ABSOLUTE CAPITAL OPPORTUNITIES FUND [ CAPOX ]

Transcription

1 ABSOLUTE CAPITAL OPPORTUNITIES FUND [ CAPOX ] FUND INTRODUCTION CAP-INTRO FINANCIAL INTERMEDIARY USE ONLY 1

2 PRINCIPAL INVESTMENT RISKS Past performance does not guarantee future results. The Fund s net asset value and investment return will fluctuate based upon changes in the value of its portfolio securities. There is no assurance that the Fund will achieve its investment objective, and an investment in the Fund is not by itself a complete or balanced investment program. For a complete description of the Fund s principal investment risks please refer to the prospectus. The Fund may invest in a number of differing classes of investment securities, each of which has specific potential rewards and risks. Small- and medium-sized companies can be more volatile than larger, more established companies. Foreign or emerging markets securities including ADRs involve special risks, including the volatility of currency exchange rates, political and economic instability, and relatively illiquid markets. Transactions that involve leverage, including selling securities short as well as borrowing for other than temporary or emergency purposes creates the risk of magnified capital losses. The Fund may also invest in several types of derivatives which can be volatile and involve various types and degrees of risks, depending upon the characteristics of a particular derivative. The Fund may invest in options and futures which are subject to special risks and may not fully protect the Fund against declines in the value of its stocks or commodities including precious metals. In addition, an option writing strategy limits the upside profit potential normally associated with stocks. Futures trading is very speculative, largely due to the traditional volatility of futures prices. The Fund may at times be focused on a relatively small number of issuers. The prospectus contains a complete discussion of the risks of investing in this Fund. Before investing you should carefully consider the Fund s investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by calling (888) or visiting the Fund's website at Please read the prospectus carefully before you invest. Foreside Fund Services, LLC, distributor. 2

3 STANDARDIZED DISCLOSURE Quarter-End Performance for CAPOX: As of 9/30/18, the 1 year and annualized since inception (12/30/15) performance for the Absolute Capital Opportunities Fund was 4.84% and 6.59% respectively. The Fund s total annual operating expense ratio (gross) is 3.37% and the net expense ratio is 2.62% through August 1, However, the Fund s Adviser has contractually agreed to waive its fee and/or reimburse Fund expenses to limit Total Annual Fund Operating Expenses to 1.75% (the Expense Cap ). This Expense Cap, which excludes all taxes, interest, portfolio transaction expenses, dividend and interest expenses on short sales, acquired fund fees and expenses, proxy expenses and extraordinary expenses, may only be raised or eliminated with the consent of the Board of Trustees. Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month-end, call the Fund at ABSOLUTE. Foreside Fund Services, LLC, distributor. 3

4 ABSOLUTE INVESTMENT ADVISERS About Us Absolute Investment Advisers, LLC was formed in 2004 with the goal of helping financial advisers and their clients diversify portfolios and manage risk. Absolute is a small, independent firm whose founders come from various parts of the hedge fund, mutual fund and financial advisory businesses. Absolute s investment philosophy centers on a belief that long-term risk-adjusted performance is best achieved by utilizing independent money managers who focus on preservation of capital and asymmetric return opportunities. Absolute manages three open-ended mutual funds: Absolute Strategies Fund (ASFIX) Absolute Convertible Arbitrage Fund (ARBIX) Absolute Capital Opportunities Fund (CAPOX) Hypothetical asset allocation including the ABSOLUTE FUNDS 4

5 ABSOLUTE & KOVITZ INVESTMENT GROUP, SUBADVISER TO THE FUND FUND ADVISOR Absolute Investment Advisers Founded 2004 Pioneer in liquid alternatives Focus on unique managers FUND SUB-ADVISOR Kovitz Investment Group Partners Founded 2003 Strategies across multiple assets Firm AUM = $5 billion FUND ABSOLUTE & KOVITZ 10+ years working together Kovitz = Sub-Adviser to Absolute Strategies Fund (multi-manager) since 2007 $500m in mutual fund sleeve assets at peak Shared focus on fundamental value investing CAPOX Inception Date 12/30/15 5

6 CAPITAL OPPORTUNITIES FUND :: Absolute Capital Opportunities Fund (CAPOX) at a Glance Long & Short Equity with Opportunistic Tail Hedges Mutual Fund with Daily Liquidity Modeled on Hedge Fund with LT Track Record Cohesive Team with Long Tenure Together Highly Differentiated Strategy Disciplined, Fundamental Value Approach 6

7 CAPITAL OPPORTUNITIES FUND - Differentiators :: Why CAPOX is Different in a crowded Long/Short Space Low Correlations to Stocks & Bonds Majority of Returns have been from Alpha Differentiated Hedging Program, not just shorting stocks to call it Long-Short Multiple ways to Generate Returns 7

8 CAPITAL OPPORTUNITIES FUND - Performance 30% CAPOX Total Returns vs. HFRX Equity Hedge Index Cumulative Returns 12/30/2015 to 11/30/ % 20% 15% CAPOX: 20.70% Beta to S&P 500: % 5% 0% HFRX Equity Hedge Index: 3.94% Beta to S&P 500: % -10% CAPOX HFRXEH Performance data quoted represents past performance and is no guarantee of future results Source: Bloomberg 8

