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Q2 2023 Long/Short Opportunity Fund Commentary

Market Commentary

The Russell 3000 Value Index rose by a modest 0.9% in the first quarter of 2023. Returns by sector reveal more upheaval. A 5% decline in Financials, Health Care and Energy– which together represent over 45% of the Index– was partially offset by a high-teens increase in Communications Services and Information Technology– together just 15% of the Index. Of note, a 78% rise in Meta Platforms (META) contributed 82 bps to the Russell 3000 Value quarterly return, or 86% of the index’s return for the quarter.

Last quarter we suggested that 2023 might feel like a roller coaster ride, and the first 90 days of the year certainly delivered on that prediction. Within a 90-day period we saw a 20% return in the tech-heavy Nasdaq 100 as well as the largest bank failure since the 2008 financial crisis. As EPS estimates have weakened into rising fears of a recession, the S&P 500’s forward P/E multiple has expanded to 17.8x, one turn above its 25-year average.

Valuations tend to decline against the backdrop of rising rates and above-average inflation. With the Fed Funds rate at a 17-year high of 4.75-5.00% and 2023 headline inflation estimates of 5.7%, investors may want to mind that sinking feeling that sets in as the roller coaster hits its apex.

Financials won the award for ‘best drama’ in the first quarter. Much has been written on the failure of Silicon Valley Bank (SIVB) and Signature Bank of New York (SBNY) and the ongoing support of others via the Fed’s new Bank Term Funding Program. We wonder if, after first quarter results are digested, investors might begin to view this moment as a necessary cleanse after years of excess liquidity and irrational competition that undercut common sense banking practices.

Stock prices have already leaped ahead to the view that lending standards will now be too tight, limiting economic growth and burdening consumers who need to buy cars, homes and borrow for college. We believe that an even more concentrated banking industry will remain willing to serve their customers through the ups and downs of the economic cycle.

Energy underperformed the index in the first quarter, but we see signs of that changing in the back half of 2023. The Chinese economic reopening is gradually.

progressing and is expected to drive growing demand for commodities in the next few quarters. International flights to and from China have snapped back after international borders reopened on January 8, 2023, a positive indicator for the broader recovery ahead. With Saudi Arabia leading OPEC’s conservative production policy and U.S. producers’ tight leash on domestic production, we see a constrained supply environment for the foreseeable future. Part of the supply conversation includes the rising use of alternative energy, but our analysis suggests that consumer demand for alternative energy would need to step up aggressively in the next 3-5 years to avoid a supply shock.

An area of rising interest is diversified industrials. Stocks in this sector were essentially off-limits to valuation-sensitive investors in 2021 and 2022 as buyers reveled in post-COVID project catch up and the promise of infrastructure spending. Rising interest rates and recession concerns have restored some pricing discipline, and more recent panic over tighter lending standards has begun to create interesting buying opportunities.

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. Investors cannot invest directly into an index. For performance information current to the most recent month-end, please call 888-814-8180.


The Easterly Snow Long/Short slightly underperformed the Russell 3000 Value in Q1 by 0.64%. However, the Fund outperformed the Russell 3000 Value Index by 279 basis points on a 1-year basis, returning -3.56% vs. -6.35%.

In the long portfolio, strong stock selection across materials, energy, staples and information technology sectors was offset by our decision not to own META.  By sector, we are overweight consumer discretionary, industrials and materials. We have been consistently underweight utilities, communication services and real estate, where earnings are particularly sensitive to rising interest rates.

Net exposure was 76% at the end of the first quarter. Option premiums on both short puts and short calls rose along with market volatility, giving us the opportunity to add to and reduce exposure in selective names. The Fund maintained its market hedge using a laddered option strategy to provide support at various strike prices and expiries. Additionally, we raised cash in the Fund toward the end of the first quarter as we anticipated continued volatility, especially with the crisis of confidence in the financial sector in March. We have since deployed most of that cash and will continue to look for more opportunities during the first quarter earnings season.

Contributors and Detractors

PVH Corp (PVH) shares boosted performance after reporting a resilient Q4 result, with impressive sales momentum continuing in Asia and Europe. While PVH is not immune to the weakening macro backdrop, the company outperformed in the quarter from several company specific initiatives. The company has a large share repurchase authorization, a clean balance sheet and is trading for ~8.6x our normalized estimate.

Wesco International Inc. (WCC) shares added to performance after issuing a stronger than expected quarterly report along with upbeat guidance. Following a period of accretive M&A, WCC has successfully reached its leverage target and is shifting more capital towards shareholder return. Shares remain attractively valued, trading for less than 8x forward earnings estimates.

Skyworks Solutions (SWKS), a wireless semiconductor designer and manufacturer, rose during the quarter as management addressed investor concerns surrounding bloated inventory levels throughout the wider industry.

