Thursday, March 9, 2017
February 2017 Commentary
Having a background in the music business, I have a keen ability to keep track of “records”. However, during the
month of February, my mind was blown away by the number of records being achieved on Bay and Wall Streets.
Up until and including Feb 28th we had 50 straight trading days where the S&P 500 had not moved 1% or more, up
or down; and then indices broke out on March 1st (after Donald Trump’s speech). If one looks back historically to
when we have had long streaks (50 days +) of subdued returns (< 1%) with an upside breakout as we experienced
on March 1st, it gets pretty interesting. In other words, if history is a guide, markets may experience a high degree
of volatility in the near future.
Previous incidents of limited volatility with resultant sharp index movements:
April 29, 1954 – Led to uninterrupted upside
June 11, 1957 – Significant weakness over the next 6 months
September 13, 1967 – Significant weakness over the next 6 months (7% drop)
July 24, 1972 – Rallied 4% in the next month then a year of volatility where it was almost all given back
October 14, 1993 – Flattish next 3 months then a drop of 4%
December 4, 1995 – Led to uninterrupted upside right into the Internet bubble
We share the view that volatility may rise; hence, a moderate portfolio positioning has been warranted. However,
despite maintaining our conservative stance during the month, Forge First Long Short LP Class F Lead Series
(“FFLSLP”) ended February down -1.44% and Forge First Multi Strategy LP Class F Lead Series (“FFMSLP”) ended
down -0.36%. Please see fund commentary section for more details on portfolio positioning and monthly
performance attribution.
Performance and Risk Analysis as at February 28, 20171
YTD
1 mo
3 mo
6 mo
1 year
2 year
3 year
Inception
Inception
(Annualized)
Forge First Long Short LP
(Class F Lead Series)
-1.79%
-1.44%
0.54%
3.10%
5.63%
12.49%
32.68%
133.19%
20.29%
Forge First Multi Strategy LP
(Class F Lead Series)
-0.81%
-0.36%
0.88%
2.94%
4.49%
9.04%
22.78%
91.58%
15.24%
TSX Total Return
1.06%
0.21%
2.74%
6.93%
23.24%
7.31%
18.38%
51.34%
9.46%
S&P 500 Total Return (US$)
5.94%
3.97%
8.04%
10.01%
24.98%
17.24%
35.42%
89.14%
14.92%
Note: Returns for the Forge First funds are based on the August 2012 Class F Lead Series and are net of all fees and expenses. In a year, up to
12 series can be created within a Class of units. Unitholders are advised to refer to their monthly statement for the net return of their
respective Class and Series. Returns expressed in this table are “time-weighted” and are not the same as the mandated “money-weighted”
returns used in the production of client statements effective December 31, 2015. All returns are in local currencies.
1 DISCLAIMER: This document is for information purposes only and does not constitute an offering memorandum. Readers of this information are expressly cautioned to seek the advice of a
registered investment advisor or other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed
above. Please review the most recent offering memorandum for a detailed description of Forge First’s funds, the fund’s strategies, objectives and risk factors. All information has been obtained from
sources believed to be reliable; however, the information’s accuracy cannot be guaranteed. The 2017 results are unaudited, net of all fees and expenses, and are based on our best estimates at the
time of this report. All returns are in local currencies. Returns expressed in this commentary are “time-weighted” and are not the same as mandated “money-weighted” returns used in the
production of client statements effective December 31, 2015. The return figures for the S&P 500 and the TSX are based on the “Total Return” figures of the associated index. Volatility and
correlation are calculated from monthly returns. The Sharpe ratio is hypothetical and is calculated using monthly standard deviation, 1% risk-free rate and net returns since the fund’s inception in
August 2012 for the Class F Lead Series of the Limited Partnership. Class F is the Founders Class and has a reduced fee structure. The Forge First Long Short Trust invests substantially all of its
assets in Class T units of the Forge First Long Short LP, and the Forge First Multi Strategy Trust invests substantially all of its assets in Class T units of the Forge First Multi Strategy LP. Profit
allocation for the Trust is payable on Class T units of the Limited Partnership. The Forge First Funds are currently open to Canadian investors who meet certain eligibility requirements. Please
contact Forge First Asset Management Inc. to request the offering documents and to speak with a registered dealing representative. Past performance is not indicative of future results.
