Longboard

COMMENTARY: Managed Futures Strategy Fund January 2019
WAVIX

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Commentary in PDF format.


HIGHLIGHTS

    Contributors
  • Equities: Short MSCI Taiwan
  • Commodities: Long Palladium
  • Currencies: Short Swiss Franc / U.S. Dollar
  • Fixed Income: Long Euro BUXL
    Detractors
  • Equities: Short OMXS 30
  • Commodities: Short WTI Crude Oil
  • Currencies: Short Canadian Dollar / U.S. Dollar
  • Fixed Income: Long 3-Year Australian Bond

Past Commentaries

January 2019

December 2018

November 2018

October 2018

September 2018

August 2018

July 2018

June 2018

May 2018

April 2018

March 2018

February 2018

January 2018


RECAP

The fund was down -12.38% in January with a majority of the losses coming from short positions in equities.

January ended up looking completely different than our strong December. In the new year, markets shook off the government shutdown and slowing Chinese growth and rebounded sharply. Once again U.S. equities led the way.

Focus turned to central banks in the wake of market turmoil. The Federal Reserve did not hike in their January FOMC meeting as expected, however “patience” became the new buzz word from the Fed. This dovish language combined with talks about slowing or ending Quantitative Tightening was broadly cheered by equity markets while weakening the U.S. dollar. The Peoples Bank of China also pledged further stimulus while the ECB and Bank of Japan signaled continued support as growth and inflation projects remained bleak.

The energy complex also saw significant reversals to start 2019 as major oil benchmarks (WTI, Brent) rallied 20% in the month of January. The weaker dollar also contributed to a continued rally in gold, breaking through $1,300 an ounce for the first time since mid-2018.

Performance (as of 12/31/2018)
*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 2.88% 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.longboardfunds.com. There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.

OUTLOOK

Markets displayed significantly more volatility throughout 2018 than we had previously seen in this long bull run. Many issues that caused volatility in 2018 remain unresolved, specifically continued U.S.-China trade wars (deadline for additional tariffs 3/1), Brexit deadline (3/29), and global growth concerns (China slowdown, Italy in recession). Despite this, the US stock market started 2019 with a classic V-bottom reversal that essentially erased all of Decembers losses. As discussed in the recap, this was largely due to central bank support. While this was cheered in January, historically central bank support comes during times of market turmoil.

Despite significant losses this month the fund remains positioned to provide crisis alpha if the above events unfold poorly. While it has been uncomfortable to watch new positions from Q4 2018 contribute to negative performance, our long-term approach has kept us in many of those positions and avoided being whipsawed.


EQUITIES

We closed a short position in the DJIA index and the Australian SPI 200, while moving closer to our stops in other U.S. equity markets as they rallied aggressively in January. Our overall sector exposure decreased due to strong global equity performance.


FIXED INCOME

Fixed income saw its overall exposure increase as it was the only positive contributor for the month. Weaker growth and dovish central bank action benefited our long positions abroad. During January we added a long German Schatz position.


CURRENCIES

We closed several USD long positions including the JPY/USD pair, BRL/USD and NZD/USD. As the JPY rallied we initiated several long positions including CHF/JPY and CAD/JPY. Elsewhere we went long the sterling vs. the euro.


COMMODITIES

We closed short positions in Gold and Tokyo Gold as both markets continued to rally. In the energy complex we closed a long position in Natural Gas. Overall exposure remained relatively flat.


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.

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 https://www.longboardfunds.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.

3155-NLD-2/14/2019