VICE FUND 2025 SEMI-ANNUAL COMMENTARY LETTER
The Vice Fund ended the first half of 2025 with a return of +15.64%.
Performance Overview (YTD through June 30, 2025)
Market volatility in Q1 and early Q2 created both challenges and opportunities, and the Fund benefited from defensive positioning and sector-specific tailwinds within our core holdings.
Sector Highlights
- Defense & Aerospace: Defense stocks remained resilient amid continued geopolitical instability, particularly in Eastern Europe and the South China Sea region. Increased U.S. and NATO defense spending led to strong performance from names BAE Systems and Northrop Grumman. Several mid-tier defense contractors also reported robust earnings, helping this segment deliver double-digit gains.
- Alcohol & Tobacco: Despite volume pressures in the U.S. and Europe, international demand and strong pricing power helped offset headwinds. Philip Morris International and Anheuser-Busch were standouts, supported by brand strength and emerging market growth. Diageo was the chief laggard with potential exposure to tariffs, raising concerns. The tobacco segment also benefited from increased regulatory clarity in some jurisdictions, easing investor concerns.
- Gaming & Casinos: This sector continued to rebound on strong travel demand and a surge in digital and sports betting platforms. Macau’s recovery has been stronger than anticipated, contributing positively to the portfolio. The seeming end to China’s firm zero-COVID Policy and threats to casino concessions provided a tailwind.
Forward View
As we move into the second half of 2025, we maintain a constructive outlook on vice-related industries. These sectors tend to perform well in uncertain environments due to their pricing power, stable demand, and strong cash flow characteristics. While we remain mindful of macroeconomic risks, including interest rate fluctuations and tariffs, we believe the Fund is well-positioned to navigate the current landscape.
Portfolio Positioning
We continue to maintain a diversified allocation across our four core sectors, with a slight overweight in defense given continued global tensions and strong government contract pipelines. According to historical valuation metrics, the fund is collectively comprised of stocks generally valued below the stock market at large.
Key Contributor Spotlight: BAE Systems (LSE: BA/OTC: BAESY), driven by a surge in international defense contracts, robust earnings growth, and increasing investor interest in well-positioned military defense firms.
Several factors contributed to BAE’s strong performance:
- Record order intake during the first two quarters, with significant contracts from the U.K. Ministry of Defense, NATO members, and expanding deals in Asia-Pacific.
- Rising demand for next-generation naval and aerospace systems, with continued momentum in the Tempest Future Combat Air System and U.S. Department of Defense projects.
- A favorable FX tailwind from a weaker pound boosted reported earnings in USD terms, further enhancing returns for U.S.-based investors.
Future Drivers
Looking ahead, we remain constructive on defense, with BAE Systems positioned to benefit from growing international defense budgets and continued investment in modern warfare technologies. Across the portfolio, our focus remains on companies with high barriers to entry, resilient cash flows, and pricing power — core traits of vice-related industries that historically outperform in uncertain markets.
As always, we thank you for your continued trust and investment in the Vice Fund.
Sincerely yours,
Vice Fund in the Media
Benzinga just spotlighted what we’ve known for years: vice stocks are resilient, profitable, and back in the headlines.
In their recent article, “Guns, Booze, And Gambling Stocks Are Crushing ESG In Trump’s America”
Benzinga Staff Writer Piero Cingari calls out how traditionally defensive sectors are once again outperforming many of the buzziest ESG names. The piece highlights companies like BAE Systems and Philip Morris, both of which are current VICEX holdings and top contributors to the fund’s performance this year. Click here to read the full article.
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 6/30/2025 Fund Inception (8/30/2002)
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 expenses are 2.15% 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, 2025, 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.
Top Ten Holdings a of 6/30/2025
| SECURITY NAME | % OF NET ASSETS OR MARKET VALUE |
|---|---|
| BAE SYSTEMS PLC | 7.20% |
| PHILLIP MORRIS INTERNATIONAL, INC | 6.67% |
| RTX CORPORATION | 6.55% |
| BRITISH AMERICAN TOBACCO PLC | 5.81% |
| ALIBABA GROUP HOLDING LTD. | 5.82% |
| HEINEKEN NV | 5.76% |
| HECLA MINING COMPANY | 4.46% |
| NORTHROP GRUMMMAN CORP | 4.41% |
| ANHEUSER-BUSCH INDEV SA | 4.34% |
| DIAGEO PLC | 4.09% |
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.
The S&P 500 Index: An unmanaged composite of 500 large capitalization companies. Professional investors widely use this index as a performance benchmark for large-cap stocks. You cannot invest directly in an index.
