Income in Motion - Portfolio Positioning and Income Drivers
How the portfolio is built to pay investors
Prospera Income ETF is a multi-asset income fund, arranged around an array of fixed income components that we believe carry optimized risk-to-reward characteristics for enhancing yield and defensiveness. The primary layer is ballast: Treasuries, (SGOV) currently weighted around twenty percent, an allocation to core fixed income, and added deliberate exposure to short-dated instruments and cash that together keep portfolio risk manageable and preserve liquidity for better entry points. The second layer acts as the yield driver: diversified credit, led by high yield (12% of the portfolio), investment-grade and corporate credit in the mid-single digits (7%) , Preferreds (7%), and senior loans (3%). The third layer provides diversification with some yield potential: modest equity income a little above two percent, small sleeves in real assets and REITs, municipal bonds, converts, and a covered-call sleeve.
Where the income is actually coming from
Currently, most of the distributable cash flow is generated by the credit complex and yield rich geographies. We believe high yield and emerging market bonds continue to pay investors for taking credit risk, even with spreads that have grown tighter in 2025 than the average of prior cycles. We find that yields remains constructive, and supported by the current macro economic landscape. Treasuries and the core bond allocations help us diversify from spread and credit risk and can be used as a source of funds when opportunities emerge to press for higher yielding assets. Our current position in short/ultra-short fixed income and cash are preserving our dry powder. Preferreds add a capital-structure premium and give us reset features through fixed-to-float structures, which helps the yield profile when policy eases and markets go risk-on. Real estate contributes a smaller share of income but benefits from any gentle decline in rates and from sector mixes with defensible cash flows. Data from Nareit show a modestly positive September with the All-Equity REIT index up, which is the kind of backdrop where REIT income does its job quietly.
What changed in the backdrop
The Federal Reserve delivered a quarter-point cut in September. The message since has been that policy remains only slightly restrictive, and that further moves will be data-dependent, but fourth coming. That combination cooled term premia across the curve a touch and helped duration assets hold their footing. Barron’s and Reuters both captured the official tone this week, which is best described as cautious relief rather than a declaration of victory. Ten-year Treasury yields have hovered a little north of four percent as October begins, a level that supports incremental price stability in core bonds without starving income. In credit, spreads remain tighter than the long-run average even after episodic widening, so the portfolio continues to lean on selection and quality inside the complex rather than shooting beta alone. For closed-end funds, the distribution power is intact while discounts remain, as does the potential for volatility. CEFA’s premium-discount dashboards are a useful read-through for how quickly those gaps can move, and why keeping dry powder is not imprudent at this juncture.
Why the weights look like this
Two design choices explain most of the positioning. First, concentrations are capped at 3% limits, so that no single income engine can dominate drawdowns. That means even when one sector screens well on a trailing yield, additional allocations still have to clear correlation and liquidity tests. Second, liquidity is treated as a source of return. Holding more short duration and cash than a static benchmark forfeits a few basis points today in exchange for the ability to buy better coupons when spreads or discounts give way. Historically we have found prescience in holding to our liquidity preference, and it aligns with how ETF liquidity and creation baskets work in practice.
Risk management in Focus
Our risk management discipline is at the core of our investment process. Each layer of the portfolio sits inside bands that are sized for liquidity and concentration, and allocation decisions are documented. Treasuries and core bonds provide ballast and liquidity so that drawdowns arrive in smaller steps, while short duration and cash keep rebalancing power close at hand. High yield, corporate credit, and Preferreds are the income engine, but they are sized alongside that ballast so credit spread risk does not dictate the whole month. Senior loans and other floating-rate exposures offset part of the portfolio’s rate sensitivity and help when curves re-price. Equity income and real-asset sleeves add cash flows that are tied to dividends, rents, and infrastructure revenues rather than to a single macro factor. Convertibles and covered-equity exposures bring a measured link to equity upside with position sizes set by liquidity and concentration limits. The result is a portfolio that earns its keep from multiple sources of cash flow, keeps path risk manageable with quality and liquidity, and preserves the ability to buy better income when spreads, discounts, or dividends move in our favor.
What would make us shift
If rate volatility continues to fade and funding markets stay orderly, expect incremental upgrades in credit quality and continued patience on discounted assets that do not yet meet coverage and leverage hurdles. A broad widening in CEF discounts without a deterioration in distribution coverage would be a signal for us to increase our exposure to the sector. If growth data wobbles and correlations cluster again, we would expect to lighten up on credit risk and move lower down the curve to ride it out. Our treasury allocation does a lot to absorb the overall portfolio volatility, which will be used as a source of funds after rates and spreads reset at better forward yields.
How It All Comes Together
THRV is built to collect income without courting unnecessary risk. The current core of short dated government treasuries and short duration provides the ballast, credit exposure in high yield and investment grade generate yield, closed end funds boost distribution potential, and ancillary allocations reduce concentration to rates, credit and equities. Our current liquidity profile is intentional and fluid. When markets serve up opportunity, the portfolio has the liquidity to pay cash for it. When markets do the opposite, the portfolio has the patience to wait.
End notes and further reading
Barron’s, “Kansas Fed President Schmid Says Rates Are Where They Should Be.” https://www.barrons.com/articles/kansas-fed-president-interest-rates-inflation-a4062cc5 Barron's
Reuters, “Fed’s Schmid says rates are appropriately calibrated.” https://www.reuters.com/business/feds-schmid-says-rates-are-appropriately-calibrated-2025-10-06/ Reuters
YCharts, “10 Year Treasury Rate.” https://ycharts.com/indicators/10_year_treasury_rate YCharts
Janus Henderson, “High yield bonds: Can tight credit spreads persist?” https://www.janushenderson.com/en-us/investor/article/high-yield-bonds-can-tight-credit-spreads-persist/ GWP
Nareit, “REITs Edge Higher in September.” https://www.reit.com/data-research REIT.com
CEFA, “U.S. Closed-End Funds Premium & Discount Reports.” https://www.cefa.com/investor-tools/premium-discount-reports/ Cefa
FRED, “ICE BofA U.S. High Yield OAS.” https://fred.stlouisfed.org/series/BAMLH0A0HYM2 FRED
Bloomberg, “Fed set to drive global rate cuts as Europe shifts to pause.” https://www.bloomberg.com/news/articles/2025-10-06/fed-set-to-drive-global-rate-cuts-as-europe-shifts-to-pause Bloomberg
Disclosures
There is no guarantee that the Fund will achieve its investment objective. An investment in the Fund involves a high degree of risk, including the potential loss of the entire investment. The Fund is subject to the risks of its underlying funds in addition to general economic and market conditions. The Fund and its service providers are subject to operational and cybersecurity risks. Past performance does not guarantee future results.
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