MKTN
1. Summary
- MKTN is an actively managed, quantitative equity market neutral ETF from Federated Hermes. A model built on fundamental and technical variables picks long and short positions from Russell 3000 stocks. On September 30, 2026 it held 219 longs and 179 shorts.
- It runs light leverage: 89.1% long and 69.3% short on September 30, 2026, or 1.58x gross and 19.8% net long in dollars (my arithmetic). It aims for zero beta rather than zero net dollars. The fact sheet gives a holdings-based beta of 0.11.
- It shorts directly. It borrows stock from a lender, and the sale proceeds stay with the lender. The fund holds 80.2% in cash and does not use short proceeds to buy more longs (my inference). No prime broker is named, and the margin type is not stated.
- Most relevant for us: MKTN shows its short costs openly. Dividends and other short sale costs added 0.96% to its expense ratio (annualized, period ended December 31, 2025). It also calls itself a "limited derivatives user" under Rule 18f-4 while running about 69% short. That conflicts with the rule summary in
fund_context.md, and is worth a question.
2. Key facts
| Item | Detail | Source |
|---|---|---|
| Name and ticker | Federated Hermes MDT Market Neutral ETF (MKTN) | MKTN-FS, page 1, header; MKTN-PR, page 1, cover |
| Exchange | NYSE Arca per the prospectus and SAI covers. Conflict: the fact sheet's "Listing exchange" line says NYSE. | MKTN-PR, page 1, cover; MKTN-SAI, page 1, cover; MKTN-FS, page 1, header |
| CUSIP | 31423L875 | MKTN-FS, page 1, header; MKTN-PR, page 26, back cover |
| Inception date | September 25, 2025 ("commencement of operations"). Conflict: the fact sheet gives a "Performance inception" of 9/24/25. | MKTN-PR, page 3, "Portfolio Turnover"; MKTN-PR, page 24, "Financial Highlights" footnote 1; MKTN-FS, page 1, "Average annual total returns (%)" |
| Trust | Federated Hermes ETF Trust, a Delaware trust "established under the laws of Delaware on August 23, 2011." At December 31, 2025, "the Trust comprised eight portfolios". The trust carries the adviser's parent's name, so it is a proprietary trust, not a multi-client series trust (my inference). | MKTN-SAI, page 2, "How is the Fund Organized?"; MKTN-SAI, page 29, "Who Manages and Provides Services to the Fund?" |
| Fiscal year end | December 31 ("For the fiscal year ended December 31, 2025") | MKTN-SAI, page 47, "Brokerage and Research Services"; MKTN-PR, page 24, "Financial Highlights" |
| Net assets and NAV | $144.4 million "Portfolio assets" on September 30, 2026. The fact sheet does not call this net assets. Earlier: net assets $26,683 thousand and NAV $25.66 on December 31, 2025. NAV for September 30, 2026 not stated. | MKTN-FS, page 1, "Fund statistics"; MKTN-PR, page 24, "Financial Highlights" |
| Morningstar category and rating | Category: Equity Market Neutral. Rating: Not stated. | MKTN-FS, page 1, "Morningstar category" |
| Number of long and short positions | 219 long and 179 short, September 30, 2026 | MKTN-FS, page 1, "Fund statistics" |
| Distribution frequency | Income "annually"; capital gains "no less frequently than annually." Fact sheet: "Paid annually". | MKTN-PR, page 20, "Fund Distributions"; MKTN-FS, page 1, "Fund statistics" |
| Creations and redemptions | "Purchases and redemptions of Creation Units will take place in-kind; and/or for cash at the discretion of the Fund." A Creation Unit is 20,000 shares. | MKTN-PR, page 18, "How Do You Buy and Sell Shares?" |
3. Service providers
| Role | Firm | Source |
|---|---|---|
| Adviser | Federated MDTA LLC ("MDT Advisers"), Boston. Federated Hermes acquired it in July 2006. | MKTN-PR, page 7, "Fund Management"; MKTN-PR, page 22, "Who Manages the Fund?" |
| Sub-adviser | None named. Federated Advisory Services Company, an affiliate, gives the adviser data and support services, paid by the adviser. | MKTN-PR, page 22, "Who Manages the Fund?" |
