ck0001742912-20210228
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SFY |
SoFi
Select 500 ETF |
SFYX |
SoFi
Next 500 ETF |
SFYF |
SoFi
Social 50 ETF |
TGIF |
SoFi
Weekly Income ETF |
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each
listed on NYSE Arca, Inc. |
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GIGE |
SoFi
Gig Economy ETF |
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listed
on The Nasdaq Stock Market, LLC |
PROSPECTUS
June 28,
2021
The
SEC has not approved or disapproved of these securities or passed upon the
accuracy or adequacy of this Prospectus. Any representation to the contrary is a
criminal offense.
SoFi Select 500 ETF – FUND
SUMMARY
Investment Objective
The SoFi Select 500 ETF (the
“Fund”) seeks to track the performance, before fees and expenses, of the
Solactive SoFi US 500 Growth Index (the “Index”).
Fees and Expenses of the
Fund
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares of the Fund
(“Shares”). You may pay other fees, such as brokerage commissions and other fees
to financial intermediaries, which are not reflected in the table and Example
below.
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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 |
0.19% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses |
0.19% |
Less
Fee Waiver |
(0.19)% |
Total
Annual Fund Operating Expenses After Fee Waiver1 |
0.00% |
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1The Fund’s investment
adviser has agreed to waive its Management Fees for the Fund until at least
June 30,
2022. This agreement may be terminated only by, or with the
consent of, the Fund’s Board of Trustees, on behalf of the Fund, upon sixty (60)
days’ written notice to the Adviser. This Agreement may not be terminated by the
Adviser without the consent of the Board of Trustees.
Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem 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. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. The management fee waiver discussed above is
reflected only through June 30, 2022. Although your actual costs may be higher
or lower, based on these assumptions your costs would
be:
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1 Year |
3
Years |
5
Years |
10
Years |
$0 |
$42 |
$88 |
$224 |
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 total annual fund operating expenses or
in the expense example above, affect the Fund’s performance. For the fiscal year
ended February 28, 2021, the Fund’s portfolio turnover rate was 26% of the average value of its
portfolio.
Principal Investment
Strategies
The
Fund uses a “passive management” (or indexing) approach to track the
performance, before fees and expenses, of the Index. The Index follows a
rules-based methodology (described generally below) that tracks the performance
of 500 of the largest U.S.-listed companies weighted based on a proprietary mix
of their market capitalization and fundamental factors. The Index is owned and
administered by Solactive AG (the “Index Provider”), and the Index Provider
partnered with Social Finance, Inc. (“SoFi”) to co-develop the methodology used
by the Index to determine the securities included in the Index. SoFi is not
involved in the ongoing maintenance of the Index or any discretionary decisions
relating to its application, and does not act in the capacity of an index
provider. SoFi has licensed certain of its trademarks to the Index Provider for
use in connection with the Index.
Solactive
SoFi US 500 Growth Index
Construction
of the Index begins with the selection of the 500 largest constituents by market
capitalization of the Solactive US Broad Market Index, a market
capitalization-weighted index that includes equity securities of approximately
3,000 of the largest U.S. companies. This selection is subject to a 20% buffer
rule to limit index turnover. The
Index may include common stocks and equity interests in real estate investment
trusts (“REITs”).
The
weight of each Index constituent is initially based on each constituent’s
free-float market capitalization and then adjusted upward or downward based on a
proprietary composite score calculated based on three growth-oriented
fundamental factors of each company: trailing 12-month sales growth, trailing
12-month earnings per share (“EPS”) growth, and 12-month forward-looking EPS
growth consensus estimates. For each factor, the scores for all Index
constituents are adjusted
to account for outliers, and each company’s score is calculated relative to the
average score for that factor. The composite score for a company reflects an
average of that company’s score for each factor.
The
Index is rebalanced and reconstituted annually, effective on the first Wednesday
of each May based on data as of the tenth business day prior to the
reconstitution date. As of May 28, 2021, the three largest Index constituents
and the weights were as follows: Amazon.com Inc. 5.86%; Apple Inc. 5.14%; and
Microsoft Corp. 4.98%.
The
Fund’s Investment Strategy
The
Fund attempts to invest all, or substantially all, of its assets in the
component securities that make up the Index. Under normal circumstances, at
least 80% of the Fund’s total assets (exclusive of any collateral held from
securities lending) will be invested in the component securities of the Index.
The Fund’s investment adviser expects that, over time, the correlation between
the Fund’s performance and that of the Index, before fees and expenses, will be
95% or better.
The
Fund will generally use a “replication” strategy to achieve its investment
objective, meaning it generally will invest in all of the component securities
of the Index. However, the Fund may use a “representative sampling” strategy,
meaning it may invest in a sample of the securities in the Index whose risk,
return and other characteristics closely resemble the risk, return and other
characteristics of the Index as a whole, when the Fund’s investment adviser
believes it is in the best interests of the Fund (e.g., when replicating the
Index involves practical difficulties or substantial costs, an Index constituent
becomes temporarily illiquid, unavailable, or less liquid, or as a result of
legal restrictions or limitations that apply to the Fund but not to the Index).
The
Fund generally may invest up to 20% of its total assets (exclusive of any
collateral held from securities lending) in securities or other investments not
included in the Index, but which the Fund’s investment adviser believes will
help the Fund track the Index. For example, the Fund may invest in securities
that are not components of the Index to reflect various corporate actions and
other changes to the Index (such as reconstitutions, additions, and deletions).
To the extent the Index concentrates
(i.e., holds more than 25% of its total assets in the securities of a particular
industry or group of related industries), the Fund will concentrate its
investments to approximately the same extent as the Index.
The
Fund may actively and frequently trade all or a significant portion of the
securities in its portfolio.
Principal Investment
Risks
The
principal risks of investing in the Fund are summarized below. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return, and/or ability to meet its
objective. For more information about the risks of investing in the Fund, see
the section in the Fund’s Prospectus titled “Additional Information About the
Funds—Principal Risks of Investing in Each Fund.”
The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears.
•Cybersecurity
Risk.
With the increased use of technologies such as the Internet to conduct business,
the Fund is susceptible to operational, information security, and related risks.
Cyber incidents affecting the Fund or its service providers may cause
disruptions and impact business operations, potentially resulting in financial
losses, interference with the Fund’s ability to calculate its NAV, impediments
to trading, the inability of shareholders to transact business, violations of
applicable privacy and other laws, regulatory fines, penalties, reputational
damage, reimbursement or other compensation costs, or additional compliance
costs.
•Equity
Market Risk. The
equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, or sectors in which the Fund invests. Common
stocks, such as those held by the Fund, are generally exposed to greater risk
than other types of securities, such as preferred stock and debt obligations,
because common stockholders generally have inferior rights to receive payment
from issuers.
•ETF
Risk.
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that are authorized to
purchase and redeem Shares directly from the Fund (known as “Authorized
Participants” or “APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become unable to
process creation and/or redemption
orders
and no other APs step forward to perform these services; or (ii) market makers
and/or liquidity providers exit the business or significantly reduce their
business activities and no other entities step forward to perform their
functions.
◦Costs
of Buying or Selling Shares. Due
to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small
investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading.
Although Shares are listed on a national securities exchange, such as NYSE Arca,
Inc. (the “Exchange”), and may be traded on U.S. exchanges other than the
Exchange, there can be no assurance that Shares will trade with any volume, or
at all, on any stock exchange. In stressed market conditions, the liquidity of
Shares may begin to mirror the liquidity of the Fund’s underlying portfolio
holdings, which can be significantly less liquid than Shares.
•General
Market Risk.
Economies and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in the general financial markets, a particular financial market, or
other asset classes, due to a number of factors, including inflation (or
expectations for inflation), interest rates, global demand for particular
products or resources, natural disasters or events, pandemic diseases,
terrorism, regulatory events, and government controls.
•High
Portfolio Turnover Risk.
A high portfolio turnover rate increases transaction costs, which may increase
the Fund’s expenses. Frequent trading may also cause adverse tax consequences
for investors in the Fund due to an increase in short-term capital
gains.
•Limited
Operating History Risk. The
Fund has a limited operating history. As a result, prospective investors have a
limited track record or history on which to base their investment
decision.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing. The
securities of large-capitalization companies may be relatively mature compared
to smaller companies and therefore subject to slower growth during times of
economic expansion. Large-capitalization companies may also be unable to respond
quickly to new competitive challenges, such as changes in technology and
consumer tastes.
◦Mid-Capitalization
Investing. The
securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large-capitalization stocks or the stock market
as a whole.
•Models
and Data Risk. The
composition of the Index is heavily dependent on proprietary quantitative models
as well as information and data supplied by third parties (“Models and Data”).
When Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon may lead to the inclusion or exclusion of securities from the
Index universe that would have been excluded or included had the Models and Data
been correct and complete. If the composition of the Index reflects such errors,
the Fund’s portfolio can be expected to also reflect the errors.
•Passive
Investment Risk. The
Fund invests in the securities included in, or representative of, its Index
regardless of their investment merit. The Fund does not attempt to outperform
its Index or take defensive positions in declining markets. As a result, the
Fund’s performance may be adversely affected by a general decline in the market
segments relating to its Index.
•Recent
Market Events Risk.
U.S. and international markets have experienced significant periods of
volatility in recent years and months due to a number of economic, political and
global macro factors including the impact of the novel coronavirus (COVID-19) as
a global pandemic, which has resulted in public health issues, growth concerns
in the U.S. and overseas, layoffs, rising unemployment claims, changed travel
and social behaviors, and reduced consumer spending. The effects of COVID-19 may
lead to a substantial economic downturn or recession in the U.S. and global
economies, the recovery from which is uncertain and may last for an extended
period of time. These developments as well as other events could result in
further market volatility and negatively affect financial asset prices, the
liquidity of certain securities and the normal operations of securities
exchanges and other markets.
•REIT
Risk.
Through its investments in REITs, the Fund is subject to the risks of investing
in the real estate market, including decreases in property revenues, increases
in interest rates, increases in property taxes and operating expenses, legal and
regulatory changes, a lack of credit or capital, defaults by borrowers or
tenants, environmental problems and natural disasters.
REITs
are subject to additional risks, including those related to adverse governmental
actions; declines in property value and the real estate market; the potential
failure to qualify for tax-free pass through of income; and exemption from
registration as an investment company. REITs are dependent upon specialized
management skills and may invest in relatively few properties, a small
geographic area, or a small number of property types. As a result, investments
in REITs may be volatile. To the extent the Fund invests in REITs concentrated
in specific geographic areas or property types, the Fund may be subject to a
greater loss as a result of adverse developments affecting such area or property
types. REITs are pooled investment vehicles with their own fees and expenses and
the Fund will indirectly bear a proportionate share of those fees and
expenses.
•Sector
Risk.
At times the Fund may increase the relative emphasis of its investments in a
particular sector or group of industries. The prices of securities of issuers in
a particular sector may be more susceptible to fluctuations due to changes in
economic or business conditions, government regulations, availability of basic
resources or supplies, or other events that affect that industry or sector more
than securities of issuers in other industries and sectors. To the extent that
the Fund increases the relative emphasis of its investments in a particular
industry or sector, the value of Shares may fluctuate in response to events
affecting that industry or sector.
•Tracking
Error Risk.
As with all index funds, the performance of the Fund and its Index may differ
from each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by the Index. In addition,
the Fund may not be fully invested in the securities of the Index at all times
or may hold securities not included in the Index.
Performance
The following
performance information provides some indication of the risks of investing in
the Fund by showing changes in the Fund’s performance. The bar
chart shows the Fund’s performance for the calendar year ended December 30,
2020. The table illustrates how the Fund’s average annual returns for the 1-year
and since inception periods compare with those of the Index and a broad measure
of market performance. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is available on the
Fund’s website at www.sofi.com/invest/etfs/.
Calendar Year Ended December 31,
The Fund’s calendar
year-to-date return as of
March 31,
2021 was 4.78%.
During the period of time shown in the bar
chart, the Fund’s highest quarterly return
was 22.90% for the quarter ended June 30, 2020 and the
lowest quarterly return was
-18.41% for the quarter ended March 31,
2020.
Average
Annual Total Returns
For
the Periods Ended December 31, 2020
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1
Year |
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Since
Inception
(April 10,
2019) |
Return Before
Taxes |
25.07% |
|
22.21% |
Return After Taxes on
Distributions |
24.66% |
|
21.80% |
Return After Taxes on Distributions and
Sale of Fund Shares |
15.05% |
|
17.13% |
Solactive
SoFi US 500 Growth Index (reflects no deduction for
fees, expenses, or taxes) |
25.04% |
|
22.20% |
S&P
500 Total Return Index
(reflects
no deduction for fees, expenses, or taxes) |
18.40% |
|
18.65% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. After-tax
returns shown are not relevant to investors who hold their Shares through
tax-deferred arrangements such as an individual retirement account (“IRA”) or
other tax-advantaged accounts.
Management
Investment
Adviser:
Toroso Investments, LLC (“Toroso” or the “Adviser”) serves
as investment adviser to the Fund.
Portfolio
Manager: Charles
A. Ragauss, CFA, Portfolio Manager for the Adviser, is responsible for the
day-to-day management of the Fund and has
been the Fund’s portfolio manager since its inception in 2019.
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities (the “Deposit Securities”) and/or a designated amount of U.S.
cash.
Shares
are listed on a national securities exchange, such as the Exchange, and
individual Shares may only be bought and sold in the secondary market through
brokers at market prices, rather than NAV. Because Shares trade at market prices
rather than NAV, Shares may trade at a price greater than NAV (premium) or less
than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. This difference in bid and ask
prices is often referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.sofi.com/invest/etfs/.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless an investment is in an IRA
or other tax-advantaged account. Distributions on investments made through
tax-deferred arrangements may be taxed later upon withdrawal of assets from
those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training, or other initiatives
related to the sale or promotion of Shares. These payments may create a conflict
of interest by influencing the Intermediary and your salesperson to recommend
the Fund over another investment. Any such arrangements do not result in
increased Fund expenses. Ask your salesperson or visit the Intermediary’s
website for more information.
SoFi Next 500 ETF – FUND
SUMMARY
Investment Objective
The SoFi Next 500 ETF (the
“Fund”) seeks to track the performance, before fees and expenses, of the
Solactive SoFi US Next 500 Growth Index (the
“Index”).
Fees and Expenses of the
Fund
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares of the Fund
(“Shares”). You may pay other fees, such as brokerage commissions and other fees
to financial intermediaries, which are not reflected in the table and Example
below.
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Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
|
Management
Fees |
0.19 |
% |
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
Other
Expenses |
0.00 |
% |
Acquired
Fund Fees and Expenses |
0.02 |
% |
Total
Annual Fund Operating Expenses |
0.21 |
% |
Less
Fee Waiver |
(0.19) |
% |
Total
Annual Fund Operating Expenses After Fee Waiver1 |
0.02 |
% |
|
|
1The Fund’s investment
adviser has agreed to waive its Management Fees for the Fund until at least
June 30,
2022. This agreement may be terminated only by, or with the
consent of, the Fund’s Board of Trustees, on behalf of the Fund, upon sixty (60)
days’ written notice to the Adviser. This Agreement may not be terminated by the
Adviser without the consent of the Board of Trustees.
Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem 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. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. The management fee waiver discussed above is
reflected only through June 30, 2022. Although your actual costs may be higher
or lower, based on these assumptions your costs would
be:
|
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|
|
|
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|
|
1 Year |
3
Years |
5
Years |
10
Years |
$0 |
$42 |
$88 |
$224 |
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 total annual fund operating expenses or
in the expense example above, affect the Fund’s performance. For the fiscal year
ended February 28, 2021, the Fund’s portfolio turnover rate was 53% of the average value of its
portfolio.
Principal Investment
Strategies
The
Fund uses a “passive management” (or indexing) approach to track the
performance, before fees and expenses, of the Index. The Index follows a
rules-based methodology (described generally below) that tracks the performance
of the 500 smallest of the 1,000 largest U.S.-listed companies weighted based on
a proprietary mix of their market capitalization and fundamental factors.
The
Index is owned and administered by Solactive
AG (the “Index Provider”), and
the Index Provider partnered
with Social Finance, Inc. (“SoFi”) to co-develop the methodology
used
by the Index to determine the securities included in the Index. SoFi is not
involved in the ongoing maintenance of the Index or any discretionary decisions
relating to its application, and does not act in the capacity of an index
provider. SoFi has licensed certain of its trademarks to the Index Provider for
use in connection with the Index.
Solactive
SoFi US Next 500 Growth Index
Construction
of the Index begins with the selection of the next 500 largest constituents
after excluding the largest 500 constituents by market capitalization of the
Solactive US Broad Market Index, a market capitalization-weighted index that
includes equity securities of approximately 3,000 of the largest U.S. companies.
This selection is subject to a 20% buffer rule to limit index turnover.
The
Index may include common stocks and equity interests in real estate investment
trusts (“REITs”).
The
weight of each Index constituent is initially based on each constituent’s
free-float market capitalization and then adjusted upward or downward based on a
proprietary composite score calculated based on three growth-oriented
fundamental factors of each company: trailing 12-month sales growth, trailing
12-month earnings per share (“EPS”) growth, and 12-month forward-looking EPS
growth consensus estimates. For each factor, the scores for all Index
constituents are adjusted
to account for outliers, and each company’s score is calculated relative to the
average score for that factor. The composite score for a company reflects an
average of that company’s score for each factor.
The
Index is rebalanced and reconstituted annually, effective on the first Wednesday
of each May based on data as of the tenth business day prior to such
reconstitution date. As of June 5, 2021, the three largest Index constituents
and the weights were as follows: Medical Properties Trust, Inc. 3.21%;
Cleveland-Cliffs Inc. 2.76%; and Nisource Inc. 1.98%.
The
Fund’s Investment Strategy
The
Fund attempts to invest all, or substantially all, of its assets in the
component securities that make up the Index. Under normal circumstances, at
least 80% of the Fund’s total assets (exclusive of any collateral held from
securities lending) will be invested in the component securities of the Index.
The Fund’s investment adviser expects that, over time, the correlation between
the Fund’s performance and that of the Index, before fees and expenses, will be
95% or better.
The
Fund will generally use a “replication” strategy to achieve its investment
objective, meaning it generally will invest in all of the component securities
of the Index. However, the Fund may use a “representative sampling” strategy,
meaning it may invest in a sample of the securities in the Index whose risk,
return and other characteristics closely resemble the risk, return and other
characteristics of the Index as a whole, when the Fund’s investment adviser
believes it is in the best interests of the Fund (e.g., when replicating the
Index involves practical difficulties or substantial costs, an Index constituent
becomes temporarily illiquid, unavailable, or less liquid, or as a result of
legal restrictions or limitations that apply to the Fund but not to the Index).
The
Fund generally may invest up to 20% of its total assets (exclusive of any
collateral held from securities lending) in securities or other investments not
included in the Index, but which the Fund’s investment adviser believes will
help the Fund track the Index. For example, the Fund may invest in securities
that are not components of the Index to reflect various corporate actions and
other changes to the Index (such as reconstitutions, additions, and deletions).
To the extent the Index concentrates
(i.e., holds more than 25% of its total assets in the securities of a particular
industry or group of related industries), the Fund will concentrate its
investments to approximately the same extent as the Index.
The Fund may actively and frequently trade
all or a significant portion of the securities in its
portfolio.
Principal Investment
Risks
The
principal risks of investing in the Fund are summarized below. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return, and/or ability to meet its
objective. For more information about the risks of investing in the Fund, see
the section in the Fund’s Prospectus titled “Additional Information About the
Funds—Principal Risks of Investing in Each Fund.”
The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears.
•Cybersecurity
Risk.
With the increased use of technologies such as the Internet to conduct business,
the Fund is susceptible to operational, information security, and related risks.
Cyber incidents affecting the Fund or its service providers may cause
disruptions and impact business operations, potentially resulting in financial
losses, interference with the Fund’s ability to calculate its NAV, impediments
to trading, the inability of shareholders to transact business, violations of
applicable privacy and other laws, regulatory fines, penalties, reputational
damage, reimbursement or other compensation costs, or additional compliance
costs.
•Equity
Market Risk. The
equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, or sectors in which the Fund invests. Common
stocks, such as those held by the Fund, are generally exposed to greater risk
than other types of securities, such as preferred stock and debt obligations,
because common stockholders generally have inferior rights to receive payment
from issuers.
•ETF
Risk.
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that are authorized to
purchase and redeem Shares directly from the Fund (known as “Authorized
Participants” or “APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become unable to
process creation and/or redemption
orders
and no other APs step forward to perform these services; or (ii) market makers
and/or liquidity providers exit the business or significantly reduce their
business activities and no other entities step forward to perform their
functions.
◦Costs
of Buying or Selling Shares. Due
to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small
investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading.
Although Shares are listed on a national securities exchange, such as NYSE Arca,
Inc. (the “Exchange”), and may be traded on U.S. exchanges other than the
Exchange, there can be no assurance that Shares will trade with any volume, or
at all, on any stock exchange. In stressed market conditions, the liquidity of
Shares may begin to mirror the liquidity of the Fund’s underlying portfolio
holdings, which can be significantly less liquid than Shares.
•General
Market Risk.
