Get inside Wall Street with StreetInsider Premium. Claim your 1-week free trial here.
|
|
ADVISORSHARES POSEIDON DYNAMIC CANNABIS ETF (NYSE Arca
Ticker: PSDN)
SUMMARY PROSPECTUS – January 11, 2022
Before you invest in the AdvisorShares Fund,
you may want to review the Fund’s prospectus and statement of additional information, which contain more information about the Fund
and the risks of investing in the Fund. The Fund’s current prospectus
and statement of additional information, each dated November 10, 2021, as supplemented from time to time, are incorporated by reference
into this summary prospectus. You can find the Fund’s prospectus and statement of additional information, as well as other information
about the Fund, online at http://advisorshares.com/etfs/psdn. You may also obtain this information at no charge by calling 877.843.3831
or by sending an email request to info@advisorshares.com.
INVESTMENT OBJECTIVE
The AdvisorShares Poseidon Dynamic Cannabis ETF (the “Fund”)
seeks long-term capital appreciation.
FUND FEES AND EXPENSES
This table describes the fees and expenses that you may
pay if you buy, hold and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries,
which are not reflected in the table below.
| SHAREHOLDER FEES (fees paid directly from your investment) | None |
|
ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) |
|
| MANAGEMENT FEES | 0.80% |
| DISTRIBUTION (12b-1) FEES | 0.00% |
| OTHER EXPENSES* | 0.12% |
| TOTAL ANNUAL OPERATING EXPENSES | 0.92% |
| * | Because the Fund is new, “Other Expenses” are based on estimated amounts for the current fiscal year. |
EXAMPLE
This Example is intended to help you compare the cost
of investing in the shares of the Fund with the cost of investing in other funds. This Example does not take into account brokerage commissions
and other fees to financial intermediaries that you may pay when purchasing or selling shares of the Fund. If these fees were included,
your costs would be higher.
The Example assumes that you invest $10,000 in the Fund
for the time periods indicated and then sell all of your shares at the end of those periods. The Example also assumes that your investment
has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
| 1 YEAR | 3 YEARS | |
| AdvisorShares Poseidon Dynamic Cannabis ETF | $94 | $293 |
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions,
when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Total Annual
Operating Expenses or in the Example, affect the Fund’s performance. This rate excludes the value of portfolio securities received
or delivered as a result of in-kind creations or redemptions of the Fund’s shares. The Fund is new and does not yet have a portfolio
turnover rate.
PRINCIPAL INVESTMENT STRATEGIES
The Fund is an actively managed exchange-traded fund (“ETF”)
that seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets (plus any borrowings
for investment purposes) in (i) securities of companies that derive at least 50% of their net revenue directly from the marijuana and
hemp business or from providing services, products or technology to the marijuana and hemp business, and (ii) derivatives that have economic
characteristics similar to such securities. The Fund primarily invests in exchange-listed equity securities, including common and preferred
stock, of U.S. and foreign mid-, small- and micro-capitalization companies, and in total return swaps intended to provide exposure to
such companies. Poseidon Investment Management, LLC (the “Sub-Advisor”), the Fund’s investment sub-advisor, may seek
investment opportunities through initial public offerings (“IPOs”).
Using total return swaps, the Sub-Advisor may, at its
discretion, dynamically adjust the Fund’s overall market exposure to marijuana and hemp companies through leverage of up to one
and a half times (1.5x), or 150% of, the Fund’s total assets. The Sub-Advisor will adjust the Fund’s net exposure to leverage
in order to seek exposure to a greater rate of growth over the long term and potentially deliver improved risk-adjusted returns, as compared
to a fund without leverage.
In addition to its investment in securities of companies
that derive a significant portion of their revenue from the marijuana and hemp business, and in derivatives providing exposure to such
securities, the Fund may invest up to 20% of its assets in securities of companies that, in the opinion of the Sub-Advisor, may have current
or future revenues from cannabis-related business or that are registered with the Drug Enforcement Agency (the “DEA”) specifically
for the purpose of handling marijuana for lawful research and development of cannabis or cannabinoid-related products.
