ETF Pulse Check Navigating the Complex Landscape of The Brinsmere Fund - Growth ETF

The Brinsmere Fund - Growth ETF (TBFG) stands out as a dynamic investment vehicle, offering exposure to both global equity and bond markets through its innovative dual proprietary strategies. Estate Counselors LLC has crafted TBFG to be actively managed, aiming for long-term capital growth by leveraging two tactical asset allocation frameworks — the Systematic Market Beta Strategy (SMB) and the Classic Asset Allocation Revisited Strategy (CAAR). These strategies enable TBFG to systematically rebalance its holdings monthly, ensuring adaptability to market conditions and risk management. With a growth-focused model, TBFG maintains an equity floor target of 35% and a cap of 85%, which aligns with its goal of delivering multi-asset exposure while mitigating market risk. Amidst a backdrop of geopolitical tensions and evolving economic policies, TBFG's relevance is underscored by its strategic approach in navigating an increasingly complex investment landscape.

Basic Information
The Brinsmere Fund - Growth ETF, known by the ticker TBFG, is an offering from Estate Counselors LLC, launched on January 12th, 2024. The ETF carries an expense ratio of 0.42%, reflecting moderate management costs in the context of actively managed funds. TBFG's portfolio is concentrated, with its top 15 holdings comprising a substantial portion of its investment weight. Notably, SPDR Portfolio S&P 500 ETF (SPLG) holds 13.97%, followed by Columbia EM Core ex-China ETF (XCEM) at 10.09%, and other significant allocations such as Vanguard FTSE Pacific ETF (VPL) at 7.45%, illustrating its diversified yet focused exposure. The financial sector predominates the fund's sector allocation, accounting for 80.49%, while real estate follows at 2.52%. The fund has experienced varied net flow ratios over 7-day and 30-day periods, at 0.42% and 0.12%, respectively. Return performance metrics indicate a challenging environment with average returns over 6 months, 1 year, and 3 years showing minimal or negative growth, compounded by volatility figures that suggest a stable yet cautious investment climate. Maximum return drawdowns remain consistent across longer time horizons, reflecting controlled risk management.

News Summary
Recent developments in the geopolitical and economic arenas are set to impact the ETF landscape significantly. The Israel-Iran conflict has heightened geopolitical tensions, with potential US involvement likely to affect energy markets, which could influence ETFs sensitive to inflation such as the abrdn Bloomberg All Commodity Strategy K-1 Free ETF (BCI) and Real Estate Select Sector SPDR Fund (XLRE). Meanwhile, the Federal Reserve's stance on interest rates, indicating possible cuts, poses both opportunities and risks. While lower rates might stimulate growth benefiting ETFs like Vanguard Growth ETF (VUG) and Invesco QQQ Trust (QQQ), they could also exacerbate inflationary pressures impacting TBFG's bond holdings. Trade negotiations, particularly between the US and Canada, and the EU, could affect industrial sectors, with potential disruptions in supply chains impacting ETFs like Vanguard Value ETF (VTV) and SPDR Portfolio S&P 500 ETF (SPLG). Political instability in Thailand adds further complexity, potentially affecting emerging market exposures such as Columbia EM Core ex-China ETF (XCEM) and Vanguard FTSE Emerging Markets ETF (VWO).

Analyst Rating: Strong Sell
The Brinsmere Fund - Growth ETF exhibits several critical weaknesses across key performance dimensions. The fund's expense ratio, at 0.42%, highlights a potentially inefficient cost structure that may deter cost-conscious investors. Capital flow analysis presents a mixed picture; while the 7-day net flow ratio of 0.42% suggests some investor interest, the 30-day ratio at 0.12% reflects potential volatility or reduced inflows over an extended period. Return performance is particularly concerning, with average returns over 6 months, 1 year, and 3 years indicating poor growth prospects and investor dissatisfaction. Although return stability shows promise with a low standard deviation, premium stability issues persist, marked by higher standard deviation figures. Concentration risk is elevated, given the top 15 holdings comprise 83% of the total weight, and the financial sector alone accounts for 80.49%, exposing the fund to sector-specific downturns. These factors collectively limit the ETF's overall investment appeal.

Backtest Scenario
A backtest of The Brinsmere Fund - Growth ETF against financial sector performance during the 2023 inflation spike and Fed rate changes reveals underperformance relative to the broader financial sector. During this period, financial sector fluctuations were driven by higher interest rates, benefiting banks and similar entities, whereas TBFG, with its focus on growth stocks, faced challenges due to its sensitivity to inflation and monetary policy adjustments. Growth stocks typically rely on future earnings projections, which are vulnerable to inflationary pressures and rising interest rates. Consequently, TBFG's performance lagged behind sectors that exhibited resilience under these macroeconomic conditions, highlighting the ETF's struggle in adapting to inflationary environments and interest rate hikes.

Risk Outlook
The Brinsmere Fund - Growth ETF is poised to encounter several forward-looking risks that may impact its future performance. Geopolitical tensions, particularly involving US engagement in the Israel-Iran conflict, could significantly affect TBFG's energy-related holdings, leading to potential volatility in oil prices and influencing inflation-sensitive ETFs. The Federal Reserve's potential interest rate cuts introduce dual-edged risks, where economic growth stimulation may benefit growth-focused ETFs but simultaneously exacerbate inflationary pressures, adversely affecting TBFG's bond allocations. Trade negotiations between the US and Canada, alongside EU-US trade talks, present uncertainties that may disrupt supply chains, influencing industrials ETFs. TBFG's substantial exposure to the financial sector adds vulnerability to sector-specific shocks. Political instability in Thailand further complicates TBFG's emerging market holdings, underscoring the multifaceted risks that the fund must navigate in the coming months.

Conclusion
The Brinsmere Fund - Growth ETF presents a challenging investment case, primarily suited for aggressive investors willing to navigate its complex risk landscape. Its concentrated sector exposure and sensitivity to macroeconomic shifts necessitate careful monitoring of geopolitical developments, interest rate policies, and international trade negotiations. Going forward, investors should remain vigilant of the fund's ability to adapt to changing market conditions and its performance relative to more resilient sectors during periods of economic uncertainty.