As the summer progressed, the Federal Reserve (FED) made significant strides toward its inflation targets, creating a favorable environment for easing. This was eagerly anticipated by both Fed Funds Futures and equity markets. Despite a typical pullback in August and early September due to concerns about a potential economic slowdown, the FED’s 50 basis point cut, and Chair Powell’s press conference, reinforced a dovish outlook. This reassured investors, enabling the S&P 500 (SPX) to recover past early July highs, ultimately closing the quarter up 5.89%. Despite maintaining a defensive posture, the Fund (JDIEX) posted a solid 5.12% return for the period. Notably, the VIX experienced substantial volatility, starting the quarter at 13, peaking at nearly 38 amid recession fears in early August, and closing around 17—35% higher than where it began. This volatility provided us with valuable opportunities for monetization, allowing us to enhance our defensive options structure while positioning for upside performance.
Economic indicators remain mixed, leaving uncertainty regarding a potential slowdown. However, the market is anticipating an additional 200 basis points of easing by the end of 2025, suggesting confidence that inflation is under control despite CPI remaining above target. Chair Powell’s shift toward policy normalization rather than strict inflation targeting is notable. Still, the market’s forecast of rates dropping to sub-3% by the end of 2025 seems ambitious, especially given the current positive GDP growth and SPX earnings. With the SPX up 22.08% year-to-date and forward P/Es at 22.3 (source Bloomberg), one might question how much further stimulus is necessary. It’s worth noting that credit spreads on high-yield bonds are at yearly lows, yet the VIX remains elevated, indicating underlying uncertainty despite robust equity performance. Our Fund has delivered a 15.06% return this year (68% participation) with less than 40% of the SPX’s volatility, allowing for effective risk management and downside protection for our investors.
While the supportive Federal Reserve has contributed to solid earnings, we remain cautious regarding election and geopolitical uncertainties that could introduce negative surprises. As highlighted last quarter, risks stemming from over-concentration persist, with smaller and mid-cap stocks still lagging. A more dovish FED could support finance-dependent sectors, but current cyclical signals remain neutral, underscoring the need for systematic defense. We see complacency in several risk metrics, which could clarify a strong allocation to our Fund. The FED’s focus on yields complicates the typical asset allocation balance between equities and fixed income. Currently, fixed income does not provide the expected negative correlation to equities in times of crisis, creating risks for traditional strategies. If fears of an economic slowdown materialize, credit cycles may worsen, increasing market volatility. We believe our hedged approach positions us well for such scenarios, and the Fund’s ability to decouple from equities while benefiting from rising volatility makes it a robust diversifier in uncertain times. We remain committed to delivering solid risk-adjusted returns for our investors, adapting our strategies as market conditions evolve.
Diversification does not guarantee a profit nor protect against loss in any market.
Source: Morningstar Direct. Performance data quoted above is historical.
Past performance does not guarantee future results and current performance may be lower or higher than the performance data quoted. The investment return and principal value of an investment will fluctuate, so that shares when redeemed may be worth more or less than their original cost. For performance information current to the most recent month-end, please call 888.814.8180 or visit Funds.Easterlyam.com.
Investment Performance (%)
| 9/30/2024 | QTD | YTD | 1-YEAR | 3-YEAR | 5-YEAR | SINCE INCEPTION (8/3/2015) |
|---|---|---|---|---|---|---|
| I Shares | 5.12 | 15.06 | 22.52 | 10.21 | 9.2 | 5.12 |
| A Shares w/ load* | 2.96 | 12.58 | 19.75 | 9.24 | 7.67 | 2.96 |
| A Shares w/o load | 5.05 | 14.88 | 22.24 | 9.97 | 8.96 | 5.05 |
| C Shares w/ load* | 3.88 | 13.19 | 20.36 | 9.13 | 8.09 | 3.88 |
| C Shares w/o load | 4.88 | 14.19 | 21.36 | 9.13 | 8.09 | 4.88 |
| R6 Shares | 5.19 | 15.28 | 22.84 | 10.52 | 9.57 | 5.19 |
| S&P 500 TR Index | 5.89 | 22.08 | 36.35 | 11.91 | 15.98 | 5.89 |
*5.75% is the maximum sales charge on purchase of A Shares. Class C charges a maximum contingent deferred sales charge of 1.00% if you redeem Class C shares within 18-months year after purchase. Class C shares convert to Class A shares after 8 years from the last day of the month in which the shares were purchased.
The past performance shown here reflects reinvested distributions and the beneficial effect of any expense reductions and does not guarantee future results. Returns for periods less than one year are cumulative, and results for other share classes will vary. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance cited. Investors cannot invest directly into an index. All classes of shares may not be available to all investors or through all distribution channels. For the most recent month-end performance, visit Funds.Easterlyam.com or call 888-814-8180.
