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Q3 2023 Long/Short Opportunity Fund Commentary

Market Commentary

During the third quarter of 2023, the Easterly Long/ Short Opportunity Fund (SNOIX) declined 1.0%, which compared favorably to the Russell 3000 Value Index (RAV) which declined by 3.2%. Sector allocation led performance, with our short-term Treasury bill position and short market ETFs adding 5% to our total return.  Our overweight to energy also added to total performance, while our underweights to real estate, utilities and consumer staples contributed to our relative performance compared to the index.  Stock selection contributed to relative performance, driven by utilities, health care and to a lesser extent, materials.  During the quarter, energy was the only positive sector contributor for the index.

Seven mega cap US-based companies – Apple, Microsoft, Amazon, Google, Nvidia, Tesla and Meta (Facebook) – have remained top of mind for many investors this year. These companies have been dubbed the “Magnificent Seven” are the largest U.S. based companies by market cap and have driven a large portion of the broad markets return for the year-to-date period. These positions have performed very well so far in 2023 partially due to artificial intelligence. Markets today remain very concentrated. Today, the “Magnificent Seven” make up 28% of the S&P 500 Index and have contributed almost 65% of the S&P 500 Index year-to-date return.  This narrow leadership has led to a market that is trading at heightened valuations with the forward price-to-earnings multiple of the S&P 500 at close to 18 times.

Market concentration has provided the guise of a market that is nearing fair value.  In fact, using the Fed Model, the 12-month forward earnings yield for the S&P 500 of 5.62%, has narrowed toward the 10 year Treasury yield of 4.58%.  Despite this market valuation indicator implying that equity markets are approaching fair value, it ignores the historic level of valuation dispersion within US broad markets. The spread between the most expensive quintile of stocks (as measured by forward P/E multiples) and the least expensive, has moved toward historic levels.  We feel that this dichotomy will inevitably reward active managers in the medium-to-long term as valuation historically provides the best indication of future returns.

Reasons for the current valuation dichotomy are plentiful. First, rising rates, yield curve inversion and a heightened level of macroeconomic uncertainty, have caused investors to rotate from cyclical stocks.  We believe there are attractive opportunities in sectors that have already begun to forecast this scenario, while other sectors viewed by the market as “high-quality” for their perceived earnings durability, have yet to accurately discount that risk.  Secondly, investors have been reticent about selling gains associated with the “Magnificent Seven”.  This has led investors to maintain positions with embedded gains, to minimize their year-end tax liability.  Finally, persistent outflows from actively managed U.S. Equity funds have continued.  This decline has concentrated the weighting of broad market indicies toward the largest of the companies. As of September 30th, 2023, the largest 10 stocks as measured by market capitalization, now represent 31.9% of the S&P 500 index.  This is higher than the recent peaks, seen in 2020 and 2022, as well as dot-com bubble in 2000.

The recent, sharp rise in yields has created a challenging investment backdrop. During the quarter, the benchmark 10-year U.S. Treasury increased from 3.81% to 4.59%. The swift move in Fed Funds from zero (during the pandemic) to 5.5% currently should begin to dampen growth. The longer rates stay elevated, the larger the economic drag will be, as more and more activity will be subject to higher rates.

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

A related detriment to economic growth is continued stress in the financials and real estate sectors. Higher rates serve as a ceiling on equity valuations and will likely keep markets in a choppy holding pattern in coming quarters.


In contrast with the first two quarters of 2023, sector allocation was the largest contributor to overall performance, followed by stock selection.

In the long portfolio, weighting and selection within the utilities, health care and energy, provided most of our relative outperformance.   By sector, we are overweight energy, information technology, health care, materials and consumer discretionary. We remain underweight consumer staples, real estate, industrials and utilities.  The majority of our underweights are particularly sensitive to rising interest rates.  Additionally, our relative weighting to industrials is a function of valuation, where the market continues to embrace the idea of a soft economic landing.

The most recent changes in sector allocation came from decreasing our exposure to consumer discretionary, while increasing our exposure to health care, energy and information technology.  We remain overweight to information technology as of quarter-end, sitting nearly 400 bps above the Russell 3000 Value sector weighting. Changes around sector and industry are a residual of the stock selection decisions, where we are finding the best opportunities in terms of valuation.