| Portfolio managers | Daniel J. Mahr, CFA; Damien Zhang, CFA; Frederick L. Konopka, CFA; John Paul Lewicke. All since August 2025. | MKTN-PR, page 7, "Fund Management"; MKTN-PR, page 22, "Portfolio Management Information" |
| Administrator | Federated Administrative Services (FAS), a Federated Hermes subsidiary | MKTN-SAI, page 47, "Administrator" |
| Fund accountant | Not stated. The adviser "arranges for transfer agency, custody, fund administration and accounting". | MKTN-PR, page 23, "Advisory Fees" |
| Custodian | State Street Bank and Trust Company | MKTN-SAI, page 47, "Custodian"; MKTN-SAI, page 49, "Addresses" |
| Transfer agent | State Street Bank and Trust Company | MKTN-SAI, page 47, "Transfer Agent and Dividend Disbursing Agent" |
| Distributor | Federated Securities Corp. | MKTN-SAI, page 19, "How is the Fund Bought and Sold?"; MKTN-FS, page 2, footer |
| Auditor | KPMG LLP | MKTN-SAI, page 47, "Independent Registered Public Accounting Firm"; MKTN-PR, page 23, "Financial Highlights" |
| Prime broker | Not stated. The documents say only "a lender" and "the broker". | MKTN-PR, page 4, "Short Selling Risk"; MKTN-SAI, page 8, "Short Sales" |
| Swap counterparties | Not stated (no swaps in use) | |
| Securities lending agent | Citibank, N.A. The fund did not lend in its last fiscal period. | MKTN-SAI, page 47, "Securities Lending Activities"; MKTN-SAI, page 50, "Appendix" |
4. Strategy
- Objective and benchmark. "to seek to provide long-term capital appreciation while limiting exposure to general stock market risk" (MKTN-PR, page 3, "Risk/Return Summary: Investment Objective"). The fact sheet benchmark is the ICE BofA US 3-Month Treasury Bill Index (MKTN-FS, page 1, "Benchmark"). The fund uses the Russell 3000 Index "as its representation for the broad equity market" (MKTN-FS, page 2, beta footnote).
- Universe. Mainly "equity securities of issuers listed in the Russell 3000 Index", of any market cap, plus REITs (MKTN-PR, page 4, "What are the Fund’s Main Investment Strategies?"). On September 30, 2026, 38.5% of net assets was long stocks over $50 billion and 7.9% long stocks under $5 billion (MKTN-FS, page 1, "Market cap - Long (%)").
- How it picks stocks. Quantitative. The adviser uses "a quantitative model driven by fundamental and technical stock selection variables." The model weighs trading costs so trades happen only if "expected to be profitable on an after-trading-cost basis" (MKTN-PR, page 4).
- Neutrality targets.
- Beta: the fund "is expected to have returns that are independent of the returns and direction of the general stock market (i.e., zero beta)" (MKTN-PR, page 4).
- Sector: "roughly balanced by sector but not balanced across industries and businesses" (MKTN-PR, page 4).
- Dollar: no dollar-neutral target is stated. The book was 19.8% net long on September 30, 2026 (my arithmetic, from MKTN-FS, page 1). A net long book with a beta near zero suggests the shorts carry higher beta than the longs (my inference).
- Net exposure. No target or range stated. Measured net: 19.8% (my arithmetic). The sector table's net column, without cash, sums to the same 19.8% (my arithmetic, MKTN-FS, page 1, "Sector weightings (%)").
- Limits on position size. "diversification constraints which limit exposure to individual companies as well as groups of correlated companies" (MKTN-PR, page 4). The fund is diversified: for 75% of total assets, no more than 5% in one issuer (MKTN-SAI, page 14, "Diversification"). No more than 25% of total assets in one industry (MKTN-SAI, page 15, "Concentration"). Largest positions on September 30, 2026: CrowdStrike 2.8% long, Ares Management -2.0% short (MKTN-FS, page 1, "Top holdings (%)").
5. Exposure and leverage
- Measured exposure, September 30, 2026 (MKTN-FS, page 1, "Portfolio composition (%)"):
- Long 89.1% (56.3% value plus 32.8% growth, my arithmetic).
- Short 69.3% (40.5% plus 28.8%, my arithmetic).
- Gross 158.4%, or 1.58x (my arithmetic).
- Net 19.8% (15.8% plus 4.0%, my arithmetic).
- Cash and equivalents: 80.2% net (MKTN-FS, page 1, "Sector weightings (%)").