9 CAPITAL OPPORTUNITIES FUND - Performance 30% CAPOX total returns vs. Commonly Used Alt Strategies Cumulative Returns 12/30/2015 to 11/30/ % 20% CAPOX: 20.70% 15% 10% 5% 0% -5% -10% HFRX Merger Arbitrage Index: 4.99% HFRX Global Hedge Fund Index: 3.17% HFRX Macro/CTA Index: -4.98% HFRX Equity Market Neutral Index: -6.25% CAPOX HFRXGL HFRXEMN HFRXM HFRXMA Performance data quoted represents past performance and is no guarantee of future results Source: Bloomberg 9

10 CAPITAL OPPORTUNITIES FUND - Performance :: Alpha Can Be Lumpy Leading to Long-Term Out-Performance 30% CAPOX Total Returns vs. HFRX Equity Hedge Index 12/30/2015 to 11/30/ % 20% 15% 10% 5% CAPOX Why? 1. Variable net exposure 2. Monetizing volatility 3. Market at Extremes 0% -5% HFRX Equity Hedge Index -10% CAPOX HFRXEH Performance data quoted represents past performance and is no guarantee of future results Source: Bloomberg 10

11 CAPITAL OPPORTUNITIES FUND - Performance :: Performance During 2018 Market Drawdowns January 26 to February 8 September 20 to November 23 3% 3% 1% 0% 0% 1% -1% -1% -3% -3% -5% -5% -7% -7% -9% -9% -11% -11% S&P 500 HFRX Equity Hedge CAPOX S&P 500 HFRX Equity Hedge CAPOX % -3.63% +2.25% -9.88% -6.25% +0.74% Performance data quoted represents past performance and is no guarantee of future results Source: Bloomberg 11

12 CAPITAL OPPORTUNITIES FUND - Source of Returns :: How CAPOX Can Generate Returns Long Stock Selection Value Oriented Concentrated, positions Sector & Market Cap agnostic Approach public markets with private equity time horizon Short Stocks Single names used sparingly, or at times of extreme valuation disparity Options often used to limit risk and construct payoff profiles Indices used when stocks or options not priced attractively Tail Hedges Both upside and downside Built off of our fundamental equity research Long Vol Monetizing spikes in vol can help balance periods when value under-performs 12

13 CAPITAL OPPORTUNITIES FUND - Options :: Many Long-Short Equity Strategies Have Performed Poorly since Financial Crisis High Correlations ---- less alpha from stock picking Low Volatility less profit from trading around names Low Rates ---- lower rebates, higher borrowing costs for single name shorts This has lead us to a greater use of the options market to express our fundamental views, particularly on the short side. Options can allow for fixed costs and structuring asymmetric risk-reward payoffs. 13

14 CAPITAL OPPORTUNITIES FUND - Options :: How CAPOX Uses Options Purposely conservative Opportunistic based on pricing, don t need to use all the time Key is structuring low fixed cost with high potential upside Used when optimal to express a fundamental view on portfolio exposure Long calls or long puts = upside and downside tail hedges Short puts or short calls = collect premium at strike prices where we d buy or sell a stock anyway (fully collateralized /cash needs to be set aside) 14

15 CAPITAL OPPORTUNITIES FUND - Challenges :: Bad Environments for CAPOX Low volatility Value underperforming growth/market Low interest rates High correlations CAPOX has generated moderate returns despite being in this environment a majority of time since fund launch (2015). The Fund has generated returns while maintaining low overall net exposure. 15

16 ABSOLUTE CAPITAL OPPORTUNITIES FUND Biographies :: Portfolio Management Mitchell A. Kovitz, Founder & Principal, Portfolio Manager 2003 Present: Kovitz Investment Group, Founder & Principal, Portfolio Manager : Rothschild Investment Corporation, President : Rothschild Investment Corporation, COO : Rothschild Investment Corporation, Financial Advisor : Arthur Andersen & Co, Tax Associate Jonathan A. Shapiro, Founder & Principal, Portfolio Manager 2003 Present: Kovitz Investment Group, Founder & Principal, Portfolio Manager : Rothschild Investment Corporation, Portfolio Manager : Vector Securities, Analyst : KPMG and Towers Perrin, Management Consultant Joel D. Hirsh, 2003 Principal, Portfolio Manager 2006 Present: Kovitz Investment Group, Principal, Portfolio Manager : KeyBanc Capital Markets, a Division of McDonald Investments, Equity Research 16

17 ABSOLUTE INVESTMENT ADVISERS :: Absolute & Mutual Fund Structure ABSOLUTE INVESTMENT TEAM: Jay Compson, Portfolio Manager Principal & Founder Absolute Investment Advisers Nathan Houser, Vice President, Portfolio Management David Faherty, General Counsel Chief Compliance Officer Neil Kristian, Vice President, Operations and Administration FEATURES & BENEFITS: Daily Pricing Daily Liquidity 1099 Tax Reporting (No limited partnership agreements or K-1) Independent administration through the Forum Funds Trust and Atlantic Fund Services: o Bank Custody of Assets through MUFG Union Bank, N.A. o Accounting, Pricing & Administration o BBD LLP, Auditor o Independent Chief Compliance Officer o K&L Gates LLC, Fund Counsel o Independent Board Of Trustees o Seward & Kessel LLP, Independent Trustee & Counsel 17

18 Brian Hlidek Whit Wannamaker Chris Ward x x SHIPYARD DRIVE, SUITE 3C HINGHAM, MA