Cannabis securities may be categorized among a wide variety
of sectors and industries including agriculture, biotechnology, pharmaceuticals, real estate, retail, and finance. The types of companies
that may engage in cannabis-related business include companies that conduct medical research, produce drug products, manufacture hemp
products, or engage in agricultural activities, real estate activities, or financial services activities. The terms “marijuana”
and “cannabis” are used interchangeably. Hemp refers to the industrial/commercial use of the cannabis stalk and seed for textiles,
foods, papers, body care products, detergents, plastics and building materials. Cannabinoids are the chemical compounds secreted by cannabis
plants. Cannabinoids can also be synthetically produced chemical compounds and used in lawful research and development of prescription
drugs or other products utilizing cannabinoids as an active ingredient. The Sub-Advisor believes that continued legislative changes and
social acceptance of cannabis in its various formats could lead to significant growth in cannabis-related public corporations. Companies
involved in cannabis-related business could also benefit from significant merger and acquisition activity as the cannabis market matures.
The Fund will not invest directly in or hold ownership in any companies that engage in cannabis-related business unless permitted by national
and local laws of the relevant jurisdiction including, but not limited to, U.S. federal and state laws.
The Fund will concentrate at least 25% of its investments
in the Pharmaceuticals, Biotechnology & Life Sciences Industry Group within the Health Care Sector. The Fund is non-diversified and
may invest a greater percentage of its assets in a particular issuer than a diversified fund.
The Sub-Advisor may use a variety of methods for security
selection. As the Fund primarily focuses on certain industries, the Sub-Advisor intends to select companies that it believes have competitive
advantages in their respective markets, or those in unique positions for growth and expansion. The Sub-Advisor will utilize fundamental
research, market analysis, numerous outside analyst ratings and stock selection rating tools. The Sub-Advisor will carefully consider
the Fund’s amount of equity exposure and leverage when making adjustments at its discretion. In addition, the Sub-Advisor may invest
the Fund’s assets in lesser-known companies that the Sub-Advisor believes have a unique opportunity for growth. At times, the Sub-Advisor
may aim to buy certain out-of-favor stocks believed to be at prices below their future potential value, as measured by the Sub-Advisor
or outside analysts. The Fund may sell a security when the Sub-Advisor believes that the security is overvalued or better investment opportunities
are available, or to limit position size within the Fund’s portfolio.
In addition, the Fund may lend portfolio securities to
brokers, dealers and other financial organizations that meet capital and other credit requirements or certain other criteria. In connection
with its securities lending activities, the Fund may invest in repurchase agreements.
PRINCIPAL RISKS OF INVESTING IN THE FUND
The Fund is subject to a number of risks, described below,
that may affect the value of its shares, including the possible loss of money. As with any fund, there is no guarantee that the Fund will
achieve its investment objective.
Cannabis-Related Company Risk. Cannabis-related
companies are subject to various laws and regulations that may differ at the state/local and federal level. These laws and regulations
may significantly affect a cannabis-related company’s ability to secure financing, impact the market for marijuana business sales
and services, and set limitations on marijuana use, production, transportation, and storage. In addition to regulatory action, litigation
initiated by private citizens or companies could have a negative impact on the financial and/or operational status of cannabis-related
companies. Cannabis-related companies may also be required to secure permits and authorizations from government agencies to cultivate
or research marijuana. In addition, cannabis-related companies are subject to the risks associated with the agricultural, biotechnology,
and pharmaceutical industries.
U.S. Regulation of Marijuana. Although
the medical use of marijuana is legal in more than half of the states, as well as the District of Columbia, and non-medical use of marijuana
is legal in an increasing number of states and the District of Columbia, the possession and use of marijuana remains illegal under U.S.
federal law. Actions by federal regulatory agencies, such as increased enforcement of federal marijuana laws and the prosecution
of nonviolent federal drug crimes by the U.S. Department of Justice (the “DOJ”) could produce a chilling effect on the industry’s
growth and discourage banks from expanding their services to cannabis-related companies where such services are currently limited. This
conflict between the regulation of marijuana under federal and state law creates volatility and risk for all cannabis-related companies.
