May 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 May 2022

Investors in traditional asset classes had suffered a torrid start to the year before May, when they were granted some respite. Heading into the month, investors’ attention remained on the key risks that had thus far dominated headlines; inflation and its effect on the future direction of central bank policy, the continuing war in Ukraine, and Covid policy rather than Covid itself. After a 1.2% rise in March, consumer prices in the US rose 0.3%, fuelling hope that the pace of rising prices was slowing. Bond and equity markets reacted well to the data and recovered strongly to both post positive returns overall.

European markets remain affected by the continuing war, amongst the other prevailing risks, and May saw the first European embargos on Russian energy. In the US, the Fed raised rates by 50bps, and signalled another 50bp hike in June, although the messaging became muddled as the month wore on, much to the delight of bond and equity markets alike. Rates volatility in particular fell heavily. In China, Shanghai, much of which has been in lockdown due to the relatively mild Omicron variant, finally began to reopen as cases dropped, to the relief of Chinese equities.

The Fund posted a return of -1.6%.

Unsurprisingly, it was the Fund’s rates volatility strategies which were the biggest detractors, given the heavy falls in rates volatility towards month end. Combined they took off 0.8%.

The Fund’s US equity volatility arbitrage strategy was also a detractor, -0.5% at Fund level. Historically, the strategy can drawdown on more measured volatility stresses; in spite of the pain felt by investors, volatility has not returned to levels seen in ‘98 ’01 ’08 ‘11 & ‘20. However, it tends to be long ‘the wings’, meaning that it should provide convexity in severe market stresses such as those mentioned above.

The Fund’s long CDS positions also suffered as credit spreads narrowed on the ‘good news’ of an inflation rate of 8.3%.

The Fund’s commodity strategies were muted as curves remain in the 99th percentile of backwardation. Indeed, long commodity positions continued to be a good place to be for investors. The entry point for commodity curve strategies remains as attractive as it has ever been, and the Fund is set to increase weighting here.

Despite the brief respite after hopes were raised of a peak in inflation having passed, it would seem, as has been argued here for some time, that central banks have grossly miscalculated inflation. The money supply was vastly increased post-2008, causing none, but money supply alone is not enough; velocity matters. As a response to Covid, more stimulus was provided in three months than in the six years after the Financial Crisis, but this time in monetary and fiscal union, including direct injections of cash into bank accounts. The money found its way to Main St rather than being trapped on Wall St. it has left a $6trn overhang of excess money in the system.

The probability that the inflation being seen is in fact more of a secular phenomenon has increased hugely. May’s print, published in June, showed a reacceleration, causing equities and bonds to once more come under pressure.

The Fund has recovered all of May’s performance and more since month end. As much as the narrative of the Fed being hesitant to heap more pressure on markets is something investors are hoping holds true, there is perhaps an argument that they should be looking to DC rather than JP; non-asset owners, who control a huge block of votes, are feeling the pinch. Gas prices tend to equal votes, and they have passed $5 for the first time ever. With mid-terms on the horizon, the Fed may now have no choice.

Total Return 2022 May
UK 100 4.8% 1.1%
US 500 -12.9% 0.1%
Europe 50 -10.1% 0.9%
Japan 225 -4.4% 1.9%
Hong Kong 50 -7.6% 2.1%
US 2000 -16.6% 0.2%
Swiss 30 -7.4% -4.1%
BCOM 32.4% 1.4%
US Treasury -8.9% 0.6%
Euro Property -14.0% -4.0%
PGF -4.9% -0.6%
AGF 0.0% -1.6%
Real Estate -13.5% -6.6%
US Equity Income -12.9% 0.1%


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."

April 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 – 29th April 2022

Bond and equity markets once again sold off in tandem in April in a continuation of what investors have had to contend with thus far in 2022. A combination of the war in Ukraine, central bank hawkishness and the misguided zero-Covid policy in China again led investors out of both asset classes.

Equity markets have posted significant falls this year; as at the end of April the MSCI World is down 13.5%. But it is the bond market which has garnered the biggest headlines, having suffered their worst start to a year on record, by some margin. Global bonds fell 5.5% in April, leaving them down 11.3% in 2022. As is well documented, this has been driven by the shift in expectations from eternally dovish central banks to those same banks entering a tightening cycle and promising to begin to shrink their grossly inflated balance sheets. Whilst credit spreads have increased, credit markets have been reasonably orderly thus far, particularly when one considers the amount of leverage in the system.

China, and its most recent Covid outbreak, became a major story. Those that have been vaccinated in China have been so with a less effective vaccine. There is a notable difference in the death rate which has prompted the Chinese authorities to continue the zero-Covid policy that, up until now, had been relatively successful in containing the virus. Chinese lockdowns have a profound effect on the global economy, both in terms of supply and demand, those effects are likely to be felt in the coming months.

The Fund posted a return of 1.0%.

The rates volatility strategies were the biggest contributors as bond markets continued to experience turbulence.

Elsewhere, there were also positive contributions from the long CDS positions. Spreads have moved higher this year but, when looking back through time, still sit well below March 2020 levels, which was not a credit crisis, below levels in early 2016, and far below 2008 levels. If the reversal in course of monetary policy were to stress credit markets, there is still a long way that spreads could go.

