Investment Philosophy

The New Economy and the Return of Alpha. 

 

The ongoing debate between Passive and Active investing has been raging for quite some time.  Proponents of Active investing theorize that excess returns above the broader market, or Alpha, can be achieved by taking an active hand in investment selection.  Conversely, believers in Passive investing espouse the idea that equity markets are efficient and simply investing in indexes will prove to be the best approach in the long run.

There are many areas of the market where passive investing makes sense. If an investor wants to gain exposure to the broad US equity market, a collection of mature and efficient industries, there are few things better to deliver this than an S&P 500 index fund. However, at TrueMark, we believe that the burgeoning New Economy has created a class of nascent economic segments that are just beginning to progress up the maturation curve. These younger economic segments are heavily characterized by inefficiencies. Where inefficiencies exist, there will most definitely be winners AND losers. These types of inefficiencies also represent a tremendous opportunity to capture significant capital appreciation. We believe that the most effective way to maximize the potential Alpha of these New Economy asset classes is through the Active management of our portfolios by credible investment experts, supported by the deep industry knowledge of our advisors.

 

Nascent Asset Classes Offer Opportunities

 

When examining New Economy segments such as Artificial Intelligence and Cannabis et al, we see rare long-term potential.  In our opinion, the question facing these areas is not IF they will become large, profitable and significant portions of the economy, but WHEN.  The premise of our investment philosophy begins with identifying areas of the New Economy that should significantly disrupt existing industries.  That disruption has the potential to exceed market growth in revenue, profit and share price.  Fundamentally, this is how we would define “nascent” asset classes.  We believe that Artificial Intelligence will disrupt the existing revenue structure of the Information Technology sector and Cannabis should create a similar disruption in certain Consumer Products, particularly Alcohol and Tobacco.  The sheer size of the sectors that are being disrupted means that the opportunity for players in these asset classes is momentous in the long run.

 

Not All Disruptive Companies Are Created Equal

 

An active approach to investing is particularly relevant in the asset classes of the New Economy.  The companies operating in these industries are attempting to change the landscape of the economy, either by offering completely new products or by fundamentally changing the way their industries operate.  When this happens, the monetary opportunity is enormous for all participants.   But these industries are still in their early stages, and the possibility of tremendous gain attracts many participants.  Some of these companies will succeed and some will fail.  The potential winners will have the kind of experience, personnel, industry reach and relationships that increase the likelihood of their success.  Other “pretenders” will not have these advantages and are less likely to succeed.  When constructing and maintaining a portfolio in a New Economy asset class, expertise in the field is essential for portfolio managers to identify and avoid the ‘pretenders’ while focusing investment on those companies that are best positioned to succeed over the long term in these highly competitive spaces.  TrueMark’s portfolio managers rely on lengthy investment experience, industry-specific acumen and the expertise of our Industry Advisors in actively positioning our portfolios to fully realize the long-term secular return opportunity of the New Economy.

Investment Process

 

  • The universe of potential companies is initially dictated by our focus on burgeoning, nascent asset classes. Long term investment decisions are derived by identifying disruptive industries in the New Economy and then further limiting our investment universe to a field of companies that have a secular tailwind.

  • TrueMark pairs highly credentialed, experienced and industry-specific Portfolio Managers with deeply knowledgeable Industry Advisors. We believe this creates investment teams with the knowledge and the reach to understand what is happening in these quickly evolving industries in real-time. Through their meticulous research, we identify the underlying factors that should lead to long-term success in these highly competitive businesses. These factors are then applied to our investable universe to identify the best-in-breed companies for each facet of the industry. Finally, we use fundamental company level research to gain insight into the relative value of these high-quality names within their respective subsector, the industry itself and the market overall.