As at February 28, 2017
Annualized volatility:
Sharpe Ratio:
Forge First Long Short LP
(Class F Lead Series)
Forge First Multi Strategy LP
(Class F Lead Series)
TSX Total Return
8.38%
6.64%
7.84%
2.30
2.14
1.08
Alpha:
16%
13%
0%
Beta (vs. TSX):
0.40
0.20
1.00
Correlation (vs. TSX):
0.37
0.24
1.00
Best monthly return:
8.38%
5.86%
5.28%
Worst monthly return:
-3.96%
-2.87%
-4.04%
Largest drawdown:
-5.88%
-5.26%
-14.28%
Average return when TSX is up:
1.93%
1.35%
1.98%
Average return when TSX is down:
0.80%
0.88%
-1.90%
73.22%
51.41%
75.31%
13.66%
14.97%
-32.33%
Upside capture:
97%
68%
100%
Downside capture:
-42%
-46%
100%
Cumulative return in positive TSX
months (38 months):
Cumulative return in negative TSX
months (17 months):
1 See disclaimer.
Macro Commentary
There certainly is no shortage of Bull and Bear forecasts out there. Be it RBC’s uber-bullish 2500 target on the S&P
500; Bank of America’s March 1st 2017 year-end S&P 500 target increase to 2450 from 2300 (largely driven by
sentiment and technicals versus its intrinsic value of 2230); the notion that the market could peak in Q2 (Elliot
Wave studies), or the GDP cuts from JP Morgan and Goldman Sachs (JPM cut its Q1 GDP forecast even lower to
1.5% from 2.0%, and Goldman lowered its forecast by three-tenths to match the Atlanta Fed's) – we will surely be
in for some wild swings.
While recent earnings results have been decent, three main drivers appear to account for the majority of the
current market rally: Animal Spirits, ETF Purchases and Hedge Fund repositioning.
Animal Spirits
As I discussed in our January 2017 commentary (LINK), animal spirits had been driving the majority of the
sentiment; hence, equity market movements since the US election in November. The current lack of substantive
economic and policy details indicates that animal spirits are alive and well. When comparing current economic
figures with those of the past, one has to ask “how much more stimulus is required to get the economy going?” As
Figure 1 shows, it is amazing to see the lack of economic growth/recovery given the level of stimulus over the last
eight years. Under the Obama administration, the doubling of US Government debt failed to deliver a robust level
of economic growth. If the Trump administration can secure Congressional support, will another trillion dollars of
infrastructure spending by the Trump administration really help? I have been saying for several years that the
structural pairing of too much debt and unfavourable demographics is a major headwind for a return to “normal”
levels of economic growth. The globe is drowning in debt (currently 3.25X global GDP) and 10,000 Americans and
Europeans turn 65 each day. It will be very difficult for President Trump to fight this major macro trend.
However, I do acknowledge that the Q4 reporting season for the S&P 500 brought us out of the earnings recession
we had been suffering through for 18 months. However, as illustrated in Figure 2 there is a tug of war between
animal spirits, economic data and earnings forecasts.
