Longboard

COMMENTARY: Managed Futures Strategy Fund April 2017
WAVIX


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CIO Eric Crittenden’s Podcast.

Commentary recap in PDF format.

Transcript version of this commentary.


HIGHLIGHTS

    Contributors
  • Equities: Long the MSCI EAFE Index Mini
  • Commodities: Long live cattle and short cocoa (London)
  • Currencies: No key currencies contributors
  • Fixed income: No key fixed income contributors
    Detractors
  • Equities: No key equities detractors
  • Commodities: Long aluminum (London) and coffee (London)
  • Currencies: Short the euro against the U.S. dollar
  • Fixed income: Long the 10-year German bond (Bund)

Past Commentaries

March 2017

Dispersion shapes global trends in April

April lived up to its unpredictable nature, disrupting trends across markets. As a result, the fund returned -1% in April as losses in currencies and fixed income offset healthy gains in global equities.

Credit growth drove foreign equity performance, boosting economies in Europe and some Asian countries while China and the United States faced deteriorating growth.

Performance (as of 4/30/2017)
*INCEPTION DATE: 6/27/12 **INCEPTION DATE: 3/22/13
The total Annual Fund Operating Expenses for the Longboard Managed Futures Strategy Fund class A and I are 3.12% and 2.87% respectively. The maximum sales charge for Class A (Max Load) shares is 5.75%. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. For performance information current to the most recent month-end, please call toll-free 855-294-7540 or visit our website, www.longboardmutualfunds.com. There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.
The Longboard Managed Futures Strategy Fund – WAVIX received 4 stars out of 97 Managed Futures Funds for the 3-year period ending 3/31/17, based on risk-adjusted returns.

Credit growth fuels foreign equity performance

The current dispersion in equity performance and economic growth reflects the differing credit situations in each region. European, Japanese and other foreign central banks are expanding credit at the fastest pace on record, fueling economic expansion. Conversely, the U.S. and China are tightening credit, causing a contraction in loan growth and slower spending among businesses and consumers. In fact, recent economic data shows the sharpest slowdown in consumer spending since 2009, alongside the sharpest spike in retail bankruptcies since 2008.

Once hard-hit markets like Greece, Spain and Italy saw the biggest gains in April. This reflects an inverse market dynamic compared to 2012-2014, when foreign equities languished and the U.S. outperformed its global counterparts because of unprecedented quantitative easing.

Still, certain pockets of the U.S. equities market are benefitting from growth overseas. Large cap technology stocks that sell into overseas markets have demonstrated so much earnings growth that the rise in the S&P 500 is correlating with the expansion in the global central bank balance sheets. Small cap U.S. stocks that serve more domestic customers are not experiencing the same level of growth.

FOREIGN CENTRAL BANKS KEEP LIQUIDITY FLOWING
January 1, 2015 – March 1, 2017

Bank of Japan: Total Assets for Japan©, Monthly, Not Seasonally Adjusted ECB Assets: Central Bank Assets for Euro Area (11-19 Countries)©, Monthly, Not Seasonally Adjusted Fed: All Federal Reserve Banks: Total Assets, Monthly, Not Seasonally Adjusted or tax features.

The index shown is for informational purposes only and is not reflective of any investment. As it is not possible to invest in indices, the data shown does not reflect or compare features of an actual investment, such as its objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, or tax features.

Past performance is no guarantee of future results.


Currency countertrends increase

The Euro staged a sharp “relief rally” against its former long-term downtrend. The first round of French elections indicated that the more Euro-friendly candidate, Emmanuel Macron, is poised to beat populist candidate Marine Le Pen. Meanwhile, higher growth and inflation in the United Kingdom caused traders to price in tighter monetary policy from the Bank of England. The Czech koruna rose sharply against a previously powerful downtrend. Cross-currency trends caused gains in the Australian dollar against the Canadian dollar, which struggled due to the falling price of oil.

