Feb 23

Fortem Capital Progressive 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 February 2023

What a difference a month makes.

After January’s spectacular start, investor optimism was tempered in February as, having eschewed reassessing assumptions based on more positive economic data, investors were forced to take note of the reacceleration in core inflation numbers and reassess where both the peak rate of interest lies and how long rates may remain elevated relative to the ultra-low levels they have become accustomed to in the post-GFC world.

That reassessment of how close to the end of the global tightening cycle we lie caused global equities and bonds to sell-off in tandem once more. Chinese equities were particularly poor performers, after a strong start to the year, as geopolitical tensions overshadowed the continued reopening as various ‘spy balloons’ found their way onto foreign shores.

The Fund returned -0.4% in February.

Two investments observed during the month with one of those investments maturing.

The maturing investment, which was linked to the FTSE 100 & EuroStoxx 50, called at the end of the first year of its life, paying out its full return of 7.7%. The proceeds were reinvested in an investment linked to the Nikkei 225 & EuroStoxx 50, with an annual return of 8.9%, illustrating that terms remain attractive against the environment into which the Fund launched.

The opportunity was also taken to upsize positions with attractive GRYs on the back of inflows.

There is currently over 34% on average before capital is at risk, and over 32% before investments would not pay out their full growth amounts, unchanged from last month.

The Fund’s GRY increased to 10.4% in the event that the underlying equities are flat, and the Fund retains large amounts of intrinsic value.

Of the three scenarios that could play out this year:

  • Soft landing (& now ‘no landing’)
  • Hard landing
  • Higher for longer

The market was increasingly confident at the start of the year that no landing, or at worst a soft landing, had been orchestrated simultaneously with inflation making its way back to target largely by supply chain easing given Fed policy cannot be overly restrictive without some form of landing.

However, recent data has called this assumption into question. For the first time in a long time, central banks have replenished some of the arrows in their quivers to tackle a recession as and when that happens. The idea that there would be a pivot and those arrows would be used before any landing is in sight is fanciful. Investors must get used to the fact that ‘higher for longer’ is likely to remain in place until either inflation does come back down to target, which is likely to prove difficult (ceteris paribus) given structural shifts in economies, or the Fed tighten enough to break something, as they always do. Either way, we are comforted by the protection afforded to investors in the Fund, and the significant returns it can produce in an environment in which equity struggles.

Total Return 2023 Feb
UK 100 6.2% 1.8%
US 500 3.6% -2.5%
Europe 50 12.0% 1.9%
Japan 225 5.2% 0.5%
Hong Kong 50 0.0% -9.4%
US 2000 7.9% -1.7%
Swiss 30 3.4% -1.7%
BCOM -5.9% -5.1%
US Treasury 0.4% -2.6%
Euro Property 7.8% -1.1%
PGF 4.7% -0.4%
AGF 0.6% 1.2%
DGF 2.5% 4.5%
Real Estate 6.0% -2.1%
US Equity Income 3.4% -2.5%


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."

Jan 23

Fortem Capital Progressive 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 January 2023

What a difference a year makes.

2023 started in fairly spectacular style as risk assets across the board enjoyed a month of high optimism and returns.

December’s inflation numbers continued to slow whereas data turned more positive causing investors to assign a higher probability to a soft landing, and the whispers are now that a recession may even be avoided altogether.

The Fund had a similarly buoyant month, increasing by 5.1%.

Within the Fund’s underlying indices themselves, the reversal of a trend that characterised 2022 was of some note; the FTSE 100 Equal Weight Index, that lagged its market cap weighted sibling so significantly in 2022, outperformed as markets priced in the prospect of lower rates. On the other side of the world the Hang Seng, which was the subject of a number of issues topped by the ill-advised and fundamentally unachievable ‘zero Covid’ policy, has enjoyed a period of significant growth as it has become clear that Beijing have abandoned it entirely and will allow Omicron to blow through the population and reopen in earnest.

There were four observations during the month, with one investment calling.

The maturing investment, which was linked to the FTSE 100 & EuroStoxx 50, called at the end of the third year of its life, paying out its full return of 21.3% (7.1% x 3). The proceeds were reinvested in an investment linked to the Russell 2000 & EuroStoxx 50, with an annual return of 9.0%, illustrating that terms remain attractive against the environment into which the Fund launched.