1 DISCLAIMER: This document is for information purposes only and does not constitute an offering memorandum. Readers of this information are expressly cautioned to seek the advice of a registered
investment advisor or other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Please
review the most recent offering memorandum for a detailed description of Forge First’s funds, the fund’s strategies, objectives and risk factors. All information has been obtained from sources believed
to be reliable; however, the information’s accuracy cannot be guaranteed. The 2017 results are unaudited, net of all fees and expenses, and are based on our best estimates at the time of this report. All
returns are in local currencies. Returns expressed in this commentary are “time-weighted” and are not the same as mandated “money-weighted” returns used in the production of client statements
effective December 31, 2015. The return figures for the S&P 500 and the TSX are based on the “Total Return” figures of the associated index. Annualized Volatility, Correlation, Alpha, Beta, and Sharpe
Ratio are calculated from monthly net returns for the Class F Lead Series of the Limited Partnership since August 1, 2012. The Sharpe ratio is hypothetical and is calculated using monthly standard
deviation and a 1% risk-free rate. Class F is the Founders Class and has a reduced fee structure. The Forge First Long Short Trust invests substantially all of its assets in Class T units of the Forge First
Long Short LP, and the Forge First Multi Strategy Trust invests substantially all of its assets in Class T units of the Forge First Multi Strategy LP. Profit allocation for the Trust is payable on Class T units
of the Limited Partnership. The Forge First Funds are currently open to Canadian investors who meet certain eligibility requirements. Please contact Forge First Asset Management Inc. to request the
offering documents and to speak with a registered dealing representative. Past performance is not indicative of future results.
Figure 1.
Figure 2.
Source: 720 Global
Source: Tradingview.com
Figure 3 illustrates the recent divergence between the performance of the S&P 500 (white line) and economic
surprises (orange line). Meanwhile, Figure 4 displays how 2017 GAAP earnings forecasts for the S&P 500 (orange
line) and 2016 earnings forecast (white line) have trended lower during the past year. This data points to the need
to exhibit a level of caution. Of course, it is important to participate when markets go up, but the first priority of
preserving capital also implies that a degree of conservatism is appropriate at the present time.
Figure 3.
Source: Citigroup
Figure 4.
Source: Bloomberg
ETF Positioning
In the fight between alpha and beta, beta has clearly been winning the race of late. Returns attributable to “the
index” are the defining reason why active money is challenged at the present time to “beat the index”. Figure 5
shows the shares outstanding for the S&P 500 index ETF “SPY.US” and illustrates that since the election, and in
particular the Trump speech on February 28th, investors have piled into the S&P 500.
1 DISCLAIMER: This document is for information purposes only and does not constitute an offering memorandum. Readers of this information are expressly cautioned to seek the advice of a registered
investment advisor or other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Please
review the most recent offering memorandum for a detailed description of Forge First’s funds, the fund’s strategies, objectives and risk factors. All information has been obtained from sources believed
to be reliable; however, the information’s accuracy cannot be guaranteed. The 2017 results are unaudited, net of all fees and expenses, and are based on our best estimates at the time of this report. All
returns are in local currencies. Returns expressed in this commentary are “time-weighted” and are not the same as mandated “money-weighted” returns used in the production of client statements
effective December 31, 2015. The return figures for the S&P 500 and the TSX are based on the “Total Return” figures of the associated index. Annualized Volatility, Correlation, Alpha, Beta, and Sharpe
Ratio are calculated from monthly net returns for the Class F Lead Series of the Limited Partnership since August 1, 2012. The Sharpe ratio is hypothetical and is calculated using monthly standard
deviation and a 1% risk-free rate. Class F is the Founders Class and has a reduced fee structure. The Forge First Long Short Trust invests substantially all of its assets in Class T units of the Forge First
Long Short LP, and the Forge First Multi Strategy Trust invests substantially all of its assets in Class T units of the Forge First Multi Strategy LP. Profit allocation for the Trust is payable on Class T units
of the Limited Partnership. The Forge First Funds are currently open to Canadian investors who meet certain eligibility requirements. Please contact Forge First Asset Management Inc. to request the
offering documents and to speak with a registered dealing representative. Past performance is not indicative of future results.
Interestingly, Figure 6 highlights a concurrent acceleration in insider selling. During the last week of February,
insider sale transactions on the NYSE outnumbered the purchase transactions by more than 11 to 1. This 11.47
reading is 3.5 standard deviations above the mean. According to Vickers, a publication of Argus Research, “the
number of insiders participating in the selling is significant. That would imply that equities might be ripe for some
level of correction”.
Figure 5.
Source: Bloomberg
Figure 6.
