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Commentary Alternative Strategies Fund Third Quarter 2020 Commentary

The iMGP Alternative Strategies Fund (Institutional Share Class), gained 2.94% in the third quarter of 2020. During the same period, the Morningstar Multialternative category was up 1.96%, and 3-month LIBOR returned 0.06%. Year to date through September 30, the fund is up 0.44% while the category is down 3.60% and 3-month LIBOR is up 0.61%.

Past performance does not guarantee future results.  Index performance is not illustrative of fund performance.  An investment cannot be made directly in an index. Short-term performance in particular is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns.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. To obtain the performance of the funds as of the most recently completed calendar month, please visit Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced.

Quarterly Review

The Alternative Strategies Fund returned 2.94% during the quarter, continuing to rebound and pulling into positive territory for the year. All five sub-advisors generated positive performance during the quarter, in a range between 1.63% and 4.23%. Three of the five are positive on the year. Water Island remains the top performer year to date through September with a gain of 7.19%, generating strong performance of approximately 10% over the last two quarters after holding up well in March’s market carnage. Loomis Sayles is the other strong year-to-date performer, up 5.88% after increasing risk exposure materially during and immediately after the crisis. DCI held up well during the downturn, but the strategy’s low beta to credit produced more modest gains in the last two quarters. DoubleLine and FPA remain negative performers for the year through September, with DoubleLine down 1.82% and FPA down 7.14%. (For context, although somewhat disappointing in absolute terms, we would rank the DoubleLine portfolio’s performance toward the better end of the spectrum of broadly comparable funds we track.) Despite negative performance this year, these two managers have been the largest contributors to the fund’s total return since inception.

Both the DoubleLine and Loomis Sayles portfolios still offer attractive (>5%) yields even after double-digit cumulative gains over the past two quarters. DoubleLine in particular still has significant segments of their portfolio trading at discounts to par while underlying fundamentals are reasonably stable or in some cases improving. FPA maintains a portfolio that is fairly balanced between high-quality, dominant franchise businesses that seem likely to prosper in an environment that looks similar to the current one, and more traditionally value-oriented businesses (some of which were crushed in March) that are quite cheap but might take longer to realize their significant upside potential. That said, a rotation into value could also happen quickly if global growth surprises to the upside or if investors at least perceive there to be a better chance of it happening than is currently expected. We don’t expect to out-guess the market on when that will happen, and we don’t expect FPA to do so either, so we are very comfortable with their portfolio construction, including enough cash to be an opportunistic buyer in another selloff.

The U.S. elections are obviously looming large in the near future as we write this. Although we have expectations about what is likely to happen and about how the results will impact financial markets, we are humble enough to know that the uncertainty about both elements (election results and market impact) makes it unlikely that we will add value by making portfolio allocation moves in anticipation. We need only think back to four years ago to be reminded that the conventional wisdom was wrong on both the election outcome and the resulting impact.

The Oscar-winning screenplay writer William Goldman was talking about the movie industry when he emphasized its inherent unpredictability with the immortal words, “Nobody knows anything,” but he could well have been describing the investment business. While it’s somewhat of an exaggeration, we think there’s quite a bit of truth to it, particularly over short horizons, and thus we avoid big portfolio changes based on the political calendar. We instead require a high hurdle for tactical changes and rely on a portfolio construction that we think should perform at least reasonably well in disparate scenarios.

We wish everyone good health and prosperity as we head into the final months of what has been a challenging and dramatic year.

iMGP Alternative Strategies Fund Risk/Return Statistics 12/31/20 MASFX Bloomberg
Agg Bond
Multi-Alternatives Category
HFRX Global Hedge Fund Russell 1000
Annualized Return4.923.441.832.3416.44
Total Cumulative Return55.9836.6718.2523.84308.83
Annualized Std. Deviation4.712.954.484.3513.82
Sharpe Ratio (Annualized)0.900.950.280.401.18
Beta (to Russell 1000)
Correlation of MASFX to…1.00-0.070.830.680.80
Worst Drawdown-13.00-5.39-13.49-10.83-32.47
Worst 12-Month Return-5.36-2.47-6.65-8.19-8.03
% Positive 12-Month Periods85.44%80.58%70.87%69.90%94.17%
Upside Capture (vs. Russell 1000)29.218.8122.5322.78100.00
Downside Capture (vs. Russell 1000)27.12-9.1337.9034.05100.00
Since inception (9/30/11).
Worst Drawdown based on weekly returns
Past performance is no guarantee of future results

Performance of Managers

For the quarter, all five sub-advisors produced positive returns.The Loomis Sayles Absolute Return strategy was up 4.23%, DoubleLine’s Opportunistic Income strategy gained 3.35%, FPA’s Contrarian Opportunity strategy was up 3.24%, the Water Island’s Arbitrage and Event-Driven strategy returned 3.23%, and the DCI Long-Short Credit strategy increased by 1.63%. (All returns are net of the management fee charged to the fund.)

