Longboard

COMMENTARY: Managed Futures Strategy Fund July 2019
WAVIX

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Commentary in PDF format.


HIGHLIGHTS

    Contributors
  • Commodities: Short London Coffee
  • Currencies: Long USD / Norwegian Krone
  • Fixed Income: Long Italian Government Bonds
  • Equities: Long Australian Stock Index
    Detractors
  • Commodities: Short Lead
  • Currencies: Long Euro / British Pound
  • Fixed Income: Long US 2-Year Note
  • Equities: Long British FTSE 100

Past Commentaries

July 2019

June 2019

May 2019

April 2019

March 2019

February 2019

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 Managed Futures Strategy Fund posted positive returns in July in all four major sectors traded.

Currencies were the best performing sector for the month, led by gains in long US dollar and Japanese yen positions. While a dovish Federal Reserve would often be accompanied by a softer dollar, global economic weakness and the pursuit of higher yielding assets steered investors towards the safety of the US dollar. Short Australian dollar and Euro currency exposure benefitted the portfolio as the Royal Bank of Australia cut their benchmark rate in July and indicated more to come. In Europe, the ECB tweaked its policy language to reflect lower interest rates and renewed asset purchases. Selling pressure drove the euro to a seven-week low against the dollar when ECB President Draghi stated the outlook for the economy is getting worse. Meanwhile in the UK, after being elected as successor to PM Theresa May, Boris Johnson targeted an October 31st Brexit deadline, whether a deal with the EU is in place or not. The ongoing fears of a disruptive Brexit dropped the British pound to its lowest level in two years against the USD.

As expected, our long global fixed income positions reacted positively to the lower yield environment. While US bonds settled the month in negative territory as the Federal Reserve kept interest rates on hold at their June meeting, Australian, German, Italian and British bonds all rallied due to falling yields and the poor outlook for the global economy.

Following the same theme that we witnessed in currencies and bonds, equities also finished the month higher. The key contributors were long positions in Australian and Dutch Indexes, as well as the S&P 500 Index.

In commodities, grains provided the largest positive performance. Unresolved trade wars between the US and China significantly weighed on wheat and bean prices, which was beneficial to our short positions. In softs, short coffee has been a profitable trade with prices hitting a six-week low during the month as frost risks have diminished in Brazil. Our lone negative sector for the month was meats due to rising feeder cattle prices.

Performance (as of 6/30/2019)
*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

With positions in seventy markets at month end, the portfolio is fairly balanced across sectors. We continue to have a slight bias towards higher US dollar and equities and long fixed income remains our largest exposure by sector. In an environment leaning towards accommodative central banks and renewed quantitative easing, we would expect stock and bond positions to continue to rally. Meanwhile, our long dollar stance may continue to outperform as the US remains a higher yielding currency. In commodities, the portfolio is net short, particularly in grains and softs while holding a long gold position and flat crude oil and its products. Although our exposure is light in commodities currently, we have seen trends develop quickly in these markets, which would add more diversity to our portfolio.


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.

3598-NLD-8/8/2019