Economies and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in the general financial markets, a particular financial market, or
other asset classes, due to a number of factors, including inflation (or
expectations for inflation), interest rates, global demand for particular
products or resources, natural disasters or events, pandemic diseases,
terrorism, regulatory events, and government controls.
•High
Portfolio Turnover Risk.
A high portfolio turnover rate increases transaction costs, which may increase
the Fund’s expenses. Frequent trading may also cause adverse tax consequences
for investors in the Fund due to an increase in short-term capital
gains.
•Limited
Operating History Risk. The
Fund has a limited operating history. As a result, prospective investors have a
limited track record or history on which to base their investment
decision.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing. The
securities of large-capitalization companies may be relatively mature compared
to smaller companies and therefore subject to slower growth during times of
economic expansion. Large-capitalization companies may also be unable to respond
quickly to new competitive challenges, such as changes in technology and
consumer tastes.
◦Mid-Capitalization
Investing. The
securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large-capitalization stocks or the stock market
as a whole.
•Models
and Data Risk. The
composition of the Index is heavily dependent on proprietary quantitative models
as well as information and data supplied by third parties (“Models and Data”).
When Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon may lead to the inclusion or exclusion of securities from the
Index universe that would have been excluded or included had the Models and Data
been correct and complete. If the composition of the Index reflects such errors,
the Fund’s portfolio can be expected to also reflect the errors.
•Passive
Investment Risk. The
Fund invests in the securities included in, or representative of, its Index
regardless of their investment merit. The Fund does not attempt to outperform
its Index or take defensive positions in declining markets. As a result, the
Fund’s performance may be adversely affected by a general decline in the market
segments relating to its Index.
•Recent
Market Events Risk.
U.S. and international markets have experienced significant periods of
volatility in recent years and months due to a number of economic, political and
global macro factors including the impact of the novel coronavirus (COVID-19) as
a global pandemic, which has resulted in public health issues, growth concerns
in the U.S. and overseas, layoffs, rising unemployment claims, changed travel
and social behaviors, and reduced consumer spending. The effects of COVID-19 may
lead to a substantial economic downturn or recession in the U.S. and global
economies, the recovery from which is uncertain and may last for an extended
period of time. These developments as well as other events could result in
further market volatility and negatively affect financial asset prices, the
liquidity of certain securities and the normal operations of securities
exchanges and other markets.
•REIT
Risk.
Through its investments in REITs, the Fund is subject to the risks of investing
in the real estate market, including decreases in property revenues, increases
in interest rates, increases in property taxes and operating expenses, legal and
regulatory changes, a lack of credit or capital, defaults by borrowers or
tenants, environmental problems and natural disasters.
REITs
are subject to additional risks, including those related to adverse governmental
actions; declines in property value and the real estate market; the potential
failure to qualify for tax-free pass through of income; and exemption from
registration as an investment company. REITs are dependent upon specialized
management skills and may invest in relatively few properties, a small
geographic area, or a small number of property types. As a result, investments
in REITs may be volatile. To the extent the Fund invests in REITs concentrated
in specific geographic areas or property types, the Fund may be subject to a
greater loss as a result of adverse developments affecting such area or property
types. REITs are pooled investment vehicles with their own fees and expenses and
the Fund will indirectly bear a proportionate share of those fees and
expenses.
•Sector
Risk.
At times the Fund may increase the relative emphasis of its investments in a
particular sector or group of industries. The prices of securities of issuers in
a particular sector may be more susceptible to fluctuations due to changes in
economic or business conditions, government regulations, availability of basic
resources or supplies, or other events that affect that industry or sector more
than securities of issuers in other industries and sectors. To the extent that
the Fund increases the relative emphasis of its investments in a particular
industry or sector, the value of Shares may fluctuate in response to events
affecting that industry or sector.
•Tracking
Error Risk.
As with all index funds, the performance of the Fund and its Index may differ
from each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by the Index. In addition,
the Fund may not be fully invested in the securities of the Index at all times
or may hold securities not included in the Index.
Performance
The following
performance information provides some indication of the risks of investing in
the Fund by showing changes in the Fund’s performance. The bar
chart shows the Fund’s performance for the calendar year ended December 30,
2020. The table illustrates how the Fund’s average annual returns for the 1-year
and since inception periods compare with those of the Index and a broad measure
of market performance. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is available on the
Fund’s website at www.sofi.com/invest/etfs/.
Calendar Year Ended December 31,
The Fund’s calendar
year-to-date return as of
March 31,
2021 was 9.65%.
During the period of time shown in the bar
chart, the Fund’s highest quarterly return
was 27.47% for the quarter ended June 30, 2020 and the
lowest quarterly return was
-28.94% for the quarter ended March 31,
2020.
Average
Annual Total Returns
For
the Periods Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Year |
|
Since
Inception
(April 10,
2019) |
Return Before
Taxes |
17.67% |
|
14.28% |
Return After Taxes on
Distributions |
17.23% |
|
13.86% |
Return After Taxes on Distributions and
Sale of Fund Shares |
10.59% |
|
10.90% |
Solactive
SoFi US Next 500 Growth Index (reflects no deduction for
fees, expenses, or taxes) |
17.72% |
|
14.37% |
S&P
MidCap 400 Total Return Index
(reflects
no deduction for fees, expenses, or taxes) |
13.66% |
|
12.26% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. After-tax
returns shown are not relevant to investors who hold their Shares through
tax-deferred arrangements such as an individual retirement account (“IRA”) or
other tax-advantaged accounts.
Management
Investment
Adviser:
Toroso Investments, LLC (“Toroso” or the “Adviser”) serves
as investment adviser to the Fund.
Portfolio
Manager: Charles
A. Ragauss, CFA, Portfolio Manager for the Adviser, is responsible for the
day-today management of the Fund and has
been the Fund’s portfolio manager since its inception in 2019.
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities (the “Deposit Securities”) and/or a designated amount of U.S.
cash.
Shares
are listed on a national securities exchange, such as the Exchange, and
individual Shares may only be bought and sold in the secondary market through
brokers at market prices, rather than NAV. Because Shares trade at market prices
rather than NAV, Shares may trade at a price greater than NAV (premium) or less
than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. This difference in bid and ask
prices is often referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.sofi.com/invest/etfs/.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless an investment is in an IRA
or other tax-advantaged account. Distributions on investments made through
tax-deferred arrangements may be taxed later upon withdrawal of assets from
those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training, or other initiatives
related to the sale or promotion of Shares. These payments may create a conflict
of interest by influencing the Intermediary and your salesperson to recommend
the Fund over another investment. Any such arrangements do not result in
increased Fund expenses. Ask your salesperson or visit the Intermediary’s
website for more information.
SoFi Social 50 ETF – FUND
SUMMARY
Investment Objective
The SoFi Social 50 ETF (the
“Fund”) seeks to track the performance, before fees and expenses, of the SoFi
Social 50 Index (the “Index”).
Fees and Expenses of the
Fund
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares of the Fund
(“Shares”). You may pay other fees, such as brokerage commissions and other fees
to financial intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
|
Management
Fees |
0.29 |
% |
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
Other
Expenses |
0.00 |
% |
Total
Annual Fund Operating Expenses |
0.29 |
% |
|
|
Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem 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. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
3
Years |
5
Years |
10
Years |
$30 |
$93 |
$163 |
$368 |
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 total annual fund operating expenses or
in the expense example above, affect the Fund’s performance. For the fiscal year
ended February 28, 2021, the Fund’s portfolio turnover rate was 414% of the average value of its
portfolio.
Principal Investment
Strategies
The
Fund uses a “passive management” (or indexing) approach to track the
performance, before fees and expenses, of the Index. The Index follows a
rules-based methodology (described generally below) that tracks the performance
of a portfolio of the 50 most widely held U.S.-listed equity securities in
self-directed brokerage accounts (the “SoFi Accounts”) of SoFi Securities, LLC,
an affiliate of Social Finance, Inc. (“SoFi”), as determined using the
rules-based methodology. The Index is owned and administered by Solactive AG
(the “Index Provider”), which engaged SoFi to develop the rules set and related
methodology used to determine the securities to be included in the Index. SoFi
is not involved in the ongoing maintenance of the Index or any discretionary
decisions relating to its application, and does not act in the capacity of an
index provider. SoFi has licensed certain of its trademarks to the Index
Provider for use in connection with the Index.
SoFi
Social 50 Index
The
Index is designed to reflect the 50 most widely held U.S.-listed equity
securities in the SoFi Accounts as weighted by aggregate holdings within the
SoFi Accounts. Securities eligible for inclusion in the Index must: (a) be
U.S.-listed equity securities held in SoFi Accounts, and (b) have an average
daily trading volume of at least $10,000,000 during the preceding one-month and
six-month periods (the “Eligible Universe”). The Index may include common stocks
and equity interests in real estate investment trusts (“REITs”). ETFs and other
investment companies are not eligible for the Index. Securities in the Eligible
Universe are sorted based on (1) the number of SoFi Accounts that hold a
particular security and (2) the total market value of the security held in the
SoFi Accounts (the “Weighted Average Value”). Each security in the Eligible
Universe is then ranked from highest to lowest based on its Weighted Average
Value (e.g., the security with the highest Weighted Average Value is assigned
rank 1). Subject to a “buffer rule” aimed at limiting Index turnover, securities
ranked within the top 50 are included in the Index.
Each
security in the Index is then weighted based on its Weighted Average Value in
relation to that of the other Index components and is subject to certain
individual security weight and sector concentration caps. For example, the
weight of each individual Index component is capped at 10%, and securities
representing investments in any particular industry sector are capped at 50%.
The Index is rebalanced and reconstituted monthly.
As
of May 31, 2021, the SoFi Accounts consisted of over 300,000 separate
self-directed brokerage accounts.
The
Fund’s Investment Strategy
The
Fund attempts to invest all, or substantially all, of its assets in the
component securities that make up the Index. Under normal circumstances, at
least 80% of the Fund’s total assets (exclusive of any collateral held from
securities lending) will be invested in the component securities of the Index.
The Fund’s investment adviser expects that, over time, the correlation between
the Fund’s performance and that of the Index, before fees and expenses, will be
95% or better.
The
Fund will generally use a “replication” strategy to achieve its investment
objective, meaning it generally will invest in all of the component securities
of the Index. However, the Fund may use a “representative sampling” strategy,
meaning it may invest in a sample of the securities in the Index whose risk,
return and other characteristics closely resemble the risk, return and other
characteristics of the Index as a whole, when the Fund’s investment adviser
believes it is in the best interests of the Fund (e.g., when replicating the
Index involves practical difficulties or substantial costs, an Index constituent
becomes temporarily illiquid, unavailable, or less liquid, or as a result of
legal restrictions or limitations that apply to the Fund but not to the Index).
The
Fund generally may invest up to 20% of its total assets (exclusive of any
collateral held from securities lending) in securities or other investments not
included in the Index, but which the Fund’s investment adviser believes will
help the Fund track the Index. For example, the Fund may invest in securities
that are not components of the Index to reflect various corporate actions and
other changes to the Index (such as reconstitutions, additions, and deletions).
To the extent the Index concentrates
(i.e., holds more than 25% of its total assets in the securities of a particular
industry or group of related industries), the Fund will concentrate its
investments to approximately the same extent as the Index.
The Fund may actively and frequently trade
all or a significant portion of the securities in its
portfolio.
Principal Investment
Risks
The
principal risks of investing in the Fund are summarized below. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return, and/or ability to meet its
objective. For more information about the risks of investing in the Fund, see
the section in the Fund’s Prospectus titled “Additional Information About the
Funds—Principal Risks of Investing in Each Fund.”
The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears.
•Cybersecurity
Risk.
With the increased use of technologies such as the Internet to conduct business,
the Fund is susceptible to operational, information security, and related risks.
Cyber incidents affecting the Fund or its service providers may cause
disruptions and impact business operations, potentially resulting in financial
losses, interference with the Fund’s ability to calculate its NAV, impediments
to trading, the inability of shareholders to transact business, violations of
applicable privacy and other laws, regulatory fines, penalties, reputational
damage, reimbursement or other compensation costs, or additional compliance
costs.
•Data
Risk. The
composition of the Index is heavily dependent on information and data supplied
by third parties. When such data prove to be incorrect or incomplete, any
decisions made in reliance thereon may lead to the inclusion or exclusion of
securities from the Index universe that would have been excluded or included had
the data been correct and complete. If the composition of the Index reflects
such errors, the Fund’s portfolio can be expected to also reflect the
errors.
•Equity
Market Risk. The
equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, or sectors in which the Fund invests. Common
stocks, such as those held by the Fund, are generally exposed to greater risk
than other types of securities, such as preferred stock and debt obligations,
because common stockholders generally have inferior rights to receive payment
from issuers.
•ETF
Risk.
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that are authorized to
purchase and redeem Shares directly from the Fund (known as “Authorized
Participants” or “APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly
face delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services; or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
◦Costs
of Buying or Selling Shares. Due
to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small
investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading.
Although Shares are listed on a national securities exchange, such as NYSE Arca,
Inc. (the “Exchange”), and may be traded on U.S. exchanges other than the
Exchange, there can be no assurance that Shares will trade with any volume, or
at all, on any stock exchange. In stressed market conditions, the liquidity of
Shares may begin to mirror the liquidity of the Fund’s underlying portfolio
holdings, which can be significantly less liquid than Shares.
•General
Market Risk.
Economies and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in the general financial markets, a particular financial market, or
other asset classes, due to a number of factors, including inflation (or
expectations for inflation), interest rates, global demand for particular
products or resources, natural disasters or events, pandemic diseases,
terrorism, regulatory events, and government controls.
•High
Portfolio Turnover Risk.
A high portfolio turnover rate increases transaction costs, which may increase
the Fund’s expenses. Frequent trading may also cause adverse tax consequences
for investors in the Fund due to an increase in short-term capital
gains.
•Limited
Operating History Risk. The
Fund has a limited operating history. As a result, prospective investors have a
limited track record or history on which to base their investment
decision.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing. The
securities of large-capitalization companies may be relatively mature compared
to smaller companies and therefore subject to slower growth during times of
economic expansion. Large-capitalization companies may also be unable to respond
quickly to new competitive challenges, such as changes in technology and
consumer tastes.
◦Mid-Capitalization
Investing. The
securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large-capitalization stocks or the stock market
as a whole.
•Passive
Investment Risk. The
Fund invests in the securities included in, or representative of, its Index
regardless of their investment merit. The Fund does not attempt to outperform
its Index or take defensive positions in declining markets. As a result, the
Fund’s performance may be adversely affected by a general decline in the market
segments relating to its Index.
•Recent
Market Events Risk.
U.S. and international markets have experienced significant periods of
volatility in recent years and months due to a number of economic, political and
global macro factors including the impact of the novel coronavirus (COVID-19) as
a global pandemic, which has resulted in public health issues, growth concerns
in the U.S. and overseas, layoffs, rising unemployment claims, changed travel
and social behaviors, and reduced consumer spending. The effects of COVID-19 may
lead to a substantial economic downturn or recession in the U.S. and global
economies, the recovery from which is uncertain and may last for an extended
period of time. These developments as well as other events could result in
further market volatility and negatively affect financial asset prices, the
liquidity of certain securities and the normal operations of securities
exchanges and other markets.
•REIT
Risk.
Through its investments in REITs, the Fund is subject to the risks of investing
in the real estate market, including decreases in property revenues, increases
in interest rates, increases in property taxes and operating expenses, legal and
regulatory changes, a lack of credit or capital, defaults by borrowers or
tenants, environmental problems and natural disasters.
REITs
are subject to additional risks, including those related to adverse governmental
actions; declines in property value and the real estate market; the potential
failure to qualify for tax-free pass through of income; and exemption from
registration as an investment company. REITs are dependent upon specialized
management skills and may invest in relatively few
properties,
a small geographic area, or a small number of property types. As a result,
investments in REITs may be volatile. To the extent the Fund invests in REITs
concentrated in specific geographic areas or property types, the Fund may be
subject to a greater loss as a result of adverse developments affecting such
area or property types. REITs are pooled investment vehicles with their own fees
and expenses and the Fund will indirectly bear a proportionate share of those
fees and expenses.
•Sector
Risk.
At times the Fund may increase the relative emphasis of its investments in a
particular sector or group of industries. The prices of securities of issuers in
a particular sector may be more susceptible to fluctuations due to changes in
economic or business conditions, government regulations, availability of basic
resources or supplies, or other events that affect that industry or sector more
than securities of issuers in other industries and sectors. To the extent that
the Fund increases the relative emphasis of its investments in a particular
industry or sector, the value of Shares may fluctuate in response to events
affecting that industry or sector.
◦Communication
Services Sector Risk.
The Fund may invest in companies in the communication services sector, and
therefore the performance of the Fund could be negatively impacted by events
affecting this sector. Communication services companies are susceptible to the
risk of potential obsolescence of products and services due to technological
advancements and innovation competition among companies. Demand for product,
shifting consumer demographics and shifting consumer preferences can drastically
affect a communication services company's profitability. Companies in the
communication services sector may be particular targets of cyber-security losses
and potential theft of proprietary or consumer information or disruptions in
service, which could have a material adverse effect on their businesses.
Companies in the communication services sector may also be affected by other
competitive pressures, such as pricing competition, as well as research and
development costs, substantial capital requirements and government regulation.
◦Consumer
Staples Sector Risk.
The Fund may invest in companies in the consumer staples sector, and therefore
the performance of the Fund could be negatively impacted by events affecting
this sector. Companies in the consumer staples sector, including those in the
food and beverage industries, may be affected by general economic conditions,
commodity production and pricing, consumer confidence and spending, consumer
preferences, interest rates, product cycles, marketing campaigns, competition,
and government regulations.
•Tracking
Error Risk.
As with all index funds, the performance of the Fund and its Index may differ
from each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by the Index. In addition,
the Fund may not be fully invested in the securities of the Index at all times
or may hold securities not included in the Index.
•User
Bias Risk.
The securities that comprise the Index are selected by retail investors holding
SoFi Accounts, who may not be professional investors, may have no financial
expertise, and may not do any research on the companies in which they invest
prior to investing. In some cases, investment decisions made may be influenced
by non-quantitative factors, including, without limitation, cognitive and
emotional biases, resulting in the inclusion of certain securities in the Index
which may underperform the market generally and result in lower returns for the
Fund.
Performance
The following
performance information provides some indication of the risks of investing in
the Fund by showing changes in the Fund’s performance. The bar
chart shows the Fund’s performance for the calendar year ended December 30,
2020. The table illustrates how the Fund’s average annual returns for the 1-year
and since inception periods compare with those of the Index and a broad measure
of market performance. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. On
June 30, 2020, the Fund’s investment objective and principal investment
strategies were substantially revised; therefore, the performance and average
annual total returns for periods prior to that date were achieved under the
Fund’s prior investment objective and principal investment strategies and would
have differed if the Fund’s current investment objective and principal
investment strategies had been in effect during those periods. Updated
performance information is available on the Fund’s website at www.sofi.com/invest/etfs/.
Calendar Year Ended December 31,
The Fund’s calendar
year-to-date return as of
March 31,
2021 was 7.86%.
During the period of time shown in the bar
chart, the Fund’s highest quarterly return
was 26.70% for the quarter ended June 30 ,2020 and the
lowest quarterly return was
-28.13% for the quarter ended March 31,
2020.
Average
Annual Total Returns
For
the Periods Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Year |
|
Since
Inception
(May 7,
2019) |
Return Before
Taxes |
33.51% |
|
22.88% |
Return After Taxes on
Distributions |
33.35% |
|
22.66% |
Return After Taxes on Distributions and
Sale of Fund Shares |
19.90% |
|
17.65% |
SoFi
Social 50 Index (reflects no deduction for
fees, expenses, or taxes) |
33.52% |
|
23.06% |
S&P
500 Total Return Index
(reflects
no deduction for fees, expenses, or taxes) |
18.40% |
|
19.62% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. After-tax
returns shown are not relevant to investors who hold their Shares through
tax-deferred arrangements such as an individual retirement account (“IRA”) or
other tax-advantaged accounts.
Management
Investment
Adviser:
Toroso Investments, LLC (“Toroso” or the “Adviser”) serves
as investment adviser to the Fund.
Portfolio
Manager: Charles
A. Ragauss, CFA, Portfolio Manager for the Adviser, is responsible for the
day-to-day management of the Fund and has
been the Fund’s portfolio manager since its inception in 2019.
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities (the “Deposit Securities”) and/or a designated amount of U.S.
cash.
Shares
are listed on a national securities exchange, such as the Exchange, and
individual Shares may only be bought and sold in the secondary market through
brokers at market prices, rather than NAV. Because Shares trade at market prices
rather than NAV, Shares may trade at a price greater than NAV (premium) or less
than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. This difference in bid and ask
prices is often referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.sofi.com/invest/etfs/.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless an investment is in an IRA
or other tax-advantaged account. Distributions on investments made through
tax-deferred arrangements may be taxed later upon withdrawal of assets from
those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training, or other initiatives
related to the sale or promotion of Shares. These payments may create a conflict
of interest by influencing the Intermediary and your salesperson to recommend
the Fund over another investment. Any such arrangements do not result in
increased Fund expenses. Ask your salesperson or visit the Intermediary’s
website for more information.