Key Performance Drivers and Positioning by Strategy


The DCI Long-Short Credit strategy returned 1.6% in the third quarter and moved further into positive territory for the year. The credit default swap (CDS) sleeve was a neutral contributor over the quarter, while the bond sleeve powered ahead on security-selection gains on the back of the continued market rally. Net beta effects were a modest positive contributor, as rates were a small positive and cash bonds somewhat outperformed the derivative hedges. By design the portfolio construction is always focused on asset selection—favoring firms with lower default risk (as measured by DCI’s proprietary default probability model) and improving fundamentals—and is constructed to be neutral to credit beta. While market dislocations from the spring continued to normalize over the summer, DCI still sees elevated spread dispersion and credit opportunity, which should be a positive factor for the strategy going forward.

Risk assets ended the quarter up notably on the positive economic rebound trend, but pulled back in September for the first negative month since March as the market began to take a more skeptical view on valuations, geopolitical risks, fiscal stimulus odds, and the U.S. election uncertainties. Technology highfliers led the gains, with the NASDAQ up 11% on the quarter, while energy was a significant underperformer in both equities and credit. For the quarter, the ICE BofA U.S. High Yield Cash Pay Index was up 4.7% as credit spreads in high-yield narrowed by about 100 basis points (bps). Other measures of credit market health were also positive. Corporations continued to issue record amounts of bonds and to refinance debt to take advantage of the extraordinary low yields. Trading and bid-ask spreads are back to about normal, with activity picking up at the end of summer and the semiannual CDS roll. Market dispersion, default probabilities, and distress all remain modestly elevated. Bond/CDS basis pressures remain for some of the BBB-rated and high-yield segment while defaults and bankruptcies continue to climb but recently at a more muted pace. The quarter overall saw a number of large bankruptcies in drilling, retail, and auto-related names.

Security-selection alpha in the portfolio was positive during quarter, led by gains in bond selection. In CDS, the net return was about flat as steady, but modest, gains in July and August were reversed in September. Long positions in housing and steel led the way, offset by losses in financials short positions and longs in hospitals and energy names. In bonds, after having missed out in May and June, the portfolio benefited from the less-beta-driven moves in the third quarter. The portfolio saw broad-based gains from smaller energy names (like Montage Energy), the ongoing recovery in autos and industrials, and especially consumer and tech. Consumer-focused tech names in the portfolio (such as Netflix) performed well, but the portfolio also benefited from beaten up consumer areas that DCI recently added (such as hotels). The portfolio’s swing to overweight in energy hurt in the short term, especially in CDS where the sector’s lagging was not offset by the security selection. 

Portfolio positioning was mostly steady over the quarter. The strategy remains long tech and housing, and short financials, and the model still finds short positions in many retailers attractive. As always, the credit selection portfolio favors improving fundamentals and strong credit quality.


For the quarter ended September 30, 2020, the Opportunistic Income strategy’s 3.2% gain outperformed the Bloomberg Barclays U.S. Aggregate Bond Index return of 0.6%. The quarter was generally characterized by tightening credit spreads and strong risk appetite as the various fiscal and monetary stimulus programs announced earlier in the year continued to flow through the economy.

The largest contributor to performance during this period was non-agency residential mortgage-backed securities (RMBS). Residential credit metrics broadly improved over the course of the quarter and housing data releases were especially strong. A renewed focus on homeownership across the United States benefited mortgage-related investments as a whole. The other standout performers during the quarter were asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS). These sectors were especially hard-hit by the March 2020 selloff, but they became attractive on a relative value basis soon after and continued to build momentum in the third quarter as their remittance data improved.

