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Commentary iMGP Alternative Strategies Fund Third Quarter 2022 Commentary

The iMGP Alternative Strategies Fund (Institutional Share Class) declined by 1.98% in the third quarter of 2022. During the same period, the Morningstar Multistrategy Category was down 1.20% and the ICE BofA 3-Month Treasury Bill Index returned 0.46%. Year to date, the fund was down 10.33%, compared to a loss of 14.61% for the Bloomberg US Aggregate Bond Index (the Agg), a loss of 5.33% for the category and a 0.61% gain for the ICE BofA 3-Month Treasury Bill Index.

Performance quoted represents past performance and 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 that their original cost.  Current performance of the fund may be lower or higher than the performance quoted.  The Advisor has contractually agreed to waive a portion of the management fee through April 30, 2023. 

Quarterly Review

The Alternative Strategies Fund fell almost 2% during the quarter, resulting in losses through the end of Q3 of slightly more than 10%. Clearly, we continue to be underwhelmed with the fund’s recent results. Much of what we would like to say here is a continuation of the sentiments we expressed in the last update, with the notable exception of announcing the addition that we had previewed last quarter. We are excited to share that effective September 30, Dynamic Beta Investments (DBi) is managing a new sleeve of the fund in a strategy we call Enhanced Trend, bringing the total number of subadvisors to six. This is a customized strategy for the fund that uses DBi’s expertise in hedge fund replication to build a portfolio combining trend following (75% weight) and equity hedge (25%). Based on our research, we believe this addition will improve the fund’s risk-adjusted returns over time while reducing the magnitude of drawdowns due to the strategy’s highly complementary (expected) return profile. We are very enthusiastic about this change, and invite you to review a more detailed discussion of DBi addition here.

We strive to deliver better absolute and relative performance over time, but we note that the fund is not intended as an explicit hedge for equities (or bonds). Despite disappointing recent returns, it has fared better than both traditional asset classes during this drawdown, as equities (measured by the S&P 500 Index) were down 23.9%, and core bonds (the Agg) were down 14.6% year-to-date through the end of September. The fund is outperforming the Agg by over 4 percentage points on the year, and almost 14 percentage points cumulatively over the trailing two years.

Global, developed international, and emerging markets equity index returns were also sharply negative, generally down in the mid- to high-20s percent range. Even commodities, still a standout performer on a year-to-date basis, offered no protection during the quarter, with the index (S&P GSCI) declining over 10%. The “head-fake” rally in risk assets at the beginning of the quarter (S&P 500 up almost 10% in July) seems like a distant memory at this point. When we noted the attractive attributes of the portfolio in the last update, we included the caveat that things could of course get worse before getting better, and, well, they did.

Too much virtual ink has been spilled detailing and analyzing the causes of the terrible performance across almost all asset classes and strategies this year for us to add anything insightful to the mix. Similarly, everyone paying attention to the economy and financial markets has their own view of when the Fed may finally slow its rate hiking or even pivot to easing, but we don’t expect to add value with a non-consensus opinion on that. Nor will we ever successfully “call a bottom” in any asset class or strategy (fortunately the fund is not predicated on that). We have no ability to predict when markets will begin to change, but we know they will at some point, and we believe the potential upside in the fund is quite substantial. We tend decidedly more toward self-flagellation than self-congratulation, but during periods of extreme pessimism and negative sentiment, we do tend to look for potential silver linings.

We recently wrote that we thought the fund’s portfolio had rarely been as attractive as it was at the end of Q2. We think it is more attractive now.

