.
Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value
of
the loaned securities increases and the collateral is not increased accordingly.
Additionally, the Fund will bear any loss on the investment of cash collateral
it receives. These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a risk that
the Fund may not be able to recall the securities in sufficient time to vote on
material proxy matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2021 |
4.17% |
Worst
Quarter: |
6/30/2022 |
-6.01% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (06/22/2020) |
Global
X Variable Rate Preferred ETF: |
|
|
·Return
before taxes |
-14.20% |
1.48% |
·Return
after taxes on distributions1 |
-15.59% |
0.01% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-7.70% |
1.02% |
ICE
U.S. Variable Rate Preferred Securities Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-14.06% |
1.71% |
S&P
500®
Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.11% |
10.29% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan have been Portfolio
Managers of the Fund since the Fund's inception. Ms. Yang has been a Portfolio
Manager of the Fund since December 2020. Mr. Lu has been a Portfolio Manager of
the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X MLP
ETF
Ticker:
MLPA
Exchange: NYSE Arca
INVESTMENT
OBJECTIVE
The Global X MLP ETF ("Fund") seeks to provide investment results
that correspond generally to the price and yield performance, before fees and
expenses, of the Solactive MLP Infrastructure Index ("Underlying
Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.45% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses (Deferred Income Tax Expense and/or Franchise Tax
Expense):1 |
0.00% |
Total
Annual Fund Operating Expenses: |
0.45% |
1
The
Fund is classified for federal income tax purposes as a taxable regular
corporation or so-called Subchapter ''C'' corporation. As a ''C'' corporation,
the Fund accrues deferred tax liability for its future tax liability associated
with the capital appreciation of its investments and the distributions received
by the Fund on equity securities of master limited partnerships considered to be
a return of capital and for any net operating gains. The Fund's accrued deferred
tax liability, if any, is reflected each day in the Fund's net asset value per
share. The deferred income tax expense/(benefit) represents an estimate of the
Fund's potential tax expense/(benefit) if it were to recognize the unrealized
gains/(losses) in the portfolio. An estimate of deferred income tax
expense/(benefit) is dependent upon the Fund's net investment income/(loss) and
realized and unrealized gains/(losses) on investments and such expenses may vary
greatly from year to year and from day to day depending on the nature of the
Fund's investments, the performance of those investments and general market
conditions. Therefore, any estimate of deferred income tax expense/(benefit)
cannot be reliably predicted from year to year. The Fund also accrues state
franchise tax liability. State franchise taxes are separate and distinct from
state income taxes. State franchise taxes are imposed on a corporation for the
right to conduct business in the state and typically are based off the net worth
or capital apportioned to a state. Due to the nature of the Fund's investments,
the Fund may be required to file franchise state returns in several
states.
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One Year |
Three Years |
Five Years |
Ten Years |
$46 |
$144 |
$252 |
$567 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 47.13% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The Fund invests at least 80% of
its total assets in the securities of the Solactive MLP Infrastructure Index
("Underlying Index"). Moreover, at least 80% of the Fund's total assets will be
invested in securities that have economic characteristics of the
Master
Limited Partnership ("MLP") asset class. The Fund's 80% investment policies are
non-fundamental and require 60 days prior written notice to shareholders before
they can be changed.
The
Underlying Index is intended to give investors a means of tracking the
performance of the energy infrastructure MLP asset class in the United States.
As of January 31, 2023, the Underlying Index was comprised of 15 MLPs
engaged in the transportation, storage, and processing of natural resources
("Midstream MLPs"). The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by Solactive AG, the provider of the Underlying
Index ("Index Provider"), which is an organization that is independent of, and
unaffiliated with, the Fund and Global X Management Company LLC, the investment
adviser for the Fund ("Adviser"). The Index Provider determines the relative
weightings of the securities in the Underlying Index and publishes information
regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations that apply to the Fund but not the
Underlying Index.
Midstream
MLPs are publicly traded partnerships engaged in the transportation, storage and
processing of natural resources. By confining their operations to these specific
activities, the interests, or units, of MLPs that elect to be taxed as a
partnership are able to trade on public securities exchanges exactly like the
shares of a corporation, without entity level taxation. The Fund may also invest
in MLPs that elect to be taxed as corporations.
To
refrain from being taxed as a corporation, a partnership must receive at least
90% of its income from qualifying sources as set forth in Section 7704(d) of the
Internal Revenue Code of 1986, as amended (the "Code"). These qualifying sources
include interest, dividends, real estate rents, gain from the sale or
disposition of real property, income and gain from mineral or natural resources
activities, income and gain from the transportation or storage of certain fuels,
gain from the sale or disposition of a capital asset held for the production of
income described in the foregoing, and, in certain circumstances, income and
gain from commodities or futures, forwards and options with respect to
commodities.
MLPs
generally have two classes of owners, the general partner and limited partners.
The general partner of an MLP is typically owned by a major energy company, an
investment fund, or the direct management of the MLP, or is an entity owned by
one or more of such parties. The general partner may be structured as a private
or publicly traded corporation or other entity. The general partner typically
controls the operations and management of the MLP through an up to 2% equity
interest in the MLP plus, in many cases, ownership of common units and
subordinated units. Limited partners typically own the remainder of the
partnership, through ownership of common units, and have a limited role in the
partnership's operations and management. MLPs are typically structured such that
common units and general partner interests have first priority to receive
quarterly cash distributions up to an established minimum amount ("minimum
quarterly distributions" or "MQD"). Common and general partner interests also
accrue arrearages in distributions to the extent the MQD is not paid. Once
common and general partner interests have been paid, subordinated units receive
distributions of up to the MQD; however, subordinated units do not accrue
arrearages. Distributable cash in excess of the MQD is paid to both common and
subordinated units and is distributed to both common and subordinated units
generally on a pro rata basis. The general partner is also eligible to receive
incentive distributions if the general partner operates the business in a manner
which results in distributions paid per common unit surpassing specified target
levels. As the general partner increases cash distributions to the limited
partners, the general partner receives an increasingly higher percentage of the
incremental cash distributions.
Due
to the nature of the Fund's investments, the Fund will not qualify as a
regulated investment company under the Code. As a result, the Fund will be taxed
as a regular corporation ("C" corporation) for federal income tax
purposes.
The
Adviser seeks a correlation over time of 95% or better between the Fund's
performance, before fund fees, expenses and taxes, and the performance of the
Underlying Index. A correlation percentage of 100% would indicate perfect
correlation. If the
Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The
Fund concentrates its investments (i.e.,
hold 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of January 31, 2023, the Underlying Index was concentrated
in the oil, gas and consumable fuels industry and had significant exposure to
the energy sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Master
Limited Partnerships Investment Risk: Investments
in securities of an MLP involve risks that differ from investments in common
stock, including risks related to limited control and limited rights to vote on
matters affecting the MLP, risks related to potential conflicts of interest
between the MLP and the MLP’s general partner, and cash flow risks. MLP common
units and other equity securities can be affected by changes in macro-economic
and other factors affecting the stock market in general, including changes in
growth, unemployment, and inflation rates, as well as expectations of interest
rates. MLP common units and other equity securities can also be affected by
investor sentiment towards MLPs or the energy sector, changes in a particular
issuer’s financial condition, or unfavorable or unanticipated poor performance
of a particular issuer (in the case of MLPs, generally measured in terms of
distributable cash flow). Prices of common units of individual MLPs and other
equity securities also can be affected by fundamentals unique to the partnership
or company, including earnings power and coverage ratios.
Midstream
MLPs Investment Risk:
MLPs that operate midstream assets are subject to supply and demand fluctuations
in the markets they serve, which may be impacted by a wide range of factors,
including fluctuating commodity prices, weather, increased conservation or use
of alternative fuel sources, increased governmental or environmental regulation,
depletion, rising interest rates, declines in domestic or foreign production,
accidents or catastrophic events, increasing operating expenses and economic
conditions, among others. Midstream MLPs may be particularly susceptible to
large drops in energy prices, which have the ability to impact more drastically
production in the oil and gas fields that they serve. Further, MLPs that operate
gathering and processing assets are subject to natural declines in the
production of the oil and gas fields they serve. In addition, some gathering and
processing contracts subject the owner of such assets to direct commodity price
risk.
Associated
Risks Related to Investing in Energy Infrastructure Companies:
The Fund invests primarily in energy infrastructure companies. Energy
infrastructure companies are subject to risks specific to the industry they
serve, including, but not limited to, the following:
•
reduced volumes of natural gas or other energy commodities available for
transporting, processing or storing;
•
new construction and acquisition risk, which can limit growth potential;
•
a sustained reduced demand for crude oil, natural gas and refined petroleum
products resulting from a recession or an increase in market price or higher
taxes;
•
changes in the regulatory environment;
•
extreme weather;
•
rising interest rates, which could result in a higher cost of capital and drive
investors into other investment opportunities; and
•
threats of attack by terrorists.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Commodity
Exposure Risk:
To the extent that its Underlying Index has exposure to securities and markets
that are susceptible to fluctuations in certain commodity markets, any negative
changes in commodity markets could have a great impact on the Fund. Commodity
prices may be influenced or characterized by unpredictable factors, including,
where applicable, high volatility, changes in supply and demand relationships,
weather, agriculture, trade, military conflict, changes in interest rates and
monetary and other governmental policies, action and inaction. Securities of
companies held by the Fund that are dependent on a single commodity, or are
concentrated on a single commodity sector, may typically exhibit even higher
volatility attributable to commodity prices.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Energy Sector:
The value of securities issued by companies in the energy sector may decline for
many reasons, including, without limitation, changes in energy prices;
international politics; energy conservation; the success of exploration
projects; natural disasters or other catastrophes; changes in exchange rates,
interest rates, or economic conditions; changes in demand for energy products
and services; and tax and other government regulatory policies. Actions taken by
central governments may dramatically impact supply and demand forces that
influence energy prices, resulting in sudden decreases in value for companies in
the energy sector.
Risks
Related to Investing in the Oil, Gas and Consumable Fuels Industry:
The oil, gas and consumable fuels industry is cyclical and highly dependent on
the market price of fuel. The market value of companies in the oil, gas and
consumable fuels industry are strongly affected by the levels and volatility of
global commodity prices, supply and demand, capital expenditures on exploration
and production, energy conservation efforts, the prices of alternative fuels,
exchange rates and technological advances. Companies in this sector are subject
to substantial government regulation and contractual fixed pricing, which may
increase the cost of business and limit these companies’ earnings. Actions taken
by central governments may dramatically impact supply and demand forces that
influence the market price of fuel, resulting in sudden decreases in value for
companies in the oil, gas and consumable fuels industry. A significant portion
of their revenues depends on a relatively small number of customers, including
governmental entities and utilities. As a result, governmental budget restraints
may have a material adverse effect on the stock prices of companies in the
industry.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in
which
the Fund invests and, consequently, the Fund are also subject to specific risks
as a result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
MLP
Tax Risk:
Subject to the application of the partnership audit rules, MLPs that elect to be
taxed as partnerships do not pay U.S. federal income tax at the partnership
level. Rather, each partner is allocated a share of the partnership’s income,
gains, losses, deductions and expenses. A change in current tax law, or a change
in the underlying business mix of a given MLP, could result in an MLP that
previously elected to be taxed as a partnership being treated as a corporation
for U.S. federal income tax purposes, which would result in such MLP being
required to pay U.S. federal income tax on its taxable income. The
classification of an MLP as a corporation for U.S. federal income tax purposes
would have the effect of reducing the amount of cash available for distribution
by the MLP. Thus, to the extent that any of the MLPs to which the Fund has
exposure are treated as a corporation for U.S. federal income tax purposes, it
could result in a reduction in the value of the Fund’s investment and lower the
Fund’s income. The Fund may also invest in MLPs that elect to be taxed as
corporations, which taxes would have the effect of reducing the amount of cash
available for distribution by the MLP. Additionally, as a result of the Fund's
exposure to MLPs taxed as partnerships, a portion of the Fund’s distributions
are expected to be treated as a return of capital for tax purposes. Return of
capital distributions are not taxable income to you, but reduce your tax basis
in your Fund Shares. Such a reduction in tax basis will result in larger taxable
gains and/or lower tax losses on a subsequent sale of Fund Shares. Shareholders
who sell their Shares for less than they bought them may still recognize a gain
due to the reduction in tax basis. Shareholders who periodically receive the
payment of dividends or other distributions consisting of a return of capital
may be under the impression that they are receiving net profits from the Fund
when, in fact, they are not. Shareholders should not assume that the source of
the distributions is from the net profits of the Fund. To the extent that the
distributions paid to you constitute a return of capital, the Fund's assets will
decline. A decline in the Fund's assets may also result in an increase in the
portion of a Fund's expense ratio that is not subject to a unitary fee or any
other form of contractual cap, and over time the distributions paid in excess of
net distributions received could work to erode the Fund's net asset value.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Potential
Substantial After-Tax Tracking Error From Index Performance Risk:
The Fund will be subject to taxation on its taxable income. The NAV of Shares
will also be reduced by the accrual of any deferred tax liabilities. The
Underlying Index, however, is calculated without any deductions for taxes. As a
result, the Fund’s performance could differ significantly from the Underlying
Index even if the pretax performance of the Fund and the performance of the
Underlying Index are closely correlated. The performance of the Fund may diverge
from that of the Underlying Index.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Taxable
Fund Risk:
Tax risks associated with the Fund's structure include, but are not limited to,
the following:
Deferred
Tax Liability. Cash distributions from an MLP to the Fund that exceed the Fund’s
allocable share of such MLP’s net taxable income are considered a tax-deferred
return of capital that will reduce the Fund’s adjusted tax basis in the equity
securities of the MLP. These reductions in the Fund’s adjusted tax basis in the
MLP equity securities will increase the amount of gain (or decrease the amount
of loss) recognized by the Fund on a subsequent sale of the securities. The Fund
will accrue deferred income taxes for any future tax liability associated with
its investment in MLPs, including as a result of ordinary income incurred by the
MLPs as well as resulting from capital appreciation of the Fund’s investments.
Upon the sale of an MLP security, the Fund may be liable for previously deferred
taxes. The Fund’s accrued deferred tax liability will be reflected each day in
the Fund’s NAV. Increases in deferred tax liability will decrease the Fund's
NAV. Conversely, decreases in deferred tax liability will increase the Fund's
NAV. The Fund will rely to some extent on information provided by the MLPs in
which it invests, which is not necessarily timely, to estimate deferred tax
liability for purposes of financial statement reporting and determining the
Fund's NAV. The Fund may accrue separately for taxes associated with both
capital gains and ordinary income realized by the Fund. From time to time, the
Adviser will modify the estimates or assumptions regarding the Fund’s deferred
tax liability as new information becomes available. The Fund’s estimates
regarding its deferred tax liability are made in good faith. However, the daily
estimate of the Fund’s deferred tax liability used to calculate the Fund’s NAV
could vary significantly from the Fund’s actual tax liability. The Fund will
generally compute deferred income taxes based on the federal income tax rate
applicable to corporations (currently 21%) and an assumed rate attributable to
state taxes. To the extent that the distributions paid to you constitute a
return of capital, the Fund's assets will decline. A decline in the Fund's
assets may also result in an increase in the portion of a Fund's expense ratio
that is not subject to a unitary fee or any other form of contractual cap, and
over time the distributions paid in excess of net distributions received could
work to erode the Fund's net asset value.
Tax
Status of the Fund. The Fund is taxed as a regular corporation ("C" corporation)
for federal income tax purposes. This differs from most investment companies,
which elect to be treated as regulated investment companies under the Code in
order to avoid paying entity level income taxes. Under current law, the Fund is
not eligible to elect treatment as a regulated investment company due to its
investments primarily in MLPs invested in energy assets. As a result, the Fund
will be obligated to pay applicable federal and state corporate income taxes on
its taxable income as opposed to most investment companies which are not so
obligated. The Fund expects that a portion of the distributions it receives from
MLPs may be treated as a tax-deferred return of capital, thus reducing the
Fund’s current tax liability. However, the amount of taxes currently paid by the
Fund will vary depending on the amount of income and gains derived from
investments and/or sales of MLP interests and such taxes may reduce your return
from an investment in the Fund. Additionally, in accordance with the provisions
of the Inflation Reduction Act of 2022, a Fund may become liable for federal
excise tax on share redemptions occurring on or after January 1, 2023. A Fund
will incur an excise tax liability equal to one percent (1%) of the fair market
value of Fund share redemptions less the fair market value of Fund share
issuances (in excess of $1 million of fair market value) annually on a taxable
year basis.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's
Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance. On or
around March 30, 2015, there was a change in the Fund's Underlying Index from
Solactive MLP Composite Index to Solactive MLP Infrastructure Index.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
47.60% |
Worst
Quarter: |
3/31/2020 |
-58.62% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Ten
Years Ended December 31, 2022 |
Global
X MLP ETF: |
|
|
|
·Return
before taxes |
26.98% |
2.12% |
0.54% |
·Return
after taxes on distributions1 |
24.81% |
1.75% |
0.18% |
·Return
after taxes on distributions and sale of Fund Shares1 |
17.42% |
1.61% |
0.38% |
Hybrid
Solactive MLP Infrastructure Index (gross)2
(Index
returns do not reflect deduction for fees, expenses, or
taxes) |
29.08% |
2.82% |
1.93% |
S&P
500®
Index
(Index
returns do not reflect deduction for fees, expenses, or
taxes) |
-18.11% |
9.42% |
12.56% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts (IRAs).
2 Hybrid Index
performance reflects the performance of the Solactive MLP Composite Index
through March 31, 2015 and the Solactive MLP Infrastructure Index thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you. A
portion of the Fund's distributions is also expected to be treated as a return
of capital for tax purposes. Return of capital distributions are not taxable to
you, but reduce your tax basis in your Shares.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MLP
& Energy Infrastructure ETF
Ticker:
MLPX
Exchange: NYSE Arca
INVESTMENT
OBJECTIVE
The Global X MLP & Energy Infrastructure ETF ("Fund") seeks to
provide investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Solactive MLP & Energy
Infrastructure Index ("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.45% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.45% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$46 |
$144 |
$252 |
$567 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 23.48% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Solactive
MLP & Energy Infrastructure Index ("Underlying Index"). The Fund also
invests at least 80% of its total assets in securities of master limited
partnerships ("MLPs") and energy infrastructure corporations. The Fund's 80%
investment policies are non-fundamental and require 60 days prior written notice
to shareholders before they can be changed. The Fund may lend securities
representing up to one-third of the value of the Fund’s total assets (including
the value of the collateral received).
The
Underlying Index tracks the performance of midstream energy infrastructure MLPs
and corporations. Midstream energy infrastructure MLPs and corporations
principally own and operate assets used in energy logistics, including, but not
limited to, pipelines, storage facilities and other assets used in transporting,
storing, gathering, and processing natural gas, natural gas liquids, crude oil
or refined products. The Underlying Index limits its exposure to partnerships in
order to comply with applicable tax diversification rules. Securities must be
publicly traded in the United States. As of January 31, 2023, the
Underlying Index was comprised of 27 securities. The Fund's investment objective
and Underlying Index may be changed without shareholder approval.
The
Underlying Index is sponsored by Solactive AG, the provider of the Underlying
Index ("Index Provider"), which is an organization that is independent of, and
unaffiliated with, the Fund and Global X Management Company LLC, the investment
adviser
for the Fund ("Adviser"). The Index Provider determines the relative weightings
of the securities in the Underlying Index and publishes information regarding
the market value of the Underlying Index.
The
Adviser will use a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
MLPs,
including midstream energy infrastructure MLPs, are publicly traded partnerships
engaged in the transportation, storage, processing, refining, marketing,
exploration, production, and mining of natural resources. By confining their
operations to these specific activities, their interests, or units, are able to
trade on public securities exchanges exactly like the shares of a corporation,
without entity level taxation.
To
qualify as a MLP and not to be taxed as a corporation, a partnership must
receive at least 90% of its income from qualifying sources as set forth in
Section 7704(d) of the Internal Revenue Code of 1986, as amended (the "Code").
These qualifying sources include interest, dividends, real estate rents, gain
from the sale or disposition of real property, income and gain from mineral or
natural resources activities, income and gain from the transportation or storage
of certain fuels, gain from the sale or disposition of a capital asset held for
the production of income described in the foregoing, and, in certain
circumstances, income and gain from commodities or futures, forwards and options
with respect to commodities.
MLPs
generally have two classes of owners, the general partner and limited partners.
The general partner of an MLP is typically owned by a major energy company, an
investment fund, or the direct management of the MLP, or is an entity owned by
one or more of such parties. The general partner may be structured as a private
or publicly traded corporation or other entity. The general partner typically
controls the operations and management of the MLP through an up to 2% equity
interest in the MLP plus, in many cases, ownership of common units and
subordinated units. Limited partners typically own the remainder of the
partnership, through ownership of common units, and have a limited role in the
partnership's operations and management. MLPs are typically structured such that
common units and general partner interests have first priority to receive
quarterly cash distributions up to an established minimum amount ("minimum
quarterly distributions" or "MQD"). Common and general partner interests also
accrue arrearages in distributions to the extent the MQD is not paid. Once
common and general partner interests have been paid, subordinated units receive
distributions of up to the MQD; however, subordinated units do not accrue
arrearages. Distributable cash in excess of the MQD is paid to both common and
subordinated units and is distributed to both common and subordinated units
generally on a pro rata basis. The general partner is also eligible to receive
incentive distributions if the general partner operates the business in a manner
which results in distributions paid per common unit surpassing specified target
levels. As the general partner increases cash distributions to the limited
partners, the general partner receives an increasingly higher percentage of the
incremental cash distributions.
The
Adviser seeks a correlation over time of 95% or better between the Fund's
performance, before fund fees, expenses and taxes, and the performance of the
Underlying Index. A correlation percentage of 100% would indicate perfect
correlation. If the Fund uses a replication strategy, it can be expected to have
greater correlation to the Underlying Index than if it uses a representative
sampling strategy.
The Fund will
concentrate its investments (i.e., hold 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index was concentrated in the oil, gas and consumable fuels industry
and had significant exposure to the energy
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well
as
other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Master
Limited Partnerships Investment Risk: Investments
in securities of an MLP involve risks that differ from investments in common
stock, including risks related to limited control and limited rights to vote on
matters affecting the MLP, risks related to potential conflicts of interest
between the MLP and the MLP’s general partner, and cash flow risks. MLP common
units and other equity securities can be affected by changes in macro-economic
and other factors affecting the stock market in general, including changes in
growth, unemployment, and inflation rates, as well as expectations of interest
rates. MLP common units and other equity securities can also be affected by
investor sentiment towards MLPs or the energy sector, changes in a particular
issuer’s financial condition, or unfavorable or unanticipated poor performance
of a particular issuer (in the case of MLPs, generally measured in terms of
distributable cash flow). Prices of common units of individual MLPs and other
equity securities also can be affected by fundamentals unique to the partnership
or company, including earnings power and coverage ratios.
Midstream
MLPs Investment Risk:
MLPs that operate midstream assets are subject to supply and demand fluctuations
in the markets they serve, which may be impacted by a wide range of factors,
including fluctuating commodity prices, weather, increased conservation or use
of alternative fuel sources, increased governmental or environmental regulation,
depletion, rising interest rates, declines in domestic or foreign production,
accidents or catastrophic events, increasing operating expenses and economic
conditions, among others. Midstream MLPs may be particularly susceptible to
large drops in energy prices, which have the ability to impact more drastically
production in the oil and gas fields that they serve. Further, MLPs that operate
gathering and processing assets are subject to natural declines in the
production of the oil and gas fields they serve. In addition, some gathering and
processing contracts subject the owner of such assets to direct commodity price
risk.
Associated
Risks Related to Investing in Energy Infrastructure Companies: The
Fund invests primarily in energy infrastructure companies. Energy infrastructure
companies are subject to risks specific to the industry they serve, including,
but not limited to, the following:
•
reduced volumes of natural gas or other energy commodities available for
transporting, processing or storing;
•
new construction and acquisition risk, which can limit growth potential;
•
a sustained reduced demand for crude oil, natural gas and refined petroleum
products resulting from a recession or an increase in market price or higher
taxes;
•
changes in the regulatory environment;
•
extreme weather;
•
rising interest rates, which could result in a higher cost of capital and drive
investors into other investment opportunities; and
•
threats of attack by terrorists.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Commodity
Exposure Risk:
To the extent that its Underlying Index has exposure to securities and markets
that are susceptible to fluctuations in certain commodity markets, any negative
changes in commodity markets could have a great impact on the Fund. Commodity
prices may be influenced or characterized by unpredictable factors, including,
where applicable, high volatility, changes in supply and demand relationships,
weather, agriculture, trade, military conflict, changes in interest rates and
monetary and other governmental policies, action and inaction. Securities of
companies held by the Fund that are dependent on a single commodity, or are
concentrated on a single commodity sector, may typically exhibit even higher
volatility attributable to commodity prices.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Energy Sector:
The value of securities issued by companies in the energy sector may decline for
many reasons, including, without limitation, changes in energy prices;
international politics; energy conservation; the success of exploration
projects; natural disasters or other catastrophes; changes in exchange rates,
interest rates, or economic conditions; changes in demand for energy products
and services; and tax and other government regulatory policies. Actions taken by
central governments may dramatically impact supply and demand forces that
influence energy prices, resulting in sudden decreases in value for companies in
the energy sector.
Risks
Related to Investing in the Oil, Gas and Consumable Fuels Industry:
The oil, gas and consumable fuels industry is cyclical and highly dependent on
the market price of fuel. The market value of companies in the oil, gas and
consumable fuels industry are strongly affected by the levels and volatility of
global commodity prices, supply and demand, capital expenditures on exploration
and production, energy conservation efforts, the prices of alternative fuels,
exchange rates and technological advances. Companies in this sector are subject
to substantial government regulation and contractual fixed pricing, which may
increase the cost of business and limit these companies’ earnings. Actions taken
by central governments may dramatically impact supply and demand forces that
influence the market price of fuel, resulting in sudden decreases in value for
companies in the oil, gas and consumable fuels industry. A significant portion
of their revenues depends on a relatively small number of customers, including
governmental entities and utilities. As a result, governmental budget restraints
may have a material adverse effect on the stock prices of companies in the
industry.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Canada:
The Canadian economy is highly dependent on the demand for and price of natural
resources. As a result, the Canadian market is relatively concentrated in
issuers involved in the production and
distribution
of natural resources and any changes in these sectors could have an adverse
impact on the Canadian economy. The Canadian economy is heavily dependent on
relationships with certain key trading partners, including the United States and
China. Developments in the United States, including renegotiation of the North
American Free Trade Agreement (“NAFTA”) and ratification of the successor United
States-Mexico-Canada Agreement (“USMCA”), which went into effect on July 1,
2020, as well as the imposition of additional tariffs by the United States, may
have implications for the trade arrangements between the United States and
Canada, which could negatively affect the value of securities held by the Fund.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
MLP
Tax Risk:
Subject to the application of the partnership audit rules, MLPs that elect to be
taxed as partnerships do not pay U.S. federal income tax at the partnership
level. Rather, each partner is allocated a share of the partnership’s income,
gains, losses, deductions and expenses. A change in current tax law, or a change
in the underlying business mix of a given MLP, could result in an MLP that
previously elected to be taxed as a partnership being treated as a corporation
for U.S. federal income tax purposes, which would result in such MLP being
required to pay U.S. federal income tax on its taxable income. The
classification of an MLP as a corporation for U.S. federal income tax purposes
would have the effect of reducing the amount of cash available for distribution
by the MLP. Thus, to the extent that any of the MLPs to which the Fund has
exposure are treated as a corporation for U.S. federal income tax purposes, it
could result in a reduction in the value of the Fund’s investment and lower the
Fund’s income. The Fund may also invest in MLPs that elect to be taxed as
corporations, which taxes would have the effect of reducing the amount of cash
available for distribution by the MLP. Additionally, as a result of the Fund's
exposure to MLPs taxed as partnerships, a portion of the Fund’s distributions
are expected to be treated as a return of capital for tax purposes. Return of
capital distributions are not taxable income to you, but reduce your tax basis
in your Fund Shares. Such a reduction in tax basis will result in larger taxable
gains and/or lower tax losses on a subsequent sale of Fund Shares. Shareholders
who sell their Shares for less than they bought them may still recognize a gain
due to the reduction in tax basis. Shareholders who periodically receive the
payment of dividends or other distributions consisting of a return of capital
may be under the impression that they are receiving net profits from the Fund
when, in fact, they are not. Shareholders should not
assume
that the source of the distributions is from the net profits of the Fund. To the
extent that the distributions paid to you constitute a return of capital, the
Fund's assets will decline. A decline in the Fund's assets may also result in an
increase in the portion of a Fund's expense ratio that is not subject to a
unitary fee or any other form of contractual cap, and over time the
distributions paid in excess of net distributions received could work to erode
the Fund's net asset value.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
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|
Best
Quarter: |
6/30/2020 |
37.87% |
Worst
Quarter: |
3/31/2020 |
-48.88% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (08/06/2013) |
Global
X MLP & Energy Infrastructure ETF: |
|
|
|
·Return
before taxes |
21.51% |
6.40% |
4.06% |
·Return
after taxes on distributions1 |
20.34% |
4.91% |
2.81% |
·Return
after taxes on distributions and sale of Fund Shares1 |
13.18% |
4.44% |
2.72% |
Solactive
MLP & Energy Infrastructure Index
(Index
returns do not reflect deduction for fees, expenses, or
taxes) |
22.47% |
7.09% |
4.74% |
S&P
500®
Index
(Index
returns do not reflect deduction for fees, expenses, or
taxes) |
-18.11% |
9.42% |
11.18% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts
(IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager
of
the Fund since March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund
since March 1, 2019. Ms. Chan has been a Portfolio Manager of the Fund since
June 10, 2019. Ms. Yang has been a Portfolio Manager of the Fund since December
2020. Mr. Lu has been a Portfolio Manager of the Fund since April
2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
Conscious Companies ETF
Ticker:
KRMA
Exchange: NASDAQ
INVESTMENT
OBJECTIVE
The Global X Conscious Companies ETF ("Fund") seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the Concinnity Conscious Companies Index
("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.43% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.43% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
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|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$44 |
$138 |
$241 |
$542 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 31.92% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the
Concinnity Conscious Companies Index ("Underlying Index"). The Fund's 80%
investment policy is non-fundamental and requires 60 days prior written notice
to shareholders before it can be changed.
The
Underlying Index is designed to provide exposure to companies listed in the U.S.
that operate their businesses in a sustainable and responsible manner, as
measured by their ability to achieve positive outcomes that are consistent with
a multi-stakeholder operating system ("MsOS"), as defined by Concinnity Advisors
LP, the provider of the Underlying Index ("Index Provider"). The MsOS is a
corporate governance structure that seeks to account for the multiple
stakeholders that are critical for the ongoing success of the business, and
incorporate the considerations of these stakeholders into the corporate
decision-making and problem-solving process. The Index Provider conducts its
analysis based on the following five key stakeholder groups: (1) Customers, (2)
Employees, (3) Suppliers, (4) Stock and Debt Holders, and (5) Communities in
which the companies operate.
The
universe of companies eligible for inclusion in the Underlying Index is
comprised of companies listed in the United States. with a market capitalization
greater than $2 billion. From this initial universe, the Index Provider applies
a proprietary, three-step analysis to select companies for the Underlying Index.
In the first step, the Index Provider utilizes approximately forty information
sources and public rankings to identify and evaluate companies based on their
demonstrated ability to achieve positive outcomes across all five stakeholder
groups. Positive outcomes vary by stakeholder group, but include metrics that
assess
areas such as employee productivity, customer loyalty and corporate governance.
These information sources are vetted annually by the Index Provider and
evaluated based on stakeholder focus, research methodology and third party or
in-house analysis of a source's potential as a leading indicator of corporate
and/or stock performance. Companies are scored by the Index Provider based on
their appearance and performance in these sources and rankings. Of the
approximately 1,100 - 1,400 companies that typically make up the eligible
universe, approximately 600-700 are generally selected by the Index Provider for
further analysis and potential inclusion in the Underlying Index.
In
the second step of the research process, the Index Provider uses a composite
analysis to apply a deeper evaluation on the remaining companies. The composite
analysis is a process that assesses various MsOS criteria by combining ratings
data from multiple research entities that specialize in various stakeholder
assessment categories. Companies are evaluated through a series of scoring
lenses that combine to form a composite score, which is underpinned by several
hundred MsOS criteria. Composite analysis MsOS criteria include, but are not
limited to: employee engagement, executive integrity, customer relationship
quality, labor and human rights, and quality of financial reporting. Various
modeling techniques are then used by the Index Provider to combine qualitative
and quantitative data into a single score for each company. This score reflects
the degree to which a company operates its business using the MsOS approach, as
defined by the research process. The approximately 300-350 highest scoring
companies ultimately comprise the MsOS investable universe for the purposes of
constructing the Underlying Index.
In
the final step, the Index Provider applies a screen for consistent achievement
to the MsOS investable universe of the approximately 300-350 highest scoring
companies. In order to be included in the Underlying Index, a company must have
qualified for inclusion in the MsOS investable universe for at least three
consecutive years. The Underlying Index is equal-weighted. The Underlying Index
may include large- or mid-capitalization companies, and will generally provide
exposure to all major sectors. As of January 31, 2023, the Underlying Index
had 177 constituents, with no single sector having an allocation greater than
25%. The three largest sectors represented in the Underlying Index as of
January 31, 2023, were information technology, health care and financials.
The Fund's investment objective and Underlying Index may be changed without
shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index had significant exposure to the information technology
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely
affect
the Fund’s net asset value (“NAV”), trading price, yield, total return and
ability to meet its investment objective, as well as other risks that are
described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Associated
Risks Related to Socially Responsible Investments:
Certain social responsibility investment criteria limit the types of securities
that can be included in the Underlying Index. This could cause the Underlying
Index to underperform other benchmark indices, and could cause the Fund to
underperform other funds that do not have a social responsibility
focus.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those
Authorized
Participants is obligated to engage in creation and/or redemption transactions.
