The Reality Shares DIVS ETF (DFND) is managed by Reality Shares, Inc., the issuer behind this unique fund. Reality Shares developed the proprietary DIVCON Dividend Health Scoring system, which forms the foundation of the Index that DFND seeks to track. This scoring system identifies and ranks companies based on their dividend growth potential, aiming to select high-quality dividend growers and short low-quality dividend cutters. DFND's investment approach reflects Reality Shares' expertise in dividend-focused strategies, offering investors the opportunity to benefit from the theory that companies with consistent dividend growth tend to outperform the broader market, while those with stagnant or declining dividends often underperform. The fund provides a long/short portfolio strategy to enhance returns with lower volatility and reduced market correlation, demonstrating the issuer's commitment to innovative investment solutions.
While the primary focus of the ETF known as DFND may revolve around its passive management and strategy, it's essential to understand its approach to dividend distribution. DFND employs a passive management approach to track the total return performance of its underlying Index, which consists of large- and mid-capitalization stocks in the euro zone. The ETF's dividend distribution is influenced by the dividend policies and performances of these constituent companies. DFND typically maintains positions in either the FTSE Eurozone Index, a combination of the Index and 3-Month US Treasury bills, or 100% 3-Month US Treasury bills, depending on the relative performance of the Index and its 200-day moving average. This approach ensures that DFND investors may experience varying levels of dividend income based on market conditions and the ETF's position within its strategy.
Tracking the DIVCON Dividend Health Index is the primary objective of the Alternative Sources DFND ETF. This ETF seeks to replicate the performance of the Index, which is developed by Reality Shares, Inc., an Index Provider. The Index is designed to capture the potential for investment returns by identifying companies with consistent dividend growth (High Quality Dividend Growers) and those with a high probability of decreasing dividends (Low Quality Dividend Cutters). The ETF utilizes Reality Shares' DIVCON Dividend Health Scoring system to select and weight these companies in its portfolio. With a focus on long and short positions, the ETF aims to provide investors with lower volatility and lower equity market correlation compared to a long-only portfolio. It is rebalanced regularly to maintain its target exposure to the Long and Short Portfolios, and as of March 31, 2023, it includes companies with market capitalizations ranging from $8.6 billion to $3 trillion within its universe. The ETF may use a representative sampling approach and invest in various financial instruments to achieve its investment objective, providing exposure to the Index's evolving composition. As of the date of this Prospectus, the ETF has significant exposure to the Technology and Industrial sectors, following the Index's sector concentration.
The correlation aspect of the DFND ETF, which seeks to track the performance of the Index developed by Reality Shares, Inc., is primarily tied to the underlying strategy of selecting high-quality dividend growers (High Quality Companies) and shorting low-quality dividend cutters (Low Quality Companies). As such, the correlation of DFND is influenced by the performance of these dividend-focused strategies. High-quality dividend growers are expected to have a positive correlation with the broader market, while low-quality dividend cutters are expected to have a negative correlation. DFND's correlation with specific sectors and industries may vary over time due to the changing composition of the Index.
The Defiance Next Gen Dividend ETF (DFND) primarily focuses on selecting companies that have the highest probability of increasing their dividends in a 12-month period, known as High Quality Dividend Growers. Conversely, it also includes companies with the highest probability of decreasing their dividends, referred to as Low Quality Dividend Cutters. This strategy is executed based on Reality Shares' proprietary DIVCON Dividend Health Scoring system, resulting in a long portfolio of Dividend Growers and a short portfolio of Dividend Cutters. DFND aims to provide investors with more stable returns, lower volatility, and reduced equity market correlation compared to a traditional long-only portfolio, with a focus on dividend health and quality. As of the date of this information, the Fund has significant exposure to the Technology and Industrial sectors, with the sectors it invests in evolving over time based on Index composition changes.
The exposure characteristic of the Reality Shares DIVS ETF (DFND) revolves around its unique strategy to capture companies that consistently grow their dividends while shorting companies that are likely to cut their dividends. DFND tracks the performance of the Reality Shares DIVS Index, which employs a proprietary DIVCON Dividend Health Scoring system. This approach allows the ETF to provide investors with exposure to high-quality dividend growers and low-quality dividend cutters, aiming to outperform the overall market returns. For those seeking a differentiated investment strategy based on dividend health, DFND's exposure offers a distinctive avenue to navigate the equity market landscape.For more detailed insights into the exposure, correlations, and overlap of DFND and other U.S. ETFs, consider using the ETF Insider web app. It provides comprehensive data and visualization tools to help investors make informed decisions about their ETF investments, including understanding how DFND's exposure aligns with their portfolio objectives.
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