The Fund’s investment manager has contractually agreed to waive all or a portion of its advisory fee and/or pay expenses of the Fund to limit total annual Fund operating expenses (excluding front-end and contingent deferred sales loads, leverage, interest and tax expenses, dividends and interest on short positions, brokerage commissions, expenses incurred in connection with any merger, reorganization or liquidation, extraordinary or non-routine expenses and the indirect costs of investing in other investment companies) until at least December 31, 2024 for I, A, C and R6 Shares to ensure that net annual operating expenses will not exceed 1.44%, 1.69%, 2.44% and 1.18%, respectively. The fee waiver and/or expense reimbursement are subject to possible recoupment from the Fund in future years. For more information, please refer to the Fund’s summary prospectus and prospectus. Performance shown would have been lower without the fee waiver and/or expense reimbursement effect.
The Fund’s investment adviser has contractually agreed to reduce and/or absorb expenses until at least December 31, 2024 for I, A, C and R6 Shares, to ensure that net annual operating expenses of the Fund (excluding front-end and contingent deferred sales loads, leverage, interest and tax expenses, dividends and interest on short positions, brokerage commissions, expenses incurred in connection with any merger, reorganization or liquidation, extraordinary or non-routine expenses and the indirect costs of investing in other investment companies) will not exceed 1.25%, 1.50%, 2.25% and 0.99% respectively, subject to possible recoupment from the Fund in future years. For more information, please refer to the Fund’s summary prospectus and prospectus.
Returns greater than one year are annualized. Returns for the Fund’s first year are since fund inception. Calendar year returns do not reflect the maximum sales charge; otherwise, returns would vary.
Glossary
VIX: The Cboe Volatility Index (VIX) is a real-time index that represents the market’s expectations for the relative strength of near- term price changes of the S&P 500 index (SPX). Because it is derived from the prices of SPX index options with near-term expiration dates, it generates a 30-day forward projection of volatility.
S&P 500 Index: An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.
Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund. This and other information is contained in the Fund’s prospectus, which can be obtained by calling 888-814-8180 and should be read carefully before investing. Additional Fund literature may be obtained by visiting Funds.EasterlyAM.com.
Risks & Disclosures
IMPORTANT FUND RISK
Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund. This and other important information about the Fund is contained in the prospectus which should be read carefully before investing, and can be obtained by visiting Funds.Easterlyam.com or by calling 888-814-8180.
There is no assurance that the Fund will achieve its investment objective. The Fund share price will fluctuate with changes in the market value of its Fund investments. Mutual Funds involve risk including possible loss of principal. Leveraging investments, by purchasing securities with borrowed money, is a speculative technique that increases investment risk while increasing investment opportunity. Derivatives may be volatile and some derivatives have the potential for loss that is greater than the Fund’s initial investment. If the Fund sells a put option, there is risk that the Fund may be required to buy the underlying investment at a disadvantageous price. If the Fund sells a call option, there is risk that the Fund may be required to sell the underlying investment at a disadvantageous price. Shares of ETF share many of the same risks as direct investments in common stocks or bonds. Because a large percentage of the Fund’s assets may be invested in a limited number of issuers, a change in the value of one or a few issuers’ securities will affect the value of the Fund more than would occur in a diversified fund.
There is no assurance that the Fund will achieve its investment objective. A CLO is a trust typically collateralized by a pool of loans. A CBO is a trust which is often backed by a diversified pool of high risk, below investment grade fixed income securities. A CDO is a trust backed by other types of assets representing obligations of various parties. For CLOs, CBOs and other CDOs, the cash flows from the trust are split into two or more portions, called tranches. MBS and ABS have different risk characteristics than traditional debt securities. Although certain principals of the Sub-Adviser have managed U.S. registered mutual funds, the Sub-Adviser has not previously managed a U.S. registered mutual fund and has only recently registered as an investment adviser with the SEC.
THE OPINIONS STATED HEREIN ARE THAT OF THE AUTHOR AND ARE NOT REPRESENTATIVE OF THE COMPANY. NOTHING WRITTEN IN THIS COMMENTARY SHOULD BE CONSTRUED AS FACT, PREDICTION OF FUTURE PERFORMANCE OR RESULTS, OR A SOLICITATION TO INVEST IN ANY SECURITY.
Past performance is not a guarantee nor a reliable indicator of future results. As with any investment, there are risks. There is no assurance that any portfolio will achieve its investment objective. The Easterly Funds are distributed by Easterly Securities LLC, member FINRA, SIPC. Easterly Investment Partners LLC and EAB Investment Group LLC are affiliates of Easterly Securities LLC. Orange Investment Advisers, LLC and Ranger Global Advisers, LLC are not affiliated with Easterly Securities LLC.
Easterly Investment Partners LLC serves as the investment adviser to the Easterly family of mutual funds and related portfolios. Easterly Investment Partners LLC is an SEC registered investment adviser; see Easterly Investment Partners’ Form ADV at www.sec.gov. Registration does not imply and should not be interpreted to imply any particular level of skill or expertise.
Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund. This and other important information about the Fund is contained in the prospectus which should be read carefully before investing, and can be obtained by visiting funds.easterlyam.com or by calling 888-814-8180.
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