  • The credit strategies that had been yielding in the upper single digits on a blended basis (with a combined duration under three years) now each sport yields about two percentage points higher, levels we have not seen in at least ten years. We obviously can’t guarantee, much less predict, fund-level returns, or the returns of any subadvisor’s portfolio. However, the last time the credit portfolios had yields approaching the current levels, their returns over the subsequent year were in the mid- to upper-teens according to data provided by. Admittedly, the situation isn’t a perfect analogue since the current Fed seems hell-bent on taming inflation almost without regard to any collateral damage. But we think the information is at least instructive in providing context for the fund’s current situation and prospective returns over a reasonable period.
  • After holding up relatively well (down~1% YTD) the merger arbitrage portfolio offers an average annualized deal spread in the high teens. Many factors can impact the actual realized returns, but this is a strong starting point.
  • The long-short credit strategy has also performed relatively well (about flat YTD), and its fundamental drivers remain at their most attractive since late 2018/early 2019 (preceding the strategy’s strongest year of performance): credit spreads are wide, volatility is medium to high but not at dysfunctional crisis levels, and there is wide dispersion in company fundamentals and default probabilities. Additionally, in the CDS sleeve of this strategy, owing to the higher spread on individual credits as well as higher notional exposures, the gross long and gross short credit risk exposures are over 50% higher (while remaining approximately market neutral on a net basis) than they were at the end of 2018, which preceded the strategy’s high single digit gain the following year.

These details hopefully provide fellow shareholders with some support for our continued strong optimism about the fund’s prospects. And with the addition of DBi, we believe the fund is potentially positioned to be able to wait out the turn with more protection. We are obviously very limited in what we can say in this regard, but if our timing had been better and we had been allocated to DBi’s strategy for the entire year, the fund’s losses would be significantly less. Of course, if we were taller and could hit jump shots from 28 feet, we might be playing for the Golden State Warriors, but we are where we are. Our aim is simply to provide additional context on the fund’s position, which we think is one with substantial upside but increased resilience to further market turmoil thanks to the new strategy addition.

Thank you for your investment in the fund. We look forward to updating you next quarter, hopefully with significantly better results.

iMGP Alternative Strategies Fund Risk/Return Statistics 9/30/2022

Statistics of 9/30/2022MASFXBloomberg US Agg Bond IndexMorningstar US Fund MultistrategyRussell 1000 Index
Annualized Return 3.451.272.5313.17
Total Cumulative Return 45.2114.9131.66289.86
Annualized Std Dev 4.833.814.2614.62
Sharpe Ratio (Annualized)0.590.180.450.88
Beta to Russell 1000
Correlation of MASFX to 1.000.350.910.85
Worst 12-Month Return-10.04-14.60-5.71-17.22
% Positive 12-Month Periods0.810.690.760.90
Upside Capture vs Russell 100027.207.2724.92100.0
Downside Capture vs Russell 1000 27.974.9230.10100.0
Upside Capture vs Agg 83.70100.068.04244.20
Downside Capture vs Agg 27.48100.028.6318.24

Quarterly Portfolio Commentary      

Performance of Managers

For the quarter, two of the five sub-advisors produced positive returns. Water Island’s Arbitrage and Event-Driven strategy was up 1.81% and the Blackstone Credit Systematic Group’s Long-Short Credit strategy gained 1.19%. On the negative side, the Loomis Sayles Absolute Return strategy was down 2.37%, the FPA Contrarian Opportunity strategy declined 5.23%, and DoubleLine’s Opportunistic Income strategy fell 6.11%. (All returns are net of the management fee charged to the fund.)

Year to date through September 30, the returns are as follows: Blackstone Credit Systematic Group is up 0.11%; Water Island is down 0.97%; Loomis Sayles down 14.15%; DoubleLine down 15.97%; and FPA down 18.24%.

Key performance drivers and positioning by strategy

Blackstone Credit Systematic Group (DCI):

The Long-Short Systematic Credit strategy returned almost 1.2% in Q3, even as the S&P 500 declined 5% and the U.S. ten-year Treasury bond returned -6%. Central bank tightening dominated the market as the Fed moved forward aggressive “higher-for-longer” rate hikes in response to the inflation news and in doing so stoked emergent recession fears for next year. The U.S. two-year Treasury yields were up 132 bps on the quarter and interest rate vol remained extremely elevated. With rising concerns about the global economy, commodity prices plummeted with oil ending down 25%, the dollar strengthened, and the VIX Index climbed to close the quarter above 31.

