ABSOLUTE Funds

Absolute Convertible Arbitrage Fund  [ARBIX & ARBOX]

Inception Date:
October 1, 2002

Structure:
Open-End Mutual Fund

Tickers:
ARBIX & ARBOX

Share Classes:
I-Share & NTF

Fund Admin:
Ultimus Fund Solutions, LLC

Distributor:
Ultimus Fund Distributors, LLC

The Absolute Convertible Arbitrage Fund [ARBIX / ARBOX] seeks to achieve positive absolute returns over the long-term with low volatility when compared to traditional market indices. To achieve this, the Fund takes advantage of the relationship between a company’s convertible bonds and its common stock in order to pursue value across credit, income and volatility factors.

The Fund is designed to complement either the alternatives or fixed income sleeve of a diversified portfolio and may be attractive to investors seeking moderate return with relatively low volatility.

In August 2017, the Absolute Convertible Arbitrage Fund was converted from a hedge fund managed by Mohican Financial Management since 2002 to the current mutual fund.   In September 2021 Mohican was acquired by Absolute Investment Advisers LLC.

ARBIX: Institutional Share Class
ARBOX: Investor Share Class, No transaction fee (NTF)
(See the Absolute Funds Prospectus for details and fee information)

Best Fund, Alternative Equity Market Neutral Funds, over 5 Years

REFINITIV LIPPER FUND AWARDS:
Ranked #1 of 13 funds (31 Share Classes) for the 5-year award period in the Alternative Equity Market Neutral Funds Classification for the United States, 2023 (as of March 8, 2023)

The Refinitiv Lipper Fund Awards, granted annually, highlight funds and fund companies that have excelled in delivering consistently strong risk-adjusted performance relative to their peers. The Refinitiv Lipper Fund Awards are based on the Refinitiv Lipper Leader for Consistent Return rating, which is a risk-adjusted performance measure calculated over 36, 60 and 120 months. The fund with the highest Refinitiv Lipper Leader for Consistent Return (Effective Return) value in each eligible classification wins the Refinitiv Lipper Fund Award. For more information, see www.lipperfundawards.com. Although Refinitiv makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Refinitiv. © 2023 Refinitiv. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. The printing, copying, redistribution, or retransmission of this Content without express written permission is prohibited).

Best Fund, Alternative Equity Market Neutral Funds, over 3 Years

REFINITIV LIPPER FUND AWARDS:
Ranked #1 of 19 funds for the 3-year award period in the Alternative Equity Market Neutral Funds Classification for the United States, 2021 (as of March 11, 2021)

The Refinitiv Lipper Fund Awards, granted annually, highlight funds and fund companies that have excelled in delivering consistently strong risk-adjusted performance relative to their peers. The Refinitiv Lipper Fund Awards are based on the Refinitiv Lipper Leader for Consistent Return rating, which is a risk-adjusted performance measure calculated over 36, 60 and 120 months. The fund with the highest Refinitiv Lipper Leader for Consistent Return (Effective Return) value in each eligible classification wins the Refinitiv Lipper Fund Award. For more information, see www.lipperfundawards.com. Although Refinitiv makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Refinitiv. © 2021 Refinitiv. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. The printing, copying, redistribution, or retransmission of this Content without express written permission is prohibited).

Portfolio Management

The portfolio management team has its roots in Cooperstown, NY and is currently located in Wilton, CT.  Brothers Eric and Dan Hage founded Mohican Financial Management in 2002 after working on the convertible bond desks at various Wall Street firms. Their experience encompasses all aspects of the convertibles market – research, sales, proprietary trading and fund management. In September 2021 Mohican was acquired by Absolute Investment Advisers LLC where they continue their singular focus on convertible bonds through the Absolute Convertible Arbitrage Fund and Absolute Flexible Fund.