Source: Vickers
When we look at the S&P TSX it becomes obvious why the index is hitting all-time highs. Financials now make up
close to 40% of the S&P TSX Composite Index. Figure 7 illustrates the relative strength of the banks versus the rest
of the market. Since the US Election, Canadian banks have crushed the remainder of the index.
Figure 7.
Source: Bloomberg
Hedge Funds Repositioning
According to the algorithms in the Arora report, several players (mainly hedge funds) built up large short positions
on the belief that Trump would (once again) either go off script during his inaugural speech to Congress, thus
spooking the markets, or provide a lack of real policy “meat” for the markets to digest.
1 DISCLAIMER: This document is for information purposes only and does not constitute an offering memorandum. Readers of this information are expressly cautioned to seek the advice of a registered
investment advisor or other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Please
review the most recent offering memorandum for a detailed description of Forge First’s funds, the fund’s strategies, objectives and risk factors. All information has been obtained from sources believed
to be reliable; however, the information’s accuracy cannot be guaranteed. The 2017 results are unaudited, net of all fees and expenses, and are based on our best estimates at the time of this report. All
returns are in local currencies. Returns expressed in this commentary are “time-weighted” and are not the same as mandated “money-weighted” returns used in the production of client statements
effective December 31, 2015. The return figures for the S&P 500 and the TSX are based on the “Total Return” figures of the associated index. Annualized Volatility, Correlation, Alpha, Beta, and Sharpe
Ratio are calculated from monthly net returns for the Class F Lead Series of the Limited Partnership since August 1, 2012. The Sharpe ratio is hypothetical and is calculated using monthly standard
deviation and a 1% risk-free rate. Class F is the Founders Class and has a reduced fee structure. The Forge First Long Short Trust invests substantially all of its assets in Class T units of the Forge First
Long Short LP, and the Forge First Multi Strategy Trust invests substantially all of its assets in Class T units of the Forge First Multi Strategy LP. Profit allocation for the Trust is payable on Class T units
of the Limited Partnership. The Forge First Funds are currently open to Canadian investors who meet certain eligibility requirements. Please contact Forge First Asset Management Inc. to request the
offering documents and to speak with a registered dealing representative. Past performance is not indicative of future results.
Figure 8.
Source: TheAroraReport.com
Figure 8 above shows the time line from February 28th through March 1st on the horizontal axis and the S&P 500
on the vertical axis. It highlights that the shorts were adding to their positions the day before the speech. After
Trump appeared to be conciliatory and calm during his speech, futures markets pointed higher and in the morning
the stock market gapped up at the open. Computers and “algos” took over, buying aggressively therefore forcing
shorts to cover which exaggerated the move higher.
Figure 9.
Source: EIA, Bloomberg
Figure 10.
Source: Pension Partners
1 DISCLAIMER: This document is for information purposes only and does not constitute an offering memorandum. Readers of this information are expressly cautioned to seek the advice of a registered
investment advisor or other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Please
review the most recent offering memorandum for a detailed description of Forge First’s funds, the fund’s strategies, objectives and risk factors. All information has been obtained from sources believed
to be reliable; however, the information’s accuracy cannot be guaranteed. The 2017 results are unaudited, net of all fees and expenses, and are based on our best estimates at the time of this report. All
returns are in local currencies. Returns expressed in this commentary are “time-weighted” and are not the same as mandated “money-weighted” returns used in the production of client statements
effective December 31, 2015. The return figures for the S&P 500 and the TSX are based on the “Total Return” figures of the associated index. Annualized Volatility, Correlation, Alpha, Beta, and Sharpe
Ratio are calculated from monthly net returns for the Class F Lead Series of the Limited Partnership since August 1, 2012. The Sharpe ratio is hypothetical and is calculated using monthly standard
deviation and a 1% risk-free rate. Class F is the Founders Class and has a reduced fee structure. The Forge First Long Short Trust invests substantially all of its assets in Class T units of the Forge First
Long Short LP, and the Forge First Multi Strategy Trust invests substantially all of its assets in Class T units of the Forge First Multi Strategy LP. Profit allocation for the Trust is payable on Class T units
of the Limited Partnership. The Forge First Funds are currently open to Canadian investors who meet certain eligibility requirements. Please contact Forge First Asset Management Inc. to request the
offering documents and to speak with a registered dealing representative. Past performance is not indicative of future results.