To the extent that those Authorized Participants exit the business or are unable
to process creation and/or redemption orders, such as in times of market stress,
Shares may be more likely to trade at a premium or discount to NAV and/or at
wider intraday bid-ask spreads, and possibly face trading halts and/or delisting
from an exchange.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
21.51% |
Worst
Quarter: |
3/31/2020 |
-22.43% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (07/11/2016) |
Global
X Conscious Companies ETF: |
|
|
|
·Return
before taxes |
-19.01% |
8.83% |
11.28% |
·Return
after taxes on distributions1 |
-19.17% |
8.49% |
10.93% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-11.13% |
6.94% |
9.06% |
Concinnity
Conscious Companies Index
(Index
returns do not reflect deduction for fees, expenses, or
taxes) |
-19.03% |
9.18% |
11.67% |
S&P
500®
Index
(Index
returns do not reflect deduction for fees, expenses, or
taxes) |
-18.11% |
9.42% |
11.49% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts
(IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a
Portfolio
Manager of the Fund since June 10, 2019. Ms. Yang has been a Portfolio Manager
of the Fund since December 2020. Mr. Lu has been a Portfolio Manager of the Fund
since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
Adaptive U.S. Factor ETF
Ticker:
AUSF
Exchange: NYSE Arca
INVESTMENT
OBJECTIVE
The Global X Adaptive U.S. Factor ETF ("Fund") seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the Adaptive Wealth Strategies U.S. Factor Index
("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.27% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.27% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$28 |
$87 |
$152 |
$343 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 115.74% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Adaptive
Wealth Strategies U.S. Factor Index ("Underlying Index"). The Fund's 80%
investment policy is non-fundamental and requires 60 days prior written notice
to shareholders before it can be changed.
The
Underlying Index is owned and was developed by NorthCrest Asset Management (the
"Index Provider"). The Index is calculated and maintained by Solactive AG (the
"Calculation Agent"). The Underlying Index is designed to dynamically allocate
across three sub-indices that provide exposure to U.S. equities that exhibit
characteristics of one of three primary factors: value, momentum and low
volatility. Each factor is represented by a sub-index that is derived from the
Solactive U.S. Large & Mid Cap Index, which is designed to measure the 1,000
largest companies, by free float market capitalization, that are exchange-listed
in the United States:
•Solactive
U.S. Large & Mid Cap Value 100 Index TR
– This index is designed to measure the performance of the 100 stocks in the
Solactive U.S. Large & Mid Cap Index that exhibit the greatest exposure to
the value factor.
•Solactive
U.S. Large & Mid Cap Momentum 100 Index TR
– This index is designed to measure the performance of the 100 stocks in the
Solactive U.S. Large & Mid Cap Index that exhibit the highest degree of
relative performance.
•Solactive
U.S. Large & Mid Cap Minimum Downside Volatility 100 Index TR
– This index is designed to measure the performance of the 100 stocks in the
Solactive U.S. Large & Mid Cap Index that exhibit the lowest degree of
downside volatility.
The
Underlying Index is rebalanced quarterly. At each rebalance, the Underlying
Index allocates weight to the three sub-indices based on the relative
performance of each sub-index since the last rebalance of the Underlying Index.
The Underlying Index is designed to always be fully allocated to at least two of
the three sub-indices described above. The Fund's investment objective and
Underlying Index may be changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider,which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). As of
January 31, 2023, the Underlying Index had 173 constituents.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index had significant exposure to the health care
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Health Care Sector: The
health care sector may be affected by government regulations and government
health care programs, increases or decreases in the cost of medical products and
services, an increased emphasis on outpatient services, and product liability
claims, among other factors. Many health care companies are heavily dependent on
patent protection, and the expiration of a company's patent may adversely affect
that company's profitability. Health care companies are subject to competitive
forces that may result in price discounting and may be thinly capitalized and
susceptible to product obsolescence. Companies in the health care sector may
also be affected by unforeseen circumstances including but not limited to the
spread of infectious disease which could impact drug development priorities and
pipelines, supply and demand dynamics for health care equipment, as well as the
ability to receive care in health care service facilities.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Model
Portfolio Risk:
The Underlying Index utilizes a proprietary methodology to determine its
allocations to the securities in which the Fund invests. Investments selected
using a proprietary methodology (i.e.,
quantitative model) may perform differently from the market as a whole or from
their expected performance. There can be no assurance that use of a quantitative
model will enable the Fund to achieve positive returns or outperform the market.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Reliance
on Trading Partners Risk: The
United States is dependent upon trading with key partners. Any reduction in this
trading, including as a result of adverse economic conditions in a trading
partner's economy, may cause an adverse impact on the economy in which the Fund
invests. Through its portfolio companies' trading partners, the Fund is
specifically exposed to Asian
Economic Risk, European Economic Risk, Latin American Economic Risk, Middle East
Economic Risk and
North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Turnover
Risk: The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At
times, the Fund may have a portfolio turnover rate substantially greater than
100%. For example, a portfolio turnover rate of 300%
is equivalent to the Fund buying and selling all of its securities three times
during the course of a year. A
high portfolio turnover rate would result in
high brokerage costs for the Fund, may result in higher taxes when shares are
held in a taxable account and lower Fund performance.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
20.38% |
Worst
Quarter: |
3/31/2020 |
-31.47% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (08/24/2018) |
Global
X Adaptive U.S. Factor ETF: |
|
|
·Return
before taxes |
-0.09% |
8.54% |
·Return
after taxes on distributions1 |
-0.71% |
7.62% |
·Return
after taxes on distributions and sale of Fund Shares1 |
0.29% |
6.43% |
Adaptive
Wealth Strategies U.S. Factor Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
0.19% |
8.88% |
S&P
500®
Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.11% |
8.75% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts
(IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
the Fund's inception. Mr. Xie has been a Portfolio Manager of the Fund since
March 1, 2019. Ms. Chan has
been
a Portfolio Manager of the Fund since June 10, 2019. Ms. Yang has been a
Portfolio Manager of the Fund since December 2020. Mr. Lu has been a Portfolio
Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X
Adaptive U.S. Risk Management ETF
Ticker:
ONOF
Exchange: NYSE Arca
INVESTMENT
OBJECTIVE
The Global X Adaptive U.S. Risk Management ETF ("Fund") seeks to
provide investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Adaptive Wealth Strategies U.S.
Risk Management Index ("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.39% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.39% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$40 |
$125 |
$219 |
$493 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or “turns over” its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund’s
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 1,481.94% of the average value of its
portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets, plus borrowings for investment
purposes (if any), in the securities of the Adaptive Wealth Strategies U.S. Risk
Management Index (the "Underlying Index"), or in investments that have economic
characteristics that are substantially identical to the economic characteristics
of such component securities, either individually or in the aggregate. The
Fund's 80% investment policy is non-fundamental and requires 60 days prior
written notice to shareholders before it can be changed.
The
Underlying Index is owned and was developed by NorthCrest Asset Management (the
"Index Provider"). The Underlying Index is calculated and maintained by
Solactive AG (the "Calculation Agent"). The Underlying Index is designed to
dynamically allocate between either 100% exposure to the Solactive GBS United
States 500 Index TR ("U.S. Equity Position") or 100% exposure to the Solactive
U.S. 1-3 Year Treasury Bond Index ("U.S. Treasury Position"). The Solactive U.S.
1-3 Year Treasury Bond Index is a rules-based, market value weighted index
designed to track the performance of USD-denominated bonds issued by the U.S.
Treasury with at least 1 year until maturity but less than 3 years until
maturity, as of the selection date of the index. The Solactive GBS United States
500 Index TR is a float-adjusted market capitalization weighted index which
measures the performance of the equity securities of the 500 largest companies
from the United States stock market across all sectors. A float-adjusted market
capitalization weighted index weights each index component according to its
market
capitalization,
using the number of shares that are readily available for purchase on the open
market, rather than the total number of shares outstanding of an issuer. The
Underlying Index seeks to provide exposure to the U.S. Equity Position during
periods of normal equity market returns, and seeks to provide exposure to the
U.S. Treasury Position prior to and during periods of adverse market conditions,
as determined by the quantitative model developed by the Index Provider. The
Underlying Index seeks to anticipate periods of adverse market conditions using
quantitative signals (explained in further detail below) that have been
developed based on historical data. The Underlying Index uses four quantitative
signals calculated daily by the Calculation Agent to determine how the
Underlying Index will be allocated between either the U.S. Equity Position or
the U.S. Treasury Position, as further described below:
i.The
200-day simple moving average (“SMA”) of the U.S. Equity Position, which
measures the average closing price of securities within the Solactive GBS United
States 500 Index TR over a 200-day period;
ii.The
moving average convergence divergence (“MACD”), which shows the relationship
between two moving averages of the prices of securities within the U.S. Equity
Position by subtracting the 26-day exponential moving average of the U.S. Equity
Position from the 12-day exponential moving average;
iii.The
drawdown percentage, where drawdown is defined as the peak-to-valley total
change in market price of the U.S. Equity Position, and;
iv.The
level of the Cboe Volatility Index (“VIX”), which is a benchmark index designed
to measure the market’s expectation of future volatility.
Each
of the signals above is given an equal “vote” in determining whether the
Underlying Index is allocated to the U.S. Equity Position or to the U.S.
Treasury Position. The allocation to either the U.S. Equity Position or the U.S.
Treasury Position is determined as follows:
•Exit
Voting:
If the Underlying Index is currently invested in the U.S. Equity Position, at
least three of the exit signals must be triggered (and no more than one entry
signal) for the Underlying Index to exit the U.S. Equity Position and enter the
U.S. Treasury Position.
•Entry
Voting:
If the Underlying Index is currently invested in the U.S. Treasury Position, at
least two of the entry signals must be triggered for the Underlying Index to
exit the U.S. Treasury Position and enter the U.S. Equity Position.
The
trigger threshold for each signal is based on a predetermined Z-score level for
that given signal. A Z-score (often referred to as a “standard score”) is a
measure of how many standard deviations below or above the mean a data point is,
and can be used to identify data points that may be considered outliers relative
to the mean. The Z-score threshold for each vote is determined using historical
returns data for the U.S. Equity Position starting in January of 1993. Each
signal looks at the recent performance of the U.S. Equity Position or the VIX,
and compares that to the historical performance of the U.S. Equity Position or
the VIX, respectively. The Z-scores used in determining an exit or entry vote
are designed to identify cases where the recent performance of the U.S. Equity
Position or the VIX are sufficiently statistically different from the historical
performance to indicate a drawdown event or period of positive market returns
may be likely going forward. Depending on the performance of the U.S. Equity
Position and the VIX, each signal can go for months without changing direction,
or can change as frequently as within the course of a few days. Below is a
description of each signal and its trigger threshold for market entry or exit:
◦SMA
Signal:
▪Market
Exit Vote:
If the prior day Z-Score of the percent difference between the U.S. Equity
Position closing price and the 200-day SMA of the U.S. Equity Position is below
-0.50, the signal indicates to exit the U.S. Equity Position and enter the U.S.
Treasury Position. If the Z-score of the 200-day SMA is below -0.50, based on
historical data, it may indicate that a drawdown event is possible, and the
signal votes to move out of the U.S. Equity Position and into the U.S. Treasury
Position.
▪Market
Entry Vote:
If the prior day Z-Score of the percent difference between the U.S. Equity
Position closing price and the 200-day SMA of the U.S. Equity Position is below
-4.00, the signal indicates to exit the U.S. Treasury Position and enter the
U.S. Equity Position. If the Z-score of the 200-day SMA is below -4.00, based on
historical data, it may indicate that the U.S. Equity Position will experience
positive returns, and the signal votes to re-enter the U.S. Equity
Position.
◦MACD
Signal:
▪Market
Exit Vote:
If the prior day Z-Score of the MACD is below -0.25, the signal indicates to
exit the U.S. Equity Position and enter the U.S. Treasury Position. If the
Z-score of the MACD is below -0.25, based on
historical
data, it may indicate that a drawdown event is possible, and the signal votes to
move out of the U.S. Equity Position and into the U.S. Treasury
Position.
•Market
Entry Vote:
If the prior day Z-Score of the MACD is above 4.00, the signal indicates to exit
the U.S. Treasury Position and enter the U.S. Equity Position. If the Z-score of
the MACD is above 4.00, based on historical data, it may indicate that the U.S.
Equity Position will experience positive returns, and the signal votes to
re-enter the U.S. Equity Position.
◦Drawdown
Percentage Signal:
•Market
Exit Vote:
If the prior day Drawdown Percentage Z-Score is below 0.50, the signal indicates
to exit the U.S. Equity Position and enter the U.S. Treasury Position. If the
Z-score of the drawdown percentage is below 0.50, based on historical data, it
may indicate that a drawdown event is possible, and the signal votes to move out
of the U.S. Equity Position and into the U.S. Treasury Position.
•Market
Entry Vote:
If the prior day Drawdown Percentage Z-Score is below -2.00, the signal
indicates to exit the U.S. Treasury Position and enter the U.S. Equity Position.
If the Z-score of the drawdown percentage is below -2.00, based on historical
data, it may indicate that the U.S. Equity Position will experience positive
returns, and the signal votes to re-enter the U.S. Equity Position.
◦VIX
Signal:
▪Market
Exit Vote:
If the Z-Score of the level of the VIX is above 1.25, the signal votes to exit
the U.S. Equity Position and enter the U.S. Treasury Position. If the Z-score of
the level of the VIX is above 1.25, based on historical data, it may indicate
that a drawdown event is possible, and the signal votes to move out of the U.S.
Equity Position and into the U.S. Treasury Position.
▪Market
Entry Vote:
If the Z-Score of the level of the VIX is above 5.5, the signal indicates to
exit the U.S. Treasury Position and enter the U.S. Equity Position. If the
Z-score of the level of the VIX is above 5.5, based on historical data, it may
indicate that the U.S. Equity Position will experience positive returns, and the
signal votes to re-enter the U.S. Equity Position.
Each
of the signals are calculated daily by the Calculation Agent. Whenever the
required number of signals are triggered, the Underlying Index allocates 100%
weight to either the constituents of the U.S. Equity Position or the U.S.
Treasury Position. As a result, the Fund may engage in active and frequent
trading of its portfolio securities to achieve its investment objective.
Whenever the Underlying Index rebalances into either the U.S. Equity Position or
into the Treasury Position, the new weights go into effect three trading days
after the quantitative signals indicate a rebalance is required. After changing
its allocation, the Underlying Index must remain in the same allocation (the
U.S. Equity Position or the U.S. Treasury Position) for at least ten trading
days before it can change its allocation again. The Fund's investment objective
and Underlying Index may be changed without shareholder approval.
In
seeking to track the Underlying Index, the Fund may purchase the component
securities of the U.S. Equity Position and/or U.S. Treasuries with 1-3 years
remaining to maturity or may purchase other ETFs that have economic
characteristics that are substantially identical to the economic characteristics
of such component securities and/or U.S. Treasuries.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in replicating the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect
correlation.
The Fund is classified as
"non-diversified," which means it may invest a larger percentage of its assets
in a smaller number of issuers than a diversified fund. The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index had significant exposure to the information technology
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
ETF
Investment Risk:
While the risks of owning shares of an underlying ETF generally reflect the
risks of owning the underlying securities of the index the ETF is designed to
track, lack of liquidity in the underlying ETF can result in its value being
more volatile than the underlying portfolio securities. Because the value of an
underlying ETF's shares depends on the demand in the market, the Adviser may not
be able to liquidate the Fund’s holdings in those shares at the most optimal
time, thereby adversely affecting the Fund’s performance. An underlying ETF may
experience tracking error in relation to the index tracked by the underlying
ETF, which could contribute to tracking error for the Fund. In addition, an
underlying ETF's shares may trade at a premium or discount to NAV.
In
addition, investments in the securities of underlying ETFs may involve
duplication of advisory fees and certain other expenses. The Fund will pay
brokerage commissions in connection with the purchase and sale of shares of the
underlying ETFs, which could result in greater expenses to the Fund. By
investing in an underlying ETF, the Fund becomes a shareholder thereof. As a
result, Fund shareholders indirectly bear the Fund’s proportionate share of the
fees and expenses indirectly paid by shareholders of the underlying ETF, in
addition to the fees and expenses Fund shareholders indirectly bear in
connection with the Fund’s own operations.
If
the underlying ETF fails to achieve its investment objective, the value of the
Fund’s investment may decline, adversely affecting the Fund’s performance.
Additionally, some ETFs are not registered under the Investment Company Act of
1940 (“1940 Act”) and therefore, are not subject to the regulatory scheme and
investor protections of the 1940 Act.
U.S.
Treasury Obligations Risk:
U.S. Treasury obligations may differ in their interest rates, maturities, times
of issuance and other characteristics. Similar to other issuers, changes to the
financial condition or credit rating of the U.S. government may cause the value
of the Fund's investments in U.S. Treasury obligations to decline.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Credit
Risk: Credit
risk refers to the possibility that the issuer of the security will not be able
to make principal and interest payments when due. Changes in an issuer’s credit
rating or the market’s perception of an issuer’s creditworthiness may also
affect the value of the Fund’s investment in that issuer. Securities rated in
the four highest categories by the rating agencies are considered investment
grade but they may also have some speculative characteristics. Investment grade
ratings do not guarantee that bonds will not lose value.
Focus
Risk: To
the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
Income
Risk:
Income
risk is the risk that the Fund’s income will decline because of falling interest
rates.
Interest
Rate Risk: Interest
rate risk is the risk that prices of fixed income securities generally increase
when interest rates decline and decrease when interest rates increase. The Fund
may lose money if short-term or long-term interest rates rise
sharply.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Model
Portfolio Risk:
The Underlying Index utilizes a proprietary methodology to determine its
allocations to the securities in which the Fund invests. Investments selected
using a proprietary methodology (i.e.,
quantitative model) may perform differently from the market as a whole or from
their expected performance. There can be no assurance that use of a quantitative
model will enable the Fund to achieve positive returns or outperform the market.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Optimization
Risk:
The Fund is based on the “modern portfolio theory” approach to asset allocation,
which is a framework for determining the allocation of a portfolio with the goal
of achieving an intended investment outcome based on a given level of risk. This
framework relies heavily on the anticipated volatilities, investment returns and
correlations of particular asset classes or securities. There is no guarantee
that the Underlying Index will outperform any alternative strategy that might be
employed in respect of the component assets or that past volatilities and
correlations of particular asset classes or securities will be indicative of
future results.
Passive
Investment Risk:
The Fund is not actively managed. Unlike many investment companies, the Fund
does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Quantitative
Signals Risk: The
performance of the Underlying Index will be significantly affected by the extent
to which the signals utilized to determine whether the Underlying Index is
invested in the U.S. Equity Position or the U.S. Treasury Position correctly
identify potential drawdowns and periods of positive returns. The methodology
upon which the Underlying Index relies is based on certain assumptions made in
reliance on historical market data and it may fail to predict future market
events
or
respond in a way that is advantageous for the Fund. There can be no assurance
that the signals will behave as expected in all market conditions.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Trend
Lag Risk: Trend
indicator signal changes pursuant to which the Fund's exposure and investments
are determined, are designed to become effective three trading days after the
quantitative signals indicate a rebalance is required, and after changing its
allocation the Underlying Index must remain in the same allocation for at least
ten trading days before it can change its allocation again. As a result of this,
the Fund may be exposed to downward trends and/or market volatility and may not
achieve immediate exposure to upward trends and/or market
volatility.
Turnover
Risk: The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At
times, the Fund may have a portfolio turnover rate substantially greater than
100%. For example, a portfolio turnover rate of 300%
is equivalent to the Fund buying and selling all of its securities three times
during the course of a year. A
high portfolio turnover rate would result in
high brokerage costs for the Fund, may result in higher taxes when shares are
held in a taxable account and lower Fund performance.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's
Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
9/30/2022 |
9.01% |
Worst
Quarter: |
3/31/2022 |
-15.29% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (01/12/2021) |
Global
X Adaptive U.S. Risk Management ETF: |
|
|
·Return
before taxes |
-11.59% |
5.38% |
·Return
after taxes on distributions1 |
-12.31% |
4.85% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-6.88% |
3.93% |
Adaptive
Wealth Strategies U.S. Risk Management Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-11.18% |
5.40% |
S&P
500®
Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.11% |
2.06% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts
(IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan and Ms. Yang have been
Portfolio Managers of the Fund since the Fund's inception. Mr. Lu has been a
Portfolio Manager of the Fund since April 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X
Founder-Run Companies ETF
Ticker:
BOSS
Exchange: Cboe BZX
INVESTMENT
OBJECTIVE
The Global X Founder-Run Companies ETF ("Fund") seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the Solactive U.S. Founder-Run Companies Index
("Underlying Index").
FEES AND
EXPENSES
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares (“Shares”) of the Fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and examples below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.45% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.45% |
Example:
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary
market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$46 |
$144 |
$252 |
$567 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys
and sells securities (or "turns over" its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund's
performance. For the most recent fiscal period, the Fund's portfolio turnover
rate was 33.97% of the average value of
its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the Solactive
U.S. Founder-Run Companies Index ("Underlying Index"). The Fund's 80% investment
policy is non-fundamental and requires 60 days prior written notice to
shareholders before it can be changed.
The
Underlying Index is designed to provide exposure to U.S. companies in which a
founder or co-founder of the company is serving as the Chief Executive Officer
of the company (collectively, "Founder-Run Companies"), as defined by Solactive
AG, the provider of the Underlying Index ("Index Provider").
The
starting universe of companies eligible for inclusion in the Underlying Index is
the Solactive U.S. Broad Market Index. From this initial universe, the Index
Provider identifies Founder-Run Companies using company-level data and ranks
these Founder-Run Companies by market capitalization. Founder-Run Companies are
then screened for liquidity to determine eligibility for inclusion in the
Underlying Index. As of the respective selection date, new constituents must
have a minimum six-month average daily traded value of $5 million to be eligible
for inclusion, while existing constituents must have a minimum six-month average
daily traded value of $4 million to remain in the Underlying Index. If more than
100 Founder-Run Companies are eligible for inclusion based on the liquidity
criteria, the top 100 companies by market capitalization are selected for
inclusion in the Underlying Index. If fewer than 100 Founder-Run Companies are
eligible for inclusion based on the liquidity criteria, the companies that meet
the liquidity criteria will comprise the constituents of the Underlying Index.
The Underlying Index also applies a sector capping approach relative to the
Solactive U.S. Broad Market Index to ensure that no
sector
deviates significantly from the sector weights in the Solactive U.S. Broad
Market Index. The Underlying Index is equal-weighted and rebalanced
annually.
The
Underlying Index may include large- or mid-capitalization companies. As of
January 31, 2023, the Underlying Index had 98 constituents. The three
largest sectors represented in the Underlying Index as of January 31, 2023,
were Information Technology, Health Care and Financials. The Fund's investment
objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of January 31, 2023, the
Underlying Index had significant exposure to the information technology
sector.
SUMMARY OF
PRINCIPAL RISKS
As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund’s performance could trail that of other investments. There
is no guarantee that the Fund will achieve its investment objective.
An investment
in the Fund is not a bank deposit and it is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund’s net
asset value (“NAV”), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an
exchange.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing the Fund's average
annual total returns for the indicated periods compared with the Fund's
benchmark index and a broad measure of market performance.
The Fund's
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at
www.globalxetfs.com.
Annual Total
Returns (Years Ended December 31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
39.91% |
Worst
Quarter: |
6/30/2022 |
-24.08% |
Average Annual
Total Returns (for the Periods Ended December 31,
2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (02/13/2017) |
Global
X Founder-Run Companies ETF: |
|
|
|
·Return
before taxes |
-34.76% |
5.90% |
7.75% |
·Return
after taxes on distributions1 |
-34.83% |
5.63% |
7.41% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-20.53% |
4.54% |
6.02% |
Solactive
U.S. Founder-Run Companies Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-34.50% |
6.43% |
8.32% |
S&P
500®
Index
(Index
returns do not reflect deductions for fees, expenses, or
taxes) |
-18.11% |
9.42% |
10.86% |
1
After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-advantaged arrangements, such as 401(k) plans or
individual retirement accounts
(IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager
of
the Fund since March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund
since March 1, 2019. Ms. Chan has been a Portfolio Manager of the Fund since
June 10, 2019. Ms. Yang has been a Portfolio Manager of the Fund since December
2020. Mr. Lu has been a Portfolio Manager of the Fund since April
2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUNDS
This
Prospectus contains information about investing in a Fund. Please read this
Prospectus carefully before you make any investment decisions. Shares of a Fund
are listed for trading on a national securities exchange. The market price for a
Share of a Fund may be different from the Fund's most recent NAV. ETFs are funds
that trade like other publicly-traded securities. A Fund is designed to track an
Underlying Index. Similar to shares of an index mutual fund, each Share of a
Fund represents an ownership interest in an underlying portfolio of securities.
Unlike shares of a mutual fund, which can be bought and redeemed from the
issuing fund by all shareholders at a price based on NAV, Shares of a Fund may
be purchased or redeemed directly from the Fund at NAV solely by Authorized
Participants and only in Creation Unit increments. Also unlike shares of a
mutual fund, Shares of a Fund are listed on a national securities exchange and
trade in the secondary market at market prices that change throughout the day. A
Fund is designed to be used as part of broader asset allocation strategies.
Accordingly, an investment in a Fund should not constitute a complete investment
program. An index is a financial calculation, based on a grouping of financial
instruments, and is not an investment product, while a Fund is an actual
investment portfolio. The performance of a Fund and its Underlying Index may
vary for a number of reasons, including transaction costs, non-U.S. currency
valuations, asset valuations, corporate actions (such as mergers and spin-offs),
timing variances and differences between a Fund’s portfolio and the Underlying
Index resulting from the Fund's legal restrictions (such as diversification
requirements) that apply to the Fund but not to the Underlying Index.
Each
Fund invests at least 80% of its total assets in the securities of the
Underlying Index, other than the Global X U.S. Preferred ETF and the Global X
Variable Rate Preferred ETF, which will invest at least 80% of its total assets
in a representative sample of securities that collectively has an investment
profile similar to the Underlying Index. Each Fund’s 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed. The Adviser anticipates that, generally, each Fund (other
than the Global X U.S. Preferred ETF and the Global X Variable Rate Preferred
ETF, which may invest in a representative sample of securities that collectively
has an investment profile similar to the Underlying Index) will hold all of the
securities that comprise its Underlying Index in proportion to their weightings
in such Underlying Index. However, under various circumstances, it may not be
possible or practicable to purchase all of those securities in those weightings.
In these circumstances, a Fund may purchase a sample of securities in its
Underlying Index. There also may be instances in which the Adviser may choose to
underweight or overweight a security in a Fund’s Underlying Index, purchase
securities not in the Fund’s Underlying Index that the Adviser believes are
appropriate to substitute for certain securities in such Underlying Index or
utilize various combinations of other available investment techniques in seeking
to replicate as closely as possible, before fees and expenses, the price and
yield performance of a Fund’s Underlying Index. In addition, each Fund may also
invest in equity index futures for cash flow management purposes and as a
portfolio management technique. Each Fund may sell securities that are
represented in its Underlying Index in anticipation of their removal from such
Underlying Index or purchase securities not represented in its Index in
anticipation of their addition to such Underlying Index. Each Fund’s investment
objective and its Underlying Index may be changed without shareholder approval
upon at least 60 days prior written notice to shareholders.
An
investment in a Fund is not a bank deposit and it is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency, the
Adviser or any of its affiliates.
A
FURTHER DISCUSSION OF PRINCIPAL RISKS
Each
Fund is subject to various risks, including the principal risks noted below, any
of which may adversely affect the Fund’s NAV, trading price, yield, total return
and ability to meet its investment objective. You could lose all or part of your
investment in the Fund, and the Fund could underperform other investments.
Asset
Class Risk
The
returns from the types of securities and/or assets in which the Fund invests may
under-perform returns from the various general securities markets or different
asset classes. The assets in the Underlying Index may under-perform investments
that track other markets, segments, sectors or assets. Different types of assets
tend to go through cycles of out-performance and under-performance in comparison
to the general securities markets.
Actively
Managed Portfolios Investment Risk
Actively
Managed Portfolios Investment Risk applies to the Global X Alternative Income
ETF
Certain
of the Underlying Index constituents are actively managed portfolios, and their
success depends upon the investment skills and analytical abilities of the
investment adviser to develop and effectively implement strategies to achieve
the Underlying Index constituent’s investment objective. Subjective decisions
made by the investment adviser may cause the Index constituent to incur losses
or to miss profit opportunities on which it may otherwise have capitalized.
Bond
Investment Risk
Bond
Investment Risk applies to the Global X Alternative Income ETF
Investments
in debt securities are generally affected by changes in prevailing interest
rates and the creditworthiness of the issuer. Prices of debt securities fall
when prevailing interest rates rise. The Fund’s yield on investments in debt
securities will fluctuate as the securities in the Fund are rebalanced and
reinvested in securities with different interest rates. Investments in bonds are
also subject to credit risk. Credit risk is the risk that an issuer of debt
securities will be unable to pay principal and interest when due, or that the
value of the security will suffer because investors believe the issuer is less
able to make required principal and interest payments. This is broadly gauged by
the credit ratings of the debt securities in which the Fund invests. However,
credit ratings are only the opinions of the rating agencies issuing them, do not
purport to reflect the risk of fluctuations in market value and are not absolute
guarantees as to the payment of interest and the repayment of principal.
Equity
Securities Risk
Equity
Securities Risk applies to each Fund
The
Fund may invest in equity securities, which are subject to changes in value that
may be attributable to market perception of a particular issuer, general stock
market fluctuations that affect all issuers, or as a result of such factors as a
company’s business performance, investor perceptions, stock market trends and
general economic conditions. Investments in equity securities may be more
volatile than investments in other asset classes.
ETF
Investment Risk
ETF
Investment Risk applies to the Global X Alternative Income ETF and Global X
Adaptive U.S. Risk Management ETF
The
Fund may hold ETFs to gain exposure to certain asset classes. As a result, the
Fund may be subject to the same risks as the underlying ETFs. While the risks of
owning shares of an underlying ETF generally reflect the risks of owning the
underlying securities the ETF is designed to track, lack of liquidity in an
underlying ETF can result in its value being more volatile than the underlying
portfolio securities. Because the value of an underlying ETF's shares depends on
the demand in the market, the Adviser may not be able to liquidate the Fund’s
holdings in those shares at the most optimal time, thereby adversely affecting
the Fund’s performance. An underlying ETF may experience tracking error in
relation to the index tracked by the underlying ETF, which could contribute to
tracking error for the Fund. In addition, an underlying ETF's shares may trade
at a premium or discount to NAV.
In
addition, investments in the securities of underlying ETFs may involve
duplication of advisory fees and certain other expenses. The Fund will pay
brokerage commissions in connection with the purchase and sale of shares of
underlying ETFs, which could result in greater expenses to the Fund. By
investing in an underlying ETF, the Fund becomes a shareholder thereof. As a
result, Fund shareholders indirectly bear the Fund’s proportionate share of the
fees and expenses indirectly paid by shareholders of the underlying ETF, in
addition to the fees and expenses Fund shareholders indirectly bear in
connection with the Fund’s own operations. In addition, certain of the
underlying ETFs may hold common portfolio positions, thereby reducing the
diversification benefits of an asset allocation style.
If
an underlying ETF fails to achieve its investment objective, the value of the
Fund’s investment may decline, adversely affecting the Fund’s performance.
Additionally, some ETFs are not registered under the 1940 Act and therefore, are
not subject to the regulatory scheme and investor protections of the 1940 Act.
A
complete list of each underlying ETF held by the Fund can be found daily on the
Trust’s website. Each investor should review the complete description of the
principal risks of each underlying ETF prior to investing in the Fund.
Fixed-to-Floating
Rate Securities Risk
Fixed-to-Floating
Rate Securities Risk applies to the Global X U.S. Preferred ETF and Global X
Variable Rate Preferred ETF
The
Fund invests in fixed-to-floating rate preferred securities, which are
securities that have an initial term with a fixed dividend rate and following
this initial term bear a floating dividend rate. Securities which include a
floating or variable interest rate component can be less sensitive to interest
rate changes than securities with fixed interest rates, but may decline in value
if their interest rates do not rise as much, or as quickly, as interest rates in
general. Conversely, floating rate securities will not generally increase in
value if interest rates decline. A decline in interest rates may result in a
reduction in income received from floating rate securities held by the Fund and
may adversely affect the value of the Fund’s shares. Generally, floating rate
securities carry lower yields than similar fixed rate securities. The interest
rate for a floating rate security resets or adjusts periodically by reference to
a benchmark interest rate. The impact of interest rate changes on floating rate
investments is typically mitigated by the periodic interest rate reset of the
investments. Fixed-to-floating rate securities generally are subject to legal or
contractual restrictions on resale, may trade infrequently, and their value may
be impaired when the Fund needs to liquidate such securities. Benchmark interest
rates, such as the LIBOR, may not accurately track market interest rates. On
July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates
LIBOR, announced that it intends to phase out LIBOR by the end of 2021. The rate
will likely cease to exist by June 2023. There remains uncertainty regarding the
future of LIBOR and the nature of any replacement rate. The replacement and/or
discontinuation of LIBOR could lead to significant short-term and long-term
uncertainty and market instability. The unavailability and/or discontinuation of
LIBOR could have adverse impacts on newly issued financial instruments and
existing financial instruments that reference LIBOR. There is no guarantee or
assurance that: (i) the Fund will be able to invest in a desired amount of
fixed-to-floating rate securities, (ii) the Fund will be able to buy such
securities at a desirable price, or (iii) floating rate securities in which it
invests or seeks to invest will be actively traded. Any or all of the foregoing,
should they occur, could negatively impact the Fund.
Hybrid
Securities Investment Risk
Hybrid
Securities Investment Risk applies to the Global X U.S. Preferred ETF and Global
X Variable Rate Preferred ETF
Hybrid
securities are securities which contain characteristics of both a debt security
and an equity security. Therefore, hybrid securities are subject to the risks of
equity securities and risks of debt securities. The terms of hybrid instruments
may vary substantially, and certain hybrid securities may be subject to similar
risks as preferred stocks, such as interest rate risk, issuer risk, dividend
risk, call risk, and extension risk. The claims of holders of hybrid securities
of an issuer are generally subordinated to those of holders of traditional debt
securities in bankruptcy, and thus hybrid securities may be more volatile and
subject to greater risk than traditional debt securities, and may in certain
circumstances even be more volatile than traditional equity securities. At the
same time, hybrid securities may not fully participate in gains of their issuer
and thus potential returns of such securities are generally more limited than
traditional equity securities, which would participate in such gains. Hybrid
securities may also be more limited in their rights to participate in management
decisions of an issuer (such as voting for the board of directors). Certain
hybrid securities may be more thinly traded and less liquid than either publicly
issued equity securities or debt securities, especially hybrid securities that
are “customized” to meet the needs of particular investors, potentially making
it difficult for the Fund to sell such securities at a favorable price or at
all. Any of these features could cause a loss in market value of hybrid
securities held by the Fund or otherwise adversely affect the Fund.
