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 2021

July was a throwback to last year when stronger growth numbers competed with the spread of a new variant in investors minds. Restrictions continued to be eased across many major economies, but the delta variant tempered investor enthusiasm at various points in the month. Again it was moves in the bond market that were most notable, as US Treasury yields continued to move lower, the 10-year moving below 1.2%. Equities also moved higher. Unsurprisingly, given the fall in yields, it was growth that outperformed as illustrated by the S&P 500’s strong showing. Emerging markets continued their underperformance; the Chinese crackdown on private tutoring companies caused widespread selling of shares such that the Hang Seng was down 10% over the month. Inflation numbers globally continued to print hot, with US inflation hitting a 13-year high in June. For now the bond market continues to accept the ‘transitory’ narrative, but if inflation turns out to be more secular, any taper might cause a severe tantrum.

The Fund was flat over the month.

Unsurprisingly, the Fund’s rates strategies were the biggest detractors given both the moves lower in both yields (higher bond prices) and volatility seen over the course of the month. However, these strategies are structural in nature over the longer term, and should benefit over shorter periods if indeed there is complacency in bond markets and turbulence to come. Elsewhere, most other strategies produced positive returns. Commodity curve benefitted from some of the recent steepening into record backwardation blowing off some steam, while equity quality benefitted from the outperformance of those companies with the farthest distance to default as measured by the Merton Model within the Russell 2000.

June and the early part of July were somewhat of a ‘perfect storm’ as the bond market told a very different story from the underlying data. However, the worst of this seems to have passed and the Fund, having always retained its convexity for the next crisis, should start to return to persistent positive returns as markets normalise in the wake of the biggest market intervention in history.

Total Return 2021 Aug
UK 100 13.2% 2.1%
US 500 21.2% 3.0%
Europe 50 20.0% 2.6%
Japan 225 3.1% 3.0%
Hong Kong 50 -3.0% -0.1%
US 2000 15.8% 2.2%
Swiss 30 19.2% 2.4%
BCOM 23.0% -0.3%
US Treasury -0.7% -0.2%
FTSE EPRA 24.1% 4.4%
PGF 6.5% 0.9%
AGF -0.5% 0.0%
Real Estate 21.9% 3.6%
US Equity Income n/a 3.0%

– 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.
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– 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.

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