Beyond these three macro factors, I am keeping my eye on oil prices, high yield spreads and the March 15th “trifecta” – US interest rate decision, US debt ceiling is due and outcome of Dutch election. Oil prices have been
range-bound for a couple of months now. Figure 9 above provides a likely answer as to why this has been the
case. OPEC has followed through with a majority of their announced supply cuts; however, US shale players have
ramped up supply. Drill rig count continues to move higher in the US; hence, it’s hard to see how production slows
unless prices fall. In fact, by latter 2017, US supply is likely to have risen by as much as 800,000 barrels.
It’s also interesting to note the amount of hedging taking place by US energy companies in the face of all-time
high levels of net-long futures positions. Meanwhile, high yield spreads are at historic tights/lows. These facts raise
the question as to how willing OPEC is to suffer further production cuts and how much more can credit spreads
tighten. My view is not much on either account.
Finally, March 15th will be a big day as three significant economic and political events take place:
1.
2.
3.
Dutch elections: Right or left wing Government?
US debt ceiling: Will Congress increase the limit on borrowing and avoid a Government shut down?
Will the Fed raise rates at its March 15th meeting?
President Trump had plenty to say on February 28th before Congress about increased spending on defense,
infrastructure, a US$23 billion wall along the southern border with Mexico and billions of dollars more for steep tax
cuts – but not a word about the looming $20 trillion national debt. There are any number of reasons why Trump
may have decided to duck the subject of the debt such as a reluctance to explain to conservatives his campaign
pledge not to cut Social Security and Medicare, the two premier federal entitlements that are the primary drivers
of the long-term debt.
Figure 11.
Source: US Treasury
Given Trump’s frequent references to the historic flow of government red ink throughout his campaign, Trump was
stone silent during his speech to congress about the challenges of slowing the growth of publicly held debt, which
currently is on track to grow to 77% of GDP by 2025 (according to the Congressional Budget Office). The stakes
couldn’t be higher! Failure to raise the debt ceiling would do irreparable harm to the US credit rating, trigger an
uproar in US and global markets, drive up the future cost of borrowing, postpone Social Security payments and tax
returns and force the layoff of non-essential government workers.
Perhaps President Trump believes the solution is to simply negotiate down the $20 trillion in debt with major US
creditors (China and Japan). The world will be watching on March 15th.
1 DISCLAIMER: This document is for information purposes only and does not constitute an offering memorandum. Readers of this information are expressly cautioned to seek the advice of a registered
investment advisor or other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Please
review the most recent offering memorandum for a detailed description of Forge First’s funds, the fund’s strategies, objectives and risk factors. All information has been obtained from sources believed
to be reliable; however, the information’s accuracy cannot be guaranteed. The 2017 results are unaudited, net of all fees and expenses, and are based on our best estimates at the time of this report. All
returns are in local currencies. Returns expressed in this commentary are “time-weighted” and are not the same as mandated “money-weighted” returns used in the production of client statements
effective December 31, 2015. The return figures for the S&P 500 and the TSX are based on the “Total Return” figures of the associated index. Annualized Volatility, Correlation, Alpha, Beta, and Sharpe
Ratio are calculated from monthly net returns for the Class F Lead Series of the Limited Partnership since August 1, 2012. The Sharpe ratio is hypothetical and is calculated using monthly standard
deviation and a 1% risk-free rate. Class F is the Founders Class and has a reduced fee structure. The Forge First Long Short Trust invests substantially all of its assets in Class T units of the Forge First
Long Short LP, and the Forge First Multi Strategy Trust invests substantially all of its assets in Class T units of the Forge First Multi Strategy LP. Profit allocation for the Trust is payable on Class T units
of the Limited Partnership. The Forge First Funds are currently open to Canadian investors who meet certain eligibility requirements. Please contact Forge First Asset Management Inc. to request the
offering documents and to speak with a registered dealing representative. Past performance is not indicative of future results.
