The Advisory Series: Investment Grade Corporate 3-7 Year Trust, Series 2 ("Trust") seeks to provide a high level of current income and to preserve capital.
|Wrap Fee Price||$1,007.17|
|Estimated Current Return (ECR)||3.47%|
|Estimated Long Term Return (ELTR)||3.17%|
|Principal Amount of Bonds*||$1,000.08|
|Average Maturity||4.1 Years|
|Estimated Annual Income||$34.9555|
Estimated Annual Income per Unit does take into account the impact of the sale of bonds to pay for the deferred sales charge. Estimated Annual Income per Unit is computed by dividing the estimated annual income of the underlying bonds by the number of units outstanding. The amount may be lower or greater than the above-stated amount due to certain factors that may include, but are not limited to, the selling of bonds to pay for the deferred sales charge, a change in Trust expenses or the sale or maturity of securities in the portfolio. Fees and expenses of the Trust may vary as a result of a variety of factors including the Trust's size, redemption activity, brokerage and other transaction costs and extraordinary expenses.
* Represents the principal amount of the underlying bonds and any cash held in the Trust and does not take into account the impact of the sale of bonds to pay the deferred sales charge or any expenses of the Trust. Bonds will be sold to pay the deferred sales charges, to meet redemptions, to pay expenses and in other limited circumstances. The sale of bonds will affect the principal amount of bonds included in the Trust and the principal amount of bonds per unit. Units of the Trust, when redeemed or upon termination, may be worth more or less than their original cost and there can be no assurance that a unitholder will receive the principal amount of bonds at any particular point in time.
Past performance is no guarantee of future results. Investment returns and principal value will fluctuate with changes in market conditions. Investors' units, when redeemed, may be worth more or less than their original cost.
Principal Investment Strategy
The Trust will primarily consist of a portfolio of investment-grade corporate debt obligations with a dollar-weighted average maturity of between 3-7 years from the Trust’s initial date of deposit (the “Inception Date”).
As of the Inception Date, the Trust’s dollar-weighted average maturity is 4.876 years. The Sponsor will select debt obligations that it believes have the best chance to meet the Trust’s investment objective over its life. As of the Inception Date, at least 80% of the value of the Trust’s assets consists of investment-grade corporate debt obligations maturing in approximately 3-7 years. While the portfolio of the Trust consists primarily of corporate debt obligations, it may also include U.S. government bonds, debt obligations offered by real estate investment Trusts, debt obligations offered by master limited partnerships, sovereign foreign bonds, mortgage- and asset-backed securities and loan participations. Corporate debt obligations are fully taxable debt obligations issued by corporations to finance their operations. The portfolio may hold debt obligations with a maturity of less than three years or greater than seven years. Investment-grade securities will be those securities rated investment-grade quality (i.e., in the category of BBB/Baa or higher) by at least one nationally recognized statistical rating organization or, if unrated, deemed to be of comparable credit characteristics by the Sponsor. Such rating relates to the underlying securities and not the Trust or the value of the units, which will fluctuate. For purposes of the Trust’s 80% policy, the Sponsor believes that any unrated corporate debt obligation held by the Trust would have been rated investment-grade if it was rated by a nationally recognized statistical rating organization. There can be no assurance that any security contained in the Trust will retain an investment-grade rating for the life of the Trust. See “Description of Bond Rating” for additional information. As a result of this strategy, the Trust is concentrated in the financials sector.
The Sponsor has selected Guggenheim Partners Investment Management, LLC (“GPIM”), a subsidiary of Guggenheim Partners, LLC, to assist the Sponsor with the selection of the Trust’s portfolio.
The Sponsor considered the following factors, among others, in selecting the debt obligations:
• All ratings provided for the debt obligations must be rated as investment-grade or above by at least one nationally recognized statistical rating organization or in the case of a debt obligation with no issued ratings, such a debt obligation has credit characteristics similar to those of comparable debt obligations that were rated so as to be acceptable for acquisition by the Trust in the opinion of the Sponsor. For purposes of the Trust’s 80% policy, the Sponsor believes that any unrated corporate debt obligation held by the Trust would have been rated investment-grade if it was rated by a nationally recognized statistical rating organization;
• The price of the debt obligations relative to other debt obligations with comparable characteristics;
• The diversification of debt obligations with respect to the issuer with no one issuer comprising more than 20% of the final portfolio;
• Attractiveness of the interest payments relative to debt obligations with similar characteristics; and
• The potential for early return of principal or any event risk which could have a negative impact on the price of the debt obligations.