The only sector that detracted from strategy performance was agency RMBS. This sector produced a small, negative return during the quarter as prepayment volatility increased and spreads leaked slightly wider. Agency RMBS is still the top-performing sector for the strategy on a year-to-date basis after insulating the portfolio from the sharp risk-off moves that occurred earlier in the year. The strategy ended the quarter almost 50% allocated to non-agency RMBS with an additional 34% in other credit-sensitive areas, primarily CMBS, collateralized loan obligations (CLOs), and ABS. The duration ended the quarter at 2.0 years and the yield-to-maturity was 5.7%.


The FPA Contrarian Opportunity strategy continued its gains in the third quarter (up about 3.2%), albeit at a slower pace than last quarter. New investment activity in the quarter was limited. As a result of the McDermott International bankruptcy agreement, some of the previously held McDermott International debt was restructured into new debt and common stock in McDermott International. There were no material position increases over the quarter. The portfolio managers decreased the long position in Jardine Strategic Holdings by over 25% and sold out of Bureau Veritas, Otis Worldwide, and General Electric preferreds. Additionally, the Murray Energy loan paid off.

The top contributors for the quarter were long positions in Comcast, Charter Communications, TE Connectivity, Broadcom, and Facebook, all of which outperformed the broader market and even the NASDAQ during the third quarter. The largest detractors were McDermott International (multiple securities), which traded down sharply after emerging from bankruptcy, financials AIG and Citigroup, and energy infrastructure company Kinder Morgan, all of which remain challenged short term but are also extremely cheap and sport healthy dividend yields. A small short in Tesla also continued to hurt, as the stock nearly doubled in the quarter despite trading at over 150x next year’s estimated earnings.

Gross long equity exposure is 72.9% and net exposure is approximately 70%. Gross long credit exposure is 5.6% and net exposure is 4.6%. Cash is approximately 24%. The largest sector concentration remains in communication services (22%), with financials (16%) and information technology (11%) following. These three sectors comprise slightly less than half of the portfolio. While FPA increased the portfolio’s credit exposure near the end of the first quarter this year given the substantial increase in yields and spreads, they no longer find credit nearly as attractive. However, the portfolio managers believe that idiosyncratic stress in the high-yield market may be a fertile area of opportunity over the next several quarters.

Loomis Sayles

High-yield corporate bonds performed well during the quarter as spreads tightened significantly. The sector benefited from continued accommodative monetary and fiscal policies during the period. Within the portfolio, consumer, communications, and financial issues buoyed performance. The portfolio managers continue to deal with a higher-volatility regime, given questions related to scale and fallout of COVID-19, trade policy uncertainty, election outcomes, and rate volatility.

Securitized assets had the largest positive impact on performance during the third quarter. The sector continued to benefit from improved consumer and business outlooks, rebounding from the coronavirus-driven stay-at-home orders and business closures in March. Allocations to ABS, CLOs, and non-agency RMBS issues had the largest positive impacts within the securitized allocation.

Investment-grade corporate bond spreads tightened during the third quarter, despite emerging concerns over a “second wave” of COVID-19 outbreaks and the prospect of fiscal stimulus withdrawal. The approaching election’s outcome provides another point of uncertainty and potential volatility. Recently, issuers have been able to take advantage of lower rates with high new issuance. Investment-grade corporates contributed to performance, with technology, financial, and consumer cyclical names contributing the most.

Although lower than peak levels reached after the March market meltdown, high-yield is still the largest exposure in the portfolio, at about 43% net long. Securitized credit (encompassing a diversified group of ABS, CMBS, and non-agency RMBS) also remains a large net exposure at almost 31%, and together with high-yield, these two allocations make up almost 75% of the net long exposure. The portfolio’s calculated duration is about 4.1, with a yield to maturity of 5.4%.

Water Island

The Water Island Arbitrage and Event-Driven portfolio generated a return of approximately 3.2%. Both strategy sleeves contributed to returns: +249 bps (gross) from merger arbitrage and +90bps from special situations.

The top contributor in the portfolio for the third quarter was a position in Pacific Biosciences of California. In November 2018, Illumina—a U.S. developer of tools for DNA sequencing and analysis—agreed to acquire Pacific Biosciences—a U.S. DNA sequencing technology firm—for $1.1 billion in cash. The transaction ultimately failed to secure regulatory approval, leading to its termination at the start of 2020. Water Island opted to maintain exposure to Pacific Biosciences, believing the company was not only trading below fundamental value post-break, but also remained an attractive takeout candidate. (In fact, during the regulatory review process it was revealed Illumina’s interest in the company was driven in part by a belief that no fewer than four of its major competitors were potential suitors of Pacific Biosciences.) Pacific Biosciences shares traded higher during the third quarter following the appointment of a new CEO and improving business prospects for the company. Water Island has been reducing exposure on strength and continues to monitor this situation closely.

