ALL SEASONS FUND: MAY 2023 – COMMENTARY LETTER
The All Seasons Fund ended the month of May with a return of -3.38%.
Market Review
In May, Artificial Intelligence (AI) dominated headlines globally. As a result, growth stocks hugely outperformed value stocks with speculators trying to find the next big AI stock. An example of the month’s equity market dispersion was illustrated in the returns of the two Russell small-cap indices. The Russell 1000 small cap growth index was up +4.6% and the Russell small cap value index was down -3.9%. The breadth of the equity market rally remains narrow.
On the rate front, the Federal Reserve hiked interest rates at the May meeting, but Fed Chair Powell said the FOMC may pause future rate hikes. He further added that we are closer to the end of the tightening cycle than the beginning. In his words, future rate decisions would be “data dependent.” It does appear inflation is moderating. However, inflation remains a long way from the Fed’s 2% target rate.
In Washington, both parties brokered a debt-limit deal. A worst-case US default appears averted until the next go-round. In the near term, this deal allayed fears with the CBOE Volatility Index (VIX) dropping by the end of May and into June. As we move closer to the 2024 election cycle, we believe the debt deal brokered in May is the last time we will see the parties compromise on anything important. But at the moment, markets expect a summer of mild moves based on pricing in the volatility markets.
The All Seasons strategy had four moderately large trade entries that stopped out for a loss. While these stop losses can be frustrating in the short term; incurring small losses (and not letting them continue to lose) is critical to hunting for large gains with modest drawdown exposure. The model had a poor outcome in the month of May. Markets will offer a fresh set of opportunities in the coming months, and we stand ready to execute.
On a performance note, the All Seasons Fund (symbol: UNAVX) remained an overall FIVE-STAR (5-Star) Fund in Morningstar’s Equity Market Neutral Category (out of 33 Equity Market Neutral funds) from its inception on October 13th, 2017 to May 31, 2023, based on risk-adjusted return.
Morningstar uses this step to calculate this rating:
Morningstar Risk-Adjusted Return: Adjust Morningstar Return for risk to get MRAR. Morningstar Risk is then calculated as the difference between Morningstar Return and Morningstar Risk-Adjusted Return.
Very truly 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.
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 the original cost upon redemption. For performance data as of the most recent month-end please call 1-866-264-8783.
Fund Objective:
The All Seasons 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 (3/31/2023) Fund Inception (02/01/2002)
| 1 Year | 5 Year | 10 Year | Since Inception | |
| UNAVX | 14.66% | 6.98% | 8.07% | 10.79% |
| S&P 500 Index | -7.73% | 11.19% | 12.24% | 8.44% |
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 3.46% and 2.00%. The advisor has contractually agreed to limit expenses to 1.99% of the average net assets of the Fund through 7/31/2023.
Definitions:
The S&P 500 Index: An unmanaged composite of 500 large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks. You cannot invest directly in an index.
CBOE Volatility Index (VIX): VIX is the ticker symbol and the popular name for the Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options.
The Morningstar Rating™ for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
UNAVX received Five-Star ratings for 3-year (33 funds), 5-year (32 funds), and a Five-Star rating for overall (33 funds) periods ending May 31, 2023. All in Morningstar’s Equity Market Neutral category based on risk-adjusted returns.
Simultaneous with the commencement of the Fund’s investment operations on October 13, 2017, the Goldman Navigator Fund, L.P., a limited partnership managed by Mr. Steven Goldman, (the “Predecessor Partnership”), converted into the Institutional Class shares of the Fund by contributing all of its assets to the Fund in exchange for Institutional Class shares of the Fund.
The Predecessor Partnership was not registered under the 1940 Act and was not subject to certain investment limitations, diversification requirements, and other restrictions imposed by the 1940 Act and the Internal Revenue Code of 1986, amended (the “Code”), which, if applicable, may have adversely affected its performance. On a going-forward basis after October 13, 2017, the Fund’s performance will be calculated using the standard formula set forth in rules promulgated by the SEC, which differs in certain respects from the methods used to compute total returns for the Predecessor Partnership. Please refer to the Financial Statements section of the Fund’s SAI to review additional information regarding the Predecessor Partnership.
SYMBOL: UNAVX
