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Commentary iMGP DBi Hedge Strategy ETF First Quarter 2024 Commentary

During the quarter, the iMGP DBi Hedge Strategy ETF gained 3.08% at NAV and 3.49% at price versus the Morningstar Long-Short Equity Category benchmark gain of 6.81%.

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

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Quarterly Review

Well, hedge funds are no longer bearish. 

In our June letter last year, we described the (rational, we argued) defensive positioning of hedge funds as follows:

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 see 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, a potential regional or global banking crisis, US debt default, profits collapse, and even “recession by June.”

Now by early 2024 the economic world looks downright sunny. The Fed says their shock hiking cycle is over.  Economic growth is accelerating.  Corporate profits are rising.  Governments show few signs of pulling the fiscal reins.  Even disturbing social, political, and geopolitical trends – while certainly not abating – have settled into a stable if somewhat depressing equilibrium. 

All this has been good for stocks and, as forecasts for rate cuts dwindle, decidedly mixed for bonds.  Hedge funds have been adding equity risk because — to borrow from Keynes – when the facts change, they change their minds.  As a result, many hedge funds have been participating in this year’s “risk on” market more so than during the episodic relief rallies that began in late 2022. 

Of course, as we have discussed, there is a tricky relationship between good news and the markets.  Right now, good news is good news, but too much of a good thing, and the cursed inflation genie might try to escape the bottle.  Perhaps because of this, and as discussed below, we see fundamental hedge funds as only back at “normal” risk levels, while more nimble trend followers are decidedly all in.


The Fund returned 3.08% net in the first quarter. Gross equity exposure in the replication portfolio rose steadily throughout the quarter, with most of the increase in EAFE and the tech heavy NASDAQ.  To be clear, gross equity exposure has reverted to “normal” ranges – around 55% — which is double the lows of the past few years but about half the peak in the post-Covid monetary-driven euphoria.  The replication portfolio also flipped to a long position in the US dollar and has maintained a hedge in a yield curve steepener – arguably hedges against a resurgence of inflation in the US.

Portfolio Characteristics

Net Asset Class Exposure (%)
Fixed Income90%
US Equities34%
US Dollar21%
International Developed Equities15%
Emerging Market Equities8%
Top 5 Holdings 
2 Yr Treasury50%
3 Month SOFR50%
NASDAQ 10016%
S&P Midcap 40011%

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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.

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 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.