Credit Opportunities ETF

Risk Definitions

Key principal investment risks include, but are not limited to:

• Management Risk: Reliance on proprietary investment processes and subjective asset evaluations may result in decisions that do not achieve intended outcomes.
• Models and Data Risk: Investment exposure relies heavily on proprietary quantitative models and third-party data. Incorrect or incomplete models and data can lead to suboptimal investment decisions. Predictive models carry inherent risks, such as incorrect forecasts and unexpected results in low-probability scenarios, potentially causing losses.
• High-Yield Bond Risk: High-yield or “junk” bonds are speculative, lower-quality securities with a higher risk of default. If they default or undergo reorganization, they may become worthless and are illiquid.
• Fixed-Income Securities Risk: Fixed-income securities face interest rate risk, credit risk, liquidity risk, prepayment risk, extension risk, and duration risk. These factors can cause volatility and impact performance.
• ETF Risks: Shares may trade at prices that differ from NAV, especially during market volatility or when liquidity is limited. A small number of authorized participants and market makers support ETF operations, and their exit could lead to significant discounts or even delisting. Cash redemptions may trigger taxable gains and higher capital gain distributions. Investors also face trading costs, including commissions and bid-ask spreads, which can be substantial for small or frequent trades.
• Business Development Company (“BDC”) Risk:  Exposure to Business Development Companies involves risks related to illiquid or thinly traded investments, limited public information, valuation uncertainty, and regulatory constraints on asset composition and leverage.
• Foreign Investment Risk: Foreign investments may be risker than US investments for many reasons, such as changes in currency exchange rates and unstable political, social, and economic conditions.
• Emerging Market Risk: Emerging markets are riskier than developed markets due to uneven development and the possibility of never fully developing. Investments in these markets may be considered speculative.
• Currency Risk: Exchange rate fluctuations may diminish gains or amplify losses on foreign investments, adversely affecting overall value.
• Geographic Focus Risk: Concentrated exposure to specific regions or countries may lead to increased volatility compared to more geographically diversified investments.
• Distribution Risk: Income from investments may fluctuate due to market conditions, limited income opportunities, valuation challenges, and counterparty risks. There is no guarantee of consistent or ongoing distributions.
• Loans Risk: The market for loans, including bank loans and loan participations, may be illiquid, making them difficult to sell. These investments expose investors to credit risk from both the financial institution and the borrower, with bank loans often settling on a delayed basis, potentially delaying sale proceeds.
• Market Risk: Investment market risks, influenced by economic growth, market conditions, interest rates, and political events, affect asset values. Unexpected events like war, terrorism, financial disruptions, natural disasters, pandemics, and recessions can significantly impact investments and market liquidity, causing investor fear and economic instability.
• Underlying Funds Risk: Investing in underlying funds may result in duplicated fees and added expenses. Each fund carries its own strategy-specific risks, and managers may not execute effectively. ETF shares may trade at premiums or discounts to NAV, and market liquidity or trading costs may impact performance and timing of liquidations.
• Derivatives Risk: Derivatives may involve leverage and imperfect market correlation, leading to losses that exceed initial investment. They carry risks related to liquidity, valuation, counterparty default, and market volatility. Specific instruments—such as futures, credit default swaps, and options—introduce additional complexities, including speculative exposure, margin requirements, and limited payout conditions.
• Valuation Risk: Certain assets may be valued above the price at which they can be sold, potentially resulting in losses if sold at a discount to their estimated value.
• Short Sale Risk: Short positions, including those in derivatives, may expose investors to unlimited losses if the underlying asset rises in value. These positions also incur transaction and financing costs that can reduce returns and increase losses.
• Convertible Securities Risk: Convertible securities carry both equity and debt risks, with sensitivity shifting based on the underlying stock’s price. Their value may fluctuate with equity markets, interest rates, and issuer credit quality, and they generally offer less volatility than stocks but more than traditional debt.

For a complete list of potential investment risks associated with this Fund, please refer to its Prospectus.