Performance began to pick up more persistently in Q3 despite some continued headwinds in the form of market gyrations and beta-dominant moves in credit that left little room for differentiation. Over the quarter the strategy’s beta hedging performed about in line, protecting the portfolio from the jump up in rates and smoothing out the credit spread whip-sawing. The Credit Default Swap (“CDS”) overlay drove the positive performance while the bond sleeve alpha was about flat. The long-short CDS sleeve benefitted from short positions in the consumer sector – in particular, retail and cruise lines. Selective shorts in energy and technology also contributed positively. There is a new position building in homebuilders, which the model now sees as oversold relative to their earnings.

Positions in Europe underperformed and the model has moved more underweight the continent. Performance in the bond sleeve was mixed, with gains in energy and materials positions offset by losses from consumer, technology, and financials. The portfolio tilts have turned more pessimistic on retail, leisure, and technology, and more positive on oversold areas such as home builders and mining. The bond portfolio continues to also favor energy names, despite the decline in oil, as the sector recovery has gained traction and the longer-term prospects look positive relative to spread levels.

The investment team expects the portfolios to generate more consistent alpha into the end of the year as the market may have an opportunity to differentiate along fundamentals. Hence, the opportunity set has gotten large as spreads, volatilities, and dispersion of fundamentals (and the resulting default probabilities) are all elevated. The portfolio risk spend is, as usual, concentrated in idiosyncratic names.


For the quarter ended September 30, 2022, the Opportunistic Income portfolio lost about 6%, underperforming the  Bloomberg Aggregate Bond Index’s (the “Agg”) 4.8% decline. This was another volatile period in the markets as the Federal Reserve delivered two consecutive 75 basis point rate hikes and commenced its quantitative tightening program. US Treasury yields rose sharply across the curve, causing negative performance for nearly every fixed income sector. Global stock markets also experienced declines as tightening monetary conditions raised investor concerns for an economic recession.

The portfolio was hurt on a relative basis by having substantially more credit risk, but active duration management and security selection in the credit sleeves added value. In terms of duration management, the portfolio consistently maintained a lower duration than the Index, which bolstered relative performance as the 5-year and 10-year sections of the US Treasury curve rose by 105 bps and 82 bps, respectively. As for security selection, nearly all of the credit sleeves in the Portfolio outperformed the credit and mortgage subsectors of the Index. The top-performing sectors in the Portfolio were non-Agency Commercial Mortgage Backed Securities (“CMBS”), bank loans, and Collateralized Loan Obligations (“CLO”)s, all of which benefitted from their relatively low durations and high levels of interest income. The worst-performing sectors were US Treasuries, Agency Mortgage Backed Securities (“MBS”), and Asset Backed Securities (“ABS”). All three of these sectors experienced duration-related price declines but the Agency MBS and ABS also experienced spread widening. The portfolio ended the quarter with a duration of 4.2 and a yield of 10.3%, while maintaining a cash balance of almost 5%.  


The Contrarian Opportunity portfolio was again dragged down by the gravity of risk assets, falling by over 5%, roughly in line with the S&P 500, but significantly better than the nearly double-digit loss of the MSCI EAFE Index. The top contributors for the quarter were again relatively minor, with no positions contributing over 0.2%. Netflix, LPL Financial, PG&E, Swire Pacific, and Uber all contributed over 10bps. Four of the five largest detractors were again concentrated in communications and technology, with Comcast, Charter, and Alphabet each costing the portfolio between 0.5 and 0.8%, while Prosus detracted 0.3%. New positions throughout the quarter included: Vornado Realty Trust, Icon Plc, Herbalife corporate bonds, and Zillow convertible debt.

Long equity exposure is almost 70% and credit holdings now make up over 3%. We would expect that to increase if credit spreads continue to widen, as the portfolio managers have invested successfully in stressed credit in previous cycles. The largest sector concentration is in communication services, with financials, and information technology following. These three sectors comprise approximately 56% of the equity portfolio. International stocks make up about one-third of the equity portfolio. There remain smatterings of interesting option-like positions, such as the basket of pre-merger Special Purpose Acquisition Companies (“SPACs”) and a handful of cheap convertible bonds, in addition to the healthy cash balance (~25%), a “call option” on the ability to continue adding exposure at significantly cheaper valuations if markets fall further.