Shares of Centene Corp (CNC) underperformed in the quarter as investors grew cautious leading up to the long-awaited expiry of the Public Health Emergency for COVID-19 that inflated Medicaid membership rolls.

CNC has restructured the business to drive meaningful cost savings, and its government-centered business model should be relatively stable and sustainable over time.

Shares of our Financials holdings, including MetLife (MET) and Truist Financial (TFC) underperformed during the quarter as sentiment for the group deteriorated following the collapse of Silicon Valley Bank. We remain positive on the financial sector, favoring banks and insurers with strong fundamentals, diversified business models, and ample liquidity.

Looking Ahead

In our view, significant variability in the quarter-to-quarter winners and losers may continue throughout the year. In these volatile markets, we believe the best ballast is price discipline and a longer-term perspective. Our options strategy allows us to use rising market volatility to buy and sell our core positions at optimal prices. We may see an increased number of option positions in the Fund if current conditions persist.

About Easterly Investment Partners

Easterly Investment Partners (EIP) is the advisor of the Easterly Long/Short Opportunity Fund. EIP is the traditional, fundamental based investment arm of Easterly Asset Management’s multiaffiliate platform. EIP’s current investment line-up spans the entire value equity market cap spectrum. Guided by a consistent contrarian investment philosophy, our value strategies are led by industry veterans and experts that have refined their craft and delivered strong performance through multiple market cycles. As of December 31 2022, EIP had approximately $1.8 billion in AUM.


Long/Short Morningstar Category: Long-short portfolios hold sizeable stakes in both long and short positions in equities and related derivatives. Some funds that fall into this category will shift their exposure to long and short positions depending on their macro-outlook or the opportunities they uncover through bottom-up research. Some funds may simply hedge long stock positions through exchange-traded funds or derivatives. At least 75% of the assets are in equity securities or derivatives.

I Shares0.27%-3.56%18.86%6.88%6.39%5.71%
Morningstar Long/Short Equity Category1.75%-4.00%8.32%3.15%3.68%2.49%
70%/30% Blended Index1.01%-3.31%13.05%5.92%6.76%5.43%
Russell 3000 Value0.91%-6.35%18.13%7.30%9.00%6.86%

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. Investors cannot invest directly into an index. For performance information current to the most recent month-end, please call 888-814-8180.

SOURCE: Morningstar Direct. 70%/30% Blended Index: 70% Russell 3000 Value TR and 30% ICE BofA 3 Month U.S. Treasury Bill Index. Prior to June 29, 2018, the Fund was named the Snow Capital Opportunity Fund.

The Fund’s management has contractually waived a portion of its management fees until November 5, 2023, for I, A, C and R6 Shares. The performance shown reflects the waivers without which the performance would have been lower. Total annual operating expenses before the expense reduction/reimbursement are 1.29%, 1.51%, 2.28% and 1.29% respectively; total annual operating expenses after the expense reduction/ reimbursement are 1.29%, 1.51%, 2.28% and 1.23% respectively. 5.75% is the maximum sales charge on purchases of A Shares.

The Fund’s investment adviser has contractually agreed to reduce and/or absorb expenses until at least November 5, 2023, for I, A, C and R6 Shares, to ensure that net annual operating expenses of the fund will not exceed 1.30%, 1.55%, 2.30% and 1.00%, respectively, subject to possible recoupment from the Fund in future years.

Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund. This and other information are 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

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 Ultimus Fund Distributors, LLC. Easterly Funds, LLC and Orange Investment Advisors, LLC are not affiliated with Ultimus Fund Distributors, LLC, member FINRA/SIPC. Certain associates of Easterly Funds, LLC are registered with FDX Capital LLC, member FINRA/SIPC.

Short sales involve unlimited loss potential since the market price of securities sold short may continuously increase.

Diversification does not assure a profit nor protect against loss in a declining market.

Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested.

Mutual fund investing involves risk; principal loss is possible. Investments in smaller companies involve additional risks such as limited liquidity and greater volatility. Investments in foreign securities involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks are greater in emerging markets.

Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. The fund may invest in lower-rated and non-rated securities which present a greater risk of loss to principal and interest than higher-rated securities. The fund may invest in other investment companies, and the cost of investing in the Fund will generally be higher than the cost of investing directly in the shares of the mutual funds in which it invests. By investing in the Fund, you will indirectly bear your share of any fees and expenses charged by the underlying funds, in addition to indirectly bearing the principal risks of the funds. The fund also invests in ETFs. They are subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of an ETF’s shares may trade at a discount to its net asset value (“NAV”), an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact the Fund’s ability to sell its shares. The Fund may use options and futures contracts which have the risks of unlimited losses of the underlying holdings due to unanticipated market movements and failure to correctly predict the direction of the securities prices, interest rates and currency exchange rates. This investment may not be suitable for all investors. Small- and Medium-capitalization companies tend to have limited liquidity and greater price volatility than large-capitalization companies. Performance over one year is annualized.


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