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 June 2023

The first half of 2023, whilst being
punctuated by a banking crisis and the associated volatility (sic) that comes
with one, has been an incredibly rewarding time for risk assets.

After the struggles of 2022, equities in
general have enjoyed a period of supernormal returns, buoyed by central banks
finding ways to loosen policy whilst rates remain elevated; ‘not QE, QE’,
whilst in Japan there has not yet been any tightening at all; ‘don’t fight the
Fed’ et al. As one would expect, as conditions loosened and the lagged effects
of higher rates are yet to be truly felt, there has also been a significant
rotation back to growth from value which can be seen clearly by the relative
fortunes of the value-heavy UK 100 against its growth-dominated counterpart in
the US this year.

Once more the outlier in global equities
was China / Hong Kong, where idiosyncratic issues continue to temper sentiment
as the initial optimism over the country’s reopening fades.

In a quarter of continued positive
performance for most of the Fund’s underlying indices, the Fund posted a
positive return of 2.3%.

Given the moves down in the underlying
indices to which the Fund is exposed during 2022, the number of investments
maturing early had reduced significantly. But, as the recovery has gathered
pace, those indices have begun to satisfy their early barriers once more.
During the quarter, 10 investments observed; the first eight had at least one
index below the required hurdle to mature early, before the two investments
that observed later in June called.  

As a reminder to investors, every
investment in the Fund must have its final barriers both to protect capital and
achieve full capital growth in the 60s at most; in other words, for every
investment in the Fund, the underlying indices can fall more than 30% (often
closer to 40% and in some cases even 50%) over a
six year period before not paying full returns or
risking capital. Both investments that called, did so at the end of the second
year of their potential

life, paying 14% (2 x 7%) and 12.6% (2 x 6.3%) respectively. They were replaced
with new investments with a potential return of 11.1% and 10.1% with lower
final barriers, illustrating just how attractive the pricing environment is
currently. With markets having enjoyed such a stellar run, barring a
significant fall in the very near future, there are a significant number of
investments set to mature early that have been offering returns almost half of
what can be achieved for commensurate or even lower risk today.

It is the current high rate environment which is mostly responsible
for the attractiveness in terms, a far cry from the middle of 2021, when the
investments that recently called were struck. At that time, the two main
pricing inputs of rates and volatility were very low, meaning that unless one
was willing to assume greater risk, one had to suffer a period of
lower than average returns in order to not change the risk
profile of the Fund. This Fund will not deviate from its strict guidelines as
to its final barriers, irrespective of environment. The current environment has
meant that the Fund can maintain its already attractive GRY, whilst also
lowering the average barrier levels:

Total Return 2023 Q2
UK 100 3.2% -0.3%
US 500 16.6% 8.6%
Europe 50 18.4% 3.7%
Japan 225 28.4% 18.5%
Hong Kong 50 -2.8% -6.1%
US 2000 8.1% 5.2%
Swiss 30 8.3% 3.0%
BCOM -10.0% -3.8%
US Treasury 2.1% -0.8%
Euro Property -7.6% -3.2%
PGF 7.4% 2.3%
AGF -1.9% -2.2%
DGF 1.7% -0.3%
US Equity Income 16.2% 8.5%


– 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.

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