The Federal Reserve (the Fed) was able to deliver its much-telegraphed pivot to an easing cycle at the September Federal Open Market Committee (FOMC) meeting after having left Fed Funds unchanged for almost 14 months. However, Fed Chairman Powell surprised many investors by lowering Fed Funds by 50 basis points (bps) in what he described as a “recalibration” accompanied by hawkish language.
Justification for the outsized rate cut included a disappointing July nonfarm payroll number released on August 2, 2024, accompanied by a rise in unemployment to 4.3% that breached the “Sahm Rule,” which is an early indicator of recession triggered when the three-month moving average of the national unemployment rate rises by 0.5 percentage points or more above its lowest level in the previous 12 months. Then on August 21, 2024, a Bureau of Labor Statistics (BLS) revision that lowered the number of jobs created over the 12 months ending in March of 2024 by 30% indicated further weakness in the labor market. At the same time, the consumer price index (CPI) declining to 2.5% YOY in August combined with Core PCE holding at 2.5% convinced the Fed that its inflation target of 2% was within sight. Also in early August, the Bank of Japan (BOJ) surprised the market by raising the overnight rate from 0.15% to 0.25%, triggering a sharp drop in JPY/USD (yen appreciation) that subsequently caused a rapid unwind of yen carry trades. An overnight lack of liquidity pushed VIX, the equity volatility index, to its highest level since the COVID-19 pandemic, while the Nikkei 225 index registered its worst loss since 1987, and U.S. indices dropped close to 5% in the overnight session preceding August 5, 2024. After reassurances from the BOJ to help support financial stability, markets quickly recovered and global indices ended up relatively unchanged for the week, although this risk of episode spooked the markets and may have influenced the Fed.
In terms of the success of the classic 60/40 equity/fixed income portfolio, both 2023 and 2024 (so far) have produced polar opposite results from 2022, when 60/40 portfolios posted one of their worst returns in history. The BlackRock 60/40 Target Allocation Fund, for example, has posted a return of 31% from the beginning of 2023 through Q3 2024 after a disappointing -16% return in 2022. Within equities, Q3 was a great quarter for stocks outside of Magnificent 7 as equal-weighted S&P 500 index posted 9.48% return versus 4.69% for the market value-weighted S&P 500 benchmark. Small caps represented by Russell 2000 index benefited from the Fed rate cut and rallied by 8.46% in Q3. Finally, the tech heavy Nasdaq 1000 managed only a 0.92% return for the quarter. Meanwhile, international stocks outperformed their U.S. counterparts on the heels of a massive stimulus package from China. The Hang Seng index with heavy exposure to Chinese companies went parabolic in Q3 with a 22.83% return.
In the fixed income markets, the yield curve rallied and steepened. The two-year Treasury note yield rallied by 111bps versus a 60bps rally for the 10-year, as the much-awaited bull steepener finally normalized the yield curve between two’s and tens (+14bp as of 09/30) after what had been the longest inversion in U.S. history. U.S. Bond mutual funds and ETFs saw $129 billion of inflows in Q3 and $451 billion YTD in 2024, representing about 6% of funds’ AUM. With the money market rates set to decline alongside the Fed’s easing cycle, money has started to seek longer duration offered by fixed income funds. After widening during the equity market volatility of early August, credit spreads finished the quarter at tighter levels despite persistent recessionary fears and geopolitical upheaval in the Middle East. Bloomberg Investment Grade (IG) Corporate index spreads ended the quarter at 88bps, the lowest level since November 2021. Bloomberg Corporate High Yield (HY) index spreads ended the quarter at 259bps. Credit investors are discounting the probabilities of U.S. economy hitting a hard landing, with a “soft” or “no landing” being the prevalent view. This sanguine economic sentiment combined with a persistent yield grab continues to push down HY all-in yields to 7.29% despite 4.8% annualized default rate in Q2 (S&P Global Ratings). While projected to improve to 3.75% over the next 12 months, assuming a 50% default severity, all-in “loss-adjusted” yields for the HY index would be only 5.42%.
