The S&P 500 made a brief new high in early May before entering into a correction that lasted most of the remainder of the month. The damage was limited to about a -4% pullback (-8.5% for the Nazz), at which point the index touched its underlying 50-day moving average and found support. A late month rally then helped stocks eke out a positive return for the month of May.
Stocks appeared to start pulling back on profit taking following the weaker than expected April payrolls report (266k jobs vs. 1m consensus). More economic data continued to come in weaker than expectations and showing slowdowns vs. the previous month. The weak payrolls report was followed by soft ISM Manufacturing and Services reports, weak housing data, decelerating Philly Fed, and cooling commodity prices.
While the weak economic data was enough to spur a mild correction, it certainly wasn’t enough to derail the whole market. Outside of the economic data, corporate earnings reports continued to come in strong and forward estimates continued to get revised higher. This has helped keep the forward P/E multiple on the overall market from getting too stretched. Basically the stairstep higher in stocks has been fundamentally supported by rising earnings estimates.
Another factor that has helped the overall market has been that not all stocks seem to pullback at once lately. Rather, there is a vacillating rotation between growth and value stocks. Value stocks started the month strong while growth stocks languished, and then as value stocks pulled back alongside weaker economic data, growth stocks picked up the slack and rallied as bond yields declined and eased inflation worries.
While this back and forth for growth vs. value stocks has been good for the overall market, it has been frustrating in portfolios such as ours that have balanced out recently between growth and value stocks. The reason is that it often feels like half of the stocks are making progress while the other half stall, and vice versa.
As can been seen in the chart below, value stocks outperformed growth for the month as a whole. But growth stocks had a stronger rally in the back half of the month as inflation fears eased and bond yields declined.
Our dynamic hedge model entered the month targeting 100% market exposure. But as the markets pulled back into mid-month, it got as low as just 40% target exposure. It ended the month back at 100%. As such, we added to index hedges intramonth, but wound up taking off those hedges as the market quickly rebounded.
The ACM Dynamic Opportunity Fund(ADOIX) returned -0.09% in May, while HFRX Index which returned +0.85% last month. YTD ADOIX has returned +4.83% vs. the HFRX which returned +6.62%. Leading contributors came from a mix of energy/materials, specialty retail, and industrials. Laggards were mostly from the tech sector.
Thank you for your continued support.
Jordan L. Kahn, CFA
Chief Investment Officer
Sources: Standard & Poor’s, Stockcharts.com, Morningstar Briefing.com
Defined Terms: S&P 500 Index- The S&P 500 index is an unmanaged composite of large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks. HFRX Equity Hedge Index– tracks strategies that maintain positions both long and short in primarily equity and equity driven securities. Morningstar Long/Short Equity Category- A composite of returns produced by Morningstar which can be used to compare the returns of other mutual funds in the same category. Long– the holder of the position owns the security and will profit if the price of the security goes up. Short- Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is motivated by the belief that a security’s price will decline, enabling it to be bought back at a lower price to make a profit. Derivative hedge – transaction that limits investment risk with the use of derivatives such as option contracts.
Investors are not able to invest directly in the indices referenced and unmanaged index returns do not reflect any fees, expenses or sales charges. For current performance information, please visit our performance page: http://acm-funds.com/dynamic-fund-performance/
There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses.
ETF’s are subject to specific risks, depending on the nature of the underlying strategy of the fund. These risks could include liquidity risk, sector risk, as well as risks associated with fixed income securities, real estate investments, and commodities, to name a few. Investments in foreign securities could subject the Fund to greater risks including, currency fluctuation, economic conditions, and different governmental and accounting standards.
Investors should carefully consider the investment objectives, risks, charges and expenses of the ACM Dynamic Opportunity Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling 1-844- 798-3833. The prospectus should be read carefully before investing. The ACM Dynamic Opportunity Fund is distributed by Northern Lights Distributors, LLC, member.”http://www.finra.org/” FINRA. “http://www.sipc.org/” SIPC. Northern Lights Distributors, LLC and Ascendant Capital Management, LLC are not affiliated.
May 2021 Fact Sheet
We strive to help our investors participate in the gains available from financial markets, while mitigating the downside risk
The ACM Dynamic Opportunity Fund is designed as a core investment for investors seeking long term capital appreciation with a short-term focus on capital preservation. The fund employs a dynamic strategy, which aims to actively participate during a rising market environment and mitigate downside
risk when markets experience downturns.
|PERFORMANCE||As of 5/31/2021|
|1-mth||3-mth||YTD||1 Yr*||3 Yr*||5 Yr*||Since Inception*|
|HFRX Eq Hedge||0.85%||4.76%||6.62%||23.88%||2.10%||4.08%||2.51%|
|Morningstar L/S Category||1.05%||7.35%||9.42%||28.56%||5.98%||6.28%||4.05%|
*As of 3/31/21
Investments in mutual funds involve risks. Performance is historic and does not guarantee future results. Investment principal value will fluctuate so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month end performance information or the Fund’s prospectus please call the Fund at 1-844-798-3833. You can also obtain a prospectus at www.ACM-funds.com.