Funds Commentary
In the type of market we are experiencing today, our funds are positioned with three points in mind:
1.
To Protect and Participate
We are positioned net long to participate should the market continue to move higher
We are hedging risk through our short book which consists of individual positions and large cap index and
sector ETFs
Utilize an S&P 500 index put option overlay strategy to add a further layer of protection
2.
Non-Indexed Exposures – Screen for Overlooked and Underfollowed Companies
Top 5 Forge First long holdings (as at February 28, 2017): Medicure Inc., TransCanada Corporation,
Northland Power Inc., Cargojet Inc. and TransAlta Corporation
Top 5 TSX holdings (as at February 28, 2017): Royal Bank of Canada, TD Bank, Bank of Nova Scotia,
Enbridge Inc. and Canadian National Railway Company
Examples of Shorts: Metro Inc., CIBC, Suncor Energy Inc., BCE Inc., SPDR S&P 500 ETF (SPY.US),
Powershares QQQ Trust Series ETF (QQQ.US), SPDR Dow Jones ETF (DIA.US)
3.
Flexibility
Listen to the market, don’t be dogmatic, adapt the portfolios, be opportunistic
Manage net exposures, gear down or up
During the month, the funds were positioned defensively. At the end February, FFLSLP and FFMSLP had a net long
exposure of 8.6% and 12.7%, respectively, to both convertible shares and preferred shares. Ex these positions, the
net long equity exposure for the funds stood at 47% for FFLSLP and 32% for FFMSLP.
Despite maintaining our conservative stance during the month, FFLSLP ended February 2017 down -1.44% and
FFMSLP ended down -0.36% (Class F Lead Series).
The funds have been layering on ETF put exposure to both the S&P 500 and TSX indices. This combination of
defensive positions and our short book detracted from performance during as the indices have continued to grind
higher. It remains a challenge to outperform a Teflon market that has not seen any major pullbacks. I’d like to
stress that while our short book detracted from performance during the month, it remains a critical component of
our portfolio construction to help the funds deliver on their primary goal to protect client capital. FFLSLP and
FFMSLP have negative downside capture ratios of -42% and -46%, respectively. In simple terms, what this means is
that since inception, if the TSX was down 10%, our funds would have been up 4.2% and 4.6% versus the TSX. The
short position returns have been positive in 16 of the 17 months that the TSX has been down.
One of the thematic sector trades we currently favour in the portfolios is exposure to lumber stocks. At the
beginning of February, we increased our position in a basket of lumber stocks such as Interfor Corporation, Canfor
Corporation, West Fraser Timber and Weyerhaeuser Company. We also augmented these positions with additional
call options of which the notional exposure further increased our exposure that we held in the equities. The driver
behind our increased position was that lumber prices started increasing as producers shifted supply to markets
outside the US ahead of potential US duties in April. Despite this view working favourably in the portfolios this
month, our overall net long exposure to the Materials sector, index short exposure and underweight positioning in
Canadian Financials cemented the funds’ underperformance this month. Materials were the largest sector detractor
1 DISCLAIMER: This document is for information purposes only and does not constitute an offering memorandum. Readers of this information are expressly cautioned to seek the advice of a registered
investment advisor or other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Please
review the most recent offering memorandum for a detailed description of Forge First’s funds, the fund’s strategies, objectives and risk factors. All information has been obtained from sources believed
to be reliable; however, the information’s accuracy cannot be guaranteed. The 2017 results are unaudited, net of all fees and expenses, and are based on our best estimates at the time of this report. All
returns are in local currencies. Returns expressed in this commentary are “time-weighted” and are not the same as mandated “money-weighted” returns used in the production of client statements
effective December 31, 2015. The return figures for the S&P 500 and the TSX are based on the “Total Return” figures of the associated index. Annualized Volatility, Correlation, Alpha, Beta, and Sharpe
Ratio are calculated from monthly net returns for the Class F Lead Series of the Limited Partnership since August 1, 2012. The Sharpe ratio is hypothetical and is calculated using monthly standard
deviation and a 1% risk-free rate. Class F is the Founders Class and has a reduced fee structure. The Forge First Long Short Trust invests substantially all of its assets in Class T units of the Forge First
Long Short LP, and the Forge First Multi Strategy Trust invests substantially all of its assets in Class T units of the Forge First Multi Strategy LP. Profit allocation for the Trust is payable on Class T units
of the Limited Partnership. The Forge First Funds are currently open to Canadian investors who meet certain eligibility requirements. Please contact Forge First Asset Management Inc. to request the
offering documents and to speak with a registered dealing representative. Past performance is not indicative of future results.
