NAVIGATOR FUND: DECEMBER 2020 – COMMENTARY LETTER
For the month of December, the Navigator fund gained +1.6%.
Market Review
December saw a continuation of the rally that began in late October, spurred by the rollout of multiple COVID-19 vaccines and the signing of a new fiscal relief bill. Small cap stocks enjoyed a second month of outperformance, while growth stocks outlasted value-oriented names. Interest rates rose slightly, and the U.S. dollar continued its slide against the other major currencies.
Looking back on the last twelve months, 2020 was certainly one of the most challenging periods in modern history. Australian bushfires welcomed the new year, destroying an area larger than the size of Cuba. California’s wildfire season was the worst on record, oil traded below zero for the first time ever, and racial divisiveness erupted across the country on an unprecedented scale. And not to forget, a global pandemic killed nearly 2 million people and caused financial destruction on a scale not seen since the 1920s.
Short-term trading opportunities remained muted as the volatility index (VIX) remained in a range between 21 and 26 while realized volatility was under 10%. At some point, implied volatility and realized volatility will converge again. What’s important is whether that is on the high end or low end of the volatility spectrum. While our strategy converted profitably on the month, our trades were typically small. This is usually an indication of less appealing risk/reward pay outs expectations.
Most notably, the SKEW index continued to climb which is one measure of the potential risk of large downside moves. The SKEW index simply indicates concern among investors and traders of a black swan move. In short, it indicates strong demand for out-of-the-money puts versus out-of-the-money calls.
In recent periods when SKEW was at current levels, the market reaction was as follows:
• Late October 2017: equities continued to rally for three months until January marked the start of the February 2018 mini flash-crash.
• August 2018: equities rallied for two months before the 2018 Q4 sell-off.
• December 2020: equities rallied for another two months before the historic February/March sell-off.
• August 2020: equities sold off one month later in September.
While our strategy is designed to perform positively over longer periods of time independent of equity markets, we suspect the coming twelve months will offer many asymmetric trade set ups that the model seeks.
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 (12/31/2020) Fund Inception (02/01/2002)
| 1 Year | 5 Year | 10 Year | Since Inception | |
| UNAVX | -8.37% | 6.86% | 7.29% | 10.80% |
| S&P 500 Index | 18.40% | 15.22% | 13.88% | 8.72% |
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.
SYMBOL: UNAVX
