Acorn Diversified Update September 2017

Transcription

1 Acorn Diversified Update September 2017 The Acorn Diversified Program continues to experience the worst drawdown it has seen. As illustrated in the chart below, many other managers and indices in the managed futures space are also experiencing similar performance (when volatility is normalized to provide a fair comparison). For most of its history, the Acorn Diversified Program has been near the top of the range. In the last year it has moved to the middle of the pack. Disclaimer: Each of the series above were produced using monthly returns which have been volatility adjusted to match an annualized volatility of 16%. While it is impossible to fully understand why this is occurring, or for how long this will continue to occur, there are certainly a few clues. First, the current environment has had a lower than normal amount of trending market activity. This has made it difficult for managed futures managers to extract returns. The chart on the next page applies a version of an indicator we developed called Trends at Present (TAP). TAP does not predict trends. Rather, it looks at the current environment and the recent

2 past to indicate whether our trading systems (and most trend following systems) would have been profitable if trends were present. The chart below shows TAP applied to our Market Universe: Since 2009, there has been a shift down in the TAP measure which coincides with the real world results that many managers have experienced since. The increased TAP scores in 2010 and 2014 align nicely with the positive performance experienced by Acorn and most of the managed futures space during those years. Recently the TAP has certainly been running dry. However, as the chart makes clear, trends have a long history of coming back. Perhaps more importantly, volatility levels across markets are falling, with many of them currently at or near all time lows. Historically, these volatility compressions have generally led to periods of strong performance. However, the process of enduring such periods before getting to the trends on other side is tough. The challenge these days is that the compression of volatility is more pervasive and seems a little more persistent than usual. Just how widespread is low volatility? SG Research recently reported that volatility is at a particularly low level (one standard deviation below the long term average) across most asset classes This low volatility regime has spread across global markets and asset classes. This is seen in the following chart from SG:

3 We still expect better performance after this compression period. In the meantime, our systems have adapted to the irony that low volatility can be risky. While the primary reasons for Acorn s current drawdown are: 1) the historically low number of tradeable trends; and, 2) compressing volatility, there is another factor. Our long exposure to equities and bonds has generally been lower than that of the indices and larger managers. There are two primary reasons for this. First, we are not as constrained as larger managers who need to invest more in liquid financials because of their size. Second, our counter trend system has been more active in the equity and bond sectors because they have been the only sectors that have qualified as extended. Obviously, selling equities in particular has been a losing proposition since the last significant equity correction in Q For some of our peers, having more exposure to equities and bonds may have helped them navigate this period somewhat better than us. Regardless of whether that exposure was due to luck or skill, it brings up an interesting question: Should we intentionally overweight exposure to equities and bonds? Given our mandate of providing our investors with an investment that has a low correlation to equities, bonds and real estate, we don t think so. Many of our investors have expressed that they already have, or can easily access, those asset classes themselves if they wish to overweight them. While the overweighting has worked recently, investors in some strategies may have more unintended exposure than they might expect. As a case in point, have a look at the chart below, which illustrates the beta of Acorn and the SG CTA Index to a 60/40 portfolio of the S&P and Ten Year Note. The beta of the CTA Index is currently nearly one. Meanwhile, Acorn is barely above zero. Also, observe that the beta of Acorn to a 60/40 portfolio has been more consistent than the CTA Index. While we at Acorn have underperformed the CTA Index as of late, in event of a market correction, which would you rather have as a diversifier? This is a challenging period for us all. However, we believe that trends and volatility will return. We remain focused, disciplined and patient.