SoFi Gig Economy ETF – FUND
SUMMARY
Investment Objective
The SoFi Gig Economy ETF (the
“Fund”) seeks long-term capital appreciation.
Fees and Expenses of the
Fund
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares of the Fund
(“Shares”). You may pay other fees, such as brokerage commissions and other fees
to financial intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
|
Management
Fees |
0.59 |
% |
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
Other
Expenses |
0.00 |
% |
Total
Annual Fund Operating Expenses |
0.59 |
% |
|
|
Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem 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. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
3
Years |
5
Years |
10
Years |
$60 |
$189 |
$329 |
$738 |
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 total annual fund operating expenses or
in the expense example above, affect the Fund’s performance. For the fiscal year
ended February 28, 2021, the Fund’s portfolio turnover rate was 68% of the average value of its
portfolio.
Principal Investment
Strategies
The
Fund is an actively-managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective primarily by investing in a portfolio of companies
listed globally that Toroso Investments, LLC, the Fund’s investment adviser (the
“Adviser”), considers part of the “gig economy”. The “gig economy” refers to the
group of companies that have embraced, that support, or that otherwise benefit
from a workforce where individual employees or independent contractors are
empowered to create their own freelance business by leveraging recent
developments in technology platforms that enable individuals to offer their
services directly to retail and commercial customers. Examples of gig economy
businesses include selling or reselling products through auction platforms or
web-based stores and offering delivery services through an app-based
platform.
The
Adviser considers the gig economy to include five categories of companies, and
constructs the Fund’s portfolio based on the following weights:
|
|
|
|
|
|
30%
to 60% |
Companies
that directly facilitate and participate in revenue generation from gig
economy businesses (e.g., app-based platforms, auction sites, web-based
stores, and other commission-based platforms) |
20%
to 40% |
Companies
that enable or support gig economy businesses in marketing and sales
functions (e.g., social media platforms, messaging platforms) |
5%
to 20% |
Companies
that facilitate financial transactions for gig economy businesses through
apps or web-based platforms |
5%
to 15% |
Companies
that support the ability of individuals to operate a gig economy business
without participating in a commission or revenue-based model (e.g.,
companies providing health care, technology, or other back office
services) |
0%
to 10% |
Other
companies that are expected to benefit from the growth of gig economy
businesses and associated lifestyle changes for individuals engaged in gig
economy businesses |
The
Adviser purchases and sells securities based on changes in the Adviser’s
assessment of which companies are likely to benefit the most from their role in
the gig economy. The Fund may invest in equity securities of large-, mid-, and
small-capitalization companies listed on a U.S., non-U.S. developed, or emerging
markets exchange. The Fund is considered to be non-diversified, which means that
it may invest more of its assets in the securities of a single issuer or a
smaller number of issuers than if it were a diversified fund. The Fund may
actively and frequently trade all or a significant portion of the securities in
its portfolio.
The
Fund may invest significantly in companies in the communication services
sector.
Principal Investment
Risks
The
principal risks of investing in the Fund are summarized below. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return, and/or ability to meet its
objective. For more information about the risks of investing in the Fund, see
the section in the Fund’s Prospectus titled “Additional Information About the
Funds—Principal Risks of Investing in Each Fund.”
The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears.
•Currency
Exchange Rate Risk. The
Fund’s assets may include exposure to investments denominated in non-U.S.
currencies or in securities or other assets that provide exposure to such
currencies. Changes in currency exchange rates and the relative value of
non-U.S. currencies will affect the value of the Fund’s investments and the
value of your Fund shares. Currency exchange rates can be very volatile and can
change quickly and unpredictably. As a result, the value of an investment in the
Fund may change quickly and without warning and you may lose money.
•Cybersecurity
Risk.
With the increased use of technologies such as the Internet to conduct business,
the Fund is susceptible to operational, information security, and related risks.
Cyber incidents affecting the Fund or its service providers may cause
disruptions and impact business operations, potentially resulting in financial
losses, interference with the Fund’s ability to calculate its NAV, impediments
to trading, the inability of shareholders to transact business, violations of
applicable privacy and other laws, regulatory fines, penalties, reputational
damage, reimbursement or other compensation costs, or additional compliance
costs.
•Emerging
Markets Risk. The
Fund may invest in securities issued by companies domiciled or headquartered in
emerging market nations. Investments in securities traded in developing or
emerging markets, or that provide exposure to such securities or markets, can
involve additional risks relating to political, economic, currency, or
regulatory conditions not associated with investments in U.S. securities and
investments in more developed international markets. Such conditions may impact
the ability of the Fund to buy, sell, or otherwise transfer securities,
adversely affect the trading market and price for Shares and cause the Fund to
decline in value.
•Equity
Market Risk. The
equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, or sectors in which the Fund invests. Common
stocks, such as those held by the Fund, are generally exposed to greater risk
than other types of securities, such as preferred stock and debt obligations,
because common stockholders generally have inferior rights to receive payment
from issuers.
•ETF
Risk.
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that are authorized to
purchase and redeem Shares directly from the Fund (known as “Authorized
Participants” or “APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become unable to
process creation and/or redemption orders and no other APs step forward to
perform these services; or (ii) market makers and/or liquidity providers exit
the business or significantly reduce their business activities and no other
entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares. Due
to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small
investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading.
Although Shares are listed on a national securities exchange, such as The Nasdaq
Stock Market, LLC (the “Exchange”), and may be traded on U.S. exchanges other
than the Exchange, there can be no assurance that Shares will trade with any
volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than
Shares.
•Foreign
Securities Risk. Investments
in securities or other instruments of non-U.S. issuers involve certain risks not
involved in domestic investments and may experience more rapid and extreme
changes in value than investments in securities of U.S. companies. Financial
markets in foreign countries often are not as developed, efficient, or liquid as
financial markets in the United States, and therefore, the prices of non-U.S.
securities and instruments can be more volatile. In addition, the Fund will be
subject to risks associated with adverse political and economic developments in
foreign countries, which may include the imposition of economic sanctions.
Generally, there is less readily available and reliable information about
non-U.S. issuers due to less rigorous disclosure or accounting standards and
regulatory practices.
•General
Market Risk.
Economies and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in the general financial markets, a particular financial market, or
other asset classes, due to a number of factors, including inflation (or
expectations for inflation), interest rates, global demand for particular
products or resources, natural disasters or events, pandemic diseases,
terrorism, regulatory events, and government controls.
•High
Portfolio Turnover Risk.
A high portfolio turnover rate increases transaction costs, which may increase
the Fund’s expenses. Frequent trading may also cause adverse tax consequences
for investors in the Fund due to an increase in short-term capital
gains.
•Limited
Operating History Risk. The
Fund has a limited operating history. As a result, prospective investors have a
limited track record or history on which to base their investment
decision.
•Management
Risk. The
Fund is actively-managed and may not meet its investment objective based on the
Adviser’s success or failure to implement investment strategies for the
Fund.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing. The
securities of large-capitalization companies may be relatively mature compared
to smaller companies and therefore subject to slower growth during times of
economic expansion. Large-capitalization companies may also be unable to respond
quickly to new competitive challenges, such as changes in technology and
consumer tastes.
◦Mid-Capitalization
Investing. The
securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large-capitalization stocks or the stock market
as a whole.
◦Small-Capitalization
Investing.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. There is typically less publicly available information
concerning smaller-capitalization companies than for larger, more established
companies.
•Non-Diversification
Risk.
The Fund is considered to be non-diversified,
which means that it may invest more of its assets in the securities of a single
issuer or a smaller number of issuers than if it were a diversified fund. As a
result, the Fund may be more exposed to the risks associated with and
developments affecting an individual issuer or a smaller number of issuers than
a fund that invests more widely. This may increase the Fund’s volatility and
cause the performance of a relatively smaller number of issuers to have a
greater impact on the Fund’s performance.
•Recent
Market Events Risk.
U.S. and international markets have experienced significant periods of
volatility in recent years and months due to a number of economic, political and
global macro factors including the impact of the novel coronavirus (COVID-19) as
a global pandemic, which has resulted in public health issues, growth concerns
in the U.S. and overseas, layoffs, rising unemployment claims, changed travel
and social behaviors, and reduced consumer spending. The effects of COVID-19 may
lead to a substantial economic downturn or recession in the U.S. and global
economies, the recovery from which is uncertain and may last for an extended
period of time. These developments as well as other events could result in
further market volatility and negatively affect financial asset prices, the
liquidity of certain securities and the normal operations of securities
exchanges and other markets.
•Sector
Risk.
At times the Fund may increase the relative emphasis of its investments in a
particular sector or group of industries. The prices of securities of issuers in
a particular sector may be more susceptible to fluctuations due to changes in
economic or business conditions, government regulations, availability of basic
resources or supplies, or other events that affect that industry or sector more
than securities of issuers in other industries and sectors. To the extent that
the Fund increases the relative emphasis of its investments in a particular
industry or sector, the value of Shares may fluctuate in response to events
affecting that industry or sector.
◦Communication
Services Sector Risk. The Fund may invest in companies in the
communication services sector, and therefore the performance of the Fund could
be negatively impacted by events affecting this sector. Communication services
companies are susceptible to the risk of potential obsolescence of products and
services due to technological advancements and innovation competition among
companies. Demand for product, shifting consumer demographics and shifting
consumer preferences can drastically affect a communication services company's
profitability. Companies in the communication services sector may be particular
targets of cyber-security losses and potential theft of proprietary or consumer
information or disruptions in service, which could have a material adverse
effect on their businesses. Companies in the communication services sector may
also be affected by other competitive pressures, such as pricing competition, as
well as research and development costs, substantial capital requirements and
government regulation.
Performance
The following
performance information provides some indication of the risks of investing in
the Fund by showing changes in the Fund’s performance. The bar
chart shows the Fund’s performance for the calendar year ended December 30,
2020. The table illustrates how the Fund’s average annual returns for the 1-year
and since inception periods compare with those of a broad measure of market
performance. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is available on the
Fund’s website at www.sofi.com/invest/etfs/.
Calendar Year Ended December 31,
The Fund’s calendar
year-to-date return as of
March 31,
2021 was 1.80%.
During the period of time shown in the bar
chart, the Fund’s highest quarterly return
was 49.85% for the quarter ended June 30, 2020 and the
lowest quarterly return was
-14.42% for the quarter ended March 31,
2020.
Average
Annual Total Returns
For
the Periods Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Year |
|
Since
Inception
(May 7,
2019) |
Return Before
Taxes |
97.81% |
|
44.55% |
Return After Taxes on
Distributions |
97.58% |
|
44.45% |
Return After Taxes on Distributions and
Sale of Fund Shares |
57.94% |
|
34.81% |
S&P
500 Total Return Index (reflects no deduction for
fees, expenses, or taxes) |
18.40% |
|
19.62% |
Nasdaq
100 Total Return Index
(reflects
no deduction for fees, expenses, or taxes) |
48.88% |
|
38.58% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. After-tax
returns shown are not relevant to investors who hold their Shares through
tax-deferred arrangements such as an individual retirement account (“IRA”) or
other tax-advantaged accounts.
Management
Investment
Adviser:
Toroso Investments, LLC serves
as investment adviser to the Fund.
Portfolio
Managers: Michael
Venuto, Chief Investment Officer for the Adviser, is responsible for the
day-to-day management of the Fund and has
been a portfolio manager of the Fund since its inception in 2019.
Charles
A. Ragauss, CFA, Portfolio Manager for the Adviser, is responsible for the
day-to-day management of the Fund and has
been the Fund’s portfolio manager since its inception in 2019.
David
Dziekanski, Portfolio Manager for the Adviser, is responsible for the day-to-day
management of the Fund and has been the Fund’s portfolio manager since September
2020.
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities (the “Deposit Securities”) and/or a designated amount of U.S.
cash.
Shares
are listed on a national securities exchange, such as the Exchange, and
individual Shares may only be bought and sold in the secondary market through
brokers at market prices, rather than NAV. Because Shares trade at market prices
rather than NAV, Shares may trade at a price greater than NAV (premium) or less
than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. This difference in bid and ask
prices is often referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.sofi.com/invest/etfs/.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless an investment is in an IRA
or other tax-advantaged account. Distributions on investments made through
tax-deferred arrangements may be taxed later upon withdrawal of assets from
those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training, or other initiatives
related to the sale or promotion of Shares. These payments may create a conflict
of interest by influencing the Intermediary and your salesperson to recommend
the Fund over another investment. Any such arrangements do not result in
increased Fund expenses. Ask your salesperson or visit the Intermediary’s
website for more information.
Investment Objective
The SoFi Weekly Income ETF
(the “Fund”) seeks to provide current income.
Fees and Expenses of the
Fund
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares of the Fund
(“Shares”). You may pay other fees, such as brokerage commissions and other fees
to financial intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
|
|
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
|
Management
Fees |
0.59 |
% |
Distribution
and/or Service (12b-1) Fees |
0.00 |
% |
Other
Expenses (1) |
0.00 |
% |
Total
Annual Fund Operating Expenses |
0.59 |
% |
|
|
(1)
Estimated for the current
fiscal year.
Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem 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. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
3
Years |
5
Years |
10
Years |
$60 |
$189 |
$329 |
$738 |
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 total annual fund operating expenses or
in the expense example above, affect the Fund’s performance. For the fiscal
period from commencement of operations (October 1, 2020) to February 28, 2021,
the Fund’s portfolio turnover rate was 8% of the average value of its
portfolio.
Principal Investment
Strategies
The
Fund is an actively-managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective, under normal circumstances, by investing in
U.S.-dollar denominated investment grade and non-investment grade (also known as
“high-yield” or “junk”) fixed income securities and instruments and expects to
distribute income from its investments to shareholders weekly. The Fund
anticipates making its weekly income distributions each Friday (or, in the event
the NYSE is closed for trading on Friday, on a day earlier in the week). While
obligations of any maturity may be purchased, under normal circumstances, the
Fund will generally have a short to intermediate overall effective duration
(i.e., typically less than three years). Effective duration is a measure of the
Fund’s price sensitivity to changes in yields or interest rates and a fund with
a higher effective duration will, under normal circumstances, have a greater
sensitivity to interest rates. For example, if a portfolio has a duration of one
year, and interest rates increase (fall) by 2%, the portfolio would decline
(increase) in value by approximately 2%. However, duration may not accurately
reflect the true interest rate sensitivity of instruments held by the Fund and,
therefore, the Fund’s exposure to changes in interest rates.
Investment
decisions for the Fund are made by Income Research + Management (“IR+M” or the
“Sub-Adviser”), the Fund’s sub-adviser, primarily through a fundamental analysis
of available debt instruments and their issuers. IR+M applies a bottom-up
investing approach focusing on the analysis of individual companies rather than
on the industry or sector in which a company operates or on the economy as a
whole.
IR+M’s
bottom-up process focuses on the following attributes of investment
opportunities:
|
|
|
|
|
|
Credit |
IR+M
evaluates the strength of a company’s management, its financial
statements, and its competitive position in its industry or peer
group. |
Structure |
IR+M
focuses on the shape of the curve reflecting the relationship of a bond’s
price to interest rates (also known as “convexity”) with a particular
interest in the extent to which an instrument may be callable (i.e., the
issuer can redeem the bond prior to its maturity date) or have other such
options attached to it that may affect the bond’s convexity. This analysis
favors bonds with positive convexity (i.e., where the price would be
expected to increase as interest rates rise) and those with structures
that may add to the bond’s effective yield without increasing credit
risk. |
Price |
IR+M
seeks bonds that it believes are under- or mis-priced and will seek to
avoid bonds it determines are overpriced. |
The
Fund may invest in a variety of fixed income instruments with a fixed or
floating (variable) interest rate. The Fund may hold U.S government securities,
including Treasury securities, Treasury Inflation Protected Securities (“TIPS”),
and agency bonds. The Fund may also invest in corporate debt, commercial and
residential mortgage-backed securities (“CMBS” and “RMBS”, respectively)
(including collateralized mortgage obligations (“CMOs”), including interest only
and principal only instruments), asset-backed securities (“ABS”), municipal
securities, convertible securities, pass-through securities, and U.S. dollar
denominated securities issued or guaranteed by foreign governments, their
agencies, or instrumentalities, and floating rate securities (such as bank
loans). The Fund may also invest in non-investment grade bonds (including
distressed securities), non-investment grade bank loans, and bonds of emerging
market issuers. The Fund’s investment in mortgage-backed securities (“MBS”) may
include both agency and non-agency MBS. The portion of the Fund invested in
non-investment grade instruments may be up to 100% of the Fund’s total assets.
The
Fund may purchase or sell securities on a when-issued, delayed delivery, or
forward commitment basis, including the use of the “To Be Announced” (“TBA”)
market for MBS investments. The Fund may invest up to 15% of its net assets in
securities that are deemed to be illiquid, which may include private placements,
certain Rule 144A securities (which are subject to resale restrictions), and
securities of issuers that are bankrupt or in default.
The
Fund may actively and frequently trade the Fund’s all or a significant portion
of the securities in its portfolio.
The Fund is expected to generally have
significant exposure to companies in the financial services and industrials
sectors, although the Fund will not concentrate (i.e., investment more than 25%
of its total assets) in any particular industry. The Fund is considered to be
non-diversified, which means that it may invest more of its assets in the
securities of a single issuer or a smaller number of issuers than if it were a
diversified fund.
Principal Investment
Risks
The
principal risks of investing in the Fund are summarized below. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return, and/or ability to meet its
objective. For more information about the risks of investing in the Fund, see
the section in the Fund’s Prospectus titled “Additional Information About the
Funds—Principal Risks of Investing in Each Fund.”
The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears.
•ABS
Risk. The
value of ABS may be significantly affected by changes in interest rates, the
market’s perception of issuers, and the creditworthiness of the parties
involved. These securities may have a structure that makes their reaction to
interest rate changes and other factors difficult to predict, making their value
highly volatile.
•Agency
Debt Risk. Bonds
or debentures issued by U.S. government agencies, government-sponsored entities,
or government corporations, including, among others, Federal National Mortgage
Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie
Mac”), are generally backed only by the general creditworthiness and reputation
of the U.S. government agency, government-sponsored entity, or government
corporation issuing the bond or debenture and are not guaranteed by the U.S.
Department of the Treasury (“U.S. Treasury”) or backed by the full faith and
credit of the U.S. government. As a result, there is uncertainty as to the
current status of many obligations of Fannie Mae, Freddie Mac and other agencies
that are placed under conservatorship of the federal government. By contrast,
Government National Mortgage Association securities are generally backed by the
full faith and credit of the U.S. government.
•Bank
Loans Risk. Bank
loans often involve borrowers whose financial conditions are troubled or
uncertain and companies that are highly leveraged. The market for bank loans may
not be highly liquid and the Fund may have difficulty selling bank loans. These
investments expose the Fund to the credit risk of both the financial institution
and the underlying borrower. Bank loans generally are subject to legal or
contractual restrictions on resale. In addition, bank loans may have trade
settlement periods extending beyond seven days, which means that, in certain
cases, it could take the Fund a significant amount of time to get its money
after selling an investment. Bank loans may be structured such that they are not
“securities” under federal securities laws and therefore not subject to federal
securities laws protections against fraud and misrepresentation. As such, there
can be no assurances that fraud or misrepresentation will not occur with respect
to bank loans in which the Fund invests.
•Call
Risk.
During
periods of falling interest rates, an issuer of a callable bond held by the Fund
may “call” or repay the security prior to its stated maturity, and the Fund may
have to reinvest the proceeds at lower interest rates, resulting in a decline in
the Fund’s income.
•Convertible
Securities Risk. Convertible
securities rank senior to the issuer's common stock, but may be subordinate to
senior debt obligations. In part, the total return for a convertible security
may depend upon the performance of the underlying stock into which it can be
converted. Synthetic convertibles may respond differently to market fluctuations
than traditional convertible securities. They are also subject to counterparty
risk.
•CMBS
Risk. The
Fund’s investments in CMBS are subject to the risk that if there is a shortfall
in loan payments from borrowers or if an underlying property is sold via
foreclosure and does not generate sufficient proceeds to meet scheduled payments
on all bond classes, investments in the most subordinate outstanding bond class
will incur a principal loss first, with any further losses impacting more senior
classes in reverse order of payment priority. CMBS are historically more
volatile than RMBS. Such securities are subject to credit, interest rate,
prepayment, and extension risks.
•CMOs
Risk.
CMOs represent interests in a short-term, intermediate-term or long-term portion
of a mortgage pool. Each portion of the pool receives monthly interest payments,
but the principal repayments pass through to the short-term CMO first and to the
long-term CMO last. Investments in CMOs are subject to the same risks as direct
investments in the underlying mortgage-backed securities including credit,
interest rate, prepayment, and extension risks. In the event of a bankruptcy or
other default of a broker who issued the CMO held by the Fund, the Fund could
experience both delays in liquidating its position and losses. In addition,
classes of CMOs may also include interest only (“IOs”) and principal only
(“POs”). IOs and POs are stripped mortgage-backed securities representing
interests in a pool of mortgages the cash flow from which has been separated
into interest and principal components. IOs (interest only securities) receive
the interest portion of the cash flow while POs (principal only securities)
receive the principal portion. IOs and POs can be extremely volatile in response
to changes in interest rates. As interest rates rise and fall, the value of IOs
tends to move in the same direction as interest rates. When payments on
mortgages underlying a PO are slow, the life of the PO is lengthened and the
yield to maturity is reduced.
