NAVIGATOR FUND: MARCH 2021 – COMMENTARY LETTER
For the month of March 2021, UNAVX gained +2.88%.
Fund Review
Equity market dynamics created more asymmetric trading opportunities in March. A few notable changes in the month and an interpretation:
• The CBOE Volatility Index (VIX) dropped -30.6% for the month closing below 20 for the first month since January 2020.
– Markets are handicapping the odds of a short-term shock lower or higher as being less likely than prior months.
• Realized volatility is now meaningfully higher than implied volatility for the first time since December 2020.
– Markets expect real volatility to subside in the very near-term.
• Implied volatility term structure is ascending over time.
– Markets are pricing in a somewhat subdued early spring with potential for larger swings three to six months out.
Putting it all together, shorts and hedgers appear closer to exhaustion than at any time in the last year. Any market “fear” reflected in the derivatives markets has been pushed out to early summer which is very unusual from an option term structure standpoint. Although the proverbial “Last Bear” hasn’t thrown in the towel quite yet, equity and bond valuations are both near historic highs and a risk-on bullishness among retail investors echoes the 1999 and 2007 periods.
Typically, we will see lower implied volatility in summer months. Markets uncertainty beyond April stems from many potential fears – perhaps the end of the new administration’s “honeymoon period”, a slower post-pandemic economy than expected, or an unknown bolt-from-the-blue risk.
The Navigator strategy doesn’t need to predict the unpredictable in the myriad of future possible market-moving events. The strategy simply seeks short-term periods, less than four days, when markets have the potential for positive returns with limited risk. If potential for returns versus risk is uninteresting, then we do not participate at all. The strategy has traditionally shown returns independent from equity and bond markets over long cycles, so investor fears or FOMO aside, we believe the strategy is well-suited going forward in these unprecedented times.
Sincerely yours,
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Share prices and investment returns fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. For performance data as of the most recent month-end please call 1-866-264-8783.
Fund Objective
The Navigator Fund seeks capital appreciation and preservation with lower volatility throughout market cycles. The resulting portfolio targets a high correlation to the S&P 500 in bull markets and a lower, or negative, correlation in bear markets.
Standardized performance as of (3/31/2020) Fund Inception (02/01/2002)
| 1 Year | 5 Year | 10 Year | Since Inception | |
| UNAVX | 14.52% | 7.30% | 6.97% | 10.97% |
| S&P 500 Index | 56.35% | 16.28% | 13.90% | 9.09% |
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. Performance data current to the most recent month end may be obtained by calling 1-866-264-8783. Returns over one year are annualized. The Gross and Net expense 2.36% and 2.01%. The advisor has contractually agreed to limit expenses to 1.99% of the average net assets of the Fund through 7/31/2021.
DEFINITIONS:
CBOE Volatility Index (VIX) is a real-time index that represents the market’s expectations for the relative strength of near-term price changes of the S&P 500 index (SPX).
SYMBOL: UNAVX