Following the Inception Date, a debt obligation may cease to be rated or its rating may be reduced, even to below investment-grade, and the Trust could continue to hold such debt obligation.
Risks and Other Considerations
As with all investments, you may lose some or all of your investment in the Trust. Units of the Trust are not deposits of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. No assurance can be given that the Trust’s investment objective will be achieved. The Trust also might not perform as well as you expect. This can happen for reasons such as these:
• Corporate bonds are fixed rate debt obligations that generally decline in value with increases in interest rates. Foreign and U.S. interest rates may rise or fall by differing amounts and, as a result, the Trust’s investment in foreign securities may expose the Trust to additional risks. Generally, bonds with longer periods before maturity are more sensitive to interest rate changes. The Trust may be subject to greater risk of rising interest rates than would normally be the case due to the current period of historically low rates.
• Corporate bonds are subject to credit risk in that an issuer of a bond may be unable to make interest and principal payments when due. In general, lower rated bonds carry greater credit risk.
• Because the Trust holds intermediate-term debt obligations, it is exposed to higher interest rate risk than a Trust that holds short-term debt obligations. Interest rate risk is the risk that debt obligation prices will decline because of rising interest rates. The prices of intermediate term debt obligations are more sensitive to interest rate changes than the prices of short-term debt obligations. As a result, the value of the Trust will have greater price sensitivity than if the Trust had held short-term debt obligations.
• There is no assurance that the Trust portfolio will retain for any length of time its present size and diversity. As indicated in the “Trust Portfolio,” a number of the bonds in the Trust may be called prior to their stated maturity date and will remain callable throughout the life of the Trust. A call provision is more likely to be exercised by the issuer when the offering price valuation of a bond is higher than its call price. Such price valuation is likely to be higher in periods of declining interest rates. In such cases, the proceeds from such redemptions will be distributed to unitholders. The Estimated Current Return and Estimated Long-Term Return of the units may be adversely affected by such sales or redemptions. As stated below, the size and diversity of the Trust may also be affected by the Trust’s sale of bonds to meet redemptions, to pay the annual deferred sales fee, for credit issues and in other circumstances.
In addition, the Trust contains bonds that have “make whole” call options that generally cause the bonds to be redeemable at any time at a designated price. Such bonds are generally more likely to be subject to early redemption and may result in the reduction of income received by the Trust and the early termination of the Trust.
• The Sponsor does not actively manage the portfolio. Because the portfolio is fixed and not managed, in general, the Trust only sells bonds at the Trust’s termination or in order to meet redemptions, for tax purposes, for credit issues or to pay expenses, including the annual deferred sales fee. As a result, the price at which a bond is sold may not be the highest price the Trust could have received during the life of the Trust.
• No assurance can be given that the Trust’s investment objective will be achieved. This objective is subject to the continuing ability of the respective issuers of the bonds to meet their obligations.
• The Trust is subject to market risk. Market value fluctuates in response to various factors. These can include changes in interest rates, inflation, the financial condition of a bond’s issuer, perceptions of the issuer, ratings on a bond, or political or economic events affecting the issuer.
• An issuer or an insurer of the bonds may be unwilling or unable to make principal payments and/or interest payments in the future, may call a security before its stated maturity or may reduce the level of payments made. In addition, there is no guarantee that the issuers will be able to satisfy their interest or principal payment obligations to the Trust over the life of the Trust. This may result in a reduction in the value of your units.
• The Trust is concentrated in the financial sector. As a result, the factors that impact the financial sector will likely have a greater effect on this Trust than on a more broadly diversified Trust. Companies in the financial sector include banks, insurance companies and investment firms. The profitability of companies in the financial sector is largely dependent upon the availability and cost of capital which may fluctuate significantly in response to changes in interest rates and general economic developments. Financial sector companies are especially subject to the adverse effects of economic recession, decreases in the availability of capital, volatile interest rates, portfolio concentrations in geographic markets and in commercial and residential real estate loans, and competition from new entrants in their fields of business.
