October 2022 – AGF

Fortem Capital Alternative Growth Fund

UK & EU – For professional and institutional investors only
Switzerland – this is an advertising document for professional and institutional clients as defined by the Swiss Financial Services Act only

Monthly Commentary – 28th October 2022

News flow continues to be dominated by inflation, its knock on effect on the future direction of monetary policy, and escalating geopolitical tensions, much as it has been over the course of the year thus far.

Inflation prints continue to be troublesome, particularly accelerating core inflation in the US, where shelter and services more than offset falling energy and finished goods prices.

Central banks continued on their hawkish trajectory for the most part; the ECB raised by another 75bps, whilst at the time of writing the Federal reserve have also raised by another 75bps as well as indicating a higher terminal rate, and rates staying there for longer than previously anticipated.

In spite of this, risk assets posted strong returns over the month following September’s volatility. The exception was China, where hopes that the Party Conference would possibly signal an end to the country’s insane zero-covid policy were premature as Xi Jinping instead used the occasion to consolidate power, notably with the Game of Thrones-style removal of former President Hu Jintao from the chamber.

The Fund posted a return of -0.9% for the month.

The major detractors to Fund performance were the Fund’s credit volatility positions, in the form of long credit default swap (CDS) positions. As one might expect, in an environment in which risk assets rally hard, credit spreads tend to narrow. The positions have done well this year, in spite of credit markets remaining reasonably sanguine; spreads have widened, but in a fairly orderly fashion thus far. It is in the event of a market panic that the positions would really come into their own.

The Fund’s rates volatility strategies posted another month of net positive returns. They have been the Fund’s biggest contributor this year as the US Treasury market has begun to creak. As the two biggest buyers in the swollen market, Japan and the Fed, begin to step away, it leaves Treasuries facing a growing liquidity issue in the form of a dearth of demand.

Elsewhere the Fund’s US equity vol arb strategy continued to struggle, as most US equity vol strategies have this year as equity volatility has remained rangebound. The strategy was reduced and a new equity vol term strategy was added. The new strategy is net long volatility, and should provide some convexity in a crisis, but has a more defined premia during flat to rising markets.

All eyes continue to be on inflation and monetary policy. The market in general seems to assume that inflation is linear and rises to a peak before falling to a trough with no noise in between. In reality this is unlikely. There are likely to be prints which raise hopes of the world returning to its previous low or no inflation environment. However, when one looks back through time, it is clear inflation itself can be volatile. We are likely to see a period of asset price normalisation with an unwinding of globalisation, a continuation of populist politics, resource scarcity and geopolitical tension. All of this is inflationary, and given there is still the prospect of the world’s second largest economy finally reopening, investors must not only retain, but continue to increase their diversification. A sizeable rally such as the current one provides the perfect opportunity.

Total Return 2022 October
UK 100 -1.5% 2.3%
US 500 -17.4% 8.9%
Europe 50 -14.0% 8.9%
Japan 225 -4.3% 4.5%
Hong Kong 50 -34.5% -13.7%
US 2000 -16.9% 11.0%
Swiss 30 -13.9% 4.9%
BCOM 12.7% 0.2%
US Treasury -15.4% -0.9%
Euro Property -37.6% 3.0%
PGF -9.6% 3.8%
AGF 0.8% -0.9%
Real Estate -34.5% 4.4%
US Equity Income -17.4% 8.9%


Disclaimer

– This document has been issued and approved as a financial promotion by Fortem Capital Limited for the purpose of section 21 of the Financial Services and Markets Acts 2000. Fortem Capital Limited registration number 10042702 is authorised and regulated by the Financial Conduct Authority under firm reference number 755370.
– This document is intended for Professional Investors, Institutional Clients and Advisors and should not be communicated to any other person.
– The information has been prepared solely for information purposes only and is not an offer or solicitation of an offer to buy or sell the product.
– Data is sourced from Fortem Capital Limited and external sources. The data is as at the date of this document and has been reviewed by Fortem Capital Limited.
– Information, including prices, analytical data and opinions contained within this document are believed to be correct, accurate and derived from reliable sources as at the date of the document. However, no representation or warranty, expressed or implied is made as to the correctness, accuracy or validity of such information.
– Fortem Capital Limited assumes

no responsibility or
liability for any errors, omissions or inaccuracy with respect to the information contained within this document.
– All price and analytical data included in this document is
intended for indicative purposes only and is as at the date
of the document.
– The information within this document does not take into account the specific investment objective or financial situation of any person. Investors should refer to the final documentation and any prospectus to ascertain all of the risks and terms associated with these securities and seek independent advice, where necessary, before making any decision to buy or sell.
– The product may not be offered, sold, transferred or delivered directly or indirectly in the United States to, or for the account or benefit of, any U.S. Person.
– The Fortem Capital Alternative Growth Fund is a Sub-Fund of Skyline, an open-ended investment company with variable capital incorporated on 1 June 2010 with limited liability under the laws of Ireland with segregated liability between Funds. The Company is authorised in Ireland by the Central Bank of Ireland pursuant to the UCITS Regulations.