Because marijuana is a Schedule I controlled substance, no drug product containing cannabis or cannabis extracts has been approved for
use by the Food and Drug Administration (the “FDA”), nor has such a product obtained registration from the DEA for commercial
production. Further, there is no guarantee that such products will ever be legally produced or sold in the U.S. Cannabis-related companies
in the U.S. that engage in medical or pharmaceutical research or the production and distribution of controlled substances such as marijuana
must be registered with the DEA to perform such activities and have the security, control, recordkeeping, reporting and inventory mechanisms
required by the DEA to prevent drug loss and diversion. With respect to cannabis-related companies and vendors servicing such companies,
the Fund will not make direct investments in the securities of companies that grow, sell, distribute, transport, or handle cannabis unless
they are registered with the DEA or otherwise in compliance with U.S. federal regulations, thus allowing them to legally handle the product.
In addition, because cannabis is a Schedule I controlled substance, Section 280E of the Internal Revenue Code of 1986, as amended (the
“Internal Revenue Code”) applies by its terms to the purchase and sale of medical-use cannabis products and provides that
no deduction or credit is allowed for expenses incurred during a taxable year “in carrying on any trade or business if such trade
or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning
of Schedules I and II of the Controlled Substances Act (the “CSA”)) which is prohibited by federal law or the law of any state
in which such trade or business is conducted.” The disallowance of such tax deductions will likely reduce the value of cannabis-related
companies.
Non-U.S. Regulation of Marijuana. Laws
and regulations related to the possession, use (medical or recreational), sale, transport and cultivation of marijuana vary throughout
the world, and the Fund will only invest in non-U.S. cannabis-related companies if such companies are operating legally in the relevant
jurisdiction. These laws and regulations are subject to change and may have a significant impact on the operations of a cannabis-related
company. Such operations may be legal under current law but may be illegal in the future if the applicable law changes to prohibit marijuana-related
activities vital to the company’s business.
U.S. Regulation of Hemp. Hemp, as defined
in the Agriculture Improvement Act of 2018 (the “Farm Bill”), refers to cannabis plants with a tetrahydrocannabinol (“THC”)
concentration of not more than 0.3% on a dry weight basis. The Farm Bill effectively removes hemp, its extracts, derivatives, and cannabinoids
(including cannabidiol (“CBD”)) from the CSA’s list of controlled substances and allows states to regulate its production,
commerce, and research with approval from the U.S. Department of Agriculture (the “USDA”). Certain portfolio holdings may
sell dietary supplements and/or foods containing CBD within the United States.
While the Farm Bill removes hemp and hemp-derived
products from the controlled substances list under the CSA, it does not legalize CBD in every circumstance. CBD, depending on the source
from which it was derived, can still be classified as a Schedule I substance under the CSA’s definition of “marihuana.”
The exception for CBD from the definition of “marihuana” only applies if the CBD is derived from “hemp.” U.S.
federal law also requires that: (i) the hemp is produced by a licensed producer; and (ii) in a manner consistent with the applicable federal
and state regulations. CBD and other cannabinoids produced from marijuana as defined by the CSA remain an illegal Schedule I substance
under federal law. In addition, many state laws include all CBD within definitions of marijuana and some states have policies or laws
that otherwise prohibit or restrict CBD sales.
Under the Federal Food, Drug, and Cosmetic Act
(the “FD&C”), if a substance (such as CBD) is an active ingredient in a drug product that has been approved by the FDA,
then the substance cannot be sold in dietary supplements or foods without FDA approval, unless the substance was marketed as a dietary
supplement or as a conventional food before the drug was approved or before the new drug investigations were authorized. The FDA has publicly
taken the position that CBD cannot be sold in dietary supplements or foods because CBD is an active ingredient in an FDA-approved drug,
while companies that sell CBD in dietary supplements and foods have taken the contrary position. Because the FDA has not brought enforcement
action against such companies, this question of fact has not yet been adjudicated. In the absence of a conclusive legal determination
to the contrary, as of the date of this prospectus, it has not been determined that the sale of dietary supplements and/or foods containing
CBD within the United States would cause a company’s securities to be ineligible for inclusion in the Fund’s portfolio. It
is possible that such a legal determination or future federal and/or state laws or regulations could materially curtail permissible uses
of hemp, which could have an adverse effect of the value of the Fund’s investments in companies with business interests in hemp
and hemp-based products.