Fund Performance
The Easterly Income Opportunities Fund’s I-Share (JSVIX, the Fund) posted a 4.67% net return in Q3 underperforming Bloomberg Aggregate Index by 0.53%. Q3 underperformance is attributed to lower duration of JSVIX relative to Bloomberg Aggregate (2.6 yrs vs 6.2 yrs) as interest rates rallied between 60 and 100bps. JSVIX net yield advantage of over 300bps and spread tightening across all structured credit sectors mitigated much of the adverse duration effect in Q2.
Representative share class (Class I). All classes of shares may not be available to all investors or through all distribution channels.
Fund Performance – 9/30/2024 (%)
| QTD | YTD | 1-YEAR | 3-YEAR | 5-YEAR | Since Inception* | |
|---|---|---|---|---|---|---|
| I Shares | 4.67 | 7.53 | 10.38 | 2.20 | 5.27 | 5.56 |
| A Shares w/ load** | 2.61 | 5.21 | 7.83 | 1.24 | 3.75 | 4.61 |
| C Shares w/ load** | 3.41 | 5.74 | 8.28 | 1.18 | 4.23 | 4.63 |
| R6 Shares | 4.85 | 7.97 | 11.00 | 2.64 | 5.71 | 5.98 |
| Bloomberg U.S. Aggregate Bond Index | 5.20 | 4.45 | 11.57 | -1.39 | 0.33 | 1.78 |
*Fund Inception date: August 21, 2018
**2% 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 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.
Source: Morningstar Direct. Performance data quoted above is historical.
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 March 31, 2025 for I, A, C and R6 Shares to ensure that net annual operating expenses will not exceed 1.59%, 1.84%, 2.59%, and 1.00%, 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 March 31, 2025 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 1.48%, 1.73%, 2.48%, and 0.89%, respectively, subject to possible recoupment from the Fund in future years. For more information, please refer to the Fund’s summary prospectus and prospectus.
The Fund has adopted the performance of the James Alpha Structured Credit Value Portfolio, a series of The Saratoga Advantage Trust (the “Predecessor Portfolio”) as the result of a reorganization of the Predecessor Portfolio into the Fund, which was consummated after the close of business on March 19, 2021 (the “Reorganization”). The returns shown for periods ending on or prior to March 19, 2021 are those of the Class A, Class C, Class I, and Class S shares of the Predecessor Portfolio. Class A, Class C, Class I, and Class S shares of the Predecessor Portfolio were reorganized into Class A, Class C, Class I, and Class R6 shares of the Fund, respectively, after the close of business on March 19, 2021. Class A, Class C, Class I, and Class R6 shares’ returns of the Fund will be different from the returns of the Predecessor Portfolio as they have different expenses.
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. There can be no assurance that the Fund will achieve its investment objective.
Sector Performance
Main contributors to the performance in Q3 were our allocations to RMBS (37%), which generated significant unrealized and realized returns, Corporate Structured Notes (12%) which generated sizeable unrealized gains due to 70bps SOFR curve bull steepening and CMBS (29.5%) that had significant carry and unrealized gains due to spread tightening of Conduit mezzanine and senior Single Asset Single Borrower (SASB) positions. The portfolio also benefited from an overweight to 3-year part of the curve versus the long end as the 3 Treasury yield rallied 40bps more than the 10-year.
| Sector | % Port | % Attribution |
|---|---|---|
| RMBS | 37.30 | 2.05 |
| CMBS | 29.50 | 1.01 |
| ABS | 7.40 | 0.29 |
| CLO/CDO | 4.60 | 0.11 |
| CORP | 12.20 | 1.20 |
| GOVT | 1.10 | 0.09 |
| Cash | 9.00 | 0.05 |
| Hedge | -1.10 | 0.25 |
| Expense | 0.00 | -0.38 |
| Total | 100.00% | 4.67% |
Residential Mortgage Backed Securities (RMBS)
Non-Agency RMBS made up approximately 37% of the portfolio over Q3 and produced a total return of 5.49%, contributing 205bps to portfolio return for the quarter. RMBS fundamentals remain strong with home prices continuing their ascent, despite very low affordability. Supply limitations remain the primary factor behind low housing affordability. According to Goldman Sachs (GS) research, U.S. homeowner vacancy rate remains close to historical lows. While inventory of existing homes recovered from the January 2022 low of 1.35 million are expected to reach 1.5 million, it’s still far below the 40-year average of 2.3 million. Also, according to GS, the total household formation has outpaced the housing starts by 235,000 units since March 2020.