- The sector and market cap tables give slightly different totals (long 88.8% and 88.7%, short 69.0%, my arithmetic). The fact sheet notes "Totals may not add or match due to rounding."
- Stated targets or limits. None for long, short, gross or net. The fund "can sell securities short to the maximum extent permitted under the Investment Company Act of 1940" (MKTN-PR, page 4, "Short Selling Risk"). The SAI adds that it limits "the amount of exposure for short sales" (MKTN-SAI, page 11, "Short-Selling Risk"), but gives no number.
- How it gets exposure above 100%. It doesn't, on either side. Longs are below 100%, and gross exposure above 100% comes only from the short book. Cash of 80.2% equals 100% minus 89.1% long plus 69.3% short proceeds (my arithmetic). So short proceeds appear to sit in cash, not in extra longs (my inference). This fits the prospectus: "the proceeds from the sale are deposited with the lender" (MKTN-PR, page 4).
- Borrowing limits. Borrowing only if asset coverage stays "at least 300%" (MKTN-SAI, page 8, "Derivatives Regulation and Asset Coverage"; MKTN-SAI, page 15, "Additional Information"). No bank line of credit is named. The fund may borrow from other Federated Hermes funds for temporary purposes, and "All inter-fund loans must be repaid in seven days or less" (MKTN-SAI, page 10, "Inter-Fund Borrowing").
6. Shorting, financing and collateral
- How it shorts. Direct short sales: "A short sale by the Fund involves borrowing a security from a lender which is then sold in the open market" (MKTN-PR, page 4, "Short Selling Risk"). No swaps, futures or other method is shown in use. No split between methods is given.
- Who lends the stock and who holds collateral. The fund borrows "from a broker or other institution" (MKTN-SAI, page 8, "Short Sales"). "To the extent necessary to meet margin requirements, the broker will retain proceeds of the short sale until the short position is closed out" (MKTN-SAI, page 8). The fund "may lose the collateral it has deposited with the lender" if the lender fails (MKTN-SAI, page 11, "Short-Selling Risk"). The lender is not named.
- What is posted. "In order to cover its obligation to purchase such securities in the future, the Fund holds short-term liquid securities such as money market funds, U.S. Treasury securities, government agency securities or equity securities" (MKTN-PR, page 9, "Short Sales"). Whether long stocks are pledged to the lender is not stated.
- Short sale proceeds used to buy longs. Not stated directly. The proceeds are "deposited with the lender" (MKTN-PR, page 4) and the fact sheet cash figure fits proceeds held as cash (my inference, see section 5).
- Segregated or tri-party account. Not stated. State Street is custodian "for the securities and cash of the Fund" (MKTN-SAI, page 47, "Custodian"). Where the short proceeds and collateral sit, and under what account agreement, is not stated.
- Margin. The SAI mentions "margin requirements" (MKTN-SAI, page 8). It does not say Reg T or portfolio margin.
- Costs named. "The Fund may incur two types of expenses from short sales: borrowing expenses and dividend expenses" (MKTN-PR, page 12, "Short Selling Risk"). The lender may also be paid "interest" (MKTN-PR, page 4).
- Securities lending. Permitted, with Citibank, N.A. as agent. "The Fund did not participate in any securities lending activities during the Fund’s most recently completed fiscal period" (MKTN-SAI, page 47, "Securities Lending Activities"). All figures in the lending table are $00.00 (MKTN-SAI, page 48).
- Permitted only. Futures, options, forwards and swaps (including total return swaps) "as an alternative to selling a security short, to increase returns, or as part of a hedging strategy" (MKTN-PR, page 4). Also repurchase and reverse repurchase agreements, hybrid instruments and short sales "against the box" (MKTN-SAI, pages 7 and 8). None is shown in use.
7. Derivatives and Rule 18f-4
- Derivatives used. None shown in use. The fund "may, but is not required to, use derivatives, such as futures, options, forward contracts, and swap agreements" (MKTN-PR, page 4). The SAI calls derivatives "a non-principal investment strategy" (MKTN-SAI, page 2, "Additional Investment Strategies").
- Limited derivatives user or full program. Limited derivatives user: "As the Fund’s derivative exposure, if any, is 10% or less of its net assets, excluding certain currency and interest rate hedging transactions, the Fund is classified as a limited derivatives user under the Derivatives Rule" (MKTN-PR, page 11, "Derivatives Regulation and Asset Coverage"; same text at MKTN-SAI, page 8). So it has no derivatives risk manager or full program (my inference).