•Credit
Risk. Issuers
and/or counterparties may fail to make payments when due or default completely.
If an issuer’s or counterparty’s financial condition worsens, the credit quality
of the issuer or counterparty may deteriorate, making it difficult for the Fund
to sell such investments. Changes in an issuer’s credit rating or the market’s
perception of an issuer’s creditworthiness may also affect the value of an
investment in that issuer.
•Cybersecurity
Risk.
With the increased use of technologies such as the Internet to conduct business,
the Fund is susceptible to operational, information security, and related risks.
Cyber incidents affecting the Fund or its service providers may cause
disruptions and impact business operations, potentially resulting in financial
losses, interference with the Fund’s ability to calculate its NAV, impediments
to trading, the inability of shareholders to transact business, violations of
applicable privacy and other laws, regulatory fines, penalties, reputational
damage, reimbursement or other compensation costs, or additional compliance
costs.
•Emerging
Markets Risk. Investments
in securities traded in developing or emerging markets, or that provide exposure
to such securities or markets, can involve additional risks relating to
political, economic, currency, or regulatory conditions not associated with
investments in U.S. securities and investments in more developed international
markets. Such conditions may impact the ability of the Fund to buy, sell, or
otherwise transfer securities, adversely affect the trading market and price for
Shares and cause the Fund to decline in value.
•ETF
Risk.
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration Risk.
The
Fund has a limited number of financial institutions that are authorized to
purchase and redeem Shares directly from the Fund (known as “Authorized
Participants” or “APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become unable to
process creation and/or redemption orders and no other APs step forward to
perform these services; or (ii) market makers and/or liquidity providers exit
the business or significantly reduce their business activities and no other
entities step forward to perform their functions.
◦Cash
Redemption Risk. The
Fund’s investment strategy may require it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds. For example, the Fund
may not be able to redeem in-kind certain securities held by the Fund (e.g.,
derivative instruments and bonds that cannot be broken up beyond certain minimum
sizes needed for transfer and settlement). In such a case, the Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund to recognize a capital
gain that it might not have recognized if it had made a redemption in-kind. As a
result, the Fund may pay out higher annual capital gain distributions than if
the in-kind redemption process was used.
◦Costs
of Buying or Selling Shares. Due
to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small
investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant. Because
securities held by the Fund may trade on foreign exchanges that are closed when
the Fund’s primary listing exchange is open, the Fund is likely to experience
premiums and discounts greater than those of ETFs holding only domestic
securities.
◦Trading.
Although Shares are listed on a national securities exchange, such as NYSE Arca,
Inc. (the “Exchange”), and may be traded on U.S. exchanges other than the
Exchange, there can be no assurance that Shares will trade with any volume, or
at all, on any stock exchange. In stressed market conditions, the liquidity of
Shares may begin to mirror the liquidity of the Fund’s underlying portfolio
holdings, which can be significantly less liquid than Shares.
•Event
Risk. Corporate
issuers may undergo restructurings, such as mergers, leveraged buyouts,
takeovers, or similar events financed by increased debt. As a result of the
added debt, the credit quality and market value of a company’s bonds and/or
other debt securities may decline significantly.
•Extension
Risk.
When
interest rates rise, certain obligations will be repaid by the obligor more
slowly than anticipated, causing the value of these securities to
fall.
•Fixed
Income Risk.
The value of the Fund’s investments in fixed income securities will fluctuate
with changes in interest rates. Typically, a rise in interest rates causes a
decline in the value of fixed income securities owned indirectly by the Fund. On
the other hand, if rates fall, the value of the fixed income securities
generally increases. The Fund may be subject to a greater risk of rising
interest rates due to the current period of historically low rates and the
effect of potential government fiscal policy initiatives and resulting market
reaction to those initiatives. In general, the market price of fixed income
securities with longer maturities will increase or decrease more in response to
changes in interest rates than shorter-term securities.
•Floating
or Variable Rate Securities Risk. Securities
with floating or variable interest rates are generally 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
comparable market interest rates. Although floating or variable rate securities
are generally less sensitive to interest rate risk than fixed rate securities,
they are subject to credit, liquidity and default risk and may be subject to
legal or contractual restrictions on resale, which could impair their
value.
•Foreign
Securities Risk. Investments
in securities or other instruments of non-U.S. issuers involve certain risks not
involved in domestic investments and may experience more rapid and extreme
changes in value than investments in securities of U.S. companies. Financial
markets in foreign countries often are not as developed, efficient, or liquid as
financial markets in the United States, and therefore, the prices of non-U.S.
securities and instruments can be more volatile. In addition, the Fund will be
subject to risks associated with adverse political and economic developments in
foreign countries, which may include the imposition of economic sanctions.
Generally, there is less readily available and reliable information about
non-U.S. issuers due to less rigorous disclosure or accounting standards and
regulatory practices.
•General
Market Risk.
Economies and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in the general financial markets, a particular financial market, or
other asset classes, due to a number of factors, including inflation (or
expectations for inflation), interest rates, global demand for particular
products or resources, natural disasters or events, pandemic diseases,
terrorism, regulatory events, and government controls.
•High
Portfolio Turnover Risk.
A high portfolio turnover rate increases transaction costs, which may increase
the Fund’s expenses. Frequent trading may also cause adverse tax consequences
for investors in the Fund due to an increase in short-term capital
gains.
•High-Yield
Securities Risk. High-yield
securities (also known as “junk” bonds) carry a greater degree of risk and are
more volatile than investment grade securities and are considered speculative.
High-yield securities may be issued by companies that are restructuring, are
smaller and less creditworthy, or are more highly indebted than other companies.
This means that they may have more difficulty making scheduled payments of
principal and interest. Changes in the value of high-yield securities are
influenced more by changes in the financial and business position of the issuing
company than by changes in interest rates when compared to investment grade
securities. The Fund’s investments in high-yield securities expose it to a
substantial degree of credit risk.
•Illiquid
Securities Risk.
The Fund may, at times, hold illiquid securities, by virtue of the absence of a
readily available market for certain of its investments, or because of legal or
contractual restrictions on sales. The Fund could lose money if it is unable to
dispose of an investment at a time or price that is most beneficial to the
Fund.
•Interest
Rate Risk. The
Fund’s investments in bonds and other debt securities will change in value based
on changes in interest rates. If rates rise, the value of these investments
generally declines. Securities with greater interest rate sensitivity and longer
maturities generally are subject to greater fluctuations in value.
•LIBOR
Risk. Instruments
in which the Fund invests may pay interest at floating rates based on the London
Interbank Offered Rate (“LIBOR”) or may be subject to interest caps or floors
based on LIBOR. The Fund and issuers of instruments in which the Fund invests
may also obtain financing at floating rates based on LIBOR. Derivative
instruments utilized by the Fund and/or issuers of instruments in which the Fund
may invest may also reference LIBOR. In July 2017, the head of the United
Kingdom Financial Conduct Authority announced the desire to phase out the use of
LIBOR by December 31, 2021. There is currently no definitive information
regarding the future utilization of LIBOR or of any particular replacement rate.
Abandonment of or modifications to LIBOR may affect the value, liquidity or
return on certain Fund investments that reference LIBOR without including
fallback provisions and may result in costs incurred in connection with closing
out positions and entering into new trades. Any pricing adjustments to the
Fund’s investments resulting from a substitute reference rate may also adversely
affect the Fund’s performance and/or NAV. The effect of a phase out of
LIBOR on instruments in which the Fund may invest is currently unclear.
•Limited
Operating History Risk. The
Fund has a limited operating history. As a result, prospective investors have a
limited track record or history on which to base their investment
decision.
•Management
Risk. The
Fund is actively-managed and may not meet its investment objective based on
IR+M’s success or failure to implement investment strategies for the
Fund.
•MBS
Risk. MBS
securities are subject to credit, interest rate, prepayment, and extension
risks. These securities also are subject to risk of default on the underlying
mortgage or asset, particularly during periods of economic downturn. Small
movements in interest rates may quickly and significantly reduce the value of
certain mortgage back securities.
•Municipal
Securities Risk. Municipal
securities can be significantly affected by political or economic changes,
including changes made in the law after issuance of the securities, as well as
uncertainties in the municipal market related to taxation, legislative changes
or the rights of municipal security holders, including in connection with an
issuer insolvency. Municipal securities backed by current or anticipated
revenues from a specific project or specific assets can be negatively affected
by the inability to collect revenues from the project or the
assets.
•Non-Diversification
Risk. The Fund is considered to be non-diversified,
which means that it may invest more of its assets in the securities of a single
issuer or a smaller number of issuers than if it were a diversified fund. As a
result, the Fund may be more exposed to the risks associated with and
developments affecting an individual issuer or a smaller number of issuers than
a fund that invests more widely. This may increase the Fund’s volatility and
cause the performance of a relatively smaller number of issuers to have a
greater impact on the Fund’s performance.
•Prepayment
Risk. The
issuer of certain securities may repay principal in advance, especially when
yields fall. Changes in the rate at which prepayments occur can affect the
return on investment of these securities. When debt obligations are prepaid or
when securities are called, the Fund may have to reinvest in securities with a
lower yield. The Fund also may fail to recover additional amounts (i.e.,
premiums) paid for securities with higher coupons, resulting in an unexpected
capital loss.
•Privately
Placed Securities Risk.
Privately placed securities generally are less liquid than publicly traded
securities and the Fund may not always be able to sell such securities without
experiencing delays in finding buyers or reducing the sale price for such
securities. The disposition of some of the securities held by the Fund may be
restricted under federal securities laws. As a result, the Fund may not be able
to dispose of such investments at a time when, or at a price at which, it
desires to do so and may have to bear expenses of registering these securities,
if necessary. These securities may also be difficult to value.
•Rating
Agencies Risks. Ratings
are not an absolute standard of quality. Ratings are general indicators that
reflect only the view of the originating rating agencies from which an
explanation of the significance of such ratings may be obtained. There is no
assurance that a particular rating will continue for any given period of time or
that any such rating will not be revised downward or withdrawn entirely. Such
changes may negatively affect the liquidity or market price of the securities in
which the Fund invests. The ratings of securitized assets may not adequately
reflect the credit risk of those assets due to their structure.
•Recent
Market Events Risk.
U.S. and international markets have experienced significant periods of
volatility in recent years and months due to a number of economic, political and
global macro factors including the impact of the novel coronavirus (COVID-19) as
a global pandemic, which has resulted in public health issues, growth concerns
in the U.S. and overseas, layoffs, rising unemployment claims, changed travel
and social behaviors, and reduced consumer spending. The effects of COVID-19 may
lead to a substantial economic downturn or recession in the U.S. and global
economies, the recovery from which is uncertain and may last for an extended
period of time. These developments as well as other events could result in
further market volatility
and
negatively affect financial asset prices, the liquidity of certain securities
and the normal operations of securities exchanges and other
markets.
•RMBS
Risk. RMBS
are particularly susceptible to prepayment risks, as they generally do not
contain prepayment penalties and a reduction in interest rates will increase the
prepayments on the RMBS. Such securities are also subject to credit, interest
rate, and extension risks.
•Sector
Risk.
At times the Fund may increase the relative emphasis of its investments in a
particular sector or group of industries. The prices of securities of issuers in
a particular sector may be more susceptible to fluctuations due to changes in
economic or business conditions, government regulations, availability of basic
resources or supplies, or other events that affect that industry or sector more
than securities of issuers in other industries and sectors. To the extent that
the Fund increases the relative emphasis of its investments in a particular
industry or sector, the value of Shares may fluctuate in response to events
affecting that industry or sector.
◦Financial
Services Sector Risk.
The Fund may invest in companies in the financial services sector, and therefore
the performance of the Fund could be negatively impacted by events affecting
this sector. This sector can be significantly affected by changes in interest
rates, government regulation, the rate of defaults on corporate, consumer and
government debt and the availability and cost of capital, among other
factors. Insurance companies, in particular, may be significantly affected
by changes in interest rates, catastrophic events, price and market competition,
the imposition of premium rate caps, or other changes in government regulation
or tax law and/or rate regulation, which may have an adverse impact on their
profitability. This sector has experienced significant losses in the recent
past, and the impact of more stringent capital requirements and of recent 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.
◦Industrials
Sector Risk. The
Fund may invest in companies in the industrials sector, and therefore the
performance of the Fund could be negatively impacted by events affecting this
sector. The industrials sector may be affected by changes in the supply of and
demand for products and services, product obsolescence, claims for environmental
damage or product liability and general economic conditions, among other
factors.
•TBA
Securities and Rolls Risk. TBA
transactions are subject to increased credit risk and increased overall
investment exposure. TBA rolls involve the risk that the Fund’s counterparty
will be unable to deliver the MBS underlying the TBA roll at the fixed time. If
the buyer files for bankruptcy or becomes insolvent, the buyer or its
representative may ask for and receive an extension of time to decide whether to
enforce the Fund’s repurchase obligation. In addition, the Fund earns interest
by investing the transaction proceeds during the roll period. TBA roll
transactions may have the effect of creating leverage in the Fund’s
portfolio.
•TIPS
Risk.
Interest payments on TIPS are unpredictable and will fluctuate as the principal
and corresponding interest payments are adjusted for inflation. There can be no
assurance that the Consumer Price Index (“CPI”) will accurately measure the real
rate of inflation in the prices of goods and services. Any increases in the
principal amount of TIPS will be considered taxable ordinary income, even though
the Fund will not receive the principal until maturity. As a result, the Fund
may make income distributions to shareholders that exceed the cash it receives.
In addition, TIPS are subject to credit risk and interest rate risk.
•Uncertain
Tax Treatment. Below
investment grade instruments may present special tax issues for the Fund. U.S.
federal income tax rules are not entirely clear about issues such as when the
Fund may cease to accrue interest, original issue discount (“OID”) or market
discount, when and to what extent deductions may be taken for bad debts or
worthless instruments, how payments received on obligations in default should be
allocated between principal and income and whether exchanges of debt obligations
in a bankruptcy or workout context are taxable, which may make it difficult for
the Fund to satisfy the annual distribution requirements applicable to
RICs.
•U.S.
Government Obligations Risk. Obligations
of U.S. government agencies and authorities receive varying levels of support
and may not be backed by the full faith and credit of the U.S. government, which
could affect the Fund’s ability to recover should they default. No assurance can
be given that the U.S. government will provide financial support to its agencies
and authorities if it is not obligated by law to do so. Additionally, market
prices and yields of securities supported by the full faith and credit of the
U.S. government or other countries may decline or be negative for short or long
periods of time.
•Valuation
Risk. The
prices provided by the Fund’s pricing services or independent dealers or the
fair value determinations made by the Fund’s valuation committee may be
different from the prices used by other investment companies or from the prices
at which debt obligations are actually bought and sold. The prices of certain
debt obligations provided by pricing services may be subject to frequent and
significant change, and will vary depending on the information that is
available.
•When-Issued,
Delayed Delivery, and Forward Commitment Risks. The
purchase of securities on a when-issued, delayed delivery, or forward commitment
basis involves a risk of loss if the value of the security to be purchased
declines prior to the settlement date.
Performance
Performance information for the Fund is not
included because the Fund has not completed a full calendar year of operations
as of the date of this Prospectus. When such
information is included, this section will provide some indication of the risks
of investing in the Fund by showing changes in the Fund’s performance history
from year to year and showing how the Fund’s average annual total returns
compare with those of a broad measure of market performance.
Although past performance of the
Fund is no guarantee of how it will perform in the future, historical
performance may give you some indication of the risks of investing in the
Fund. Updated performance information is available on the Fund’s
website at www.sofi.com/invest/etfs/.
Management
Investment
Adviser
Toroso
Investments, LLC (“Toroso” or the “Adviser”) serves
as investment adviser to the Fund.
Sub-Adviser
Income
Research + Management serves as investment sub-adviser to the Fund.
Portfolio
Managers
William
A. O’Malley, CFA, Chief Executive Officer and Co-Chief Investment Officer for
IR+M, is responsible for the day-to-day management of the Fund and has been a
portfolio manager of the Fund since its inception in 2020.
James
E. Gubitosi, CFA, Senior Portfolio Manager and Co-Chief Investment Officer for
IR+M, is responsible for the day-to-day management of the Fund and has been a
portfolio manager of the Fund since its inception in 2020.
William
O’Neill, CFA, Senior Portfolio Manager for IR+M, is responsible for the
day-to-day management of the Fund and has been a portfolio manager of the Fund
since its inception in 2020.
Charles
A. Ragauss, CFA, Portfolio Manager for Toroso, has been a portfolio manager of
the Fund since its inception in 2020.
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities (the “Deposit Securities”) and/or a designated amount of U.S.
cash.
Shares
are listed on a national securities exchange, such as the Exchange, and
individual Shares may only be bought and sold in the secondary market through
brokers at market prices, rather than NAV. Because Shares trade at market prices
rather than NAV, Shares may trade at a price greater than NAV (premium) or less
than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. This difference in bid and ask
prices is often referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.sofi.com/invest/etfs/.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless an investment is in an IRA
or other tax-advantaged account. Distributions on investments made through
tax-deferred arrangements may be taxed later upon withdrawal of assets from
those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser, Sub-Adviser or their
affiliates may pay Intermediaries for certain activities related to the Fund,
including participation in activities that are designed to make Intermediaries
more knowledgeable about exchange-traded products, including the Fund, or for
other activities, such as marketing, educational training, or other initiatives
related to the sale or promotion of Shares. These payments may create a conflict
of interest by influencing the Intermediary and your salesperson to recommend
the Fund over another investment. Any such arrangements do not result in
increased Fund expenses. Ask your salesperson or visit the Intermediary’s
website for more information.
Investment
Objective
Each
of the SoFi Select 500 ETF, SoFi Next 500 ETF, and SoFi Social 50 ETF
(collectively, the “Index ETFs”) seeks to track the performance, before fees and
expenses, of the applicable Index. The SoFi Gig Economy ETF seeks long-term
capital appreciation. The
SoFi Weekly Income ETF seeks to provide current income.
An
investment objective is fundamental if it cannot be changed without the consent
of the holders of a majority of the outstanding Shares. The Funds’ investment
objectives have not been adopted as fundamental investment policies and
therefore may be changed without the consent of the Funds’ shareholders upon
approval by the Board of Trustees (the “Board’) of Tidal ETF Trust (the “Trust”)
and written notice to shareholders.
Principal
Investment Strategies
For
the Index ETFs, to the extent the applicable Index concentrates (i.e., holds
more than 25% of its total assets in the securities of a particular industry or
group of related industries), a Fund will concentrate its investments to
approximately the same extent as the Index.
The
Funds may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. A high portfolio turnover rate
increases transaction costs, which may increase a Fund’s expenses. Frequent
trading may also cause adverse tax consequences for investors in a Fund due to
an increase in short-term capital gains.
Each
of the Index ETFs tracks an Index that is calculated by Solactive AG, an
independent third party calculation agent that is not affiliated with the
applicable Fund, the Adviser, the Sub-Adviser (with regard to the SoFi Weekly
Income ETF), the Funds’ distributor, or any of their affiliates. None of the
Index ETFs is sponsored, promoted, sold or supported in any other manner by
Solactive AG, nor does Solactive AG offer any express or implicit guarantee or
assurance either with regard to the results of using each Index and/or Index
trade mark, or the price of each Index at any time or in any other respect. Each
Index is calculated and published by Solactive AG. Solactive AG uses its best
efforts to ensure that the Index is calculated correctly. Notwithstanding its
obligations under an index license agreement with the Adviser, Solactive AG has
no obligation to point out errors in an Index to third parties, including, but
not limited to, investors and/or financial intermediaries of each Index ETF.
Neither publication of the Indices nor the licensing of the Indices or their
trade marks by Solactive AG for the purpose of use in connection with the Index
ETFs constitutes a recommendation by Solactive AG to invest capital in any of
the Index ETFs, nor does it in any way represent an assurance or opinion of
Solactive AG with regard to an investment in any of the Index ETFs.
Additional
Information - SoFi Weekly Income ETF
144A
Securities. The
SoFi Weekly Income ETF may invest in Rule 144A securities (known as “restricted
securities”), which are not registered under the federal securities laws and
cannot be sold to the U.S. public because of SEC regulations. The SoFi Weekly
Income ETF generally considers Rule 144A securities to be liquid unless
determined otherwise pursuant to guidelines contained in the liquidity risk
management program of the Trust applicable to the SoFi Weekly Income
ETF.
MBS.
The SoFi Weekly Income ETF’s investments may include instruments issued by both
U.S. and non-U.S. government and private sector issuers, including asset-backed
securities. Instruments issued by the U.S. government include U.S. Treasuries
and U.S. agency securities, which may include MBS issued or guaranteed by the
U.S. government, federal agencies, or U.S. government sponsored
instrumentalities, such as Ginnie Mae and the Federal Housing Administration
(“FHA”).