Agency MBS had a strong quarter in Q3 with nominal current coupon 30-year MBS spreads tightening by 20bps stop 128bps while Bloomberg MBS index OAS tightened by 6p to 42bps as rate volatility declined. Non-Agency RMBS sectors also fared well with spreads tightening across most cohorts. Non-QM continues to dominate Non-Agency RMBS issuance with $33 billion issued through Q3, an amount higher than the collective of 2023. Lower interest rates should result in even higher issuance volumes going forward. Non-QM spreads were largely unchanged in Q3 with AAAs closing the quarter at 135bps, BBBs at 210bps and BBs at 330bp. In past rate rallies, Non-Agency spreads often widened at lower yields, but given the relative value of Non-Agencies relative to Corporates, spreads remained unchanged to slightly tighter. Discount coupons from 2020 and 2021 vintages outperformed new on-the-run 2023-2024 Non-QM across the credit stack as investors anticipated faster prepayment scenarios from the current rate rally.
Prime 2.0 and Agency-eligible Investor issuance has totaled $22 billion through Q3, almost three times the amount in the first three quarters of 2023, as execution in Non-Agency securitization continues to be more efficient than Agency execution. Prime 2.0 spreads relative to Agency TBAs (UMBS) tightened in Q3 with on-the-run 5.5 Senior Passthroughs trading 1 point back of TBAs, Mezzanine Passthroughs trading 1.5 points back of Agency TBAs and LCF (last cashflow) off 5.5% Prime Jumbo collateral tightening 20bps to a spread of 145bps. The Reperforming and Non-Performing Loan (RPL/NPL) market also had robust new issuance of $16.6 billion through Q3, per JP Morgan (JPM) research. RPL front-pay spreads tightened by 20-25bps in Q3 with the front pay tranche from the newest deal issued by Chase pricing at 135bps spread, 25bps tighter than the same tranche from their previous deal, which was issued at 160bps spread.
The Government-Sponsored Enterprise Credit Risk Transfer (GSE CRT) market has seen $7.6 billion of net new issue in 2024, which is somewhat suppressed by programmatic tenders from Fannie Mae and Freddie Mac that have seen over 95% of investor participation. The latest CAS 2024-R06 deal priced in late September 2024 with BBB-rated M2s at a 160 discount margin (dm) and BB-rated B1s at 205bps. On-the-run CRT spreads continue to grind tighter due to both the technicals of limited supply mentioned above and improving credit fundamentals driven by a robust residential housing market. Additionally, regular rating agency upgrades of non-IG CRT to investment grade due to their continuous de-levering helps increase their liquidity and valuation. The closed-end second lien/HELOC market exploded in 2024 with $10.5 billion of issuance through Q3, double the issuance amount of the full year in 2023. Given the high build-up in home equity, with the average mortgage holder having $315,000 of equity, and a very low ability to refinance of outstanding first lien mortgages at current high rates, an increasing number of borrowers are resorting to second lien mortgages and HELOCs for equity extraction. Spreads on closed-end second lien paper are closely tracking Non-QM spreads with on-the-run senior AAA tranches clearing at spreads of 150bps and BBB subordinate bonds at 235bps.
Q3 saw strong investor demand for less liquid esoteric RMBS sectors such as Private-label Reverse RMBS. Spreads on HECM buy-out deals tightened by 30bps to 200bps. on senior and subordinate tranches as investors chased incremental yields. Ocwen’s most recent HECM buy-out deal priced at aggressive levels compared to their previous deals with AAA front-pay at 140bps spread, and BBBs at 460bps with spreads tightening on the follow. Legacy RMBS also saw stronger investor interest with several all-or-none bid-lists trading to large money managers at aggressive levels. Investment-grade subprime or Prime/Alt-A floaters ended the quarter in the high hundreds dm while non-IG Subprime Floaters have been trading at dms of 250bps.