Leveraged
Portfolios Investment Risk
Leveraged
Portfolios Investment Risk applies to the Global X Alternative Income ETF
Certain
of the Underlying Index constituents may engage in transactions that give rise
to leverage. Such transactions may include, among others, reverse repurchase
agreements, securities lending, forward commitment transactions, short sales and
certain derivative transactions. The use of leverage may cause the Underlying
Index constituent to liquidate portfolio positions when it may not be
advantageous to do so to satisfy its obligations or to meet segregation
requirements. Leverage may cause the Underlying Index constituent’s share price
to be more volatile than if it had not been leveraged, as certain types of
leverage may exaggerate the effect of any increase or decrease in the value of
the
Underlying
Index constituent’s portfolio securities. The loss on leveraged investments may
substantially exceed the initial investment.
LIBOR
Transition Risk
LIBOR
Transition Risk applies to the Global X U.S. Preferred ETF and Global X Variable
Rate Preferred ETF
The
Fund invests in financial instruments that utilize London Interbank Offered Rate
(“LIBOR”) as the reference or benchmark rate for variable interest rate
calculations. On July 27, 2017, the head of the United Kingdom’s Financial
Conduct Authority announced a desire to phase out the use of LIBOR by the end of
2021. In March 2021, the FCA and LIBOR's administrator, ICE Benchmark
Administration, announced that most LIBOR settings will no longer be published
after the end of 2021 and a selection of widely used U.S. dollar LIBOR rates
will continue to be published until June 2023 in order to assist with the
transition. There remains uncertainty regarding the effect of the LIBOR
transition process and therefore any impact of a transition away from LIBOR on
the Fund or the instruments in which the Fund invests cannot yet be determined.
There is no assurance that the composition or characteristics of any alternative
reference rate (e.g., the Secured Overnight Financing Rate (“SOFR”), which is
intended to replace the U.S. dollar LIBOR) will be similar to or produce the
same value or economic equivalence as LIBOR or that instruments using an
alternative rate will have the same volume or liquidity. As a result, the
transition process might lead to increased volatility and reduced liquidity in
markets that currently rely on LIBOR to determine interest rates; a reduction in
the value of some LIBOR-based investments; increased difficulty in borrowing or
refinancing and diminished effectiveness of any applicable hedging strategies
against instruments whose terms currently include LIBOR; and/or costs incurred
in connection with temporary borrowings and closing out positions and entering
into new agreements. Any such effects of the transition away from LIBOR and the
adoption of alternative reference rates could result in losses to the Fund.
Master
Limited Partnerships Investment Risk
Master
Limited Partnerships Investment Risk applies to the Global X Alternative Income
ETF, Global X MLP ETF and Global X MLP & Energy Infrastructure ETF
Investments
in securities of MLPs involve risks that differ from an investment in common
stock.
Holders
of units of MLPs have more limited control rights and limited rights to vote on
matters affecting such MLP as compared to holders of stock of a corporation. For
example, MLP unit holders may not elect the general partner or the directors of
the general partner and the MLP unit holders have limited ability to remove an
MLP’s general partner. MLPs are controlled by their general partners, which
generally have conflicts of interest and limited fiduciary duties to the MLPs,
which may permit the general partners to favor their own interests over the
MLPs. The amount of cash that the Fund will have available to pay or distribute
to you depends entirely on the ability of the MLPs that the Fund owns to make
distributions to their partners and the tax character of those distributions.
Neither the Fund nor the Adviser has control over the actions of underlying
MLPs. The amount of cash that each individual MLP can distribute to its partners
will depend on the amount of cash it generates from operations, which will vary
from quarter to quarter depending on factors affecting the energy infrastructure
market generally and on factors affecting the particular business lines of the
MLP. Available cash will also depend on the MLPs’ level of operating costs
(including incentive distributions to the general partner), level of capital
expenditures, debt service requirements, acquisition costs (if any),
fluctuations in working capital needs, and other factors. The Fund expects to
generate significant investment income, and the Fund’s investments may not
distribute the expected or anticipated levels of cash, resulting in the risk
that the Fund may not have the ability to make cash distributions as investors
expect from MLP-focused investments.
Certain
MLPs in which the Fund may invest depend upon their parent or sponsor entities
for a majority of their revenues. If their parent or sponsor entities fail to
make such payments or satisfy their obligations, the revenues and cash flows of
such MLPs and ability of such MLPs to make distributions to unit holders, such
as the Fund, would be adversely affected.
MLPs
are subject to various federal, state and local environmental laws and health
and safety laws as well as laws and regulations specific to their particular
activities. These laws and regulations address: health and safety standards for
the operation of facilities, transportation systems and the handling of
materials; air and water pollution requirements and standards; solid waste
disposal requirements; land reclamation requirements; and requirements relating
to the handling and disposition of hazardous materials. MLPs are subject to the
costs of compliance with such laws applicable to them, and changes in such laws
and regulations may adversely affect their results of operations.
MLPs
are subject to numerous business related risks, including: deterioration of
business fundamentals reducing profitability due to development of alternative
energy sources, among other things, consumer sentiment, changing demographics in
the markets served, unexpectedly prolonged and precipitous changes in commodity
prices and increased competition that reduces an MLP’s market share; the lack of
growth of markets requiring growth through acquisitions; disruptions in
transportation systems; the dependence of certain MLPs upon unrelated third
parties; availability of capital for expansion and construction of needed
facilities; a significant decrease in production due to depressed commodity
prices or otherwise; the inability of MLPs to successfully integrate recent or
future acquisitions; and the general level of the economy.
Midstream
MLPs Investment Risk
Midstream
MLPs Investment Risk applies to the Global X MLP ETF and Global X MLP &
Energy Infrastructure ETF
MLPs
that operate midstream assets are subject to supply and demand fluctuations in
the markets they serve, which may be impacted by a wide range of factors,
including fluctuating commodity prices, weather, increased conservation or use
of alternative fuel sources, increased governmental or environmental regulation,
depletion, rising interest rates, declines in domestic or foreign production,
accidents or catastrophic events, increasing operating expenses and economic
conditions, among others. Midstream MLPs may be particularly susceptible to
large drops in energy prices, which have the ability to impact more drastically
production in the oil and gas fields that they serve. Further, MLPs that operate
gathering and processing assets are subject to natural declines in the
production of the oil and gas fields they serve. In addition, some gathering and
processing contracts subject the owner of such assets to direct commodity price
risk.
Mortgage
Real Estate Investment Trusts (Mortgage REITs) Investment Risk
Mortgage
Real Estate Investment Trusts (Mortgage REITs) Investment Risk applies to the
Global X Alternative Income ETF
Mortgage
REITs are exposed to the risks specific to the real estate market as well as the
risks that relate specifically to the way in which Mortgage REITs are organized
and operated. Mortgage REITs are subject to the credit risk of the borrowers to
whom they extend credit. Mortgage REITs are subject to significant interest rate
risk. Interest rate risk refers to fluctuations in the value of a Mortgage
REIT’s investment in fixed rate obligations resulting from changes in the
general level of interest rates. When the general level of interest rates goes
up, the value of a Mortgage REIT’s investment in fixed rate obligations goes
down. When the general level of interest rates goes down, the value of a
Mortgage REIT’s investment in fixed rate obligations goes up.
Mortgage
REITs typically use leverage and many are highly leveraged, which exposes them
to leverage risk. Leverage risk refers to the risk that leverage created from
borrowing may impair a Mortgage REIT’s liquidity, cause it to liquidate
positions at an unfavorable time, increase the volatility of the values of
securities issued by the Mortgage REIT and incur substantial losses if its
borrowing costs increase.
Mortgage
REITs are subject to prepayment risk, which is the risk that borrowers may
prepay their mortgage loans at faster than expected rates. Prepayment rates
generally increase when interest rates fall and decrease when interest rates
rise. These faster than expected payments may adversely affect a Mortgage REIT’s
profitability because the Mortgage REIT may be forced to replace investments
that have been redeemed or repaid early with other investments having a lower
yield. Additionally, rising interest rates may cause the duration of a Mortgage
REIT’s investments to be longer than anticipated and increase such investments’
interest rate sensitivity.
Real
estate investment trusts are subject to special U.S. federal tax requirements. A
real estate investment trust’s failure to comply with these requirements may
negatively affect its performance.
Mortgage
REITs may be dependent upon their management skills and may have limited
financial resources. Mortgage REITs are generally not diversified and may be
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. In addition, transactions between Mortgage REITs and their
affiliates may be subject to conflicts of interest which may adversely affect a
Mortgage REIT’s shareholders.
Non-Hedging
Foreign Currency Trading Exposure Risk
Non-Hedging
Foreign Currency Trading Exposure Risk applies to the Global X Alternative
Income ETF
Certain
of the Underlying Index components may engage in forward foreign currency
transactions for speculative purposes. The Underlying Index component may
purchase or sell foreign currencies through the use of forward contracts based
on the applicable advisors’ judgment regarding the direction of the market for a
particular foreign currency or currencies. In pursuing this strategy, the
advisors seek to profit from anticipated movements in currency rates by
establishing “long” and/or “short” positions in forward contracts on various
foreign currencies. Foreign exchange rates can be extremely volatile and a
variance in the degree of volatility of the market or in the direction of the
market from the advisors’ expectations may produce significant losses to the
Underlying Index component.
Option
Trading Strategies Exposure Risk
Option
Trading Strategies Exposure Risk applies to the Global X Alternative Income ETF
Options
are generally subject to volatile swings in price based on changes in value of
the underlying instrument, and the options written by an Underlying Index
constituent may be particularly subject to this risk because of the volatility
of the underlying stocks selected by an Underlying Index constituent. An
Underlying Index constituent may incur a form of economic leverage through its
use of options, which will increase the volatility of an Underlying Index
constituent’s returns and may increase the risk of loss to an Underlying Index
constituent. While an Underlying Index constituent will collect premiums on the
options it writes, an Underlying Index constituent’s risk of loss if one or more
of its options is exercised and expires in-the-money may substantially outweigh
the gains to an Underlying Index constituent from the receipt of such option
premiums. Moreover, the options sold by an Underlying Index constituent may have
imperfect correlation to the returns of their underlying stocks.
Preferred
Stock Investment Risk
Preferred
Stock Investment Risk applies to the Global X U.S. Preferred ETF and Global X
Variable Rate Preferred ETF
Unlike
interest payments on debt securities, dividend payments on a preferred stock
typically must be declared by the issuer’s board of directors. An issuer’s board
of directors is generally not under any obligation to pay a dividend (even if
such dividends have accrued), and may suspend payment of dividends on preferred
stock at any time. In the event an issuer of preferred stock experiences
economic difficulties, the issuer’s preferred stock may lose substantial value
due to the reduced likelihood that the issuer’s board of directors will declare
a dividend and the fact that the preferred stock may be subordinated to other
securities of the same issuer. Preferred stock may be less liquid than many
other types of securities, such as common stock, and generally provides no
voting rights with respect to the issuer. Certain additional risks associated
with preferred stock could adversely affect investments in the Fund.
Interest
Rate Risk
Because
many preferred stocks pay dividends at a fixed rate, their market price can be
sensitive to changes in interest rates in a manner similar to bonds - that is,
as interest rates rise, the value of the preferred stocks held by the Fund are
likely to decline. To the extent that the Fund invests a substantial portion of
its assets in fixed rate preferred stocks, rising interest rates may cause the
value of the Fund’s investments to decline significantly.
Issuer
Risk
Because
many preferred stocks allow holders to convert the preferred stock into common
stock of the issuer, their market price can be sensitive to changes in the value
of the issuer’s common stock. To the extent that the Fund invests a substantial
portion of its assets in convertible preferred stocks, declining common stock
values may also cause the value of the Fund’s investments to decline.
Dividend
Risk
There
is a chance that the issuer of any of the Fund’s holdings will have its ability
to pay dividends deteriorate or will default (fail to make scheduled dividend
payments on the preferred stock or scheduled interest payments on other
obligations of the issuer not held by the Fund), which would negatively affect
the value of any such holding.
Call
Risk
Preferred
stocks are subject to market volatility and the prices of preferred stocks will
fluctuate based on market demand. Preferred stocks often have call features
which allow the issuer to redeem the security at its discretion. If a preferred
stock is redeemed by the issuer, it will be removed from the Underlying Index.
The redemption of preferred stocks having a higher than average yield may cause
a decrease in the yield of the Underlying Index and the Fund.
Real
Estate Stocks and Real Estate Investment Trusts (REITs) Investment
Risk
Real
Estate Stocks and Real Estate Investment Trusts (REITs) Investment Risk applies
to the Global X Alternative Income ETF
The
Fund invests in companies or underlying funds that invest in real estate, such
as REITs, which exposes investors in the Fund to the risks of owning real estate
directly, as well as to risks that relate specifically to the way in which real
estate companies are organized and operated. Real estate is highly sensitive to
general and local economic conditions and developments, and characterized by
intense competition and periodic overbuilding. Many real estate companies,
including REITs, utilize leverage (and some may be highly leveraged), which
increases risk and could adversely affect a real estate company's operations and
market value in periods of rising interest rates.
Concentration
Risk
Real
estate companies may own a limited number of properties and concentrate their
investments in a particular geographic region or property type.
Equity
REITs Risk
Certain
REITs may make direct investments in real estate. These REITs are often referred
to as "Equity REITs." Equity REITs invest primarily in real properties and earn
rental income from leasing those properties. Equity REITs may also realize gains
or losses from the sale of the properties. Equity REITs will be affected by
conditions in the real estate rental market and by changes in the value of the
properties they own. A decline in rental income may occur because of extended
vacancies, limitations on rents, the failure to collect rents, increased
competition from other properties or poor management. Equity REITs also can be
affected by rising interest rates. Rising interest rates may cause investors to
demand a high annual yield from future distributions that, in turn, could
decrease the market prices for such REITs. In addition, rising interest rates
also increase the costs of obtaining financing for real estate projects. Because
many real estate projects are dependent upon receiving financing, this could
cause the value of the Equity REITs in which the Fund invests to decline.
Interest
Rate Risk
Rising
interest rate could result in higher costs of capital for real estate companies,
which could negatively affect a real estate company's ability to meet its
payment obligations.
Leverage
Risk
Real
estate companies may use leverage (and some may be highly leveraged), which
increases investment risk and the risks normally associated with debt financing,
and could adversely affect a real estate company's operations and market value
in periods of rising interest rates. Financing covenants related to a real
estate company's leveraging may affect the ability of the real estate company to
operate effectively. In addition, real property may be subject to quality of
credit extended and defaults by borrowers and tenants. Leveraging may also
increase repayment risk.
Liquidity
Risk
Investing
in real estate companies may involve risks similar to those associated with
investing in small-capitalization companies. Real estate company securities may
be volatile. There may be less trading in real estate company shares, which
means that buy and sell transactions in those shares could have a magnified
impact on share price, resulting in abrupt or erratic price fluctuations. In
addition, real estate is relatively illiquid and, therefore, a real estate
company may have a limited ability to vary or liquidate its investments in
properties in response to changes in economic or other conditions.
Operational
Risk
Real
estate companies are dependent upon management skills and may have limited
financial resources. Real estate companies are generally not diversified and may
be subject to heavy cash flow dependency, default by borrowers and
self-liquidation. In addition, transactions between real estate companies and
their affiliates may be subject to conflicts of interest, which may adversely
affect a real estate company's shareholders. A real estate company may also have
joint ventures in certain of its properties and, consequently, its ability to
control decisions relating to such properties may be limited.
Property
Risk
Real
estate companies may be subject to risks relating to functional obsolescence or
reduced desirability of properties; extended vacancies due to economic
conditions and tenant bankruptcies; catastrophic events such as earthquakes,
hurricanes, tornadoes and terrorist acts; and casualty or condemnation losses.
Real estate income and values also may be greatly affected by demographic
trends, such as population shifts, changing tastes and values, or increasing
vacancies or declining rents resulting from legal, cultural, technological,
global or local developments.
Regulatory
Risk
Real
estate income and values may be adversely affected by applicable domestic and
foreign laws (including tax laws). Government actions, such as tax increases,
zoning law changes or environmental regulations also may have a major impact on
real estate.
Repayment
Risk
The
prices of real estate company securities may drop because of the failure of
borrowers to repay their loans, poor management, or the inability to obtain
financing either on favorable terms or at all. If the properties do not generate
sufficient income to meet operating expenses, including, where applicable, debt
service, ground lease payments, tenant improvements, third-party leasing
commissions and other capital expenditures, the income and ability of the real
estate companies to make payments of interest and principal on their loans will
be adversely affected.
U.S.
Tax Risk
Certain
U.S. real estate companies are subject to special U.S. federal tax requirements.
A REIT that fails to comply with such tax requirements may be subject to U.S.
federal income taxation, which may affect the value of the REIT and the
characterization of the REIT's distributions. The U.S. federal tax requirement
that a REIT distributes substantially all of its net income to its shareholders
may result in the REIT having insufficient capital for future expenditures.
U.S.
Treasury Obligations Risk
U.S.
Treasury Obligations Risk applies to the Global X Adaptive U.S. Risk Management
ETF
Investments
in debt securities are generally affected by changes in prevailing interest
rates and the creditworthiness of the issuer. Prices of U.S. Treasury securities
fall when prevailing interest rates rise. Price fluctuations of longer-term U.S.
Treasury securities are greater than price fluctuations of shorter-term U.S.
Treasury securities and may be as great as price fluctuations of common stock.
The Fund’s yield on investments in U.S. Treasury securities will fluctuate as
the Fund is invested in U.S. Treasury securities with different interest
rates.
Variable
and Floating Rate Securities Risk
Variable
and Floating Rate Securities Risk applies to the Global X Variable Rate
Preferred ETF
Variable
or floating rate securities are debt securities with variable or floating
interest rates payments. Variable or floating rate securities bear rates of
interest that are adjusted periodically according to formulae intended generally
to reflect market rates of interest and allow the Fund to participate
(determined in accordance with the terms of the securities) in increases in
interest rates through upward adjustments of the coupon rates on the securities.
During periods of increasing interest rates, changes in the coupon rates of
variable or floating rate securities may lag behind the changes in market rates
or may have limits on the maximum increases in coupon rates. Alternatively,
during periods of declining interest rates, the coupon rates on such securities
will typically readjust downward resulting in a lower yield. Floating rate
securities may trade infrequently, and their value may be impaired when the Fund
needs to
liquidate
such securities. A downward adjustment in coupon rates may decrease the Fund's
income as a result of its investment in variable or floating rate securities.
The Fund may also invest in variable or floating rate equity securities whose
payments vary based on changes in market rates of interest or other factors. The
markets for such securities may be less developed and may have less liquidity
than the markets for conventional securities.
Associated
Risks Related to Investing in Energy Infrastructure Companies
Associated
Risks Related to Investing in Energy Infrastructure Companies applies to the
Global X MLP ETF and Global X MLP & Energy Infrastructure ETF
Companies
engaged in the energy infrastructure sector also are subject to risks specific
to the industry they serve. Risks inherent in the energy infrastructure business
include the following:
A
sustained decline in demand for crude oil, natural gas and refined petroleum
products could adversely affect revenues and cash flows. Factors that could lead
to a decrease in market demand include a recession or other adverse economic
conditions, an increase in the market price of the underlying commodity, higher
taxes or other regulatory actions that increase costs, or a shift in consumer
demand for such products. Demand may also be adversely impacted by consumer
sentiment with respect to global warming and/or by any state or federal
legislation intended to promote the use of alternative energy sources, such as
bio-fuels.
Companies
engaged in the energy infrastructure sector employ a variety of means of
increasing cash flow, including increasing utilization of existing facilities,
expanding operations through new construction, expanding operations through
acquisitions, or securing additional long-term contracts. Thus, some companies
engaged in the energy infrastructure sector may be subject to construction risk,
acquisition risk or other risk factors arising from their specific business
strategies. A significant slowdown in large energy companies’ disposition of
energy infrastructure assets and other merger and acquisition activity in the
energy infrastructure industry could reduce the growth rate of cash flows
received by a Fund from companies engaged in the energy infrastructure sector
that grow through acquisitions.
The
volatility of energy commodity prices can indirectly affect certain entities
engaged in the energy infrastructure sector due to the impact of prices on the
volume of commodities transported, processed, stored or distributed. Most energy
infrastructure entities are not subject to direct commodity price exposure
because they do not own the underlying energy commodity. Nonetheless, the price
of an energy infrastructure security can be adversely affected by the perception
that the performance of all such entities is directly tied to commodity prices.
In
addition, a significant decrease in the production of natural gas, oil or other
energy commodity due to a decline in production from existing facilities, import
supply disruption or otherwise would reduce revenue and operating income of
certain MLPs in the energy infrastructure sector and, therefore, the ability of
MLPs to make distributions would be reduced.
The
profitability of companies engaged in the energy infrastructure sector could be
adversely affected by changes in the regulatory environment. Most assets of such
companies are heavily regulated by federal and state governments in diverse
matters, such as the way in which such company assets are constructed,
maintained and operated and the prices such companies may charge for their
services. Such regulation can change over time in scope and intensity. For
example, a particular by-product of a process may be declared hazardous by a
regulatory agency and unexpectedly increase production costs for a company
engaged in the energy infrastructure sector. Moreover, many state and federal
environmental laws provide for civil as well as regulatory remediation, thus
adding to the potential exposure such a company may face.
Extreme
weather patterns could result in significant volatility in the supply of energy
and power and could adversely impact the value of the securities in which each
Fund invests. This volatility may create fluctuations in commodity prices and
earnings of companies in the energy infrastructure industry.
A
rising interest rate environment could adversely impact the performance of
companies engaged in the energy infrastructure sector. Rising interest rates
could limit the capital appreciation of equity units of such companies as a
result of the increased availability of alternative investments at competitive
yields. Rising interest rates may increase the cost of capital for companies
operating in this industry. A higher cost of capital could limit growth from
acquisition or expansion projects, limit the ability of such entities to make or
grow distributions or meet debt obligations, and adversely affect the prices of
their securities.
Since
the September 11th terrorist attacks, the U.S. government has issued warnings
that energy assets, specifically U.S. pipeline infrastructure, may be targeted
in future terrorist attacks. These dangers give rise to risks of substantial
losses as a result of loss or destruction of commodity reserves; damage to or
destruction of property, facilities and equipment; pollution and environmental
damage; and personal injury or loss of life. Any occurrence of such catastrophic
events could bring about a
limitation,
suspension or discontinuation of the operations of companies in the North
American energy infrastructure sector. Companies in the North American energy
infrastructure sector may not be fully insured against all risks inherent in
their business operations and therefore accidents and catastrophic events could
adversely affect such companies’ financial condition and ability to pay
distributions to shareholders.
Associated
Risks Related to Investing in Infrastructure Companies
Associated
Risks Related to Investing in Infrastructure Companies applies to the Global X
Alternative Income ETF
Infrastructure
companies may be subject to a variety of factors that could adversely affect
their business or operations, including high interest costs in connection with
capital construction programs, high degrees of leverage, costs associated with
governmental, environmental and other regulations, the effects of economic
slowdowns, increased competition from other providers of services, uncertainties
concerning costs, the level of government spending on infrastructure projects,
and other factors. Infrastructure companies may be adversely affected by
commodity price volatility, changes in exchange rates, import controls,
depletion of resources, technological developments, and labor relations. There
is also the risk that corruption may negatively affect publicly funded
infrastructure projects, especially in emerging markets, resulting in delays and
cost overruns. Infrastructure issuers can be significantly affected by
government spending policies because companies involved in this industry rely to
a significant extent on U.S. and other government demand for their products.
Infrastructure
companies in the oil and gas industry may be adversely affected by government
regulation or world events in the regions that the companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and repatriation of capital,
military coups, social unrest, violence or labor unrest). Infrastructure
companies may have significant capital investments in, or engage in transactions
involving, emerging market countries, which may heighten these risks.
Operations
Risk
The
failure of an infrastructure company to carry adequate insurance or to operate
its assets appropriately could lead to significant losses. Infrastructure may be
adversely affected by environmental clean-up costs and catastrophic events such
as earthquakes, hurricanes and terrorist acts.
Customer
Risk
Infrastructure
companies can be dependent upon a narrow customer base. Additionally, if these
customers fail to pay their obligations, significant revenues could be lost and
may not be replaceable.
Regulatory
Risk
Infrastructure
companies may be subject to significant regulation by various governmental
authorities and also may be affected by regulation of rates charged to
customers, service interruption due to environmental, operational or other
events, the imposition of special tariffs and changes in tax laws, regulatory
policies and accounting standards.
Strategic
Asset Risk
Infrastructure
companies may control significant strategic assets (e.g., major pipelines or
highways), which are assets that have a national or regional profile, and may
have monopolistic characteristics. Given their national or regional profile or
irreplaceable nature, strategic assets could generate additional risk not common
in other industry sectors and they may be targeted for terrorist acts or adverse
political actions.
Interest
Rate Risk
Rising
interest rates could result in higher costs of capital for infrastructure
companies, which could negatively impact their ability to meet payment
obligations.
Leverage
Risk
Infrastructure
companies can be highly leveraged which increases investments risk and other
risks normally associated with debt financing, and could adversely affect an
infrastructure company’s operations and market value in periods of rising
interest rates.
Inflation
Risk
Many
infrastructure companies may have fixed income streams. Consequently, their
market values may decline in times of higher inflation. Additionally, the prices
that an infrastructure company is able to charge users of its assets may be
linked to inflation, whether by government regulation, contractual arrangement
or other factors. In this case, changes in the rate of inflation may affect the
company’s profitability.
Transportation
Risk
The
stock prices of companies in the transportation industry group are affected by
both supply and demand for their specific product. Government regulation, world
events and economic conditions may affect the performance of companies in the
transportation sector.
Oil
and Gas Risk
The
profitability of oil and gas companies is related to worldwide energy prices,
exploration, and production spending.
Associated
Risks Related to Socially Responsible Investments
Associated
Risks Related to Socially Responsible Investments applies to the Global X
Conscious Companies ETF
Certain
social responsibility investment criteria limit the types of securities that can
be included in the Underlying Index. In order to comply with its social
responsibility investment criteria, the Underlying Index may be required to
exclude advantageous investment opportunities or reduce exposure at
inappropriate times. This could cause the Underlying Index to underperform other
benchmark indices. The Fund’s social responsibility investment criteria could
therefore cause it to underperform funds that do not maintain social
responsibility investment criteria by limiting the Fund’s exposure to certain
types of profitable activity.
Capitalization
Risk
Investing
in issuers within the same market capitalization category carries the risk that
the category may be out of favor due to current market conditions or investor
sentiment.
Large-Capitalization
Companies Risk
Large-Capitalization
Companies Risk applies to each Fund
Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk
Mid-Capitalization
Companies Risk applies to the Global X Alternative Income ETF, Global X U.S.
Preferred ETF, Global X Variable Rate Preferred ETF, Global X MLP ETF, Global X
Adaptive U.S. Factor ETF and Global X Founder-Run Companies ETF
Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk
Small-Capitalization
Companies Risk applies to the Global X Alternative Income ETF and Global X
Variable Rate Preferred ETF
The
Fund may invest a significant percentage of its assets in small-capitalization
companies. If it does so, it may be subject to certain risks associated with
small-capitalization companies. These companies often have greater price
volatility, lower trading volume and less liquidity than larger, more
established companies. In addition, these companies are often subject to less
analyst coverage and may be in early and less predictable periods of their
corporate existences. These companies tend to have smaller revenues, narrower
product lines, less management depth and experience, smaller shares of their
product or service markets, fewer financial resources and less competitive
strength than larger companies.
Cash
Transaction Risk
Cash
Transaction Risk applies to the Global X MLP ETF and Global X MLP & Energy
Infrastructure ETF
Unlike
most ETFs, the Fund intends to effect a significant portion of creations and
redemptions for cash, rather than in-kind securities. As a result, an investment
in the Fund may be less tax-efficient than an investment in a more conventional
ETF. ETFs generally are able to make in-kind redemptions and avoid being taxed
on gain on the distributed portfolio securities at the Fund level. Because the
Fund currently intends to effect redemptions for cash, rather than in-kind
distributions, it may be required to sell portfolio securities in order to
obtain the cash needed to distribute redemption proceeds. If the Fund recognizes
gain on these sales, this generally will cause the Fund to recognize gain it
might not otherwise have recognized, or to recognize such gain sooner than would
otherwise be required if it were to distribute portfolio securities in-kind. The
Fund generally intends to distribute these gains to shareholders to avoid being
taxed on this gain at the Fund level and otherwise comply with the special tax
rules that apply to it. This strategy may cause shareholders to be subject to
tax on gains they would not otherwise be subject to, or at an earlier date than,
if they had made an investment in a different ETF. Moreover, cash transactions
may have to be carried out over several days if the securities market is
relatively illiquid and may involve considerable brokerage fees and taxes. These
factors may result in wider spreads between the bid and the offered prices of
the Fund’s Shares than for more conventional ETFs. To the extent that the
maximum additional variable charge for cash creation or cash redemption
transactions is insufficient to cover the transaction costs of purchasing or
selling portfolio securities, the Fund’s performance could be negatively
impacted.
Commodity
Exposure Risk
Commodity
Exposure Risk applies to the Global X Alternative Income ETF, Global X MLP ETF
and Global X MLP & Energy Infrastructure ETF
To
the extent that its Underlying Index invests in, or otherwise has exposure to,
securities and markets that are susceptible to fluctuations in certain commodity
markets, any negative changes in commodity markets could have a great impact on
the Fund. Commodity prices may be influenced or characterized by unpredictable
factors, including, where applicable, high volatility, changes in supply and
demand relationships, weather, agriculture, trade, changes in interest rates and
monetary and other governmental policies, action and inaction. Securities of
companies held by the Fund that are dependent on a single commodity, or are
concentrated on a single commodity sector, may typically exhibit even higher
volatility attributable to commodity prices.
Focus
Risk
Focus
Risk applies to each Fund
In
following its methodology, the Underlying Index may be focused to a significant
degree in securities of issuers in a particular industry or group of industries
and/or may have significant exposure to one or more sectors. To the extent that
the Underlying Index focuses in the securities of issuers in such an area, the
Fund will also focus its investments to approximately the same extent. In such
event, the Fund’s performance will be particularly susceptible to adverse events
impacting such industry or sector, and the Fund will face greater risk than if
it were diversified broadly over numerous such areas. Such heightened risks, any
of which may adversely affect the companies in which the Fund invests, may
include, but are not limited to, the following: general economic conditions or
cyclical market patterns that could negatively affect supply and demand;
competition for resources; adverse labor relations; political or world events;
obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular industry or sector. In addition, at times, such industry, group of
industries or sector may be out of favor and underperform other such categories
or the market as a whole.
Risks
Related to Investing in the Banking Industry
Risks
Related to Investing in the Banking Industry applies to the Global X U.S.
Preferred ETF and Global X Variable Rate Preferred ETF
Companies
in the banking sector of an economy are subject to extensive governmental
regulation and intervention, which may adversely affect the scope of their
activities, the prices they can charge, the amount of capital they must maintain
and, potentially, their size. The extent to which the Fund may invest in a
company that engages in securities-related activities or banking is limited by
applicable law. Extensive governmental regulation may limit the amounts and
types of loans and other financial commitments companies in the banking sector
can make, the interest rates and fees they can charge, the scope of their
activities, the prices they can charge and the amount of capital they must
maintain. Such governmental regulation may change frequently and may have
significant adverse consequences for companies in the banking sector, including
effects not intended by such regulation. Legislation enacted in 2018 in the U.S.
relaxed capital requirements and other regulatory burdens on certain U.S. banks.
While the effect of the legislation may benefit certain companies in the
financials sector, increased risk taking by affected banks may also result in
greater overall risk in the U.S. and global financials sector. The impact of
changes in capital requirements, or recent or future regulation in various
countries, on any individual financial company or on the financials sector as a
whole cannot be predicted. Certain risks may impact the value of investments in
the financials sector more severely than those of investments outside this
sector, including the risks associated with companies that operate with
substantial financial leverage. Banking companies may also be adversely affected
by increases in interest rates and loan losses, decreases in the availability of
money or asset valuations, credit rating downgrades and adverse conditions in
other related markets. Their profitability is heavily dependent on the
availability and cost of capital funds and can fluctuate significantly when
interest rates change or due to increased competition. Credit losses resulting
from financial difficulties of borrowers can negatively impact banking
companies. The banking sector is particularly sensitive to fluctuations in
interest rates. The banking sector is also a target for cyberattacks, and may
experience technology malfunctions and disruptions. In recent years,
cyberattacks and technology malfunctions and failures have become increasingly
frequent in this sector and have reportedly caused losses to companies in this
sector, which may negatively impact the Fund.
Risks
Related to Investing in the Energy Sector
Risks
Related to Investing in the Energy Sector applies to the Global X MLP ETF and
Global X MLP & Energy Infrastructure ETF
The
success of companies in the energy sector may be cyclical and highly dependent
on energy prices. Securities of companies in the energy sector are subject to
swift energy price and supply fluctuations caused by events relating to
international politics, energy conservation, the success of exploration
projects, and tax and other governmental regulatory policies. Actions taken by
central governments may dramatically impact supply and demand forces that
influence energy prices, resulting in sudden decreases in value for companies in
the energy sector. Weak demand for the companies’ products or services or for
energy products and services in general, as well as negative developments in
these other areas, would adversely impact the Fund's performance. Companies in
the oil and gas sector (including alternative energy suppliers) may be adversely
affected by natural disasters or other catastrophes and may be at risk for
environmental damage claims. Additionally, these companies could be negatively
impacted by the adoption of other and/or novel energy sources, driven by
economic, environmental, and/or regulatory reasons, among others. These
companies may also be adversely affected by changes in exchange rates, interest
rates, economic conditions or world events in the regions that the companies
operate (i.e., expropriation, nationalization, confiscation of assets and coups,
social unrest, violence or labor unrest). Investments in companies located in
emerging market countries may heighten these risks. Companies engaged in the
distribution of energy, including electricity and gas, may be adversely affected
by governmental limitation on rates charged to customers. Deregulation and
greater competition may adversely affect the profitability of these companies
and lead to diversification outside of their original geographic regions and
their traditional lines of business, potentially increasing risk and making the
price of their equity securities more volatile.
Risks
Related to Investing in the Financials Sector
Risks
Related to Investing in the Financials Sector applies to the Global X U.S.