- Conflict to check.
fund_context.mdsays short sales count as derivatives exposure under Rule 18f-4. MKTN was about 69% short on September 30, 2026. If its shorts counted, it would be far above the 10% limit (my inference). The documents don't explain how the fund treats its short sales under the rule. - VaR test and reference portfolio. Not used. The fund is not subject to "VAR testing and stress testing" (MKTN-PR, page 11). VaR (value at risk) estimates the most a fund could lose over a set period at a set confidence level.
- Commodity pool status (CFTC Rule 4.5). "The Adviser has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act with respect to the Fund" (MKTN-PR, page 10, "Futures Contracts"). Rule 4.5 is not named.
8. Costs
| Item | Amount | Source |
|---|---|---|
| Management fee | 1.08% of average daily net assets. Not called unitary, but the adviser "has contractually agreed to pay all operating expenses of the Fund, except" a list of items. | MKTN-PR, page 3, "Risk/Return Summary: Fees and Expenses"; MKTN-PR, page 23, "Advisory Fees" |
| Other expenses | 1.04% in total: 0.96% "Dividends and Other Operating Expenses Related to Short Sales" plus 0.08% "Other Operating Expenses". Estimated for the current fiscal year. | MKTN-PR, page 3, fee table and footnote 2 |
| Dividend and interest expense on short sales | 0.96%, dividends and other short sale costs combined (fee table, estimated). Actual for September 25 to December 31, 2025: 0.96% annualized, from 1.91% minus 0.95% (my arithmetic). | MKTN-PR, page 3; MKTN-PR, page 24, "Financial Highlights" |
| Borrowing costs | Not stated separately. Borrow fees appear to sit inside the 0.96% "Other Operating Expenses Related to Short Sales" line (my inference). | MKTN-PR, page 3; MKTN-PR, page 12 |
| Acquired fund fees | 0.15% (estimated) | MKTN-PR, page 3 |
| Gross and net expense ratio | 2.27% gross, 1.94% net | MKTN-PR, page 3; MKTN-FS, page 1 |
| Fee waivers or caps | Waiver of 0.33%. Expenses, excluding acquired fund fees, short sale dividends and other costs, interest, taxes and some others, "will not exceed 0.83%" from March 1, 2026 until the later of March 1, 2027 or the next prospectus. The prospectus calls the waivers "voluntary" but says only the Trustees can end them early. | MKTN-PR, page 3, footnote 3 |
| Stated financing spreads or rates | Not stated | |
| Where financing costs are reported | In the expense ratio, combined with short dividends | MKTN-PR, page 3; MKTN-FS, page 1, footnote |
- Who pays what. The adviser pays operating expenses except: interest and taxes; trading costs "including brokerage commissions and short sale dividend or interest expense"; 12b-1 costs; acquired fund fees; litigation; proxy costs; tax reclaim costs; and extraordinary expenses (MKTN-PR, page 23, "Advisory Fees"). The fund pays those. The fee table still shows 0.08% of other operating expenses, which the documents don't break down. FAS charges an administrative fee of 0.100% on complex assets up to $50 billion (MKTN-SAI, page 47, "Administrator"). Whether the fund or the adviser bears it is not stated.
- Fees in the first period. Advisory fee earned $27,842, waived $3,773 and reimbursed $1,455, for September 25 to December 31, 2025 (MKTN-SAI, page 47, "Fees Paid by the Fund for Services").
- 12b-1 plan. Up to 0.25%, but "No such fee is currently incurred and paid by the Fund" (MKTN-PR, page 3, footnote 1).
- Expense example. $230 for 1 year and $709 for 3 years per $10,000, without waivers (MKTN-PR, page 3).
- Brokerage commissions and turnover.
- Total commissions: Not stated. Commissions on trades directed for research: $3,402 on $17,790,403 of trades, fiscal year ended December 31, 2025 (MKTN-SAI, page 47).
- Turnover: 59% for September 25 to December 31, 2025 (MKTN-PR, page 3, "Portfolio Turnover"). The fund expects turnover "possibly in excess of 100%" (MKTN-PR, page 6, "Portfolio Turnover Risk").