“NOTICE TO INVESTORS DOMICILED OR RESIDENT IN SWITZERLAND – The interests in the UCITS Fund and any related services, information and opinions described or referenced in this document are not, and may not be, offered or marketed to or directed at persons in Switzerland (a) that do not meet the definition of “qualified investor" pursuant to the Swiss Federal Act on Collective Investment Schemes of 23 June 2006 (“CISA") (“Non-Qualified Investors"), or (b) that are high net worth individuals (including private investment structures established for such high-net worth individuals if they do not have professional treasury operations) that have opted out of customer protection under the Swiss Federal Financial Services Act of 15 June 2018 (“FinSA") and that have elected to be treated as “professional clients" and “qualified investors" under the FinSA and the CISA, respectively (“Elective Qualified Investors").
In particular, none of the information provided in this document should be construed as an offer in Switzerland

for the purchase or sale of the interests or any related services, nor as advertising in Switzerland for the interests or any related services, to or directed at Non-Qualified Investors or Elective Qualified Investors. Circulating or otherwise providing access to this document or offering, advertising or selling the interests or any related services to Non-Qualified Investors or Elective Qualified Investors may trigger, in particular, approval requirements and other regulatory requirements in Switzerland.
This document does not constitute a prospectus pursuant to Articles 35 et seqq. FinSA and may not fulfil the information standards established thereunder. No key information document pursuant to Swiss law has been established for the interests. The interests will not be listed or admitted to trading on a Swiss trading venue and, consequently, the information presented in this document may not fulfil the information standards set out in the relevant trading venue rules."

September 2022 – AGF

Fortem Capital Alternative Growth Fund

UK & EU – For professional and institutional investors only
Switzerland – this is an advertising document for professional and institutional clients as defined by the Swiss Financial Services Act only

Monthly Commentary – 30th September 2022

September saw a continuation of the struggles seen for both equity and bond markets thus far this year as investors fully digested Jackson Hole, continued to come to terms with the fact policymakers are committed to bringing down inflation at the expense of growth, and witnessed this in action as central banks around the world hiked aggressively and terminal rate expectations jumped.

September’s continued declines leave global equities down 25% for the year, whilst even the mighty US Treasury market has given up over 14%.

The Fund posted a positive return of 1.5% for the month.

The majority of the returns were contributed by the Fund’s rates volatility strategies. Of those strategies, the swaption on the US 10 year yield had a hard limit of the yield hitting 3.5% before profits were taken and the position restruck. This occurred in September and indeed profits were taken and a new position entered into with a higher strike.

The Fund’s credit volatility positions were also positive contributors once more. As the market grapples with the fact central banks are looking at inflation alone and not the effect their actions have on companies’ ability to service the significant debt built up over years of low rates, spreads continue to widen.

The biggest detractor to performance was the Fund’s commodity value strategy, which is designed to monetise the outperformance of gold in Asian trading hours over European. It tends to be net long gold over time and thus suffered from gold’s heavy falls.

A new rates curve strategy was added during the month, a steepener on the US yield curve. The curve has inverted to levels not seen for 40 years. The opportunity was taken to put on a two year trade to take advantage of an eventual reversion here.

It has become something of a trope, but this year has shown more than any other in recent memory the importance of diversification within investment portfolios. Persistent and high inflation, the hawkish commitment from central banks to bring it down, rising geo-political tensions and the de-globalisation of the global economy mean that the risk that traditional assets may produce at best anaemic returns for the foreseeable future is one investors must take seriously. Liquid alternatives were unnecessary whilst 60/40 had its goldilocks decade. The temperature has changed and looks set to not be quite right for some time to come.

Total Return 2022 September
UK 100 -3.7% -5.2%
US 500 -24.1% -9.3%
Europe 50 -21.0% -5.6%
Japan 225 -8.5% -7.1%
Hong Kong 50 -24.1% -13.2%
US 2000 -25.1% -9.6%
Swiss 30 -18.0% -5.3%
BCOM 12.4% -8.4%
US Treasury -14.6% -4.3%
Euro Property -39.5% -16.6%
PGF -12.9% -6.2%
AGF 1.7% 1.5%
Real Estate -37.3% -17.3%
US Equity Income -24.1% -9.3%


