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Commentary iMGP RBA Responsible Global ETF Second Quarter 2022 Update

The iMGP RBA Responsible Global Allocation ETF outperformed its benchmark in the second quarter 2022, posting a return of -10.21% at NAV and -10.68 at market price compared to a -11.90% return for its benchmark index (65% MSCI ACWI, 35% Bloomberg US Aggregate Bond Index).

Performance data quoted represents past performance. Past performance 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 fund may be lower or higher than the performance quoted. Short term performance is not a good indication of the fund’s future performance and should not be the sole basis for investing in the fund. Performance data current to the most recent month end may be obtained by visiting  The Advisor has contractually agreed to limit the expenses for at least one year from the effective date of the Trust’s registration statement.

Equity Positioning and Performance Attribution

The portfolio was slightly overweight equity over the period, holding an average weight of 67.3% (2.3percentage point “ppt.” overweight) in 2Q22. The equity sleeve outperformed by 1.7% vs. the MSCI ACWI Index. This outperformance was driven by the underweights to long duration growth names in the tech, consumer discretionary, and communication services sectors as well as overweights to more defensive sectors such as consumer staples and health care. Overweighting Japan and Europe relative to ACWI was also accretive to the portfolio. Our underweightto the energy sector and overweight to the materials sector detracted slightly from performance for the quarter.

Fixed Income Positioning and Performance Attribution

The portfolio was underweight fixed income over the period, holding an average weight of 32.5% (2.5ppt underweight) in 2Q22. The fixed income sleeve outperformed slightly by 0.05%. Overweighting investment grade and high yield corporates were the strongest themes for the quarter in the fixed income sleeve. Underweighting treasuries during the quarter detracted from performance. Our shorter duration corporate theme helped performance through the quarter.

Outlook and Positioning

RBA’s investment process remains focused on its three pillars of corporate profit cycles, liquidity, and investor sentiment/valuation, all of which suggest that we remain in a weakening fundamental backdrop. Corporate profit growth continues to decelerate and the Fed appears increasingly committed to tightening liquidity to rein in inflation. While deteriorating investor sentiment is reflected in lower valuations, significant portions of the market remain relatively expensive and US household equity allocations remain near all-time highs.

Despite today’s environment of heightened uncertainty surrounding the Russia/Ukraine conflict, tensions with China, Fed policy and fears of a recession, there is a high degree of certainty around two key market drivers. Regardless of the geopolitical backdrop, it seems very likely that (1) profits will continue to decelerate, and (2) the Fed will continue to tighten monetary policy.

Historically, there has been a reasonably high correlation between the Fed Funds rate and the profits cycle, i.e., interest rates rose as profits accelerated and fell as profits decelerated. That historical relationship implied monetary policy was a good ballast to economic and profits growth. There have been only a few periods when the Fed raised rates despite a decelerating profits cycle (e.g., 1989 and 2005). However, if our forecast for profits growth is on the correct (downward) path and the Fed continues to hike interest rates, investors might be faced with this relatively rare combination again. The matrix below shows the average S&P 500® quarterly return during the various combinations of Fed policy and profits growth. One can see that Fed tightening with decelerating profits has been the worst environment for S&P 500 quarterly returns on average (the orange quadrant).

The following chart shows sector performance during periods when the profits cycle has historically decelerated. As one might expect, defensive sectors tend to outperform. That’s especially interesting because the current discussion among most investors seems to center on whether one should accentuate cyclicals or growth stocks, with little mention of traditional defensive sectors.

Consistent with this, and based on RBA’s proprietary indicators and analysis, RBA has been reducing overall portfolio risk and cyclicality (equity beta) while increasing exposure to higher quality and less economically sensitive investments.

IRBA Portfolio Allocations as of June 30, 2022

Asset Class Exposures (%)
US Equities38.4%
Non-U.S. Equities27.4%
U.S. Fixed Income25.5%
Non-U.S. Fixed Income7.9%
IRBA vs. Blended 65/35 BenchmarkIRBA WeightBenchmark WeightRelative Weight
Crude Oil33.5%35.0%-1.5%
2 Yr Treasury0.8%0.0%0.8%
IRBA Equity Region vs MSCI ACWI Net IndexIRBA WeightBenchmark WeightRelative Weight
United Kingdom4.3%3.3%1.0%
Asia ex-Japan4.7%3.3%1.4%
Emerging Markets6.8%12.2%-5.4%
IRBA Equity Sector vs MSCI ACWI Net IndexIRBA WeightBenchmark WeightRelative Weight
Communication Services5.0%7.9%-2.9%
Consumer Discretionary7.3%11.1%-3.8%
Consumer Staples12.5%7.6%4.9%
Health Care16.3%13.0%3.3%
Information Technology12.5%20.9%-8.3%
Real Estate7.5%2.8%4.7%

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The funds’ investment objectives, risks, charges, and expenses must be considered carefully before investing. The statutory and summary prospectuses contain this and other important information about the investment company, and it may be obtained by calling 1-800-960-0188, or visiting Read it carefully before investing.

Investing involves risk. Principal loss is possible  The Fund is considered a “fund of funds” that seeks to achieve its investment objective by primarily investing in Underlying ETFs.  The risks of investing in securities of ETFS, ETPs and Investment companies typically reflect the risks of the types of instruments in which the underlying ETFS, ETS or investment company invests.  In additions, with such investments, the Fund bears its proportionate share of the fees and expenses of the underlying entity.  As a result, the Fund’s operating expenses may be higher and performance may be lower.  Through its investments in investment companies, the Fund may be indirectly exposed to derivatives and leverage .  Any use of leverage by Underlying Vehicles I speculative and could magnify losses.  Because ETS are unsecured, unsubordinated debt securities, an investment in an ETN exposes the Fund to the risk that an ETN issuer may be unable to pay.  In addition, with investments in ETS, the Fund bears its proportionate share of the fees and expenses of the ETN, which may cause the Fund’s operating expenses to be higher and performance to be lower.

Investing in securities that meet ESG criteria may result in the fund forgoing otherwise attractive opportunities, which may result in underperformance when compared to funds that do not consider ESG factors. 

The Fund is new and has a limited operating history.

A commission may apply when buying or selling an ETF.

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole

Duration is a commonly used measure of the potential volatility of the price of a debt security, or the aggregate market value of a portfolio of debt securities, prior to maturity.   Securities with a longer duration generally have more volatile prices than securities of comparable quality with a shorter duration.

The 10-year Treasury yield is the current rate Treasury notes would pay investors if they bought them today. The 10-year Treasury yield is closely watched as an indicator of broader investor confidence.

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.

The MSCI ACWI ESG Leaders Index is a capitalization weighted index that provides exposure to companies with high Environmental, Social and Governance (ESG) performance relative to their sector peers. MSCI ACWI ESG Leaders Index consists of large and mid cap companies across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries.

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

iM Global Partner Fund Management, LLC  has ultimate responsibility for the performance of the IMGPFunds 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.  LGE000161exp. 10/31/2022