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Commentary iMGP RBA Responsible Global ETF Fourth Quarter 2022 Update

The iMGP RBA Responsible Global Allocation ETF outperformed its benchmark in the fourth quarter, posting a return of 8.14% (NAV) 7.69% (Price return) compared to a 7.03% return for its benchmark index (65% MSCI ACWI, 35% Bloomberg US Agg). For the year 2022 (since inception on 2/1/22), IRBA also outperformed its benchmark, posting a return of-10.88% (NAV),  -11.75% (Price)  vs. -13.22% for its benchmark 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 www.imgpfunds.com. 

Equity Positioning and Performance Attribution

The Strategy was slightly underweight equities over the period, holding an average weight of 60.2% (4.8ppt underweight versus its benchmark) in 4Q22. The equity sleeve outperformed by 1.9% vs. the MSCI ACWI Index. This outperformance was driven by underweights to long duration growth names in the tech, consumer discretionary, and communication services sectors as well as an overweight to health care. From a regional allocation perspective, overweighting Europe relative to its weighting in the ACWI was also accretive to the portfolio.

Fixed Income Positioning

The Strategy was overweight fixed income throughout the period, holding an average weight of 38.1% (3.1ppt overweight) in 4Q22. The fixed income sleeve underperformed by about 0.21%. Underweighting mortgage-backed securities detracted from performance for the quarter as did an overweight allocation to IG corporates.

Outlook and Positioning

RBA’s investment process remains focused on the three pillars of corporate profits, liquidity and investor sentiment/valuation, all of which suggest that we remain in a weakening fundamental backdrop.

2023 may be another difficult year for investors who hope to relive the speculative markets of 2020 and 2021. Consensus seems poised for a signal from the Fed that they will lower interest rates and reignite investors’ interest in more speculative investments. But with inflation the highest in 40 years and the entire credibility of central banking being challenged, the odds seem to favor too much tightening of monetary policy rather than too little.

We focus on three themes going into 2023:

(1) Play defense and worry later about playing offense

The US, and many other countries, are in the early stages of profits recessions, yet both equity and fixed-income markets have been very slow to anticipate the potential falloff in corporate profits. We believe a defensive posture in the portfolio is prudent to combat this.

(2) Diversify geographically

Investors should consider increasing geographic diversification. Today, consensus among investors favors US equities, but profit fundamentals for the US are among the worst of the major regions. We continue to have lower-than-normal exposure to US equities within our portfolios because of the combination of US sector weights in the most speculative sectors (Technology, Communications Services, and Consumer Discretionary) and the deterioration in US profits fundamentals.

(3) Accept that the world is changing

Growth investors should not become mired in the old growth themes and should be on the lookout for new ones. Consensus is still focused on the leadership of the last 5-10 years. However, the global economy is changing and leadership within the financial markets is likely to reflect that changing economy.

Investors should probably never invest purely for short-term or long-term opportunities. Every secular theme can be influenced by the cycle, and every cyclical theme can be influenced by secular forces. Our portfolios at RBA attempt to balance the cyclical AND the secular economic influences.

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DISCLOSURE

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 imgpfunds.com. 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.

 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 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.  LGE000188exp. 7/31/2023