Disclaimer

– This document has been issued and approved as a financial promotion by Fortem Capital Limited for the purpose of section 21 of the Financial Services and Markets Acts 2000. Fortem Capital Limited registration number 10042702 is authorised and regulated by the Financial Conduct Authority under firm reference number 755370.
– This document is intended for Professional Investors, Institutional Clients and Advisors and should not be communicated to any other person.
– The information has been prepared solely for information purposes only and is not an offer or solicitation of an offer to buy or sell the product.
– Data is sourced from Fortem Capital Limited and external sources. The data is as at the date of this document and has been reviewed by Fortem Capital Limited.
– Information, including prices, analytical data and opinions contained within this document are believed to be correct, accurate and derived from reliable sources as at the date of the document. However, no representation or warranty, expressed or implied is made as to the correctness, accuracy or validity of such information.
– Fortem Capital Limited assumes

no responsibility or
liability for any errors, omissions or inaccuracy with respect to the information contained within this document.
– All price and analytical data included in this document is
intended for indicative purposes only and is as at the date
of the document.
– The information within this document does not take into account the specific investment objective or financial situation of any person. Investors should refer to the final documentation and any prospectus to ascertain all of the risks and terms associated with these securities and seek independent advice, where necessary, before making any decision to buy or sell.
– The product may not be offered, sold, transferred or delivered directly or indirectly in the United States to, or for the account or benefit of, any U.S. Person.
– The Fortem Capital Alternative Growth Fund is a Sub-Fund of Skyline, an open-ended investment company with variable capital incorporated on 1 June 2010 with limited liability under the laws of Ireland with segregated liability between Funds. The Company is authorised in Ireland by the Central Bank of Ireland pursuant to the UCITS Regulations.

“NOTICE TO INVESTORS DOMICILED OR RESIDENT IN SWITZERLAND – The interests in the UCITS Fund and any related services, information and opinions described or referenced in this document are not, and may not be, offered or marketed to or directed at persons in Switzerland (a) that do not meet the definition of “qualified investor" pursuant to the Swiss Federal Act on Collective Investment Schemes of 23 June 2006 (“CISA") (“Non-Qualified Investors"), or (b) that are high net worth individuals (including private investment structures established for such high-net worth individuals if they do not have professional treasury operations) that have opted out of customer protection under the Swiss Federal Financial Services Act of 15 June 2018 (“FinSA") and that have elected to be treated as “professional clients" and “qualified investors" under the FinSA and the CISA, respectively (“Elective Qualified Investors").
In particular, none of the information provided in this document should be construed as an offer in Switzerland

for the purchase or sale of the interests or any related services, nor as advertising in Switzerland for the interests or any related services, to or directed at Non-Qualified Investors or Elective Qualified Investors. Circulating or otherwise providing access to this document or offering, advertising or selling the interests or any related services to Non-Qualified Investors or Elective Qualified Investors may trigger, in particular, approval requirements and other regulatory requirements in Switzerland.
This document does not constitute a prospectus pursuant to Articles 35 et seqq. FinSA and may not fulfil the information standards established thereunder. No key information document pursuant to Swiss law has been established for the interests. The interests will not be listed or admitted to trading on a Swiss trading venue and, consequently, the information presented in this document may not fulfil the information standards set out in the relevant trading venue rules."

August 2022 – AGF

Fortem Capital Alternative Growth Fund

UK & EU – For professional and institutional investors only
Switzerland – this is an advertising document for professional and institutional clients as defined by the Swiss Financial Services Act only

Monthly Commentary – 31st August 2022

In August investors were finally left in no doubt as to where the priorities of the Federal Reserve lie; in reducing inflation, even at the expense of the economy over the short term. Jerome Powell’s Jackson Hole speech was clear, there will not be a pivot unless inflation moves meaningfully towards the 2% target. As a result, equities and bonds suffered in tandem once more, as they are likely to in an environment in which inflation proves more structural and persistent than is being priced in, even now. From here, bond and equity markets are likely to experience more turbulence unless inflation does indeed move down in a meaningful manner.

The MSCI World Index returned -4.1%, whilst global aggregate bonds returned -3.9%.

The Fund returned 0.7%.

Whereas the previous month, which saw investors buoyed by a truly paltry inflation reading of 8.5%, saw the Fund’s rates and credit volatility strategies suffer, August saw a return of volatility in bond markets after Powell’s Jackson Hole speech.

Some calm also returned to natural gas prices in the US after a turbulent summer in which inventories were depleted as demand for cooling was high by historic standards. Something to note for investors is the disconnect between what is going on in European gas prices, which have surged on the back of the Russia situation, and US gas prices which are an inventory and weather phenomena. The US are already at their export limit for liquefied natural gas (LNG) and prices therefore are relatively insulated from the troubles across the Atlantic. US natural gas prices have though increased incredibly early this year, to the detriment of the Fund, but it does mean that there is a sizeable premium available to investors heading into winter. But, given the scale of the rise so far this year (+125%) it is a risk that needs to be sized diligently; any portfolio that was left alone would have double the exposure that it started the year with.