TBA
Securities. The
TBA market allows investors to gain exposure to MBS with certain broad
characteristics (e.g.,
maturity, coupon, age) without taking delivery of the actual securities until
the settlement day, which is once every month. In addition, the SoFi Weekly
Income ETF may utilize the TBA roll market, in which one sells, in the TBA
market, the security for current month settlement, while simultaneously
committing to buy the same TBA security for next month settlement. The SoFi
Weekly Income ETF may utilize the TBA roll market for extended periods of time
without taking delivery of the physical securities. The SoFi Weekly Income ETF
may, without limitation, seek to obtain market exposure to the securities in
which it primarily invests by entering into a series of purchase and sale
contracts or by using other investment techniques (such as buy backs or dollar
rolls).
Temporary
Strategies
For
temporary defensive purposes, the SoFi Gig Economy ETF may invest in short-term
instruments such as commercial paper and/or repurchase agreements collateralized
by U.S. government securities, corporation obligations, municipal debt
securities, MBS, or convertible securities.
For
temporary defensive purposes during adverse market, economic, political, or
other conditions, the SoFi Weekly Income ETF may invest in short-term
instruments such as commercial paper and/or repurchase agreements collateralized
by U.S. government securities, corporation obligations, municipal debt
securities, or MBS.
Taking
a temporary defensive position may result in the SoFi Gig Economy ETF and SoFi
Weekly Income ETF not achieving their investment objectives.
Manager
of Managers Structure
The
Funds and the Adviser have received exemptive relief from the SEC permitting the
Adviser (subject to certain conditions and the approval of the Board) to change
or select new unaffiliated sub-advisers without obtaining shareholder approval.
The relief also permits the Adviser to materially amend the terms of agreements
with an unaffiliated sub-adviser (including an increase in the fee paid by the
Adviser to the unaffiliated sub-adviser (and not paid by a Fund)) or to continue
the employment of an unaffiliated sub-adviser after an event that would
otherwise cause the automatic termination of services with Board approval, but
without shareholder approval. Shareholders will be notified of any unaffiliated
sub-adviser changes. The Adviser has the ultimate responsibility, subject to
oversight by the Board, to oversee a sub-adviser(s) and recommend their hiring,
termination and replacement.
Principal
Risks of Investing in each Fund
There
can be no assurance that a Fund will achieve its investment objective. The
following information is in addition to, and should be read along with, the
description of each Fund’s principal investment risks in the section titled
“Fund Summary— Principal Investment Risks” above.
The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Funds,
regardless of the order in which it appears. As with any investment, there is a
risk that you could lose all or a portion of your investment in a Fund. Some or
all of these risks may adversely affect a Fund’s NAV per share, trading price,
yield, total return and/or ability to meet its investment objective. The
following risks could affect the value of your performance in the
Funds:
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SoFi
Select 500 ETF |
SoFi
Next 500 ETF |
SoFi
Social 50 ETF |
SoFi
Gig Economy ETF |
SoFi
Weekly Income ETF |
ABS
Risk |
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X |
Agency
Debt Risk |
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X |
Bank
Loans Risk |
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X |
Call
Risk |
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X |
Convertible
Securities Risk |
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X |
CMBS
Risk |
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X |
CMOs
Risk |
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X |
Credit
Risk |
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X |
Currency
Exchange Rate Risk |
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X |
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Cybersecurity
Risk |
X |
X |
X |
X |
X |
Data
Risk |
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X |
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Emerging
Markets Risk |
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X |
X |
Equity
Market Risk |
X |
X |
X |
X |
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ETF
Risk |
X |
X |
X |
X |
X |
—
Authorized Participants, Market Makers, and Liquidity Providers
Concentration Risk |
X |
X |
X |
X |
X |
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Cash
Redemption Risk |
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X |
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Costs
of Buying or Selling Shares |
X |
X |
X |
X |
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—
Shares
May Trade at Prices Other Than NAV |
X |
X |
X |
X |
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—
Trading |
X |
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X |
X |
Event
Risk |
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X |
Extension
Risk |
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Fixed
Income Risk |
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X |
Floating
or Variable Rate Securities Risk |
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X |
Foreign
Securities Risk |
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X |
X |
General
Market Risk |
X |
X |
X |
X |
X |
High
Portfolio Turnover Risk |
X |
X |
X |
X |
X |
High-Yield
Securities Risk |
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Illiquid
Securities Risk |
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Interest
Rate Risk |
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LIBOR
Risk |
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SoFi
Select 500 ETF |
SoFi
Next 500 ETF |
SoFi
Social 50 ETF |
SoFi
Gig Economy ETF |
SoFi
Weekly Income ETF |
Limited
Operating History Risk |
X |
X |
X |
X |
X |
Management
Risk |
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X |
X |
Market
Capitalization Risk |
X |
X |
X |
X |
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Large-Capitalization Investing |
X |
X |
X |
X |
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Mid-Capitalization Investing |
X |
X |
X |
X |
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—Small-Capitalization
Investing |
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MBS
Risk |
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Municipal
Securities Risk |
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X |
Models
and Data Risk |
X |
X |
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Non-Diversification
Risk |
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X |
X |
Passive
Investment Risk |
X |
X |
X |
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Prepayment
Risk |
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Privately
Placed Securities Risk |
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Rating
Agencies Risk |
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X |
Recent
Market Events Risk |
X |
X |
X |
X |
X |
REIT
Investment Risk |
X |
X |
X |
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RMBS
Risk |
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X |
Sector
Risk |
X |
X |
X |
X |
X |
—
Communication Services Sector Risk |
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X |
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Consumer Staples Sector Risk |
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X |
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Financial Services Sector Risk |
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Industrials Sector Risk |
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TBA
Securities and Rolls Risk |
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TIPS
Risk |
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X |
Tracking
Error Risk |
X |
X |
X |
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Uncertain
Tax Treatment |
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U.S.
Government Obligations Risk |
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User
Bias Risk |
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Valuation
Risk |
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When-Issued,
Delayed Delivery, and Forward Commitment Risk |
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ABS
Risk.
The value of ABS may be significantly affected by changes in interest rates, the
market’s perception of issuers, and the creditworthiness of the parties
involved. These securities may have a structure that makes their reaction to
interest rate changes and other factors difficult to predict, making their value
highly volatile.
Agency
Debt Risk. Bonds
or debentures issued by U.S. government agencies, government-sponsored entities,
or government corporations, including, among others, Fannie Mae and Freddie Mac,
are generally backed only by the general creditworthiness and reputation of the
U.S. government agency, government-sponsored entity, or government corporation
issuing the bond or debenture and are not guaranteed by the U.S. Treasury or
backed by the full faith and credit of the U.S. government. Ginnie Mae
securities are generally backed by the full faith and credit of the U.S.
government.
Some
U.S. government agencies, including Fannie Mae and Freddie Mac, purchase and
guarantee residential mortgages and form MBS that they issue to the market.
These agencies also hold their own MBS as well as those of other institutions
with funding from the agency debentures they issue. The market for MBS has been
adversely affected by the value of those MBS held and/or issued by these
agencies. These securities are subject to more credit risk than U.S. government
securities that are supported by the full faith and credit of the U.S.
(e.g.,
U.S. Treasury bonds). If a U.S. government agency that is the issuer of
securities in which the Fund invests is unable to meet its obligations or ceases
to exist and no plan is made for repayment of securities, the performance of the
Fund will be adversely impacted.
Bank
Loans Risk.
Bank loans often involve borrowers whose financial conditions are troubled or
uncertain and companies that are highly leveraged. The market for bank loans may
not be highly liquid and the Fund may have difficulty selling bank loans. These
investments expose the Fund to the credit risk of both the financial institution
and the underlying borrower. Bank loans generally are subject to legal or
contractual restrictions on resale. In addition, bank loans may have trade
settlement periods extending beyond seven
days,
which means that, in certain cases, it could take the Fund a significant amount
of time to get its money after selling an investment. Bank loans may be
structured such that they are not “securities” under federal securities laws and
therefore not subject to federal securities laws protections against fraud and
misrepresentation. As such, there can be no assurances that fraud or
misrepresentation will not occur with respect to bank loans in which the Fund
invests.
Call
Risk.
During
periods of falling interest rates, an issuer of a callable bond held by the Fund
may “call” or repay the security before its stated maturity, and the Fund may
have to reinvest the proceeds in securities with lower yields, which would
result in a decline in the Fund’s income, or in securities with greater risks or
with other less favorable features.
Convertible
Securities Risk. Convertible
securities rank senior to the issuer's common stock, but may be subordinate to
senior debt obligations. In part, the total return for a convertible security
may depend upon the performance of the underlying stock into which it can be
converted. Synthetic convertibles may respond differently to market fluctuations
than traditional convertible securities. They are also subject to counterparty
risk.
CMBS
Risk. The
Fund’s investments in CMBS are subject to the risk that if there is a shortfall
in loan payments from borrowers or if an underlying property is sold via
foreclosure and does not generate sufficient proceeds to meet scheduled payments
on all bond classes, investments in the most subordinate outstanding bond class
will incur a principal loss first, with any further losses impacting more senior
classes in reverse order of payment priority. CMBS are historically more
volatile than RMBS. CMBS, like traditional fixed-income securities, are
subject to credit, interest rate, prepayment, and extension risks (see “Credit
Risk,” “Interest Rate Risk,” “Prepayment Risk,” and “Extension Risk” for more
information on these risks).
CMOs
Risk.
CMOs represent interests in a short-term, intermediate-term or long-term portion
of a mortgage pool. Each portion of the pool receives monthly interest payments,
but the principal repayments pass through to the short-term CMO first and to the
long-term CMO last. Investments in CMOs are subject to the same risks as direct
investments in the underlying mortgage-backed securities including credit,
interest rate, prepayment, and extension risks. In the event of a bankruptcy or
other default of a broker who issued the CMO held by the Fund, the Fund could
experience both delays in liquidating its position and losses. In addition,
classes of CMOs may also include interest only (“IOs”) and principal only
(“POs”). IOs and POs are stripped mortgage-backed securities representing
interests in a pool of mortgages the cash flow from which has been separated
into interest and principal components. IOs (interest only securities) receive
the interest portion of the cash flow while POs (principal only securities)
receive the principal portion. IOs and POs can be extremely volatile in response
to changes in interest rates. As interest rates rise and fall, the value of IOs
tends to move in the same direction as interest rates. When payments on
mortgages underlying a PO are slow, the life of the PO is lengthened and the
yield to maturity is reduced.
Credit
Risk. Issuers
and/or counterparties may fail to make payments when due or default completely.
If an issuer’s or counterparty’s financial condition worsens, the credit quality
of the issuer or counterparty may deteriorate, making it difficult for the Fund
to sell such investments. Changes in an issuer’s credit rating or the market’s
perception of an issuer’s creditworthiness may also affect the value of an
investment in that issuer.
Currency
Exchange Rate Risk. Changes
in currency exchange rates and the relative value of non-U.S. currencies will
affect the value of the Fund’s investments and the value of your Fund shares.
Because the Fund’s NAV is determined on the basis of U.S. dollars, the U.S.
dollar value of your investment in the Fund may go down if the value of the
local currency of the non-U.S. markets in which the Fund invests depreciates
against the U.S. dollar. This is true even if the local currency value of
securities in the Fund’s holdings goes up. Conversely, the dollar value of your
investment in the Fund may go up if the value of the local currency appreciates
against the U.S. dollar. The value of the U.S. dollar measured against other
currencies is influenced by a variety of factors. These factors include:
national debt levels and trade deficits, changes in balances of payments and
trade, domestic and foreign interest and inflation rates, global or regional
political, economic or financial events, monetary policies of governments,
actual or potential government intervention, and global energy prices. Political
instability, the possibility of government intervention and restrictive or
opaque business and investment policies may also reduce the value of a country’s
currency. Government monetary policies and the buying or selling of currency by
a country’s government may also influence exchange rates. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the value of an investment in the Fund may change quickly and without
warning, and you may lose money.
Cybersecurity
Risk.
With the increased use of technologies such as the Internet to conduct business,
the Fund is susceptible to operational, information security, and related risks.
In general, cyber incidents can result from deliberate attacks or unintentional
events. Cyber attacks 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). Cyber incidents affecting the Fund or its
service providers 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, impediments to trading, the inability of
shareholders to transact business, violations of applicable privacy and other
laws, regulatory fines, penalties, reputational damage, reimbursement or other
compensation costs, or additional compliance costs. Similar adverse consequences
could result from cyber incidents affecting issuers of securities in which the
Fund invests, counterparties with which the Fund engages in transactions,
governmental and other regulatory
authorities,
exchange and other financial market operators, banks, brokers, dealers,
insurance companies and other financial institutions (including financial
intermediaries and service providers for shareholders) and other parties. In
addition, substantial costs may be incurred in order to prevent any cyber
incidents in the future. While the Fund’s service providers have established
business continuity plans in the event of, and risk management systems to
prevent, such cyber incidents, there are inherent limitations in such plans and
systems including the possibility that certain risks have not been identified.
Furthermore, the Fund cannot control the cyber security plans and systems put in
place by their service providers or any other third parties whose operations may
affect the Fund or its shareholders. As a result, the Fund and its shareholders
could be negatively impacted.
Data
Risk. The
composition of the Index is heavily dependent on information and data supplied
by third parties. When such data prove to be incorrect or incomplete, any
decisions made in reliance thereon may lead to the inclusion or exclusion of
securities from the Index universe that would have been excluded or included had
the data been correct and complete. If the composition of the Index reflects
such errors, the Fund’s portfolio can be expected to reflect the errors,
too.
Emerging
Markets Risk. Investments
in securities and instruments traded in developing or emerging markets, or that
provide exposure to such securities or markets, can involve additional risks
relating to political, economic, or regulatory conditions not associated with
investments in U.S. securities and instruments. For example, developing and
emerging markets may be subject to (i) greater market volatility, (ii) lower
trading volume and liquidity, (iii) greater social, political, and economic
uncertainty, (iv) governmental controls on foreign investments and limitations
on repatriation of invested capital, (v) lower disclosure, corporate governance,
auditing and financial reporting standards, (vi) fewer protections of property
rights, (vii) restrictions on the transfer of securities or currency, and (viii)
settlement and trading practices that differ from those in U.S. markets. Each of
these factors may impact the ability of the Fund to buy, sell, or otherwise
transfer securities, adversely affect the trading market and price for Fund
Shares and cause the Fund to decline in value.
Equity
Market Risk. Common
stocks are susceptible to general stock market fluctuations and to volatile
increases and decreases in value as market confidence in and perceptions of
their issuers change. These investor perceptions are based on various and
unpredictable factors including: expectations regarding government, economic,
monetary and fiscal policies; inflation and interest rates; economic expansion
or contraction; and global or regional political, economic and banking crises.
If you held common stock, or common stock equivalents, of any given issuer, you
would generally be exposed to greater risk than if you held preferred stocks and
debt obligations of the issuer because common stockholders, or holders of
equivalent interests, generally have inferior rights to receive payments from
issuers in comparison with the rights of preferred stockholders, bondholders,
and other creditors of such issuers.
•ETF
Risk.
◦APs,
Market Makers, and Liquidity Providers Concentration Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares may trade at a material discount to NAV and possibly face
delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services; or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
◦Cash
Redemption Risk. The
Fund’s investment strategy may require it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds. For example, the Fund
may not be able to redeem in-kind certain securities held by the Fund (e.g.,
derivative instruments and bonds that cannot be broken up beyond certain minimum
sizes needed for transfer and settlement). In such a case, the Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund to recognize a capital
gain that it might not have recognized if it had made a redemption in-kind. As a
result, the Fund may pay out higher annual capital gain distributions than if
the in-kind redemption process was used.
◦Costs
of Buying or Selling Shares. Investors
buying or selling Shares in the secondary market will pay brokerage commissions
or other charges imposed by brokers, as determined by that broker. Brokerage
commissions are often a fixed amount and may be a significant proportional cost
for investors seeking to buy or sell relatively small amounts of Shares. In
addition, secondary market investors will also incur the cost of the bid-ask
spread. The bid-ask spread varies over time for Shares based on trading volume
and market liquidity, and is generally lower if Shares have more trading volume
and market liquidity and higher if Shares have little trading volume and market
liquidity. Further, a relatively small investor base in the Fund, asset swings
in the Fund and/or increased market volatility may cause increased bid-ask
spreads. Due to the costs of buying or selling Shares, including bid-ask
spreads, frequent trading of Shares may significantly reduce investment results
and an investment in Shares may not be advisable for investors who anticipate
regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of the Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of the Shares or during periods of market
volatility. This risk is heightened in times of market volatility or periods of
steep market declines. The market price of Shares during the trading day, like
the price of any exchange-traded security, includes a “bid-ask” spread charged
by the exchange specialist, market makers, or other participants that trade the
Shares. In times of severe market disruption, the bid-ask spread can increase
significantly. At those times, Shares are most likely to be traded at a discount
to NAV, and the discount is likely to be greatest when the price of Shares is
falling fastest, which may be the time that you most want to sell your Shares.
The Adviser believes that, under normal market conditions, large market price
discounts or premiums to NAV will not be sustained because of arbitrage
opportunities. Because securities held by the Fund may trade on foreign
exchanges that are closed when the Fund’s primary listing exchange is open, the
Fund is likely to experience premiums and discounts greater than those of ETFs
holding only domestic securities.
◦Trading.
Although
Shares are listed for trading on the Exchange and may be listed or traded on
U.S. and non-U.S. stock exchanges other than the Exchange, there can be no
assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 500 during a single day reaches certain thresholds (e.g.,
7%, 13%, and 20%). Additional rules applicable to the Exchange may halt trading
in Shares when extraordinary volatility causes sudden, significant swings in the
market price of Shares. There can be no assurance that Shares will trade with
any volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than
Shares.
Event
Risk.
Corporate issuers may undergo restructurings, such as mergers, leveraged
buyouts, takeovers, or similar events financed by increased debt. As a result of
the added debt, the credit quality and market value of a company’s bonds and/or
other debt securities may decline significantly.
Extension
Risk. When
interest rates rise, certain obligations will be repaid by the obligor more
slowly than anticipated, causing the value of these securities to fall. Rising
interest rates tend to extend the duration of securities, making them more
sensitive to future changes in interest rates. The value of longer-term
securities generally changes more in response to changes in interest rates than
the value of shorter-term securities. As a result, in a period of rising
interest rates, securities may exhibit additional volatility and may lose
value.
Fixed
Income Risk.
The value of the Fund’s investments in fixed income securities will fluctuate
with changes in interest rates. Typically, a rise in interest rates causes a
decline in the value of fixed income securities owned indirectly by the Fund. On
the other hand, if rates fall, the value of the fixed income securities
generally increases. The Fund may be subject to a greater risk of rising
interest rates due to the current period of historically low rates and the
effect of potential government fiscal policy initiatives and resulting market
reaction to those initiatives. In general, the market price of fixed income
securities with longer maturities will increase or decrease more in response to
changes in interest rates than shorter-term securities.
Floating
or Variable Rate Securities Risk. Securities
with floating or variable interest rates are generally 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
comparable market interest rates. Conversely, floating or variable rate
securities will not generally increase in value if interest rates decline. The
impact of interest rate changes on floating or variable rate securities is
typically mitigated by the periodic interest rate reset of the investments.
Floating or variable rate securities can be rated below investment grade or
unrated; therefore, the Fund relies heavily on the analytical ability of IR+M.
Floating or variable rate securities are often subject to restrictions on
resale, which can result in reduced liquidity.
Foreign
Securities Risk.
Certain foreign countries may impose exchange control regulations, restrictions
on repatriation of profit on investments or of capital invested, local taxes on
investments, and restrictions on the ability of issuers of non-U.S. securities
to make payments of principal and interest to investors located outside the
country, whether from currency blockage or otherwise. In addition, the Fund will
be subject to risks associated with adverse political and economic developments
in foreign countries, including seizure or nationalization of foreign deposits,
the imposition of economic sanctions, different legal systems and laws relating
to bankruptcy and creditors’ rights, and the potential inability to enforce
legal judgments, all of which could cause the Fund to lose money on its
investments in non-U.S. securities. The cost of servicing external debt will
also generally be adversely affected by rising international interest rates, as
many external debt obligations bear interest at rates which are adjusted based
upon international interest rates. Because non-U.S. securities may trade on days
when Shares are not priced, NAV may change at times when Shares cannot be
sold.
Foreign
banks and securities depositories at which the Fund holds its foreign securities
and cash may be recently organized or new to the foreign custody business and
may be subject to only limited or no regulatory oversight. Additionally, many
foreign governments do not supervise and regulate stock exchanges, brokers and
the sale of securities to the same extent as does the United States and may
not
have laws to protect investors that are comparable to U.S. securities laws.
Settlement and clearance procedures in certain foreign markets may result in
delays in payment for or delivery of securities not typically associated with
settlement and clearance of U.S. investments.
In
recent years, the European financial markets have experienced volatility and
adverse trends due to concerns about economic downturns in, or rising government
debt levels of, several European countries. These events may spread to other
countries in Europe, including countries that do not use the Euro. These events
may affect the value and liquidity of certain of the Fund’s
investments.
General
Market Risk.
Economies and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in the general financial markets, a particular financial market or
other asset classes, due to a number of factors, including inflation (or
expectations for inflation), interest rates, global demand for particular
products or resources, natural disasters or events, pandemic diseases,
terrorism, regulatory events, and government controls.
High
Portfolio Turnover Risk.
A high portfolio turnover rate increases transaction costs, which may increase
the Fund’s expenses. Frequent trading may also cause adverse tax consequences
for investors in the Fund due to an increase in short-term capital
gains.
