View as:
View as:

Commentary iMGP DBi Hedge Strategy ETF Third Quarter 2022 Commentary

During the quarter, the iMGP DBi Hedge Strategy ETF fell 0.92% at NAV and 1.26% at Market Price versus the Morningstar Long-Short Equity Category benchmark loss of 3.40%. Year-to-date, the ETF declined 6.88% at NAV and 7.25% at Market versus the benchmark’s 12.73% 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

In the third quarter, reality set in.  The 2010s will likely be remembered as unique and anomalous:  a period where a decade of monetary easing – and then an unprecedented fiscal splurge – drove many asset prices to unsustainable levels.  Inflation appears entrenched and central banks – especially the Fed – are responding in kind.  The fracturing of the geopolitical landscape adds fuel to the fire through supply disruption and deglobalization.  As we have been writing about since early 2021, this is a once-in-a-decade regime shift.  Dan Loeb noted that signs of the shift – sometimes subtle, sometimes obvious – are all around us; it’s time for a new playbook, he said.  Stan Druckenmiller, whose call on inflation in early 2021 ranks among the best of the past decade, says this is the most difficult environment he has seen in his career.

The regime shift rippled through markets last quarter.  The MSCI World Index declined -6.2% and is down -25.4% for the year; the Bloomberg Global Agg Bond index dropped in tandem and is down -19.9% year to date.  The Fed is slamming on the brakes:  the 2-year Treasury yield – at 0.7% in January and 2.9% in June – now stands at 4.2%.  The dollar soared higher – up an astonishing 20% and 14% versus the Yen and Euro, respectively – causing cracks to spread through the markets.  As noted in a prior letter, hedge funds overall de-risked early and put on inflation hedges in the first half, which helped to preserve capital during the quarter.

Performance and Portfolio Positioning

While the Fund has declined this year, we are very pleased with performance given the bullish positioning of most hedge funds (and most investors) entering 2022.  Relative to the 25.4% year-to-date decline in developed markets equities, a decline of less than 6% represents material alpha generation.  In our case, it derives from four sources.  First, equity long/short hedge funds reduced equity risk in the first half of the year, and we followed suit.  Second, they migrated exposure to value centric small/mid cap and international developed markets, which performed somewhat better in the rising rate environment.  Third, we have maintained hedges against rising rates – in the US dollar and by shorting Treasuries – which have partially offset losses on equities.  Finally, we have avoided single stock risk, which has been critical in a year when hedge fund longs have materially underperformed shorts.

Reflecting the “smart money” view of the current challenges outlined above, the Fund remains conservatively positioned:  underweight equities, a bias to cheaper markets like small/mid cap US stock and non-US developed markets equities, underweight tech and emerging markets, and with inflation hedges in currencies and rates. 

Portfolio Characteristics

Net Asset Class Exposure (%)
US Equities23%
International Developed Equities10%
Emerging Market Equities1%
US Dollar 30%
Fixed Income-40%
Top 5 Holdings 
2 Yr Treasury-23%
Dollar Index12%

Stay Informed

iMGP Funds emails provide investors a way to stay in touch with us and receive information regarding the funds and investment principles in general. Topics may include updates on the funds and managers, further insights into our investment team’s processes, and commentary on various aspects of investing.


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.

The Bloomberg U.S. 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.

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.

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.  LGE000178exp. 1/31/2023