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Q4 2023 Hedged Equity Commentary

The 4th quarter ended what has been a somewhat surprising 2023 with a flourish. In many ways, the quarter’s story continued the year’s narrative of waiting for the Fed to turn dovish as disinflation gave credibility to the Fed’s efforts. Throughout the year, the level of the VIX had dropped consistently with a few minor spikes. However, in early October, the VIX spiked from about 13 to 21 as realities in the Middle East led to inflationary energy concerns. These moments of increased volatility sunk equities from their bullish stance and provided periods when the defensive nature of the Fund worked as expected. With the market down -2.1% in October, the Easterly Hedged Equity Fund (“JDIEX”) was down -0.65%. The market’s bullishness returned as Chairman Powell gave a very dovish indication of the Fed’s likely 2024 path after the December FOMC meeting. In January, subsequent minutes somewhat walked this back, but regardless the Fed Funds futures market remain significantly more dovish than the Fed’s own dot plots, assuming approximately six 25 bp eases versus the Fed’s anticipated 75 bps of 2024 easing. As the year ended, the “Santa Claus” rally left the quarter up 11.68% and the VIX down almost 29%. The Fund also benefited from a period of October volatility that advantaged capture in our over defended put spreads. Through the quarter, JDIEX provided a 6.48% return (~55% in upside capture), a very solid result given the Fund’s average upside capture since inception of ~48%. While a reduction in volatility would not normally be a positive market factor for the Fund, the fact that skew remained so bullish did allow us to sell attractively priced out-of-the-money calls to fund its ongoing portfolio overlay. The quarter’s performance added to what was a very solid year with 14.58% annual performance on less volatility than the market. Looking at the longer term, the Fund’s 3-year and 5-year Sharpe ratios were 0.63 and 0.85 versus the S&P’s 0.49 and 0.78. This supports our view that the Fund’s approach over market cycles adds meaningful risk adjusted returns for our investors.

As we look ahead to this next quarter and 2024, we continue to caution investors that the discrepancy between the market’s expectations around Fed policy and what the Fed has forecasted is far from resolved. There is also the prospect that the behavior of companies facing elevated real yields may not support the investor expectations around share buybacks, dividends and CAPEX for growth needs. We expect the next few earnings seasons to be critical as most of last year’s market progress was due to very concentrated returns resulting from a lower discount rate on hopes of Fed easing. With consistent hedging and being positioned for drawdown protection with reasonable capture, the Fund expects to defend well during these periods. In that kind of environment, JDIEX’s ability to reduce its correlation to equities and benefit from increases in volatility makes it a very robust diversifier.* We remind our investors that the risks of bond and stock correlation being positive present unique asset allocation challenges. With the market currently hoping for an outcome that would benefit both bonds and stocks, we see an inherent risk to traditional asset allocation. Because we are systematically hedged to equity risk which reduces correlation as equities decline, we see the Fund as a prudent way to mitigate the risk of positive stock- bond correlation. We continue to see this as a very important characteristic for investors that have traditionally relied on.

*Diversification does not guarantee a profit nor protect against loss in any market.

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

I Shares6.48%14.58%14.58%7.44%8.33%5.94%
Morningstar Options Trading Category6.85%17.57%17.57%5.36%7.12%4.36%
S&P 500 TR11.69%26.29%26.29%10.01%15.69%12.28%

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.  Investors cannot directly invest in an index, and unmanaged index returns do not reflect any fees, expense, or sales charges. For performance information current to the  most recent month-end, please call 888-814-8180 or visit

Source: Morningstar Direct.

Total return for all periods less than one year is an aggregate number (not annualized) and is based on the change in net asset value plus the reinvestment of all income  dividends and capital gains distributions.

The Fund’s management has contractually waived a portion of its management fees until December 31, 2024 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 1.78%, 2.03%, 2.78%, and 1.78% respectively; total annual operating expenses after the expense reduction/reimbursement are 1.44%, 1.69%, 2.44%, and 1.18% 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 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.


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.

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


Mutual funds involve risk, including possible loss of principal. Options involve risk and are not suitable for all investors. Writing a covered call option allows the Fund to receive a premium (income) for giving the right to a third party to purchase shares that the Fund owns in a given company at a set price for a certain period of time. There is no guarantee of success for any options strategy. Increased portfolio turnover may result in higher brokerage commissions, dealer mark- ups and other transaction costs and may result in taxable capital gains. Investments in lesser-known, small and medium capitalization companies may be more vulnerable to these and other risks than larger, more established organizations.

Structured investments are formed by combining two or more financial instruments, including one or more derivatives. Structured investments may carry a high degree of risk and may not be suitable for many members of the public, as the risks associated with the financial instruments may be interconnected. As such, the extent of loss due to market movements can be substantial. Prior to engaging in structured investment transactions, you should understand the inherent risks involved. In particular, the various risks associated with each financial instrument should be evaluated separately as well as taking the structured investment as a whole. Each structured investment has its own risk profile and given the unlimited number of possible combinations, it is not possible to detail in this Risk Disclosure Statement all the risks which may arise in any particular case.


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. Effective 10/2/2023, the Easterly mutual funds are distributed by Easterly Securities LLC. Easterly Investment Partners, LLC and EAB Investment Group LLC, 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.

Easterly Funds LLC serves as the investment adviser to the Easterly Fund family of mutual funds and related portfolios. Easterly Funds LLC is an SEC registered investment adviser; see Easterly Funds’ Form ADV at Registration does not imply and should not be interpreted to imply any particular level of skill or expertise.

There is no assurance that the portfolio 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.


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