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USA Mutuals WaveFront Hedged Quantamental Opportunities Fund 2017-10-19T15:14:53+00:00

Portfolio Managers

Roland Austrup
Roland Austrup
Mr. Roland Austrup brings over 29 years of investment management experience and currently serves as co-Portfolio Manager for the Fund.   Prior to becoming CIO, Mr. Austrup served as President, CEO and founder of WaveFront’s predecessor, IMFC Corp, a leading quantitative alternative asset manager that was acquired by IAM Group in 2003.  Subsequently, he orchestrated the acquisition of two US-based alternative asset managers, combining them to form WaveFront Global Asset Management, a now $550 million global asset manager.  Roland has also held positions with BMO Nesbitt Burns as an investment advisor and began his career with Scotia McLeod as a commodities broker.  Mr. Austrup graduated from the University of Western Ontario with a Bachelor of Arts (Honours) and is a member of the advisory board of the Centre for Advanced Studies in Finance.  He also serves as the Director of the Master of Quantitative Finance at the University of Waterloo.
Ryan Butz
Ryan Butz

Mr. Ryan Butz brings over 18 years of investment management experience and currently serves as co-Portfolio Manager for the Fund.  Previously, Mr. Butz acted as a Principal and portfolio manager of BC Holdings, an investment advisor that was acquired by WaveFront, and was advisor to the fund’s predecessor, the BC Capital Investors LP.  Prior to becoming a portfolio manager, Ryan served as a security analyst and trader and began his career with LaSalle Bank in Chicago as a credit analyst for the corporate lending department.  Mr. Butz graduated from Marquette University with a Bachelor of Finance.

Mark Adams
Mark Adams

Mr. Mark Adams, Senior Portfolio Manager and Principal, is a co-portfolio manager for the Fund.  Previously, Mr. Adams was the Founding Principal and Portfolio Manager of WaveFront Capital Management, LP.  Mark also currently serves as the Portfolio Manager, responsible for the ongoing management of the WaveFront Global Emerging Markets Fund and the WaveFront China Fund. Previous to joining WaveFront, Mr. Adams served as Director of Research with Baochuan Capital Management, LLC, and was Senior Portfolio Manager for Active Investment Advisers Active China Strategy and Active Managed ETF Portfolios. Mr. Adams has also served as Chief Operating Officer at Barra Rogers Casey and currently sits on the Investment Committee of AlphaShares, LLC. Mr. Adams holds a B.S. in Economics and B.A. in Fine Arts from the University of Pennsylvania, and is a Chartered Financial Analyst.

John Lukovich
John LukovichPortfolio Manager
Mr. John Lukovich, Portfolio Manager, is a co-portfolio manager primarily responsible for the day-to-day portfolio management and investment research for the Fund. Prior to joining WaveFront Capital Management, L.P. in 2009, Mr. Lukovich served as a Field Programmable Gate Array (“FPGA”)/Application-Specific Integrated Circuit (“ASIC”) verification engineer with Nortel. Mr. Lukovich is registered with the Commodity Futures Trading Commission as an Associated Person and is an Associate Member of the National Futures Association. Mr. Lukovich has holds a Master of Applied Science degree and a B.A.Sc. from the University of Toronto and has successfully completed all three levels of the CFA Program.

Firm Description

The Fund’s Sub-Advisor, WaveFront Global Asset Management, is a privately-owned investment management firm proudly serving a prestigious group of institutional and individual investors from around the globe including from the US, Canada, and China.  Headquartered in Toronto, WaveFront is majority owned by Koloshuk Farugia Corporation (KFC Corp.), a privately held company with majority ownership in two major financial enterprises which collectively manage over $3 billion of primarily institutional assets across a suite of private and public alternative investment products. At its core, WaveFront is driven by the quantifiable success of its clients. The company’s mission is to deliver superior investment performance while seeking to develop and maintain credible and long-term partnerships built on a foundation of candor, trust and total transparency. WaveFront’s deep and talented investment team is highly experienced and forward-thinking, investing with focused expertise across a variety of strategies and global asset classes for the benefit of its clients.

For additional information regarding WaveFront Global Asset Management, please visit wavefrontgam.com.

Strategy

The Investment Manager’s focus is on absolute rather than relative returns with an emphasis on the benefits of compounding over time. The Fund’s intent is to provide an investment strategy that offers an opportunity for positive absolute returns while reducing exposure to general equity market risk. In addition, through a macro overlay hedging strategy, the Fund intends to realize lower levels of volatility and a lower exposure to systematic equity market risk.