High-Yield
Securities Risk.
Below investment grade instruments are commonly referred to as “junk” or
high-yield instruments and are regarded as predominantly speculative with
respect to the issuer’s capacity to pay interest and repay principal. Lower
grade instruments may be particularly susceptible to economic downturns. It is
likely that a prolonged or deepening economic recession could adversely affect
the ability of the issuers of such instruments to repay principal and pay
interest thereon, increase the incidence of default for such instruments and
severely disrupt the market value of such instruments.
Lower
grade instruments, though higher yielding, are characterized by higher risk. The
retail secondary market for lower grade instruments, which are often thinly
traded or subject to irregular trading, may be less liquid than that for higher
rated instruments. Such instruments can be more difficult to sell and to value
than higher rated instruments because there is generally less public information
available about such securities. As a result, subjective judgment may play a
greater role in valuing such instruments. Adverse conditions could make it
difficult at times for the Fund to sell certain instruments or could result in
lower prices than those used in calculating the Fund’s NAV. Because of the
substantial risks associated with investments in lower grade instruments,
investors could lose money on their investment in the Fund, both in the
short-term and the long-term.
Illiquid
Securities Risks. The
Fund may invest up to 15% of its net assets in illiquid or restricted securities
deemed illiquid. Investments in restricted securities could have the effect of
increasing the amount of the Fund’s assets invested in illiquid securities if
qualified institutional buyers are unwilling to purchase these
securities.
Illiquid
and restricted securities may be difficult to dispose of at a fair price at the
times when the Fund believes it is desirable to do so. The market price of
illiquid and restricted securities generally is more volatile than that of more
liquid securities, which may adversely affect the price that the Fund pays for
or recovers upon the sale of such securities. Illiquid and restricted securities
are also more difficult to value, especially in challenging markets. The
Adviser’s or Sub-Adviser’s judgment may play a greater role in the valuation
process. Investment of the Fund’s assets in illiquid and restricted securities
may restrict the Fund’s ability to take advantage of market opportunities. To
dispose of an unregistered security, the Fund, where it has contractual rights
to do so, may have to cause such security to be registered. A considerable
period may elapse between the time the decision is made to sell the security and
the time the security is registered, thereby enabling the Fund to sell it.
Contractual restrictions on the resale of securities vary in length and scope
and are generally the result of a negotiation between the issuer and acquiror of
the securities. In either case, the Fund would bear market risks during that
period. Liquidity risk may impact the Fund’s ability to meet shareholder
redemptions and as a result, the Fund may be forced to sell securities at
inopportune prices.
Certain
fixed income instruments are not readily marketable and may be subject to
restrictions on resale. Fixed income instruments may not be listed on any
national securities exchange and no active trading market may exist for certain
of the fixed income instruments in which the Fund will invest. Where a secondary
market exists, the market for some fixed income instruments may be subject to
irregular trading activity, wide bid-ask spreads and extended trade settlement
periods. In addition, dealer inventories of certain securities are at historic
lows in relation to market size, which indicates a potential for reduced
liquidity as dealers may be less able to “make markets” for certain fixed income
securities.
Interest
Rate Risk. The
Fund’s investments in bonds and other debt securities will change in value based
on changes in interest rates. If rates rise, the value of these investments
generally declines. Securities with greater interest rate sensitivity and longer
maturities generally are subject to greater fluctuations in value.
LIBOR
Risk. Instruments
in which the Fund invests may pay interest at floating rates based on LIBOR or
may be subject to interest caps or floors based on LIBOR. The Fund and issuers
of instruments in which the Fund invests may also obtain financing at floating
rates based on LIBOR. Derivative instruments utilized by the Fund and/or issuers
of instruments in which the Fund may invest may also reference LIBOR. In July
2017, the head of the United Kingdom Financial Conduct Authority announced the
desire to phase out the use of LIBOR by December 31, 2021. There is currently no
definitive information regarding the future utilization of LIBOR or of any
particular replacement rate. Abandonment of or modifications to LIBOR may
affect the value, liquidity or return on certain Fund
investments
that reference LIBOR without including fallback provisions and may result in
costs incurred in connection with closing out positions and entering into new
trades. Any pricing adjustments to the Fund’s investments resulting from a
substitute reference rate may also adversely affect the Fund’s performance
and/or NAV. The effect of a phase out of LIBOR on instruments in which
the Fund may invest is currently unclear.
Limited
Operating History Risk. The
Fund has a limited operating history. As a result, prospective investors have a
limited track record or history on which to base their investment decision.
There
can be no assurance that the Fund will grow to or maintain an economically
viable size.
Management
Risk. The
Fund is actively-managed and may not meet its investment objective based on the
Adviser’s or Sub-Adviser’s, as applicable, success or failure to implement
investment strategies for the Fund.
Market
Capitalization Risk.
◦Large-Capitalization
Investing. The
securities of large-capitalization companies may be relatively mature compared
to smaller companies and therefore subject to slower growth during times of
economic expansion. Large-capitalization companies may also be unable to respond
quickly to new competitive challenges, such as changes in technology and
consumer tastes.
◦Mid-Capitalization
Investing. The
securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large capitalization stocks or the stock market
as a whole. Some medium capitalization companies have limited product lines,
markets, financial resources, and management personnel and tend to concentrate
on fewer geographical markets relative to large-capitalization companies.
◦Small-Capitalization
Investing.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. Some small capitalization companies have limited
product lines, markets, and financial and managerial resources and tend to
concentrate on fewer geographical markets relative to larger capitalization
companies. There is typically less publicly available information concerning
smaller-capitalization companies than for larger, more established companies.
Small-capitalization companies also may be particularly sensitive to changes in
interest rates, government regulation, borrowing costs and
earnings.
MBS
Risk. Mortgage-related
securities represent ownership in pools of mortgage loans assembled for sale to
investors by various government agencies such as Ginnie Mae and
government-related organizations such as Fannie Mae and Freddie Mac. Although
these mortgage-related securities are guaranteed by a third party or otherwise
similarly secured, the market value of the security, which may fluctuate, is not
so secured. MBS, like traditional fixed-income securities, are subject to
credit, interest rate, prepayment, and extension risks (see “Credit Risk,”
“Interest Rate Risk,” “Prepayment Risk,” and “Extension Risk” for more
information on these risks).
These
securities differ from conventional bonds in that the principal is paid back to
the investor as payments are made on the underlying mortgages in the pool.
Accordingly, the Fund will receive scheduled payments of principal and interest
along with any unscheduled principal prepayments on the underlying mortgages.
Because these scheduled and unscheduled principal payments must be reinvested at
prevailing interest rates, MBS do not provide an effective means of locking in
long-term interest rates for the investor. Small movements in interest rates
(both increases and decreases) may quickly and significantly reduce the value of
certain MBS.
The
mortgage market in the United States has experienced and may in the future
experience difficulties that may adversely affect the performance and market
value of certain of the Fund’s mortgage-related investments. Delinquencies and
losses on mortgage loans (including subprime and second-lien mortgage loans) may
increase and real-estate values may decline due to such difficulties, which may
exacerbate such delinquencies and losses. Reduced investor demand for mortgage
loans and mortgage-related securities and increased investor yield requirements
may cause limited liquidity in the secondary market for mortgage-related
securities, which can adversely affect the market value of mortgage-related
securities and the Fund.
Municipal
Securities Risk. Municipal
securities can be significantly affected by political or economic changes,
including changes made in the law after issuance of the securities, as well as
uncertainties in the municipal market related to taxation, legislative changes
or the rights of municipal security holders, including in connection with an
issuer insolvency. Municipal securities backed by current or anticipated
revenues from a specific project or specific assets can be negatively affected
by the inability to collect revenues from the project or the
assets.
Models
and Data Risk. The
composition of the Index is heavily dependent on proprietary quantitative models
as well as information and data supplied by third parties (“Models and Data”).
When Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon may lead to the inclusion or exclusion of securities from the
Index universe that would have been excluded or included had the Models and Data
been correct and complete. If the composition of the Index reflects such errors,
the Fund’s portfolio can be expected to also reflect the errors.
Non-Diversification
Risk. A
non-diversified Fund may be more exposed to the risks associated with and
developments affecting an individual issuer or a smaller number of issuers than
a fund that invests more widely. This may increase the Fund’s volatility and
cause the performance of a relatively smaller number of issuers to have a
greater impact on the Fund’s performance.
Passive
Investment Risk.
The Fund invests in the securities included in, or representative of, its Index
regardless of their investment merit. The Fund does not attempt to outperform
its Index or take defensive positions in declining markets. As a result, the
Fund’s performance may be adversely affected by a general decline in the market
segments relating to its Index. The returns from the types of securities in
which the Fund invests may underperform returns from the various general
securities markets or different asset classes. This may cause the Fund to
underperform other investment vehicles that invest in different asset classes.
Different types of securities (for example, large-, mid- and
small-capitalization stocks) tend to go through cycles of doing better – or
worse – than the general securities markets. In the past, these periods have
lasted for as long as several years.
Prepayment
Risk. The
issuer of certain securities may repay principal in advance, especially when
yields fall. Changes in the rate at which prepayments occur can affect the
return on investment of these securities. When debt obligations are prepaid or
when securities are called, the Fund may have to reinvest in securities with a
lower yield. The Fund also may fail to recover additional amounts (i.e.,
premiums) paid for securities with higher coupons, resulting in an unexpected
capital loss. In periods of falling interest rates, the rate of prepayments
tends to increase (as does price fluctuation) as borrowers are motivated to
repay debt and refinance at new lower rates. During such periods, reinvestment
of the prepayment proceeds by the management team will generally be at lower
rates of return than the return on the assets that were prepaid. Prepayment
reduces the yield to maturity and the average life of the security.
Privately
Placed Securities Risk.
Privately placed securities generally are less liquid than publicly traded
securities and the Fund may not always be able to sell such securities without
experiencing delays in finding buyers or reducing the sale price for such
securities. The disposition of some of the securities held by the Fund may be
restricted under federal securities laws. As a result, the Fund may not be able
to dispose of such investments at a time when, or at a price at which, it
desires to do so and may have to bear expenses of registering these securities,
if necessary. These securities may also be difficult to value.
Rating
Agencies Risk. Rating
agencies may fail to make timely changes in credit ratings and an issuer’s
current financial condition may be better or worse than a rating indicates. In
addition, rating agencies are subject to an inherent conflict of interest
because they are often compensated by the same issuers whose securities they
grade.
Recent
Market Events Risk.
U.S. and international markets have experienced significant periods of
volatility in recent years and months due to a number of economic, political and
global macro factors including the impact of the novel coronavirus (COVID-19) as
a global pandemic and related public health issues, growth concerns in the U.S.
and overseas, uncertainties regarding interest rates, trade tensions, and the
threat of tariffs imposed by the U.S. and other countries. In particular,
the spread of COVID-19 worldwide has resulted in disruptions to supply chains
and customer activity, stress on the global healthcare system, temporary and
permanent layoffs in the private sector, and rising unemployment claims, reduced
consumer spending, quarantines, cancellations, market declines, the closing of
borders, restrictions on travel, changed travel and social behaviors, and
widespread concern and uncertainty, all of which may lead to a substantial
economic downturn or recession in the U.S. and global economies. The recovery
from the effects of COVID-19 is uncertain and may last for an extended period of
time. Health crises and related political, social and economic disruptions
caused by the spread of COVID-19 may also exacerbate other pre-existing
political, social and economic risks in certain countries. These developments as
well as other events could result in further market volatility and negatively
affect financial asset prices, the liquidity of certain securities and the
normal operations of securities exchanges and other markets, despite government
efforts to address market disruptions. In addition, the Fund may face challenges
with respect to its day-to-day operations if key personnel of the Fund’s Adviser
or Sub-Adviser or other service providers are unavailable due to quarantines and
restrictions on travel related to COVID-19. As a result, the risk environment
remains elevated. The Adviser and the Sub-Adviser will monitor developments and
seek to manage the Fund in a manner consistent with achieving the Fund’s
investment objective, but there can be no assurance that they will be successful
in doing so.
REIT
Investment Risk. Investments
in REITs involve unique risks. REITs may have limited financial resources, may
trade less frequently and in limited volume, and may be more volatile than other
securities. In addition, to the extent the Fund holds interests in REITs, it is
expected that investors in the Fund will bear two layers of asset-based
management fees and expenses (directly at the Fund level and indirectly at the
REIT level). The risks of investing in REITs include certain risks associated
with the direct ownership of real estate and the real estate industry in
general. These include risks related to general, regional and local economic
conditions; fluctuations in interest rates and property tax rates; shifts in
zoning laws, environmental regulations and other governmental action such as the
exercise of eminent domain; cash flow dependency; increased operating expenses;
lack of availability of mortgage funds; losses due to natural disasters;
overbuilding; losses due to casualty or condemnation; changes in property values
and rental rates; and other factors.
In
addition to these risks, REITs are dependent upon management skills and
generally may not be diversified. REITs are also subject to heavy cash flow
dependency, defaults by borrowers and self-liquidation. In addition, REITs could
possibly fail to qualify for the beneficial tax treatment available to REITs
under the Internal Revenue Code of 1986, as amended (the “Code”), or to maintain
their exemptions from registration under the Investment Company Act of 1940, as
amended (the “1940 Act”). The Fund expects that dividends received from a REIT
and distributed to Fund shareholders generally will be taxable to the
shareholder as ordinary income,
but
may be taxable as return of capital. In the event of a default by a borrower or
lessee, the REIT may experience delays in enforcing its rights as a mortgagee or
lessor and may incur substantial costs associated with protecting investments.
For more information regarding the regulation and taxation of REIT investments,
please see the section in this Prospectus entitled “Taxation of REIT
Investments” under “Dividends, Distributions, and Taxes.”
RMBS
Risk. RMBS
are particularly susceptible to prepayment risks, as they generally do not
contain prepayment penalties and a reduction in interest rates will increase the
prepayments on the RMBS. Such securities are also subject to credit, interest
rate, and extension risks. (see “Credit Risk,” “Interest Rate Risk,” and
“Extension Risk” for more information on these risks). The rate of defaults and
losses on residential mortgage loans will be affected by a number of factors,
including general economic conditions and those in the geographic area where the
mortgaged property is located, the terms of the mortgage loan, the borrower’s
equity in the mortgaged property, and the financial circumstances of the
borrower. Certain mortgage loans may be of sub-prime credit quality (i.e., do
not meet the customary credit standards of Fannie Mae and Freddie Mac).
Delinquencies and liquidation proceedings are more likely with sub-prime
mortgage loans than with mortgage loans that satisfy customary credit standards.
If a portfolio of RMBS is backed by loans with disproportionately large
aggregate principal amounts secured by properties in only a few states or
regions in the United States, residential mortgage loans may be more susceptible
to geographic risks relating to such areas. Violation of laws, public policies,
and principles designed to protect consumers may limit the servicer’s ability to
collect all or part of the principal or interest on a residential mortgage loan,
entitle the borrower to a refund of amounts previously paid by it, or subject
the servicer to damages and administrative enforcement. Any such violation could
also result in cash flow delays and losses on the related issue of RMBS. It is
not expected that RMBS will be guaranteed or insured by any U.S. governmental
agency or instrumentality or by any other person. Distributions on RMBS will
depend solely upon the amount and timing of payments and other collections on
the related underlying mortgage loans.
Sector
Risk. The
Fund’s investing approach may dictate an emphasis on certain sectors,
industries, or sub-sectors of the market at any given time. To the extent the
Fund invests more heavily in one sector, industry, or sub-sector of the market,
it thereby presents a more concentrated risk and its performance will be
especially sensitive to developments that significantly affect those sectors,
industries, or sub-sectors. In addition, the value of Shares may change at
different rates compared to the value of shares of a fund with investments in a
more diversified mix of sectors and industries. An individual sector, industry,
or sub-sector of the market may have above-average performance during particular
periods, but may also move up and down more than the broader market. The several
industries that constitute a sector may all react in the same way to economic,
political or regulatory events. The Fund’s performance could also be affected if
the sectors, industries, or sub-sectors do not perform as expected.
Alternatively, the lack of exposure to one or more sectors or industries may
adversely affect performance.
◦Communication
Services Sector Risk.
The Fund may invest in companies in the communication services sector, and
therefore the performance of the Fund could be negatively impacted by events
affecting this sector. Communication services companies are susceptible to the
risk of potential obsolescence of products and services due to technological
advancements and innovation competition among companies. Demand for product,
shifting consumer demographics and shifting consumer preferences can drastically
affect a communication services company's profitability. Companies in the
communication services sector may be particular targets of cyber-security losses
and potential theft of proprietary or consumer information or disruptions in
service, which could have a material adverse effect on their businesses.
Companies in the communication services sector may also be affected by other
competitive pressures, such as pricing competition, as well as research and
development costs, substantial capital requirements and government
regulation.
•Consumer
Staples Sector Risk.
The Fund may invest in companies in the consumer staples sector, and therefore
the performance of the Fund could be negatively impacted by events affecting
this sector. Companies in the consumer staples sector, including those in the
food and beverage industries, may be affected by general economic conditions,
commodity production and pricing, consumer confidence and spending, consumer
preferences, interest rates, product cycles, marketing campaigns, competition,
and government regulations.
◦Financial
Services Sector Risk.
The Fund may invest in companies in the financial services sector, and therefore
the performance of the Fund could be negatively impacted by events affecting
this sector. This sector can be significantly affected by changes in interest
rates, government regulation, the rate of defaults on corporate, consumer and
government debt and the availability and cost of capital, among other
factors. Insurance companies, in particular, may be significantly affected
by changes in interest rates, catastrophic events, price and market competition,
the imposition of premium rate caps, or other changes in government regulation
or tax law and/or rate regulation, which may have an adverse impact on their
profitability. This sector has experienced significant losses in the recent
past, and the impact of more stringent capital requirements and of recent 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.
◦Industrials
Sector Risk. The
Fund may invest in companies in the industrials sector, and therefore the
performance of the Fund could be negatively impacted by events affecting this
sector. The industrials sector may be affected by changes in the supply of and
demand for products and services, product obsolescence, claims for environmental
damage or product liability and general economic conditions, among other
factors.
TBA
Securities and Rolls Risk.
The principal risks of TBA transactions are increased credit risk and increased
overall investment exposure. The Fund may enter into TBA roll transactions, in
which the Fund sells MBS for delivery in the current month and simultaneously
contracts to purchase substantially similar securities on a specified future
date from the same party. The investor may assume some risk because the
characteristics of the MBS delivered to the investor may be less favorable than
the MBS the investor delivered to the dealer. Because the dealer is not
obligated to return the identical MBS collateral that the investor has
delivered, both parties usually transact the dollar roll with generic MBS pools
that have the same or less value than the average TBA-eligible
security.
TIPS
Risk.
Interest payments on TIPS are unpredictable and will fluctuate as the principal
and corresponding interest payments are adjusted for inflation. There can be no
assurance that the CPI will accurately measure the real rate of inflation in the
prices of goods and services. Any increases in the principal amount of TIPS will
be considered taxable ordinary income, even though the Fund will not receive the
principal until maturity. As a result, the Fund may make income distributions to
shareholders that exceed the cash it receives. In addition, TIPS are subject to
credit risk and interest rate risk (see “Credit Risk,” and “Interest Rate Risk,”
for more information on these risks).
Tracking
Error Risk.
As with all index funds, the performance of the Fund and its Index may differ
from each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by its Index. In addition,
the Fund may not be fully invested in the securities of its Index at all times
or may hold securities not included in its Index. The use of sampling techniques
may affect the Fund’s ability to achieve close correlation with its Index. The
Fund may use a representative sampling strategy to achieve its investment
objective, if the Adviser believes it is in the best interest of the Fund, which
generally can be expected to produce a greater non-correlation
risk.
Uncertain
Tax Treatment. The
Fund may invest a portion of its net assets in below investment grade
instruments. Investments in these types of instruments may present special tax
issues for the Fund. U.S. federal income tax rules are not entirely clear about
issues such as when the Fund may cease accruing interest, OID or market
discount, when and to what extent deductions may be taken for bad debts or
worthless instruments, how payments received on obligations in default should be
allocated between principal and income and whether exchanges of debt obligations
in a bankruptcy or workout context are taxable. These and other issues will be
addressed by the Fund to the extent necessary to seek to ensure that it
distributes sufficient income that it does not become subject to U.S. federal
income or excise tax.
U.S.
Government Obligations Risk. The
total public debt of the United States as a percentage of gross domestic product
has grown rapidly since the beginning of the 2008–2009 financial downturn.
Although high debt levels do not necessarily indicate or cause economic
problems, they may create certain systemic risks if sound debt management
practices are not implemented. A high national debt can raise concerns that the
U.S. government will not be able to make principal or interest payments when
they are due. This increase has also necessitated the need for the U.S. Congress
to negotiate adjustments to the statutory debt limit to increase the cap on the
amount the U.S. government is permitted to borrow to meet its existing
obligations and finance current budget deficits. In August 2011, S&P lowered
its long term sovereign credit rating on the U.S. In explaining the downgrade at
that time, S&P cited, among other reasons, controversy over raising the
statutory debt limit and growth in public spending. On August 2, 2019, following
passage by Congress, the President of the United States signed the Bipartisan
Budget Act of 2019, which suspends the statutory debt limit through July 31,
2021. Any controversy or ongoing uncertainty regarding the statutory debt
ceiling negotiations may impact the U.S. long-term sovereign credit rating and
may cause market uncertainty. As a result, market prices and yields of
securities supported by the full faith and credit of the U.S. government may be
adversely affected.