- Gap between expense ratio and management fee. 1.94% minus 1.08% is 0.86% (my arithmetic). It equals short sale costs 0.96% plus other operating expenses 0.08% plus acquired fund fees 0.15%, minus the 0.33% waiver (my arithmetic). Without short costs, net expenses would be 0.98% (MKTN-FS, page 1, footnote). Short costs are the largest single item in the gap (my inference).
- Actual first-period ratios (annualized, September 25 to December 31, 2025): net expenses 1.91%; net expenses excluding short sale costs 0.95%; expense waiver 0.20% (MKTN-PR, page 24, "Financial Highlights").
9. Performance and risk
Returns from the fact sheet (MKTN-FS, page 1, "Average annual total returns (%)"). The table gives no separate end date; the fact sheet header date is 9/30/26.
| Period | NAV | Market price | Benchmark (3-month T-bill index) |
|---|---|---|---|
| 3 months (cumulative) | 7.52% | 7.47% | 0.89% |
| 1 year | 12.25% | 12.24% | 3.65% |
| Since inception (performance inception 9/24/25) | 12.18% | 12.30% | - |
- Calendar-year returns (MKTN-FS, page 1, "Calendar year total returns (%)"): YTD 2026 8.65% at NAV against 2.65% for the benchmark. No full calendar year for the fund; the benchmark returned 4.18% in 2025. For September 25 to December 31, 2025, total return was 3.44% at NAV, not annualized (MKTN-PR, page 24, "Financial Highlights").
- Prospectus performance. None yet. A bar chart "will be provided after the Fund has been in operation for a full calendar year" (MKTN-PR, page 7).
- Risk statistics.
- Beta 0.11, a "5 yr weighted avg beta of underlying stocks vs Russell 3000® Index" (MKTN-FS, page 1, "Fund statistics"). This is a holdings-based beta, not a beta of the fund's own returns (MKTN-FS, page 2, footnote ***).
- Correlation, volatility, Sharpe ratio, drawdown and up and down capture: Not stated.
- Valuation and size tilts, September 30, 2026 (MKTN-FS, page 1): weighted median market cap $45.4 billion long and $26.4 billion short; weighted median forward P/E 17.7x long and 22.2x short. The shorts are smaller and pricier than the longs (my inference).
10. History and structural changes
- Predecessor funds. None stated. Searches for "predecessor" and "reorganiz" found nothing.
- Reorganizations and 351 conversions. None. Section 351 appears only in the right to reject a creation order that would give a buyer "80% or more" of shares (MKTN-PR, page 21, "Taxes on Creations and Redemptions of Creation Units").
- Name, ticker, strategy, adviser or trust changes. None stated.
- Document dates. The prospectus and SAI are dated February 28, 2026, about five months after launch. The fact sheet data is as of September 30, 2026, seven months later. The fee limit of 0.83% took effect March 1, 2026, after the documents' date (MKTN-PR, page 3, footnote 3). No supplements are bound into either document. No annual report for the year ending December 31, 2026 exists yet.
- Conflicts between documents.
- Exchange: "NYSE Arca" (MKTN-PR, page 1; MKTN-SAI, page 1) versus "NYSE" (MKTN-FS, page 1).
- Inception: September 25, 2025, "commencement of operations" (MKTN-PR, page 24) versus "Performance inception" 9/24/25 (MKTN-FS, page 1).
- Net assets label: the fact sheet gives "Portfolio assets" of $144.4 million (MKTN-FS, page 1) but says its holdings percentages "are based on net assets" (MKTN-FS, page 2, "Definitions").
11. Principal risks
Summary list: MKTN-PR, pages 4 to 7, "What are the Main Risks of Investing in the Fund?". Longer descriptions: MKTN-PR, pages 11 to 16, "What are the Specific Risks of Investing in the Fund?".
- Quantitative Modeling Risk (page 4). Flag: shorting. Longs may fall while shorts rise.
- Strategy Risk (page 4).
- Short Selling Risk (pages 4 and 5; also page 12). Flag: shorting, leverage and counterparties. Loss "is theoretically unlimited". Short selling "involves the risk of increased leverage". Page 12 adds that "a third party to the short sale may fail to honor its contract terms".
- Stock Market Risk (page 5).
- Risk Related to the Economy (page 5).
- Small-Cap Company Risk (page 5).
- Mid-Cap Company Risk (page 5).
- Large-Cap Company Risk (page 5).
- Liquidity Risk (page 5).