Other top contributors included a merger-arbitrage position in Advent International’s acquisition of Forescout Technologies and a special situations position in Velodyne LiDAR. Forescout is a cybersecurity company that agreed to be acquired by private equity firm Advent in February 2020 for $1.8 billion in cash. The portfolio managers initiated a position upon announcement but exited several months later, as they saw increasing signs of buyer’s remorse on Advent’s part. This proved prescient when Advent sought to back out of the deal, claiming Forescout’s business had been adversely impacted by the COVID-19 pandemic. With the companies set to go to court, Water Island gained comfort with the strength of the merger agreement and the risk/reward in the wider spread and reinitiated a position. Forescout and Advent ultimately agreed to renegotiate terms rather than pursue their litigation, and the deal closed successfully in August, producing gains. The portfolio also benefited when Velodyne, a leader in technology used for autonomous driving and last-mile delivery, was successfully brought public through an acquisition by Graf Industrial, a special purpose acquisition company (SPAC) in which the fund invested early in the second quarter.

The top detractor for the quarter was a position in Simon Property Group’s planned acquisition of Taubman Centers, which continued to experience volatility in the deal spread due to Simon’s attempts to escape the deal. Taubman and Simon—both real estate investment trusts (REITs) focused on shopping centers—agreed to a $3.2 billion cash merger in February 2020. As the novel coronavirus pandemic spread and malls shuttered or saw their traffic plummet amidst mass quarantines, signs of buyer’s remorse on Simon’s part began to emerge. Simon eventually filed suit to terminate the transaction in June, claiming Taubman has been disproportionately impacted by the pandemic. While the position has been reduced to be more in line with the risk/reward inherent in the situation, Water Island continues to believe Taubman has the better case due to the strength of the merger agreement (which even excludes pandemics as a reason for which a material adverse effect may be claimed). The trial is scheduled to begin in the fourth quarter. Other top detractors included merger-arbitrage positions in the acquisition of Fitbit by Alphabet-subsidiary Google and the acquisition of Gilat Satellite Networks by Comtech Telecommunications. The Fitbit/Google merger has encountered regulatory opposition due to concerns about Google having access to sensitive health data and user privacy (or lack thereof). Water Island has since exited the position. Gilat and Comtech both saw their businesses impacted by the COVID-19 pandemic, and they eventually sued each other during the third quarter—Comtech in an attempt to terminate the merger, and Gilat in an attempt to bind Comtech to it. The team continues to monitor the situation.

Green shoots for the U.S. economy and continuing accommodation from the Federal Reserve extended the market’s rally from late spring through July and August, and although September marked a momentary retreat, equity markets nonetheless ended the third quarter with healthy gains. During the quarter, the S&P 500 Index not only re-entered positive territory for the year, but also began setting all-time highs once again. Bouts of volatility appeared throughout the period, most notably during September. With ongoing uncertainty around COVID-19, a lack of progress on further stimulus, and what are certain to be contentious U.S. elections, Water Island does not expect volatility to dissipate in the fourth quarter.

For event-driven strategies, the most notable developments during the quarter were the return of mergers and acquisitions (M&A) activity and the entrance of SPACs into the vernacular of a broader investor base. The COVID-19 pandemic caused deal flow to grind to a halt in the second quarter, though consolidation activity typically rebounds quickly following such a period. Indeed, 36 deals of $5 billion or greater, totaling $456 billion in value, were announced during the quarter setting a record for a third-quarter period. While total year-to-date deal flow is still below that of recent periods, Water Island expects robust levels of consolidation to continue. Periods of stress can put well-capitalized companies in a position to make opportunistic acquisitions, while weaker peers seek to combine to survive. Another theme the team is seeing during this unprecedented time is consolidation in sectors where M&A due diligence can easily be conducted remotely, through data rooms and virtual conference calls, rather than onsite visits and face-to-face meetings with management. Technology and biotechnology are notable examples, and Water Island expects these industries to comprise a healthy share of announced M&A in the near term. Outside of the merger-arbitrage strategy, SPACs have emerged as an attractive area of focus. SPACs, or so-called blank-check companies, raise money through an IPO specifically for the purpose of making an acquisition. These acquisitions can serve as a route for a startup or more mature private company to go public, and 2020 has been a record year for SPAC activity. Target companies seem increasingly willing to consider the SPAC process as an alternative to an IPO of their own, and Water Island has evaluated and participated in several opportunities at different stages of the SPAC lifecycle.

