Longboard

COMMENTARY: Managed Futures Strategy Fund October 2017
WAVIX

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Commentary in PDF format.


HIGHLIGHTS

    Contributors
  • Equities: Long U.S., European and Japanese equities
  • Commodities: Long Brent crude oil and short natural gas
  • Currencies: Long the Polish zloty against the U.S. dollar
  • Fixed income: Long 2-year, 5-year and 10-year German government bonds
    Detractors
  • Equities: None
  • Commodities: Long lead and short sugar
  • Currencies: Long the Mexican peso and Canadian dollar against the U.S. dollar
  • Fixed income: Short Australian and Canadian government bonds

Past Commentaries

October 2017

September 2017

August 2017

July 2017

June 2017

May 2017

April 2017

March 2017

RECAP

The fund returned +4.03% in October, as profits from commodities and equities offset losses in currencies and fixed income.

The global equities bull market continued. Mega-cap multinationals led the market. Solid earnings reports drove price gains in technology stocks like Amazon, Microsoft and Alphabet (formerly Google). In fact, more than half of October’s S&P 500 gains came from just five technology stocks. Despite the narrow leadership within domestic equities, global breadth ticked higher as new foreign markets entered uptrends.

Currencies created a performance headwind, as the U.S. dollar strengthened against its major counterparts. The dollar (or greenback) received a lift from tax reform hopes and the shift towards balance sheet reduction from the U.S. Federal Reserve (Fed). We reduced currency exposure as the dollar rallied against its long-term downtrend, causing modest losses. Conversely, we increased commodities exposure as new trends took hold. The increase in exposure generated profits across energy and agricultural markets. Our fixed income exposure remained low due to the lack of long-term trends in global sovereign bonds.

Performance (as of 10/31/2017)
*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.

OUTLOOK

U.S. equities resisted their historic tendency for turbulence in October. Instead, they made new highs while the CBOE volatility index registered its lowest monthly average on record. The market appears determined to climb the “wall of worry,” defying the growing chorus of skeptics with each new record high. Our disciplined approach requires a commitment to longterm trends—no matter how uncomfortable or counterintuitive. So far, this approach has yielded profits in 2017.

That said, the portfolio does not fully depend upon further gains in stock prices. We increased our commodities risk allocation, which closely trails the total risk allocation to equities. Commodities prices continue to diverge. Fundamentals are driving uncorrelated price trends across the asset class. For example, the rebalancing oil market has fueled new uptrends in crude oil and gasoline, while oversupply continues exerting downward pressure on grains. Going into November, we believe the fund is positioned to keep delivering returns uncorrelated with traditional asset classes.


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 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.

3995-NLD-11/13/2017