VICE FUND: DECEMBER 2022 – COMMENTARY LETTER
The Vice Fund was +1.35% in December and +3.25% in 2022.
Market Review
We are pleased to report positive returns in 2022 in an unusually challenging year for both equities and bond markets. Both stocks and bonds were negative for only the second time since the S&P’s inception. The main driver of the monthly and annual outperformance was the Fund’s investment in historically value-oriented dividend-paying stocks relative to growth stocks. This is after a decade-plus of underperforming value stocks.
At the end of 2021, growth stocks had reached relatively frothy levels. The MSCI World Growth Index traded at 31 times the expected earnings, compared with only 14 times the expected earnings for the MSCI World Value Index. This spread narrowed significantly in 2022. Rising rates, the war in Ukraine, and the relaxation of Covid policies all contributed to the spread narrowing.
The Vice Fund is primarily invested in companies that we believe are inelastic in nature. For example, tobacco, alcohol, and the military defense industry are more resilient to rising rates and economic challenges. In particular, the military defense industry was bolstered as Western nations provided aid to Ukraine after the Russian invasion.
It is not lost on the current management team that the Vice Fund has underperformed the growth-heavy broader indices over the last ten-plus years. However, we believe the next ten-plus years will likely be a different experience with the potential for higher interest rates and less government stimulus. In this potential new regime, we believe investing in companies that historically pay dividends and trade at lower P/E ratios may offer an opportunity.
We are grateful for our investors and interest from all parties in our Fund. Please let us know how we can serve you better.
Sincerely yours,
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 1-800-MUTUALS or visit our website at www.USAMutuals.com. Read the prospectus or summary prospectus carefully before investing.
Standardized performance as of (12/31/2022) Fund Inception (02/01/2002)
| 1 Year | 5 Year | 10 Year | Since Inception | |
| VICEX | -3.25% | 0.07% | 6.55% | 7.99% |
| MSCI World Index | -17.96% | 5.75% | 8.54% | 8.23% |
Investor Class 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 1.64% and 1.49%. Contractual fee waivers through 07/31/2023.
DEFINITIONS:
The MSCI All Country World Index Total Return (“MSCI ACWI TR”) captures large and mid-cap representation across 23 Developed Markets (DM) and 26 Emerging Markets (EM) countries.
SYMBOL: VICEX