As always, regardless of the specific makeup of the portfolio—merger arbitrage or special situations, hard or soft catalyst—the portfolio managers will continue to focus on risk management, seeking to generate returns from the outcomes of idiosyncratic corporate catalysts rather than broad market direction while striving to preserve capital during times of market stress.

Strategy Allocations

The fund’s capital is allocated according to its strategic target allocations: 25% to DoubleLine, 19% each to DCI, Loomis Sayles, and Water Island, and 18% to FPA. We use the fund’s daily cash flows to bring the manager allocations toward their targets when differences in shorter-term relative performance cause divergences.

Sub-Advisor Portfolio Composition as of September 30, 2020

DCI Long-Short Credit Strategy

Bond Portfolio Top 5 Sector Long Exposures as of 12/31/20
High Tech14.3%
Consumer Discretionary14.2%
Consumer Non-Discretionary7.9%

CDS Portfolio Statistics:

CDS Portfolio Statistics: LongShort
Number of Issuers8777
Average Credit Duration (yrs.)4.84.8
Spread111 bps115 bps

DoubleLine Opportunistic Income Strategy

Sector Exposures as of 12/31/20
Agency Inverse Floaters1.5%
Agency Inverse Interest-Only9.5%
Agency CMO0.7%
Agency PO3.1%
Collateralized Loan Obligations8.1%
Commercial MBS11.8%
Bank Loan5.3%
Emerging Markets5.6%
Non-Agency Residential MBS41.5%

FPA Contrarian Opportunity Strategy

Asset Class Exposures as of 12/31/20
U.S. Stocks48.5%
Foreign Stocks29.8%
Bonds and Loans3.9%
Limited Partnerships1.0%
Short Sales-2.6%

Loomis Sayles Absolute Return Fixed-Income Strategy

Long Total Short Total Net Exposure
High-Yield Corporate 41.2%-2.3%38.9%
Investment-Grade Corp.18.7%0.0%18.7%
Dividend Equity9.0%-0.4%8.6%
Emerging Market6.1%-2.0%4.1%
Bank Loans0.5%-0.2%0.3%
Global Credit0.4%-0.4%0.1%
Global Rates0.2%0.0%0.2%
Cash & Equivalents8.7%0.0%8.7%

Water Island Arbitrage and Event-Driven Strategy

Sub-Strategy Exposures

Long Short Net
Merger Arbitrage – Equity76.1%-26.4%49.7%
Merger Arbitrage – Credit3.2%-0.2%3.0%
Total Merger-Related79.3%-26.6%52.7%
Special Situations – Equity11.7%-1.0%10.7%
Special Situations – Credit3.9%0.0%3.9%
Total Special-Situations15.6%-1.0%14.7%

Stay Informed

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The fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The statutory and summary prospectus contains this and other important information about the investment company, and it may be obtained by calling 1-800-960-0188. Read it carefully before investing.

Although the managers actively manage risk to reduce portfolio volatility, there is no guarantee that the fund will always maintain its targeted risk level, especially over shorter time periods and loss of principal is possible. The performance goals are not guaranteed, are subject to change, and should not be considered a predictor of investment return. All investments involve the risk of loss and no measure of performance is guaranteed. The fund aims to deliver its return over a full market cycle, which is likely to include periods of both up and down markets.

Though not an international fund, the fund may invest in foreign securities. Investing in foreign securities exposes investors to economic, political and market risks, and fluctuations in foreign currencies. Investments in debt securities typically decrease when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in mortgage-backed securities include additional risks that investor should be aware of including credit risk, prepayment risk, possible illiquidity, and default, as well as increased susceptibility to adverse economic developments. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management, and the risk that a position could not be closed when most advantageous. The fund may make short sales of securities, which involves the risk that losses may exceed the original amount invested. Multi-investment management styles may lead to higher transaction expenses compared to single investment management styles. Outcomes depend on the skill of the sub-advisors and advisor and the allocation of assets amongst them. Investing in derivatives could lose more than the amount invested. The fund may make short sales of securities, which involves the risk that losses may exceed the original amount invested. Merger arbitrage investments risk loss if a proposed reorganization in which the fund invests is renegotiated or terminated.

Diversification does not assure a profit nor protect against loss in a declining market.

