VICE FUND: DECEMBER 2023 – COMMENTARY LETTER
The Vice Fund ended the month of December with a return of +3.65%.
Market Review
Equities rallied to close out 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. If any of these stocks have earnings surprises, then a top-heavy market may tumble as well. It is our belief that if markets go lower, it is unlikely to be as tame as 2022.
The Vice Fund remains committed to its core belief that certain stocks are undervalued based on certain factions of society deeming these stocks as morally questionable. Our core holdings remain military defense, casino, alcohol, and tobacco stocks because they typically have an inelastic customer base that is unlikely to be swayed whether the price of the product rises or falls. While it can be frustrating for shareholders to hold the fund during risk-off periods in markets. We believe it is an important part of any portfolio to hold assets that historically have less downside when markets capitulate.
We have gratitude for all of our investors and wish everyone a prosperous and happy 2024. Please reach out to us with any questions.
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 (12/31/2023) Fund Inception (08/30/2002)
| 1 Year | 5 Year | 10 Year | Since Inception | |
| VICEX | -2.15% | 4.52% | 3.40% | 7.49% |
| MSCI World Index | 22.81% | 12.27% | 8.48% | 8.88% |
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 are 1.98% and 1.73%. The Fund’s adviser, USA Mutuals Advisors, Inc. (the “Adviser”), has contractually agreed to reduce its fees and/or absorb expenses of the Fund, until July 31, 2024, to ensure that total annual fund operating expenses after fee waiver and reimbursement will not exceed 1.48% of the Fund’s average daily net assets for each share class.
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.
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.
SYMBOL: VICEX