Also of note is the increase in the protection levels afforded to investors after the recent rally. There is currently over 34% on average before capital is at risk, and over 32% before investments would not pay out their full growth amounts.

Despite the levels of protection increasing significantly, the Fund retains a high GRY of 9.9% in the event markets return nothing, whilst if markets were to fall 20% from here, the terminal payoff of the existing investments is +34.5%. Those returns are contractually stipulated and in effect locked-in provided the underlying indices satisfy their conservative final barriers.

The market is increasingly confident that the Federal reserve have managed to orchestrate a soft landing. Whilst this might be the case, purely on the balance of probabilities it is less likely than the other outcomes of a hard landing or the need for higher rates for longer. Anecdotally, they have never in their history managed it before. Investors should note that in all previous rate rise cycles, soft landing type conditions have been experienced, after all, you need to at least pass through those types of conditions before heading elsewhere. Let us hope we have reached our final destination.

Total Return 2023 Jan
UK 100 4.4% 4.4%
US 500 6.3% 6.3%
Europe 50 9.9% 9.9%
Japan 225 4.7% 4.7%
Hong Kong 50 10.4% 10.4%
US 2000 9.8% 9.8%
Swiss 30 5.2% 5.2%
BCOM -0.9% -0.9%
US Treasury 3.1% 3.1%
Euro Property 8.8% 8.8%
PGF 5.1% 5.1%
AGF -0.6% -0.6%
Real Estate 8.3% 8.3%
US Equity Income 6.2% 6.2%


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."

Dec 22

Fortem Capital Progressive 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 December 2022

Despite another month in which inflation numbers moderated, risk assets struggled as central banks reiterated their hawkish rhetoric and commitment to staying the course in taming inflation, which remains highly elevated. This was possibly best illustrated by the dot plot increasing in spite of the softer print.

Elsewhere, the big news came out of Asia, where China stepped up their relaxation of Covid curbs and Japan adjusted Yield Curve Control, widening the target band to 50bps on the 0% 10 year yield target.

The Fund decreased by 1.3%.

No investments called during the month.

The GRY available to investors increased once more. The terminal value of the current investments stands at 33.7% in the event markets annualise at 0% in price terms over the next three years. GRYs remain highly attractive even in equity markets that fall significantly.

The Fund decreased by 6.5% over the year, against a decrease in global equities of 17.7%. The Fund’s sensitivity to its underlying equity exposures remains within target before the protection overlay is taken into account.

As the dust settles on 2022, it will go down as perhaps the year in which irreparable damage was done to the 60/40 investment philosophy as a stand alone, all weather strategy for all times. And, more importantly, that asset allocations consisting purely of bonds and equities are not suitable across risk profiles. That is certainly not to say that the 60/40 portfolio will not have its day again, it will. The question is when. But, given correlations, and what has been seen this year as the result of markets beginning to be weaned from the performance enhancing drugs they have enjoyed for so long, there can be no argument over its fitness in isolation.

Given the price action seen in the first part of the New Year, it would seem the narrative has shifted to one of the Fed having manufactured a soft landing perfectly. Of course this is possible, but less likely than the options either side that they have either done too much already, leading to a hard landing, or not enough and, as the central banks themselves remain keen to point out, more is needed to tame the stickier aspects of inflation, namely wages. In either of the latter scenarios, equity is likely to struggle to annualise above meagre returns for the foreseeable future, and investors need to seek ways to achieve meaningful returns from other sources.

Total Return 2022 December
UK 100 4.6% -1.5%
US 500 -18.5% -5.8%
Europe 50 -9.5% -4.3%
Japan 225 -7.8% -6.8%
Hong Kong 50 -12.7% 6.4%
US 2000 -20.4% -6.5%
Swiss 30 -11.1% -3.6%
BCOM 13.8% -2.8%
US Treasury -13.0% -0.5%
Euro Property -38.9% -1.7%
PGF -6.5% -1.3%
AGF 1.0% 0.2%
Real Estate -33.9% -1.2%
US Equity Income -18.4% -5.9%


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."