Loomis Sayles:

The Absolute Return strategy outperformed the Agg significantly, but was still negative, falling 2.4% in the quarter. Investment grade corporate bond spreads widened amid aggressive central bank policy focused on tamping down persistent inflation. The longer duration profile of investment grade relative to high yield corporates was an added headwind. As such, investment grade corporates detracted significantly from performance, with financial, communications, and consumer cyclical names being primarily responsible. Securitized credit market spreads generally widened significantly in sympathy with broader credit markets as investors assigned a higher probably to a “hard landing” scenario. This was particularly true within subsectors with corporate-exposed credit. Within the securitized allocation, ABS issues were primarily responsible for the sector’s negative impact, with non-Agency Residential Mortgage Backed Securities (“RMBS”), CLOs, and CMBS issues also detracting. Emerging market assets also detracted from performance, as they continued to face headwinds caused by a rising US dollar, global growth concerns, continued inflationary pressure, and idiosyncratic risks concerning Russia and China.

High yield corporate bonds were a positive contributor to performance. Spreads tightened very modestly during the third quarter and the category was broadly helped by lower interest rate sensitivity and comparatively high representation of energy-related names compared to investment grade bonds. Consumer cyclical names were mostly responsible for the positive impact. The portfolio ended the quarter with a duration of 3.3 and a yield of 8.0%.

Water Island:

The Water Island Arbitrage and Event-Driven portfolio was up almost 2% in the quarter, all of it coming from merger arbitrage positions (special situations were a modest allocation and detracted a handful of basis points). 

Deal Highlights

The top contributor in the portfolio for Q3 was a position in the acquisition of Change Healthcare by UnitedHealth Group. In January 2021, Change Healthcare, a US-based medical software and technology provider, agreed to be acquired by OptumInsight, a subsidiary of UnitedHealth Group (which also owns the country’s largest health insurer) providing medical information technology services, for $8.8 billion in cash. After a lengthy regulatory review, the US Department of Justice (“DOJ”) sued to stop the transaction in February 2022, alleging the combination would harm competition in multiple markets. In September, however, a federal judge ruled against the DOJ’s attempt to intervene in the deal, allowing the merger to proceed. The deal spread narrowed significantly on the news, leading to gains for the fund. The deal is expected to close in Q4.

Other top contributors included the acquisition of Nielsen Holdings by a private equity consortium led by Brookfield Asset Management and Elon Musk’s troubled bid for Twitter. The Nielsen deal experienced spread volatility after the company’s largest shareholder sought to scuttle the transaction, believing it undervalued the company. Ultimately, the dissident entered negotiations with the acquirers and was brought into the consortium, allowing the deal to proceed. The spread tightened on the news and tightened further after the transaction received shareholder approval in September. The deal is expected to close in Q4. The Twitter spread traded significantly wide after Musk attempted to back out of the deal due to a case of buyer’s remorse. Twitter sued to enforce the deal on its original terms, and each development in the preparations for the trial – which was set to begin in mid-October – created a seemingly endless parade of good news for Twitter. Perhaps seeing the writing on the wall, in early October, Musk announced his willingness to complete the deal at its original terms. While the details have yet to be ironed out, this seems to be good news for Twitter shareholders.

Conversely, the top detractor in the portfolio was a position in the terminated acquisition of Momentive Global by Zendesk. Water Island has previously written about this deal, which fell apart due to interference from activist shareholders at Zendesk. The portfolio managers have maintained exposure to Momentive post deal break as the activist shareholder who originally agitated for Momentive to put itself up for sale has reemerged, and the background of the Zendesk deal indicated the company received at least two other competing bids during the initial process. While volatility in the share price has contributed to mark-to-market losses for the fund, the PMs believe there is a high likelihood the company finds another buyer.

Other top detractors included the acquisition of semiconductor company Silicon Motion Technology by semiconductor company MaxLinear and the acquisition of electronics and materials company Rogers by chemicals company DuPont. Both of these bids have encountered delays in receiving regulatory approval from the State Administration for Market Regulation (“SAMR”) in China, having been asked to withdraw and refile the respective notices of their planned mergers, which has led to volatility in the deal spreads. Despite the delays, Water Island has favorable views of the remaining risk/reward in the transactions, and is maintaining exposure, but monitoring the situations closely.