Fixed income reflects global confusion

U.S. interest rates fell while bond prices rallied in April. Slowing growth, plus the buildup of record speculative short positions, fueled a short squeeze in the U.S. treasury market. While purchases by some overseas central banks are spurring lower yields on U.S. bonds, other notable central banks such as China’s have been selling down their holdings.

DOWNTREND IN U.S. TREASURIES REMAINS INTACT
January 1, 2015 – May 5, 2017

iShares 20+ Year Treasury Bond: The iShares 20+ Year Treasury Bond ETF seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities greater than twenty years.

Past performance is no guarantee of future results.

European traders piled into the traditional safe haven of German bonds prior to the French elections, while some sold off towards the close of the month. Fixed income will likely continue to be dominated by global economic growth (or lack thereof), political developments and monetary policy.


GLOSSARY
Commodity Market
A physical or virtual marketplace for buying, selling, and trading raw or primary product such as natural resources, agricultural products, and livestock.
Forward Contract
A non-standardized contract between two parties to buy or sell a specified asset of specified quantity with delivery and payment occurring on a specified date.
Futures Contract
A standardized contract between two parties to buy or sell a specified asset of standardized quantity and quality with delivery and payment occurring on a specified date.
Long
Buying an asset such as a stock, commodity or currency with the expectation that the asset will rise in value.
Risk Allocation
The estimated maximum equity a position could lose, divided by the estimated aggregate equity currently at risk of loss across all positions inthe portfolio.
Short
Selling an asset such as a stock, commodity or currency, with the expectation that the asset will decrease in value.
Long-Term
Holding periods averaging greater than one year.

Morningstar is an independent provider of financial information. Morningstar performance rankings are based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads and redemption fees), placing more emphasis on downward variation and rewarding consistent performance. The top 10%, the next 22.5%, 35%, 22.5% and bottom 10% receive 5, 4, 3, 2 or 1 star, respectively. The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics.

PROSPECTUS OFFERING DISCLOSURE

Investors should carefully consider the investment objectives, risks, charges and expenses of the Longboard Managed Futures Strategy Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained at http://www.longboardmutualfunds.com or by calling 855-294-7540. The prospectus should be read carefully before investing. The Longboard Managed Futures Strategy Fund is distributed by Northern Lights Distributors, LLC, a FINRA/SIPC member. Longboard Asset Management, LP, is not affiliated with Northern Lights Distributors, LLC.

MUTUAL FUND RISK DISCLOSURE

Mutual funds involve risk including possible loss of principal. The fund will invest a percentage of its assets in derivatives, such as commodities, futures and options contracts. The use of such derivatives and the resulting high portfolio turnover may expose the fund to additional risks that it would not be subject to, if it invested directly in the securities and commodities underlying those derivatives. The fund may experience losses that exceed those experienced by funds that do not use futures contracts, options and commodities. Changes in interest rates and the liquidity of certain investments could affect the fund’s overall performance. The fund is non-diversified and as a result, changes in the value of a single security may have significant effect on the fund’s value. Other risks include credit risks and investments in fixed income securities, structured notes, asset-backed securities and foreign investments. Furthermore, the use of short positions and leveraging can magnify the potential for gain or loss and amplify the effects of market volatility on the fund’s share price. The fund is subject to regulatory change and tax risks. Changes to current regulation or taxation rules could increase costs associated with an investment in the Fund.


Index definitions
S&P 500:
A stock market index based on the market capitalization of 500 leading companies publicly traded in the U.S. stock market, as determined by Standard & Poor’s. In this presentation, the S&P 500 is presented as a total return index, which reflects the effects of dividend reinvestment.
SG CTA Mutual Fund Index:
An index that tracks the performance of ‘40 Act mutual funds pursuing managed futures strategies. The Index includes the 10 largest single-manager CTA Mutual Funds, including funds employing both systematic and discretionary management styles. Index values are based on performance of the institutional share classes with dividends reinvested.
3377-NLD-5/16/2017