Eric Hage - Absolute Investment Advisers LLC - 2021-Present - Managing Director & Portfolio Manager, Absolute Convertible Arbitrage Fund & Absolute Flexible Fund

2002-2021, Mohican Financial Management, LLC, Co-Founder, CIO & Portfolio Manager. Mohican was sub-adviser for the Absolute Convertible Arbitrage Fund.
1999-2002, Salomon Smith Barney, Director of Convertible Arbitrage
1994-1999, Salomon Smith Barney, Institutional Trader of Convertible Securities
1991-1994, Bear Stearns, Managing Director & Co-Head of Sales of Convertible Securities
1989-1991, Smith Barney, Assistant Trader of Convertible Securities
Columbia, University Business School, MBA, Cornell University, B.S. in Economics

Daniel Hage - Absolute Investment Advisers LLC - 2021-Present - Managing Director & Portfolio Manager, Absolute Convertible Arbitrage Fund & Absolute Flexible Fund

2002 – 2021 Mohican Financial Management, LLC, Co-Founder, CCO & Portfolio Manager. Mohican was sub-adviser for the Absolute Convertible Arbitrage Fund.
2000-2002, CIBC World Markets, Sales Manager of Convertible Securities
1998-2000, Fahnestock, Convertible Bond Broker1995-1997, Murphy & Durieu, International & Domestic Convertible Bond Broker
University of Albany, MBA, LeMoyneCollege, B.S. in Business Administration

Fund Videos

The Benefits of Higher Rates
June 2023 (3 min)

Dakota Portfolio Manager
Interview December 2022

Topics Covered:
0:28:  How convertible arbitrage benefits
from higher rates

2:00:  Performance expectations &
high yield comparison

Topics Covered:
0:00:  Intro / PM Bio
2:30:  ARBIX customer base
4:27:  What is convertible arbitrage?
6:20:  Enviroment -Repricing & return expectations
9:00:  Converts vs corporates or high yield?
11:00: Carry advantage
12:00: How ARBIX differs from other convert arb options
13:00: Effect of rising rates
15:30: Investment team’s experience
20:00: 2022 review & 2023’s higher return valuations

Fund Literature

Fact Sheet

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Intro Presentation

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ARBIX / ARBOX Summary Prospectus

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Absolute Funds Prospectus

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Absolute Funds Statement of Additional Information (SAI)

Additional Resources:

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Convertible Arbitrage & ARBIX Explained

Convertible Arbitrage 101: Take-aways from convertible bonds, convertible arbitrage and ARBIX

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Convertible Arbitrage: Where does it Fit?

Explanation of how convertible arbitrage may fit in to fixed income or alternative portfolios. (data updated quarterly)

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Core Strength of Convertible Arbitrage

Explanation of the “return to fair value in a set time frame” benefit of convertible arbitrage (data updated quarterly)

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ARBIX Monthly Returns

(email request – financial professional use only)
Monthly Returns since 2002 (inception) are available for financial professionals upon request.

Recent Posts:

ARBIX Performance & Risk Data - Q323

Portfolio & Risk Statistics including: 3-Year rolling returns, performance in rising rate environments and comparable beta, volatility and draw-down data (this data is also available in the ARBIX Intro Presentation).

Shareholder Reports

Annual Report – Period Ending 3/31/23
Semi-Annual Report – Period Ending 9/30/22
Annual Report – Period Ending 3/31/22
Semi-Annual Report – Period Ending 9/30/21
Annual Report – Period Ending 3/31/21
Semi-Annual Report – Period Ending 9/30/20
Absolute Funds Information Statement – 9/17/20
Annual Report – Period Ending 3/31/20
Semi-Annual Report – Period Ending 9/30/19
Annual Report – Period Ending 3/31/19
Semi-Annual Report – Period Ending 9/30/18
Annual Report – Period Ending 3/31/18
Semi-Annual Report – Period Ending 9/30/17

Portfolio Commentary

Portfolio Commentary for the Absolute Convertible Arbitrage Fund is provided on a regular basis and can be found below along with other “discussion” articles that are relevant to the Fund. Additional information can be found within the shareholder letters in the Annual and Semi-Annual Reports. If you are a financial adviser and would like to be added to our e-mail distribution list, use the form at the bottom of the page or contact us by email.

Please note that this commentary provides a very detailed analysis of the Fund’s strategy. Some of this analysis may too technical for the average investor to fully understand. It is presented here for those who may have an interest in such a discussion and as always, we encourage investors to discuss questions with their financial adviser.