Preferred ETF and Global X Variable Rate Preferred ETF
Companies
in the financials sector are subject to government intervention and extensive
governmental regulation, which may adversely affect the scope of their
activities, the prices they can charge, the amount of capital they must maintain
and, potentially, their size. Governmental regulation may change frequently and
may have significant adverse consequences for companies in the financials
sector, including effects not intended by such regulation. Recently
enacted
legislation in the U.S. has relaxed capital requirements and other regulatory
burdens on certain U.S. banks. While the effect of the legislation may benefit
certain companies in the financials sector, increased risk taking by affected
banks may also result in greater overall risk in the financials sector. The
impact of changes in capital requirements, or recent or future regulation in
various countries, on any individual financial company or on the financials
sector as a whole cannot be predicted. The financials sector is exposed to risks
that may impact the value of investments in the financials sector more severely
than investments outside this sector, including operating with substantial
financial leverage. The financials sector may also be adversely affected by
increases in interest rates and loan losses, decreases in the availability of
money or asset valuations and adverse conditions in other related markets.
Additionally, the deterioration of the credit markets during the 2008-2009
global financial crisis caused an adverse impact in a broad range of mortgage,
asset-backed, auction rate and other markets, including U.S. and international
credit and interbank money markets generally, thereby affecting a wide range of
financial services institutions and markets. This situation created instability
in the financial services markets and caused certain financial services
companies to incur large losses or even become insolvent or bankrupt. Some
financial services companies experienced downgrades in their credit ratings,
declines in the valuations of their assets, took action to raise capital (such
as the issuance of debt or equity securities), or even ceased operations. These
actions caused the securities of many financial services companies to decline in
value and could occur again if credit markets were substantially affected once
more. Insurance companies may be subject to severe price competition. The
financials sector is also a target for cyber-attacks and may experience
technology malfunctions and disruptions. In recent years, cyber-attacks and
technology malfunctions and failures have become increasingly frequent in this
sector and have reportedly caused losses to companies in this sector, which may
negatively impact the Fund.
Risks
Related to Investing in the Health Care Sector
Risks
Related to Investing in the Health Care Sector applies to the Global X Adaptive
U.S. Factor ETF
The
profitability of companies in the health care sector may be adversely affected
by the following factors, among others: extensive government regulations,
restrictions on government reimbursement for medical expenses, rising costs of
medical products and services, pricing pressure, an increased emphasis on
outpatient services, changes in the demand for medical products and services, a
limited number of products, industry innovation, changes in technologies and
other market developments. A number of issuers in the health care sector have
recently merged or otherwise experienced consolidation. The effects of this
trend toward consolidation are unknown and may be far-reaching. Many health care
companies are heavily dependent on patent protection. The expiration of a
company’s patents may adversely affect that company’s profitability. Many health
care companies are subject to extensive litigation based on product liability
and similar claims. Health care companies are subject to competitive forces that
may make it difficult to raise prices and, in fact, may result in price
discounting. Many new products in the health care sector may be subject to
regulatory approvals. The process of obtaining such approvals may be long and
costly, and such efforts ultimately may be unsuccessful. Companies in the health
care sector may be thinly capitalized and may be susceptible to product
obsolescence. In addition, a number of legislative proposals concerning health
care have been considered by the U.S. Congress in recent years. It is unclear
what proposals will ultimately be enacted, if any, and what effect they may have
on U.S. and non-U.S. companies in the health care sector. Companies in the
health care sector may also be affected by unforeseen circumstances including
but not limited to the spread of infectious disease which could impact drug
development priorities and pipelines, supply and demand dynamics for health care
equipment, as well as the ability to receive care in health care service
facilities.
Risks
Related to Investing in the Information Technology Sector
Risks
Related to Investing in the Information Technology Sector applies to the Global
X Conscious Companies ETF, Global X Adaptive U.S. Risk Management ETF and Global
X Founder-Run Companies ETF
Market
or economic factors impacting information technology companies and companies
that rely heavily on technology advances could have a major effect on the value
of the Fund’s investments. The value of stocks of information technology
companies and companies that rely heavily on technology is particularly
vulnerable to rapid changes in technology product cycles, rapid product
obsolescence, government regulation and increased competition, both domestically
and internationally, including competition from foreign competitors with lower
production costs. Information technology companies and companies that rely
heavily on technology, especially those of smaller, less-seasoned companies,
tend to be more volatile than the overall market. These companies also are
heavily dependent on patent and intellectual property rights, the loss or
impairment of which may adversely affect profitability. Additionally, companies
in the information technology sector may face dramatic and often unpredictable
changes in growth rates and competition for the services of qualified personnel.
Companies in the information technology sector are facing
increased
government and regulatory scrutiny and may be subject to adverse government or
regulatory action. Companies in the application software industry, in
particular, may also be negatively affected by the decline or fluctuation of
subscription renewal rates for their products and services, which may have an
adverse effect on profit margins. Companies in the systems software industry may
be adversely affected by, among other things, actual or perceived security
vulnerabilities in their products and services, which may result in individual
or class action lawsuits, state or federal enforcement actions and other
remediation costs.
Risks
Related to Investing in the Oil, Gas and Consumable Fuels Industry
Risks
Related to Investing in the Oil, Gas and Consumable Fuels Industry applies to
the Global X MLP ETF and Global X MLP & Energy Infrastructure
ETF
The
oil, gas and consumable fuels industry is cyclical and highly dependent on the
market price of fuel. The market value of companies in the oil, gas and
consumable fuels industry are strongly affected by the levels and volatility of
global commodity prices, supply and demand, capital expenditures on exploration
and production, energy conservation efforts, the prices of alternative fuels,
exchange rates and technological advances. Companies in this sector are subject
to substantial government regulation and contractual fixed pricing, which may
increase the cost of business and limit these companies’ earnings. Actions taken
by central governments may dramatically impact supply and demand forces that
influence the market price of fuel, resulting in sudden decreases in value for
companies in the oil, gas and consumable fuels industry. A significant portion
of their revenues depends on a relatively small number of customers, including
governmental entities and utilities. As a result, governmental budget restraints
may have a material adverse effect on the stock prices of companies in the
industry.
Companies
in the oil, gas and consumable fuels industry may also operate in countries with
less developed regulatory regimes or a history of expropriation, nationalization
or other adverse policies. Companies in the oil, gas and consumable fuels
industry also face a significant civil liability from accidents resulting in
injury or loss of life or property, pollution or other environmental mishaps,
equipment malfunctions or mishandling of materials, and a risk of loss from
terrorism or other natural disasters. Any such event could have serious
consequences for the general population of the area affected and result in a
material adverse impact on the Fund’s portfolio securities and the performance
of the Fund. Companies in the oil, gas and consumable fuels industry can be
significantly affected by the supply of and demand for specific products and
services, weather conditions, exploration and production spending, government
regulation, world events and general economic conditions.
Credit
Risk
Credit
Risk applies to the Global X Alternative Income ETF, Global X U.S. Preferred
ETF, Global X Variable Rate Preferred ETF and Global X Adaptive U.S. Risk
Management ETF
Credit
risk is the risk that the issuer of the security will not be able to make
principal and interest payments when due. Changes in an issuer’s credit rating
or the market’s perception of an issuer’s creditworthiness may also affect the
value of the Fund’s investment in that issuer. Securities rated in the four
highest categories by the rating agencies are considered investment grade, but
they may also have some speculative characteristics. Investment grade ratings do
not guarantee that bonds will not lose value.
Currency
Risk
Currency
Risk applies to the Global X Alternative Income ETF
Foreign
currencies are subject to risks, which include changes in the debt level and
trade deficit of the country issuing the foreign currency; inflation rates of
the United States and the country issuing the foreign currency; investors’
expectations concerning inflation rates; interest rates of the United States and
the country issuing the foreign currency; investors’ expectations concerning
interest rates; investment and trading activities of mutual funds, hedge funds
and currency funds; and global or regional political, economic or financial
events and situations.
In
addition, a foreign currency in which the Fund invests may not maintain its
long-term value in terms of purchasing power in the future. When the price of a
foreign currency in which the Fund invests declines, it may have an adverse
impact on the Fund.
Foreign
exchange rates are influenced by the factors identified above and may also be
influenced by: changing supply and demand for a particular currency; monetary
policies of governments (including exchange control programs, restrictions on
local
exchanges
or markets and limitations on foreign investment in a country or on investment
by residents of a country in other countries); changes in balances of payments
and trade; trade restrictions; and currency devaluations and revaluations. Also,
governments from time to time intervene in the currency markets, directly and by
regulation, in order to influence prices directly. These events and actions are
unpredictable. The resulting volatility in the USD/foreign currency exchange
rate could materially and adversely affect the performance of the Fund.
Dividend-Paying
Stock Risk
Dividend-Paying
Stock Risk applies to the Global X S&P 500® Quality Dividend ETF
The
Fund’s strategy of investing in dividend-paying stocks involves the risk that
such stocks may fall out of favor with investors and underperform the broader
market. Companies that issue dividend-paying stocks are not required to continue
to pay dividends. Therefore, there is the possibility that such companies could
significantly reduce or eliminate the payment of dividends in the future.
Certain companies have increasingly faced pressure from governments and other
actors to reduce or eliminate dividends, and may continue to face such pressure
in the future. Depending upon market conditions, dividend-paying stocks that
meet the Fund’s investment criteria may not be widely available and/or may be
highly concentrated in only a few market sectors. In these conditions, the
Fund may become more concentrated in a fewer number of companies and therefore
be less diversified.
Foreign
Financial Institution Risk
Foreign
Financial Institution Risk applies to the Global X Alternative Income ETF,
Global X U.S. Preferred ETF and Global X Variable Rate Preferred ETF
Certain
of the securities that comprise the Underlying Index, while traded on U.S.
exchanges, may be issued by foreign financial institutions. Securities issued by
non-U.S. issuers have different risks from securities issued by U.S. issuers.
These include differences in accounting, auditing, and financial reporting
standards, the possibility of expropriation or confiscatory taxation, adverse
changes in investment or exchange control regulations, political instability
which could affect U.S. investments in non-U.S. countries, and potential
restrictions of the flow of international capital. Non-U.S. issuers may be
subject to fewer governmental regulations than U.S. issuers. Moreover,
individual non-U.S. economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payment
positions. In addition, the value of these securities may fluctuate due to
changes in the exchange rate of the issuer's local currency against the U.S.
dollar. The health of many foreign financial institutions is often tied closely
with the financial stability of the local economy in which they are domiciled,
and therefore are subject to additional risks including but not limited to:
policy changes, slow economic growth, and high levels of debt.
Foreign
Securities Risk
Foreign
Securities Risk applies to the Global X Alternative Income ETF, Global X U.S.
Preferred ETF, Global X Variable Rate Preferred ETF and Global X MLP &
Energy Infrastructure ETF
The
Fund’s assets may be invested within the equity markets of countries outside of
the United States. These markets are subject to special risks associated with
foreign investment, including, but not limited to: lower levels of liquidity and
market efficiency; greater securities price volatility; exchange rate
fluctuations and exchange controls; less availability of public information
about issuers; limitations on foreign ownership of securities; imposition of
withholding or other taxes; imposition of restrictions on the expatriation of
the assets of the Fund; restrictions placed on U.S. investors by U.S.
regulations governing foreign investments; higher transaction and custody costs
and delays in settlement procedures; difficulties in enforcing contractual
obligations; lower levels of regulation of the securities market; weaker
accounting, disclosure and reporting requirements; and legal principles relating
to corporate governance and directors’ fiduciary duties and liabilities.
Shareholder rights under the laws of some foreign countries may not be as
favorable as U.S. laws. Thus, a shareholder may have more difficulty in
asserting its rights or enforcing a judgment against a foreign company than a
shareholder of a comparable U.S. company. Investment of more than 25% of the
Fund’s total assets in securities located in one country or region will subject
the Fund to increased country or region risk with respect to that country or
region. Where all or a portion of the Fund's underlying securities trade in a
market that is closed when the market in which the Fund's shares are listed and
trading is open, there may be differences between the last quote from the
security’s closed foreign market and the value of the security during the Fund’s
domestic trading day. This in turn could lead to differences between the market
price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk
Geographic
Risk applies to each Fund
Geographic
risk is the risk that the Fund’s assets may be focused in countries located in
the same geographic region. This investment focus will subject the Fund to risks
associated with that particular region, or a region economically tied to that
particular region, such as a natural, biological or other disaster. Outbreaks of
contagious viruses and diseases may reduce business activity or disrupt market
activity, and have the potential to exacerbate market risks in the countries and
regions in which they occur. The securities in which the Fund invests and,
consequently, the Fund are also subject to specific risks as a result of their
business operations, including, but not limited to:
Risk
of Investing in Canada
Risk
of Investing in Canada applies to the Global X MLP & Energy Infrastructure
ETF
The
United States is Canada’s largest trading and investment partner, and the
Canadian economy is significantly affected by developments in the U.S. economy
and by changes in U.S. trade policy. Since the implementation of NAFTA in 1994
among Canada, the United States and Mexico, total two-way merchandise trade
between the United States and Canada has more than doubled. To further this
relationship, the three NAFTA countries entered into the Security and Prosperity
Partnership of North America in March 2005, which has further affected Canada’s
dependency on the U.S. economy. Any downturn in U.S. or Mexican economic
activity is likely to have an adverse impact on the Canadian economy. The
Canadian economy is also dependent upon external trade with other key trading
partners, including China and the European Union. Any trade policy changes by
the United States, China or the European Union which reduced Canada's ability to
trade with such regions could therefore have significant impact on the Canadian
economy. Developments in the United States, including renegotiation of NAFTA,
ratification of the successor USMCA, which received legislative approval and
went into effect in 2020, and imposition of tariffs by the United States, may
have implications for the trade arrangements among the United States and Canada,
which could negatively affect the value of securities held by the Funds. In
addition, Canada is a large supplier of natural resources (e.g., oil, natural
gas and agricultural products). As a result, the Canadian economy is sensitive
to fluctuations in certain commodity prices.
Risk
of Investing in Developed Markets
Risk
of Investing in Developed Markets applies to each Fund
Investment
in developed country issuers may subject the Fund to regulatory, political,
currency, security, and economic risk specific to developed countries. Developed
countries generally tend to rely on services sectors (e.g., the financial
services sector) as the primary means of economic growth. A prolonged slowdown
in, among others, services sectors is likely to have a negative impact on
economies of certain developed countries, although economies of individual
developed countries can be impacted by slowdowns in other sectors. In the past,
certain developed countries have been targets of terrorism, and some geographic
areas in which the Fund invests have experienced strained international
relations due to territorial disputes, historical animosities, defense concerns
and other security concerns. These situations may cause uncertainty in the
financial markets in these countries or geographic areas and may adversely
affect the performance of the issuers to which the Fund has exposure. Heavy
regulation of certain markets, including labor and product markets, may have an
adverse effect on certain issuers. Such regulations may negatively affect
economic growth or cause prolonged periods of recession. Many developed
countries are heavily indebted and face rising healthcare and retirement
expenses and may be underprepared for global health crises. For example, the
rapid and global spread of a highly contagious novel coronavirus respiratory
disease, designated COVID-19, resulted in extreme volatility in the financial
markets and severe losses; reduced liquidity of many instruments; restrictions
on international and, in some cases, local travel; significant disruptions to
business operations (including business closures); strained healthcare systems;
disruptions to supply chains, consumer demand and employee availability; and
widespread uncertainty regarding the duration and long-term effects of this
pandemic. In addition, price fluctuations of certain commodities and regulations
impacting the import of commodities may negatively affect developed country
economies.
Risk
of Investing in Emerging Markets
Risk
of Investing in Emerging Markets applies to the Global X Alternative Income ETF
The
securities markets of emerging market countries may be less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation and not be subject to as extensive and frequent
accounting, financial and other reporting requirements as the securities markets
of more developed countries, as has historically been the case. Issuers and
securities markets in emerging markets are generally not subject to as extensive
and frequent accounting, financial and other reporting requirements or as
comprehensive government regulations as are issuers and securities markets in
the developed markets. In particular, the assets and profits appearing on the
financial statements of emerging market issuers may not reflect their financial
position or results of operations in the same manner as financial statements for
developed market issuers. Substantially less information may be publicly
available about emerging market issuers than is available about issuers in
developed markets. It may be difficult or impossible for the Fund to pursue
claims against an emerging market issuer in the courts of an emerging market
country. There may be significant obstacles to obtaining information necessary
for investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies.
Emerging
markets are generally located in the Asia and Pacific regions, the Middle East,
Eastern Europe, Latin America, and Africa. Emerging markets typically are
classified as such by lacking one or more of the following characteristics:
sustainability of economic development, large and liquid securities markets,
openness to foreign ownership, ease of capital inflows and outflows, efficiency
of the market’s operational framework, and/or stability of the institutional
framework. The Fund’s purchase and sale of portfolio securities in certain
emerging market countries may be constrained by limitations relating to daily
changes in the prices of listed securities, periodic trading or settlement
volume and/or limitations on aggregate holdings of foreign investors. Such
limitations may be computed based on the aggregate trading volume by or holdings
of the Fund, the Adviser, its affiliates and their respective clients and other
service providers. The Fund may not be able to sell securities in circumstances
where price, trading or settlement volume limitations have been reached.
Foreign
investment in the securities markets of certain emerging market countries is
restricted or controlled to varying degrees, which may limit investment in such
countries or increase the administrative costs of such investments. For example,
certain Asian countries require government approval prior to investments by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities which may have less advantageous terms (including price) than
securities of the issuer available for purchase by nationals. In addition,
certain countries may restrict or prohibit investment opportunities in issuers
or industries deemed important to national interests. Such restrictions may
affect the market price, liquidity and rights of securities that may be
purchased by the Fund. The repatriation of both investment income and capital
from certain emerging market countries is subject to restrictions, such as the
need for governmental consents. In situations where a country restricts direct
investment in securities (which may occur in certain Asian, Latin American and
other countries), the Fund may invest in such countries through other investment
funds in such countries. Certain emerging market countries may have privatized,
or have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Many
emerging market countries have experienced currency devaluations, substantial
(and, in some cases, extremely high) rates of inflation, and economic
recessions. These circumstances have had a negative effect on the economies and
securities markets of those emerging market countries. Economies in emerging
market countries generally are dependent upon commodity prices and international
trade and, accordingly, have been, and may continue to be, affected adversely by
the economies of their trading partners, trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist measures
imposed or negotiated by the countries with which they trade. As a result,
emerging market countries are particularly vulnerable to downturns of the world
economy. The 2008-2009 global financial crisis tightened international credit
supplies and weakened the global demand for their exports. As a result, certain
of these economies faced significant economic difficulties, which caused some
emerging market economies to fall into recession. Recovery from such conditions
may be gradual and/or halting as weak economic conditions in developed markets
may continue to suppress demand for exports from emerging market countries.
Many
emerging market countries are subject to a substantial degree of economic,
political and social instability. Governments of some emerging market countries
are authoritarian in nature or have been installed or removed as a result of
military coups, while governments in other emerging market countries have
periodically used force to suppress civil dissent. Disparities of wealth, the
pace and success of democratization, and ethnic, religious and racial
disaffection, among other factors, have also led to social unrest, violence
and/or labor unrest in some emerging market countries. Many emerging market
countries have experienced strained international relations due to border
disputes, historical animosities or other defense concerns. These situations may
cause uncertainty in the markets and may adversely affect the performance of
these economies. Unanticipated political, social, and public health developments
may
result in sudden and significant investment losses. Many emerging markets may be
underprepared for global health crises. For example, the rapid and global spread
of a highly contagious novel coronavirus respiratory disease, designated
COVID-19, has resulted in extreme volatility in the financial markets and severe
losses; reduced liquidity of many instruments; restrictions on international
and, in some cases, local travel; significant disruptions to business operations
(including business closures); strained healthcare systems; disruptions to
supply chains, consumer demand and employee availability; and widespread
uncertainty regarding the duration and long-term effects of this pandemic.
Investing in emerging market countries involves greater risk of loss due to
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and on repatriation of capital
invested. As an example, in the past some Eastern European governments have
expropriated substantial amounts of private property, and many claims of the
property owners have never been fully settled. There is no assurance that
similar expropriations will not occur in other emerging market countries,
including China.
As
a result of heightened geopolitical tensions, various countries have imposed
economic sanctions, imposed non-trade barriers and renewed existing economic
sanctions on specific emerging markets and on issuers within those markets.
These non-trade barriers consist of prohibiting certain securities trades,
prohibiting certain private transactions in certain sectors and with respect to
certain companies, asset freezes, and prohibition of all business, against
certain individuals and companies. The United States and other nations or
international organizations may impose additional, broader economic sanctions or
take other actions that may adversely affect certain emerging markets in the
future. These actions, any future sanctions or other actions, or even the threat
of further sanctions or other actions, may negatively affect the value and
liquidity of the Fund’s investments. For example, the Fund may be prohibited
from investing in securities issued by companies subject to such sanctions. In
addition, sanctions may require the Fund to freeze its existing investments,
prohibiting the Fund from buying, selling or otherwise transacting in these
investments. Also, if an affected security is included in the Fund's Underlying
Index, the Fund may, where practicable, seek to eliminate its holdings of the
affected security by employing or augmenting its representative sampling
strategy to seek to track the investment results of the Underlying Index. The
use of (or increased use of) a representative sampling strategy may increase the
Fund’s tracking error risk. Actions barring some or all transactions with a
specific company will likely have a substantial, negative impact on the value of
such company’s securities. These sanctions may also lead to changes in the
Fund’s Underlying Index. The Fund’s index provider may remove securities from
the Underlying Index or implement caps on the securities of certain issuers that
have been subject to recent economic sanctions. In such an event, it is expected
that the Fund will rebalance its portfolio to bring it in line with its
Underlying Index as a result of any such changes, which may result in
transaction costs and increased tracking error. The Fund’s investment in
emerging market countries may also be subject to withholding or other taxes,
which may be significant and may reduce the return to the Fund from an
investment in such countries.
Settlement
and clearance procedures in emerging market countries are frequently less
developed and reliable than those in the United States and may involve the
Fund’s delivery of securities before receipt of payment for their sale. In
addition, significant delays may occur in certain markets in registering the
transfer of securities. Settlement, clearance or registration problems may make
it more difficult for the Fund to value its portfolio securities and could cause
the Fund to miss attractive investment opportunities, to have a portion of its
assets uninvested or to incur losses due to the failure of a counterparty to pay
for securities the Fund has delivered or the Fund’s inability to complete its
contractual obligations because of theft or other reasons. In addition, local
agents and depositories are subject to local standards of care that may not be
as rigorous as developed countries. Governments and other groups may also
require local agents to hold securities in depositories that are not subject to
independent verification. The less developed a country’s securities market, the
greater the risk to the Fund.
The
creditworthiness of the local securities firms used by the Fund in emerging
market countries may not be as sound as the creditworthiness of firms used in
more developed countries. As a result, the Fund may be subject to a greater risk
of loss if a securities firm defaults in the performance of its
responsibilities.
The
Fund’s use of foreign currency management techniques in emerging market
countries may be limited. Due to the limited market for these instruments in
emerging market countries, all or a significant portion of the Fund's currency
exposure in emerging market countries may not be covered by such instruments.
Rising
interest rates, combined with widening credit spreads, could negatively impact
the value of emerging market debt and increase funding costs for foreign
issuers. In such a scenario, foreign issuers might not be able to service their
debt obligations, the market for emerging market debt could suffer from reduced
liquidity, and the Fund could lose money.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer's securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level, for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Risk
of Investing in the United States
Risk
of Investing in the United States applies to each Fund
A
decrease in imports or exports, changes in trade regulations and/or an economic
recession in the U.S. may have a material adverse effect on the U.S. economy and
the securities listed on U.S. exchanges. Proposed and adopted policy and
legislative changes in the U.S. are changing many aspects of financial and other
regulation and may have a significant effect on the U.S. markets generally, as
well as on the value of certain securities. In addition, a continued rise in the
U.S. public debt level or the imposition of U.S. austerity measures may
adversely affect U.S. economic growth and the securities to which the Fund has
exposure. The U.S. has developed increasingly strained relations with a number
of foreign countries. If these relations continue to worsen, it could adversely
affect U.S. issuers as well as non-U.S. issuers that rely on the U.S. for trade.
The U.S. has also experienced increased internal unrest and discord. If this
trend were to continue, it may have an adverse impact on the U.S. economy and
the issuers in which the Fund invests.
Geographic
Economic Exposure Risk
Geographic
Economic Exposure Risk applies to each Fund
The
constituents held by the Fund may have partners, suppliers and/or customers
located in various geographic regions, and the geographic regions in which Fund
constituents are located may have trading partners in other geographic regions.
As a result, an economic downturn in one or more of these regions may impact the
performance of the constituents in which the Fund invests, even if the Fund does
not invest directly in companies located in such region. The risks related to
such regions may include:
African
Economic Risk
The
economies of African countries are subject to risks not typically associated
with more developed economies, countries or geographic regions. Such heightened
risks include, among others, expropriation and/or nationalization of assets,
restrictions on and government intervention in international trade, confiscatory
taxation, political instability, including authoritarian and/or military
involvement in governmental decision making, armed conflict, civil war, and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
The
securities markets in Africa are underdeveloped and are often considered to be
less correlated to global economic cycles than markets located in more developed
countries or geographic regions. Securities markets in Africa are subject to
greater risks associated with market volatility, lower market capitalization,
lower trading volume, illiquidity, inflation, greater price fluctuations,
uncertainty regarding the existence of trading markets, governmental control and
heavy regulation of labor and industry. Moreover, trading on securities markets
may be suspended altogether.
Certain
governments in Africa may restrict or control to varying degrees the ability of
foreign investors to invest in securities of issuers located or operating in
those countries. These restrictions and/or controls may at times limit or
prevent foreign investment in securities of issuers located or operating in
countries in Africa. Moreover, certain countries in Africa may require
governmental approval or special licenses prior to investment by foreign
investors; may limit the amount of investment by foreign investors in a
particular industry and/or issuer; may limit such foreign investment to a
certain class of securities of an issuer that may have less advantageous rights
than the classes available for purchase by domestic investors of those
countries; and/or may impose additional taxes on foreign investors. These
factors,
among others, make investing in issuers located or operating in countries in
Africa significantly riskier than investing in issuers located or operating in
more developed countries.
Asian
Economic Risk
Many
Asian economies have experienced rapid growth and industrialization in recent
years, but there is no assurance that this growth rate will be maintained. Other
Asian economies, however, have experienced high inflation, high unemployment,
currency devaluations and restrictions, and over-extension of credit.
Geopolitical hostility, political instability, as well as economic or
environmental events in any one Asian country may have a significant economic
effect on the entire Asian region, as well as on major trading partners outside
Asia. Any adverse event in the Asian markets may have a significant adverse
effect on some or all of the economies of the countries in which the Fund
invests. Many Asian countries are subject to political risk, including political
instability, corruption and regional conflict with neighboring countries. Hong
Kong is currently administered as a Special Administrative Region under the
sovereignty of the People’s Republic of China, but pro-independence sentiment
and political dissatisfaction towards China have resulted and may continue to
result in widespread protests. In 2020, China passed the National Security Law
in Hong Kong, which tightened political freedoms and heightens risk for any
businesses or individuals that express pro-independence views. North Korea and
South Korea each have substantial military capabilities, and historical tensions
between the two countries present the risk of war. Escalated tensions involving
the two countries and any outbreak of hostilities between the two countries, or
even the threat of an outbreak of hostilities, could have a severe adverse
effect on the entire Asian region. Maritime disputes in the South China Sea are
complex and involve conflicting claims by China, Brunei, Indonesia, Malaysia,
the Philippines, Taiwan and Vietnam, and there is a risk that these disputes
could escalate into armed conflict between any of the aforementioned countries.
Furthermore, there are numerous disputes over islands in East Asia that pose
security risks, including but not necessarily limited to the Liancourt Rocks
dispute between Japan and Korea, the Senkaku/Diaoyu Islands dispute between
China and Japan, and the Kuril Islands dispute between Japan and Russia.
Although Taiwan currently has a government that is separate from that of the
People’s Republic of China, the PRC lays claim to Taiwan and has enacted
legislation mandating military invasion should Taiwan’s government formally
declare independence. China may also choose to launch an invasion of Taiwan even
without the Taiwanese government formally declaring independence and there is a
high risk that such a conflict would draw in other actors such as the United
States and Japan. In response to the elevated risk of conflict in Taiwan, in
2022 the government of Japan moved to dramatically raise its defense budget and
lift longstanding restrictions on obtaining missiles with strike capabilities.
Certain Asian countries have also developed increasingly strained relationships
with the U.S., and if these relations were to worsen, they could adversely
affect Asian issuers that rely on the U.S. for trade. In addition, many Asian
countries are subject to social and labor risks associated with demands for
improved political, economic and social conditions.
Australasian
Economic Risk
The
economies of Australasia, which include Australia and New Zealand, are dependent
on exports from the agricultural and mining sectors. This makes Australasian
economies susceptible to fluctuations in the commodity markets. Australasian
economies are also increasingly dependent on their growing service industries.
Because the economies of Australasia are dependent on the economies of Asia,
Europe and the United States as key trading partners and investors, reduction in
spending by any of these trading partners on Australasian products and services,
or negative changes in any of these economies, may cause an adverse impact on
some or all of the Australasian economies.
European
Economic Risk
The
economies of Europe are highly dependent on each other, both as key trading
partners and, in many cases, as fellow members maintaining the euro. Decreasing
European imports, new trade regulations, changes in exchange rates, a recession
in Europe, or a slowing of economic growth in this region could have an adverse
impact on the securities in which the Fund invests. Reduction in trading
activity among European countries may cause an adverse impact on each nation’s
individual economies. The Economic and Monetary Union of the European Union (the
“EU”) requires compliance with restrictions on inflation rates, deficits,
interest rates, debt levels and fiscal and monetary controls, each of which may
significantly affect every country in Europe, including those countries that are
not members of the EU. Decreasing imports or exports, changes in governmental or
EU regulations on trade, changes in the exchange rate of the euro, the default
or threat of default by an EU member country on its sovereign debt, and
recessions in an EU member country may have a significant adverse effect on the
economies of EU member countries and their trading partners. The European
financial markets have historically experienced volatility and adverse trends
due to concerns about economic downturns or rising government debt levels in
several European countries, including, but not limited
to,
Austria, Belgium, Cyprus, France, Greece, Ireland, Italy, Portugal, Spain and
Ukraine. These events have adversely affected the exchange rate of the euro and
may continue to significantly affect European countries.
Latin
American Economic Risk
High
interest rates, inflation, government defaults and unemployment rates are
characteristics of the economies in some Latin American countries. Currency
devaluations in any Latin American country can have a significant effect on the
entire region. Because commodities such as oil and gas, minerals and metals can
represent a significant percentage of the region’s exports, the economies of
Latin American countries may be particularly sensitive to fluctuations in
commodity prices. As a result, the economies in many Latin American countries
could experience significant volatility. Political stability is also a concern
in Latin America, with the risk of contested election results, military coups,
and mass social disorder presenting complex risks.
Middle
East Economic Risk
Middle
Eastern governments have exercised and continue to exercise substantial
influence over many aspects of the private sector. Many economies in the Middle
East are highly reliant on income from the sale of oil or trade with countries
involved in the sale of oil, and their economies are therefore vulnerable to
changes in the market for oil and foreign currency values. As global demand for
oil fluctuates, many Middle Eastern economies may be significantly impacted. A
sustained decrease in commodity prices could have a significant negative impact
on all aspects of the economy in the region. Middle Eastern economies may be
subject to acts of terrorism, political strife, religious, ethnic or
socioeconomic unrest and sudden outbreaks of hostilities with neighboring
countries. Certain Middle Eastern countries have strained relations with other
Middle Eastern countries due to territorial disputes, historical animosities,
international alliances, religious tensions or defense concerns, which may
adversely affect the economies of these countries. Certain Middle Eastern
countries experience significant unemployment, as well as widespread
underemployment. Many Middle Eastern countries have little or no democratic
tradition. Many Middle Eastern countries periodically have experienced
political, economic and social unrest as protestors have called for widespread
reform. Some of these protests have resulted in a governmental regime change,
internal conflict or civil war. If further regime changes were to occur,
internal conflict were to intensify, or a civil war were to continue in any of
these countries, such instability could adversely affect the economies of Middle
Eastern countries.
North
American Economic Risk
A
decrease in imports or exports, changes in trade regulations or an economic
recession in any North American country can have a significant economic effect
on the entire North American region and on some or all of the North American
countries to which the Fund has economic exposure. The U.S. is Canada's and
Mexico's largest trading and investment partner. The Canadian and Mexican
economies are significantly affected by developments in the U.S. economy. Since
the implementation of the North American Free Trade Agreement (“NAFTA”) in 1994
among Canada, the U.S. and Mexico, total merchandise trade among the three
countries has increased. However, political developments in the U.S., including
the renegotiation of NAFTA and imposition of tariffs by the U.S., may have
implications for the trade arrangements among the U.S., Mexico and Canada, which
could negatively affect the value of securities held by the Fund. Policy and
legislative changes in any of the three countries may have a significant effect
on North American economies generally, as well as on the value of certain
securities held by the Fund.
High
Dividend Yield Stocks Risk
High
Dividend Yield Stocks Risk applies to the Global X Alternative Income ETF
High-yielding
stocks are often speculative, high risk investments. These companies may be
paying out more than they can support and may reduce their dividends or stop
paying dividends at any time, which could have a material adverse effect on the
stock price of these companies and the Fund’s performance. Securities that pay
dividends, as a group, can fall out of favor with the market, potentially during
periods of rising interest rates, causing such companies to underperform
companies that do not pay dividends.
High
Yield Securities Risk
High
Yield Securities Risk applies to the Global X Alternative Income ETF, Global X
U.S. Preferred ETF and Global X Variable Rate Preferred ETF
High
yield securities typically involve greater risk and are less liquid than higher
grade issues. Changes in general economic conditions, changes in the financial
condition of the issuers and changes in interest rates may adversely impact the
ability of issuers of high yield securities to make timely payments of interest
and principal.