Net exposure declined throughout the quarter from 79% to 76%.  Option premiums on both short puts and short calls declined as market volatility remained muted. We selectively added to market hedges through ETF short positions, to dampen volatility.  We believe the market appears close to fair value, with outliers masking opportunities we are finding across all sectors.

Contributors and Detractors

Our top three contributors came from different sectors. Suncor Energy Inc. (SU) outperformed during the second quarter, following a rise in oil prices, which have been supported by OPEC+’s resolve to cut supplies, as uncertainty around the global economic outlook weighed on prices in the first half of 2023.  Even with the outperformance, shares of SU remain attractive as management refocuses operations to enhance oil production.  Shares are trading at 7X forward earnings and are yielding 5%.  Year-to-date, SU has repurchased 3.3% of their outstanding shares, bringing the total share count reduction since 2021 to 16%.

Shares of Amgen Inc. (AMGN), added to overall performance due to strong execution as well as increased clarity around their acquisition of Horizon Therapeutics.  In August, the Federal Trade Commission announced that it had suspended its administrative case against the merger, allowing for line-of-site for the deal to close before year-end.  On 10/9/23, AMGN closed the acquisition and now expects the deal will be accretive to non-GAAP EPS starting in 2024, a year earlier than initially expected.

Vistra Corp. (VST) rallied throughout the quarter, fueled by a strong second quarter report which came with raised annual guidance. The company continues to progress toward closing the Energy Harbor acquisition, which is an attractive deal for the company, both financially and strategically.

Similar to our contributors, top detractors came from different sectors.  Shares of medical device company Zimmer Biomet Holdings Inc. (ZBH) negatively impacted performance during the quarter as investors question the trajectory of ZBH’s recent growth, which has been buoyed by a broad recovery in procedures.  ZBH also announced an unexpected management change. We continue to hold ZBH as we believe the company has gained share and has solid pricing momentum.

Wesco International (WCC) lost value during the quarter, negatively impacting our performance. WCC is working through supply chain rebalancing in the electrical industry, leading to customer destocking. Moreover, weakness in certain sectors, including commercial construction and manufactured structures has been a headwind to sentiment. We continue to hold the position and believe this is a short term issue that WCC will work through.

Shares of Norwegian Cruise Line Holdings Ltd. (NCLH) detracted from performance during the quarter, giving back strong gains from the first half of 2023.  NCLH issued disappointing guidance that pushed out our timeline for an expected earnings recovery. We liquidated our position to reallocate towards stocks with a greater risk/reward profile.

Looking Ahead

The dichotomy in markets has created a significant opportunity for long-term investors, looking for attractively priced stocks outside top broad market holdings.  Looking ahead we expect more of the same on the economy—a slow rate of growth, hovering just above zero. Corporate earnings may remain stagnant, though dispersion could become quite extreme as some companies will be better at increasing margins and reducing costs. In our view, investment results for the broad markets will be more muted in the quarters ahead. Variables including inflation, the specter of a recession and Fed action will keep volatility levels elevated and pressure capital asset prices.

In this environment, we feel strongly that a hedging strategy complements the value investing process and helps reduce the likelihood of negative outcomes. In addition, by opportunistically buying and selling options to build or reduce position sizes, we capture attractive premiums that increase the fund’s income.

In closing, we remain dedicated to delivering strong long-term performance and transparent communications to our investors.  Thank you for your confidence and commitment to Easterly Investment Partners. As always, we welcome your comments and questions.

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 June 30 2023, 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 Shares-1.02%3.03%15.76%15.46%6.53%5.70%5.71%
Morningstar Long/Short Equity Category-1.00%3.89%9.24%5.00%2.98%3.46%2.54%
70%/30% Blended Index-1.79%2.40%11.43%8.61%5.12%6.36%5.35%
Russell 3000 Value-3.15%1.67%14.05%11.20%5.98%0.83%6.70%

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 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

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. Effective 10/2/2023, the Easterly mutual funds are distributed by Easterly Securities, LLC. Easterly Investment Partners, LLC and EAB Risk Solutions, LLC are affiliates of Easterly Securities, LLC, member FINRA/SIPC. Orange Investment Advisors, LLC and Ranger Global Advisers are not affiliated with Easterly Securities, LLC. Certain associates of Easterly Securities, 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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