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 December 2021

December was a very strong month for risk assets largely as a result of data emanating
from South Africa, and later the UK, suggesting that Omicron carried a significantly lower
risk of serious illness than previous variants. In spite of the positive data, the policy
reaction in a number of countries meant that there were still headwinds for many service
businesses to contend with, an all too familiar tale. Growth projections were revised
down heavily whilst inflation concerns remained, flattening the yield curve once again as
more rate hikes were priced into the front end of the curve as longer term inflation
expectations came down at longer maturities.

Inflation remains the key concern for policymakers and investors alike. In December, the
YoY inflation rate in the US hit 7.0% whilst the continued issues with Russian pipelines
deepened Europe’s energy crisis, adding to its own inflation woes.

The Fund returned -0.45% over the month.

The major drivers were the long rates volatility strategies, which suffered as volatility
collapsed due to investors flocking into treasuries after the Omicron variant came to light.
Rates volatility sits at historically low levels, which makes sense given that there has been
a guaranteed buyer in the market for over a decade. However, if central banks are true to
their word and quantitative tightening is on the horizon, the guaranteed buyer will
disappear at the same time as huge infrastructure spending requires financing through
further Treasury issuance.

The Fund’s more defensive strategies were also a drag during the month.

2021 was another stellar year for risk assets; the MSCI World Index returned a net 21.8%,
and has annualised at 20% over the past two years, in spite of a global pandemic.

The Fund returned -0.9% over the year, and is up 1.1% over the past two years.

It is looking possible that the Omicron variant may bring about an end to the pandemic in
its restrictive sense; its sheer infectiousness means that it is crowding out other more
dangerous variants. Countries such as Australia, New Zealand and China which, likely to
their overall detriment, have managed to largely keep omicron out, must decide when, not
if, they accept the inevitable. The world is going to get omicron, it is unavoidable.

Whilst clearly good news from a human standpoint, what it would mean for markets is
much more uncertain; the incredible rise in both bonds and equities seen since the
pandemic has, without question, been driven largely by the incredible support offered by
central banks around the world. One should remember that, immediately before the
pandemic, central banks had begun to tighten, or to normalise policy, having already been
incredibly accommodative in the post-GFC era.

If Omicron truly does signify the end of a restrictive pandemic that requires support,
there is much more to unwind now than there was then, and much further for parts of the
market to potentially fall.

Central banks have managed to keep the show on the road remarkably well, largely down
to the ability to keep rates floored and liquidity high. This is why inflation is the key issue;
if secular inflation removes the central banks’ ability to keep the current liquidity cycle in
perpetual motion then investors should prepare for extreme volatility.

The pandemic has been incredibly good for risk assets, it must stand to reason that there is at least a chance that its end may not be.

Total Return 2021 Dec
UK 100 18.4% 4.8%
US 500 28.2% 4.5%
Europe 50 23.3% 5.8%
Japan 225 6.3% 3.6%
Hong Kong 50 -11.9% -0.3%
US 2000 14.8% 2.2%
Swiss 30 23.7% 5.9%
BCOM 27.1% 3.5%
US Treasury -1.5% -0.3%
FTSE EPRA 28.3% 3.8%
PGF 7.7% 2.0%
AGF -0.9% -0.5%
Real Estate 24.1% 3.3%
US Equity Income n/a 4.5%

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."