• The Trust invests in foreign securities. The Trust’s investment in foreign securities presents additional risk. Securities of foreign issuers present risks beyond those of domestic securities. More specifically, foreign risk is the risk that foreign securities will be more volatile than U.S. securities due to such factors as adverse economic, currency, political, social or regulatory developments in a country, including government seizure of assets, excessive taxation, limitations on the use or transfer of assets, the lack of liquidity or regulatory controls with respect to certain industries or differing legal and/or accounting standards.
• The Trust includes restricted bonds. Restricted bonds are issued under Rule 144A of the Securities Act of 1933, as amended, and may only be resold in privately negotiated transactions pursuant to federal securities laws or in a public offering with respect to which a registration statement is in effect under the Securities Act. As a result, such bonds may not be readily marketable. In addition, certain restricted bonds may be illiquid.
• The financial condition of an issuer or an insurer of the bonds may worsen or its credit ratings may drop, resulting in a reduction in the value of your units. This may occur at any point in time, including during the primary offering period. There can be no assurance that any security contained in the Trust will retain an investment-grade rating for the life of the Trust. As the Trust is unmanaged, a downgraded security will remain in the portfolio.
• The income generated by the Trust may be reduced over time in response to bond sales, changes in distributions paid by issuers and unit redemptions.
• Certain debt obligations may be rated as investment-grade by only one rating agency. As a result, such split-rated securities may have more speculative characteristics and are subject to a greater risk of default than securities rated as investment-grade by more than one rating agency.
• Certain bonds in the Trust may have been purchased by the Sponsor on a “when issued” basis. Bonds purchased on a “when issued” basis have not yet been issued by the issuer on the Inception Date (although such issuer has committed to issue such bonds). The effect of the Trust holding a “when issued” bond is that unitholders who purchase their units prior to the delivery date of such bond may have to make a downward adjustment in the tax basis of their units. Such downward adjustment may be necessary to account for interest accruing on such “when issued” bond during the time between their purchase of units and delivery of such bonds to the Trust.
• The Trust may sell bonds to meet redemptions, to pay annual deferred sales fees, for credit issues and in other circumstances. Accordingly, the size, diversity, composition, returns and income generated by the Trust may be adversely affected. In addition, such sales of bonds may be at a loss. If such sales are substantial enough, provisions of the Trust’s indenture could cause a complete and unexpected liquidation of the Trust before its scheduled maturity, resulting in unanticipated losses for investors.
• Certain bonds in the Trust may be subject to liquidity risk. The principal trading market for the bonds in the Trust will generally be in the over-the-counter market. As a result, the existence of a liquid trading market for the bonds may depend on whether dealers will make a market in the bonds. There can be no assurance that a market will be made for any of the bonds, that any market for the bonds will be maintained or of the liquidity of the bonds in any markets made. The price at which the bonds may be sold to meet redemptions and the value of the Trust will be adversely affected if trading markets for the bonds are limited or absent.
• Inflation may lead to a decrease in the value of assets or income from investments.
See “Investment Risks” for additional information.
Please see the Trust prospectus for more complete risk information.
Unit Investment Trusts are fixed, not actively managed and should be considered as part of a long-term strategy. Investors should consider their ability to invest in successive portfolios, if available, at the applicable sales charge. UITs are subject to annual fund operating expenses in addition to the sales charge. Investors should consult an attorney or tax advisor regarding tax consequences associated with an investment from one series to the next, if available, and with the purchase or sale of units. Guggenheim Funds Distributors, LLC does not offer tax advice.
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.
Investing involves risk, including the possible loss of principal.
Guggenheim Investments represents the investment management business of Guggenheim Partners, LLC ("Guggenheim"), which includes Security Investors, LLC ("SI"), Guggenheim Funds Investments Advisors, LLC ("GFIA") and Guggenheim Partners Investment Management ("GPIM") the investment advisors to the referenced funds.
© 2019 Guggenheim Investments. All Rights Reserved.
Research our firm with FINRA Broker Check.
• Not FDIC Insured • No Bank Guarantee • May Lose Value
This website is directed to and intended for use by citizens or residents of the United States of America only. The material provided on this website is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation. Investing involves risk, including the possible loss of principal.