ALL SEASONS FUND: DECEMBER 2023 – COMMENTARY LETTER
The All Seasons Fund ended the month of December with a return of +2.03%.
Market Review
Equities rallied to close the year with full participation across eleven equity sectors. The month started with a drop in unemployment and better-than-expected inflation data. After twenty months of Fed hikes, a soft economic landing remains possible. As a result, 2023 was a return to a risk-on environment.
However, current market dynamics indicate fear among institutional investors that markets may return to higher volatility levels. The cost of hedging equity positions with options is near the levels seen in early 2020 ahead of that year’s big sell-off. The CBOE Volatility Index and Skew Index are higher this month as Put options are expensive compared to realized volatility this past year.
Based on this volatility positioning, a segment of investors believes equity markets overshot reasonable valuation levels and are positioned defensively. We believe broader indices are very fragile, with the “Magnificent Seven” Big Tech growth stocks accounting for a majority of the returns last year. A top-heavy market may also tumble if any of these stocks have earnings surprises. It is our belief that if markets go lower, it is unlikely to be as tame as 2022. In any case, we believe the All Seasons Fund is prepared for a new bull market or a return to a bear market.
The fund seeks capital appreciation and capital preservation with lower volatility throughout market cycles – highly correlated with equities in bull markets and less or negatively correlated in bear markets. As Portfolio Managers of the fund since the end of 2020, we delivered positive returns in the three calendar years we have managed the fund despite a bear market in 2022.
While the fund had a modest return of +3.43% this year, we believe the fund’s emphasis on risk management first will serve investors well over the long term. The fund strategy has historically moved independently of broad indices, just as an investor would expect from an alternative product.
On January 1, 2024, the All Seasons Fund (UNAVX) received a 4-Star Overall Morningstar Rating™ from its inception on October 13th, 2017 to December 31, 2023, out of 234 funds, in the Tactical Allocation Category, 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.
We have gratitude for all of our investors and wish everyone a prosperous and happy 2024. Please reach out to us with any questions.
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.
Fund Objective:
The Fund seeks capital appreciation and capital preservation with lower volatility throughout market cycles – highly correlated with the Standard & Poor’s (“S&P”) 500® Index in bull markets, and less or negatively correlated in bear markets.
Standardized performance as of (12/31/2023) Fund Inception (02/01/2002)
| 1 Year | 5 Year | 10 Year | Since Inception | |
| UNAVX | 3.43% | 7.29% | 6.33% | 10.31% |
| S&P 500 Index | 26.29% | 15.69% | 12.03% | 8.93% |
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 expenses are 3.26% and 1.99%. The advisor has contractually agreed to limit expenses to 1.96% of the average net assets of the Fund through 7/31/2024.
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.
Volatility – The degree of variation of a trading price series over time, usually measured by the standard deviation of logarithmic returns.
CBOE Volatility Index – A popular measure of the stock market’s expectation of volatility based on S&P 500 index options.
Skew Index – A measure of the perceived tail risk of the distribution of S&P 500 investment returns over a 30-day horizon. The index values are calculated and published by the Chicago Board Options Exchange based on current S&P 500 options market data.
Put Option – a derivative instrument in financial markets that gives the holder the right to sell an asset, at a specified price, by a specified date to the writer of the put.
Performance data quoted prior to October 13, 2017 represents the past performance of the Goldman Navigator Fund, L.P., a limited partnership (the “Predecessor Partnership”). From its inception on February 1, 2002 through October 13, 2017, the Predecessor Partnership maintained investment policies, objectives, guidelines, and restrictions that were, in all material respects, equivalent to those 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, as 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. The Navigator Fund name was changed to the All Seasons Fund on July 21st, 2021. Past performance is no guarantee of future results.
UNAVX received 4-Star Morningstar Ratings™ overall out of 234 funds, 5-Star for 3-year out of 234 funds, and 4-Star for 5-year out of 214 funds, for the period ending December 31, 2023. All in Morningstar’s Tactical Allocation category, based on risk-adjusted returns. The 10-year returns are not included in the Morningstar rating because the Predecessor Partnership was not registered under the 1940 Act.
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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 Morningstar Rating does not include any adjustment for sales loads. 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 was rated against the following numbers of Tactical Allocation funds over the following time periods: 234 funds in the last three years, 214 funds in the last five years.
SYMBOL: UNAVX