Water Island Market Commentary

During Q3, central bank actions and geopolitical strife helped extend this year’s equity and fixed income market routs, with the S&P 500 Index ending September with its third-worst return for the first nine months of a calendar year in the past five decades and the Bloomberg US Aggregate Bond Index experiencing its worst first-nine-month period since its inception more than 40 years ago. Although event-driven strategies have largely succeeded in delivering differentiated return streams with low sensitivity to and lower volatility than the broader markets so far this year, the weakening economy continues to inflict collateral damage on catalyst-driven opportunities such as announced mergers and acquisitions (“M&A”). For example, over late Q2 and the first several weeks of Q3, we saw significant volatility in M&A deal spreads – only to have spreads broadly contract during the middle of the quarter, and then once again begin widening at the tail end of Q3. Growing concerns around the ability of banks to finance deals and heightened antitrust risk played a role; however, the largest contributor to volatility in M&A spreads has been volatility in the broader markets leading to forced and panicked selling across arbitrage positions.

Overall, though, we believe arbitrageurs are in a better position at the end of September than they were three months prior, and while the journey may not have been all roses, we believe it can broadly be summed up as one overarching theme: there is growing confidence across the merger arbitrage community that deals would continue to get done. Multiple deal-specific events unfolded during the quarter which contributed to this growing confidence in three key areas: antitrust, financing, and buyer’s remorse.

In the realm of antitrust, we have several examples to support our view that, absent any material reform to antitrust laws, established precedent will continue to hold true: the DOJ suffered a string of losses in court cases in which it either attempted to use a novel view of antitrust in vertical mergers to block deals or sued the parties to a merger for an unrelated alleged offense (including the Change Healthcare/UnitedHealth Group, Sanderson Farms/Cargill, and US Sugar Corp/Imperial Sugar mergers); the Competition Authority in Norway failed in its attempt to block the merger of Sbanken and DNB; and the acquisition of Avast by NortonLifeLock cleared all regulatory hurdles, despite being highly scrutinized in the UK and Europe. Furthermore, any fears that China’s antitrust regulator, SAMR, would put a halt to all deal approvals amidst geopolitical tensions proved unfounded, with SAMR approving two transactions that had suffered lengthy regulatory reviews in the country: CMC Materials/Entegris and Coherent/II-VI. (With the benefit of hindsight, we are curious what would have happened had several widely held transactions, such as Willis Towers Watson/Aon and Aerojet Rocketdyne/Lockheed Martin, chosen to fight the DOJ in court rather than abandon their planned mergers in the face of regulatory pushback.)

Regarding financing, fears that bank commitments to fund deals would dry up rose in concert with interest rates. At this point, however, banks appear able and willing to honor their prior commitments – even those that were agreed to months prior, in a very different interest rate environment. In addition, we have begun to see financial sponsors bypass the traditional loan markets in order to secure financing for deals via direct lending. Thoma Bravo, in particular, has been at the forefront of this trend, having used direct lending for some portion of the financing in 16 of the 19 buyouts the firm conducted last year.

Lastly, we witnessed multiple instances of buyer’s remorse during the most recent severe market downturn in 2020 (e.g., Tiffany & Co/LVMH and Taubman Centers/Simon Property Group), and while deal prices were renegotiated lower in several instances, they ultimately closed successfully. This year, we view Elon Musk’s attempt to back out of his deal to buy Twitter as a proxy for the strength of definitive merger agreements in 2022 – and if his progress thus far is any indication, we believe it bodes poorly for future remorseful buyers.

While positive deal-specific events helped drive spreads tighter across transactions with related exposures (e.g., vertical mergers, financing, antitrust reviews), we believe rates of return remain attractive thanks to a confluence of factors related to some of the primary drivers of merger arbitrage returns, namely interest rates and volatility. Rising interest rates have historically served as a tailwind for merger arb returns, and we expect interest rates to continue to rise as the Federal Reserve attempts to battle inflation in the US. In addition, volatility, which has the potential to present opportunistic entry points to trade around positions at attractive rates of return, remains broadly present in the broader markets, and we don’t anticipate it will subside anytime soon.