4 Disclaimer Acorn Global Investments Inc. ( Acorn ) is registered as a portfolio manager, investment fund manager, commodity trading manager and exempt market dealer with the Ontario Securities Commission, and with the Commodity Futures Trading Commission as a commodity pool operator and commodity trading advisor, and a member of the National Futures Association. The registrations described above in no way imply that the Ontario Securities Commission, the Commodity Trading Commission, or any other regulatory body have endorsed any of the services discussed herein. The information we use is obtained from sources we believe to be accurate; however, that is not always the case so we make no guarantees. Important Information The performance of the Acorn Diversified Program reflects the performance of the BTR Global Macro Fund from July 2005 November 2008, which used the same investment decision maker, process, objective and strategy as the Fund has since commencing operations in July The performance includes a transition period of December 2008 June 2009 where no trading took place. Audited records which document and support this performance are available upon request. The returns above are net of 2% management fees, 20% performance fees and expenses until September 2010 and 1% management fees, 20% performance fees and expenses thereafter. This communication is not, and under no circumstances is it to be construed as, an invitation to make an investment in the Acorn Diversified Trust (the Fund ), nor does it constitute a public offering to sell the Fund. This communication is not intended to constitute an offering memorandum for the purposes of Ontario securities law or US securities laws. Subscriptions to the Fund s units (the Units ) will only be considered on the terms of the Fund s offering memorandum. Each subscriber to Units may have statutory or contractual rights of action under circumstances as disclosed in the offering memorandum. To the extent this communication is determined to constitute an offering memorandum for the purposes of Ontario securities law, the statutory rights of action as disclosed in the offering memorandum shall also apply to this communication and shall be deemed to be incorporated herein. Please review the provisions of the applicable securities legislation for particulars of these rights. The information contained in this material is subject to change without notice and Acorn will not be held liable for any inaccuracies or misprints. Risks of investing in the Fund PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Potential investors should note that alternative investments can involve significant risks and the value of an investment may go down as well as up. There is no guarantee of trading performance. An investment in the Fund may involve a high degree of risk and is not intended as a complete investment program. An investment in Units should only be made after consultation with independent investment and tax advisors. It should be borne in mind that risk involved in this type of investment may be greater than those normally associated with other types of investments. Only investors who do not require immediate liquidity to the investment should consider the purchase of Units. Only investors who can reasonably afford a substantial impairment or loss of their entire investment should consider the purchase of Units. Please refer to the offering memorandum for a further discussion of the risks of investing in the Fund.

5 Acorn Diversified Acorn Diversified Program September 2017 The objective of the Acorn Diversified Program is to deliver long term capital appreciation with low correlation to equity, bond and real estate investments. Acorn Global Investments, founded in 2005, is an alternative investment manager that identifies early stage opportunities in global futures markets. With institutional infrastructure and extensive experience, we serve institutions, advisors and individuals from around the world. Acorn has two offices in Canada, located in Oakville, Ontario, and in Montreal, Quebec. Acorn Diversified Global Equities Global Global Real Estate 1 Month Return 10 years 5 years 3 years 1 year Max Drawdown Volatility -3.54% 4.19% 1.96% -3.65% % % % 15.75% 2.24% 6.79% 4.22% 10.99% 7.69% 18.17% % 15.17% -0.82% 3.78% 3.57% 0.72% 1.51% -1.18% -9.42% 5.71% -1.12% 5.61% 1.77% 6.92% 6.56% 3.30% % 18.43% Correlations to Acorn Diversified Global Market Universe Global Equities Global Global Real Estate CTA Index 1 Year Year Year Year Inception Diversification Benefits: Efficient Frontiers 13% 13% Grains Softs 3% 11% 11% Energies Stock Indices 7% 14% Rates Metals 14% 13% Meats Currencies Opimal Curve With Return Acorn without vs. Volatility Acorn Return vs. Drawdown Optimal Without Curve Acorn With Acorn 10% 10% 9% 7.00% 7.00% 9% 7.00% 7.00% 8% 8% Variance 7% 5.00% 5.00% Return Optimization Frontier 7% 5.00% Risk Return 5.00% Risk Variance Optimizatio 6% Drawdown 6% n Frontier Optimization 5% 3.00% 3.00% Frontier 5% 3.00% 3.00% Drawdown Optimizatio 4% n Frontier 4% 3% 1.00% 1.00% 3% 1.00% 1.00% 2% 2% % -5 4% -4 6% % -1 10% 1 12% % 16% % -10% -20% -30% -40% -50% -60% -70% With Acorn Without Acorn With Acorn Without Acorn Maximum Drawdown Average Monthly Returns in Equity Bear and Bull Markets 3.19% 3.23% -9.42% BEAR % % 0.79% Average return durinaverage return during bull Benchmark 10.04% Negative Positive Acorn Diversified 0.79% 0.23% Global Equities -3.48% 3.19% Global 0.04% 0.50% Global Real Estate -3.63% 3.23% HFRX Macro/CTA Ind -0.51% 0.41% 0.23% BULL 0.50% % Acorn Diversified Global Equities Global Global Real Estate -3.48% -3.63% Acorn Diversified Global Equities Global Global Real Estate Program Information Fund Terms Service Providers Contact Information Program AUM: $49m Management/Perf Fee: 1% & 20% Admin: Apex Fund Services Website: Firm AUM: $189m Lockup Period: None Auditor: KPMG service@acorn.ca Fund Minimum: $10k Subscribe/Redeem: Monthly Legal: Fasken Martineau Phone: (905) Mgd Acct Minimum: $5m Redemption Notice: 5 days Brokers: SocGen, IB Fax: (888) PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THERE IS A RISK OF LOSS.