The
Fund may invest in high yield securities that offer generally a higher current
yield than that available from higher grade issues, but they typically involve
greater risk. Securities rated below investment grade commonly are referred to
as “junk bonds.” The ability of issuers of high yield securities to make timely
payments of interest and principal may be impacted by adverse changes in general
economic conditions, changes in the financial condition of their issuers and
price fluctuations in response to changes in interest rates. High yield
securities are less liquid than investment grade securities and may be difficult
to price or sell, particularly in times of negative sentiment toward high yield
securities. Issuers of high yield securities may have a larger amount of
outstanding debt relative to their assets than issuers of investment grade
securities have. Periods of economic downturn or rising interest rates may cause
the issuers of high yield securities to experience financial distress, which
could adversely impact their ability to make timely payments of principal and
interest and could increase the possibility of default. The market value and
liquidity of high yield securities may be impacted negatively by adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, especially in a market characterized by low trade volume.
Income
Risk
Income
Risk applies to the Global X Alternative Income ETF, Global X U.S. Preferred ETF
and Global X Adaptive U.S. Risk Management ETF
The
Fund’s income may decline when interest rates fall. This decline can occur
because the Fund may invest in or have exposure to lower-yielding bonds as bonds
in its portfolio mature or the Fund otherwise needs to purchase additional
bonds.
Interest
Rate Risk
Interest
Rate Risk applies to the Global X Alternative Income ETF, Global X U.S.
Preferred ETF, Global X Variable Rate Preferred ETF and Global X Adaptive U.S.
Risk Management ETF
Interest
rate risk is the risk that prices of fixed income securities generally increase
in value when interest rates decline and decrease in value when interest rates
increase. The Fund may lose money if short-term or long-term interest rates rise
sharply.
Investors
should note that interest rates are currently at, or near, decade highs, but may
ultimately remain high or continue to rise, with potentially sudden and
unpredictable effects on the markets and the Fund's investments. Interest rates
are measured by the US 10-Year Treasury Yield for long-term yields and the
Federal Funds rate (continuous series) for short-term rates.
Securities
of lower credit quality or with longer durations tend to be more sensitive to
changes in interest rates, often making them more volatile in response to
interest rate changes than securities of higher credit quality or with shorter
durations. Interest rate fluctuations may also negatively impact the values of
equity and other non-fixed income securities.
Inflation-indexed
bonds, including Treasury Inflation-Protected Securities, decline in value when
real interest rates rise (the real interest rate is the rate of interest an
investor expects to receive after allowing for inflation). In certain interest
rate environments, such as when real interest rates are rising faster than
nominal interest rates, inflation-indexed bonds may experience greater losses
than other fixed income securities with similar durations.
Variable
and floating rate securities generally are less sensitive to interest rate
changes but may decline in value if their interest rates do not rise as much, or
as quickly, as interest rates in general. Conversely, floating rate securities
will not generally increase in value if interest rates decline. Inverse floating
rate securities may decrease in value if interest rates increase. Inverse
floating rate securities may also exhibit greater price volatility than a fixed
rate obligation with similar credit quality. When the Fund holds variable or
floating rate securities, a decrease (or, in the case of inverse floating rate
securities, an increase) in market interest rates will adversely affect the
income received from such securities, which may also impact the net asset value
of the Fund’s Shares.
Following
the pandemic of 2020, the Board of Governors of the Federal Reserve System
(“Federal Reserve”) has attempted to stabilize the U.S. inflation and tighten
financial conditions by raising the federal funds rate, which contradicts the
zero-bound range during the pandemic. In addition, the Federal Reserve started
quantitative tightening (QT) by rolling off large quantities of securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
by letting them expire and not adding new securities. There is a risk that
interest rates across the U.S. financial system will remain elevated. Such
policies may expose fixed-income and related markets to heightened volatility
and may reduce liquidity for certain Fund investments, which
could
cause the value of the Fund’s investments and the NAV of the Fund’s Shares to
decline. To the extent the Fund experiences high redemptions in connection with
these developments or otherwise, the Fund may experience increased portfolio
turnover, which will increase the costs that the Fund incurs and may lower the
Fund’s performance. The liquidity levels of the Fund’s investments may also be
affected.
Further,
fixed income markets have consistently grown over the past three decades while
the capacity for traditional dealer counterparties to engage in fixed income
trading has not kept pace and in some cases has decreased. As a result, dealer
inventories of corporate bonds, which provide a core indication of the ability
of financial intermediaries to “make markets,” are at or near historic lows in
relation to market size. This reduction in dealer inventories could potentially
lead to decreased liquidity and increased volatility in the fixed income
markets. If sudden or large-scale rises in interest rates were to occur, the
Fund could also face above-average redemption requests, which could cause the
Fund to lose value due to downward pricing forces and reduced market liquidity.
Investable
Universe of Companies Risk
Investable
Universe of Companies Risk applies to the Global X MLP ETF and Global X MLP
& Energy Infrastructure ETF
The
investable universe of companies in which the Fund may invest may be limited. If
a company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s overall portfolio holdings
and on Fund performance.
Issuer
Risk
Issuer
Risk applies to each Fund
Issuer
risk is the risk that any of the individual companies that the Fund invests in
may perform badly, causing the value of its securities to decline. Poor
performance may be caused by poor management decisions, competitive pressures,
changes in technology, disruptions in supply, labor problems or shortages,
corporate restructurings, fraudulent disclosures or other factors. Issuers may,
in times of distress or on their own discretion, decide to reduce or eliminate
dividends, which would also cause their stock prices to decline.
Market
Risk
Market
Risk applies to each Fund
Market
risk is the risk that the value of the securities in which the Fund invests may
go up or down in response to the prospects of individual issuers and/or general
economic conditions. Turbulence in the financial markets and reduced liquidity
may negatively affect issuers, which could have an adverse effect on the Fund.
If the securities held by the Fund experience poor liquidity, the Fund may be
unable to transact at advantageous times or prices, which may decrease the
Fund’s returns. In addition, there is a risk that policy changes by central
governments and governmental agencies, including the Federal Reserve or the
European Central Bank, which could include increasing interest rates, could
cause increased volatility in financial markets and lead to higher levels of
Fund redemptions from Authorized Participants, which could have a negative
impact on the Fund. Furthermore, local, regional or global events such as war,
acts of terrorism, the spread of infectious illness or other public health
issues, recessions, or other events could have a significant impact on the Fund
and its investments and trading of its Shares. For example, at the start of
2023, central banks had already increased interest rates at the fastest rate on
record, the unknown is the length of time they remain restrictive and when
inflation returns to target levels. This increases the risk that monetary policy
may provide less support should economic growth slow. Additionally, China’s
shift away from their zero-COVID policy creates both opportunities and risks,
establishing China as the wildcard for global economic growth. Market risk
factors may result in increased volatility and/or decreased liquidity in the
securities markets. The Fund’s NAV could decline over short periods due to
short-term market movements and over longer periods during market downturns.
MLP
Tax Risk
MLP
Tax Risk applies to the Global X Alternative Income ETF, Global X MLP ETF and
Global X MLP & Energy Infrastructure ETF
Subject
to the application of the partnership audit rules, MLPs that elect to be taxed
as partnerships do not pay U.S. federal income tax at the partnership level.
Rather, each partner is allocated a share of the partnership’s income, gains,
losses, deductions and expenses. A change in current tax law, or a change in the
underlying business mix of a given MLP, could result
in
an MLP that previously elected to be taxed as a partnership being treated as a
corporation for U.S. federal income tax purposes, which would result in such MLP
being required to pay U.S. federal income tax on its taxable income. The
classification of an MLP as a corporation for U.S. federal income tax purposes
would have the effect of reducing the amount of cash available for distribution
by the MLP. Thus, to the extent that any of the MLPs to which the Fund has
exposure are treated as a corporation for U.S. federal income tax purposes, it
could result in a reduction in the value of the Fund’s investment and lower the
Fund’s income. The Fund may also invest in MLPs that elect to be taxed as
corporations, which taxes would have the effect of reducing the amount of cash
available for distribution by the MLP. Additionally, as a result of the Fund's
exposure to MLPs taxed as partnerships, a portion of the Fund’s distributions
are expected to be treated as a return of capital for tax purposes. Return of
capital distributions are not taxable income to you, but reduce your tax basis
in your Fund Shares. Such a reduction in tax basis will result in larger taxable
gains and/or lower tax losses on a subsequent sale of Fund Shares. Shareholders
who sell their Shares for less than they bought them may still recognize a gain
due to the reduction in tax basis. Shareholders who periodically receive the
payment of dividends or other distributions consisting of a return of capital
may be under the impression that they are receiving net profits from the Fund
when, in fact, they are not. Shareholders should not assume that the source of
the distributions is from the net profits of the Fund. To the extent that the
distributions paid to you constitute a return of capital, the Fund's assets will
decline. A decline in the Fund's assets may also result in an increase in the
portion of a Fund's expense ratio that is not subject to a unitary fee or any
other form of contractual cap, and over time the distributions paid in excess of
net distributions received could work to erode the Fund's net asset value.
Model
Portfolio Risk
Model
Portfolio Risk applies to the Global X Adaptive U.S. Factor ETF and Global X
Adaptive U.S. Risk Management ETF
The
Underlying Index utilizes a proprietary methodology to determine its allocations
to the securities in which the Fund invests. Investments selected using a
proprietary methodology, including quantitative models, may perform differently
from the market as a whole or from their expected performance. There can be no
assurance that use of a quantitative model will enable the Fund to achieve
positive returns or outperform the market.
Non-Diversification
Risk
Non-Diversification
Risk applies to the Global X Variable Rate Preferred ETF, Global X MLP ETF,
Global X MLP & Energy Infrastructure ETF and Global X Adaptive U.S. Risk
Management ETF
The
Fund is classified as a “non-diversified” investment company under the 1940 Act.
This means that the Fund may invest most of its assets in securities issued by
or representing a small number of companies. As a result, the Fund may be more
susceptible to the risks associated with these particular companies, or to a
single economic, political or regulatory occurrence affecting these companies.
Operational
Risk
Operational
Risk applies to each Fund
The
Fund is exposed to operational risk arising from a number of factors, including
but not limited to human error, processing and communication errors, errors of
the Fund's service providers, counterparties or other third-parties, failed or
inadequate processes and technology or systems failures.
With
the increased use of technologies such as the internet to conduct business, the
Fund, Authorized Participants, service providers and the relevant listing
exchange are susceptible to operational, information security and related
“cyber” risks both directly and through their service providers. Similar types
of cyber security risks are also present for issuers of securities in which the
Fund invests, which could result in material adverse consequences for such
issuers and may cause the Fund’s investment in such portfolio companies to lose
value. Unlike many other types of risks faced by the Fund, these risks typically
are not covered by insurance. In general, cyber incidents can result from
deliberate attacks or unintentional events. Cyber incidents include, but are not
limited to, gaining unauthorized access to digital systems (e.g., through
“hacking” or malicious software coding) for purposes of misappropriating assets
or sensitive information, corrupting data, or causing operational disruption.
Cyber-attacks may also be carried out in a manner that does not require gaining
unauthorized access, such as causing denial-of-service attacks on websites
(i.e., efforts to make network services unavailable to intended users).
Recently, geopolitical tensions may have increased the scale and sophistication
of deliberate attacks, particularly those from nation-states or from entities
with nation-state backing. Cyber security failures by or breaches of the systems
of the Adviser and the Fund’s distributor and other service providers
(including, but not limited to, the Index Provider, fund accountants,
custodians, transfer agents and administrators), market makers, Authorized
Participants, or the issuers of securities in which the Fund invests, have
the
ability to cause disruptions and impact business operations, potentially
resulting in: financial losses, interference with the Fund’s ability to
calculate its NAV, disclosure of confidential trading information, impediments
to trading, submission of erroneous trades or erroneous creation or redemption
orders, the inability of the Fund or its service providers to transact business,
violations of applicable privacy and other laws, regulatory fines, penalties,
reputational damage, reimbursement or other compensation costs, or additional
compliance costs. In addition, cyber-attacks may render records of Fund assets
and transactions, shareholder ownership of Fund Shares, and other data integral
to the functioning of the Fund inaccessible or inaccurate or incomplete.
Substantial costs may be incurred by the Fund in order to resolve or prevent
cyber incidents in the future. While the Fund has established business
continuity plans in the event of, and risk management systems to prevent, such
cyber-attacks, there are inherent limitations in such plans and systems,
including the possibility that certain risks have not been identified and that
prevention and remediation efforts will not be successful. Furthermore, the Fund
cannot control the cyber security plans and systems put in place by service
providers to the Fund, issuers in which the Fund invests, the Index
Provider, market makers or Authorized Participants. The Fund and its
shareholders could be negatively impacted as a result.
The
Fund and the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate for those risks that they are intended to address.
Optimization
Risk
Optimization
Risk applies to the Global X Adaptive U.S. Risk Management ETF
The
Fund is based on the “modern portfolio theory” approach to asset allocation,
which is a framework for determining the allocation of a portfolio with the goal
of achieving an intended investment outcome based on a given level of risk. This
framework relies heavily on the anticipated volatilities, investment returns and
correlations of particular asset classes or securities. There is no guarantee
that the Underlying Index will outperform any alternative strategy that might be
employed in respect of the component assets or that past volatilities and
correlations of particular asset classes or securities will be indicative of
future results.
Passive
Investment Risk
Passive
Investment Risk applies to each Fund
The
Fund is not actively managed and may be affected by a general decline in market
segments relating to the Underlying Index. The Fund invests in securities
included in, or representative of, the Underlying Index regardless of their
investment merits, and the Adviser does not otherwise attempt to take defensive
positions in declining markets. Unlike many investment companies, the Fund does
not seek to outperform its Underlying Index. Therefore, the Fund would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk
There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk
The
Fund may not fully replicate its Underlying Index and may hold securities not
included in its Underlying Index. Therefore, the Fund is subject to management
risk. That is, the Adviser’s investment strategy, the implementation of which is
subject to a number of constraints, may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. While the Fund is passively managed,
implementation of the Fund’s principal investment strategy may result in
tracking error risk, which is described below. The ability of the Adviser to
successfully implement the Fund’s investment strategies will influence the
Fund’s performance significantly.
Tracking
Error Risk
Tracking
error is the divergence of the Fund's performance from that of the Underlying
Index. Tracking error may occur because of differences between the securities
and other instruments held in the Fund's portfolio and those included in the
Underlying Index, pricing differences (including differences between a
security's price at the local market close and the Fund's valuation of a
security at the time of calculation of the Fund's NAV), transaction costs
incurred by the Fund, the Fund's holding of uninvested cash, differences in
timing of the accrual of or the valuation of dividends or interest, tax gains or
losses, changes to the Underlying Index or the costs to the Fund of complying
with various new or existing regulatory requirements. This risk may be
heightened during times of increased market volatility or other unusual market
conditions. Tracking error also may result because the Fund incurs fees and
expenses, while the Underlying Index does not. ETFs that track indices with
significant weight in emerging markets issuers may experience higher tracking
error than other ETFs that do not track such indices.
Potential
Substantial After-Tax Tracking Error From Index Performance Risk
Potential
Substantial After-Tax Tracking Error From Index Performance Risk applies to the
Global X MLP ETF
The
Fund will be subject to taxation on its taxable income. The NAV of Shares will
also be reduced by the accrual of any deferred tax liabilities. The Underlying
Index, however, is calculated without any deductions for taxes. As a result, the
Fund’s after tax performance could differ significantly from the Underlying
Index even if the pretax performance of the Fund and the performance of the
Underlying Index are closely correlated.
Quantitative
Signals Risk
Quantitative
Signals Risk applies to the Global X Adaptive U.S. Risk Management
ETF
The
performance of the Underlying Index will be significantly affected by the extent
to which the signals utilized to determine whether the Underlying Index is
invested in the U.S. Equity Position or the U.S. Treasury Position correctly
identify potential drawdowns and periods of positive returns. The methodology
upon which the Underlying Index relies is based on certain assumptions made in
reliance on historical market data and it may fail to predict future market
events or respond in a way that is advantageous for the Fund. There can be no
assurance that the signals will behave as expected in all market conditions.
Reliance
on Trading Partners Risk
Reliance
on Trading Partners Risk applies to the Global X Adaptive U.S. Factor ETF
The
Fund may invest in economies that are heavily dependent upon trading with key
partners. Any reduction in this trading, institution of tariffs or other trade
barriers or a slowdown in the economies of any of its key trading partners may
cause an adverse impact on the economies of the markets in which the Fund
invests.
Risks
Associated with Exchange-Traded Funds
Risks
Associated with Exchange-Traded Funds applies to each Fund
As
an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk
The
Fund has a limited number of financial institutions that may act as Authorized
Participants. Only Authorized Participants who have entered into agreements with
the Fund's distributor may engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, and no other
Authorized Participant is able to step forward to create and redeem in either of
those cases, Shares may trade like closed-end fund shares at a discount to NAV
and/or at wider intraday bid-ask spreads, and may possibly face trading halts
and/or delisting from the Exchange.
Large
Shareholder Risk
Certain
shareholders, including an Authorized Participant, the Adviser or an affiliate
of the Adviser, may own a substantial amount of the Fund’s Shares. Additionally,
from time to time an Authorized Participant, a third-party investor, the
Adviser, or an affiliate of the Adviser may invest in the Fund and hold its
investment for a specific period of time in order to facilitate commencement of
the Fund’s operations or to allow the Fund to achieve size or scale.
Redemptions by large shareholders could have a significant negative impact on
the Fund. If a large shareholder were to redeem all, or a large portion, of its
Shares, there is no guarantee that the Fund will be able to maintain sufficient
assets to continue operations in which case the Board of Trustees may determine
to liquidate the Fund. In addition, transactions by large shareholders may
account for a large percentage of the trading volume on the Exchange and may,
therefore, have a material upward or downward effect on the market price of the
Shares.
Listing
Standards Risk
The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks
Absence
of Active Market
Although
Shares of the Fund are or will be listed for trading on a U.S. exchange and may
be listed on certain foreign exchanges, there can be no assurance that an active
trading market for the Shares will develop or be maintained.
Risks
of Secondary Listings
The
Fund's Shares may be listed or traded on U.S. and non-U.S. exchanges other than
the U.S. exchange where the Fund’s primary listing is maintained. There can be
no assurance that the Fund’s Shares will continue to trade on any such exchange
or in any market or that the Fund's Shares will continue to meet the
requirements for listing or trading on any exchange or in any market. The Fund's
Shares may be less actively traded in certain markets than others, and investors
are subject to the execution and settlement risks and market standards of the
market where they or their brokers direct their trades for execution. Certain
information available to investors who trade Shares on a U.S. exchange during
regular U.S. market hours may not be available to investors who trade in other
markets, which may result in secondary market prices in such markets being less
efficient.
Secondary
Market Trading Risk
Only
Authorized Participants who have entered into agreements with the Fund’s
distributor may engage in creation or redemption transactions directly with the
Fund. Shares of the Fund may trade in the secondary market on days when the Fund
does not accept orders to purchase or redeem Shares from Authorized
Participants. On such days, Shares may trade in the secondary market with more
significant premiums or discounts than might be experienced on days when the
Fund accepts purchase and redemption orders.
Secondary
market trading in Fund Shares may be halted by a stock exchange because of
market conditions or other reasons. In addition, trading in Fund Shares on a
stock exchange or in any market may be subject to trading halts caused by
extraordinary market volatility pursuant to "circuit breaker" rules on the stock
exchange or market. There can be no assurance that the requirements necessary to
maintain the listing or trading of Fund Shares will continue to be met or will
remain unchanged.
Shares
of the Fund May Trade at Prices Other Than NAV
Shares
of the Fund may trade at, above or below NAV. The per share NAV of the Fund will
fluctuate with changes in the market value of the Fund’s holdings. The trading
prices of Shares will fluctuate in accordance with changes in the Fund's NAV as
well as market supply and demand. The trading prices of the Fund's Shares may
deviate significantly from NAV during periods of market volatility or when the
Fund has relatively few assets or experiences a lower trading volume. In
stressed market conditions, the market for the Shares may become less liquid in
response to the deteriorating liquidity of the Fund’s portfolio. Any of these
factors may lead to the Fund's Shares trading at a premium or discount to NAV.
While the creation/redemption feature is designed to make it likely that Shares
normally will trade close to the Fund’s NAV, market prices are not expected to
correlate exactly with the Fund's NAV due to timing
reasons
as well as market supply and demand factors. In addition, disruptions to
creations and redemptions or the existence of extreme market volatility may
result in trading prices that differ significantly from NAV. If a shareholder
purchases at a time when the market price is at a premium to the NAV or sells at
a time when the market price is at a discount to the NAV, the shareholder may
sustain losses.
Since
foreign exchanges may be open on days when the Fund does not price Shares, the
value of the securities in the Fund’s portfolio may change on days when
shareholders will not be able to purchase or sell Shares.
Costs
of Buying or Selling Fund Shares
Buying
or selling Fund Shares involves two types of costs that apply to all securities
transactions. When buying or selling Shares of the Fund through a broker, you
will likely incur a brokerage commission or other charges imposed by brokers as
determined by that broker. In addition, you may incur the cost of the "spread" -
that is, the difference between what professional investors are willing to pay
for Fund Shares (the "bid" price) and the market price at which they are willing
to sell Fund Shares (the "ask" price). Because of the costs inherent in buying
or selling Fund Shares, frequent trading may detract significantly from
investment results and an investment in Fund Shares may not be advisable for
investors who anticipate regularly making small investments.
Securities
Lending Risk
Securities
Lending Risk applies to the Global X Alternative Income ETF, Global X U.S.
Preferred ETF, Global X Variable Rate Preferred ETF and Global X MLP &
Energy Infrastructure ETF
The
Fund may engage in lending its portfolio securities. The Fund may lend its
portfolio securities to the extent noted under Fund Summaries-Principal
Investment Strategies. In connection with such loans, the Fund receives liquid
collateral equal to at least 102% of the value of domestic equity securities and
ADRs and 105% of the value of the foreign equity securities (other than ADRs)
being lent. This collateral is marked-to-market on a daily basis. Although the
Fund will receive collateral in connection with all loans of its securities
holdings, the Fund would be exposed to a risk of loss should a borrower default
on its obligation to return the borrowed securities (e.g., the loaned securities
may have appreciated beyond the value of the collateral held by the Fund). In
addition, the Fund will bear the risk of loss of any cash collateral that it
invests. Also, as securities on loan may not be voted by the Fund, there is a
risk that the Fund may not be able to recall the securities in sufficient time
to vote on material proxy matters.
Taxable
Fund Risk
Taxable
Fund Risk applies to the Global X MLP ETF
In
addition to other risk considerations, an investment in the Fund’s shares will
involve certain tax risks, including, but not limited to, the risks summarized
below and discussed in more detail elsewhere in this Prospectus. Tax matters are
complicated, and the federal, state, local and foreign tax consequences of the
purchase and ownership of each Fund’s shares will depend on the facts of each
investor’s situation. Prospective investors are encouraged to consult their own
tax advisors regarding the specific tax consequences that may affect the
investment in each Fund.
Deferred
Tax Liability
Cash
distributions from an MLP to a Fund that exceed such Fund’s allocable share of
such MLP’s net taxable income are considered a tax-deferred return of capital
that will reduce the Fund’s adjusted tax basis in the equity securities of the
MLP. These reductions in such Fund’s adjusted tax basis in the MLP equity
securities will increase the amount of gain (or decrease the amount of loss)
recognized by the Fund on a subsequent sale of the securities. A Fund will
accrue deferred income taxes for any future tax liability associated with its
investment in MLPs, including as a result of ordinary income incurred by the
MLPs as well as resulting from capital appreciation of the Fund’s investments.
Upon the sale of an MLP security, the Fund may be liable for previously deferred
taxes. A Fund will rely to some extent on information provided by the MLPs in
which its invests, which is not necessarily timely, to estimate deferred tax
liability for purposes of financial statement reporting and determining the NAV.
However, the daily estimate of the Fund's deferred tax liability used to
calculate the Fund's NAV could vary significantly from the Fund's actual tax
liability. A Fund may accrue separately for taxes associated with both capital
gains and ordinary income realized by the Fund. From time to time, the Adviser
will modify the estimates or assumptions regarding a Fund’s deferred tax
liability as new information becomes available. A Fund will generally compute
deferred income taxes based on the federal income tax rate applicable to
corporations (currently 21%) and an assumed rate attributable to state taxes.
Historically,
MLPs have been able to offset a significant portion of their current taxable
income with tax deductions, including depreciation and amortization expense
deductions. The law could change to eliminate or reduce such tax deductions,
which ultimately defer the recognition of taxable income by the Fund. The
elimination or reduction of such tax benefits could significantly reduce the
value of the MLPs held by the Fund, which would similarly reduce the Fund’s NAV.
Additionally, the Fund could consequently be subject to U.S. federal, state and
local corporate income taxes on a greater portion of the amount of the
distributions it receives from the MLPs, which would reduce the amount the Fund
can distribute to shareholders and could increase the percentage of Fund
distributions treated as dividends instead of tax advantaged return of capital.
Depreciation
or other cost recovery deductions passed through to the Fund from investments in
MLPs taxed as partnerships in a given year generally will reduce the Fund’s
taxable income (and earnings and profits), but those deductions may be
recaptured in the Fund’s taxable ordinary income (and earnings and profits) in
subsequent years when the MLPs dispose of their assets or when the Fund disposes
of its interests in the MLPs. When deductions are recaptured, distributions to
the Fund’s shareholders may be taxable, even though the shareholders at the time
of the distribution might not have held shares in the Fund at the time the
deductions were taken by the Fund, and even though the Fund’s shareholders at
the time of the distribution will not have corresponding economic gain on their
shares at the time of the distribution. Additionally, the ordinary income
associated with the recapture of such deductions cannot be offset by capital
losses incurred by a Fund, which may increase the deferred taxes for which the
Fund accrues and the amount of taxes for which the Fund may be liable.
The
portion of the distributions received by the Fund each year that is considered a
return of capital from the MLPs taxed as partnerships, which incorporates the
recapture of previous deductions, will not be known until the Fund receives a
Schedule K-1 for that year with respect to certain of its MLP investments. The
Fund’s tax liability will not be known until the Fund completes its annual tax
return. The Fund’s tax estimates could vary substantially from the actual
liability and therefore the determination of the Fund’s actual tax liability may
have a material impact on the Fund’s NAV. The payment of corporate income taxes
imposed on the Fund will decrease cash available for distribution to
shareholders.
Individuals and certain other non-corporate investors might
be entitled to a 20% deduction against taxable income allocated from direct
investments in MLPs. In contrast, neither the Fund directly nor the Fund’s
shareholders indirectly will be entitled to this deduction with respect to the
Fund’s MLP investments.
Tax
Status of A Fund
The
Fund is taxed as a regular corporation ("C" corporation) for federal income tax
purposes. This differs from most investment companies, which elect to be treated
as RICs under the Code in order to avoid paying entity level income taxes. Under
current law, a Fund is not eligible to elect treatment as a regulated investment
company due to its investments primarily in MLPs invested in energy assets. As a
result, the Fund will be obligated to pay applicable federal and state corporate
income taxes on its taxable income, as opposed to most other investment
companies, which are not so obligated. As discussed below, the Fund expects that
a portion of the distributions it receives from MLPs may be treated as a
tax-deferred return of capital, thus reducing the Fund’s current tax liability.
However, the amount of taxes currently paid by the Fund will vary depending on
the amount of income and gains derived from investments and/or sales of MLP
interests, and such taxes will reduce your return from an investment in the
Fund. Upon the sale of an MLP security, the Fund may be liable for previously
deferred taxes even if the MLP security is sold at a loss. Additionally, in
accordance with the provisions of the Inflation Reduction Act of 2022, a Fund
may become liable for federal excise tax on share redemptions occurring on or
after January 1, 2023. A Fund will incur an excise tax liability equal to one
percent (1%) of the fair market value of Fund share redemptions less the fair
market value of Fund share issuances (in excess of $1 million of fair market
value) annually on a taxable year basis.
Trading
Halt Risk
Trading
Halt Risk applies to each Fund
An
exchange or market may close or issue trading halts on specific securities, or
the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Trend
Lag Risk
Trend
Lag Risk applies to the Global X Adaptive U.S. Risk Management ETF
Trend
indicator signal changes pursuant to which the Fund's exposure and investments
are determined, are designed to become effective three trading days after the
quantitative signals indicate a rebalance is required, and after changing its
allocation the Underlying Index must remain in the same allocation for at least
ten trading days before it can change its allocation again. As a result of this,
the Fund may be exposed to downward trends and/or market volatility and may not
achieve immediate exposure to upward trends and/or market
volatility.
Turnover
Risk
Turnover
Risk applies to the Global X Adaptive U.S. Factor ETF and Global X Adaptive U.S.
Risk Management ETF
The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At times, the Fund may have a portfolio
turnover rate substantially greater than 100%. For example, a portfolio turnover
rate of 300% is equivalent to the Fund buying and selling all of its securities
three times during the course of a year. A high portfolio turnover rate would
result in high brokerage costs for the Fund, may result in higher taxes when
shares are held in a taxable account and lower Fund performance.
Valuation
Risk
Valuation
Risk applies to each Fund
The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). Because non-U.S. exchanges may be open on days when the Fund does not
price its Shares, the value of the securities in the Fund's portfolio may change
on days when shareholders will not be able to purchase or sell the Fund's
Shares.
A
FURTHER DISCUSSION OF OTHER RISKS
Each
Fund may also be subject to certain other risks associated with its investments
and investment strategies.
Exclusion
from the Definition of a Commodity Pool Operator Risk
With
respect to the Fund, the Adviser has claimed an exclusion from the definition of
“commodity pool operator” (“CPO”) under the Commodity Exchange Act, as amended
(“CEA”), and the rules of the Commodity Futures Trading Commission (“CFTC”) and,
therefore, is not subject to CFTC registration or regulation as a CPO. In
addition, the Adviser is relying upon a related exclusion from the definition of
“commodity trading advisor” (“CTA”) under the CEA and the rules of the CFTC. The
terms of the CPO exclusion require the Fund, among other things, to adhere to
certain limits on its investments in “commodity interests.” Commodity interests
include commodity futures, commodity options and swaps. Because the Adviser and
the Fund intend to comply with the terms of the CPO exclusion, the Fund may, in
the future, need to adjust its investment strategies, consistent with its
investment objective, to limit its investments in these types of instruments.
The Fund is not intended as a vehicle for trading in the commodity futures,
commodity options or swaps markets. The CFTC has neither reviewed nor approved
the Adviser’s reliance on these exclusions, or the Fund, its investment
strategies or this Prospectus.
Leverage
Risk
Under
the 1940 Act, the Fund is permitted to borrow from a bank up to 33 1/3% of its
net assets for short term or emergency purposes. The Fund may borrow money at
fiscal quarter end to maintain the required level of diversification to qualify
as a regulated investment company ("RIC") for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"). As a result, the Fund may be exposed to
the risks of leverage, which may be considered a speculative investment
technique. Leverage magnifies the potential for gain and loss on amounts
invested and therefore increases the risks associated with investing in the
Fund. If the value of the Fund's assets increases, then leveraging would cause
the Fund's NAV to increase more sharply than it would have had the Fund not
leveraged. Conversely, if the value of the Fund's assets decreases, leveraging
would cause the Fund's NAV to decline more sharply than it otherwise would have
had the Fund not leveraged. The Fund may incur additional expenses in connection
with borrowings.
Qualification
as a Regulated Investment Company Risk
Qualification
as a Regulated Investment Company Risk Applies to each Fund except the Global X
MLP ETF
The
Fund must meet a number of diversification requirements to qualify as a RIC
under Section 851 of the Code and, if qualified, to continue to qualify. If the
Fund experiences difficulty in meeting those requirements for any fiscal
quarter, it might enter into borrowings in order to increase the portion of the
Fund’s total assets represented by cash, cash items, and U.S. government
securities shortly thereafter and, as of the close of the following fiscal
quarter, to attempt to meet the requirements. However, the Fund may incur
additional expenses in connection with any such borrowings, and increased
investments by the Fund in cash, cash items, and U.S. government securities
(whether the Fund makes such investments from borrowings) are likely to reduce
the Fund’s return to investors.
Tax
Treaty Reclaims Uncertainty
When
the Fund receives dividend and interest income (if any) from issuers in certain
countries, such distributions may be subject to partial withholding by local tax
authorities in order to satisfy potential local tax obligations. The Fund may
file claims to recover such withholding tax in jurisdictions where withholding
tax reclaim is possible, which may be the case as a result of bilateral treaties
between the United States and local governments. Whether or when the Fund will
receive a withholding tax refund in the future is within the control of the tax
authorities in such countries. Where the Fund expects to recover withholding tax
based on a continuous assessment of probability of recovery, the NAV of the Fund
generally includes accruals for such tax refunds. The Fund continues to evaluate
tax developments for potential impact to the probability of recovery. If the
likelihood of receiving refunds materially decreases, for example due to a
change in tax regulation or approach, accruals in the Fund’s NAV for such
refunds may need to be written down partially or in full, which will adversely
affect that Fund’s NAV. Investors in the Fund at the time an accrual is written
down will bear the impact of any resulting reduction in NAV regardless of
whether they were investors during the accrual period. Conversely, if the Fund
receives a tax refund that has not been previously accrued, investors in the
Fund at the time the claim is successful will benefit from any resulting
increase in the Fund’s NAV. Investors who sold their shares prior to such time
will not benefit from such NAV increase.
PORTFOLIO
HOLDINGS INFORMATION
A
description of the policies and procedures of Global X Funds®
(the "Trust") with respect to the disclosure of the Funds’ portfolio securities
is available in the Funds’ combined Statement of Additional Information (“SAI”).
The top holdings of each Fund and Fund Fact Sheets providing information
regarding each Fund’s top holdings can be found at
www.globalxetfs.com/explore/(click on the name of your Fund) and may be
requested by calling 1-888-493-8631.
FUND
MANAGEMENT
Investment
Adviser
Global
X Management Company LLC (the "Adviser") serves as the investment adviser and
the administrator for the Funds. Subject to the supervision of the Trust's Board
of Trustees, the Adviser is responsible for managing the investment activities
of the Funds and the Funds' business affairs and other administrative matters.
The Adviser has been a registered investment adviser since 2008. The Adviser is
a Delaware limited liability company with its principal offices located at 605
3rd Avenue, 43rd Floor, New York, New York 10158. As of March 1, 2023, the
Adviser provided investment advisory services for assets of approximately $38.8
billion.
