ABSOLUTE CAPITAL OPPORTUNITIES FUND
[ CAPOX ]

FUND INTRODUCTION

 

 

Q221

 

PRINCIPAL INVESTMENT RISKS

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 be exposed to varying forms of risk. The Fund is nondiversified and may focus its investments in the securities of a comparatively small number of issuers. Concentration in securities of a limited number of issuers exposes a fund to greater market risk and potential monetary losses than if its assets were diversified among the securities of a greater number of issuers. The Fund may invest in smalland medium-sized companies which involve greater risk than investing in larger, more established companies, such as increased volatility of earnings and prospects, higher failure rates, and limited markets, product lines or financial resources.

The Fund may invest in foreign or emerging markets securities which involve special risks, including the volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. The Fund may invest in debt securities which are subject to interest rate risk. An increase in interest rates typically causes a fall in the value of the debt securities in which the Fund may invest. The Fund may also invest in high yield, lower rated (junk) bonds which involve a greater degree of risk and price fluctuation than investment grade bonds in return for higher yield potential.

The Fund may purchase securities of companies in initial public offerings. Special risks associated with these securities may include a

limited number of shares available for trading, unseasoned trading, lack of investor knowledge of the company and limited operating history. The Fund may leverage transactions which include selling securities short as well as borrowing for other than temporary or emergency purposes. Leverage creates the risk of magnified capital losses.

The Fund may also invest in 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. 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.

If the Fund buys back a security it has sold short at a higher price, the Fund will incur a loss on the transaction. Because the loss on a short sale stems from increases in the value of the security sold short, the extent of such loss is theoretically unlimited. Short salesmay decrease the liquidity of the Fund and may create leverage, which may cause relatively smaller adverse market movement to have a disproportionate impact on the Fund’s performance.

Investors should carefully consider the Fund’s investments objectives, risks, charges and expenses before investing. This and other information is in the prospectus, a copy of which may be obtained by calling (888) 992-2765 or visiting the Fund’s web site: www.absoluteadvisers.com. Please read the prospectus carefully before you invest.

Foreside Fund Services, LLC, distributor

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 and one ETF:

•     Absolute Strategies Fund (ASFIX)
•    Absolute Convertible Arbitrage Fund (ARBIX)
•    Absolute Capital Opportunities Fund (CAPOX)
•   Absolute Core Strategy ETF (ABEQ)

Hypothetical asset allocation including the ABSOLUTE FUNDS

The Absolute Core Strategy ETF (ABEQ) is distributed by Northern Lights Distributors, LLC.
Northern Lights Distributors, LLC and Foreside Fund Services, LLC are not affiliated

FUND & ADVISERS

The Fund

The Absolute Capital Opportunities Fund (CAPOX) was launched in 2015 and is modeled on a hedged strategy managed by Kovitz Investment Group with a 20-year track record. The Fund utilizes a value based long-short equity strategy run with a long-term time horizon, while dynamically hedging overall market exposure. The Fund seeks to provide long-term capital appreciation with an emphasis on risk adjusted returns.

  • Absolute Investment Advisers, the Fund’s Adviser, was founded in 2004 and specializes in implementing alternative strategies in liquid investment structures.
  • KovitzInvestment Group, the Fund’s Sub-Adviser, was founded in 2003 and manages over $5b in assets across multiple investment strategies and asset classes.

FUND PERFORMANCE

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 nvestor’s shares, when redeemed, may be worth more or less than the original cost. Annualized returns current to the most recent month end can be obtained by calling the Fund at 888-99-ABSOLUTE. Some of the Fund’s fees were waived or expenses reimbursed; otherwise, returns would have been lower.

The Fund’s total annual operating expense ratio (gross) is 1.91% and the net expense ratio is 1.82% through August 1, 2021. 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% through August 1, 2022 (the “Expense Cap”) and to 1.49% when the Fund reaches $125 million in assets under management. This Expense Cap, which excludes all taxes, interest, portfolio transaction expenses, dividend and interest expenses on short sales, acquired fund fees and expenses, broker fees, proxy expenses and extraordinary expenses, may only be raised or eliminated with the consent of the Board of Trustees.

FUND PERFORMANCE

See last of the document for term and index definitions
Performance data quoted represents past performance and is no guarantee of future results

FUND ALPHA, BETA & CORRELATION

See last of the document for term and index definitions.
Performance data quoted represents past performance and is no guarantee of future results

FUND ALPHA, BETA & CORRELATION

See last of the document for term and index definitions
Performance data quoted represents past performance and is no guarantee of future results

FUND ALPHA, BETA & CORRELATION

Differentiators (What’s Different about the Fund?)

•    Net exposure will vary over time based on absolute & relative valuations

Many long-short funds operate in a tight range of net exposures

•    Significant use of options, especially to achieve short exposure

Shorting individual stocks has been a source of negative alpha for many long-short funds

•    Return potential can come from stock selection, broad market moves, or volatility

Many long-short funds rely on a single source of returns

•    Performance has been alpha-oriented rather than beta-oriented (see page 7)

Many long-short funds just rise and fall with broader equity market indices

PORTFOLIO MANAGEMENT– Biographies

Portfolio Management

Mitchell A. Kovitz, CFA

Founder & Principal, Co-Chief Investment Officer

  • Industry start: 1989
  • Firm start: 2003
  • Education: University of Illinois at Urbana –Champaign, BS; University of Illinois, MST

Joel D. Hirsh, CFA

Principal, Co-Chief Investment Officer

  • Industry Start: 2004
  • Firm Start: 2006
  • Education: University Of Michigan, BA

Mark C. Rosland

Principal, Portfolio Manager

  • Industry Start: 2001
  • Firm Start: 2003
  • Education: University of Iowa, BA

DEFINITIONS

The HFRX (Hedge Fund Research) Equity Hedge Index includes strategies that maintain positions both long and short in primarily equity and equity derivative securities. Equity Hedge managers typically maintain at least 50%, and may in some cases be substantially entirely invested in equities, both long and short.

Correlation is a statistic that measures the degree to which two securities move in relation to each other.

Alpha is the excess returns earned on an investment above the benchmark return and is often considered to represent the value that a portfolio manager adds to or subtracts from a fund’s return.

Beta is the measure of a fund’s relative volatility as compared to the S&P 500 Index which by definition is 1.00. Accordingly, a fund with a 1.10 beta is expected to perform 10% better than the Index in up markets and 10% worse in down markets.

The S&P 500, or simply the S&P, is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.

Options are financial derivatives that give buyers the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price and date.

Brian Hlidek
bhlidek@absoluteadvisers.com
781.740.1904 x202

Whit Wannamaker
wwannamaker@absoluteadvisers.com
813.639.0034

Chris Ward
cward@absoluteadvisers.com
781.740.1904 x203

4 North Street
HINGHAM, MA. 02043
781.740.1904
www.absoluteadvisers.com