- Risk Related to Investing for Growth (page 5).
- Risk Related to Investing for Value (page 5).
- Real Estate Investment Trust Risk (page 5).
- Focused Investment Risk (page 6).
- Counterparty Risk (page 6; also page 15). Flag: counterparties.
- Portfolio Turnover Risk (page 6).
- Risk of Investing in Derivative Contracts (page 6). Flag: leverage.
- Leverage Risk (page 6; also page 15). Flag: leverage. It comes from "short selling activities and investment in derivative contracts and certain hybrid instruments".
- ETF Risk (pages 6 and 7): Authorized Participants Concentration Risk; Premium/Discount Risk; Secondary Market Trading Risk; Cash Transactions Risk (flag: may force sales of positions, including closing shorts, to meet cash redemptions, my inference).
- New Fund Risk (page 7).
The SAI adds lender risks not in the prospectus list: "The lender may also recall borrowed securities at any time", and the lender "may go bankrupt" (MKTN-SAI, page 11, "Short-Selling Risk").
12. Relevance to our fund
- How close is its structure and leverage? (my inference)
- Close in strategy: a quantitative equity market neutral book of U.S. stocks, with 398 positions, well above our 150 minimum. It is roughly sector-balanced, as our book will be.
- Far in leverage: 1.58x gross against our 3.0x. It is not dollar neutral (19.8% net long) and targets zero beta instead.
- Different platform: a proprietary Federated Hermes trust with State Street as custodian, not Tidal.
- What does it show about 3.0x gross in a 40 Act ETF? (my inference)
- Little directly. MKTN never goes above 100% on either side, and leaves short proceeds in cash.
- Using the Reg T rule in
fund_context.md, an 89/69 book needs about $79 of equity per $100 (50% of 89.1 plus 50% of 69.3, my arithmetic). So it sits inside Reg T and needs no portfolio margin, bank borrowing or swaps. - Its prospectus lets it short "to the maximum extent permitted" under the 40 Act, and permits swaps and futures. That language would not by itself stop a larger book, but the fund doesn't use it.
- What does it show about financing, collateral, custody and costs? (my inference)
- Custody: longs and cash sit with State Street, while short proceeds stay with the lender or broker. This matches Tidal's point that shorts are held away from the main custodian. The documents don't name the broker or the account agreement.
- Costs: MKTN is a useful cost marker because it reports short costs in the expense ratio. Short dividends and other short costs were 0.96% of net assets, annualized, in its first period, and the fund was likely ramping up then. Dividends and borrow fees are lumped together, so the borrow fee alone can't be read.
- Financing: with no broker debit, its cost above the base rate is about short × c plus short × b, using the
fund_context.mdformulas. For a 69% short book that is $69.3 × c + $69.3 × b per $100, against $150 × c + $50 × d + $150 × b for our 150/150. - Rule 18f-4: MKTN claims limited derivatives user status while about 69% short.
fund_context.mdtreats short sales as derivatives exposure. If MKTN's counsel reads the rule differently, that reading matters for our fund's 18f-4 setup. Worth asking Tidal.
13. Gaps and open questions
What the documents don't answer, for a 150/150 fund:
- The lender or prime broker's name, and the margin type (Reg T or portfolio margin).
- Where short proceeds and collateral are held, and under what agreement (prime brokerage under Rule 17f-1, or a control agreement with State Street).
- Whether long stocks are pledged to the lender.
- The split of the 0.96% between short dividends, borrow fees and any interest. The rebate earned on short proceeds.
- How the fund squares limited derivatives user status with a 69% short book.
- Gross and net exposure over time. Only one fact sheet date is given.
- Total brokerage commissions. Correlation, volatility and drawdown figures.
Questions to ask:
- To Federated Hermes: Who lends MKTN's shorts, and is the account Reg T or portfolio margin?
- To Federated Hermes: Do short proceeds earn a rebate, and at what spread to the base rate?
- To Federated Hermes: What part of the 0.96% short cost is dividends and what part is borrow fees?
- To Federated Hermes or fund counsel: Why don't MKTN's short sales count toward the 10% limited derivatives user test?
- To Tidal: Would Tidal's counsel accept the same 18f-4 treatment of short sales for our fund?
- To Federated Hermes: Is $144.4 million "Portfolio assets" the same as net assets?