HFRX Equity Hedge Index – Equity Hedge strategies maintain positions both long and short in primarily equity and equity derivative securities. A wide variety of investment processes can be employed to arrive at an investment decision, including both quantitative and fundamental techniques; strategies can be broadly diversified or narrowly focused on specific sectors and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market capitalizations and valuation ranges of typical portfolios. Equity Hedgemanagers would typically maintain at least 50%, and may in some cases be substantially entirely invested in equities, both long and short. Hedge Fund Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to construct the HFRX Hedge Fund Indices. The methodology is based on defined and predetermined rules and objective criteria to select and rebalance components to maximize representation of the Hedge Fund Universe. HFRX Indices utilize state-of-the-art quantitative techniques and analysis; multi-level screening, cluster analysis, Monte-Carlo simulations and optimization techniques ensure that each Index is a pure representation of its corresponding investment focus.

Moringstar Long-Short Equity 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 exchangetraded funds or derivatives. At least 75% of the assets are in equity securities or derivatives.

BofA Merrill Lynch 0-3 Month US Treasury Index: Is a subset of The Bank of America Merrill Lynch 0-1 Year US Treasury Index including all securities with a remaining term to final maturity less than 3 months.

The Fund seeks to achieve positive absolute return by trading and investing opportunistically in a broad range of markets, instruments and asset-classes. Investment opportunities and relevant themes are identified through a Quantamental approach that combines quantitative and fundamental research. Pursuant to this approach, macro-economic variables and securities fundamentals and characteristics are analyzed quantitatively alongside historical returns in order to derive the relative probabilities of future expected returns. In turn, these return expectations define both long and short investment opportunities and themes in the Fund. Lastly, at the portfolio management level, a top-down, quantitative analysis of the volatility and correlations of current investment opportunities and themes finalizes portfolio weights. The potential benefit of a Quantamental philosophy is that the subjectivity of investing is replaced by an objective, quantitative, and data-driven approach, and manager skill is focused on evaluating fundamental information in an objective, scientific manner.

Investment themes identified by the Investment Manager may be expressed through a variety of different investment approaches including, but not limited to, directional, relative value and event-driven investment strategies, as well as through a variety of different financial instruments.
The Fund’s portfolio generally consists of a core long position in equity securities. However, as part of its hedging strategy, the Investment Manager may also take short positions to capitalize from overvalued securities or broad equity indices. Furthermore, the Investment Manager may, in its hedging strategy, trade and/or invest the Fund’s capital among other financial instruments, such as fixed income securities, commodity interests, currencies, futures, options and other derivatives in U.S. markets and, to a lesser extent, globally. The objective of the macro overlay hedging strategy is to reduce overall exposure to systematic equity market risk when equity markets appear overvalued or vulnerable, and to further reduce risk by trading or investing in uncorrelated assets that offer the benefit of diversification to the core long equity exposure in the Fund.

Although the Fund may employ a variety of opportunistic trading tools, the Investment Manager primarily seeks to identify investment opportunities in markets, sectors, issuers and instruments which the Investment Manager does not believe reflect their potential financial reward. Examples may include, but are not limited to, the following:

  • Companies whose shares do not reflect such fundamental indicators as ownership of new intellectual property, new management, positive fundamental condition, improved regulatory environment or positive changes in cost structure, implying the potential for an acceleration of earnings.
  • Corporate restructuring which may have unrecognized positive implications for shareholder returns such as share buybacks, liquidation or the sale of corporate assets which may lead to higher returns and the potential of special cash distributions to shareholders.
  • Either as a means of hedging risk or exploiting pricing inefficiencies identified by the Investment Manager, the Fund may trade exchange-traded futures in a variety of global equity indices, commodities, currencies and fixed-income products (including non-U.S. instruments).

The Investment Manager generally does not have predetermined maximum or expected holding periods for any particular position. The length of time for which a position is maintained varies significantly based on the Investment Manager’s subjective judgment of the appropriate point at which to liquidate a position so as to augment gains or reduce losses.

The Investment Manager anticipates that it will continue to develop and implement new trading and investment strategies as it seeks to identify investment opportunities for the Fund and implement changes in the Investment Manager’s macro-economic outlook and securities analysis.