Commercial Mortgage Backed Securities (CMBS)
CMBS accounted for about 29.5% of portfolio capital over Q3. The CMBS position posted a return of 3.41% in the Q2, contributing 101bps to overall portfolio total return. The CMBS market continued its year-long trend in Q3 of gradually deteriorating fundamentals for certain property types combined with incrementally tighter spreads. The beleaguered Office segment saw additional price declines according to Real Capital Analytics Commercial Property Price Indices (RCA CPPI) with August levels down 54% from the Q1 2022 peak. September saw another uptick in conduit delinquencies with 30+ delinquencies rising to 5.7%. Office delinquencies are now at 8.4% while Lodging is not too far behind at 6.2%. According to Morgan Stanley research, 78% of office loans scheduled to mature in the month of September 2024 remain outstanding while retail loans that failed to mature on schedule in September stood at 43%. The Q3 interest rate decline has yet to make a big impact on the refinancibility of many large office loans. However, there have been some green shoots in Q3 as CMBS investors were encouraged by the pay-off of two of their properties.
Credit curve flattening continued in Q3 in CMBS Conduit market. On-the-run AAA LCF tranches saw 10bps of spread tightening to 95bps while on-the-run BBB- tranches ended Q3 80bps tighter at 450bps. With A-rated Conduits at around 250bps, we expect the spread differential between As and BBBs to compress. Investors bid up recent well-underwritten deals that were originated at higher rates, as well as 2019-2021 vintage Conduit subordinate tranches from deals with low office exposure as investors assigned lower probabilities to extension scenarios due to declining interest rates. Similar hunger for yield in the post-Fed-rate-cut regime was observed in seasoned Conduit mezzanine tranches (2013 -2016) that saw 2-4% price appreciation as they are priced to a more sanguine scenario. It must be noted that many of these seasoned Conduit mezzanine tranches were trading to distressed scenarios and a latent emergence of several distressed CMBS/CRE funds has served as a major catalyst to push prices on these bonds higher. Still, a lack of favorable maturity resolutions and a sharp decline in most recent appraisals kept many seasoned Conduit mezzanine bonds trading at double digit nominal yields to maturity (not adjusted for maturity extensions). Finally, dealers have recently shown a willingness to position CMBS, adding a decent amount of investment grade Conduit and SASB paper to their inventory in Q3, further adding to demand.
Private label CMBS issuance reached $75.5 billion through the end of Q3, a massive 142% increase over 2023 issuance. Most of this new issuance has been concentrated in SASB market with $45.9 billion issued. Despite this inflow of new supply, SASB spreads were largely unchanged in Q3. New issue Multifamily and Hotel AAA priced at 150-160dm, SASB AAA Retail deals cleared at 170dm, while well underwritten office deals sold in the high hundreds with general SASB spreads approaching those in Q1 2022. At the other end of the spectrum, seasoned SASB deals backed by Office collateral suffered significant appraisal reductions due to a drop in occupancy levels, lower debt yields and DSCRs, causing them to see lower prices relative to May peaks. There is an element of investor fatigue and disenchantment with distressed SASB deals as 6 to 7 AAA SASB are set to follow in the footsteps of 1740 Broadway (BBWAY 2015-1740) in suffering principal writedowns at the AAA level. The most vulnerable Office SASB deals are those backed by leasehold properties where the borrower is facing an escalating ground rent schedule (e.g. BBCMS 2019-BWAY).
The Commercial Real Estate Collateralized Loan Obligations (CRE CLO) market saw an uptick in demand in September as it became the last CMBS sector to tighten with multifamily CRE CLOs clearing at 160dm despite deteriorating fundamentals and negative headlines around some sponsors. Small Balance Commercial (SBC) spreads tightened in Q3 as collateral performance remains strong and investors’ demand for incremental yield continues to drive spreads tighter. The latest Velocity deal (VCC 2024-5) saw AAA front-pay tighter by 15bps to 180bps while BBBs were tighter by 30bps to 310bps.