Search terms tried for fields left "Not stated":
- Prime broker and margin type: prime broker, borrow, margin, Regulation T, Reg T, portfolio margin, collateral, segregat, pledge.
- Leverage cost split: short sale, sold short, interest, borrowing, line of credit, credit facility, box spread, reverse repurchase, swap.
- VaR and derivatives risk manager: value at risk, VaR, 18f-4, derivatives risk manager, limited derivatives user.
- Fund accountant: fund accountant, accounting agent, accounting services.
- Total brokerage commissions: brokerage commission, total brokerage.
- Predecessor and conversions: predecessor, reorganiz, 351.
- Morningstar rating and risk statistics: read from the fact sheet in full; no rating, correlation, volatility or drawdown shown.
14. Documents used
| Code | Document | Date | Pages | Pages read | File name |
|---|---|---|---|---|---|
| MKTN-FS | Fact sheet | Data as of September 30, 2026; printed October 2026 ("G85012-22 (10/26)") | 2 | 1 and 2 (all; page 1 also from a page image) | bcbff500-MKTN_fact_sheet.pdf |
| MKTN-PR | Prospectus, single fund, no supplements | February 28, 2026 | 26 | In full: 1 to 15, 20 to 24, 26. Keyword passages only: 16 to 19. Not read: 25 (Appendix A). | 3549e3e8-MKTN_prospectus.pdf |
| MKTN-SAI | Statement of Additional Information, single fund, no supplements | February 28, 2026 | 50 | In full: 1, 7, 8, 14, 15, 47, 50. Part or keyword passages: 2 to 5, 9 to 11, 19, 20, 22, 28, 29, 34, 35, 46, 48, 49. Headings only: 6, 12, 13, 16. | f576e3ec-MKTN_SAI.pdf |
Page numbering.
- MKTN-FS: no printed page numbers. Page 1 is the data page; page 2 holds disclosures and definitions.
- MKTN-PR: PDF page 1 is the cover and PDF page 2 the contents, with no printed numbers. From PDF page 3 to 25, PDF page = printed page + 2. PDF page 26 is the unnumbered back cover.
- MKTN-SAI: PDF page 1 is the cover and contents, with no printed number. From PDF page 2 to 50, PDF page = printed page + 1.
15. Snapshot sources
- Ticker: MKTN-FS, page 1, header, "Ticker symbol" line.
- Fund name: MKTN-FS, page 1, header. Same on MKTN-PR, page 1, cover.
- As of date: "9/30/26" (MKTN-FS, page 1, top left). Holdings are "based on net assets at the close of business on 9/30/26" (MKTN-FS, page 2, "Definitions").
- Adviser: "The Fund’s Investment Adviser is Federated MDTA LLC." (MKTN-PR, page 7, "Fund Management").
- Platform: the fund is "a diversified portfolio of Federated Hermes ETF Trust" (MKTN-SAI, page 2), and the adviser is a Federated Hermes company (MKTN-PR, page 22). Own trust (my inference).
- Exchange: "NYSE Arca MKTN" (MKTN-PR, page 1, cover; MKTN-SAI, page 1, cover). The fact sheet says "NYSE" (MKTN-FS, page 1).
- Inception: "September 25, 2025 (commencement of operations)" (MKTN-PR, page 3, "Portfolio Turnover"; MKTN-PR, page 24, footnote 1). The fact sheet's "Performance inception" is 9/24/25 (MKTN-FS, page 1).
- Net assets: "Portfolio assets $144.4 m" (MKTN-FS, page 1, "Fund statistics"), as of September 30, 2026. Not labeled net assets.
- Strategy type: Morningstar category "Equity Market Neutral" (MKTN-FS, page 1); "The style is termed market neutral" (MKTN-PR, page 4).
- Long %: 56.3 value plus 32.8 growth, long column (MKTN-FS, page 1, "Portfolio composition (%)"), September 30, 2026 (my arithmetic).
- Short %: 40.5 plus 28.8, short column (MKTN-FS, page 1, "Portfolio composition (%)"), September 30, 2026 (my arithmetic).
- Gross: 89.1% plus 69.3% = 158.4% (my arithmetic).
- Above 2.0x: from the 1.58x gross (my arithmetic).
- Net: 15.8 plus 4.0, net column (MKTN-FS, page 1, "Portfolio composition (%)") (my arithmetic).