6 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Monthly Returns (July 2005-November 2008-see disclaimer) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD % -5.58% -4.57% -4.42% -3.96% -4.46% -0.32% -1.39% -3.54% % 4.11% -1.92% -2.78% -3.13% 3.76% -0.74% -3.44% -8.25% -0.20% 2.97% -3.47% -4.78% % 2.36% 1.44% -3.07% 0.12% -3.96% 3.06% 1.61% -4.11% -5.72% 4.56% -3.33% -4.18% % 11.52% -1.16% -3.29% -4.98% -2.05% 6.11% 1.04% 5.01% -0.40% 6.51% 21.17% % -4.50% 4.11% 3.78% 2.47% -0.21% 0.07% 0.14% -7.19% 2.20% 0.55% 1.17% 9.69% % -4.10% 1.06% -3.06% 10.03% -2.21% 1.59% -2.57% 9.89% -2.99% -0.08% -1.89% 2.13% % 2.62% -1.68% 6.18% -2.95% -6.82% 4.25% 3.08% -0.49% -5.72% 0.72% -1.42% -5.03% % -0.70% 2.65% -2.82% 2.34% 2.02% -1.25% 5.84% 2.93% 2.81% -2.38% 7.56% 15.63% % 2.89% 1.00% -2.08% -5.50% 2.21% -5.96% % 12.10% 3.98% -2.38% -3.21% 7.08% 2.02% -1.81% % 5.25% -0.38% 22.32% % -4.43% -4.28% 4.21% 1.33% 2.50% -4.35% 1.85% 12.07% 1.44% 6.73% -0.44% 18.97% % 0.27% 7.04% 3.78% -5.78% -4.32% % -0.86% 2.94% 4.80% 3.33% 3.03% 6.89% % 4.17% 1.59% -7.02% 6.98% 7.09% 15.42% Sector Performance Currencies Energies Grains Meats Metals Rates Softs Stock Indices Sector Performance -4% -3% -2% -1% 0% 1% 2% 3% 4% Currencies Energies Grains Meats Metals Rates Softs Stock Indices Sector Exposures Sector Exposures -3% -2% -1% 0% 1% 2% 3% Short Long 200% Historical Cumulative Returns 20% Monthly Return Distribution 18% 150% 100% 50% 0% -50% 16% 14% 12% 10% 8% 6% 4% 2% Max Drawdown Max Historical Drawdown Acorn Diversified % Global Equities % Global -9.42% Global Real Estate % HFRX Macro/CTA Ind % 0% -16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% Acorn Diversified Global Equities Global Global Real Estate Acorn Diversified Norm Distribution September proved to be a difficult month for Managed Futures as the SG Trend Index dropped by over 3% and the SG Trend Indicator was down over 7%. Our worst performing sector was metals as a result of trend reversals in both the industrial and precious segments, mainly Zinc, Gold and Copper. We still came out nicely ahead on the Zinc and Copper trades despite this month's losses. Reversals in Crude Oil and RBOB early in the month also generated losses as Gulf Coast production returned to normal. Lastly, there was a broad-based selloff in Global Bond prices last month. Our losses in that sector were limited to the US Treasury Note. The currency sector was the best performer this month as long GBP exposure and short JPY exposure generated solid gains. Long exposure to the Nikkei was beneficial as the index rocketed to new highs in September. Sugar was another strong performer as we were able to take advantage of the selloff late in the month. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THERE IS A RISK OF LOSS.