The Fund’s US equity volatility arbitrage strategy was the main detractor. The strategy aims to profit from taking long and short option positions where they are perceived to be under or overvalued.

2022 has been a tough year for investors thus far, particularly in the world of 60/40. The Covid crisis in March 2020, and as importantly the sheer speed and severity of the recovery, has possibly lulled investors into an assumption that this would be repeated if the current turbulence were to get worse before it gets better. And of course it might.

However, investors should be aware that the very core of the current turbulence is centred around the removal of the stimulus that has kept bond and equity markets so buoyant for so long and facilitated such a swift recovery from the last crisis. This is not a new paradigm, it is the reversal of the old one.

Total Return 2022 Apr
UK 100 3.6% 0.8%
US 500 -13.0% -8.7%
Europe 50 -10.9% -2.1%
Japan 225 -6.1% 3.5%
Hong Kong 50 -9.5% -4.1%
US 2000 -16.7% -9.9%
Swiss 30 -3.5% 0.9%
BCOM 30.6% 4.1%
US Treasury -9.5% -3.8%
Euro Property -10.3% -6.0%
PGF -5.5% -1.5%
AGF 1.6% 1.0%
Real Estate -7.4% -3.6%
US Equity Income -13.0% -8.8%


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."

March 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 March 2022

March was an extraordinary month in global markets. At the beginning of the month, as attention was firmly focussed on the Russian invasion of Ukraine, equities, particularly in Europe, suffered heavy losses. Remarkably, even with no resolution to the conflict, those losses were made back throughout the month to leave most major indices sitting above where they started it. The notable exception was Hong Kong, where the absurd ‘zero-covid’ policy has prompted a swathe of lockdowns.

Despite the volatility in equity markets, it was bond and commodity markets that continued to grab headlines. There were truly unprecedented moves in commodities; energy and grains were particularly affected by the fallout from the invasion as a somewhat rare, by modern standards at least, coordinated response from the West put Russian energy exports in the spotlight. But the biggest surprise came in Nickel, where a Chinese billionaire, who also happened to own one of the world’s largest Nickel exporters, got short squeezed on his own reckless speculation. Ordinarily this would be a problem for any individual, unless the exchange, LME in this case, cancels all trades for that day and effectively turns back the clock, to the detriment of those who were on the other side of those contractually agreed trades.

Bond markets provided no refuge for investors as US Treasuries closed March to record their worst quarter since records began. It is well documented that the bond market has come under pressure as inflation has risen, threatening the goldilocks environment of the past decade. The first major ground invasion in Europe since the Second World War has put further pressure on prices and therefore policymakers, albeit whilst seemingly throwing them a bone in that it now seems the ‘Putin Price Hike’ is being blamed for the world’s inflationary troubles, which were already set in motion long before.

The Fund posted a return of 0.7% for the month.

The best performing strategies were the Fund’s rates strategies. These strategies are net long rates volatility and benefit from turbulence in US rates. The Fund also owns a swaption on US 10 year rates, with a strike of 3%; this provides the Fund with some convexity in the event of further increases in the US 10 year Treasury yield .

In spite of the unprecedented moves seen in commodity markets, the Fund was unscathed testament to the dynamic nature of the strategies’ implementations as well as some weakening of timespreads towards month end. Levels of backwardation entered previously unseen territory on the back of the invasion, and still sits in the 99.5th percentile historically. As a reminder, the strategies are set to benefit from the move back towards contango when it occurs.

The Fund’s FX Value strategies were the detractors; the strategies go long and short G10 currencies based on their under/overvaluation relative to their PPP. The Yen was the main driver as the Bank of Japan boosted its bond buying programme to control its yield curve.

As the dust has settled on the first quarter of 2022, the financial press is awash with the death knell for the 60/40 portfolio, something that has been written about here for some time. As always, most commentators are too binary in their aspersions; it is true that currently the 60/40 portfolio is not fit for purpose, but it may well have its time again if bond and equity markets are ever allowed to function without obscene central bank intervention; this is not a given. What is more relevant for investors is that, in the current environment, one needs more than two asset classes in order to achieve diversification in a multi-asset portfolio. Policymakers said, incorrectly, that there would be no inflation.  They said, incorrectly, that it was transitory. They now say it has peaked. Given their track record in predicting these things, it would be foolhardy to take them at their word; they hope it has peaked, as does everybody else.

Total Return 2022 Mar
UK 100 2.9% 1.4%
US 500 -4.7% -3.7%
Europe 50 -9.0% -0.5%
Japan 225 -2.7% 5.6%
Hong Kong 50 -5.7% -2.8%
US 2000 -7.5% 1.2%
Swiss 30 -4.3% 2.8%
BCOM 25.5% 8.6%
US Treasury -5.9% -2.8%
Euro Property -5.9% -2.8%
PGF -4.0% -1.0%
AGF 0.6% 0.7%
Real Estate -3.9% 4.7%
US Equity Income -5.9% 3.7%


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."