The Fund’s FX strategies once again suffered from the dollar’s strength vs the rest of the G10 currencies, particularly the yen as the Bank of Japan remain incredibly dovish given the backdrop. That has undoubtedly been to the advantage of Japanese equities this year, but as import price rises start to bite there are whispers of intervention coming.

It has been something of a theme this year that the Fund has dovetailed bonds and equities; benefitted as they have suffered and given back on their relief rallies (as one might hope an alternative might). It was reported here last month that the narrative around the potential Fed pivot was far overblown, and so it has turned out. Worryingly for the Fed, it is again the stickier components of inflation that are increasing. It is looking increasingly likely that they will be forced into hiking higher and for longer than the market anticipates. Add to this Quantitative Tightening starting in earnest and there is the potential for things to get worse before they get better. The net short position in commodities has clearly been a detractor this year but, in spite of this, the Fund remains in positive territory and that commodity positioning remains the biggest risk weight. If the Fed are indeed forced into hiking to the point of killing off demand, that may be the time that all of the strategies begin to work together.

Total Return 2022 August
UK 100 1.6% -1.1%
US 500 -16.4% -4.1%
Europe 50 -16.3% -5.1%
Japan 225 -1.6% 1.1%
Hong Kong 50 -12.6% -0.8%
US 2000 -17.2% -2.1%
Swiss 30 -13.4% -2.6%
BCOM 22.7% 0.2%
US Treasury -10.8% -2.8%
Euro Property -27.4% -10.8%
PGF -7.2% -2.3%
AGF 0.2% 0.7%
Real Estate -24.2% -9.4%
US Equity Income -18.8% -4.1%


Disclaimer

– This document has been issued and approved as a financial promotion by Fortem Capital Limited for the purpose of section 21 of the Financial Services and Markets Acts 2000. Fortem Capital Limited registration number 10042702 is authorised and regulated by the Financial Conduct Authority under firm reference number 755370.
– This document is intended for Professional Investors, Institutional Clients and Advisors and should not be communicated to any other person.
– The information has been prepared solely for information purposes only and is not an offer or solicitation of an offer to buy or sell the product.
– Data is sourced from Fortem Capital Limited and external sources. The data is as at the date of this document and has been reviewed by Fortem Capital Limited.
– Information, including prices, analytical data and opinions contained within this document are believed to be correct, accurate and derived from reliable sources as at the date of the document. However, no representation or warranty, expressed or implied is made as to the correctness, accuracy or validity of such information.
– Fortem Capital Limited assumes

no responsibility or
liability for any errors, omissions or inaccuracy with respect to the information contained within this document.
– All price and analytical data included in this document is
intended for indicative purposes only and is as at the date
of the document.
– The information within this document does not take into account the specific investment objective or financial situation of any person. Investors should refer to the final documentation and any prospectus to ascertain all of the risks and terms associated with these securities and seek independent advice, where necessary, before making any decision to buy or sell.
– The product may not be offered, sold, transferred or delivered directly or indirectly in the United States to, or for the account or benefit of, any U.S. Person.
– The Fortem Capital Alternative Growth Fund is a Sub-Fund of Skyline, an open-ended investment company with variable capital incorporated on 1 June 2010 with limited liability under the laws of Ireland with segregated liability between Funds. The Company is authorised in Ireland by the Central Bank of Ireland pursuant to the UCITS Regulations.

“NOTICE TO INVESTORS DOMICILED OR RESIDENT IN SWITZERLAND – The interests in the UCITS Fund and any related services, information and opinions described or referenced in this document are not, and may not be, offered or marketed to or directed at persons in Switzerland (a) that do not meet the definition of “qualified investor" pursuant to the Swiss Federal Act on Collective Investment Schemes of 23 June 2006 (“CISA") (“Non-Qualified Investors"), or (b) that are high net worth individuals (including private investment structures established for such high-net worth individuals if they do not have professional treasury operations) that have opted out of customer protection under the Swiss Federal Financial Services Act of 15 June 2018 (“FinSA") and that have elected to be treated as “professional clients" and “qualified investors" under the FinSA and the CISA, respectively (“Elective Qualified Investors").
In particular, none of the information provided in this document should be construed as an offer in Switzerland

for the purchase or sale of the interests or any related services, nor as advertising in Switzerland for the interests or any related services, to or directed at Non-Qualified Investors or Elective Qualified Investors. Circulating or otherwise providing access to this document or offering, advertising or selling the interests or any related services to Non-Qualified Investors or Elective Qualified Investors may trigger, in particular, approval requirements and other regulatory requirements in Switzerland.
This document does not constitute a prospectus pursuant to Articles 35 et seqq. FinSA and may not fulfil the information standards established thereunder. No key information document pursuant to Swiss law has been established for the interests. The interests will not be listed or admitted to trading on a Swiss trading venue and, consequently, the information presented in this document may not fulfil the information standards set out in the relevant trading venue rules."