During the quarter, the iMGP DBi Managed Futures Strategy ETF was up 6.44% at NAV and 6.69% at market price versus the SG CTA Index’s gain of 5.33%. Through the first three quarters of the year, the Fund was up 6.26% at NAV and 6.39% at price, compared the index’s loss of 2.69%.

Performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted. Short term performance is not a good indication of the fund’s future performance and should not be the sole basis for investing in the fund. Performance data current to the most recent month end may be obtained by visiting www.imgpfunds.com. 

For standardized performance click here: https://imgpfunds.com/im-dbi-managed-futures-strategy-etf/

Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. 

Quarterly Review

These are strange times, indeed. The markets seem willing to ignore, for now, various elephants in the room. The Ai spending supernova is fueling economic growth, yet is built on peculiarly circular transactions among formerly capital efficient tech companies using highly speculative returns on investment. A frontal assault on the independence of the Fed, zero political will to reduce the deficit and the inflationary ripple effects of a global trade war are met with … declining yields. The dollar debasement trade is in full swing in gold and bitcoin, the US president is personally short the dollar, and yet the dollar is in rebound mode.

This (arguably) might be rational. One theme of these letters has been that, despite various shocks to system, nothing big broke. The global trade war has produced neither runaway inflation nor a deep recession. Bond markets have yet to truly punish profligate governments. Briefly scared away, capital has returned to the American Exceptionalism trade. Political dysfunction has not morphed into riots in the streets, and geopolitical nightmares persist but do not escalate. No “unknown unknowns” – another pandemic, a sudden banking collapse, etc. – have shaken market confidence. One conclusion may be that the system is more robust, more durable than predicted. And hence the market has learned to tune out alarmists and embrace optimism.

We, of course, are skeptical. Market confidence is a powerful but fragile force. Equities are up 60% in two years and valuations, by some measures, exceed those of the dotcom peak. Bonds and equities both face the same risk in inflation, which undercuts a fundament of most portfolio construction. So our mantra remains the same: maintain diversification because the world will change; we will see new crises, and market euphoria will reverse.

Fund Characteristics

*Net of fees

Gross Expense Ratio: 0.85%

The Fund increased by 6.44% net over the third quarter. During the quarter, the portfolio benefitted from the “let it run hot” trade, with equity risk increased, particularly in emerging markets, which rallied more than 9%. Towards the tail-end of the quarter, the portfolio shifted to an overweight in emerging markets and the U.S. while relatively reducing exposure to EAFE. A long gold position, which gradually increased to its maximum weight also helped to drive gains. Whipsaws in crude oil weighed modestly on performance, though losses were limited by an increased long position that captured the late quarter rebound. A short position in the Japanese yen, which was further expanded, contributed positively as the currency weakened amid fiscal concerns. Conversely, a long euro position in late July offset those gains following the announcement of a trade deal. The position was quickly scaled back, allowing the portfolio to recover a portion of the losses. Within rates, the portfolio added to longs at the short end of the curve, anticipating a decline in short term yields, but shifted to a short position on the long end. This curve steepener trade detracted from performance as long-duration bonds rallied during the quarter. The portfolio has outperformed the target hedge fund index by over 900 bps this year.

Portfolio Characteristics