RiverNorth Patriot ETF (FLDZ) Commentary - Q1 2022

The RiverNorth Patriot ETF (NYSE: FLDZ) launched January 3rd of this year and is designed to deliver true impact investing to shareholders. The majority of advisory fees and all profits from managing the Fund support Folds of Honor: a charity that provides educational scholarships for the families of America’s military and first responders. Since 2007, Folds of Honor has awarded more than 35,000 scholarships, with 91% of each dollar donated going to these scholarships.

Along with the goal of supporting Folds of Honor, we seek to give our investors exposure to core mid- and large-cap equity with a focus on American businesses that primarily operate within our borders. In our view, FLDZ brings value to those we serve in two ways: The potential to grow one’s capital through an investment in America and provide a regular source of income to a worthy charity that supports American values.

To align the portfolio with our goal of helping those who’ve fought for our country, we invest exclusively in companies that generate at least 90% of their revenues within the United States and are principally traded and domiciled here. To focus on the subset of more developed and liquid American companies, we also exclude any that have a market capitalization of less than $5 Billion at the time of selection.

As a result of the Fund’s mandate, there are some portfolio statistics worth noting. First, the Fund maintains a 99.7% geographic revenue exposure to the United States versus an estimated 60.1% for the S&P 900 – an active exposure of 39.5%. Second, the Fund’s weighting to the Technology sector is about 2% versus 30% for the benchmark. The allocation in the Fund away from Technology and into other sectors is primarily a result of the large companies within this sector who have relatively low revenue exposure to the United States. This is demonstrated below by looking to the geographic revenue exposure of the top 10 constituents of the S&P 900 index, where Technology sector firms are highlighted:

Following a strong finish to 2021, equity markets have exhibited elevated volatility in the first quarter of 2022, facing headwinds due to the geopolitical conflict in Eastern Europe, decades-high inflation, and an increasingly hawkish Federal Reserve. At the daily year-to-date index low of 9,420 witnessed in early March, the S&P 900 had fallen nearly 13% from its January 3rd all-time high of 10,822 before recovering about 7.5% to finish the quarter at 10,221. In line with these observations, FLDZ returned -3.01% on a total return basis in the first quarter compared to the S&P 900 index total return of -4.62%. It is worth noting FLDZ’s lower allocation to Technology and higher allocation to Energy versus the benchmark strongly contributed to outperformance while most of the relative losses by sector were spread across consumer cyclicals, healthcare and industrials, respectively.

Below are some portfolio statistics and the top 5 contributors to and detractors from FLDZ’s 1Q 2022 performance:

We look forward to what the future brings as America and the rest of the world enter the endemic stage of the COVID-19 outbreak and hopefully emerge with a new sense of urgency and patriotism. Thank you for your support of our endeavor as we seek to give back to the families of our nation’s fallen heroes and add value to your portfolio.