12117 FM 2244 Bldg 3, #170 Austin, TX 78738

Investment Vehicles

ETFs are baskets of securities that seek to track various market indexes, and are traded on national stock exchanges. The advantages of ETFs-low cost, diversification, transparency, liquidity/price efficiency, and tax efficiency-allow us to manage the portfolio’s risk and equity exposure with rigorous precision. Like index mutual funds, most ETFs are diversified baskets of securities that seek to mimic the performance of an established index. Unlike index mutual funds, ETFs are priced and traded like stocks throughout the day, and bought and sold on the exchange.

Their published daily holdings provide transparency and can offer precise strategic broad market or market segment exposure to sectors, styles, countries, geographic regions, currency, and commodities that are tailored to investor goals, risk tolerance and time horizon.

As index-based investment vehicles, ETFs seek to offer:

– Transparency
– Liquidity
– Tax efficiency
– Pricing efficiency
– Indexed performance
– No hidden fees2
– Diversification with precision
– Little to no tracking error
– Low fees and expenses1

 

  1. While trading costs do apply, ETFs generally have lower costs than other investment products because most ETFs are not actively managed and because ETFs are insulated from the costs of having to buy and sell securities to accommodate shareholder purchases and redemptions. ETFs typically have lower marketing, distribution and accounting expenses.
  2. ETFs have transparent portfolios and are priced at frequent intervals throughout the trading day.

ETF Selection Process

Exchange traded funds (ETFs) provide investors with a single, tradable security for gaining exposure to an index. In the U.S. alone, ETF assets under management have grown to nearly $1 trillion.

A critical component of our investment process is of course to seek what we feel is the best set of ETFs for each asset class in the investment discipline. A proprietary framework is used to examine the structural integrity and the investment metrics of each ETF in the marketplace.

In summary, we review the assets managed by the ETF, in addition to the normal dollar volume liquidity of the ETF, in the context of:

  1. The size of the market and the liquidity of the underlying asset class the ETF represents
  2. The likely size of the position we intend to establish
  3. The sophistication of the ETF provider

We work closely with the most sophisticated ETF providers as part of this process.


Shares of the Innealta Capital Funds are currently offered only in the United States to U.S. investors and are not available for sale in any jurisdiction other than the United States. The information on this Web site should not be considered a solicitation to buy or an offer to sell shares of the Innealta Capital Funds in any jurisdiction where it would be unlawful under the securities law of that jurisdiction.

Investors should carefully consider the investment objectives, risks, charges and expenses of the Innealta Funds. This and other important information about the Funds are contained in the prospectus, which can be obtained at www.innealtafunds.com or by calling 888.994.6827. The prospectus should be read carefully before investing. The Innealta Funds are distributed by Northern Lights Distributors, LLC, member FINRA/SIPC.

Mutual Funds involve risk including the possible loss of principal.

There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses

The Funds are ‘fund of funds’ products and typically invest in other investment companies such as ETFs.  The costs of investing in the Funds will generally be higher than the cost of investing directly in the ETFs or other investment company shares.  Investments in ETFs may not completely replicate the performance of the underlying index and carry security specific and market risk.  Investments by the Funds in inverse and leveraged ETFs may magnify and compound changes in the Funds’ share price and result in increased volatility, potential loss and prevent the fund from achieving investment objectives.

The value of investments in ETNs and ETFs that own fixed income securities will fluctuate with changes in interest rates.  Typically, a rise in interest rates causes a decline of fixed income securities, with a greater effect on longer term maturities.  ETNs are a type of unsecured, unsubordinated debt security with characteristics similar to fixed income securities that trade similar to ETFs.  Risk associated with ETNs include credit, market, liquidity, and price-tracking, holding period, conflicts of interest, early redemption and acceleration risks.  The Funds may invest in high yield and unrated securities or ‘junk bonds’, which may be subject to greater levels of credit and liquidity risk including default.  The securities are considered speculative with respect to the issuer’s ability to make principal and interest payments and investment could result in a loss. 

Investing in foreign securities and ETFs that hold foreign securities and foreign currency involves risks not generally associated with investments in U.S. Companies.  Risks include fluctuations in foreign currency, currency exchange controls, political and economic instability, differences in financial reporting and securities regulation, trading and taxations issues.  These risks may be greater in emerging markets which may have relatively unstable governments, weaker economics and less developed legal systems with few security holder rights. 

The earnings and prospectus of small and medium capitalization companies or ETFs that invest in such companies are more volatile than larger companies and may experience higher failure rates than larger companies.  The Advisor’s perceptions of a company’s growth or value may be incorrect and those securities may not perform as expected or reach their intrinsic value, reducing Fund performance.  The Funds may engage is short-term trading with portfolio turnover rates in excess of 100% which may subject the Funds to higher costs, decreased performance and increased taxable distributions.

Investments in securities issued by, or with exposure to, commercial and residential real estate companies are associated with risks similar to those with direct ownership of real estate, including changes in local and general economic conditions, vacancy rates, interest rates, zoning laws, rental income, property taxes operation expenses and losses from casualty or condemnation.  REIT investments have additional risks including poor manager performance, adverse tax consequences and limited diversification.  The Funds’ investment in volatility ETFs will increase exposure to cash during periods of high market volatility and are not expected to gain the full benefit of rising equity markets is such market conditions were also accompanied by high volatility. 

Commodities and derivatives markets (including options and futures) may subject the Funds to greater volatility than investments in traditional securities.  Commodities are subject to environmental and geologic risks such as weather, disease as well as government regulation.  Derivative instruments include risks that  a counterparty to a transaction may not fulfill its obligations, improper valuations, or the value of the derivative may not correlate perfectly with the underlying asset.

Diversification does not assure a profit or protect against loss in a declining market.

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