allocated over a
smaller asset base, leading to an increase in the Fund's expense
ratio.
Market
Risk.
Over time, securities markets generally tend to move in cycles
with periods when security prices rise and periods when
security prices decline. The value of the Fund’s investments may
move with these cycles and, in some instances, increase or
decrease more than the applicable market(s) as measured by the
Fund’s benchmark index(es). The securities markets may also
decline because of factors that affect a particular
industry or market sector.
Price declines may
occur in response to general market and economic
conditions or events, including conditions and developments
outside of the financial markets such as significant changes in
interest and inflation rates and the availability of credit. In
addition, domestic or global events, including the spread of an
infectious illness, public health threats, war, terrorism, natural
disasters or similar events could reduce consumer demand or
economic output, result in market closures, travel
restrictions or quarantines, and generally have a significant impact on the
world economies, which in turn could adversely affect the Fund's
investments. Any investment is subject to the risk that the
financial markets as a whole may decline in value, thereby depressing
the investment’s price.
Market
Trading Risk. Although Fund
shares are listed on national
securities exchanges, there can be no assurance that an active trading
market for Fund shares will develop or be maintained. If an
active market is not maintained, investors may find it difficult
to buy or sell Fund shares. Trading of shares of the Fund on a national
securities exchange may be halted if exchange officials
deem such action appropriate, if the Fund is delisted, or if
the activation of marketwide “circuit breakers” halts stock trading
generally. If the Fund’s shares are delisted, the Fund may seek to
list its shares on another market, become a fully-transparent
ETF, merge with another ETF, or redeem its shares at
NAV.
Mid
Cap Risk. Medium-sized
companies often have greater price volatility,
lower trading volume, and less liquidity than larger, more-established
companies. 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.
New
and Smaller Sized Fund Risk. Funds, like the
Fund, that are relatively new
or relatively small are subject to additional risks. A fund that
is relatively new has a limited operating history for investors to
evaluate and may not be successful in implementing its
investment strategies. The Fund that is relatively small may fail to
attract sufficient assets to achieve or maintain economies of
scale, which could result in the Fund being liquidated at any
time without shareholder approval and at a time that may not be
favorable for all shareholders. In addition, a fund that is relatively
small may not be successful in implementing its investment
strategies after the Fund’s assets grow beyond a certain size,
which could adversely affect the Fund’s performance.
Smaller ETFs will have a lower public float and lower trading
volumes, leading to wider bid/ask spreads.
Premium/Discount
Risk.
Publication of the Proxy Portfolio is not the same level of
transparency as the publication of the Actual Portfolio by a
fully transparent ETF. Although the Proxy Portfolio is intended to
provide Authorized Participants and other market
participants with
enough information to allow for an effective arbitrage
mechanism that is intended to keep the market price of the Fund at or
close to the underlying NAV per share of the Fund, there is a risk
(which may increase during periods of market disruption or
volatility) that the market price of the Fund’s shares will vary
significantly from the NAV per share of the Fund. This means the price
paid to buy shares on an exchange may not match the value of
the Fund’s portfolio. The same is true when shares are
sold.
Proxy
Portfolio Risk. Unlike
traditional ETFs that disclose their portfolio holdings
on a daily basis, the Fund does not disclose its holdings daily,
rather it discloses a Proxy Portfolio. The goal of the Proxy Portfolio,
during all market conditions, is to track closely the daily performance
of the Actual Portfolio and minimize intra-day misalignment
between the performance of the Proxy Portfolio and the performance of
the Actual Portfolio. The Proxy Portfolio is designed to
reflect the economic exposures and the risk characteristics of
the Actual Portfolio on any given trading day. The Proxy
Portfolio is intended to provide Authorized Participants (which are members
or participants of a clearing agency registered with
the SEC, which have a written agreement with the Fund that allows
them to place orders for the purchase and redemption of
Creation Units) and other market participants with enough information
to support an effective arbitrage mechanism that keeps the
market price of the Fund at or close to the underlying NAV per
share of the Fund. Thrivent Asset Mgt. has licensed from a
third party the right to use a model that will determine the
Proxy Portfolio. The Fund’s ability to operate as described herein
depends on the quality of that model and the timely and
accurate determination of the Proxy Portfolio each day. The Proxy
Portfolio methodology is novel, has only been in use for a limited
period of time, and is not yet proven as an effective arbitrage
mechanism. There can be no assurance that the Proxy Portfolio will
function as expected or that it will support an effective
arbitrage mechanism, especially under difficult or stressed market
conditions, and there can be no assurance that the intellectual
property necessary to utilize the Proxy Portfolio will remain
available to the Fund. The effectiveness of the Proxy Portfolio as an
arbitrage mechanism is contingent upon, among other things, the
Proxy Portfolio performing in a manner substantially
identical to the performance of the Actual Portfolio and the
willingness of Authorized Participants and other market participants to
trade based on a Proxy Portfolio. There is no guarantee that
this arbitrage mechanism will operate as intended or with the
intended effects. The Fund may not function as intended and the
market price of its shares may be adversely affected if the
licensor of the methodology used to determine the Proxy Portfolio
fails to continue to make the intellectual property used to determine
the Proxy Portfolio available for use by the Fund. Further,
while the Proxy Portfolio may include some of the Fund’s holdings,
it is not the Fund’s Actual Portfolio. ETFs trading on the basis of a
published Proxy Portfolio may exhibit wider premiums and
discounts, bid/ask spreads, and tracking error than other ETFs
using the same investment strategies that publish their
portfolios on a daily basis, especially during periods of market
disruption or volatility. Therefore, shares of the Fund may cost investors
more to trade than shares of a traditional ETF. There is also a
possibility of additional expenses related to operating the
Proxy Portfolio.
•
Each day the Fund
calculates the Proxy Overlap and the Tracking Error. If
the Tracking Error becomes large, there is a