The fund’s maximum sales charges for Class “A” shares is 5.75%. Gross expense ratios are 2.07% for Class A shares and 1.82% for Class I Shares. The Adviser has contractually agreed to reduce its fees and reimburse expenses of the Fund, at least Until April 30, 2022, to ensure that the net annual fund operating expenses will not exceed 2.40% for Class A shares and 2.15% for Class I shares.
These fee waivers and expense reimbursements are subject to possible recoupment from each Fund within three years after the fees have been waived or reimbursed. You should be aware that the Fund’s past performance (before and after taxes) may not be an indication of how the Fund will perform in the future. Although Class A Shares would have similar returns to Class I shares because the classes are invested in the same portfolio of securities, the returns for Class A shares are different from Class I shares because Class A shares have different expenses than Class I shares. Updated performance information is available at no cost by visiting www.ACM-funds.com or by calling 1-8444-798-3833. Actual Total Annual Operating Expenses of 1.95% for Class A and 1.70% for Class I from the prospectus.
As of 5/31/2021
There is no assurance that the Fund will achieve its investment objectives.
|Dynamic Opportunity Fund|
|Generac Holdings Inc.||2.52%|
|Mosaic Company (The).||2.28%|
|XPO Logistics Inc.||2.14%|
|Vertiv Holdings Company.||1.88%|
|Fund Characteristics *|
|Avg. Market Cap||$50,101M|
|Gross Long Exposure||71.7%|
|Gross Short Exposure||-0.5%|
|Net Market Exposure||71.2%|
|Beta Adj. Exposure||91.0%|
|HFRX Eq Hedge||-1.61%||0.10%||9.98%||-9.42%||10.71%||4.60%|
|Morningstar L/S Category||-2.20%||2.34%||11.18%||-6.73%||11.90%||7.89%|
*Inception Date 1/20/2015
Investors should carefully consider the investment objectives, risks, charges and expenses of the ACM Dynamic Opportunity Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling 1-844-798-3833. The prospectus should be read carefully before investing. The ACM Dynamic Opportunity Fund is distributed by Northern Lights Distributors, LLC, member FINRA/SIPC. Northern Lights Distributors, LLC and Ascendant Capital Management, LLC are not affiliated.
Mutual Funds involve risk including possible loss of principal. Adverse changes in currency exchange rates may erode or reverse any potential gains from the Fund’s investments. ETF’s are subject to specific risks, depending on the nature of the underlying strategy of the fund. These risks could include liquidity risk, sector risk, as well as risks associated with fixed income securities, real estate investments, and commodities, to name a few. Investments in underlying funds that own small and mid-capitalization companies may be more vulnerable than larger, more established organizations. Derivative instruments involve risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Investments in foreign securities could subject the Fund to greater risks including currency fluctuation, economic conditions, and different governmental and accounting standards. In addition to the risks generally associated with investing in securities of foreign companies, countries with emerging markets also may have relatively unstable governments, social and legal systems that do not protect shareholders, economies based on only a few industries, and securities markets that trade a small number of issues.
Investors bear the risk that the Fund may not be able to implement its investment strategies or attract sufficient assets. Purchased put options may decline in value or expire worthless and may have imperfect correlation to the value of the Fund’s portfolio securities. Written call and put options may limit the Fund’s participation in equity market gains and may amplify losses in market declines. The Fund’s losses are potentially large in a written put or call transaction. If unhedged, written calls expose the Fund to potentially unlimited losses. The Fund will incur a loss as a result of a short position if the price of the short position instrument increases in value between the date of the short position sale and the date on which an offsetting position is purchased. Short positions may be considered speculative transactions and involve special risks, including greater reliance on the ability to accurately anticipate the future value of a security or instrument. The Fund’s losses are potentially large in a short position transaction.
Price to Earnings (P/E) is a valuation ratio of a company’s current share price compared to its per share earnings. Gross Long and Short Exposure is the percentage in securities that are expected to rise and decline, respectively. Beta is a measure of systemic risk. Standard Deviation is a statistical measurement. It sheds light on the historical volatility of that investment. The greater the standard deviation of a security, the greater the variance between each price and the mean, indicating a larger price range. Treynor ratio – A performance metric for determining how much excess return was generated for each unit of risk taken on by a portfolio. HFRX Equity Hedge Index – tracks strategies that maintain positions both long and short in primarily equity and equity driven securities. S&P 500 Index – tracks 500 individual stocks chosen for market size, liquidity and industry grouping, among other factors.
Investors are not able to invest directly in the indices referenced in this illustration and unmanaged index returns do not reflect any fees, expenses or sales charges.