General ETF Risks
There are risks involved with investing in ETFs, including the loss of the principal amount that you invest.
ETF shares are bought and sold throughout the trading day at their market price, not their NAV, on the exchange on which they are listed. ETF shares may trade in the market at a premium or discount to their NAV. A financial intermediary (such as a broker) may charge a commission to execute a transaction in ETF shares, and an investor also may incur the cost of the spread between the price at which a dealer will buy ETF shares and the somewhat higher price at which a dealer will sell ETF shares.
ETF shares are not individually redeemable from an ETF. Only market makers or Authorized Participants may trade directly with an ETF, typically in large blocks of shares, as disclosed in each Fund’s prospectus.
1This ETF is different from traditional ETFs.
Traditional ETFs tell the public what assets they hold each day. This ETF will not. This may create additional risks for your investment. For example:
- You may have to pay more money to trade this ETF’s shares. This ETF will provide less information to traders, who tend to charge more for trades when they have less information.
- The price you pay to buy this ETF’s shares on an exchange may not match the value of the ETF’s portfolio. The same is true when you sell shares. These price differences may be greater for this ETF compared to other ETFs because it provides less information to traders.
- These additional risks may be even greater in bad or uncertain market conditions.
- This ETF will publish on its website each day a “Tracking Basket” designed to help trading in shares of the ETF. While the Tracking Basket includes some of the ETF’s holdings, it is not the ETF’s actual portfolio.
The differences between this ETF and other ETFs may also have advantages. By keeping certain information about this ETF secret, this ETF may face less risk that other traders can predict or copy its investment strategy. This may improve the ETF’s performance. If other traders are able to copy or predict the ETF’s investment strategy, however, this may hurt the ETF’s performance.
For additional information regarding the unique attributes and risks of this ETF, see disclosure below and the Principal Risks section of the prospectus.
More Information About the Semi-Transparent ETF Structure
The objective of the semi-transparent ETF Tracking Basket is to construct a portfolio of stocks, representative ETFs and cash that tracks the daily performance of a semi-transparent ETF without exposing current holdings, trading activities, or internal research. The Tracking Basket (as described below) is designed to conceal non-public information about the underlying portfolio and only uses the Fund’s most recent publicly disclosed holdings and/or select securities from the universe from which the Fund’s investments are selected, representative ETFs and cash, and the publicly known daily performance in its construction. You can gain access to the Tracking Basket and the Tracking Basket Weight Overlap (as described below) on Columbia Seligman Semiconductor Technology ETF (SEMI).
The Tracking Basket is designed to closely track the daily performance of the Fund but is not the Fund's actual portfolio. The Tracking Basket often may include a significant percentage of the securities held in the Fund’s portfolio, but it will exclude (or modify the weightings of) certain securities held in the Fund’s portfolio, such as those securities that the Fund’s portfolio managers are actively looking to purchase or sell, or securities which, if disclosed, could increase the risk of front-running (trading ahead) or free-riding (mirroring) the Fund’s portfolio. The Tracking Basket Weight Overlap is the percentage weight overlap between the prior business day’s Tracking Basket, compared to the portfolio holdings of the Fund that formed the basis for the Fund’s calculation of NAV at the end of the prior business day.
Although the Tracking Basket and the Tracking Basket Weight Overlap are intended to provide investors with enough information to allow for an effective arbitrage mechanism that will keep the market price of the Fund at or close to the underlying NAV per share of the Fund, there is a risk (which may increase during periods of market disruption or volatility) that market prices will vary significantly from the underlying NAV of the Fund; ETFs trading on the basis of a published Tracking Basket may trade at a wider bid/ask spread than ETFs that publish their portfolios on a daily basis, especially during periods of market disruption or volatility, and therefore, may cost investors more to trade; and although the Fund seeks to benefit from keeping its portfolio information secret, market participants may attempt to use the Tracking Basket to identify a Fund's trading strategy, which if successful, could result in such market participants engaging in certain predatory trading practices that may have the potential to harm the Fund and its shareholders.
There may be circumstances where a security held in the Fund’s portfolio but not in the Tracking Basket does not have readily available market quotations. If the Fund’s investment manager determines that such circumstance may affect the reliability of the Tracking Basket as an arbitrage vehicle, that information, along with the identity and weighting of that security in the Fund’s portfolio, will be publicly disclosed on the Fund’s website and the Fund’s investment manager will assess appropriate remedial measures. In these circumstances, market participants may use this information to engage in certain predatory trading practices that may have the potential to harm the Fund and its shareholders. If securities representing 10% or more of the Fund’s portfolio do not have readily available market quotations, the Fund’s investment manager will promptly request the Exchange to halt trading on the Fund, meaning that investors would not be able to trade Fund shares. Moreover, trading in Fund shares on the Exchange may be halted due to market conditions or for reasons that, in the view of the Exchange, make trading in Fund shares inadvisable. In addition, trading in Fund shares on the Exchange is subject to trading halts caused by extraordinary market volatility pursuant to the Exchange’s “circuit breaker” rules.
The performance data quoted above represents past performance. Past performance is not a guarantee of future results. Investment return and value of the Fund shares will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than performance data quoted. Shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Total Returns (Net Asset Value) are calculated using the daily 4:00pm net asset value (NAV). Through July 31, 2020, Market Price returns are based on the midpoint of the bid/ask spread for fund shares at market close (typically 4 pm ET). Beginning with August 31, 2020 month-end performance, Market Price returns are based on closing prices reported by the fund's primary listing exchange (typically 4 pm ET close). Returns over one year are annualized. Performance results shown reflect expense reimbursements (if any), without which the results would have been lower.
The amount that the fund's Market Price is above the reported NAV is called the premium. The amount that the fund's Market Price is below the reported NAV is called the discount. The fund's premium and discount data is based on closing prices reported by the fund's primary listing exchange (typically 4 pm ET close) and the fund's end-of-day NAV. For funds with less than a full calendar year of investment operations, premium/discount data is since the first day of secondary market trading of fund shares
The 30-day SEC yield is an estimate of the fund's rate of investment income reflecting an estimated yield to maturity (assuming all current portfolio holdings are held to maturity), and it may not equal the fund's actual income distribution rate or the income paid to a shareholder's account. The yield shown reflects fee waivers in effect, if any. In the absence of such waivers, yields would be reduced. The yield will reflect an inflation adjustment that is attributable to any inflation-protected securities owned by the fund. This adjustment and the resulting yield can be positive (in the case of inflation) or negative (in the case of deflation). The unsubsidized 30-day SEC yield is the SEC yield adjusted to reflect the gross expense ratio applicable to the share class shown and without regard to the contractual reimbursements and fee waivers required of the fund's investment manager and affiliates. The 30-day SEC yields may appear to be the same due to rounding.
For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ used to rank the fund against other funds in the same category. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly excess performance, without any adjustments for loads (front-end, deferred, or redemption fees), placing more emphasis on downward variations and rewarding consistent performance. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star (each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages).
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