- Short method: "A short sale by the Fund involves borrowing a security from a lender which is then sold in the open market." (MKTN-PR, page 4, "Short Selling Risk").
- Prime broker or counterparty: the documents say only "a lender" (MKTN-PR, page 4) and "the broker" (MKTN-SAI, page 8). No firm is named.
- Custodian: "State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the securities and cash of the Fund." (MKTN-SAI, page 47, "Custodian").
- Management fee: 1.08% (MKTN-PR, page 3, fee table; MKTN-PR, page 23, "Advisory Fees").
- Total expense ratio: "Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements" 1.94% (MKTN-PR, page 3); "After waivers" 1.94 (MKTN-FS, page 1). Fee limit runs to the later of March 1, 2027 or the next prospectus.
- Short costs in expense ratio: "The expense ratio includes Dividends and Other Expenses Related to Short Sales." (MKTN-FS, page 1, footnote *); 0.96% line in the fee table (MKTN-PR, page 3).
- 3-month return: 7.52% at NAV, 3 months to September 30, 2026 (MKTN-FS, page 1, "Average annual total returns (%)", "Cumulative 3-month"). The table has no own date; the date is from the fact sheet header (my inference).
- 1-year return: 12.25% at NAV, 1 year to September 30, 2026 (MKTN-FS, page 1, "Average annual total returns (%)"). Date from the header, as above (my inference).
- Beta: "Portfolio beta (Source: 5 yr weighted avg beta of underlying stocks vs Russell 3000® Index)" 0.11 (MKTN-FS, page 1, "Fund statistics"), September 30, 2026. Holdings-based, not a beta of fund returns.
- Beta benchmark: Russell 3000 Index (MKTN-FS, page 1, "Fund statistics"; MKTN-FS, page 2, footnote ***).
- Beta period: "5 yr" (MKTN-FS, page 1, "Fund statistics"); "The 5-year beta represents the 5-year beta of the underlying stocks in the portfolio relative to the Russell 3000® Index." (MKTN-FS, page 2).
- Leverage Method: "A short sale by the Fund involves borrowing a security from a lender which is then sold in the open market." (MKTN-PR, page 4); "To the extent necessary to meet margin requirements, the broker will retain proceeds of the short sale until the short position is closed out." (MKTN-SAI, page 8, "Short Sales"). No document says Reg T, Regulation T or portfolio margin.
- Leverage cost: "Net expenses" 1.91% minus "Net expenses excluding dividends and other expenses related to short sales" 0.95% = 0.96%, annualized, September 25 to December 31, 2025 (MKTN-PR, page 24, "Financial Highlights") (my arithmetic). The fee table's estimate for the current fiscal year is also 0.96%, "Dividends and Other Operating Expenses Related to Short Sales" (MKTN-PR, page 3). Whether interest expense is in this line is not stated.
- Short dividend expense: combined with other short sale costs in the same line (MKTN-PR, page 3; MKTN-PR, page 24).
- Ranking properties (Rank to Score): from the ranking of the 27 LS peers prepared November 11, 2026, using only the project's fund profiles. Each of the seven criteria scores Yes = 1, Partly = 0.5, No or Not stated = 0. Funds sort first by Portfolio margin (YES, LIKELY, POSSIBLE, UNLIKELY, NO), then by Score, then Tidal funds first, then higher gross exposure (my inference).
- Rank: 13 of 27, as of November 11, 2026.
- Long/short: equity market neutral, with 219 long and 179 short positions on September 30, 2026 (MKTN-FS, page 1).
- Portfolio margin: POSSIBLE. The fund shorts directly, and the broker retains short proceeds "to meet margin requirements" (MKTN-SAI, page 8). No document says Reg T or portfolio margin.
- Cross-collateral: Not stated. Short cover is held in "short-term liquid securities such as money market funds, U.S. Treasury securities, government agency securities or equity securities" (MKTN-PR, page 9). Whether long stocks are pledged to the lender is not stated.
- Outside Reg T: Not stated.
- Short costs (includes dividends): No. 0.96% annualized for September 25 to December 31, 2025 (MKTN-PR, page 24; my arithmetic).
- Over 2.0x: No. 1.58x on September 30, 2026 (MKTN-FS, page 1; my arithmetic).
- Tidal: No. The fund is a portfolio of Federated Hermes ETF Trust (MKTN-SAI, page 2).
- Score: 1 (my arithmetic).