  • TrueMark portfolios are specifically designed to capture the potential alpha of a secular growth story. Relying on our research process, our goal is to choose the winners and avoid the losers in each of the industries we invest in, and in doing so, potentially deliver better long-term results to our investors. Exposure to these companies will be attained through the implementation of concentrated portfolios designed for the long term. Our goal is to buy and hold these best-of-breed names while limiting turnover to only the necessary levels. Essentially, this means entering or exiting a position, or the opportunistic increase or decrease of an existing position based on valuation. In our opinion, trading excessively in response to noise is not the best way to capture alpha. Long-term investing in companies with a competitive edge is.

  • Management team changes, reversals in competitive imbalances, the addition or subtraction of a major financial partner and systemic valuation adjustments. These are all realistic scenarios in New Economy industries. With this in mind, our teams continuously monitor our portfolio holdings, their respective industry and the broader market to ensure that we continue to own the best-of-breed. This is coupled with a tailored risk management program which incorporates sub-industry exposure, cash management, and security limits with an understanding of the volatility and risk associated with these nascent industries.

MANAGER & ASSET CLASS SELECTION

The Future is Now. A commonly used statement that can carry several different interpretations depending upon context. But what does it mean to the investment world? The answer is far from simple. In some segments, the “New Economy” is exploding onto the scene. Developments in Cannabis, Artificial Intelligence, and Socially Responsible Investing, to name just a few, are triggering massive paradigm shifts and disrupting traditional economic hierarchies. In others, the broader equity indices continue their relentless march toward market efficiency, passivity and fee compression.

At TrueMark, we feel that these nascent asset classes of the New Economy offer investors the most favorable environment in which to pursue capital appreciation. The combination of competitive inefficiency and eye-popping growth potential that exists in these dynamic segments makes them well-suited targets for our active, alpha-seeking investment strategies. We strongly believe that expert navigation of these landscapes is imperative, and it is this belief that represents the backbone of our manager selection process.

TrueMark will only enter an asset class in which we have identified an appropriately capable investment manager. We marry highly credentialed, experienced and industry-specific Portfolio Managers with deeply knowledgeable Industry Advisors to create a credible and effective investment team. The integrity and thoroughness of this selection process is paramount to delivering the true, targeted, actively managed exposure to the Modern Economy asset classes that our clients have come to not only expect, but also deserve.

 Before investing, carefully consider the True-Shares ETFs investment objectives, risks, charges and expenses. Specific information about the True-Shares is contained in the prospectus and a summary prospectus, copies of which may be obtained by visiting true-shares.com. Read the prospectus carefully before you invest. Foreside Fund Services, LLC, distributor.

An investment in TrueMark ETFs involve investment risks, which may adversely affect the Fund's net asset value per share (“NAV”), trading price, yield, total return and/or ability to meet its objective. There is no guarantee that the investment objectives of any fund or strategy will be met. An ETF that focuses on one sector may undergo more price fluctuations than a fund that invests its assets more broadly. A fund could lose money, or its performance could trail that of other investment alternatives. For a complete description of risks associated with each Fund please refer to the prospectus.

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The TrueMark AI & Deep Learning ETF (AI ETF) is also subject to the following risks: Artificial Intelligence, Machine Learning and Deep Learning Investment Risk - the extent of such technologies’ versatility has not yet been fully explored. There is no guarantee that these products or services will be successful and the securities of such companies, especially smaller, start-up companies, are typically more volatile than those of companies that do not rely heavily on technology. Foreign Securities Risk -The Fund invests in foreign securities which involves certain risks such as currency volatility, political and social instability and reduced market liquidity. Growth Investing Risk - The risk of investing in growth stocks that may be more volatile than other stocks because they are more sensitive to investor perceptions of the issuing company’s growth potential. IPO Risk - The Fund may invest in companies that have recently completed an initial public offering that are unseasoned equities lacking a trading history, a track record of reporting to investors, and widely available research coverage. IPOs are thus often subject to extreme price volatility and speculative trading. New Issuer Risk - Investments in shares of new issuers involve greater risks than investments in shares of companies that have traded publicly on an exchange for extended periods of time. Non-Diversification Risk - The Fund is non-diversified which means it may be invested in a limited number of issuers and susceptible to any economic, political and regulatory events than a more diversified fund.

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