Pursuant
to a Supervision and Administration Agreement and subject to the general
supervision of the Board of Trustees, the Adviser provides, or causes to be
furnished, all supervisory, administrative and other services reasonably
necessary for the operation of the Funds and also bears the costs of various
third-party services required by the Funds, including audit, certain custody,
portfolio accounting, legal, transfer agency and printing costs. The Supervision
and Administration Agreement also requires the Adviser to provide investment
advisory services to the Funds pursuant to an Investment Advisory Agreement. The
Supervision and Administration Agreement for the Global X Alternative Income ETF
provides that the Adviser also bears the costs for acquired fund fees and
expenses generated by investments by the Fund in affiliated investment
companies.
Each
Fund pays the Adviser a fee ("Management Fee") in return for providing
investment advisory, supervisory and administrative services under an all-in fee
structure. For the fiscal year ended November 30, 2022, the Funds paid a
monthly Management Fee to the Adviser at the following annual rates (stated as a
percentage of the average daily net assets of each Fund taken separately):
|
|
|
|
|
|
Fund |
Management
Fee |
Global
X MLP ETF |
0.45% |
Global
X MLP & Energy Infrastructure ETF |
0.45% |
Global
X Alternative Income ETF |
0.50% |
Global
X Conscious Companies ETF |
0.43% |
Global
X Founder-Run Companies ETF |
0.45% |
Global
X U.S. Preferred ETF |
0.23% |
Global
X S&P 500®
Quality Dividend ETF |
0.20% |
Global
X Adaptive U.S. Factor ETF |
0.27% |
Global
X Variable Rate Preferred ETF |
0.25% |
Global
X Adaptive U.S. Risk Management ETF |
0.39% |
In
addition, each Fund bears other fees and expenses that are not covered by the
Supervision and Administration Agreement, which may vary and will affect the
total expense ratio of each Fund, such as taxes, brokerage fees, commissions and
other transaction expenses, interest and extraordinary expenses (such as
litigation and indemnification expenses). The Adviser may earn a profit on the
Management Fee paid by each Fund. Also, the Adviser, and not shareholders of the
Funds, would benefit from any price decreases in third-party services, including
decreases resulting from an increase in net assets.
The
Adviser or its affiliates may pay compensation, out of profits derived from the
Adviser’s Management Fee or other resources and not as an additional charge to
the Funds, to certain financial institutions (which may include banks,
securities dealers and other industry professionals) for the sale and/or
distribution of Fund Shares or the retention and/or servicing of Fund investors
and Fund Shares (“revenue sharing”). These payments are in addition to any other
fees described in the fee table or elsewhere in the Prospectus or SAI. Examples
of “revenue sharing” payments include, but are not limited to, payments to
financial institutions for “shelf space” or access to a third party platform or
fund offering list or other marketing programs, including, but not limited to,
inclusion of the Funds on preferred or recommended sales lists, mutual fund
“supermarket” platforms and other formal sales programs; granting the Adviser
access to the financial institution’s sales force; granting the Adviser access
to the financial institution’s conferences and meetings; assistance in training
and educating the financial institution’s personnel; and obtaining other forms
of marketing support. The level of revenue sharing payments made to financial
institutions may be a fixed fee or based upon one or more of the following
factors: gross sales, current assets and/or number of accounts of a Fund
attributable to the financial institution, or other factors as agreed to by the
Adviser and the financial institution or any combination thereof. The amount of
these revenue sharing payments is determined at the discretion of the Adviser
from time to time, may be substantial, and may be different for different
financial institutions depending upon the services provided by the financial
institution. Such payments may provide an incentive for the financial
institution to make Shares of the Funds available to its customers and may allow
the Funds greater access to the financial institution’s customers.
Approval
of Advisory Agreement
Discussions
regarding the basis for the Board of Trustees' approval of the Supervision and
Administration Agreement and the related Investment Advisory Agreement for each
Fund is available in the Fund's Semi-Annual Report to Shareholders for the
fiscal half-year ended May 31 and/or Annual Report to Shareholders for the
fiscal year ended November 30.
Portfolio
Management
The
Portfolio Managers who are currently responsible for the day-to-day management
of each Fund's portfolio are Nam To, Wayne Xie, Kimberly Chan, Vanessa Yang and
Sandy Lu.
Nam
To:
Nam To, CFA, Portfolio Manager, joined the Adviser in July 2017. Prior to that,
Mr. To was a Global Economics Research Analyst at Bunge Limited from 2014 to
2017. Mr. To received his Bachelor of Arts in Philosophy and Economics from
Cornell University in 2014.
Wayne
Xie:
Wayne Xie, Director of Portfolio Management, joined the Adviser in July 2018 as
a Portfolio Management Associate. Previously, Mr. Xie was an Analyst at VanEck
Associates on the Equity ETF Investment Management team from 2010 to 2018 and a
Portfolio Administrator at VanEck Associates from 2007 to 2010. Mr. Xie received
his Bachelor of Science from the State University of New York at Buffalo in
2002.
Kimberly
Chan:
Kimberly Chan, Portfolio Manager, joined the Adviser in June 2018. Previously,
Ms. Chan was a U.S. Associate Trader at Credit Agricole from 2016 to 2018, and
an Investment Analyst at MetLife Investments from 2015 to 2016. Ms. Chan
received her Bachelor of Science from New York University in 2015.
Vanessa
Yang:
Vanessa Yang, Portfolio Manager, joined the Adviser in 2016 as a Portfolio
Administrator. She was appointed to the portfolio management team in June 2019.
Previously, Ms. Yang was a Portfolio Administrator at VanEck Associates from
2011 to 2014. Ms. Yang received her MS in Financial Engineering from Drucker
School of Management in 2010 and her BS in Economics from Guangdong University
of Foreign Studies in 2008.
Sandy
Lu:
Sandy Lu, CFA, Portfolio Manager, joined the Adviser in September 2021.
Previously, Mr. Lu was a Portfolio Analyst and Junior Portfolio Manager at PGIM
Fixed Income from 2014 to 2021, and a Fixed Income Portfolio Analyst at Lincoln
Financial Group from 2010 to 2014. Mr. Lu received his Bachelor of Science in
Economics from the Wharton School of the University of Pennsylvania. He earned
his CFA designation in September 2015, and holds the Series 3
license.
The
SAI provides additional information about the Portfolio Managers’ compensation
structure, other accounts managed by the Portfolio Managers, and the Portfolio
Managers' ownership of Shares of the Funds.
DISTRIBUTOR
SEI
Investments Distribution Co. ("Distributor") distributes Creation Units for the
Funds on an agency basis. The Distributor does not maintain a secondary market
in Shares. The Distributor has no role in determining the policies of the Funds
or the securities that are purchased or sold by each Fund. The Distributor’s
principal address is One Freedom Valley Drive, Oaks, PA 19456. The Distributor
is not affiliated with the Adviser.
BUYING
AND SELLING FUND SHARES
Shares
of the Funds trade on a national securities exchange and in the secondary market
during the trading day. Shares can be bought and sold throughout the trading day
like other shares of publicly-traded securities. There is no minimum investment
for purchases made on a national securities exchange. When buying or selling
Shares through a broker, you will incur customary brokerage commissions and
charges. In addition, you will also incur the cost of the “spread,” which is the
difference between what professional investors are willing to pay for Shares
(the “bid” price) and the price at which they are willing to sell Shares (the
“ask” price). The commission is frequently a fixed amount and may be a
significant proportional cost for investors seeking to buy or sell small amounts
of Shares. The spread with respect to Shares varies over time based on a Fund’s
trading volume and market liquidity and is generally lower if a Fund has
significant trading volume and market liquidity and higher if a Fund has little
trading volume and market liquidity. Because of the costs of buying and selling
Shares, frequent trading may reduce investment returns.
Shares
of a Fund may be acquired or redeemed directly from the Fund only by Authorized
Participants (as defined in the SAI) and only in Creation Units or multiples
thereof, as discussed in the "Creations and Redemptions" section in the SAI.
Except for the Global X MLP ETF and Global X MLP & Energy Infrastructure
ETF, the Funds anticipate regularly meeting redemption requests primarily
through in-kind redemptions. However, the Funds reserve the right to pay
redemption proceeds to an Authorized Participant in cash, consistent with the
Trust’s exemptive relief. Cash used for redemptions will be raised from the sale
of portfolio assets or may come from existing holdings of cash or cash
equivalents.
Shares
generally trade in the secondary market in amounts less than a Creation Unit.
Shares of the Funds trade under the trading symbol listed for each Fund in the
Fund Summaries section of the Prospectus.
The
Funds are listed on a national securities exchange, which is open for trading
Monday through Friday and is closed on weekends and the following holidays, as
observed: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good
Friday, Memorial Day, Juneteenth National Independence Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Book
Entry
Shares
of the Funds are held in book-entry form, which means that no stock certificates
are issued. The Depository Trust Company (“DTC”) or its nominee is the record
owner of all outstanding Shares and is recognized as the owner of all Shares for
all purposes.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares.
Participants include DTC, securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any rights as an owner of
Shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any securities that you hold in
book entry or “street name” form.
FREQUENT
TRADING
Unlike
frequent trading of shares of a traditional open-end mutual fund (i.e., not
exchange-traded shares), frequent trading of Shares on the secondary market does
not disrupt portfolio management, increase a Fund's trading costs, lead to
realization of capital gains, or otherwise harm Fund shareholders because these
trades do not involve a Fund directly. A few institutional investors are
authorized to purchase and redeem the Funds' Shares directly with the Funds.
When these trades are effected in-kind (i.e.,
for securities, and not for cash), they do not cause any of the harmful effects
(noted above) that may result from frequent cash trades. Moreover, each Fund
imposes transaction fees on in-kind purchases and redemptions of the Fund
intended to cover the custodial and other costs incurred by the Fund in
effecting in-kind trades. These fees increase if an investor substitutes cash in
part or in whole for securities, reflecting the fact that a Fund’s trading costs
increase in those circumstances, although transaction fees are subject to
certain limits and therefore may not cover all related costs incurred by a Fund.
For these reasons, the Board of Trustees has determined that it is not necessary
to adopt policies and procedures to detect and deter frequent trading and
market-timing in Shares of the Funds.
DISTRIBUTION
AND SERVICES PLAN
The
Board of Trustees of the Trust has adopted a Distribution and Services Plan
(“Plan”) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, each Fund is
authorized to pay distribution fees in connection with the sale and distribution
of its Shares and pay service fees in connection with the provision of ongoing
services to shareholders of each class and the maintenance of shareholder
accounts in an amount up to 0.25% of its average daily net assets each year.
No
Rule 12b-1 fees are currently paid by a Fund, and there are no current plans to
impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because these fees are paid out of each Fund’s assets on an ongoing
basis, these fees will increase the cost of your investment in a Fund. By
purchasing Shares subject to distribution fees and service fees, you may pay
more over time than you would by purchasing Shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the rules of
FINRA. The net income attributable to Shares will be reduced by the amount of
distribution fees and service fees and other expenses of a Fund.
DIVIDENDS
AND DISTRIBUTIONS
The
following discussion applies to the Global X MLP ETF
Net
Investment Income and Capital Gains.
The Fund currently anticipates making distributions to its shareholders
quarterly in an amount that is approximately equal to the distributions the Fund
receives from its investments, including the MLPs in which it invests, less the
actual, estimated or anticipated expenses of the Fund, including taxes imposed
on the Fund (if any). The Fund is not required to make such distributions and,
consequently, the Fund could decide, at its discretion, not to make such
distributions or not to make distributions in the amount described above because
of market or other conditions affecting or relevant to the Fund.
Generally,
the Fund expects, based on its investment objective and strategies, that its
distributions, if any, will be treated for U.S. federal income tax purposes as
ordinary income, tax-deferred returns of capital, and/or capital gains.
Unlike
the MLPs in which the Fund invests, the Fund is not a pass through entity.
Consequently, the tax characterization of the distributions paid by the Fund may
differ greatly from those of the MLPs in which the Fund invests. The Fund's
ability to meet its investment objective will depend, in part, on the character
and amount of distributions it receives from such MLP investments. The Fund will
have no control over the timing of the distributions it receives from its MLP
investments because such MLPs have the ability to modify their distribution
policies from time to time generally without input from or the approval of the
Fund.
The
Trust is an open-end registered investment company under the 1940 Act. As such,
each Fund is generally limited under the 1940 Act to one distribution in any one
taxable year of long-term capital gains realized by each Fund. In this regard,
that portion of a Fund's income which consists of gain realized by each Fund on
a sale of equity units in an MLP (other than the portion of such gain
representing recapture income) may constitute long-term capital gain subject to
this limitation. Cash distributions received by a Fund from the MLPs in which
such Fund invests generally will not constitute long-term capital gain, except
to the extent that (i) such MLP distributions relate to long-term capital gain
realized by the MLP on a sale by the MLP of its assets or (ii) the distributions
received from a particular MLP exceed such Fund's tax basis in its equity units
in such MLP. A Fund does not expect that a material portion of the cash
distributions it receives from MLPs in which it invests will constitute
long-term capital gain.
The
following discussion applies to each Fund except the Global X MLP
ETF
Net
Investment Income and Capital Gains. As
a Fund shareholder, you are entitled to your share of the Fund's distributions
of net investment income and net realized capital gains on its investments. Each
Fund pays out substantially all of its net earnings to its shareholders as
"distributions."
It
is the policy of the Trust each fiscal year to distribute substantially all of
each Fund's net investment income (i.e., generally, the income earned from cash
distributions and interest on investments, and any capital gains, net of each
Fund's expenses). A portion of each Fund's distributions are also expected to be
treated as a return of capital for tax purposes.
The
Trust is an open-end registered investment company under the 1940 Act. As such,
each Fund is generally limited under the 1940 Act to one distribution in any one
taxable year of long-term capital gains realized by each Fund. In this regard,
that portion of a Fund's income which consists of gain realized by each Fund on
a sale of equity units in an MLP (other than the portion of such gain
representing recapture income) may constitute long-term capital gain subject to
this limitation. Cash distributions received by a Fund from the MLPs in which
such Fund invests generally will not constitute long-term capital gain, except
to the extent that (i) such MLP distributions relate to long-term capital gain
realized by the MLP on a sale by the MLP of its assets or (ii) the distributions
received from a particular MLP exceed such Fund's tax basis in its equity units
in such MLP. A Fund does not expect that a material portion of the cash
distributions it receives from MLPs in which it invests will constitute
long-term capital gain.
A
Fund may determine to distribute at least annually amounts representing the full
dividend yield net of expenses on the underlying investment securities, as if
the Fund owned the underlying investment securities for the entire dividend
period in which case some portion of each distribution may result in a return of
capital. You will be notified regarding the portion of the distribution which
represents a return of capital. Distributions in cash may be reinvested
automatically in additional Shares of the applicable Fund only if the broker
through which you purchased Shares makes such option available.
INVESTMENTS
BY INVESTMENT COMPANIES
Section
12(d)(1) of the 1940 Act restricts investments by investment companies in the
securities of other investment companies, including shares of the Funds.
Registered investment companies and unit investment trusts that enter into a
fund-of-funds investment agreement with the Trust ("Investing Funds") are
permitted to invest in certain Global X Funds beyond the limits set forth in
Section 12(d)(1) of the 1940 Act, subject to certain conditions set forth in
Rule 12d1-4 under the 1940 Act. With respect to the Global X Alternative Income
ETF, which invests in underlying ETFs, Investing Funds must adhere to the limits
set forth in Section 12(d)(1) when investing in such Fund.
TAXES
FOR THE GLOBAL X MLP ETF
Set
forth below is a discussion of certain U.S. federal income tax considerations
affecting the Fund and the purchase, ownership and disposition of relevant Fund
Shares. It is based upon the Code, the regulations promulgated thereunder,
judicial authorities, and administrative rulings and practices as in effect as
of the date of this Prospectus, all of which are subject to change. No ruling
has been or will be sought from the IRS regarding any matter discussed in this
Prospectus. Counsel to the Fund has not rendered any legal opinion regarding any
tax consequences relating to any Fund or your investment in the Fund. No
assurance can be given that the IRS would not assert, or that a court would not
sustain, a position contrary to any of the tax information set out
below.
The
following is a summary of the material U.S. federal income tax considerations
applicable to an investment in Shares of the Fund. The summary is based on the
laws in effect on the date of this Prospectus and existing judicial and
administrative interpretations thereof, all of which are subject to change,
possibly with retroactive effect. In addition, this summary assumes that the
Fund shareholder holds Shares as capital assets within the meaning of the Code
and does not hold Shares in connection
with
a trade or business. This summary does not address all potential U.S. federal
income tax considerations possibly applicable to an investment in Shares of the
Fund, to Fund shareholders that are, or that are holding Shares through, a
partnership (or other pass-through entity), or to Fund shareholders subject to
special tax rules. Prospective Fund shareholders are urged to consult their own
tax advisors with respect to the specific federal, state, local and foreign tax
consequences of investing in Fund Shares.
Federal
Income Taxation.
The Fund is taxed as a regular corporation for federal income tax purposes and
as such is obligated to pay federal and applicable state, local, and foreign
corporate taxes on its taxable income. This differs from most investment
companies, which elect to be treated as regulated investment companies under the
Code in order to avoid paying entity level income taxes. Under current law, the
Fund is not eligible to elect treatment as a RIC due to its investments in MLPs
invested in energy assets. As a result, the Fund will be obligated to pay
federal and state taxes on its taxable income, as opposed to most other
investment companies, which are not so obligated.
As
discussed below, the Fund expects that a portion of the distributions it
receives from MLPs may be treated as a tax-deferred return of capital, thus
reducing the Fund's current tax liability. However, the amount of taxes
currently paid by the Fund will vary depending on the amount of income and gains
derived from investments and/or sales of MLP interests, and such taxes may
reduce your return from an investment in the Fund.
The
Fund invests its assets primarily in MLPs, which generally are treated as
partnerships for federal income tax purposes. As a partner in the MLPs, the Fund
must report its allocable share of the MLPs' taxable income in computing its
taxable income, regardless of the extent (if any) to which the MLPs make
distributions. Based upon the Adviser's review of the historic results of the
types of MLPs in which the Fund invests, the Adviser expects that the cash flow
received by the Fund with respect to its MLP investments will generally exceed
the taxable income allocated to the Fund (and this excess generally will not be
currently taxable to the Fund but, rather, will result in a reduction of the
Fund's adjusted tax basis in each MLP as described in the following paragraph).
This is the result of a variety of factors, including significant non-cash
deductions, such as accelerated depreciation. There is no assurance that the
Adviser's expectation regarding the tax character of MLP distributions will be
realized. If this expectation is not realized, there may be greater tax expense
borne by the Fund and less cash available to distribute to you or to pay to
expenses.
The
Fund also will be subject to U.S. federal income tax (and possibly state, local,
or foreign taxes) at the corporate tax rate on any gain recognized by the Fund
on any sale of equity securities of an MLP. Cash distributions from an MLP to
the Fund that exceed the Fund's allocable share of such MLP's net taxable income
will reduce the Fund's adjusted tax basis in the equity securities of the MLP.
These reductions in the Fund's adjusted tax basis in the MLP equity securities
will increase the amount of any taxable gain (or decrease the amount of any tax
loss) recognized by the Fund on a subsequent sale of the
securities.
The
Fund will accrue deferred income taxes for any future tax liability associated
with its investment in MLPs, including as a result of ordinary income incurred
by the MLPs as well as resulting from capital appreciation of the Fund’s
investments. Upon the sale of any security of an MLP, the Fund may be liable for
previously deferred taxes. The Fund's accrued deferred tax liability will be
reflected each day in the Fund's NAV. Increases in deferred tax liability will
decrease the NAV. Conversely, decreases in deferred tax liability will increase
the NAV. The Fund will rely to some extent on information provided by the MLPs
in which it invests, which is not necessarily timely, to estimate deferred tax
liability for purposes of financial statement reporting and determining the NAV.
The Fund may accrue separately for taxes associated with both capital gains and
ordinary income realized by the Fund.
From
time to time, the Adviser will modify the estimates or assumptions regarding the
Fund's deferred tax liability as new information becomes available. The Fund's
estimates regarding its deferred tax liability are made in good faith. However,
the daily estimate of the Fund's deferred tax liability used to calculate the
Fund's NAV could vary significantly from the Fund's actual tax liability. The
Fund will generally compute deferred income taxes based on the federal income
tax rate applicable to corporations (currently 21%) and an assumed rate
attributable to state taxes.
Distributions.
Distributions by the Fund will be treated as dividends for U.S. federal income
tax purposes to the extent paid from the Fund's current or accumulated earnings
and profits (as determined under U.S. federal income tax principles). If the
amount of the Fund distribution exceeds the Fund's current and accumulated
earnings and profits, such excess will be treated first as a tax- deferred
return of capital to the extent of, and in reduction of, a shareholder's tax
basis in the shares, and thereafter as capital gain to the extent the
shareholder held the shares as a capital asset. Any such capital gain will be
long-term capital gain if such shareholder has held the applicable shares for
more than one year. The portion of the distribution received by a shareholder
from the Fund that is treated as a return of capital will decrease the
shareholder's tax basis in his or her Fund shares (but not below zero), which
will result in an increase in the amount of gain(or decrease in the amount of
loss) that will be recognized by the shareholder for tax purposes on the later
sale of the Fund shares.
Qualified
Publicly Traded Partnership Income.
Under 2017 legislation commonly known as the Tax Cuts and Jobs Act ("TCJA")
certain "qualified publicly traded partnership income" (e.g., certain income
from certain of the MLPs in which the Fund invests) is treated as eligible for a
20% deduction by noncorporate taxpayers. Neither the TCJA nor applicable
regulations contain a provision permitting an entity, such as the Fund, to
benefit from this deduction (since the Fund is taxed as a "C" corporation) or
pass the special character of this income through to its shareholders. Direct
investors in MLPs that are allocated qualified publicly traded partnership
income, however, might be eligible for the deduction.
Sales
and Exchanges.
The sale of Shares is a taxable event on which a gain or loss is recognized. The
amount of gain or loss is based on the difference between your tax basis in
Shares and the amount you receive for them upon disposition. Generally, you will
recognize long-term capital gain or loss if you have held your Shares for over
one year at the time you sell or exchange them. Gains and losses on Shares held
for one year or less will generally constitute short-term capital gains, except
that a loss on Shares held six months or less will be re-characterized as a
long-term capital loss to the extent of any long-term capital gain distributions
that you have received on the Shares. A loss realized on a sale or exchange of
Shares may be disallowed under the so-called "wash sale" rules to the extent the
Shares disposed of are replaced with other Shares of the Fund within a period of
61 days beginning 30 days before and ending 30 days after the Shares are
disposed of, such as pursuant to a dividend reinvestment in Shares of the Fund.
If disallowed, the loss will be reflected in an adjustment to the basis of the
Shares acquired.
Taxes
on Purchase and Redemption of Creation Units. An
Authorized Participant who exchanges equity securities for Creation Units
generally will recognize a gain or a loss. The gain or loss will be equal to the
difference between the market value of the Creation Units at the time of
purchase (plus any cash received by the Authorized Participant as part of the
issue) and the Authorized Participant’s aggregate basis in the securities
surrendered (plus any cash paid by the Authorized Participant as part of the
issue). An Authorized Participant who exchanges Creation Units for equity
securities generally will recognize a gain or loss equal to the difference
between the Authorized Participant’s basis in the Creation Units (plus any cash
paid by the Authorized Participant as part of the redemption) and the aggregate
market value of the securities received (plus any cash received by the
Authorized Participant as part of the redemption). The Internal Revenue Service
(the “IRS”), however, may assert that a loss realized upon an exchange of
securities for Creation Units cannot be deducted currently under the rules
governing “wash sales,” or on the basis that there has been no significant
change in economic position. Persons exchanging securities should consult their
own tax advisor with respect to whether the wash sale rules apply and when a
loss might be deductible. Under current federal tax laws, any capital gain or
loss realized upon redemption of Creation Units is generally treated as
long-term capital gain or loss if the Shares have been held for more than one
year and as a short-term capital gain or loss if the Shares have been held for
one year or less, assuming such Creation Units are held as a capital asset.
IRAs
and Other Tax-Qualified Plans.
The one major exception to the preceding tax principles is that distributions
on, and sales, exchanges and redemptions of, Shares held in an IRA or other
tax-qualified plan are not currently taxable but may be taxable when funds are
withdrawn from the tax qualified plan, unless the Shares were purchased with
borrowed funds.
Medicare
Tax. An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from the
Fund and net gains from redemptions or other taxable dispositions of Fund
Shares) of U.S. individuals, estates and trusts to the extent that such person's
"modified adjusted gross income" (in the case of an individual) or "adjusted
gross income" (in the case of an estate or trust) exceeds a threshold amount.
This Medicare tax, if applicable, is reported by you on, and paid with, your
federal income tax return.
Backup
Withholding.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury backup withholding at the applicable rate on dividends and gross sales
proceeds paid to any shareholder (i) who has either provided an incorrect tax
identification number or no number at all, (ii) who is subject to backup
withholding by the IRS, or (iii) who has failed to certify to the Fund, when
required to do so, that he or she is not subject to backup withholding or is an
"exempt recipient."
State
and Local Taxes.
You may also be subject to state and local taxes on income and gain attributable
to your ownership of Shares. You should consult your tax advisor regarding the
tax status of distributions in your state and locality.
U.S.
Tax Treatment of Foreign Shareholders. A
non-U.S. shareholder generally will not be subject to U.S. withholding tax on
gain from the redemption of Shares unless, in the case of a shareholder who is a
non-resident alien individual, the shareholder is present in the United States
for 183 days or more during the taxable year and certain other conditions are
met. Non-U.S. shareholders generally will be subject to U.S. withholding tax at
a rate of 30% (or a lower treaty rate, if applicable) on distributions by the
Fund of net investment income, other ordinary income, and the excess, if any, of
net short-term capital gain over net long-term capital loss for the year, unless
the distributions are effectively connected with a U.S. trade or business of the
shareholder. Non-U.S. shareholders are subject to special U.S. tax certification
requirements to avoid backup withholding and claim any treaty benefits. Non-U.S.
shareholders should consult their tax advisors regarding the U.S. and foreign
tax consequences of investing in the Fund.
Other
Reporting and Withholding Requirements. Under
the Foreign Account Tax Compliance Act ("FATCA"), a 30% withholding tax is
imposed on income dividends paid by the Fund to certain foreign entities,
referred to as foreign financial institutions or nonfinancial foreign entities,
that fail to comply (or be deemed compliant) with extensive reporting and
withholding requirements designed to inform the U.S. Department of the Treasury
of U.S.-owned foreign investment accounts. After December 31, 2018, FATCA
withholding also would have applied to certain capital gain distributions,
return of capital distributions and the proceeds arising from the sale of Fund
Shares, however based on proposed regulations issued by the IRS, which may be
relied upon currently, such withholding is no longer required unless final
regulations provide otherwise (which is not expected). Information about a
shareholder in the Fund may be disclosed to the IRS, non-U.S. taxing authorities
or other parties as necessary to comply with FATCA. Withholding also may be
required if a foreign entity that is a shareholder of the Fund fails to provide
the appropriate certifications or other documentation concerning its status
under FATCA.
Consult
Your Tax Professional. Your
investment in the Fund could have additional tax consequences. You should
consult your tax professional for information regarding all tax consequences
applicable to your investments in the Fund. More tax information relating to the
Fund is also provided in the SAI. This short summary is not intended as a
substitute for careful tax planning.
TAXES
FOR EACH FUND OTHER THAN THE GLOBAL X MLP ETF
The
following is a summary of certain tax considerations that may be relevant to an
investor in a Fund. Except where otherwise indicated, the discussion relates to
investors who are individual United States citizens or residents and is based on
current tax law. You should consult your tax advisor for further information
regarding federal, state, local and/or foreign tax consequences relevant to your
specific situation.
Distributions.
Each Fund receives income and gains on its investments. The income, less
expenses incurred in the operation of a Fund, constitutes the Fund's net
investment income from which dividends may be paid to you. Each Fund has elected
and intends to qualify as a RIC under the Code for federal tax purposes and to
distribute to shareholders substantially all of its net investment income and
net capital gain each year. Except as otherwise noted below, you will generally
be subject to federal income tax on a Fund’s distributions you receive. For
federal income tax purposes, Fund distributions attributable to short-term
capital gains and net investment income are taxable to you as ordinary income.
Distributions attributable to net capital gains (the excess of net long- term
capital gains over net short-term capital losses) of a Fund generally are
taxable to you as long-term capital gains. This is true no matter how long you
own your Shares or whether you take distributions in cash or additional Shares.
The maximum long-term capital gain rate applicable to individuals is 20%.
Distributions
of “qualifying dividends” will also generally be taxable to you at long-term
capital gain rates as long as certain requirements are met. In general, if 95%
or more of the gross income of a Fund (other than net capital gain) consists of
dividends received from domestic corporations or “qualified” foreign
corporations (“qualifying dividends”), then all distributions received by
individual shareholders of a Fund will be treated as qualifying dividends. But
if less than 95% of the gross income of a Fund (other than net capital gain)
consists of qualifying dividends, then distributions received by individual
shareholders of a Fund will be qualifying dividends only to the extent they are
derived from qualifying dividends earned by such Fund. For the lower rates to
apply, you must have owned your Shares for at least 61 days during the 121-day
period beginning on the date that is 60 days before such Fund’s ex-dividend date
(and such Fund will need to have met a similar holding period requirement with
respect to the Shares of the corporation paying the qualifying dividend). The
amount of a Fund’s distributions that qualify for this favorable treatment may
be reduced as a result of such Fund’s securities lending activities (if any), a
high portfolio turnover rate or investments in debt securities or
“non-qualified” foreign corporations. In addition, whether distributions
received from foreign corporations are qualifying dividends will depend on
several factors including the country of residence of the corporation making the
distribution. Accordingly, distributions from many of the Funds’ holdings may
not be qualifying dividends.
A
portion of distributions paid to shareholders that are corporations may also
qualify for the dividends-received deduction for corporations, subject to
certain holding period requirements and debt financing limitations. The amount
of the dividends qualifying for this deduction may, however, be reduced as a
result of such Fund’s securities lending activities, by a high portfolio
turnover rate or by investments in debt securities or foreign corporations.
Distributions
from a Fund will generally be taxable to you in the year in which they are paid,
with one exception. Dividends and distributions declared by a Fund in October,
November or December and paid in January of the following year are taxed as
though they were paid on December 31.
You
should note that if you buy Shares of a Fund shortly before it makes a
distribution, the distribution will be fully taxable to you even though, as an
economic matter, it simply represents a return of a portion of your investment.
This adverse tax result is known as “buying into a dividend.”
You
will be informed of the amount of your ordinary income dividends, qualifying
dividend income, and capital gain distributions at the time they are paid, and
you will be advised of the tax status for federal income tax purposes shortly
after the close of each calendar year. If you have not held Shares for a full
year, a Fund may designate and distribute to you, as ordinary income or capital
gain, a percentage of income that is not equal to the actual amount of such
income earned during the period of your investment in such Fund.
A
Fund’s investments in partnerships, including in partnerships defined as
Qualified Publicly Traded Partnerships for tax purposes, may result in such Fund
being subject to state, local or foreign income, franchise or withholding tax
liabilities.
Qualified
REIT Dividends.
Under the 2017 Tax Cuts and Jobs Act, “qualified REIT dividends” (i.e., ordinary
REIT dividends other than capital gain dividends and portions of REIT dividends
designated as qualified dividend income) are treated as eligible for a 20%
deduction by noncorporate taxpayers. This deduction, if allowed in full, equates
to a maximum effective tax rate of 29.6% (37% top rate applied to income after
20% deduction). A Fund may choose to report the special character of “qualified
REIT dividends”. A noncorporate shareholder receiving such dividends would treat
them as eligible for the 20% deduction, provided Fund shares were held by the
shareholder for more than 45 days during the 91-day period beginning on the date
that is 45 days before the date on which the shares become ex-dividend with
respect to such dividend). The amount of a RIC’s dividends eligible for the 20%
deduction for a taxable year is limited to the excess of the RIC’s qualified
REIT dividends for the taxable year over allocable expenses.
Excise
Tax Distribution Requirements.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
RIC’s “required distribution” for the calendar year ending within the RIC’s
taxable year over the “distributed amount” for such calendar year. The term
“required distribution” means the sum of (a) 98% of ordinary income (generally
net investment income) for the calendar year, (b) 98.2% of capital gain (both
long-term and short-term) for the one-year period ending on October 31 (or
December 31, if a Fund so elects), and (c) the sum of any untaxed, undistributed
net investment income and net capital gains of the RIC for prior periods. The
term “distributed amount” generally means the sum of (a) amounts actually
distributed by a Fund from its current year’s ordinary income and capital gain
net income and (b) any amount on which a Fund pays income tax for the taxable
year ending in the calendar year. Although each Fund intends to distribute its
net investment income and net capital gains so as to avoid excise tax liability,
a Fund may determine that it is in the interest of shareholders to distribute a
lesser amount. The Funds intend to declare and pay these amounts in December (or
in January, which must be treated by you as received in December) to avoid these
excise taxes but can give no assurances that their distributions will be
sufficient to eliminate all such taxes.
Foreign
Currencies.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time a Fund accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency, and the
time such Fund actually collects such receivables or pays such liabilities, are
treated as ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies, from the disposition of debt securities
denominated in a foreign currency, or from the disposition of a forward foreign
currency contract which are attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the asset and the date of
disposition also are treated as ordinary income or loss. These gains or losses,
referred to under the Code as “section 988” gains or losses, increase or
decrease the amount of a Fund’s investment company taxable income available to
be distributed to its shareholders as ordinary income, rather than increasing or
decreasing the amount of such Fund’s net capital gain.
Foreign
Taxes.
Each Fund will be subject to foreign withholding taxes with respect to certain
payments received from sources in foreign countries. If at the close of the
taxable year more than 50% in value of a Fund’s assets consists of stock in
foreign corporations, such Fund will be eligible to make an election to treat a
proportionate amount of those taxes as constituting a distribution to each
shareholder, which would allow you either (subject to certain limitations) (1)
to credit that proportionate amount of taxes against your U.S. Federal income
tax liability as a foreign tax credit or (2) to take that amount as an itemized
deduction. If a Fund is not eligible or chooses not to make this election, it
will be entitled to deduct such taxes in computing the amounts it is required to
distribute.
Sales
and Exchanges.
