FolioBeyond Alternative Income and Interest Rate Hedge ETF

FolioBeyond Alternative Income and Interest Rate Hedge ETF (RISR) is an actively managed bond fund. It holds mostly interest-only mortgage-backed securities from Fannie Mae, Freddie Mac and Ginnie Mae, and can add U.S. Treasuries to balance its risk. Most bond funds lose value when interest rates rise, but this one is built to gain. It paid a 5.33% yield over the 12 months to October 27, 2026. Its 1.04% expense ratio is far higher than Treasury ETFs charge.

• Over the year to Oct 27, 2026, RISR returned +9.0%, 1st of 8 among similar funds.
• Its 5-year annualized return was +14.5%.
• Its worst full calendar year was 2025 (+4.7%); its best was 2022 (+32.0%).
• The deepest fall in its price history was 14.3% (Jun 14, 2022 to Aug 16, 2022), recovered by Mar 21, 2023.

As of Jul 31, 2026, the fund held 144 securities; the ten largest made up 19.82% of assets, and 6.5% sat in cash and money-market holdings.

The bonds mature in 24.8 years on average (weighted by size), with an average coupon of 3.73%.

• Over the three months to Jul 31, 2026, investors added a net $81.4M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: +0.15%, +0.50%, +1.55%.

RISR tracks no index. Its sub-adviser, FolioBeyond, actively picks holdings to pay income and protect against rising interest rates. Normally at least 80% of net assets sit in alternative income securities, chiefly interest-only mortgage-backed securities (MBS IOs). An IO collects only the interest on a pool of home loans, never the principal. The fund buys only agency IOs, issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac.

When rates rise, fewer homeowners refinance, so interest flows longer and IO values tend to rise. When rates fall, refinancing speeds up, cutting IO income and value. The fund targets a duration (a gauge of rate sensitivity) of about negative 3 to negative 10 years. At negative 3, a 0.01% rate rise would lift the portfolio about 0.03%, and an equal fall would cut it about as much. Because IOs alone tend to sit beyond negative 10, FolioBeyond adds U.S. Treasuries, directly or via ETFs, to pull duration into range. After rates fall, it generally sells Treasuries and buys more IOs.

To pick IOs, FolioBeyond's quantitative models weigh coupon, geography, loan purpose and loan size. Agency guarantees do not stop defaults from shrinking an IO's interest stream. As of July 31, 2026, the fund's 144 holdings were 94% mortgage-backed securities plus 6.5% cash; no Treasuries appeared, and no position topped 2.6%.

• RISR charges 1.04% a year, versus an average of 0.1% for the similar funds below (8th of 8, cheapest first).
• Of that, 0.99% is the management fee; the rest covers other fund expenses.
• Using the prospectus's standard example, $10,000 invested would cost about $106 in the first year and $1,271 over 10 years (assuming a 5% annual return).

Its negative duration is designed to gain when interest rates rise, which can offset losses in traditional bonds, and its one-year beta to stocks was -0.06.

RISR launched in September 2021, so it has no record in the 2008 crisis or the 2020 COVID crash. In the 2022 bear market, rising rates hurt both stocks and bonds, but RISR gained about 32% between the market's peak and its low. Its deepest drop was 14.3%, from June to August 2022, and it took about seven months to recover, by March 2023. Its weakest calendar year was 2025, still a gain of about 4.7%. The risk runs the other way: a sharp fall in rates could hurt it while ordinary bonds rally. That matters for anyone who may need to sell shares in such a period. It pays monthly, with a 5.33% trailing yield as of October 27, 2026, but it costs 1.04% a year. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.

Matched by bond funds with the closest average maturity and issuer mix (N-PORT).