HOW TO INVEST

Performance At A Glance

QUARTER-END PERFORMANCE AS OF 9/30/2017
3 Months 1 Year 3 Year 5 Year 10 Year Since Inception*
USA Mutuals/WaveFront Hedged Quantamental Opportunities Fund Inst. Class 0.43% 0.95% 0.97% 4.18% 4.52% 6.46%
BofA Merrill Lynch 0-3 Month U.S. Treasury Bill Index 0.26% 0.66% 0.32% 0.22% 0.47% 1.31%
HFRX Equity Hedge Index 3.21% 7.96% 1.60% 3.64% -0.97% 1.61%
Morningstar Long/Short Equity Category 2.41% 9.68% 3.69% 6.00% 4.01% 4.85%

* Inception date 2/28/2002
Gross expense ratio Inst. Class is 2.21%.
Net Expense Ratio Inst. Class is 1.30%
Contractual fee waivers through 7/31/19.

TOP TEN HOLDINGS AS OF 9/30/2017
Industry/Company Portfolio Weight
GOLDMAN SACH FIN SQ TR OB-CP 28.50%
US TREASURY N/B 0.750% 02/28/18 12.19%
MICROSOFT CORP 5.40%
ENTERPRISE PRODUCTS PARTNERS 4.18%
JPMORGAN CHASE & CO 4.01%
REPUBLIC SERVICES INC 3.53%
SERVICE CORP INTERNATIONAL 3.42%
SPDR S&P REGIONAL BANKING 3.25%
VISA INC-CLASS A SHARES 3.21%
US TREASURY N/B 1.000% 12/31/17 3.05%

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-866-264-8783.

Simultaneous with the commencement of the Fund’s investment operations on October 2, 2017, BC Capital Investors, L.P., a limited partnership managed by the Sub-Advisor (the “Predecessor Partnership”), converted into the Institutional Class shares of the Fund by contributing all of its assets to the Fund in exchange for Institutional Class shares of the Fund. From its inception through October 2, 2017, the Predecessor Partnership maintained investment policies, objectives, guidelines, and restrictions that were, in all material respects, equivalent to those of the Fund, and at the time of the conversion, the Predecessor Partnership was by the same portfolio managers as the Fund and such portfolio managers managed the Predecessor Partnership since its inception in a manner that, in all material respects, complied with the investment guidelines and restrictions of the Fund.  The Fund’s performance for periods before October 2, 2017 is that of the Predecessor Partnership and includes the expenses of the Predecessor Partnership.  The performance includes gains or losses plus income and the reinvestment of all dividends and interest.  All returns reflect the deduction of all actual fees and expenses, paid by the Predecessor Partnership, without provision for state or local taxes. If the Predecessor Partnership’s performance was adjusted to reflect the projected first year expenses of the Fund, the performance for all periods would have been lower than that stated.

The performance returns of the Predecessor Partnership are audited.  The Predecessor Partnership was not registered under the 1940 Act, and was not subject to certain investment limitations, diversification requirements, and other restrictions imposed by the 1940 Act and the Internal Revenue Code of 1986, as amended (the “Code”), which, if applicable, may have adversely affected its performance.  On a going forward basis after October 16, 2017, the Fund’s performance will be calculated using the standard formula set forth in rules promulgated by the SEC, which differs in certain respects from the methods used to compute total returns for the Predecessor Partnership.

Fund holdings are subject to change at any time and should not be considered a recommendation to buy or sell any security.

HFRX Equity Hedge Index – Equity Hedge strategies maintain positions both long and short in primarily equity and equity derivative securities. A wide variety of investment processes can be employed to arrive at an investment decision, including both quantitative and fundamental techniques; strategies can be broadly diversified or narrowly focused on specific sectors and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market capitalizations and valuation ranges of typical portfolios. Equity Hedgemanagers would typically maintain at least 50%, and may in some cases be substantially entirely invested in equities, both long and short. Hedge Fund Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to construct the HFRX Hedge Fund Indices. The methodology is based on defined and predetermined rules and objective criteria to select and rebalance components to maximize representation of the Hedge Fund Universe. HFRX Indices utilize state-of-the-art quantitative techniques and analysis; multi-level screening, cluster analysis, Monte-Carlo simulations and optimization techniques ensure that each Index is a pure representation of its corresponding investment focus.

Moringstar Long-Short Equity 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 exchangetraded funds or derivatives. At least 75% of the assets are in equity securities or derivatives.

BofA Merrill Lynch 0-3 Month US Treasury Index: Is a subset of The Bank of America Merrill Lynch 0-1 Year US Treasury Index including all securities with a remaining term to final maturity less than 3 months.