The sale of Shares is a taxable event on which a gain or loss is recognized. The
amount of gain or loss is based on the difference between your tax basis in
Shares and the amount you receive for them upon disposition. Generally, you will
recognize long-term capital gain or loss if you have held your Shares for over
one year at the time you sell or exchange them. Gains and losses on Shares held
for one year or less will generally constitute short-term capital gains, except
that a loss on Shares held six months or less will be re-characterized as a
long-term capital loss to the extent of any long-term capital gain
distributions
that you have received on the Shares. A loss realized on a sale or exchange of
Shares may be disallowed under the so-called “wash sale” rules to the extent the
Shares disposed of are replaced with other Shares of that same Fund within a
period of 61 days beginning 30 days before and ending 30 days after the Shares
are disposed of, such as pursuant to a dividend reinvestment in Shares of a
Fund. If disallowed, the loss will be reflected in an adjustment to the basis of
the Shares acquired.
Taxes
on Purchase and Redemption of Creation Units. An
Authorized Participant who exchanges equity securities for Creation Units
generally will recognize a gain or a loss. The gain or loss will be equal to the
difference between the market value of the Creation Units at the time of
purchase (plus any cash received by the Authorized Participant as part of the
issue) and the Authorized Participant’s aggregate basis in the securities
surrendered (plus any cash paid by the Authorized Participant as part of the
issue). An Authorized Participant who exchanges Creation Units for equity
securities generally will recognize a gain or loss equal to the difference
between the Authorized Participant’s basis in the Creation Units (plus any cash
paid by the Authorized Participant as part of the redemption) and the aggregate
market value of the securities received (plus any cash received by the
Authorized Participant as part of the redemption). The Internal Revenue Service
(the “IRS”), however, may assert that a loss realized upon an exchange of
securities for Creation Units cannot be deducted currently under the rules
governing “wash sales,” or on the basis that there has been no significant
change in economic position. Persons exchanging securities should consult their
own tax advisor with respect to whether the wash sale rules apply and when a
loss might be deductible. Under current federal tax laws, any capital gain or
loss realized upon redemption of Creation Units is generally treated as
long-term capital gain or loss if the Shares have been held for more than one
year and as a short-term capital gain or loss if the Shares have been held for
one year or less, assuming such Creation Units are held as a capital
asset.
IRAs
and Other Tax-Qualified Plans.
The one major exception to the preceding tax principles is that distributions
on, and sales, exchanges and redemptions of, Shares held in an IRA or other
tax-qualified plan are not currently taxable but may be taxable when funds are
withdrawn from the tax qualified plan, unless the Shares were purchased with
borrowed funds.
Medicare
Tax. An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from a
Fund and net gains from redemptions or other taxable dispositions of Fund
Shares) of U.S. individuals, estates and trusts to the extent that such person’s
“modified adjusted gross income” (in the case of an individual) or “adjusted
gross income” (in the case of an estate or trust) exceeds a threshold amount.
This Medicare tax, if applicable, is reported by you on, and paid with, your
federal income tax return.
Backup
Withholding.
Each Fund will be required in certain cases to withhold and remit to the U.S.
Treasury backup withholding at the applicable rate on dividends and gross sales
proceeds paid to any shareholder (i) who has either provided an incorrect tax
identification number or no number at all, (ii) who is subject to backup
withholding by the IRS, or (iii) who has failed to certify to a Fund, when
required to do so, that he or she is not subject to backup withholding or is an
“exempt recipient.”
Cost
Basis Reporting.
Federal law requires that shareholders' cost basis, gain/loss, and holding
period be reported to the IRS and to shareholders on the Consolidated Form 1099s
when “covered” securities are sold. Covered securities are any RIC and/or
dividend reinvestment plan shares acquired on or after January 1, 2012.
For
those securities defined as "covered" under current IRS cost basis tax reporting
regulations, accurate cost basis and tax lot information must be maintained for
tax reporting purposes. This information is not required for Shares that are not
"covered." The Funds and their service providers do not provide tax advice. You
should consult independent sources, which may include a tax professional, with
respect to any decisions you may make with respect to choosing a tax lot
identification method. Shareholders should contact their financial
intermediaries with respect to reporting of cost basis and available elections
for their accounts.
State
and Local Taxes.
You may also be subject to state and local taxes on income and gain attributable
to your ownership of Shares. You should consult your tax advisor regarding the
tax status of distributions in your state and locality.
U.S.
Tax Treatment of Foreign Shareholders.
A non-U.S. shareholder generally will not be subject to U.S. withholding tax on
gain from the redemption of Shares or on capital gain dividends (i.e., dividends
attributable to long-term capital gains of a Fund) unless, in the case of a
shareholder who is a non-resident alien individual, the shareholder is present
in the United States for 183 days or more during the taxable year and certain
other conditions are met. Non-U.S. shareholders generally will be subject to
U.S. withholding tax at a rate of 30% (or a lower treaty rate, if applicable) on
distributions by a Fund of net investment income, other ordinary income, and the
excess, if any, of net short-term capital gain over net long-term capital loss
for the year, unless the distributions are effectively connected with a U.S.
trade or business of the shareholder. Exemptions from U.S. withholding tax are
provided for certain capital gain dividends paid by a Fund from net long-term
capital gains, if any, interest-related dividends paid by the Fund from its
qualified net interest income from U.S. sources and short-term capital gain
dividends,
if such amounts are reported by the Fund. Non-U.S. shareholders are subject to
special U.S. tax certification requirements to avoid backup withholding and
claim any treaty benefits. Non-U.S. shareholders should consult their tax
advisors regarding the U.S. and foreign tax consequences of investing in a Fund.
Other
Reporting and Withholding Requirements. Under
the Foreign Account Tax Compliance Act (“FATCA”), a 30% withholding tax is
imposed on income dividends paid by a Fund to certain foreign entities, referred
to as foreign financial institutions or nonfinancial foreign entities, that fail
to comply (or be deemed compliant) with extensive reporting and withholding
requirements designed to inform the U.S. Department of the Treasury of
U.S.-owned foreign investment accounts. After December 31, 2018, FATCA
withholding also would have applied to certain capital gain distributions,
return of capital distributions and the proceeds arising from the sale of Fund
Shares; however, based on proposed regulations issued by the IRS, which may be
relied upon currently, such withholding is no longer required unless final
regulations provide otherwise (which is not expected). Information about a
shareholder in a Fund may be disclosed to the IRS, non-U.S. taxing authorities
or other parties as necessary to comply with FATCA. Withholding also may be
required if a foreign entity that is a shareholder of a Fund fails to provide
the appropriate certifications or other documentation concerning its status
under FATCA.
Consult
Your Tax Professional.
Your investment in a Fund could have additional tax consequences. You should
consult your tax professional for information regarding all tax consequences
applicable to your investments in a Fund. More tax information relating to the
Funds is also provided in the SAI. This short summary is not intended as a
substitute for careful tax planning.
DETERMINATION
OF NET ASSET VALUE
Each
Fund calculates its NAV as of the regularly scheduled close of business of the
New York Stock Exchange (“NYSE”) (normally 4:00 p.m. Eastern time) on each day
that the NYSE is open for business, based on prices at the time of closing,
provided that any assets or liabilities denominated in currencies other than the
U.S. dollar shall be translated into U.S. dollars at the prevailing market rates
on the date of valuation as quoted by one or more major banks or dealers that
make a two-way market in such currencies (or a data service provider based on
quotations received from such banks or dealers). The NAV of each Fund is
calculated by dividing the value of the net assets of such Fund (i.e., the value
of its total assets less total liabilities) by the total number of outstanding
Shares, generally rounded to the nearest cent. The price of Fund Shares is based
on market price, and because ETF shares trade at market prices rather than NAV,
Shares may trade at a price greater than NAV (a premium) or less than NAV (a
discount).
In
calculating a Fund’s NAV, the Fund’s investments are generally valued using
market valuations. A market valuation generally means a valuation (i) obtained
from an exchange or a major market maker (or dealer), (ii) based on a price
quotation or other equivalent indication of value supplied by an exchange, a
pricing service, or a major market maker (or dealer), or (iii) based on
amortized cost, provided the amortized cost is approximately the value on
current sale of the security. In the case of shares of funds that are not traded
on an exchange, a market valuation means such fund’s published NAV per share. A
Fund may use various pricing services or discontinue the use of any pricing
service.
In
the event that current market valuations are not readily available or such
valuations do not reflect current market values, the affected investments will
be valued using fair value pricing pursuant to the pricing policy and procedures
approved by the Board of Trustees. A price obtained from a pricing service based
on such pricing service's valuation matrix may be used to fair value a security.
The frequency with which a Fund’s investments are valued using fair value
pricing is primarily a function of the types of securities and other assets in
which the Fund invests pursuant to its investment objective, strategies and
limitations.
Investments
that may be valued using fair value pricing include, but are not limited to: (i)
an unlisted security related to corporate actions; (ii) a restricted security
(i.e., one that may not be publicly sold without registration under the
Securities Act of 1933, as amended (the “Securities Act”)); (iii) a security
whose trading has been suspended or which has been de-listed from its primary
trading exchange; (iv) a security that is thinly traded; (v) a security in
default or bankruptcy proceedings for which there is no current market
quotation; (vi) a security affected by currency controls or restrictions; and
(vii) a security affected by a significant event (i.e., an event that occurs
after the close of the markets on which the security is traded but before the
time as of which the Fund’s NAV is computed and that may materially affect the
value of the Fund’s investments). Examples of events that may be “significant
events” are government actions, natural disasters, armed conflict, acts of
terrorism, and significant market fluctuations.
Valuing
a Fund’s investments using fair value pricing will result in using prices for
those investments that may differ from current market valuations. Use of fair
value prices and certain current market valuations could result in a difference
between the prices used to calculate a Fund’s NAV and the prices used by the
Fund’s Underlying Index, which, in turn, could result in a difference between
the Fund’s performance and the performance of the Fund’s Underlying Index.
Because
foreign markets may be open on different days than the days during which a
shareholder may purchase Shares, the value of a Fund’s investments may change on
days when shareholders are not able to purchase Shares. Additionally, due to
varying holiday schedules, redemption requests made on certain dates may result
in a settlement period exceeding seven calendar days.
The
value of assets denominated in foreign currencies is converted into U.S. dollars
using exchange rates deemed appropriate by the Adviser. Any use of a different
rate from the rates used by each Index Provider may adversely affect a Fund’s
ability to track its Underlying Index.
The
right of redemption may be suspended or the date of payment postponed with
respect to a Fund (1) for any period during which the NYSE or listing exchange
is closed (other than customary weekend and holiday closings), (2) for any
period during which trading on the NYSE or listing exchange is suspended or
restricted, (3) for any period during which an emergency exists as a result of
which disposal of the Fund’s portfolio securities or determination of its NAV is
not reasonably practicable, or (4) in such other circumstances as the SEC
permits.
Subject
to oversight by the Board of Trustees, the Adviser, as “valuation designee,”
pursuant to Rule 2a-5 under the 1940 Act, performs fair value determinations of
Fund investments. In addition, the Adviser, as the valuation designee, is
responsible for periodically assessing any material risks associated with the
determination of the fair value of a Fund's investments; establishing and
applying fair value methodologies; testing the appropriateness of fair value
methodologies; and overseeing and evaluating third-party pricing services. The
Adviser has established a fair value committee to assist with its designated
responsibilities as valuation designee.
The
following discussion applies to the Global X MLP ETF
In
calculating the Fund's daily NAV, the Fund will, among other things, account for
its deferred tax liability and/or asset balances. As a result, any deferred tax
liability and/or asset is reflected in the Fund's daily NAV.
The
Fund will accrue a deferred income tax liability balance, at the currently
effective statutory U.S. federal income tax rate (currently 21%) plus an
estimated state and local income tax rate for its future tax liability
associated with that portion of MLP distributions considered to be a
tax-advantaged return of capital, as well as for its future tax liability
associated with the capital appreciation of its investments. The Fund's current
and deferred tax liability, if any, will depend upon the Fund's net investment
gains and losses and realized and unrealized gains and losses on investments and
therefore may vary greatly from year to year depending on the nature of the
Fund's investments, the performance of those investments and general market
conditions. Any deferred tax liability balance will reduce the Fund's NAV. Upon
the Fund's sale of an MLP security, the Fund may be liable for previously
deferred taxes.
The
Fund will accrue, in accordance with generally accepted accounting principles, a
deferred tax asset balance, which reflects an estimate of the Fund's future tax
benefit associated with net operating losses and unrealized losses. Any deferred
tax asset balance will increase the Fund's NAV. To the extent the Fund has a
deferred tax asset balance, the Fund will assess, in accordance with generally
accepted accounting principles, whether a valuation allowance, which would
offset the value of some or all of the Fund's deferred tax asset balance, is
required. Pursuant to Financial Accounting Standards Board Accounting Standards
Codification 740 (FASB ASC 740), the Fund will assess a valuation allowance to
reduce some or all of the deferred tax asset balance if, based on the weight of
all available evidence, both negative and positive, it is more likely than not
that some or all of the deferred tax asset will not be realized. The Fund will
use judgment in considering the relative impact of negative and positive
evidence. The weight given to the potential effect of negative and positive
evidence will be commensurate with the extent to which such evidence can be
objectively verified. The Fund's assessment considers, among other matters, the
nature, frequency and severity of current and cumulative losses, forecasts of
future profitability (which are dependent on, among other factors, future MLP
cash distributions), the duration of statutory carryforward periods and the
associated risk that operating loss carryforwards may be limited or expire
unused. However, this assessment generally may not consider the potential for
market value increases with respect to the Fund's investments in equity
securities of MLPs or any other securities or assets. Significant weight is
given to the Fund's forecast of future taxable income, which is based on, among
other factors, the expected continuation of MLP cash distributions at or near
current levels. Consideration is also given to the effects of the potential of
additional future realized and unrealized gains or losses on investments and the
period over which deferred tax assets can be realized, as federal tax net
operating loss carryforwards expire in twenty years and federal capital loss
carryforwards expire in five years. Recovery of a deferred tax asset is
dependent on continued payment of the MLP cash distributions at or near current
levels in the future and the resultant generation of taxable income. The Fund
will assess whether a valuation allowance is required to offset some or all of
any deferred tax asset in connection with the calculation of the Fund's NAV per
share each day; however, to the extent the final valuation allowance differs
from the estimates the Fund used in
calculating
the Fund's daily NAV, the application of such final valuation allowance could
have a material impact on the Fund's NAV.
The
Fund's deferred tax asset and/or liability balances are estimated using
estimates of effective tax rates expected to apply to taxable income in the
years such balances are realized. The Fund will rely to some extent on
information provided by MLPs in determining the extent to which distributions
received from MLPs constitute a return of capital, which may not be provided to
the Fund on a timely basis, to estimate the Fund's deferred tax liability and/or
asset balances for purposes of financial statement reporting and determining its
NAV. If such information is not received from such MLPs on a timely basis, the
Fund will estimate the extent to which distributions received from MLPs
constitute a return of capital based on average historical tax characterization
of distributions made by MLPs. The Fund's estimates regarding its deferred tax
liability and/or asset balances are made in good faith; however, the daily
estimate of the Fund's deferred tax liability and/or asset balances used to
calculate the Fund's NAV could vary dramatically from the Fund's actual tax
liability. Actual income tax expense, if any, will be incurred over many years,
depending on if and when investment gains and losses are realized, the
then-current basis of the Fund's assets and other factors. As a result, the
determination of the Fund's actual tax liability may have a material impact on
the Fund's NAV. The Fund's daily NAV calculation will be based on then current
estimates and assumptions regarding the Fund's deferred tax liability and/or
asset balances and any applicable valuation allowance, based on all information
available to the Fund at such time. From time to time, the Fund may modify its
estimates or assumptions regarding its deferred tax liability and/or asset
balances and any applicable valuation allowance as new information becomes
available. Modifications of the Fund's estimates or assumptions regarding its
deferred tax liability and/or asset balances and any applicable valuation
allowance, changes in generally accepted accounting principles or related
guidance or interpretations thereof, limitations imposed on net operating losses
(if any) and changes inapplicable tax law could result in increases or decreases
in the Fund's NAV per share, which could be material.
PREMIUM/DISCOUNT
AND SHARE INFORMATION
Once
available, information regarding how often the Shares of each Fund traded on the
national securities exchanges at a price above (i.e., at a premium to) or below
(i.e., at a discount to) the NAV of the Fund, the Fund's per share NAV, and the
median bid-ask spread of the Shares can be found at www.globalxetfs.com.
TOTAL
RETURN INFORMATION
Each
Fund had commenced operations as of the most recent fiscal year
end.
The
tables that follow present information about the total returns of each Fund's
Underlying Index and the total returns of each Fund. The information presented
for each Fund is as of its fiscal year ended November 30,
2022.
“Annualized
Total Returns” or "Cumulative Total Returns" represent the total change in value
of an investment over the periods indicated.
Each
Fund’s per share NAV is the value of one share of the Fund as calculated in
accordance with the standard formula for valuing mutual fund Shares. The NAV
return is based on the NAV of each Fund and the market return is based on the
market prices of the Fund. The price used to calculate market prices is
determined by using the midpoint between the bid and the ask on the primary
stock exchange on which Shares of the Fund are listed for trading, as of the
time that the Fund’s NAV is calculated. Market and NAV returns assume that
dividends and capital gain distributions have been reinvested in the Fund at
market prices and NAV, respectively.
An
index is a statistical composite that tracks a specified financial market or
sector. Unlike a Fund, an Underlying Index does not actually hold a portfolio of
securities and therefore does not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of a Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The returns shown in the tables below do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund Shares. The investment return and principal value of Shares of a
Fund will vary with changes in market conditions. Shares of a Fund may be worth
more or less than their original cost when they are redeemed or sold in the
market. A Fund’s past performance is no guarantee of future results.
Annualized
Total Returns
Inception
to 11/30/22
|
|
|
|
|
|
|
|
|
|
|
|
|
NAV |
MARKET |
UNDERLYING
INDEX |
Global
X MLP ETF1 |
1.02% |
1.01% |
2.60% |
Global
X MLP & Energy Infrastructure ETF2 |
4.82% |
4.84% |
5.50% |
Global
X Alternative Income ETF3 |
4.36% |
4.38% |
4.78% |
Global
X Conscious Companies ETF4 |
12.49% |
12.47% |
12.90% |
Global
X Founder-Run Companies ETF5 |
9.51% |
9.47% |
10.09% |
Global
X U.S. Preferred ETF6 |
1.69% |
1.72% |
1.88% |
Global
X S&P 500®
Quality Dividend ETF7 |
9.92% |
9.95% |
10.25% |
Global
X Adaptive U.S. Factor ETF8 |
9.59% |
9.54% |
9.93% |
Global
X Variable Rate Preferred ETF9 |
3.20% |
3.17% |
3.42% |
Global
X Adaptive U.S. Risk Management ETF10 |
7.70% |
7.58% |
7.67% |
1 For
the period since inception on 04/18/12 to 11/30/22
2 For
the period since inception on 08/06/13 to 11/30/22
3 For
the period since inception on 07/13/15 to 11/30/22
4 For
the period since inception on 07/11/16 to 11/30/22
5 For
the period since inception on 02/13/17 to 11/30/22
6 For
the period since inception on 09/11/17 to 11/30/22
7 For
the period since inception on 07/13/18 to 11/30/22
8 For
the period since inception on 08/24/18 to 11/30/22
9 For
the period since inception on 06/22/20 to 11/30/22
10 For
the period since inception on 01/12/21 to 11/30/21
Cumulative
Total Returns
Inception
to 11/30/22
|
|
|
|
|
|
|
|
|
|
|
|
|
NAV |
MARKET |
UNDERLYING
INDEX |
Global
X MLP ETF1 |
11.37% |
11.32% |
31.34% |
Global
X MLP & Energy Infrastructure ETF2 |
55.07% |
55.37% |
64.81% |
Global
X Alternative Income ETF3 |
37.07% |
37.30% |
41.24% |
Global
X Conscious Companies ETF4 |
112.19% |
111.96% |
117.16% |
Global
X Founder-Run Companies ETF5 |
69.28% |
69.00% |
74.57% |
Global
X U.S. Preferred ETF6 |
9.16% |
9.31% |
10.19% |
Global
X S&P 500®
Quality Dividend ETF7 |
51.39% |
51.57% |
53.42% |
Global
X Adaptive U.S. Factor ETF8 |
47.86% |
47.59% |
49.85% |
Global
X Variable Rate Preferred ETF9 |
7.98% |
7.92% |
8.54% |
Global
X Adaptive U.S. Risk Management ETF10 |
14.99% |
14.74% |
14.93% |
1 For
the period since inception on 04/18/12 to 11/30/22
2 For
the period since inception on 08/06/13 to 11/30/22
3 For
the period since inception on 07/13/15 to 11/30/22
4 For
the period since inception on 07/11/16 to 11/30/22
5 For
the period since inception on 02/13/17 to 11/30/22
6 For
the period since inception on 09/11/17 to 11/30/22
7 For
the period since inception on 07/13/18 to 11/30/22
8 For
the period since inception on 08/24/18 to 11/30/22
9 For
the period since inception on 06/22/20 to 11/30/22
10 For
the period since inception on 01/12/21 to 11/30/21
INFORMATION
REGARDING THE INDICES AND THE INDEX PROVIDERS
Solactive
MLP Infrastructure Index
The
Solactive MLP Infrastructure Index is intended to give investors a means of
tracking the performance of the energy infrastructure MLP asset class in the
United States. As of January 31, 2023, the index was comprised of 15 MLPs
engaged in the transportation, storage, and processing of natural resources. The
index is comprised of MLPs that meet certain criteria relating to size and
liquidity, as determined by Solactive AG. The index is maintained by Solactive
AG.
Solactive
MLP & Energy Infrastructure Index
The
Solactive MLP & Energy Infrastructure Index is intended to give investors a
means of tracking the performance of MLPs and energy infrastructure
corporations. Midstream energy infrastructure MLPs and corporations principally
own and operate assets used in energy logistics, including, but not limited to,
pipelines, storage facilities and other assets used in transporting, storing,
gathering, and processing natural gas, natural gas liquids, crude oil or refined
products. The index limits its exposure to partnerships in order to comply with
applicable tax diversification rules. Securities must be publicly traded in the
United States. As of January 31, 2023, the index was comprised of 27
securities. The index is comprised of securities that meet certain criteria
relating to size and liquidity, as determined by Solactive AG. The index is
maintained by Solactive AG.
Indxx
SuperDividend®
Alternatives Index
The
Indxx SuperDividend®
Alternatives Index is intended to provide exposure to five income producing
categories: Master Limited Partnerships ("MLPs") and Infrastructure, Real
Estate, Preferreds, Emerging Market Bonds and Covered Calls. The MLPs and
Infrastructure categories primarily consist of units of MLPs and shares of
infrastructure companies. The Real Estate category provides exposure to global
real estate investment trusts ("REITs"), and gains this exposure through
investing directly in the Global X SuperDividend®
REIT ETF. The Preferreds category provides exposure to U.S. preferred
securities, and gains this exposure through investing directly in the Global X
U.S. Preferred ETF. The Emerging Markets Bonds category provides exposure to
emerging markets debt, and gains this exposure through investing directly in the
Global X Emerging Markets Bond ETF. The Covered Call category provides exposure
to a covered call strategy, and gains this exposure through investing directly
in the Global X Nasdaq 100 Covered Call ETF. At the annual reconstitution, each
of the five categories is equally weighted at 20%. The Underlying Index may
rebalance quarterly if any one category deviates more than 3% from its target
weight, in which case each category is rebalanced back to equal weight of 20%.
The Fund's investment objective and Underlying Index may be changed without
shareholder approval.
Concinnity
Conscious Companies Index
The
Concinnity Conscious Companies Index is designed to provide exposure to
companies listed in the U.S. that operate their businesses in a sustainable and
responsible manner, as measured by their ability to achieve positive outcomes
that are consistent with a multi-stakeholder operating system ("MsOS"), as
defined by Concinnity Advisors LP ("Concinnity"), the provider of the Concinnity
Conscious Companies Index. The MsOS is a corporate governance structure that
seeks to account for the multiple stakeholders that are critical for the ongoing
success of the business, and incorporate the considerations of these
stakeholders into the corporate decision-making and problem-solving process.
Concinnity conducts its analysis based on the following five key stakeholder
groups: (1) Customers, (2) Employees, (3) Suppliers, (4) Stock and Debt Holders,
and (5) Communities in which the companies operate.
The
universe of companies eligible for inclusion in the Concinnity Conscious
Companies Index is comprised of companies listed in the U.S. with a market
capitalization greater than $2 billion. From this initial universe, Concinnity
applies a proprietary, three-step analysis to select companies for the
Concinnity Conscious Companies Index. In the first step, Concinnity utilizes
approximately forty information sources and public rankings to identify and
evaluate companies based on their demonstrated ability to achieve positive
outcomes across all five stakeholder groups. Positive outcomes vary by
stakeholder group, but include metrics that assess areas such as employee
productivity, customer loyalty and corporate governance. These information
sources are vetted annually by Concinnity and evaluated based on stakeholder
focus, research methodology and third party or in-house analysis of a source's
potential as a leading indicator of corporate and/or stock performance.
Companies are scored by Concinnity based on their appearance and performance in
these sources and rankings. Of the approximately 1,100 - 1,400 companies that
typically make up the eligible universe, approximately 600-700 are generally
selected by Concinnity for further analysis and potential inclusion in the
Concinnity Conscious Companies Index.
In
the second step of the research process, Concinnity uses a composite analysis to
apply a deeper evaluation on the remaining companies. The composite analysis is
a process that assesses various MsOS criteria by combining ratings data from
multiple
research
entities that specialize in various stakeholder assessment categories. Companies
are evaluated through a series of scoring lenses that combine to form a
composite score, which is underpinned by several hundred MsOS criteria.
Composite analysis MsOS criteria include, but are not limited to: employee
engagement, executive integrity, customer relationship quality, labor and human
rights, and quality of financial reporting. Various modeling techniques are then
used by Concinnity to combine qualitative and quantitative data into a single
score for each company. This score reflects the degree to which a company
operates its business using the MsOS approach, as defined by the research
process. The approximately 300-350 highest scoring companies ultimately comprise
the MsOS investable universe for the purposes of constructing the Concinnity
Conscious Companies Index.
In
the final step, Concinnity applies a screen for consistent achievement to the
MsOS investable universe of the approximately 300-350 highest scoring companies.
In order to be included in the Concinnity Conscious Companies Index, a company
must have qualified for inclusion in the MsOS investable universe for at least
three consecutive years. The Concinnity Conscious Companies Index is
equal-weighted. The Concinnity Conscious Companies Index may include large- or
mid-capitalization companies, and will generally provide exposure to all major
sectors. As of January 31, 2023, the Concinnity Conscious Companies Index
had 177 constituents, with no single sector having an allocation greater than
25%. The three largest sectors represented in the Concinnity Conscious Companies
Index as of January 31, 2023, were information technology, health care and
financials.
Solactive
U.S. Founder-Run Companies Index
The
Solactive U.S. Founder-Run Companies Index is designed to provide exposure to
U.S. companies in which a founder or co-founder of the company is serving as the
Chief Executive Officer of the company (collectively, "Founder-Run Companies").
The starting universe of companies eligible for inclusion is the Solactive U.S.
Broad Market Index. From this initial universe, Founder-Run Companies are
identified using company-level data, and are then ranked by market
capitalization. Founder-Run Companies are then screened for liquidity to
determine eligibility for inclusion in the Solactive U.S. Founder-Run Companies
Index. As of the respective selection date, new constituents must have a minimum
six-month average daily traded value of $5 million to be eligible for inclusion,
while existing constituents must have a minimum six-month average daily traded
value of $4 million to remain in the Solactive U.S. Founder-Run Companies Index.
If more than 100 Founder-Run Companies are eligible for inclusion based on the
liquidity criteria, the top 100 companies by market capitalization are selected
for inclusion. If fewer than 100 Founder-Run Companies are eligible for
inclusion based on the liquidity criteria, the companies that meet the liquidity
criteria will comprise the constituents of the Solactive U.S. Founder-Run
Companies Index. The Solactive U.S. Founder-Run Companies Index is
equal-weighted and rebalanced annually.
ICE
BofA Diversified Core U.S. Preferred Securities Index
The
ICE BofA Diversified Core U.S. Preferred Securities Index is designed to track
the broad-based performance of the U.S. preferred securities market. The ICE
BofA Diversified Core U.S. Preferred Securities Index includes different
categories of preferred stock, such as floating, variable and fixed-rate
preferreds, cumulative and non-cumulative preferreds, and trust preferreds.
Qualifying preferred securities must be listed on a U.S. exchange, denominated
in U.S. dollars, and have a minimum amount outstanding of $50 million.
Qualifying preferred securities must meet minimum price, liquidity, maturity and
other requirements as determined by ICE Data Indices, LLC.
Constituents
in the ICE BofA Diversified Core U.S. Preferred Securities Index are
capitalization-weighted based on their current amount outstanding times the
market price plus accrued interest. A weighting cap of 10% is applied at the
issuer level in order to limit the aggregate weight of a single issuer to 10% at
each rebalance. The ICE BofA Diversified Core U.S. Preferred Securities Index is
rebalanced quarterly.
S&P
500®
Quality
High Dividend Index
The
S&P
500®
Quality
High Dividend Index is designed to provide exposure to U.S. equity securities
included in the S&P 500®
Index that exhibit high quality and dividend yield characteristics, as
determined by Standard & Poor's Financial Services LLC, the provider of the
S&P
500®
Quality
High Dividend Index. All constituents of the S&P
500®
Quality
High Dividend Index are members of the S&P 500®
Index and follow the eligibility criteria for that index. From this starting
universe, eligible constituents are screened to include only securities that
rank within the top 200 of the S&P 500®
Index universe by both quality score and dividend yield. The S&P
500®
Quality
High Dividend Index is equal weighted and is reconstituted and rebalanced
semi-annually. At each semi-annual rebalance, a sector capping methodology is
applied to reduce sector concentration and increase diversification of the
S&P
500®
Quality
High Dividend Index. As of January 31, 2023, the S&P
500®
Quality
High Dividend Index had 77 constituents.
Adaptive
Wealth Strategies U.S. Factor Index
The
Adaptive Wealth Strategies U.S. Factor Index is owned and was developed by
NorthCrest Asset Management. The Index is calculated and maintained by Solactive
AG. The Adaptive Wealth Strategies U.S. Factor Index is designed to dynamically
allocate across three sub-indices that provide exposure to U.S. equities that
exhibit characteristics of one of three primary factors: value, momentum and low
volatility. Each factor is represented by a sub-index that is derived from the
Solactive U.S. Large & Mid Cap Index, which is designed to measure the 1,000
largest companies, by free float market capitalization, that are exchange-listed
in the United States:
•Solactive
U.S. Large & Mid Cap Value 100 Index TR
– This index is designed to measure the performance of the 100 stocks in the
Solactive U.S. Large & Mid Cap Index that exhibit the greatest exposure to
the value factor.
•Solactive
U.S. Large & Mid Cap Momentum 100 Index TR
– This index is designed to measure the performance of the 100 stocks in the
Solactive U.S. Large & Mid Cap Index that exhibit the highest degree of
relative performance.
•Solactive
U.S. Large & Mid Cap Minimum Downside Volatility 100 Index TR
– This index is designed to measure the performance of the 100 stocks in the
Solactive U.S. Large & Mid Cap Index that exhibit the lowest degree of
downside volatility.
The
Adaptive Wealth Strategies U.S. Factor Index is rebalanced quarterly. At each
rebalance, the Adaptive Wealth Strategies U.S. Factor Index allocates weight to
the three sub-indices based on the relative performance of each sub-index since
the last rebalance of the Adaptive Wealth Strategies U.S. Factor Index. The
Adaptive Wealth Strategies U.S. Factor Index is designed to always be fully
allocated to at least two of the three sub-indices described above. As of
January 31, 2023, the Adaptive Wealth Strategies U.S. Factor Index had 173
constituents.
ICE
U.S. Variable Rate Preferred Securities Index
The
ICE U.S. Variable Rate Preferred Securities Index is designed to track the
broad-based performance of the U.S. variable rate preferred securities market.
Qualifying preferred securities must be listed on a U.S. exchange, denominated
in U.S. dollars, have floating or variable dividends or coupons, and have a
minimum amount outstanding of $50 million. Qualifying preferred securities may,
however, be issued by non-U.S. companies. Qualifying securities must be issued
in $25, $50, $100, or $1000 par/liquidation preference increments, must have a
traded market value of greater than $6 million in each of the previous three
calendar months, and must have at least one year remaining to maturity, as
determined by ICE Data Indices, LLC (the "Index Provider").
Constituents
in the ICE U.S. Variable Rate Preferred Securities Index are
capitalization-weighted based on their current amount outstanding times the
market price plus accrued interest. A weighting cap of 10% is applied at the
issuer level to limit the aggregate weight of a single issuer to 10% at each
rebalance. The ICE U.S. Variable Rate Preferred Securities Index may include
large-, mid- or small-capitalization companies. Components of the ICE U.S.
Variable Rate Preferred Securities Index primarily include financials companies.
The ICE U.S. Variable Rate Preferred Securities Index is rebalanced quarterly.
Adaptive
Wealth Strategies U.S. Risk Management Index
The
Adaptive Wealth Strategies U.S. Risk Management Index is owned and was developed
by NorthCrest Asset Management. The Adaptive Wealth Strategies U.S. Risk
Management Index is calculated and maintained by Solactive AG. The Adaptive
Wealth Strategies U.S. Risk Management Index is designed to dynamically allocate
between either 100% exposure to the Solactive GBS United States 500 Index TR
("U.S. Equity Position") or 100% exposure to the Solactive U.S. 1-3 Year
Treasury Bond Index ("U.S. Treasury Position"). The Solactive U.S. 1-3 Year
Treasury Bond Index is a rules-based, market value weighted index designed to
track the performance of USD-denominated bonds issued by the U.S. Treasury with
at least 1 year until maturity but less than 3 years until maturity, as of the
selection date of the index. The Solactive GBS United States 500 Index TR is a
float-adjusted market capitalization weighted index which measures the
performance of the equity securities of the 500 largest companies from the
United States stock market across all sectors. A float-adjusted market
capitalization weighted index weights each index component according to its
market capitalization, using the number of shares that are readily available for
purchase on the open market, rather than the total number of shares outstanding
of an issuer. The Adaptive Wealth Strategies U.S. Risk Management Index seeks to
provide exposure to the U.S. Equity Position during periods of normal equity
market returns, and seeks to provide exposure to the U.S. Treasury Position
prior to and during periods of adverse market conditions, as determined by the
quantitative model developed by the Index Provider. The Adaptive Wealth
Strategies
U.S.