Valuation
Risk. It
may be difficult for the Fund to purchase and sell particular investments within
a reasonable time at a fair price, or the price at which it has been valued for
purposes of the Fund’s net asset value, causing the Fund to be less liquid and
unable to sell securities for what the Adviser believes is the appropriate price
of the investment. Valuation of portfolio investments may be difficult, such as
during periods of market turmoil or reduced liquidity and for investments that
trade infrequently or irregularly. In these and other circumstances, an
investment may be valued using fair value methodologies, which are inherently
subjective, reflect good faith judgments based on available information and may
not accurately estimate the price at which the Fund could sell the investment at
that time. Based on its investment strategies, a significant portion of the
Fund’s investments can be difficult to value and potentially less liquid and
therefore particularly prone to these risks.
When-Issued,
Delayed Delivery, and Forward Commitment Risks. The
purchase of securities on a when-issued, delayed delivery, or forward commitment
basis involves a risk of loss if the value of the security to be purchased
declines prior to the settlement date. Although the Fund would generally
purchase securities on a when-issued, delayed delivery, or forward commitment
basis with the intention of actually acquiring securities for its portfolio, it
may dispose of a when- issued or delayed delivery security or forward commitment
prior to settlement if the SoFi Weekly Income ETF’s Sub-Adviser deems it
appropriate to do so.
User
Bias Risk.
The securities that comprise the Index are selected by retail investors holding
SoFi Accounts, who may not be professional investors, may have no financial
expertise, and may not do any research on the companies in which they invest
prior to investing. In some cases, investment decisions made may be influenced
by non-quantitative factors, including, without limitation, cognitive and
emotional biases, resulting in the inclusion of certain securities in the Index
which may underperform the market generally and result in lower returns for the
Fund.
Information
about each Fund’s daily portfolio holdings is available on the Funds’ website at
www.sofi.com/invest/etfs/. A complete description of the Funds’ policies and
procedures with respect to the disclosure of the Funds’ portfolio holdings is
available in the Funds’ Statement of Additional Information
(“SAI”).
Investment
Adviser
Toroso
Investments, LLC, 898 N. Broadway, Suite 2, Massapequa, New York 11758, serves
as investment adviser to the Funds and has overall responsibility for the
general management and administration of the Funds pursuant to an investment
advisory agreement with the Trust, on behalf of the Funds (the “Advisory
Agreement”). The Adviser also arranges for sub-advisory, transfer agency,
custody, fund administration, and all other related services necessary for the
Funds to operate. Toroso is a Delaware limited liability company founded in
March 2012 that is dedicated to understanding, researching and managing assets
within the expanding ETF universe. As of May 31, 2021, Toroso had assets under
management of approximately $7.5 billion.
With
respect to the SoFi Weekly Income ETF, the Adviser provides oversight of the
Sub-Adviser, monitoring of the Sub-Adviser’s buying and selling of securities
for the SoFi Weekly Income ETF, and review of the Sub-Adviser’s performance.
With respect to the SoFi Gig Economy ETF, the Adviser is responsible for
determining the securities purchased and sold by the Fund. For the services it
provides to the Funds, each Fund pays the Adviser a unified management fee,
which is calculated daily and paid monthly, at an annual rate based on the
applicable Fund’s average daily net assets as set forth in the table
below.
|
|
|
|
|
|
|
|
|
Name
of Fund |
Management
Fee |
Management
Fee After Waiver |
SoFi
Select 500 ETF |
0.19% |
0.00% |
SoFi
Next 500 ETF |
0.19% |
0.00% |
SoFi
Social 50 ETF |
0.29% |
0.29% |
SoFi
Gig Economy ETF |
0.59% |
0.59% |
SoFi
Weekly Income ETF |
0.59% |
0.59% |
The
Adviser has contractually agreed to waive its unified management fee for the
SoFi Select 500 ETF and SoFi Next 500 ETF until at least June 30, 2022. The fee
waiver agreement may be terminated only by, or with the consent of, the
Board.
Under
the Advisory Agreement, the Adviser has agreed to pay all expenses incurred by
each Fund except for interest charges on any borrowings, dividends and other
expenses on securities sold short, taxes, brokerage commissions and other
expenses incurred in placing orders for the purchase and sale of securities and
other investment instruments, acquired fund fees and expenses, accrued deferred
tax liability, extraordinary expenses, distribution fees and expenses paid by
the Fund under any distribution plan adopted pursuant to Rule 12b-1 under the
1940 Act, and the unified management fee payable to the Adviser (collectively,
the “Excluded Expenses”).
Sub-Adviser
- SoFi Weekly Income ETF
Income
Research + Management, a Massachusetts business trust, located at 100 Federal
Street, 30th
Floor, Boston, Massachusetts 02110, serves as investment sub-adviser to the SoFi
Weekly Income ETF pursuant to a sub-advisory agreement between the Adviser and
the Sub-Adviser (the “Sub-Advisory Agreement”). IR+M is responsible for the
day-to-day management of the SoFi Weekly Income ETF’s portfolio, including
determining the securities purchased and sold by the SoFi Weekly Income ETF and
trading portfolio securities for the SoFi Weekly Income ETF, subject to the
supervision of the Adviser and the Board. IR+M specializes in managing U.S.
fixed income portfolios for institutional and private clients, as well as
managing several U.S. fixed income private investment funds and collective
investment trusts for qualified investors. For its services, IR+M is paid a fee
by the Adviser, which fee is calculated daily and paid monthly, at an annual
rate of the SoFi Weekly Income ETF’s average daily net assets as follows: 0.35%
on the first $20 million; 0.30% on the next $80 million; 0.20% on the next $200
million; 0.15% on the next $300 million; 0.10% on the next $400 million; and
0.075% on amounts over $1 billion.
A
discussion regarding the basis for the Board’s approval of the Index ETFs’ and
the SoFi
Gig Economy ETF’s
Advisory Agreement is available in the Index ETFs’ and the SoFi
Gig Economy ETF’s
semi-annual report to shareholders for the period ended August 31,
2019.
A
discussion regarding the basis for the Board’s approval of the SoFi Weekly
Income ETF’s Advisory Agreement and Sub-Advisory Agreement is available in the
Fund’s annual report to shareholders for the period ended February 28,
2021.
Portfolio
Managers
The
Index ETFs are managed by Charles A. Ragauss, CFA, Portfolio Manager for the
Adviser. Mr. Ragauss has been the portfolio manager for each Index ETF since the
inception of each Index ETF in 2019.
The
SoFi Gig Economy ETF is jointly managed by Michael Venuto, Chief Investment
Officer for the Adviser, Charles A. Ragauss, CFA, Portfolio Manager for the
Adviser, and David Dziekanski, Portfolio Manager for the Adviser. Mr. Venuto and
Mr. Ragauss have each been a portfolio manager for the SoFi Gig Economy ETF
since its inception in 2019. Mr. Dziekanski has been a portfolio manager for the
SoFi Gig Economy ETF since September 2020.
The
SoFi Weekly Income ETF is jointly managed by William A. O’Malley, CFA, Chief
Executive Officer and Co-Chief Investment Officer for IR+M, James E. Gubitosi,
CFA, Senior Portfolio Manager and Co-Chief Investment Officer for IR+M, and
William O’Neill, CFA, Senior Portfolio Manager for IR+M and each has served as a
portfolio manager since its inception in 2020. Charles A. Ragauss, CFA,
Portfolio Manager for the Adviser, oversees trading and execution for the SoFi
Weekly Income ETF and has served as a portfolio manager since its inception in
2020.
Portfolio
Managers of the Adviser (All Funds)
Michael
Venuto, Chief Investment Officer for the Adviser
Mr.
Venuto is a co-founder and has been the Chief Investment Officer of the Adviser
since 2012. Mr. Venuto is an ETF industry veteran with over a decade of
experience in the design and implementation of ETF-based investment strategies.
Previously, he was Head of Investments at Global X Funds where he provided
portfolio optimization services to institutional clients. Before that, he was
Senior Vice President at Horizon Kinetics where his responsibilities included
new business development, investment strategy and client and strategic
initiatives.
Charles
A. Ragauss, CFA, Portfolio Manager for the Adviser
Mr.
Ragauss serves as Portfolio Manager at the Adviser, having joined the Adviser in
September 2020. Mr. Ragauss previously served as Chief Operating Officer and in
other roles at CSat Investment Advisory, L.P., doing business as Exponential
ETFs from April 2016 to September 2020. Previously, Mr. Ragauss was Assistant
Vice President at Huntington National Bank (“Huntington”), where he was Product
Manager for the Huntington Funds and Huntington Strategy Shares ETFs, a combined
fund complex of almost $4 billion in assets under management. At Huntington, he
led ETF development bringing to market some of the first actively managed ETFs.
Mr. Ragauss joined Huntington in 2010. Mr. Ragauss attended Grand Valley State
University where he received his Bachelor of Business Administration in Finance
and International Business, as well as a minor in French. He is a member of both
the National and West Michigan CFA societies and holds the CFA
designation.
David
Dziekanski, Portfolio Manager for the Adviser
Mr.
Dziekanski has 18 years of experience in the asset management industry, 14 years
as a portfolio manager in the ETF space. He has been a Portfolio Manager and
Partner at the Adviser since 2013. Previously, he was a portfolio manager and
head of research and trading for Ladenburg Thalmann Asset Management, working on
internal ETF-based models. Mr. Dziekanski co-founded Foursight Capital Partners
in 2020 in the seed round venture space. Mr. Dziekanski earned a Triple Major
degree in Applied Mathematics, Finance, and Economics from Washington University
in St. Louis, and a Master of Science in Finance from Washington University in
St. Louis.
Portfolio
Managers of the Sub-Adviser (SoFi Weekly Income ETF)
William
A. O’Malley, CFA, Chief Executive Officer and Co-Chief Investment Officer for
IR+M
Mr.
O’Malley joined IR+M in September 1994 and was named Chief Executive Officer in
January 2020. In his role as Chief Executive Officer, Mr. O’Malley is
responsible for leading the operations and day-to-day business functions of
IR+M. As Co-Chief Investment Officer, Mr. O’Malley partners with Mr. James E.
Gubitosi to lead IR+M’s Investment Professionals and they share responsibility
for all investment activity and investment results. Mr. O’Malley is also the
Chairperson of IR+M’s Management Committee and serves on IR+M’s Board of
Trustees. Prior to joining IR+M, Mr. O’Malley was a Vice President at Wellington
Management Company, LLP, and also worked at the Vanguard Group, and in Morgan
Stanley’s Fixed Income Division. Mr. O’Malley has a BA in Political Science from
Amherst College (1984) and an MBA from The Wharton School, University of
Pennsylvania (1989).
James
E. Gubitosi, CFA, Senior Portfolio Manager and Co-Chief Investment Officer for
IR+M
Mr.
Gubitosi joined IR+M in March of 2007 as an Analyst and was named Co-Chief
Investment Officer in January 2020. As Co-Chief Investment Officer, Mr. Gubitosi
partners with Mr. William A. O’Malley to lead IR+M’s Investment Professionals
and they share responsibility for all investment activity and results. Mr.
Gubitosi is also a member of IR+M’s Management Committee. Prior to joining IR+M,
Mr. Gubitosi was a Senior Analyst at Financial Architects Partners. Mr. Gubitosi
has a BSBA from Boston University School of Management.
William
O’Neill, CFA, Senior Portfolio Manager for IR+M
Mr.
O’Neill joined IR+M in July 2004 as an Analyst, assisting IR+M with its broad
fixed income research and analysis efforts. He was promoted to Portfolio Manager
in 2008 and subsequently to Senior Portfolio Manager in 2013, focusing on credit
investing and broad asset allocation. Mr. O’Neill serves on IR+M’s Product
Committee. Prior to joining IR+M, Mr. O’Neill was a Trader at
Investors
Bank and Trust. In this role, he focused on the securitized and rates markets
with responsibilities in trading, analysis, and idea generation. Mr. O’Neill has
a BSBA in Finance from the University of Rhode Island and an MBA from F.W. Olin
Graduate School of Business, Babson College.
The
Funds’ SAI provides additional information about the Portfolio Managers’
compensation structure, other accounts that the Portfolio Managers manage, and
the Portfolio Managers’ ownership of Shares.
CFA®
is a registered trademark owned by the CFA Institute.
The
Adviser has entered into an Agreement with SoFi, under which SoFi assumes the
obligation of the Adviser to pay all expenses of the Funds, except Excluded
Expenses (such expenses of the Funds, except Excluded Expenses, the “Unitary
Expenses”). Although SoFi has agreed to be responsible for the Unitary Expenses,
the Adviser retains the ultimate obligation to the Funds to pay such expenses.
SoFi will also provide marketing support for the Funds, including hosting the
Funds’ website and preparing marketing materials related to the Funds. For these
services and payments, SoFi is entitled to a fee, paid by the Adviser, based on
the total management fee earned by the Adviser under the Advisory Agreement less
the Unitary Expenses and certain start-up costs. SoFi does not make investment
decisions, provide investment advice, or otherwise act in the capacity of an
investment adviser to the Funds.
SoFi
also provided support to the Index Provider in developing the methodology used
by each Index ETF’s underlying Index to determine the securities included in
such Index. However, SoFi is not involved in the maintenance of each such Index
and does not act in the capacity of an index provider.
Each
Fund issues and redeems Shares only in Creation Units at the NAV per share next
determined after receipt of an order from an AP. Only APs may acquire Shares
directly from a Fund, and only APs may tender their Shares for redemption
directly to a Fund, at NAV. APs must be a member or participant of a clearing
agency registered with the SEC and must execute a Participant Agreement that has
been agreed to by the Distributor (defined below), and that has been accepted by
the Funds’ transfer agent, with respect to purchases and redemptions of Creation
Units. Once created, Shares trade in the secondary market in quantities less
than a Creation Unit.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Individual Shares are listed for trading on the secondary market on the Exchange
and can be bought and sold throughout the trading day like other publicly traded
securities.
When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the spread between the
bid and the offer price in the secondary market on each leg of a round trip
(purchase and sale) transaction. In addition, because secondary market
transactions occur at market prices, you may pay more than NAV when you buy
Shares, and receive less than NAV when you sell those Shares.
Book
Entry
Shares
are held in book-entry form, which means that no stock certificates are issued.
Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding Shares.
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. DTC’s
participants include 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 right 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 other securities that you hold in book-entry or
“street name” through your brokerage account.
Frequent
Purchases and Redemptions of Shares
The
Funds impose no restrictions on the frequency of purchases and redemptions of
Shares. In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by Fund shareholders. Purchases
and redemptions by APs, who are the only parties that may purchase or redeem
Shares directly with the Funds, are an essential part of the ETF process and
help keep Share trading prices in line with the NAV. As such, the Funds
accommodate frequent purchases and redemptions by APs. However, the Board has
also determined that frequent purchases and redemptions for cash may increase
tracking error and portfolio transaction costs and may lead to the realization
of capital gains. To minimize these potential consequences of frequent purchases
and redemptions, the Funds employ fair value pricing and may impose transaction
fees on purchases and redemptions of Creation Units to cover the custodial and
other costs incurred by the Funds in effecting trades. In addition, the Funds
and the Adviser reserve the right to reject any purchase order at any
time.
Determination
of Net Asset Value
Each
Fund’s NAV is calculated as of the scheduled close of regular trading on the New
York Stock Exchange (“NYSE”), generally 4:00 p.m. Eastern Time, each day
the NYSE is open for business. The NAV for each Fund is calculated by dividing
the Fund’s net assets by its Shares outstanding.
In
calculating its NAV, each Fund generally values its assets on the basis of
market quotations, last sale prices, or estimates of value furnished by a
pricing service or brokers who make markets in such instruments. The values of
non-U.S. dollar denominated securities are converted to U.S. dollars using
foreign currency exchange rates generally determined as of 4:00 p.m., London
time. If such information is not available for a security held by a Fund or is
determined to be unreliable, the security will be valued at fair value estimates
under guidelines established by the Board (as described below).
Fair
Value Pricing
The
Board has adopted procedures and methodologies to fair value Fund securities
whose market prices are not “readily available” or are deemed to be unreliable.
For example, such circumstances may arise when: (i) a security has been delisted
or has had its trading halted or suspended; (ii) a security’s primary pricing
source is unable or unwilling to provide a price; (iii) a security’s primary
trading market is closed during regular market hours; or (iv) a security’s value
is materially affected by events occurring after the close of the security’s
primary trading market. Generally, when fair valuing a security, the Funds will
take into account all reasonably available information that may be relevant to a
particular valuation including, but not limited to, fundamental analytical data
regarding the issuer, information relating to the issuer’s business, recent
trades or offers of the security, general and/or specific market conditions, and
the specific facts giving rise to the need to fair value the security. Fair
value determinations are made in good faith and in accordance with the fair
value methodologies included in the Board-adopted valuation procedures. Due to
the subjective and variable nature of fair value pricing, there can be no
assurance that a Fund will be able to obtain the fair value assigned to the
security upon the sale of such security.
Investments
by Other Registered Investment Companies in the Funds
Section 12(d)(1)
of the 1940 Act restricts investments by registered investment companies in the
securities of other investment companies, including Shares. Registered
investment companies are permitted to invest in the Funds beyond the limits set
forth in Section 12(d)(1), subject to certain terms and conditions set forth in
an SEC exemptive order issued to the Trust or rule under the 1940 Act, including
that such investment companies enter into an agreement with the
Funds.
Delivery
of Shareholder Documents – Householding
Householding
is an option available to certain investors of the Funds. Householding is a
method of delivery, based on the preference of the individual investor, in which
a single copy of certain shareholder documents can be delivered to investors who
share the same address, even if their accounts are registered under different
names. Householding for the Funds is available through certain broker-dealers.
If you are interested in enrolling in householding and receiving a single copy
of prospectuses and other shareholder documents, please contact your
broker-dealer. If you are currently enrolled in householding and wish to change
your householding status, please contact your broker-dealer.
Dividends
and Distributions
Each
of the SoFi Select 500 ETF, the SoFi Next 500 ETF, the SoFi Social 50 ETF, and
the SoFi Gig Economy ETF intends to pay out dividends and interest income, if
any, at least semi-annually, and distribute any net realized capital gains to
its shareholders at least annually. The SoFi Weekly Income ETF intends to pay
out dividends and interest income, if any, weekly, and distribute any net
realized capital gains to its shareholders at least annually. Each Fund will
declare and pay income and capital gain distributions, if any, in cash.
Distributions in cash may be reinvested automatically in additional whole Shares
only if the broker through whom you purchased Shares makes such option
available. Your broker is responsible for distributing the income and capital
gain distributions to you.
Taxes
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the Funds. Your investment
in a Fund may have other tax implications. Please consult your tax advisor about
the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws.
Each
Fund intends to qualify each year for treatment as a regulated investment
company (a “RIC”) under the Code. If it meets certain minimum distribution
requirements, a RIC is not subject to tax at the fund level on income and gains
from investments that are timely distributed to shareholders. However, a Fund’s
failure to qualify as a RIC or to meet minimum distribution requirements would
result (if certain relief provisions were not available) in fund-level taxation
and, consequently, a reduction in income available for distribution to
shareholders.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA plan, you need to be aware of the possible tax
consequences when a Fund makes distributions, when you sell your Shares listed
on the Exchange, and when you purchase or redeem Creation Units (institutional
investors only).
The
tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax
Act”) made significant changes to the U.S. federal income tax rules for taxation
of individuals and corporations, generally effective for taxable years beginning
after December 31, 2017. Many of the changes applicable to individuals are
temporary and would apply only to taxable years before January 1, 2026. There
were only minor changes with respect to the specific rules only applicable to
RICs, such as the Funds. The Tax Act, however, also made numerous other changes
to the tax rules that may affect shareholders and the Funds. Subsequent
legislation has modified certain changes to the U.S. federal income tax rules
made by the Tax Act which may, in addition, affect shareholders and the Funds.
You are urged to consult with your own tax advisor regarding how this
legislation affects your investment in a Fund.
Taxes
on Distributions
For
federal income tax purposes, distributions of net investment income are
generally taxable as ordinary income or qualified dividend income. Taxes on
distributions of net capital gains (if any) are determined by how long a Fund
owned the investments that generated them, rather than how long a shareholder
has owned their Shares. Sales of assets held by a Fund for more than one year
generally result in long-term capital gains and losses, and sales of assets held
by such Fund for one year or less generally result in short-term capital gains
and losses. Distributions of a Fund’s net capital gain (the excess of net
long-term capital gains over net short-term capital losses) that are reported by
such Fund as capital gain dividends (“Capital Gain Dividends”) will be taxable
as long-term capital gains. Distributions of short-term capital gain will
generally be taxable as ordinary income. Dividends and distributions are
generally taxable to you whether you receive them in cash or reinvest them in
additional Shares.
