COMMENTARY: Managed Futures Strategy Fund March 2017
WAVIX

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HIGHLIGHTS

    Contributors
  • Equities: Long CAC40 and AEX (Netherlands) indexes
  • Commodities: Short wheat (Kansas City) and long lead (London)
  • Currencies: Long the Russian ruble against the U.S. dollar
  • Fixed income: Long 3-month euro and short 5-year U.S. treasury note
    Detractors
  • Equities: Long TOPIX and Nikkei 225 Mini indexes
  • Commodities: Short cocoa (New York) and long copper
  • Currencies: Short the Swiss franc against the U.S. dollar
  • Fixed income: Long 2- and 5-year German bonds

Counterintuitive Trends Play Out in March Markets

The Ides of March brought mild headwinds for overall fund performance, although foreign equities soared against their U.S. counterparts. The fund returned +.56% in March with profits in equities offsetting losses in currencies, fixed income and commodities.

A number of trends challenged conventional thinking during the month, especially in the United States. Investors bullish on U.S. stocks, a stronger U.S. dollar and an infrastructure boom spurred by the Trump Administration faced some frustration in March.

Performance (as of 3/31/2017)
*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.

Growth in foreign equities

The fund’s exposure to equities grew in response to uptrends, especially in European and emerging markets. In fact, the fund was long in 24 of the 25 equity markets it followed in March. Growth and inflation are rising in several European countries, while emerging markets are benefiting from rebounding commodities prices and a weaker U.S. dollar. India is leading global markets this year, bolstered by a new government policy that replaced cash transactions with ones taking place through a centralized digital currency network.

The indices shown are for informational purposes only and are not reflective of any investment. As it is not possible to invest in the 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.

U.S. dollar unfazed, Russian ruble rallies

The U.S. dollar remained largely flat despite an interest rate hike by the Federal Reserve mid-month. It’s uncertain whether this contrarian trend will continue, but it is not without precedent. In the late 1970s and mid-2000s, the dollar moved downward despite aggressive Fed rate hikes. The current environment appears to be creating opportunities in currencies that are benefiting from undervaluation and attractive interest rate spreads, like the Russian ruble. In contrast to the 1990s, Russia today has one of the lowest debt-to-GDP ratios in the world, and the country has been diversifying its economy and forging major economic alliances with emerging Asian economies, most notably China.

Infrastructure hopes in a holding pattern

Commodities were mixed in March, with hopes fading that the Donald Trump administration would be able to move quickly on infrastructure improvements. Many investors who were hot on base metals and energy-related stocks have since cooled as legislative realities set in. Crude is one example of a consensus trade that failed to pan out. In fact, energy was among the worst performers in the first quarter, despite a cut in output from Saudi Arabia.

Past performance is no guarantee of future results.

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.

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.


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.
MSCI EAFE:
The MSCI EAFE Index is an equity index which captures large and mid cap representation across Developed Markets countries around the world, excluding the US and Canada. With 929 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.
MSCI France:
The MSCI France Index is designed to measure the performance of the large and mid cap segments of the French market. With 76 constituents, the index covers about 85% of the equity universe in France.
MSCI Germany:
The MSCI Germany Index is designed to measure the performance of the large and mid cap segments of the German market. With 58 constituents, the index covers about 85% of the equity universe in Germany.
MSCI Australia:
The MSCI Australia Index is designed to measure the performance of the large and mid cap segments of the Australia market. With 71 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in Australia.
MSCI Netherlands:
The MSCI Netherlands Index is designed to measure the performance of the large and mid cap segments of the Netherlands market. With 24 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in Netherlands
MS China A Share:
Index compiled by Morgan Stanley, with at least 80% of its assets in A-shares of Chinese companies listed on the Shanghai and Shenzhen Stock Exchanges.
MSCI Spain:
The MSCI Spain Index is designed to measure the performance of the large and mid cap segments of the Spanish market. With 25 constituents, the index covers about 85% of the equity universe in Spain.
MSCI India:
The MSCI India Index is designed to measure the performance of the large and mid cap segments of the Indian market. With 77 constituents, the index covers approximately 85% of the Indian equity universe.
3296-NLD-4/17/2017