Christopher Bellacicco
Disclosure Review and Accounting Office
Securities and Exchange Commission
Division of Investment Management
100 F. Street, N.E.
Washington, D.C. 20549-0506
Re: | Collaborative Investment Series Trust, File Nos. 811-23306 and 333-221072 |
Dear Mr. Bellacicco:
On February 26, 2021, the Collaborative Investment Series Trust (the “Trust” or the “Registrant”), on behalf of its series, the Short De-SPAC ETF and the De-SPAC ETF (each a “Fund” and collectively, the “Funds”) filed post-effective amendment no. 75 the Trust’s registration statement. The amendment was filed pursuant to Rule 485(a)(2) under the Securities Act of 1933, as amended to add a two new series to the Trust. On April 9, 2021, you provided comments by phone to Brian Doyle-Wenger. On May 10, 2021, you provided three additional comments to Mr. Doyle-Wenger. Please find below a summary of those comments and the Registrant’s responses, which the Registrant has authorized Thompson Hine LLP to make on its behalf. Capitalized terms not otherwise defined herein have the meanings ascribed to them in the prospectus and statement of additional information.
The Short De-SPAC ETF
1. Comment. Please add additional disclosure relating to the Fund’s objective of providing the daily inverse of the Index.
Response. The Registrant has added the following disclosure above the Fund’s investment objective:
Important Information Regarding the Fund: The Fund seeks daily inverse investment results and is very different from most other exchange-traded funds. The pursuit of daily inverse investment goals means that the return of the Fund for a period longer than a full trading day may have no resemblance to -100% of the return of the De-SPAC Index (the “Index”). This means that the return of the Fund for a period longer than a trading day will be the result of each single day’s compounded return over the period, which will very likely differ from -100% of the return of the Index for that period. Longer holding periods and higher volatility of the Index increase the impact of compounding on an investor’s returns. During periods of higher Index volatility, the volatility of the Index may affect the Fund’s return as much as, or more than, the return of the Index. Further, the return for investors that invest for periods longer or shorter than a trading day should not be expected to be -100% of the performance of the Index for the period. The Fund is not suitable for all investors. The Fund is designed to be utilized only by knowledgeable investors who understand the potential consequences of seeking daily inverse (-1X) investment results, understand the risks associated with the use of shorting and are willing to monitor their portfolios frequently. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios. For periods longer than a single day, the Fund will lose money if the Index’s performance is flat, and it is possible that the Fund will lose money even if the Index’s performance decreases over a period longer than a single day. An investor could lose the full principal value of his/her investment within a single day.
May 11, 2021
Page 2
Principal Investment Strategies
2. Comment. Please add additional disclosure regarding the Fund’s daily rebalancing and the compounding of each day’s return.
Response. The Registrant has added the following disclosure:
Because of daily rebalancing and the compounding of each day’s return over time, the return of the Fund for periods longer than a single day will be the result of each day’s returns compounded over the period, which will very likely differ from -100% of the return of the Index over the same period. The Fund will lose money if the Index performance is flat over time, and as a result of daily rebalancing, the Index’s volatility and the effects of compounding, it is even possible that the Fund will lose money over time while the Index's performance decreases over a period longer than a single day.
Principal Investment Risks
3. Comment. Please add risk factors that disclose the risks associated with the Fund’s rebalancing and compounding.
Response. The Registrant has added the following risk disclosures:
Compounding Risk: The return of the Fund for a period longer than a single day is the result of its return for each day compounded over the period and usually will differ in amount and possibly even direction from the Fund’s stated multiple times the return of the Index for the same period.
Rebalancing Risk: If for any reason the Fund is unable to rebalance all or a part of its portfolio, or if all or a portion of the portfolio is rebalanced incorrectly, the Fund’s investment exposure may not be consistent with its investment objective. In these instances, the Fund may have investment exposure to the Index that is significantly greater or significantly less than its stated multiple. The Fund may be more exposed to leverage risk than if it had been properly rebalanced and may not achieve its investment objective, leading to significantly greater losses or reduced gains.
* * * * *
May 11, 2021
Page 3
If you have any questions or additional comments, please call the undersigned at (614) 469-3294 or the Andrew Davalla at (614) 469-3353.
Sincerely, | ||
/s/ Brian Doyle-Wenger | ||
Brian Doyle-Wenger |