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 2022

Equity and bond markets once again sold off simultaneously in February. First, concerns around inflation and the potential need for more rate hikes slowing future growth continued, before the potential and then realised Russian invasion of Ukraine dominated sentiment. Global equities, led by Europe, suffered significant falls, leaving most down fairly heavily for the year. The exception was in the UK, where heavy energy exposure meant that the index was reasonably insulated. The Bloomberg Commodity Index itself was up 6.2% on the month, leaving it up 15.5% YTD.

The Fund returned -1.8% over the month.

The Fund, by design, is diversified across geographies, and it has been this geographical diversification that has caused some underperformance this year as US and European markets have underperformed their UK counterpart. It is also diversified amongst market cap weighted and equal weighted indices which, in the case of the UK, has seen the equal weight version of the index underperform the market cap weighted version by 6.7% YTD. For those avid readers of the factsheet, the split between equally weighted and market cap weighted indices can be found on page 2. Over the long term, as with all equity or equity-linked investing, this diversification means that the Fund is not as exposed to severe underperformance in a single index at maturity.

As investors will be aware, the protection built into the Fund is predicated on how conservatively the final barriers that stipulate protection of capital and capital growth are set. No investment in the Fund can be incepted that does not allow for falls of more than 30% over a six year period before they would not pay their capital growth in full and return original capital invested. Just how conservatively these barriers are set can be seen by the fact that as at the end of February the average level of protection against any capital loss at maturity sits at 34.4%, and for full capital growth at 32.3%. The average time until that final barrier is observed is over 5 years away, meaning the Fund has significant long term protection at these levels.

The Fund also has an overlay of uncorrelated protection in order to take some sting out of the tail of the investments in severely stressed markets, as they did during the March 2020 crisis, including ¾ of the Fund being covered by long CDS positions. Credit markets have been reasonably well behave to this point, but any threat to the global economy emanating from the current situation, given where inflation and rates are, is likely to cause significant stress. The overlay added 0.2% in February.

The Fund’s long term target return of an annual 6-7% will be achieved if its investments mature above their final barriers, to which they are still afforded significant protection and time. Given that significant protection, the Fund’s GRY (in order to catch up to the 6-7%) looks ever more attractive:

Total Return 2022 Feb
UK 100 1.4% 0.3%
US 500 -8.1% -3.0%
Europe 50 -8.5% -5.9%
Japan 225 -7.8% -1.7%
Hong Kong 50 -2.9% -4.6%
US 2000 -8.7% 1.1%
Swiss 30 -6.9% -1.9%
BCOM 15.5% 6.2%
US Treasury -3.3% -1.1%
Euro Property -6.4% -2.8%
PGF -3.0% -1.8%
AGF -0.2% 0.1%
Real Estate -8.2% -2.5%
US Equity Income -8.0% -3.1%

The Fund remains positioned to outperform equity in multiple market scenarios, and importantly has the ability to produce significant positive returns even if there is significant further deterioration in equity levels from here. Given the uncertain outlook, a Fund with that ability has rarely looked more attractive.


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."