Counterparty Risk. The Fund may invest in financial
instruments involving counterparties that attempt to gain exposure to a particular group of securities, index or asset class without actually
purchasing those securities or investments, or to hedge a position. The Fund’s use of such financial instruments involves risks
that are different from those associated with ordinary portfolio securities transactions. For example, if a swap agreement counterparty
defaults on its payment obligations to the Fund, this default will cause the value of your investment in the Fund to decrease.
Derivatives Risk. Derivatives may be riskier than
other types of investments because they may be more sensitive to changes in economic or market conditions than other types of investments
and could result in losses that significantly exceed the Fund’s original investment. A derivative is a financial contract the value
of which depends on, or is derived from, the value of a financial asset (such as stock, bond or currency), a physical asset (such as gold),
or a market index (such as the S&P 500 Index). Many derivatives create leverage thereby causing the Fund to be more volatile than
it would be if it had not invested in derivatives. Derivatives, such as total return swaps, also expose the Fund to counterparty risk
(the risk that the derivative counterparty will not fulfill its contractual obligations) and to credit risk (the risk that a counterparty
is or is perceived to be unwilling or unable to make timely payments or otherwise meet its contractual obligations).
Equity Risk. The prices of equity securities rise
and fall daily. These price movements may result from factors affecting individual issuers, industries or the securities market as a whole.
In addition, equity markets tend to move in cycles which may cause stock prices to fall over short or extended periods of time.
ETF Market Risk. In stressed market conditions,
the market for certain ETF shares may become less liquid in response to deteriorating liquidity in the markets for the ETF’s underlying
portfolio holdings. This adverse effect on liquidity for the ETF’s shares in turn could lead to differences between the market price
of the ETF’s shares and the underlying value of those shares. In addition, there are a limited number of institutions that act as
authorized participants. If these institutions exit the business or are, for any reason, unable to process creation and/or redemption
orders with respect to the Fund, or purchase and sell securities in connection with creation and/or redemption orders, as applicable,
and no other authorized participant steps forward to create or redeem, or purchase or sell securities, as applicable, Fund shares may
trade at a premium or discount to their net asset value (“NAV”) and possibly face operational issues such as trading halts
and/or delisting. The absence of an active market in the Fund’s shares could lead to a heightened risk of differences between the
market price of the Fund’s shares and the underlying value of those shares.
Foreign Investment Risk. The Fund’s investments
in securities of foreign issuers, may involve certain risks that are greater than those associated with investments in securities of U.S.
issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange
rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial
reporting and legal standards and practices; differing securities market structures; and higher transaction costs. In addition, the securities
of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies.
Canada Risk. The Canadian economy
is susceptible to adverse changes in certain commodities markets, including those related to the agricultural and mining industries. It
is also heavily dependent on trading with key partners. Any reduction in this trading may adversely affect the Canadian economy.
Growth Investing Risk. Growth stocks can
be volatile for several reasons. Since those companies usually invest a high portion of earnings in their businesses, they may lack the
dividends of value stocks that can cushion stock prices in a falling market. The prices of growth stocks are based largely on projections
of the issuer’s future earnings and revenues. If a company’s earnings or revenues fall short of expectations, its stock price
may fall dramatically.
Health Care Sector Risk. Companies in the Health
Care Sector are subject to extensive government regulation and their profitability can be significantly affected by restrictions on government
reimbursement for medical expenses, rising costs of medical products and services, pricing pressure (including price discounting), limited
product lines, litigation, obsolescence of technology and an increased emphasis on the delivery of health care through outpatient services.
