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Commentary iMGP DBi Hedge Strategy ETF Second Quarter 2023 Commentary

During the quarter, the iMGP DBi Hedge Strategy ETF gained 3.15% at NAV and 3.19% at price versus the Morningstar Long-Short Equity Category benchmark gain of 3.10%.

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 than their original cost. Current performance of the funds may be lower or higher than the performance quoted. To obtain standardized performance of the funds, and performance as of the most recently completed calendar month, please visit

Quarterly Review

Since last Fall, the markets have been like a drunk stumbling across a highway. You watch an eighteen-wheeler barrel down and clench your eyes shut — only to open them seconds later and find that he’s still standing. Then it happens again. And again. And, to your utter surprise, you soon find that he’s standing on the other side.

Here we are in mid-2023 and we have been grazed, not flattened, by a long list of economic eighteen wheelers: most recently, no regional or global banking crisis, no US debt default, no profits collapse, no “recession by June.” We’re still standing. 

Now place yourself back in early January. The market gods tip you off: inflation will prove sticky and the Fed will keep hiking. With a wink and a nod, they tell you that the Two-Year Treasury, then 4.4%, will hit nearly 5% by mid-year. Armed with this inside information, would you have bet that the Nasdaq, decimated by higher rates last year, would rise nearly 40% by mid-year, a record? Or that value would underperform growth by 25%, a tad more than its historic rebound last year? Or that equities would simply ignore the bond market which, with the most inverted yield curve in five decades, has breathlessly screamed recession for months? 

We have two observations. Hedge funds have been cautiously positioned this year and are up single digits.  While this might seem paltry relative to the 14% gain in the MSCI World Index, should they have predicted an overnight frenzy in AI that added $5 trillion to tech stocks? On the other hand, those numbers do look healthy relative to the 1% return on the Bloomberg Global Aggregate Bond Index – a disappointment given the unexpected headwind of higher rates. This clearly has been a year to manage risk and live to fight another day. Great investors sometimes put on a sensible trade and it doesn’t work out – statistical tails do happen, after all. Over time, sensible trades have the potential to generate alpha. That’s our bet, at least.

Further, we would like to remind people about the math of drawdowns. Bold cap headlines on Meta and Tesla tout year-to-date returns of 140% and 113%, respectively – not that both, after 65% drawdowns last year, are down 17% and 27% over eighteen months. The current obsession with respectable yields on corporate credit – and a decent 3% total return this year – glosses over the 18% drawdown last year. Investing is a long game and our math should reflect it.

Performance Commentary

A rally in equities during the quarter aided portfolio performance, particularly exposure to equity with growth bias and developed market equities excluding the U.S. Furthermore, short interest rate positions in 2-year Treasury futures also contributed to portfolio performance. Current positioning remains conservative:  underweight equities with a bias to growth and international equities. 

Portfolio Characteristics

Net Asset Class Exposure (%)
US Equities18%
International Developed Equities13%
Emerging Market Equities9%
US Dollar 0%
Fixed Income-63%
Top 5 Holdings 
2 Year Treasury-27%
Emerging Markets9%

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Investing involves risk. Principal loss is possible.

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 funds. Brokerage commissions will reduce returns.

Because the Fund is not a hedge fund, the Fund will be limited in its ability to fully replicate hedge fund strategies due to regulatory requirements including limitations on leverage and liquidity of the Fund’s investments.  The Fund is non-diversified so it may invest a greater portion of its assets in the securities of a single issuer.  As a result, a decline in the value of an investment in a single issuer could cause the Fund’s overall value to decline to a greater degree than if the Fund held a more diversified portfolio.

The Fund should be considered highly leveraged and is suitable only for investors with high tolerance for investment risk. Futures contracts and forward contracts can be highly volatile, illiquid and difficult to value, and changes in the value of such instruments held directly or indirectly by the Fund may not correlate with the underlying instrument or reference assets, or the Fund’s other investments. Derivative instruments and futures contracts are subject to occasional rapid and substantial fluctuations. Taking a short position on a derivative instrument or security involves the risk of a theoretically unlimited increase in the value of the underlying instrument. Exposure to the commodities markets may subject the Fund to greater volatility than investments in traditional securities. Exposure to foreign currencies subjects the Fund to the risk that those currencies will change in value relative to the U.S. Dollar.

The Fund’s investment objectives, risks, charges and expense must be considered carefully before investing.  The statutory and summary prospectuses contain this and other important information about the investment company and may be obtained by visiting  Read it carefully before investing.

A commission may apply when buying or selling an ETF.

Diversification does not eliminate the risk of experiencing investment losses.

A basis point (bps) is a value equal to one one-hundredth of one percent (1/100th of 1%0

Each Morningstar Category Average represents a universe of Funds with similar investment objectives.

Index performance is not illustrative of fund performance.  An investment cannot be made directly in an index. 

A basis point equals one hundredth of a percent.

The Morningstar Lang Short Equity Category includes funds that seek to generate returns from two sources: exposure to the performance of equity markets and from stock selection – holding stocks they like in long positions and shorting stocks they don’t like in a short portfolio.

The Bloomberg Global Aggregate Bond Index is a measure of global investment grade, fixed-rate corporate debt. This multi-currency benchmark includes bonds from developed and emerging markets issuers within the industrial, utility and financial sectors.

The MSCI All Country World Free Index captures large and mid-cap representation across 23 Developed Markets and 23 Emerging Markets countries. With 2,491 constituents, the index covers approximately 85% of the global investable equity opportunity set.

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.  LGE000228 exp. 10/31/2023