Risk Management Index seeks to anticipate periods of adverse market conditions
using quantitative signals (explained in further detail below) that have been
developed based on historical data.
The
Adaptive Wealth Strategies U.S. Risk Management Index uses four quantitative
signals calculated daily by Solactive AG to determine how the Adaptive Wealth
Strategies U.S. Risk Management Index will be allocated between either the U.S.
Equity Position or the U.S. Treasury Position, as further described below:
i.The
200-day simple moving average (“SMA”) of the U.S. Equity Position, which
measures the average closing price of securities within the Solactive GBS United
States 500 Index TR over a 200-day period;
ii.The
moving average convergence divergence (“MACD”), which shows the relationship
between two moving averages of the prices of securities within the U.S. Equity
Position by subtracting the 26-day exponential moving average of the U.S. Equity
Position from the 12-day exponential moving average;
iii.The
drawdown percentage, where drawdown is defined as the peak-to-valley total
change in market price of the U.S. Equity Position, and;
iv.The
level of the Cboe Volatility Index (“VIX”), which is a benchmark index designed
to measure the market’s expectation of future volatility.
Each
of the signals above is given an equal “vote” in determining whether the
Adaptive Wealth Strategies U.S. Risk Management Index is allocated to the U.S.
Equity Position or to the U.S. Treasury Position.
The
allocation to either the U.S. Equity Position or the U.S. Treasury Position is
determined as follows:
•Exit
Voting:
If the Adaptive Wealth Strategies U.S. Risk Management Index is currently
invested in the U.S. Equity Position, at least three of the exit signals must be
triggered (and no more than one entry signal) for the Adaptive Wealth Strategies
U.S. Risk Management Index to exit the U.S. Equity Position and enter the U.S.
Treasury Position.
•Entry
Voting:
If the Adaptive Wealth Strategies U.S. Risk Management Index is currently
invested in the U.S. Treasury Position, at least two of the entry signals must
be triggered for the Adaptive Wealth Strategies U.S. Risk Management Index to
exit the U.S. Treasury Position and enter the U.S. Equity Position.
The
trigger threshold
for
each signal is based on a predetermined Z-score level for that given
signal.
A
Z-score (often referred to as a “standard score”) is a measure of how many
standard deviations below or above the mean a data point is, and can be used to
identify data points that may be considered outliers relative to the
mean.
The
Z-score threshold for each vote is determined using historical returns data for
the U.S. Equity Position starting in January of 1993. Each signal looks at the
recent performance of the U.S. Equity Position or the VIX, and compares that to
the historical performance of the U.S. Equity Position or the VIX, respectively.
The Z-scores used in determining an exit or entry vote are designed to identify
cases where the recent performance of the U.S. Equity Position or the VIX are
sufficiently statistically different from the historical performance to indicate
a drawdown event or period of positive market returns may be likely going
forward. Depending on the performance of the U.S. Equity Position and the VIX,
each signal can go for months without changing direction, or can change as
frequently as within the course of a few days. Below is a description of each
signal and its trigger threshold for market entry or exit:
◦SMA
Signal:
▪Market
Exit Vote:
If the prior day Z-Score of the percent difference between the U.S. Equity
Position closing price and the 200-day SMA of the U.S. Equity Position is below
-0.50, the signal indicates to exit the U.S. Equity Position and enter the U.S.
Treasury Position. If the Z-score of the 200-day SMA is below -0.50, based on
historical data, it may indicate that a drawdown event is possible, and the
signal votes to move out of the U.S. Equity Position and into the U.S. Treasury
Position.
▪Market
Entry Vote:
If the prior day Z-Score of the percent difference between the U.S. Equity
Position closing price and the 200-day SMA of the U.S. Equity Position is below
-4.00, the signal indicates to exit the U.S. Treasury Position and enter the
U.S. Equity Position. If the Z-score of the 200-day SMA is below -4.00, based on
historical data, it may indicate that the U.S. Equity Position will experience
positive returns, and the signal votes to re-enter the U.S. Equity
Position.
◦MACD
Signal:
▪Market
Exit Vote:
If the prior day Z-Score of the MACD is below -0.25, the signal indicates to
exit the U.S. Equity Position and enter the U.S. Treasury Position. If the
Z-score of the MACD is below -0.25, based on historical data, it may indicate
that a drawdown event is possible, and the signal votes to move out of the U.S.
Equity Position and into the U.S. Treasury Position.
•Market
Entry Vote:
If the prior day Z-Score of the MACD is above 4.00, the signal indicates to exit
the U.S. Treasury Position and enter the U.S. Equity Position. If the Z-score of
the MACD is above 4.00, based on historical data, it may indicate that the U.S.
Equity Position will experience positive returns, and the signal votes to
re-enter the U.S. Equity Position.
◦Drawdown
Percentage Signal:
•Market
Exit Vote:
If the prior day Drawdown Percentage Z-Score is below 0.50, the signal indicates
to exit the U.S. Equity Position and enter the U.S. Treasury Position. If the
Z-score of the drawdown percentage is below 0.50, based on historical data, it
may indicate that a drawdown event is possible, and the signal votes to move out
of the U.S. Equity Position and into the U.S. Treasury Position.
•Market
Entry Vote:
If the prior day Drawdown Percentage Z-Score is below -2.00, the signal
indicates to exit the U.S. Treasury Position and enter the U.S. Equity Position.
If the Z-score of the drawdown percentage is below -2.00, based on historical
data, it may indicate that the U.S. Equity Position will experience positive
returns, and the signal votes to re-enter the U.S. Equity Position.
◦VIX
Signal:
▪Market
Exit Vote:
If the Z-Score of the level of the VIX is above 1.25, the signal votes to exit
the U.S. Equity Position and enter the U.S. Treasury Position. If the Z-score of
the level of the VIX is above 1.25, based on historical data, it may indicate
that a drawdown event is possible, and the signal votes to move out of the U.S.
Equity Position and into the U.S. Treasury Position.
▪Market
Entry Vote:
If the Z-Score of the level of the VIX is above 5.5, the signal indicates to
exit the U.S. Treasury Position and enter the U.S. Equity Position. If the
Z-score of the level of the VIX is above 5.5, based on historical data, it may
indicate that the U.S. Equity Position will experience positive returns, and the
signal votes to re-enter the U.S. Equity Position.
Each
of the signals are calculated daily by Solactive AG. Whenever the required
number of signals are triggered, the Adaptive Wealth Strategies U.S. Risk
Management Index allocates 100% weight to either the constituents of the U.S.
Equity Position or the U.S. Treasury Position. As a result, the Fund may engage
in active and frequent trading of its portfolio securities to achieve its
investment objective. Whenever the Adaptive Wealth Strategies U.S. Risk
Management Index rebalances into either the U.S. Equity Position or into the
Treasury Position, the new weights go into effect three trading days after the
quantitative signals indicate a rebalance is required.
After
changing its allocation, the Adaptive Wealth Strategies U.S. Risk Management
Index must remain in the same allocation (the U.S. Equity Position or the U.S.
Treasury Position) for at least ten trading days before it can change its
allocation again.
The
Fund's investment objective and Adaptive Wealth Strategies U.S. Risk Management
Index may be changed without shareholder approval.
Disclaimers
The
Index Providers are independent of the Fund and Global X Management Company LLC,
the investment adviser for the Fund ("Adviser"). The Index Providers determine
the relative weightings of the constituents of the Underlying Index and publish
information regarding the market value of the Underlying Index.
Solactive
AG (Solactive) is a leading company in the structuring and indexing business for
institutional clients. Solactive runs the Solactive index platform. Solactive
indices are used by issuers worldwide as underlying indices for financial
products. Solactive does not sponsor, endorse or promote any Fund and is not in
any way connected to it and does not accept any liability in relation to their
issue, operation and trading.
Indxx
is a service mark of Indxx, LLC and has been licensed for use for certain
purposes by the Adviser. The Fund are not sponsored, endorsed, sold or promoted
by Indxx. Indxx makes no representation or warranty, express or implied, to the
owners of the Fund or any member of the public regarding the advisability of
investing in securities generally or in the Fund particularly. Indxx has no
obligation to take the needs of the Adviser or the shareholders of the Fund into
consideration in determining, composing or calculating the Underlying Indices.
Indxx is not responsible for and has not participated in the determination of
the timing, amount or pricing of the Fund Shares to be issued or in the
determination or calculation of the equation by which the Fund Shares are to be
converted into cash. Indxx has no obligation or liability in connection with the
administration, marketing or trading of the Fund.
Source
ICE Data Indices, LLC (“ICE Data”), is used with permission. ICE®
and ICE BofA®
are trade marks of ICE Data Indices, LLC or its affiliates and have been
licensed, along with the BofA Diversified Core U.S. Preferred Securities Index
and ICE U.S. Variable Rate Preferred Securities Index (each, an “Index”) for use
by Global X Management Company LLC (the “LICENSEE”) in connection with the
Global X U.S. Preferred ETF and the Global X Variable Rate Preferred ETF (each,
a “Product”). Neither the LICENSEE, Global X Funds (the “Trust”) nor the
Product, as applicable, is sponsored, endorsed, sold or promoted by ICE Data
Indices, LLC, its affiliates or its Third Party Suppliers (“ICE Data and its
Suppliers”). ICE Data and its Suppliers make no representations or warranties
regarding the advisability of investing in securities generally, in the Product
particularly, the Trust or the ability of the Index to track general stock
market performance. ICE Data’s only relationship to LICENSEE is the licensing of
certain trademarks and trade names and the Index or components thereof. The
Index is determined, composed and calculated by ICE Data without regard to the
LICENSEE or the Product or its holders. ICE Data has no obligation to take the
needs of the Licensee or the holders of the Product into consideration in
determining, composing or calculating the Index. ICE Data is not responsible for
and has not participated in the determination of the timing of, prices of, or
quantities of the Product to be issued or in the determination or calculation of
the equation by which the Product is to be priced, sold, purchased, or redeemed.
Except for certain custom index calculation services, all information provided
by ICE Data is general in nature and not tailored to the needs of LICENSEE or
any other person, entity or group of persons. ICE Data has no obligation or
liability in connection with the administration, marketing, or trading of the
Product. ICE Data is not an investment advisor. Inclusion of a security within
an index is not a recommendation by ICE Data to buy, sell, or hold such
security, nor is it considered to be investment advice.
ICE
DATA AND ITS SUPPLIERS DISCLAIM ANY AND ALL WARRANTIES AND REPRESENTATIONS,
EXPRESS AND/OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE, INCLUDING THE INDICES, INDEX DATA AND ANY
INFORMATION INCLUDED IN, RELATED TO, OR DERIVED THEREFROM (“INDEX DATA”). ICE
DATA AND ITS SUPPLIERS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY WITH
RESPECT TO THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE INDICES AND
THE INDEX DATA, WHICH ARE PROVIDED ON AN “AS IS” BASIS AND YOUR USE IS AT YOUR
OWN RISK.
Standard
& Poor's®
and S&P®
are registered trademarks of Standard & Poor's Financial Services LLC
("S&P") and have been licensed for use by the Adviser. The Global X S&P
500®
Quality Dividend ETF ("ETF") is not sponsored, endorsed, sold or promoted by
Standard & Poor's and its affiliates ("S&P"). S&P makes no
representation, condition or warranty, express or implied, to the owners of the
ETF or any member of the public regarding the advisability of investing in
securities generally or in the ETF particularly or the ability of the S&P
500®
Quality High Dividend Index (the "Index") to track the performance of certain
financial markets and/or sections thereof and/or of groups of assets or asset
classes. S&P's only relationship to the Adviser is the licensing of certain
trademarks and trade names and of the index which is determined, composed and
calculated by S&P without regard to the Adviser or the ETF. S&P has no
obligation to take the needs of Global X Management Company, LLC or the owners
of the ETF into consideration in determining, composing or calculating the
index. S&P is not responsible for and has not participated in the
determination of the prices and amount of the ETF or the timing of the issuance
or sale of the ETF or in the determination or calculation of the equation by
which the ETF units are to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing, or trading of the
ETF.
Neither
S&P, its affiliates nor third party licensors, guarantees the accuracy
and/or the completeness of the index or any data included therein and S&P,
its affiliates and their third party licensors, shall have no liability for any
errors, omissions, or interruptions therein. S&P, its affiliates and third
party licensors make no warranty, condition or representation, express or
implied, as to the results to be obtained by to Adviser, owners of the ETF, or
any other person or entity from the use of the index or any data included
therein. S&P makes no express or implied warranties, representations or
conditions, and expressly disclaims all warranties or conditions of
merchantability or fitness for a particular purpose or use and any other express
or implied warranty or condition with respect to the index or any data included
therein. Without limiting any of the foregoing, in no event shall S&P, its
affiliates or their third party licensors, have any liability for any special,
punitive, indirect, or consequential damages (including lost profits) resulting
from the use of the index or any data included therein, even if notified of the
possibility of such damages.
The
Global X Adaptive U.S. Factor ETF and the Global X Adaptive U.S. Risk Management
ETF and their common shares are not sponsored, endorsed, sold or promoted by
NorthCrest Asset Management. NorthCrest Asset Management makes no representation
or warranty, express or implied, to the shareholders of the Global X Adaptive
U.S. Factor ETF, the Global X Adaptive U.S. Risk Management ETF or any member of
the public regarding the advisability of investing in securities generally or in
the Global X Adaptive U.S. Factor ETF or the Global X Adaptive U.S. Risk
Management ETF particularly or the ability of any data supplied by NorthCrest
Asset Management, to track general stock market performance. NorthCrest Asset
Management's only relationship to the Adviser is the licensing of certain
trademarks and trade names of Adaptive Wealth Strategies and of the data
supplied by NorthCrest Asset Management related to the Adaptive Wealth
Strategies U.S. Factor Index and the Adaptive Wealth Strategies U.S. Risk
Management Index, which is determined, composed and calculated by Solactive AG
without regard to the Global X Adaptive U.S. Factor ETF or the Global X Adaptive
U.S. Risk Management ETF or its common shares. NorthCrest Asset Management has
no obligation to take the needs of the Adviser or the shareholders of the Global
X Adaptive U.S. Factor ETF or the Global X Adaptive U.S. Risk Management ETF
into consideration in determining, composing or calculating the data supplied by
NorthCrest Asset Management. NorthCrest Asset Management is not responsible for
and has not participated in the determination of the prices of the common shares
of the Global X Adaptive U.S. Factor ETF or the Global X Adaptive U.S. Risk
Management ETF or the timing of the issuance or sale of such common shares.
NorthCrest Asset Management has no obligation or liability in connection with
the administration, marketing or trading of the Global X Adaptive U.S. Factor
ETF, the Global X Adaptive U.S. Risk Management ETF or their common
shares.
OTHER
SERVICE PROVIDERS
SEI
Investments Global Funds Services is the sub-administrator for each Fund.
Brown
Brothers Harriman & Co. serves as the custodian and transfer agent for each
Fund.
Stradley
Ronon Stevens & Young, LLP serves as counsel for the Trust and the Trust's
Independent Trustees.
PricewaterhouseCoopers
LLP serves as each Fund's independent registered public accounting firm.
ADDITIONAL
INFORMATION
The
Trust enters into contractual arrangements with various parties, including among
others, the Funds’ Adviser, sub-adviser(s) (as applicable), custodian(s), and
transfer agent(s) who provide services to the Funds. Shareholders are not
parties to any such contractual arrangements and are not intended beneficiaries
of those contractual arrangements, and those contractual arrangements are not
intended to create in any shareholder any right to enforce them against the
service providers or to seek any remedy under them against the service
providers, either directly or on behalf of the Trust.
This
Prospectus provides information concerning the Funds that investors should
consider in determining whether to purchase Fund Shares. Neither this Prospectus
nor the SAI is intended, or should be read, to be or give rise to an agreement
or contract between the Trust or the Funds and any investor, or to give rise to
any rights in any shareholder or other person other than any rights under
federal or state law that may not be waived.
FINANCIAL
HIGHLIGHTS
Each
Fund has commenced operations and has financial highlights. The financial
highlights tables are intended to help investors understand a Fund's financial
performance since the Fund's inception. Certain information reflects financial
results for a single Share of a Fund. The total returns in the tables represent
the rate that an investor would have earned (or lost) on an investment in a
Fund, assuming reinvestment of all dividends and distributions.
PricewaterhouseCoopers
LLP serves as the Funds' independent registered public accounting firm and has
audited the financial statements of the Funds for the fiscal years ended
November 30, 2018, 2019, 2020, 2021 and 2022. The Funds' financial statements
are available without charge upon request.
Selected Per Share Data & Ratios
For a Share Outstanding Throughout the Period
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Net
Asset Value, Beginning of Period ($) |
Net
Investment Income (Loss) ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of Capital ($) |
Total
from Distributions ($) |
Net Asset
Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Tax
Expense |
Ratio
of Net Investment Income (Loss) to Average Net Assets (%) |
Portfolio
Turnover (%)†† |
Global
X MLP ETF |
2022 |
33.59 |
(0.02) |
12.44 |
12.42 |
(3.02) |
— |
— |
(3.02) |
42.99 |
37.69 |
1,378,279 |
0.44‡ |
(0.01)^^ |
(0.04) |
47.13 |
2021 |
26.73 |
(0.06) |
9.97 |
9.91 |
— |
— |
(3.05) |
(3.05) |
33.59 |
37.49 |
992,935 |
0.43‡ |
(0.02) |
(0.19) |
33.79 |
2020(1) |
43.92 |
(0.26) |
(13.13) |
(13.39) |
— |
— |
(3.80) |
(3.80) |
26.73 |
(30.51) |
687,577 |
0.46‡ |
0.46 |
(0.85) |
33.78 |
2019(1) |
51.24 |
(0.24) |
(2.76) |
(3.00) |
— |
— |
(4.32) |
(4.32) |
43.92 |
(6.54) |
947,045 |
0.46‡ |
— |
(0.46) |
55.65 |
2018(1) |
56.52 |
(0.24) |
(0.42) |
(0.66) |
(0.12) |
— |
(4.50) |
(4.62) |
51.24 |
(1.72) |
828,622 |
0.45‡ |
— |
(0.45) |
30.35 |
Global
X MLP & Energy Infrastructure ETF |
2022 |
34.89 |
0.75 |
9.98 |
10.73 |
(1.39) |
— |
(0.76) |
(2.15) |
43.47 |
31.26 |
1,090,000 |
0.45 |
— |
1.85 |
23.48 |
2021 |
26.59 |
0.42 |
9.97 |
10.39 |
(1.05) |
— |
(1.04) |
(2.09) |
34.89 |
39.64 |
738,092 |
0.45
|
— |
1.25 |
16.88 |
2020(2) |
33.45 |
0.71 |
(5.33) |
(4.62) |
(1.95) |
— |
(0.29) |
(2.24) |
26.59 |
(13.34) |
538,344 |
0.45 |
— |
2.66 |
35.86 |
2019(2) |
36.39 |
1.14 |
(1.89) |
(0.75) |
(2.01) |
— |
(0.18) |
(2.19) |
33.45 |
(2.34) |
612,300 |
0.45 |
— |
3.03 |
36.57 |
2018(2) |
38.40 |
1.05 |
(1.11) |
(0.06) |
(1.56) |
— |
(0.39) |
(1.95) |
36.39 |
(0.43) |
540,381 |
0.45 |
— |
2.65 |
25.68 |
Global
X Alternative Income ETF |
2022 |
13.16 |
0.61 |
(1.45) |
(0.84) |
(0.77) |
— |
(0.13) |
(0.90) |
11.42 |
(6.64) |
37,216 |
0.50# |
— |
5.03 |
18.10 |
2021 |
11.51 |
0.49 |
2.05 |
2.54 |
(0.62) |
— |
(0.27) |
(0.89) |
13.16 |
22.52 |
35,921 |
0.63#^‡‡ |
— |
3.77 |
86.85 |
2020 |
14.74 |
0.66 |
(2.64) |
(1.98) |
(0.98) |
(0.15) |
(0.12) |
(1.25) |
11.51 |
(13.13) |
19,573 |
0.75# |
— |
5.61 |
52.78 |
2019 |
14.52 |
0.94 |
0.44 |
1.38 |
(1.07) |
(0.09) |
— |
(1.16) |
14.74 |
9.89 |
28,012 |
0.75# |
— |
6.39 |
18.16 |
2018 |
15.40 |
0.92 |
(0.64) |
0.28 |
(1.16) |
— |
— |
(1.16) |
14.52 |
1.89 |
16,698 |
0.75# |
— |
6.19 |
18.32 |
*
Per share data calculated using average shares method.
**
Total Return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.
††
Portfolio turnover rate is for the period indicated and periods of less than one
year have not been annualized. Excludes effect of in-kind
transfers.
‡
The Before Net Deferred Tax Expense/(Benefit) expense ratios for the periods
ending November 30, 2018, 2019, 2020, 2021, 2022 was 0.45%, 0.46%, 0.45%, 0.45%,
and 0.45%..
‡‡
Effective for the fiscal year ended November 30, 2022, the Fund began presenting
acquired fund fees borne by the Adviser as part of its unitary fee agreement
(See Note 3 in Notes to Financial Statements) as a realized gain on the
Statement of Operations as compared to a contra-expense as in prior fiscal
years. If such amounts had been presented as a realized gain in the year ended
November 30, 2021 (first year of this agreement), the ratio of Expenses to
Average Net Assets would have been 0.70%..
#
Excludes fees and expenses incurred indirectly as a result of investments in
underlying funds.
^
Effective September 28, 2021, the fund's fee were permanently lowered to
0.50%.
^^
Amount presented represents impact on expense ratio from tax benefit or expense.
Includes amount of tax benefit or expense associated with expenses. Including
amount of tax benefit or expense associated for all components of the Statement
of Operations, the impact would be (2.29)%.
(1)
Per share amounts have been adjusted for a 1 for 6 reverse stock split on April
28, 2020 (see Note 9 in the Notes to Financial Statements).
(2)
Per share amounts have been adjusted for a 1 for 3 reverse share split on April
28, 2020 (See Note 9 in Notes to Financial Statements).
Amounts
designated as "—" are either $0 or have been rounded to $0.
Selected Per Share Data & Ratios
For a Share Outstanding Throughout the Period
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Net
Asset Value, Beginning of Period ($) |
Net
Investment Income ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of Capital ($) |
Total
from Distributions ($) |
Net Asset
Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Ratio
of Net Investment Income to Average Net Assets (%) |
Portfolio
Turnover (%)†† |
Global
X Conscious Companies ETF |
2022 |
32.97 |
0.31 |
(3.40) |
(3.09) |
(0.36) |
— |
— |
(0.36) |
29.52 |
(9.45) |
673,733 |
0.43 |
1.06 |
31.92 |
2021 |
26.46 |
0.31 |
6.49 |
6.80 |
(0.29) |
— |
— |
(0.29) |
32.97 |
25.84 |
654,764 |
0.43 |
1.00 |
22.92 |
2020 |
23.10 |
0.33 |
3.32 |
3.65 |
(0.27) |
(0.02) |
— |
(0.29) |
26.46 |
16.01 |
403,499 |
0.43 |
1.45 |
48.73 |
2019 |
20.55 |
0.37 |
2.68 |
3.05 |
(0.50) |
— |
— |
(0.50) |
23.10 |
15.35 |
85,459 |
0.43 |
1.73 |
34.97 |
2018 |
19.23 |
0.33 |
1.22 |
1.55 |
(0.23) |
— |
— |
(0.23) |
20.55 |
8.16 |
56,504 |
0.43 |
1.65 |
36.35 |
Global
X Founder-Run Companies ETF |
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2022 |
34.44 |
0.07 |
(10.26) |
(10.19) |
(0.07) |
— |
— |
(0.07) |
24.18 |
(29.64) |
7,979 |
0.45 |
0.25 |
33.97 |
2021 |
28.66 |
0.18 |
5.94 |
6.12 |
(0.34) |
— |
— |
(0.34) |
34.44 |
21.51 |
15,842 |
0.45 |
0.54 |
47.49 |
2020 |
20.50 |
0.09 |
8.14 |
8.23 |
(0.07) |
— |
— |
(0.07) |
28.66 |
40.29 |
5,732 |
0.45 |
0.39 |
31.51 |
2019 |
18.63 |
0.05 |
2.12 |
2.17 |
(0.07) |
(0.23) |
— |
(0.30) |
20.50 |
12.05 |
4,100 |
0.52 |
0.29 |
33.82 |
2018 |
17.41 |
0.04 |
1.45 |
1.49 |
(0.04) |
(0.23) |
— |
(0.27) |
18.63 |
8.67 |
4,657 |
0.65 |
0.13 |
25.22 |
Global
X U.S. Preferred ETF |
2022 |
25.21 |
1.23 |
(4.64) |
(3.41) |
(1.29) |
— |
— |
(1.29) |
20.51 |
(13.82) |
2,214,461 |
0.23 |
5.51 |
33.20 |
2021 |
25.36 |
1.28 |
(0.12) |
1.16 |
(1.31) |
— |
— |
(1.31) |
25.21 |
4.61 |
2,458,022 |
0.23^^ |
4.99 |
47.89 |
2020 |
24.79 |
1.33 |
0.58 |
1.91 |
(1.34) |
— |
— |
(1.34) |
25.36 |
8.13 |
868,550 |
0.23^^ |
5.49 |
39.14 |
2019 |
22.97 |
1.36 |
1.83 |
3.19 |
(1.37) |
— |
— |
(1.37) |
24.79 |
14.25 |
585,150 |
0.24 |
5.57 |
32.93 |
2018 |
25.03 |
1.44 |
(2.08) |
(0.64) |
(1.42) |
— |
— |
(1.42) |
22.97 |
(2.72) |
188,314 |
0.23 |
5.98 |
42.90 |
*
Per share data calculated using average shares method.
**
Total Return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.
††
Portfolio turnover rate is for the period indicated and periods of less than one
year have not been annualized. Excludes effect of in-kind
transfers.
^^
Effective April 1, 2020, until April 1, 2021, the ratio of Expenses to Average
Net Assets included the effect of a waiver. If these offsets were excluded, the
ratio would have been 0.23%.
Amounts
designated as "—" are either $0 or have been rounded to $0.
Selected Per Share Data & Ratios
For a Share Outstanding Throughout the Period
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Net
Asset Value, Beginning of Period ($) |
Net
Investment Income ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of Capital ($) |
Total
from Distributions ($) |
Net Asset
Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Ratio
of Net Investment Income to Average Net Assets (%) |
Portfolio
Turnover (%)†† |
Global
X S&P 500®
Quality Dividend ETF |
2022 |
31.02 |
1.03 |
2.10 |
3.13 |
(0.91) |
— |
— |
(0.91) |
33.24 |
10.25 |
61,156 |
0.20 |
3.24 |
78.73 |
2021 |
25.20 |
0.78 |
5.84 |
6.62 |
(0.80) |
— |
— |
(0.80) |
31.02 |
26.45 |
9,615 |
0.20 |
2.60 |
70.66 |
2020 |
26.51 |
0.75 |
(1.24) |
(0.49) |
(0.82) |
— |
—*** |
(0.82) |
25.20 |
(1.47) |
6,300 |
0.20 |
3.27 |
93.40 |
2019 |
24.60 |
0.75 |
1.89 |
2.64 |
(0.73) |
— |
— |
(0.73) |
26.51 |
11.01 |
9,278 |
0.28‡ |
2.99 |
49.18 |
2018(1) |
25.00 |
0.26 |
(0.44) |
(0.18) |
(0.22) |
— |
— |
(0.22) |
24.60 |
(0.72) |
2,460 |
0.36† |
2.70† |
1.18 |
Global
X Adaptive U.S. Factor ETF |
2022 |
29.86 |
0.62 |
2.50 |
3.12 |
(0.71) |
— |
(0.04) |
(0.75) |
32.23 |
10.61 |
178,533 |
0.27 |
2.03 |
115.74 |
2021 |
24.91 |
0.61 |
5.09 |
5.70 |
(0.70) |
— |
(0.05) |
(0.75) |
29.86 |
23.01 |
172,008 |
0.27 |
2.09 |
96.21 |
2020 |
25.79 |
0.63 |
(0.67) |
(0.04) |
(0.70) |
(0.05) |
(0.09) |
(0.84) |
24.91 |
0.14 |
144,484 |
0.27 |
2.78 |
159.91 |
2019 |
24.39 |
0.89 |
1.53 |
2.42 |
(1.02) |
—*** |
— |
(1.02) |
25.79 |
10.27 |
189,564 |
0.27 |
3.63 |
112.43 |
2018(2) |
25.00 |
0.22 |
(0.61) |
(0.39) |
(0.19) |
— |
(0.03) |
(0.22) |
24.39 |
(1.58) |
102,438 |
0.27† |
3.31† |
28.89 |
Global
X Variable Rate Preferred ETF |
2022 |
27.28 |
1.45 |
(3.70) |
(2.25) |
(1.39) |
(0.02) |
(0.07) |
(1.48) |
23.55 |
(8.40) |
285,389 |
0.25 |
5.93 |
74.41 |
2021 |
26.97 |
1.40 |
0.37 |
1.77 |
(1.29) |
(0.02) |
(0.15) |
(1.46) |
27.28 |
6.60 |
89,217 |
0.25 |
5.01 |
26.17 |
2020(3) |
24.85 |
0.61 |
2.00 |
2.61 |
(0.49) |
— |
— |
(0.49) |
26.97 |
10.59 |
1,349 |
0.25† |
5.38† |
10.96 |
Global
X Adaptive U.S. Risk Management ETF |
2022 |
29.88 |
0.40 |
(1.71) |
(1.31) |
(0.31) |
— |
— |
(0.31) |
28.26 |
(4.28) |
66,408 |
0.39 |
1.49 |
1,481.94 |
2021(4) |
24.95 |
0.25 |
4.77 |
5.02 |
(0.09) |
— |
— |
(0.09) |
29.88 |
20.13 |
104,574 |
0.39† |
1.01† |
30.10 |
*
Per share data calculated using average shares method.
**
Total Return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.
***
Amount is less than $0.005.
†
Annualized.
††
Portfolio turnover rate is for the period indicated and periods of less than one
year have not been annualized. Excludes effect of in-kind
transfers.
‡
Effective April 1, 2019, the Fund's fees were permanently lowered to 0.20%.
Prior to April 1, 2019, the ratio of Expenses to Average Net Assets included the
effect of a waiver. If these offsets were excluded, the ratio would have been
0.31% for the year ended November 30, 2019.
(1)
The Fund commenced operations on July 13, 2018.
(2)
The Fund commenced operations on August 24, 2018.
(3)
The Fund commenced operations on June 22, 2020.
(4)
The Fund commenced operations on January 12, 2021.
Amounts
designated as "—" are either $0 or have been rounded to $0.
OTHER
INFORMATION
The
Funds are not sponsored, endorsed, sold or promoted by any national securities
exchange. No national securities exchange makes any representation or warranty,
express or implied, to the owners of Shares or any member of the public
regarding the advisability of investing in securities generally or in the Funds
particularly or the ability of the Funds to achieve their objectives. No
national securities exchange has any obligation or liability in connection with
the administration, marketing or trading of the Funds.
For
purposes of the 1940 Act, shares that are issued by a registered investment
company and purchases of such shares by investment companies and companies
relying on Sections 3(c)(1) or 3(c)(7) of the 1940 Act are subject to the
restrictions set forth in Section 12(d)(1) of the 1940 Act. Registered
investment companies are permitted to invest in certain of the Funds beyond the
limits set forth in section 12(d)(1), subject to certain conditions set forth in
Rule 12d1-4 under the 1940 Act, including that such investment companies enter
into an agreement with such Fund.
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Funds on an ongoing basis, a “distribution,” as such term is used in the
Securities Act, may occur at any point. Broker-dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker-dealers
who are not “underwriters” but are participating in a distribution (as
contrasted with ordinary secondary trading transactions), and thus dealing with
Shares that are part of an “unsold allotment” within the meaning of Section
4(a)(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
This is because the prospectus delivery exemption in Section 4(a)(3) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that
dealers who are not underwriters but are participating in a distribution (as
contrasted with ordinary secondary market transactions) and thus dealing with
the Shares that are part of an overallotment within the meaning of Section
4(a)(3)(A) of the Securities Act would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
Firms that incur a prospectus delivery obligation with respect to Shares are
reminded that, under Rule 153 of the Securities Act, a prospectus delivery
obligation under Section 5(b)(2) of the Securities Act owed to an exchange
member in connection with a sale on NYSE Arca, NASDAQ or Cboe BZX is satisfied
by the fact that the prospectus is available at NYSE Arca, NASDAQ or Cboe BZX
upon request. The prospectus delivery mechanism provided in Rule 153 is only
available with respect to transactions on an exchange.
For
more information visit our website at
www.globalxetfs.com
or
call 1-888-493-8631
|
|
|
Investment
Adviser and Administrator
Global
X Management Company LLC
605
3rd Avenue, 43rd Floor
New
York, NY 10158
|
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
|
Custodian
and Transfer Agent Brown
Brothers Harriman & Co. 50 Post Office Square Boston, MA
02110
|
Sub-Administrator
SEI
Investments Global Funds Services
One
Freedom Valley Drive
Oaks,
PA 19456
|
Legal
Counsel to the Global X Funds®
and Independent Trustees
Stradley
Ronon Stevens & Young, LLP
2000
K Street, N.W., Suite 700
Washington,
DC 20006
|
Independent
Registered Public Accounting Firm
PricewaterhouseCoopers
LLP
Two
Commerce Square, Suite 1800
2001
Market Street
Philadelphia,
PA 19103 |
A
Statement of Additional
Information
dated April 1, 2023, which contains more details about the Funds, is
incorporated by reference in its entirety into this Prospectus, which means that
it is legally part of this Prospectus.
Additional
information about each Fund and its investments is available in its annual and
semi-annual reports to shareholders. The annual report explains the market
conditions and investment strategies affecting each Fund’s performance during
its last fiscal year.
You
can ask questions or obtain a free copy of each such Fund’s semi-annual and
annual report or the Statement of Additional Information by calling
1-888-493-8631. Free copies of a Fund’s semi-annual and annual report and the
Statement of Additional Information are available from our website at
www.globalxetfs.com.
Information
about each Fund, including its semi-annual and annual reports and the Statement
of Additional Information, has been filed with the SEC. It can be reviewed and
copied on the EDGAR database on the SEC’s internet site (http://www.sec.gov).
You can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC’s e-mail address ([email protected]).
PROSPECTUS
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
April 1,
2023
Investment
Company Act File No.: 811-22209
GLX-PS-032-1100