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 – 30th November 2022

There was a month of respite for traditional asset classes across the board in November as US inflation numbers came in below consensus.

The beginning of the month was more uncertain as central banks continued on their hawkish trajectory, with further 75bps rate rises on both sides of The Atlantic. However, sentiment quickly shifted as US inflation came in at 7.7% YoY, giving investors hope that the worst of inflation and therefore tighter conditions were behind them.

Adding to the buoyant mood were developments in China, where unrest seems to have softened Xi Jinping’s stance on zero-covid policy. The problem China has is the lack of vaccinated peoples in the country, particularly the old, and the efficacy of the vaccines that were used. The problem the world may have is the potential for a meaningful Chinese reopening to unleash a further wave of demand and put on hold or even reverse any hopes of a pivot.

The Fund posted a return of -0.2% for the month.

The Diversifier portfolio returned 0.1% over the month.

The commodity curve and congestion strategies were positive contributors, benefitting from the weakness seen in oil as curves began to normalise somewhat at the front end. However, the Fund’s gold intraday strategy suffered on the continued non-normal gold price moves seen of European hours outperforming Asian hours.

As one might expect, given the moves seen in rates post-CPI print, the rates volatility strategies were slightly down, whilst the 2s10s steepener was flat. The yield curve inversion now sits at levels not seen since the 1980s and the eventual reversion will be to the benefit of the position.

The Fund’s FX strategies, which had been negatively impacted by the dollar’s strength, particularly against the yen, posted gains and are likely to be the beneficiaries of any continued mean reversion in FX markets.

The Protection portfolio was the biggest negative contributor at -0.3% as credit spreads narrowed on Fed pivot hopes.

The Income portfolio added 0.1%. The Fund is fully collateralised with short-dated bonds, and given where rates have moved this year, an annualised return of over 3.5% is now achievable from this part of the portfolio that previously yielded very little.

The market seems to have taken the latest inflation numbers from the US as the sign needed to expect inflation to fall from here and allow the Fed to pivot earlier than previously expected. As is the norm now, everything must be binary; inflation is either cyclical or structural. The reality is more likely that there are both cyclical and structural elements at play, and it is perhaps telling that it was the more cyclical elements of finished goods and autos that drove the number lower last month. Stickier components like shelter and food remain elevated and the structural implications of deglobalisation are likely here to stay.

Whilst inflation falling back to levels where most market participants are still anchored would be ideal, the prospect that central banks may struggle to achieve this without doing significantly more to kill demand is a real one, and one investors must keep taking seriously, irrespective of what December’s CPI print brings. There is a lot further to go before any victory over inflation can be celebrated.

Total Return 2022 November
UK 100 6.3% 7.8%
US 500 -13.5% 4.7%
Europe 50 -5.5% 9.9%
Japan 225 -1.3% 3.2%
Hong Kong 50 -17.9% 25.3%
US 2000 -14.9% 2.3%
Swiss 30 -11.1% 3.3%
BCOM 17.0% 3.8%
US Treasury -12.6% 3.2%
Euro Property -35.7% 3.1%
PGF -5.3% 4.8%
AGF 0.6% -0.2%
Real Estate -33.1% 2.1%
US Equity Income -13.4% 4.8%

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."