Asset Backed Securities (ABS)
During Q3, ABS accounted for just over 7% of portfolio capital. The ABS holdings returned 3.90%, contributing 29bps to portfolio total return. ABS issuance reached $262 billion at the end of Q3, surpassing the full year 2023 issuance. 2024 issuance is already a record for ABS with one quarter still to come. Auto ABS issuance as expected is leading charge with $139 billion (Prime, Subprime, Lease, and Floorplan according to JPM) but esoteric ABS issuance has been a pleasant surprise for ABS investors with $54 billion issued through Q3. The top four categories in Esoteric ABS are Franchise, Device Payments, Data Centers, and Aircraft. ABS issuers clearly have responded to seemingly insatiable investor demand for short duration paper.
As mentioned above, net inflows into fixed income funds, including structured credit-focused ETFs, have been very strong. As a result, according to JPM asset managers have accounted for 69% of net demand for ABS in 2024 with insurance companies a distant second at 12%.
ABS spreads have retraced small widening that occurred in early August and have ended Q3 at multi-year tights. AAA Prime Auto ABS has traded in a narrow range all year, ending Q3 at 55bps. Subprime Auto ABS spreads tightened with AAAs at 65bps and BBBs at 165bps at the end of the quarter. Subprime Auto ABS credit performance has stabilized with annualized losses on Fitch Subprime Auto ABS index declining to 8% in August after reaching 9.5% in Q4 2023. With used car prices declining by 5.3% according to Manheim Used Car Value index, the recovery rate on subprime auto loans has declined to 35% in Q3, well below the post-GFC average. However, with delinquencies stabilizing after a spike at the end of 2023 and unemployment rates still low, the credit performance of subprime auto ABS deals remains robust. Unsecured consumer space remained well bid with AAA seniors spreads tightening to 100bps while BBBs have been trading in 220-240bps range. MPL (market placed lending)/Unsecured credit has marginally improved after both delinquencies and defaults reached record highs in the beginning of 2024. 30+ delinquencies declined by 1% to 5.28% in August while conditional default rates (CDR) dropped to 14.94% from 17% earlier in the year.
Corporate Structured Notes (CSN)
The CSN position made up about 12% of the portfolio in Q3, posting a total return of 9.81%, contributing 120bps to the portfolio. CMS Spread Floaters with coupons linked to the difference between 30 and 2-year SOFR rates had a trifecta of positive news in Q3. First and foremost, the SOFR curve steepened by 70bps from 2s to 30s and brought the inversion between 2s and 30s down to 14bps. Hence, the longest yield curve inversion is about to end with coupon payments resuming when the spread between 30 and two-year CMS turns positive. Also supporting prices were the secondary effects of lower interest rates and tighter corporate spreads. These positive developments caused a rush of demand into CSN. The best performers for the quarter were the high multiplier CMS floaters. 10x multiplier, 2030 through 2037 maturity, Citi, Morgan Stanley, and UBS CMS spread floaters saw 10-12% price appreciation in Q3. Lower multiple 4x and 5x Morgan Stanley 2034 maturity bonds saw 7-8% price appreciation with prices moving to high 60s amidst limited supply.
Other Sectors
Collateralized Loan Obligations/Collateralized Debt Obligations (CLO/CDO) accounted for just under 5% of portfolio capital during Q3, posting a total return of 2.40% which contributed 11bps to the overall portfolio. Treasury bonds made up 1.1% of portfolio capital, returning 8.39%, contributing 9bps of portfolio return. Hedges, including Treasury futures for duration and HY CDX to reduce portfolio spread duration, contributed 25bps of total return for the quarter. Cash accounted for around 9% of portfolio assets in Q2 and contributed 5bps of return. Fund expenses reduced portfolio gross return by 38bps.
Portfolio Outlook
We expect the long end of the curve to be rangebound over the next three to four quarters. Exploding federal debt will counterbalance a potential weakening in the economy. With federal deficits currently 5-6% of GDP and no political will to cut spending by either party, there is no end in sight to debt growth. In fact, at current rates, interest on the debt now exceeds defense spending. It is always a possibility that the Fed will attempt to inflate its way out of this debt by lowering short-term interest rates and engaging in quasi-QE as they have done in the past. These inflationary measures will cause long-term rates to push higher, while the current easing cycle will cause the yield curve to continue to steepen. Our thesis of higher long-term rates is supported by the actual performance of the 10-year Treasury note over the past two calendar years. Despite widespread bullishness since the end of 2022, when the 10-year Treasury yield closed the year at 3.88%, it has spent 64% of the time since 2022 at higher yields, averaging 4.05% over that period. In terms of credit spreads, we expect the Fund to fare well relative to Corporates based on where their spreads are currently in relation to their respective ranges over the past 10 years. Specifically, Non-Agency RMBS, CMBS, and ABS spreads are currently above the 50th percentile (i.e. wide) while the spreads of both IG and HY Corporates are in the bottom decile (i.e. tight). While spreads of the Fund sectors have tightened in 2024, we believe they still look attractive relative to the 2018-2019 pre-pandemic period.
