Longboard

COMMENTARY: Managed Futures Strategy Fund September 2017
WAVIX

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Commentary in PDF format.


HIGHLIGHTS

    Contributors
  • Equities: Long Russell 2000 Index and Euro STOXX 50 Index Index (H-Shares) and MSCI Taiwan Index
  • Commodities: Long London Lead and Gasoil
  • Currencies: Long Canadian dollar against the Japanese yen
  • Fixed income: Short 10-Year Canadian Bond
    Detractors
  • Equities: Long Hang Seng China Enterprises Index (H-Shares) and MSCI Taiwan Index
  • Commodities: Long Copper and Short Chicago Wheat
  • Currencies: Long Euro against the British pound
  • Fixed income: Long 5- and 10-Year German Bonds

Past Commentaries

September 2017

August 2017

July 2017

June 2017

May 2017

April 2017

March 2017

RECAP

The fund returned -0.46% in September. Losses in currencies, commodities and fixed income offset gains from equities.

The U.S. Federal Reserve (Fed) announced plans to reduce its balance sheet as early as October at its Federal Open Market Committee (FOMC) meeting. The Fed also hinted at an additional rate hike, boosting the implied odds of a December hike, according to Fed funds futures. Risk assets were unfazed and the global bull market in stocks accelerated throughout the month. Equity gains spanned U.S., European, Japanese and emerging market stock indices. In the United States, domestically focused small-cap and mid-cap stock indices outperformed based on renewed hopes for tax reform. Large caps and technology stocks transitioned from leaders to laggards as the dollar strengthened.

The Fed’s renewed hawkish bent sent U.S. interest rates higher across the board, reversing this year’s former trend of declining rates and a flattening yield curve. Rising yields sparked corresponding moves across currencies and commodities, including a rebound in the U.S. dollar against nearly all foreign currencies. Precious metals sold off as the “risk on” environment and higher interest rates lessened the demand for perceived safe haven assets. Other commodities moved independently, as divergent supply and demand fundamentals drove uncorrelated price movements across the sector. Volatility reached a new record low.

Performance (as of 9/30/2017)
*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

After years of easy money and balance sheet expansion, the U.S. central bank is transitioning towards tighter monetary conditions and balance sheet reduction. Risk assets reacted with relative exuberance, defying expectations for higher volatility in this new era of tighter money. However, we’re still in the early days of the tightening process in the U.S., and easy money continues to spill into global asset prices from foreign central banks. For now, the global equities bull market is alive and well, so we remain long risk assets in line with the market’s prevailing trends.

The portfolio’s recent reduction in equity risk has moved towards commodities and currencies. This adds a meaningful degree of diversification that we believe will lower our correlation with traditional asset classes. We believe the fund is well positioned to continue delivering equity-like returns over the long term, while taking on less risk and travelling an uncorrelated path.


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.

3813-NLD-10/13/2017