In all, we believe this is an exciting time for our strategy. As we enter the typically busy fourth quarter, we look forward to new deals and a potential tailwind from the natural impetus of companies and regulators to close transactions before calendar year-end, as they seek to start the New Year off with a fresh slate. With valuations depressed amidst the current market downturn, we could see an increase in opportunistic M&A – which may further benefit the portfolio by leading to potential topping or competing bids or creating opportunities for event-driven litigation post deal closure. Beyond that, the only certainty may be more uncertainty. With macroeconomic issues persisting in causing broader market volatility, we will continue to seek to provide investors with an uncorrelated return stream that may help buffer the volatility in their portfolios.

Strategy Allocations

Following the addition of DBi’s Enhanced Trend strategy, the fund’s capital is allocated according to its new strategic targets: 20% each to DBi and DoubleLine, 18% Water Island, 15% each to Blackstone Credit Systematic Group and Loomis Sayles, and 12% 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, 2022

Blackstone Credit Systematic Group (DCI) Long-Short Credit Strategy

Bond Portfolio Top Five Sector Exposures
Energy                                                           13.5%
Investment Vehicles/REITs                                                    11.4%
High Tech                             10.3%
Consumer Non-Discretionary   10.0%
Consumer Discretionary                                                9.4%
CDS Portfolio Statistics
                                                                 Long  Short
Number of Issuers                                     7971
Average Credit Duration                           4.54.6
Spread                                                              249 bps244 bps
DBi Enhanced Trend Strategy
Asset Class Exposures (Notional)
DoubleLine Opportunistic Income Strategy
Sector Exposures            
Cash                                                              4.8%
Government                                             2.5%
Agency Inverse Interest-Only                   7.7%
Agency CMO                                                 0.4%
Agency PO                                                    0.3%
Non-Agency Residential MBS                35.9%
Commercial MBS                                      15.8%
Collateralized Loan Obligations                                                   12.4%
ABS                                                    5.8%
Bank Loan                                       5.9%
Emerging Markets                    5.1%
HY/Other                                                        3.5%
TOTAL                                                       100.0%
FPA Contrarian Opportunity Strategy
Asset Class Exposures
U.S. Stocks                                        46.0%
Foreign Stocks                                           22.8%
Bonds                                                       3.3%
Limited Partnerships                                  2.4%
Cash                                                             25.3%
TOTAL                 100.0%

Loomis Sayles Absolute Return Strategy

Strategy Exposures

 Long TotalShort TotalNet Exposure
High-Yield Corporate24.3%-4.6%19.8%
Investment-Grade Corp.16.4%0.0%16.4%
Emerging Market6.5%-3.0%3.6%
Dividend Equity3.4%-0.0%3.3%
Bank Loans0.5%-0.3%0.2%
Global Credit0.4%-0.4%-0.1%
Cash & Equivalents11.7%0.0%11.7%

Water Island Arbitrage and Event-Driven Strategy

Sub-Strategy Exposures

Merger Arbitrage – Equity88.5%-4.2%84.3%
Merger Arbitrage – Credit2.7%-0.2%2.5%
Total Merger-Related91.3%-4.4%86.8%
Special Situations – Equity0.7%0.0%0.7%
Special Situations – Credit1.2%0.0%1.2%
Total Special Situations1.9%0.0%1.9%

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Must be preceded or accompanied by a prospectus. 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.

Dividends, if any, of net investment income are declared and paid quarterly. The Fund intends to distribute capital gains, if any, to shareholders on a quarterly basis. There is no assurance that the funds will be able to maintain a certain level of distributions. Dividend yield is the weighted average dividend yield of the securities in the portfolio (including cash). The number is not intended to demonstrate income earned or distributions made by the Fund.

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.

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

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

Credit spread is the difference in yield between a U.S. Treasury bond and another debt security of the same maturity but different credit quality.

Deal spread refers to the difference between the acquisition price of the shares and the market price at the time of investment.

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

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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.

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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.

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

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

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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.

Mutual fund investing involves risk. Principal loss is possible.

iM Global Partner Fund Management, 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.

The iMGP Funds are Distributed by ALPS Distributors, Inc.  LGM001271  exp. 1/31/2023