Pharmaceuticals, Biotechnology & Life
Sciences Industry Group Risk. The Fund will concentrate at least 25% of its investments in the Pharmaceuticals, Biotechnology &
Life Sciences Industry Group within the Health Care Sector. The business operations and profitability of companies in the Pharmaceuticals,
Biotechnology & Life Sciences Industry Group can be significantly affected by, among other things, government approval of products
and services, government regulation and reimbursement rates, product liability claims, patent expirations and protection, and intense
competition.
IPO Risk. The Fund may invest in securities offered
in IPOs or in companies that have recently completed an IPO. The market value of IPO shares can have significant volatility due to factors
such as the absence of a prior public market, unseasoned trading, a small number of shares available for trading and limited information
about the issuer. The purchase of IPO shares may involve high transaction costs and the Fund may lose money on an investment in such securities.
Leverage Risk. Leverage is investment exposure
that exceeds the initial amount invested. The loss on a leveraged investment may far exceed the Fund’s principal amount invested.
Leverage may magnify the Fund’s gains and losses and, therefore, increase volatility. The use of leverage may result in the Fund
having to liquidate holdings when it may not be advantageous to do so.
Management Risk. The Sub-Advisor continuously evaluates
the Fund’s holdings, purchases and sales with a view to achieving the Fund’s investment objective. However, achievement of
the stated investment objective cannot be guaranteed. The Sub-Advisor’s judgment about the markets, the economy, or companies may
not anticipate actual market movements, economic conditions or company performance, and these factors may affect the return on your investment.
Market Risk. Due to market conditions, the value
of the Fund’s investments may fluctuate significantly from day to day. Price fluctuations may be temporary or may last for extended
periods. This volatility may cause the value of your investment in the Fund to decrease. Local, regional, or global events such as war,
acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant
impact on the market generally and on specific securities. The market value of a security may also decline because of factors that affect
a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry.
Because of its link to the markets, an investment in the Fund may be more suitable for long-term investors who can bear the risk of short-term
principal fluctuations, which at times may be significant.
Micro-Capitalization Risk. Stock prices
of micro-cap companies are significantly more volatile, and more vulnerable to adverse business and economic developments, than those
of larger companies. Micro-cap stocks may also be thinly traded, making it difficult for the Fund to buy and sell them.
Mid-Capitalization Risk. Mid-cap companies may
be more volatile and more likely than large-cap companies to have limited product lines, markets, or financial resources, and to depend
on a few key employees. Returns on investments in stocks of mid-cap companies could trail the returns on investments in stocks of large-cap
companies or the equity market as a whole.
Non-Diversification Risk. As a non-diversified
fund under the federal securities laws, the Fund may invest a greater percentage of its assets in a particular issuer and hold a smaller
number of portfolio securities; therefore, the value of the Fund’s shares may be more volatile than the value of shares of more
diversified funds.
Real Estate Investment Trust Risk. Investment in
real estate companies, including real estate investment trusts (“REITs”), exposes the Fund to the risks of owning real estate
directly. Real estate is highly sensitive to general and local economic conditions and developments. The U.S. real estate market may experience
and has, in the past, experienced a decline in value, with certain regions experiencing significant losses in property values. Many real
estate companies, including REITs, utilize leverage (and some may be highly leveraged), which increases investment risk and the risk normally
associated with debt financing, and could potentially increase the Fund’s volatility and losses. Exposure to such real estate may
adversely affect Fund performance. Further, REITs are dependent upon specialized management skills, and their investments may be concentrated
in relatively few properties, or in a small geographic area or a single property type. REITs are also subject to heavy cash flow dependency
and, as a result, are particularly reliant on the proper functioning of capital markets. A variety of economic and other factors may adversely
affect a lessee’s ability to meet its obligations to a REIT. In the event of a default by a lessee, the REIT may experience delays
in enforcing its rights as a lessor and may incur substantial costs associated in protecting its investments. In addition, a REIT could
fail to qualify for favorable regulatory treatment.