7 Disclaimer Acorn Global Investments Inc. ( Acorn ) is registered as a portfolio manager, investment fund manager, commodity trading manager and exempt market dealer with the Ontario Securities Commission, and with the Commodity Futures Trading Commission as a commodity pool operator and commodity trading advisor, and a member of the National Futures Association. The registrations described above in no way imply that the Ontario Securities Commission, the Commodity Trading Commission, or any other regulatory body have endorsed any of the services discussed herein. Important Information The performance of the Acorn Diversified Program reflects the performance of the BTR Global Macro Fund from July 2005 November 2008, which used the same investment decision maker, process, objective and strategy as the Fund has since commencing operations in July The performance includes a transition period of December 2008 June 2009 where no trading took place. Audited records which document and support this performance are available upon request. The returns above are net of 2% management fees, 20% performance fees and expenses until September 2010 and 1% management fees, 20% performance fees and expenses thereafter. The returns for Global Equities, and Real Estate are derived from the MSCI World Index (Total Return), JPM Global Aggregate Bond Index (Total Return) and MSCI World Real Estate Index (Total Return). These same indices are also used to derive the efficient frontiers both with and without Acorn from the inception date of July Drawdown for the efficient frontier is calculated using a weighted average which puts the highest weight on the worst drawdown. This communication is not, and under no circumstances is it to be construed as, an invitation to make an investment in the Acorn Diversified Trust (the Fund ), nor does it constitute a public offering to sell the Fund. This communication is not intended to constitute an offering memorandum for the purposes of Ontario securities law or US securities laws. Subscriptions to the Fund s units (the Units ) will only be considered on the terms of the Fund s offering memorandum. Each subscriber to Units may have statutory or contractual rights of action under circumstances as disclosed in the offering memorandum. To the extent this communication is determined to constitute an offering memorandum for the purposes of Ontario securities law, the statutory rights of action as disclosed in the offering memorandum shall also apply to this communication and shall be deemed to be incorporated herein. Please review the provisions of the applicable securities legislation for particulars of these rights. The information contained in this material is subject to change without notice and Acorn will not be held liable for any inaccuracies or misprints. Risks of investing in the Fund PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Potential investors should note that alternative investments can involve significant risks and the value of an investment may go down as well as up. There is no guarantee of trading performance. An investment in the Fund may involve a high degree of risk and is not intended as a complete investment program. An investment in Units should only be made after consultation with independent investment and tax advisors. It should be borne in mind that risk involved in this type of investment may be greater than those normally associated with other types of investments. Only investors who do not require immediate liquidity to the investment should consider the purchase of Units. Only investors who can reasonably afford a substantial impairment or loss of their entire investment should consider the purchase of Units. Please refer to the offering memorandum for a further discussion of the risks of investing in the Fund. Notice to US Investors Acorn offers managed accounts and the Fund pursuant to an exemption pursuant to Commodity Futures Trading Commission regulations for registrants who limit their investors to qualified eligible persons. Therefore, the information contained herein is being directed solely to qualified eligible persons (as that term is defined in Commodity Futures Trading Regulation 4.7) in order to assist them in determining whether they have an interest in the type of Program described herein and is solely for their internal use. The Units described herein will not be registered under the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction. The securities offered herein will not be recommended by any United States federal or state securities commission or any other regulatory authority. The securities described herein will be subject to certain restrictions on transfers as described in the Offering Memorandum.