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Commentary iMGP DBi Hedge Strategy ETF Third Quarter 2023 Commentary

During the quarter, the iMGP DBi Hedge Strategy ETF declined 1.21% at NAV and 1.16% at price versus the Morningstar Long-Short Equity Category benchmark loss of 1.00%. Year-to-date, the ETF is up 3.71% at NAV and 3.21% at price, compared to a 3.89% gain for the benchmark.

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

As discussed extensively in prior letters, this has been a humbling period for most market strategists. The taper trade was dead wrong. The “Year of the Bond” turned into the “Year of Cash.” The overnight banking crisis … was solved by morning. We’re still waiting for the “delayed impact” of higher rates. Nothing big broke.

For hedge funds, an added complication has been how to make money off “correct” calls. Nail “sticky inflation” – as did the CTA world — and good luck holding your positions through the Silicon Valley Bank/Credit Suisse bond market unwinds. Stock pickers who rationally concluded that higher rates would translate into higher returns in value stocks flat out missed the AI wave. For relative value investors, the long-awaited valuation convergence between non-US and US stocks has yet to materialize. 

For traditional investors, two big trades have worked this year: growth stocks and cash. Ironically, in January those were contradictory macro calls – i.e., higher rates should have been good for cash but bad for growth stocks. Then AI fever hit – and who cares about rates when you’re on the cusp of a new tech revolution? — and the Nasdaq popped 35% through September, pulling the S&P 500 with it. Outside the Magnificent Seven and a few others, the report card is dismal: most equity categories have underperformed cash, most bond categories are in the red, REITS are down, and the obvious inflation hedges — TIPS and gold – are not working for the second year in a row.

The great challenge is how to think about where we go from here. Our simple view is as follows: spending is addictive. Governments like to spend money because their voters (today) like it. Companies prefer to hire than fire.  Splurging on another vacation is a lot more fun than adding to a rainy day fund. Throw in structural issues like deglobalization, and all this suggests that inflation will be a tough nut to crack. For two years, many allocators have hoped that the surge was ephemeral; it might be time to battle plan for a very different world order.


Short exposures to developed market currencies weighed on the portfolio’s performance during the quarter. Net long exposure to equities also detracted from performance as global equities fell 3-5% on the back of rising rates. Developed market stocks were the hardest hit, but a short in emerging markets helped to portfolio to contain some losses.

Portfolio Characteristics

Net Asset Class Exposure (%)
US Equities19%
International Developed Equities8%
Emerging Market Equities-4%
US Dollar -19%
Fixed Income10%
Top 5 Holdings 
Dollar Index-7%
2 Yr Treasury7%

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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