from the S&P/TSX Composite index in February (-3.78%) where Canadian Financials (now representing
approximately 40% of the index) added 1.12% to the index’s performance.
For the remainder of the portfolios, some of the contribution to positive performance during the month was
generated from long positions in Restaurants Brands International Inc. (QSR.CA), Interfor Corporation (IFP.CA), the
US dollar, Hudson’s Bay Company (HBC.CA) and Tricon Capital Group Inc. (TCN.CA). Short positions in AutoNation
Inc. (AN.US), Boardwalk REIT (BEI.UN.CA) and TFI International Inc. (TFII.CA) also contributed to positive
performance.
Some of the detractors from performance during the month were long positions in Northern Dynasty Minerals
(NDM.CA), Medicure Inc. (MPH.CA), Sherritt International Corporation (S.CA), Fannie Mae (FNMA.US) and
TransAlta Corporation (TA.CA). Short positions in S&P 500 ETF (SPY.US), SPDR Dow Jones Industrial Average
ETF (DIA.US) and HP Inc. (HPQ.US) also detracted from performance this month.
We remain confident that we will continue to offer a competitive advantage and provide the flexibility to navigate
these uncertain markets by delivering on our three investment goals: 1) asset protection, 2) building broadly
diversified portfolios (currently our lower volatility Multi Strategy fund has 230 positions) and 3) earning a
competitive rate of risk-adjusted return.
As always, we welcome any feedback, and for more information please visit our website at www.forgefirst.com.
Thank you,
Andrew McCreath, CFA
President and CEO
D: 416-687-6771
E: [email protected]
1 DISCLAIMER: This document is for information purposes only and does not constitute an offering memorandum. Readers of this information are expressly cautioned to seek the advice of a registered
investment advisor or other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Please
review the most recent offering memorandum for a detailed description of Forge First’s funds, the fund’s strategies, objectives and risk factors. All information has been obtained from sources believed
to be reliable; however, the information’s accuracy cannot be guaranteed. The 2017 results are unaudited, net of all fees and expenses, and are based on our best estimates at the time of this report. All
returns are in local currencies. Returns expressed in this commentary are “time-weighted” and are not the same as mandated “money-weighted” returns used in the production of client statements
effective December 31, 2015. The return figures for the S&P 500 and the TSX are based on the “Total Return” figures of the associated index. Annualized Volatility, Correlation, Alpha, Beta, and Sharpe
Ratio are calculated from monthly net returns for the Class F Lead Series of the Limited Partnership since August 1, 2012. The Sharpe ratio is hypothetical and is calculated using monthly standard
deviation and a 1% risk-free rate. Class F is the Founders Class and has a reduced fee structure. The Forge First Long Short Trust invests substantially all of its assets in Class T units of the Forge First
Long Short LP, and the Forge First Multi Strategy Trust invests substantially all of its assets in Class T units of the Forge First Multi Strategy LP. Profit allocation for the Trust is payable on Class T units
of the Limited Partnership. The Forge First Funds are currently open to Canadian investors who meet certain eligibility requirements. Please contact Forge First Asset Management Inc. to request the
offering documents and to speak with a registered dealing representative. Past performance is not indicative of future results.