SOURCE: Orange Investment Advisors
Glossary
Bloomberg US Aggregate Bond Index: A broad bond index covering most U.S. traded bonds and some foreign bonds traded in the U.S. The Index consists of approximately 17,000 bonds.
CDO: A bundle of loans ranked below investment grade with the investor receiving the debt payments form these underlying loans.
CDX High Yield (HY): High Yield CDS (credit default swap) index focused on North America.
CLO: Collateralized Loan Obligation is a single security backed by a pool of debt. The debt is often corporate loans with low credit ratings or loans taken out by private equity firms to conduct leveraged buyouts.
CMBS: Commercial mortgage-backed securities (CMBS) are fixed-income investment products that are backed by mortgages on commercial properties rather than residential real estate.
CMS: Also known as constant maturity swap floaters, are a variation of an interest rate swap in which one side is fixed or reset periodically against the rate of a floating rate reference index and the constant maturity side is reset each period relative to a fixed maturity instrument like a treasury note.
Conduit: Are commercial real estate loans that are pooled together with similar commercial mortgages.
Credit Spread: The difference between the yield on two debt instruments of the same maturity but different credit quality. The spread is measured in basis points, 100 basis points in 1%.
LSTA Leveraged Loan Index: Is a daily tradable index for the U.S. market that tracks the performance of the largest institutional leveraged loans, which are loans to companies with high debt or low credit ratings.
Non-QM: A non-qualified mortgage is a home loan designed to help homebuyers who cannot meet the strict criteria of a qualifying mortgage.
OAS: Option adjusted spread is used for bonds with embedded options. It represents the spread between the risk-free rate of return and a fixed income security after adjusting for or removing the bond’s option.
RMBS: A type of bond secured by a pool of residential mortgages. Typically, there are 100’s of mortgages grouped together in one bond.
Small Balance Commercial (SBC): Small balance commercial loans are financial products specifically designed for small businesses. Small balance commercial loans are characterized by their low loan amounts, which typically range from $50,000 to $500,000. They are designed to provide accessible funding options for businesses that may not qualify for larger loans or that have limited collateral.
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.
Risks & Disclosures
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. Mutual funds involve risk, including possible loss of principal.
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.
The Easterly funds are distributed by Easterly Securities LLC, member FINRA/SIPC. Easterly Investment Partners and Easterly EAB Risk Solutions are affiliates of Easterly Securities LLC. Orange Investment Advisers, LLC, Ranger Global Advisers, LLC and EAB Investment Group are not affiliated with Easterly Securities LLC.
Not FDIC Insured–No Bank Guarantee–May Lose Value.
IMPORTANT FUND RISK
The derivatives that the Fund primarily expects to use include options, futures and swaps. Derivatives may be volatile and some derivatives have the potential for loss that is greater than the Fund’s initial investment. The liquidity of the futures market depends on participants entering into offsetting transactions rather than making or taking delivery. High yield, below investment grade and unrated high risk debt securities (which also may be known as “junk bonds”) may present additional risks because these securities may be less liquid, and therefore more difficult to value accurately and sell at an advantageous price or time, present more credit risk than investment grade bonds and may be subject to greater risk of default. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. There is no guarantee that the investment techniques and risk analysis used by the portfolio managers will produce the desired results. MBS and ABS have different risk characteristics than traditional debt securities. Credit spread risk is the risk that credit spreads (i.e., the difference in yield between securities that is due to differences in their credit quality) may increase when the market believes that bonds generally have a greater risk of default.
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.
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