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Commentary iMGP DBi Hedge Strategy ETF Second Quarter 2022 Commentary

During the quarter, the iMGP DBi Hedge Strategy ETF fell 4.76% at NAV and 4.80% at market price versus the Morningstar category’s 7.14% loss. For the first half of the year, the ETF declined 6.02% at NAV and 6.07% at market versus the Morningstar category’s 9.65% loss.

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

2021 was a challenging year for hedge funds — and, for that matter, most active managers.  Beneath the market surface, investors faced wrenching volatility.   Bubbles in disruptive tech, meme stocks, SPACs, and crypto seemed to inflate and deflate overnight, catching both long and short investors offsides.  COVID subsided then surged then morphed, whipsawing value and growth investors along the way.  China launched a surprise crackdown on the tech industry and some popular hedge fund stocks lost significant amounts of value in a matter of days.  The Fed flipped on a dime from easy-forever to aggressive tightening and punished macro investors betting on a policy mistake and runaway inflation.  This chaotic market environment meant that a few prescient macro calls – the return of inflation and rising equities (especially relative to bonds) – were difficult to fully monetize.  Consequently, after a historically good 2020, when hedge funds were early on both the recovery and value rotation, 2021 can best be characterized as “two steps forward and one step back.” 

We see three important lessons.  First, the consensus shifts radically and often.  Just a year ago, few market observers expected any inflation at all – forecasts showed a decade of perpetually low interest rates.  Even by mid-August, most expected no rate hikes in 2022; today the debate is between three and four.  Second, the broad macro call is only half the battle:  predicting how markets respond presents its own challenges.  Handed a crystal ball in December 2020 that showed 7% Consumer Price Index a year later, who would have expected gold to decline, 10-Year Treasuries to struggle to breach 2%, and commodity-heavy emerging market stocks to underperform global equities by 25%?  Third, we think this is just the beginning.  That is, we are in a regime shift from a decade of soaring equity and bond prices, deflation, near zero interest rates, and endless monetary easing to something more complicated.  No one knows precisely what the world will look like in a few years, nor how these changes will ripple through markets, but we are confident that hedge funds will be presented with many compelling opportunities to profit.  Our wagon is hitched to their train.


The Fund entered the quarter with most equity risk allocated to small/mid cap and international developed stocks.  Additionally, the portfolio shifted to a neutral and then a short position in emerging markets, which proved accretive as the China crackdown continued to cause instability.  While midcap stocks performed well during the quarter, underweight tech was costly as Nasdaq returned 11%.    Since inception, DBEH has outperformed the Morningstar Category by over 500 basis points per annum.

Portfolio Characteristics

Net Asset Class Exposure (%)
US Equities21%
International Developed Equities14%
US Dollar8%
Emerging Market Equities-2%
Fixed Income-70%
Top 5 Holdings 
2 Yr Treasury-36%
S&P 400 Midcap11%

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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.

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.

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.