Leverage may cause the effect of an increase or decrease in the value of the portfolio securities to be magnified and the fund to be more volatile than if leverage was not used.

Alpha is an annualized return measure of how much better or worse a fund’s performance is relative to an index of funds in the same category, after allowing for differences in risk.

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

Correlation is a statistical measure of how two securities move in relation to each other.

Credit Default Swap (CDS) A credit default swap (CDS) is a financial derivative or contract that allows an investor to “swap” or offset their credit risk with that of another investor. For example, if a lender is worried that a borrower is going to default on a loan, the lender could use a CDS to offset or swap that risk

Duration is a commonly used measure of the potential volatility of the price of a debt security, or the aggregate market value of a portfolio of debt securities, prior to maturity. Securities with a longer duration generally have more volatile prices than securities of comparable quality with a shorter duration.

A basis point is a value equaling one on-hundredth of a percent (1/100 of 1%).

Collateralized Loan Obligation (CLO) is a security backed by a pool of debt, often low-rated corporate loans. Collateralized loan obligations (CLOs) are similar to collateralized mortgage obligations, except for the different type of underlying loan.

Market capitalization (or market cap) is the total value of the issued shares of a publicly traded company; it is equal to the share price times the number of shares outstanding.

Mortgage-backed security (MBS) is a type of asset-backed security that is secured by a mortgage or collection of mortgages

Mortgage Real Estate Investment Trusts mREITs deal in investment and ownership of property mortgages; they loan money for mortgages to owners of real estate, or purchase existing mortgages or mortgage-backed securities.

Standard deviation is a statistical measure of the historical volatility of a mutual fund or portfolio, usually computed using 36 monthly returns.

Sharpe ratio is the measure of a fund’s return relative to its risk. The Sharpe ratio uses standard deviation to measure a fund’s risk-adjusted returns. The higher a fund’s Sharpe ratio, the better a fund’s returns have been relative to the risk it has taken on. Because it uses standard deviation, the Sharpe ratio can be used to compare risk-adjusted returns across all fund categories.

A short sale is the sale of an asset or stock the seller does not own.  It is generally a transaction in which an investor sells borrowed securities in anticipation of a price decline; the seller is then required to return an equal number of shares at some point in the future. Contrastingly, a seller owns the security or stock in a long position.

Upside/downside capture is a statistical measure that shows whether a given fund has outperformed–gained more or lost less than–a broad market benchmark during periods of market strength and weakness, and if so, by how much.

The BofA High-Yield Cash Pay Index The index is an unmanaged index used as a general measure of market performance consisting of fixed-rate, coupon-bearing bonds with an outstanding par which is greater than or equal to $50 million, a maturity range greater than or equal to one year and must be less than BBB/Baa3 rated but not in default.

The BofA High-Yield Constrained Index  is a market value-weighted index of all domestic and yankee high-yield bonds, including deferred interest bonds and payment-in-kind securities.

The Bloomberg Barclays Aggregate Bond Index is a market capitalization-weighted index, meaning the securities in the index are weighted according to the market size of each bond type. Most U.S. traded investment grade bonds are represented. The index includes US Treasury Securities (non TIPS), Government agency bonds, Mortgage backed bonds, Corporate bonds, and a small amount of foreign bonds traded in U.S.

CDX Indexes track North American and emerging market credit derivative indexes.

LIBOR stands for London Interbank Offered Rate. It’s an index that is used to set the cost of various variable-rate loans.

The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market.

The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies; including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage.

The VIX Index is a trademarked ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market’s expectation of stock market volatility over the next 30 day period.

Each Morningstar Category Average represents a universe of Funds with similar investment objectives. As of March 31, 2020, the Morningstar Multialternative Category average expenses were 2.01% gross and 1.58% net.

You cannot invest directly in an index.

Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.

As of September 30, 2020, the iMGP Alternative Strategies Fund’s top 10 holdings were:

58.COM INC 1.00%

Any tax or legal information provided is merely a summary of our understanding and interpretation of some of the current income tax regulations and it is not exhaustive. Investors must consult their tax advisor or legal counsel for advice and information concerning their particular situation. Neither the Funds nor any of its representatives may give legal or tax advice.

Mutual fund investing involves risk. Principal loss is possible.

Litman Gregory Fund Advisors, LLC has ultimate responsibility for the performance of the iMGP Funds due to its responsibility to oversee the funds’ investment managers and recommend their hiring, termination, and replacement.