Distributions
reported by a Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided certain holding period and other requirements are met. “Qualified
dividend income” generally is income derived from dividends paid by U.S.
corporations or certain foreign corporations that are either incorporated in a
U.S. possession or eligible for tax benefits under certain U.S. income tax
treaties. In addition, dividends that a Fund receives in respect of stock of
certain foreign corporations may be qualified dividend income if that stock is
readily tradable on an established U.S. securities market. Corporate
shareholders may be entitled to a dividends-received deduction for the portion
of dividends they receive from a Fund that are attributable to dividends
received by the Fund from U.S. corporations, subject to certain limitations.
Shortly
after the close of each calendar year, you will be informed of the character of
any distributions received from a Fund.
In
addition to the federal income tax, certain individuals, trusts, and estates may
be subject to a Net Investment Income (“NII”) tax of 3.8%. The NII tax is
imposed on the lesser of: (i) a taxpayer’s investment income, net of deductions
properly allocable to such income; or (ii) the amount by which such taxpayer’s
modified adjusted gross income exceeds certain thresholds ($250,000 for married
individuals filing jointly, $200,000 for unmarried individuals and $125,000 for
married individuals filing separately). A Fund’s distributions are
includable in a shareholder’s investment income for purposes of this NII
tax. In addition, any capital gain realized by a shareholder upon a sale or
redemption of Fund shares is includable in such shareholder’s investment income
for purposes of this NII tax.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are generally
taxable even if they are paid from income or gains earned by a Fund before your
investment (and thus were included in the Shares’ NAV when you purchased your
Shares).
You
may wish to avoid investing in a Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable even though
it may economically represent a return of a portion of your
investment.
If
you are neither a resident nor a citizen of the United States or if you are a
foreign entity, distributions (other than Capital Gain Dividends) paid to you by
a Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. A Fund may, under certain circumstances,
report all or a portion of a dividend as an “interest-related dividend” or a
“short-term capital gain dividend,” which would generally be exempt from this
30% U.S. withholding tax, provided certain other requirements are
met.
Under
the Foreign Account Tax Compliance Act (“FATCA”), a Fund may be required to
withhold a generally nonrefundable 30% tax on (i) distributions of investment
company taxable income and (ii) distributions of net capital gain and the gross
proceeds of a sale or redemption of Fund shares paid to (A) certain “foreign
financial institutions” unless such foreign financial institution agrees to
verify, monitor, and report to the Internal Revenue Service (“IRS”) the identity
of certain of its account-holders, among other items (or unless such entity is
otherwise deemed compliant under the terms of an intergovernmental agreement
between the United States and the foreign financial institution’s country of
residence), and (B) certain “non-financial foreign entities” unless such entity
certifies to the Fund that it does not have any substantial U.S. owners or
provides the name, address, and taxpayer identification number of each
substantial U.S. owner, among other items. In December 2018, the IRS and
Treasury Department released proposed Treasury Regulations that would eliminate
FATCA withholding on Fund distributions of net capital gain and the gross
proceeds from a sale or redemption of Fund shares. Although taxpayers are
entitled to rely on these proposed Treasury Regulations until final Treasury
Regulations are issued, these proposed Treasury Regulations have not been
finalized, may not be finalized in their proposed form, and are potentially
subject to change. This FATCA withholding tax could also affect a Fund’s return
on its investments in foreign securities or affect a shareholder’s return if the
shareholder holds its Fund shares through a foreign intermediary. You are urged
to
consult
your tax adviser regarding the application of this FATCA withholding tax to your
investment in a Fund and the potential certification, compliance, due diligence,
reporting, and withholding obligations to which you may become subject in order
to avoid this withholding tax.
Each
Fund (or a financial intermediary, such as a broker, through which a shareholder
owns Shares) generally is required to withhold and remit to the U.S. Treasury a
percentage of the taxable distributions and sale or redemption proceeds paid to
any shareholder who fails to properly furnish a correct taxpayer identification
number, who has underreported dividend or interest income, or who fails to
certify that they are not subject to such withholding.
Taxes
When Shares are Sold on the Exchange
Any
capital gain or loss realized upon a sale of Shares generally is treated as a
long-term capital gain or loss if Shares have been held for more than one year
and as a short-term capital gain or loss if Shares have been held for one year
or less. However, any capital loss on a sale of Shares held for six months or
less is treated as long-term capital loss to the extent of Capital Gain
Dividends paid with respect to such Shares. Any loss realized on a sale will be
disallowed to the extent Shares of a Fund are acquired, including through
reinvestment of dividends, within a 61-day period beginning 30 days before and
ending 30 days after the sale of substantially identical Shares.
Taxes
on Purchases and Redemptions of Creation Units
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered plus the amount of any cash paid for the
Creation Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The IRS may
assert, however, that a loss that is realized upon an exchange of securities for
Creation Units may not be currently deducted under the rules governing “wash
sales” (for an AP who does not mark-to-market their holdings) 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 wash sale rules apply and when a loss might be deductible.
Any
capital gain or loss realized upon redemption of Creation Units is generally
treated as long-term capital gain or loss if Shares comprising the Creation
Units have been held for more than one year and as a short-term capital gain or
loss if such Shares have been held for one year or less.
A
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. A Fund may sell
portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause a Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the redemption in-kind. As a result, a Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
Taxation
of REIT Investments
In
general, qualified REIT dividends that an investor receives directly from a REIT
are automatically eligible for the 20% qualified business income deduction. The
IRS has issued final Treasury Regulations that permit a dividend or part of a
dividend paid by a RIC and reported as a “section 199A dividend” to be treated
by the recipient as a qualified REIT dividend for purposes of the 20% qualified
business income deduction, if certain holding period and other requirements have
been satisfied by the recipient with respect to its Fund shares.
Foreign
Investments by a Fund
Interest
and other income received by a Fund with respect to foreign securities may give
rise to withholding and other taxes imposed by foreign countries. Tax treaties
or conventions between certain countries and the United States may reduce or
eliminate such taxes. If as of the close of a taxable year more than 50% of the
value of a Fund’s assets consists of certain foreign stock or securities, such
Fund will be eligible to elect to “pass through” to investors the amount of
foreign income and similar taxes paid by such Fund during that taxable year.
This means that investors would be considered to have received as additional
income their respective shares of such foreign taxes, but may be entitled to
either a corresponding tax deduction in calculating taxable income, or, subject
to certain limitations, a credit in calculating federal income tax. If a Fund
does not so elect, such Fund will be entitled to claim a deduction for certain
foreign taxes incurred by such Fund. A Fund (or its administrative agent) will
notify you if it makes such an election and provide you with the information
necessary to reflect foreign taxes paid on your income tax return.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in each Fund. It is not a substitute for
personal tax advice. You also may be subject to foreign, state and local tax on
Fund distributions and sales of Shares. Consult your personal tax advisor about
the potential tax consequences of an investment in Shares
under
all applicable tax laws. For more information, please see the section entitled
“Federal Income Taxes” in the SAI.
Foreside
Fund Services, LLC (the “Distributor”), the Funds’ distributor, is a
broker-dealer registered with the U.S. Securities and Exchange Commission. The
Distributor distributes Creation Units for the Funds on an agency basis and 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 the Funds. The Distributor’s principal address is Three Canal Plaza,
Suite 100, Portland, Maine 04101.
The
Board has adopted a Distribution (Rule 12b-1) Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, each Fund is authorized
to pay an amount up to 0.25% of its average daily net assets each year for
certain distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Funds, and there are no plans to
impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because the fees are paid out of Fund assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than certain other types of sales charges.
Information
regarding how often Shares of a Fund traded on the Exchange at a price above
(i.e., at a premium) or below (i.e., at a discount) the NAV of the applicable
Fund can be found on the Funds’ website at www.sofi.com/invest/etfs/.
Shares
are not sponsored, endorsed, or promoted by the Exchange. The Exchange is not
responsible for, nor has it participated in the determination of, the timing,
prices, or quantities of Shares to be issued, nor in the determination or
calculation of the equation by which Shares are redeemable. The Exchange has no
obligation or liability to owners of Shares in connection with the
administration, marketing, or trading of Shares.
Without
limiting any of the foregoing, in no event shall the Exchange have any liability
for any lost profits or indirect, punitive, special, or consequential damages
even if notified of the possibility thereof.
The
Adviser, the Sub-Adviser, and each Fund make no 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.
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SoFi
Select 500 ETF |
|
FINANCIAL
HIGHLIGHTS For a capital share outstanding throughout the
year/period |
|
|
|
Year
Ended February 28, 2021 |
|
Period
Ended
February
29, 2020 (1) |
|
Net
asset value, beginning of year/period |
|
$ |
10.38 |
|
|
$ |
10.00 |
|
|
|
|
|
|
|
|
Income
(Loss) from Investment Operations: |
|
|
|
|
|
Net
investment income
(loss)
(2) |
|
0.18 |
|
|
0.17 |
|
|
Net
realized and unrealized gain (loss) on investments |
|
3.54 |
|
|
0.33 |
|
|
Total
from investment operations |
|
3.72 |
|
|
0.50 |
|
|
|
|
|
|
|
|
Less
Distributions: |
|
|
|
|
|
From
net investment income |
|
(0.16) |
|
|
(0.12) |
|
|
From
net realized gain |
|
(0.00) |
(6) |
— |
|
|
Total
distributions |
|
(0.16) |
|
|
(0.12) |
|
|
|
|
|
|
|
|
Net
asset value, end of year/period |
|
$ |
13.94 |
|
|
$ |
10.38 |
|
|
Total
return (3)
(4) |
|
36.04 |
% |
|
4.95 |
% |
|
|
|
|
|
|
|
Ratios
/ Supplemental Data: |
|
|
|
|
|
Net
assets, end of year/period (millions) |
|
$ |
177.1 |
|
|
$ |
73.7 |
|
|
Portfolio
turnover rate |
|
26 |
% |
|
22 |
% |
(3) |
Ratio
of expenses to average net assets |
|
|
|
|
|
Before
management fees waived |
|
0.19 |
% |
|
0.19 |
% |
(5) |
After
management fees waived |
|
0.00 |
% |
|
0.00 |
% |
(5) |
Ratio
of net investment income (loss) to average net assets |
|
|
|
|
|
Before
management fees waived |
|
1.25 |
% |
|
1.60 |
% |
(5) |
After
management fees waived |
|
1.44 |
% |
|
1.79 |
% |
(5) |
|
|
|
|
|
|
(1)
The Fund commenced operations on April 10, 2019. The information presented
is from April 10, 2019 to February 29, 2020. |
|
(2)
Calculated using average shares outstanding method. |
|
(3)
Not annualized. |
|
(4)
The total return is based on the Fund’s net asset value. Additional
performance information is presented in the Performance
Summary. |
|
(5)
Annualized. |
|
|
|
|
|
(6)
Does not round to $0.01 or $(0.01), as applicable. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SoFi
Next 500 ETF |
|
FINANCIAL
HIGHLIGHTS For a capital share outstanding throughout the
year/period |
|
|
|
Year
Ended February 28, 2021 |
|
Period
Ended
February
29, 2020 (1) |
|
Net
asset value, beginning of year/period |
|
$ |
9.62 |
|
|
$ |
10.00 |
|
|
|
|
|
|
|
|
Income
(Loss) from Investment Operations: |
|
|
|
|
|
Net
investment income
(loss)
(2) |
|
0.16 |
|
|
0.13 |
|
|
Net
realized and unrealized gain (loss) on investments |
|
3.67 |
|
|
(0.40) |
|
|
Total
from investment operations |
|
3.83 |
|
|
(0.27) |
|
|
|
|
|
|
|
|
Less
Distributions: |
|
|
|
|
|
From
net investment income |
|
(0.14) |
|
|
(0.11) |
|
|
From
net realized gain |
|
(0.00) |
(6) |
— |
|
|
Total
distributions |
|
(0.14) |
|
|
(0.11) |
|
|
|
|
|
|
|
|
Net
asset value, end of year/period |
|
$ |
13.31 |
|
|
$ |
9.62 |
|
|
Total
return (3)
(4) |
|
40.17 |
% |
|
(2.84) |
% |
|
|
|
|
|
|
|
Ratios
/ Supplemental Data: |
|
|
|
|
|
Net
assets, end of year/period (millions) |
|
$ |
24.6 |
|
|
$ |
9.1 |
|
|
Portfolio
turnover rate |
|
53 |
% |
|
55 |
% |
(3) |
Ratio
of expenses to average net assets |
|
|
|
|
|
Before
management fees waived |
|
0.19 |
% |
|
0.19 |
% |
(5) |
After
management fees waived |
|
0.00 |
% |
|
0.00 |
% |
(5) |
Ratio
of net investment income (loss) to average net assets |
|
|
|
|
|
Before
management fees waived |
|
1.29 |
% |
|
1.29 |
% |
(5) |
After
management fees waived |
|
1.48 |
% |
|
1.48 |
% |
(5) |
|
|
|
|
|
|
(1)
The Fund commenced operations on April 10, 2019. The information presented
is from April 10, 2019 to February 29, 2020. |
|
(2)
Calculated using average shares outstanding method. |
|
(3)
Not annualized. |
|
(4)
The total return is based on the Fund’s net asset value. Additional
performance information is presented in the Performance
Summary. |
|
(5)
Annualized. |
|
|
|
|
|
(6)
Does not round to $0.01 or $(0.01), as applicable. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SoFi
Social 50 ETF |
|
FINANCIAL
HIGHLIGHTS For a capital share outstanding throughout the
year/period |
|
|
|
Year
Ended February 28, 2021 |
|
Period
Ended
February
29, 2020 (1) |
|
Net
asset value, beginning of year/period |
|
$ |
18.73 |
|
|
$ |
20.00 |
|
|
|
|
|
|
|
|
Income
(Loss) from Investment Operations: |
|
|
|
|
|
Net
investment income
(loss)
(2) |
|
0.12 |
|
|
0.15 |
|
|
Net
realized and unrealized gain (loss) on investments |
|
10.64 |
|
|
(1.27) |
|
|
Total
from investment operations |
|
10.76 |
|
|
(1.12) |
|
|
|
|
|
|
|
|
Less
Distributions: |
|
|
|
|
|
From
net investment income |
|
(0.11) |
|
|
(0.15) |
|
|
Total
distributions |
|
(0.11) |
|
|
(0.15) |
|
|
|
|
|
|
|
|
Net
asset value, end of year/period |
|
$ |
29.38 |
|
|
$ |
18.73 |
|
|
Total
return (3)
(4) |
|
57.67 |
% |
|
(5.67) |
% |
|
|
|
|
|
|
|
Ratios
/ Supplemental Data: |
|
|
|
|
|
Net
assets, end of year/period (millions) |
|
$ |
11.8 |
|
|
$ |
2.8 |
|
|
Portfolio
turnover rate |
|
414 |
% |
|
168 |
% |
(3) |
Ratio
of expenses to average net assets |
|
0.29 |
% |
|
0.29 |
% |
(5) |
Ratio
of net investment income (loss) to average net assets |
|
0.52 |
% |
|
0.92 |
% |
(5) |
|
|
|
|
|
|
(1)
The Fund commenced operations on May 7, 2019. The information presented is
from May 7, 2019 to February 29, 2020. |
|
(2)
Calculated using average shares outstanding method. |
|
(3)
Not annualized. |
|
(4)
The total return is based on the Fund’s net asset value. Additional
performance information is presented in the Performance
Summary. |
|
(5)
Annualized. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SoFi
Gig Economy ETF |
|
FINANCIAL
HIGHLIGHTS For a capital share outstanding throughout the
year/period |
|
|
|
Year
Ended February 28, 2021 |
|
Period
Ended
February
29, 2020 (1) |
|
Net
asset value, beginning of year/period |
|
$ |
18.56 |
|
|
$ |
20.00 |
|
|
|
|
|
|
|
|
Income
(Loss) from Investment Operations: |
|
|
|
|
|
Net
investment income
(loss)
(2) |
|
(0.11) |
|
|
(0.05) |
|
|
Net
realized and unrealized gain (loss) on investments |
|
23.14 |
|
|
(1.39) |
|
|
Total
from investment operations |
|
23.03 |
|
|
(1.44) |
|
|
|
|
|
|
|
|
Less
Distributions: |
|
|
|
|
|
From
net investment income |
|
(0.12) |
|
|
— |
|
|
Total
distributions |
|
(0.12) |
|
|
— |
|
|
|
|
|
|
|
|
Net
asset value, end of year/period |
|
$ |
41.47 |
|
|
$ |
18.56 |
|
|
Total
return (3)
(4) |
|
124.22 |
% |
|
(7.22) |
% |
|
|
|
|
|
|
|
Ratios
/ Supplemental Data: |
|
|
|
|
|
Net
assets, end of year/period (millions) |
|
$ |
51.8 |
|
|
$ |
7.4 |
|
|
Portfolio
turnover rate |
|
68 |
% |
|
33 |
% |
(3) |
Ratio
of expenses to average net assets |
|
0.59 |
% |
|
0.59 |
% |
(5) |
Ratio
of net investment income (loss) to average net assets |
|
(0.36) |
% |
|
(0.36) |
% |
(5) |
|
|
|
|
|
|
(1)
The Fund commenced operations on May 7, 2019. The information presented is
from May 7, 2019 to February 29, 2020. |
|
(2)
Calculated using average shares outstanding method. |
|
(3)
Not annualized. |
|
(4)
The total return is based on the Fund’s net asset value. Additional
performance information is presented in the Performance
Summary. |
|
(5)
Annualized. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SoFi
Weekly Income ETF |
|
FINANCIAL
HIGHLIGHTS For a capital share outstanding throughout the
year/period |
|
|
|
Period
Ended
February
28, 2021 (1) |
|
Net
asset value, beginning of period |
|
$ |
100.00 |
|
|
|
|
|
|
Income
(Loss) from Investment Operations: |
|
|
|
Net
investment income
(loss)
(2) |
|
1.16 |
|
|
Net
realized and unrealized gain (loss) on investments |
|
3.73 |
|
|
Total
from investment operations |
|
4.89 |
|
|
|
|
|
|
Less
Distributions: |
|
|
|
From
net investment income |
|
(1.05) |
|
|
Total
distributions |
|
(1.05) |
|
|
|
|
|
|
Net
asset value, end of period |
|
$ |
103.84 |
|
|
Total
return (3)
(4) |
|
4.91 |
% |
|
|
|
|
|
Ratios
/ Supplemental Data: |
|
|
|
Net
assets, end of period (millions) |
|
$ |
20.8 |
|
|
Portfolio
turnover rate |
|
8 |
% |
(3) |
Ratio
of expenses to average net assets |
|
0.59 |
% |
(5) |
Ratio
of net investment income (loss) to average net assets |
|
2.73 |
% |
(5) |
|
|
|
|
(1)
The Fund commenced operations on October 1, 2020. The information
presented is from October 1, 2020 to February 28, 2021. |
|
(2)
Calculated using average shares outstanding method. |
|
(3)
Not annualized. |
|
(4)
The total return is based on the Fund’s net asset value. Additional
performance information is presented in the Performance
Summary. |
|
(5)
Annualized. |
|
|
|
|
|
|
|
|
|
|
|
SoFi
Select 500 ETF
SoFi
Next 500 ETF
SoFi
Social 50 ETF
SoFi
Gig Economy ETF
SoFi
Weekly Income ETF
|
|
|
|
|
|
|
|
|
|
|
|
Adviser |
Toroso
Investments, LLC
898
N. Broadway, Suite 2
Massapequa,
New York 11758 |
Administrator |
Tidal
ETF Services LLC
898
N. Broadway, Suite 2
Massapequa,
New York 11758 |
Sub-Adviser (SoFi
Weekly Income ETF) |
Income
Research + Management
100
Federal Street, 30th
Floor
Boston,
Massachusetts 02110 |
Distributor |
Foreside
Fund Services, LLC
Three
Canal Plaza, Suite 100
Portland,
Maine 04101 |
Custodian |
U.S.
Bank National Association
1555
N. Rivercenter Dr.
Milwaukee,
Wisconsin 53212
|
Independent
Registered Public Accounting Firm |
Tait,
Weller & Baker LLP
Two
Liberty Place
50
S. 16th
Street
Philadelphia,
Pennsylvania 19102 |
Sub-Administrator,
Fund Accountant, and Transfer Agent |
U.S.
Bancorp Fund Services, LLC
615
East Michigan Street
Milwaukee,
Wisconsin 53202 |
Legal
Counsel |
Godfrey
& Kahn, S.C.
833
East Michigan Street, Suite 1800
Milwaukee,
Wisconsin 53202 |
Investors
may find more information about the Funds in the following documents:
Statement
of Additional Information: The
Funds’ SAI provides additional details about the investments of the Funds and
certain other additional information. A current SAI dated June 28, 2021, as
supplemented from time to time, is on file with the SEC and is herein
incorporated by reference into this Prospectus. It is legally considered a part
of this Prospectus.
Annual/Semi-Annual
Reports: Additional
information about each Fund’s investments is available in the Funds’ annual and
semi-annual reports to shareholders. In the annual report you will find a
discussion of the market conditions and investment strategies that significantly
affected each Fund’s performance during the Fund’s prior fiscal year or
period.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Funds by contacting the Funds at SoFi ETFs, c/o U.S.
Bank Global Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or
calling (877) 358-0096.
These
documents and other information about the Funds are also available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov; or
•Free
of charge from the Funds’ Internet website at www.sofi.com/invest/etfs/;
or
(SEC
Investment Company Act
File
No. 811-23377)