Repurchase Agreement Risk. The Fund will be subject
to credit risk with respect to the counterparties with which the Fund enters into repurchase agreements, including with respect to recovering
or realizing on collateral.
Small-Capitalization Risk. Security prices of small
cap companies may be more volatile than those of larger companies and therefore the Fund’s share price may be more volatile than
those of funds that invest a larger percentage of their assets in securities issued by larger-cap companies. These risks are even greater
for micro-cap companies.
Trading Risk. Shares of the Fund may trade above
or below their NAV. The trading price of the Fund’s shares may deviate significantly from their NAV during periods of market volatility
and, in such instances, you may pay significantly more or receive significantly less than the underlying value of the Fund’s shares.
There can be no assurance that an active trading market for the Fund’s shares will develop or be maintained. In addition, trading
in shares of the Fund may be halted because of market conditions or for reasons that, in the view of the NYSE Arca, Inc. (the “Exchange”),
make trading in shares inadvisable.
Value Investing Risk. Because the Fund may utilize
a value style of investing, the Fund could suffer losses or produce poor results relative to other funds, even in a rising market, if
the Sub-Advisor’s assessment of a company’s value or prospects for exceeding earnings expectations or market conditions is
wrong.
FUND PERFORMANCE
A comparison of the Fund’s performance with that
of a broad measure of market performance may give some indication of the risks of an investment in the Fund; however, the Fund is new
and, therefore, does not have a performance history for a full calendar year. Of course, once the Fund has performance, this past performance
(before and after taxes) does not necessarily indicate how the Fund will perform in the future.
Updated performance information is available on the Fund’s website at
www.advisorshares.com.
MANAGEMENT
| Name | Title |
| AdvisorShares Investments, LLC | Advisor |
| Poseidon Investment Management, LLC | Sub-Advisor |
PORTFOLIO MANAGERS
| Name and Title | Length of Service with Sub- Advisor |
| Emily Paxhia, Co-Founder, Managing Director & Portfolio Manager | since 2017 |
| Morgan Paxhia, Co-Founder, Managing Director & Portfolio Manager | since 2017 |
| Tyler Greif, Managing Director & Portfolio Manager | since 2019 |
PURCHASE AND SALE OF FUND SHARES
The Fund issues and redeems shares on a continuous basis
at NAV only in a large specified number of shares called a “Creation Unit.” Only institutional investors that are acting as
the Fund’s authorized participants (typically broker-dealers) may purchase or redeem Creation Units. A Creation Unit transaction
generally is conducted in exchange for a basket of securities closely approximating the holdings of the Fund along with a specified amount
of cash.
Individual Fund shares may only be purchased and sold
in secondary market transactions through brokers. The shares of the Fund are listed on the Exchange and, because shares trade at market
price rather than at NAV, shares may trade at a value greater than (premium) or less than (discount) NAV. When buying or selling shares
in the secondary market, you may incur costs attributable to the difference between the highest price a buyer is willing to pay to purchase
shares of the Fund (bid) and the lowest price a seller is willing to accept for shares of the Fund (ask) (the “bid-ask spread”).
Recent information regarding the Fund’s NAV, market price, premiums and discounts, and bid-ask spreads will be available on the
Fund’s website at www.advisorshares.com.
TAX INFORMATION
The Fund intends to make distributions that may be taxed
as ordinary income, qualified dividend income or capital gains (or a combination thereof), unless you are investing through a tax-advantaged
arrangement such as a 401(k) plan or an individual retirement account (“IRA”), which may be taxed upon withdrawal.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL
INTERMEDIARIES
Investors purchasing shares in the secondary market through
a brokerage account or with the assistance of a broker may be subject to brokerage commissions and charges. If you purchase Fund shares
through a broker-dealer or other financial intermediary (such as a bank), the Advisor or Sub-Advisor may pay the intermediary for the
sale of Fund shares and related services. These payments may create a conflict of interest by influencing broker-dealers or other intermediaries
and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s
website for more information.