COMMENTARY: Managed Futures Strategy Fund April 2018
WAVIX

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Commentary in PDF format.


HIGHLIGHTS

    Contributors
  • Equities: Long MSCI Taiwan Index
  • Fixed income: Long Italian 10-year bond
  • Currencies: Long British pound versus Australian dollar
  • Commodities: Long Carbon Dioxide Emissions
    Detractors
  • Equities: Short SPI 200 Index
  • Fixed income: Short U.S. 30-year bond
  • Currencies: Short U.S. dollar versus Swiss franc
  • Commodities: Long Aluminum

Past Commentaries

April 2018

March 2018

February 2018

January 2018


RECAPS

The fund returned 2.17% in April. Profits from commodities, equities and fixed income offset losses in currencies.

Selling pressure in equities eased slightly in April as market participants continue to look for further clarity on the resilience of the equity markets. Global equities rallied broadly, with the United Kingdom and France gaining nearly 6% on the month.

Commodities posted mixed results. The energy complex strengthened as investors continued to focus on geopolitical developments. Brent crude rallied by nearly 7% amid tensions between the United States and Syria. Gold weakened by nearly 1% as trade concerns decreased and the yields rallied.

Yield curve flattening in April gained increasing attention from market participants who interpret an inverted yield curve as a sign of impending equity trouble. As concerns of a trade war with China subsided, yields rallied with the U.S. 10-year note breaking the psychologically relevant 3% level not seen in nearly a decade.

Performance (as of 4/30/2018)
*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 3.13% 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

As we head into May, a number of macro themes are developing and strengthening. The interplay between the different sectors is quite interesting. Rising energy prices are playing a role in rising treasury yields. A rising U.S. dollar is weighing on some equity markets. There are a number of crosscurrents and markets, like gold for example, that are impacted from the ebb and flow. At different times in April, gold rallied and sold off based on market sentiment, inflation concerns and U.S. dollar strength.

We anticipate the landscape to remain highly connected until a clear macro theme emerges. It’s not uncommon to witness macro themes that impact different markets in multiple ways. However, while we await clarity on geopolitical tensions, the emergence of inflation, and the path of equities, it seems markets will be impacted by a “chicken or the egg” scenario.

We are particularly focused on the impact that rising yields will have on equities and energy markets. Similarly, all eyes are focused on the rising U.S. dollar and the pressure it may provide to the equity markets.


EQUITIES

Selling pressure in equities eased as geopolitical tensions with Russia, China and Syria gradually relaxed. In the United States, the energy sector outperformed with the rising price of oil. More broadly developed markets underperformed as a stronger U.S. dollar weighed on emerging market equities.

We closed a long position in the Chinese FTSE A50 during the month, but our overall exposure to equities stayed fairly stable. The portfolio remains long equities in the United States and Asia, but our exposure still remains light compared to year end levels.


FIXED INCOME

Global fixed income generally weakened as geopolitical tensions eased during the second half of the month. Concerns of a trade war with China and hope for improving relations with North Korea allowed yields to break higher in the United States and abroad. The U.S. 10-year note broke above 3% and the 2-year note broke above 2.5% for the first time since the global financial crisis.

Our portfolio did not experience any major position shifts during the month. However, our overall exposure was slightly reduced. We remain short U.S. fixed income with overall fixed income exposure somewhat limited.


CURRENCIES

The U.S. dollar rallied versus its major counterparts. The euro, British pound sterling and Australian dollars all weakened by nearly 2% versus the greenback. In Europe, shifting rate hike expectations from the Bank of England weakened the sterling. Disappointing economic data from the eurozone weighed on the euro.

We closed long positions in the Australian dollar, Russian ruble and Swiss franc versus the U.S. dollar. We opened new short positions in the Brazilian real and Swiss franc versus the U.S. dollar. Although the portfolio still reflects a bias toward a weaker dollar, we began buying the U.S. dollar versus some counterparts, which is a significant shift from our positioning in recent quarters.


COMMODITIES

The energy complex continued to strengthen in April as chemical weapons attacks in Syria and the potential for a response from the U.S. made headlines. Later, in the month, supply concerns allowed oil to take another leg higher and ultimately make new multi-year hights. Gold responded to a number of macro headlines regarding mediocre economic data and improving geopolitical tensions and ultimately ended the month slightly lower. Palladium outperformed in the precious metals sector as supply concerns out of Russia boosted the price nearly 2%.

We established a new short position in live cattle and closed a long position in palladium. Our overall commodity exposure increased slightly in April and remains our largest risk allocation for the time being. Energy longs are currently a core theme within the portfolio, with the exception of natural gas.


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.

3548-NLD-5/17/2018