  • Q223 Portfolio Commentary
    “…It is important to note, however, that market conditions impacting the convertible arbitrage strategy – credit spreads, interest rates, equity volatility, and the Fed Funds rate, are constantly changing. These conditions do typically offset each other because of the hybrid and hedged nature of the strategy. This was the case in the second quarter. …With the average US convertible bond priced near par (100.4), there are ample opportunities to maintain a balanced approach among various trade profiles—equity-sensitive, balanced, and credit—allowing the potential for steady returns despite unpredictable changes in underlying market forces.” [read all]
  • Q123 Commentary
  • Q422 Portfolio Commentary
    “…the great repricing of 2022 is mostly done which puts convertibles in a much better position to make returns in the years ahead. Average convertible yields (greater of ytm/ytp) have jumped more than 400 basis points in less than 2 years. Also, convertibles now reflect an underlying risk free rate that is 300 basis points higher too. Fed Funds rates at over 4% now greatly enhance the stock rebates received on our stock shorts adding an additional source of return that was actually negative just 2 years ago.”  [read all]
  • Q322 Commentary
  • Q222 Commentary
  • Q122 Commentary

Fund Distribution Information

The Fund distributes income semi-annually in June and December and distributes long and short-term capital gains in December. This page will be updated with distribution amounts when the data becomes available.

If you are a financial adviser and would like to be added to our e-mail distribution list contact us by e-mail.

2023 Distributions
December – Income & Capital Gains Distributions per share.
Class Income Long-Term Capital Gains Short-Term Capital Gains
Class ARBIX Income – Long-Term Capital Gains —––——
 Short-Term Capital Gains –
Class ARBOX Income – Long-Term Capital Gains –
 Short-Term Capital Gains –
Class Ex Date Income – Long-Term Capital Gains – Short-Term Capital Gains –
Class Record Date Income – Long-Term Capital Gains – Short-Term Capital Gains –

.

June – Income Distributions per share.
Class Income
Class ARBIX Income $0.16619
Class ARBOX Income $0.15241
Class Ex Date Income 6/30/23
Class Record Date Income 6/29/23
2022 Distributions
December – Income & Capital Gains Distributions per share.
Class Income Long-Term Capital Gains Short-Term Capital Gains
Class ARBIX Income $0.10664 Long-Term Capital Gains $0.19357
 Short-Term Capital Gains $0.02998
Class ARBOX Income $0.09878 Long-Term Capital Gains $0.19357
 Short-Term Capital Gains $0.02998
Class Ex Date Income 12/30/22 Long-Term Capital Gains 12/13/22 Short-Term Capital Gains 12/13/22
Class Record Date Income 12/29/22 Long-Term Capital Gains 12/12/22 Short-Term Capital Gains 12/12/22

.

June – Income Distributions per share.
Class Income
Class ARBIX Income $0.02852 
Class ARBOX Income $0.01491 
Class Ex Date Income 6/30/22
Class Record Date Income 6/29/22
2021 Distributions
December – Income & Capital Gains Distributions per share.
Class Income Long-Term Capital Gains Short-Term Capital Gains
Class ARBIX Income $0.00 Long-Term Capital Gains $0.34358
 Short-Term Capital Gains $0.00540
Class ARBOX Income $0.00
 Long-Term Capital Gains $0.34358
 Short-Term Capital Gains $0.00540
Class Ex Date Income 12/31/21 Long-Term Capital Gains 12/14/21 Short-Term Capital Gains 12/14/21
Class Record Date Income 12/30/21 Long-Term Capital Gains 12/13/21 Short-Term Capital Gains 12/13/21

.

June – Income Distributions per share.
Class Income
Class ARBIX Income $0.00
Class Ex Date Income 6/30/21
Class Record Date Income 6/29/21
2020 Distributions
December – Income & Capital Gains Distributions per share.
Class Income Long-Term Capital Gains Short-Term Capital Gains
Class ARBIX Income $0.00 Long-Term Capital Gains $0.31721 Short-Term Capital Gains $0.00
Class Ex Date Income 12/29/20 Long-Term Capital Gains 12/10/20 Short-Term Capital Gains 12/10/20
Class Record Date Income 12/30/20 Long-Term Capital Gains 12/11/20 Short-Term Capital Gains 12/11/20

.

June – Income Distributions per share
Class Income
Class ARBIX Income $0.00985
Class Ex Date Income 6/30/20
Class Record Date Income 6/29/20
2019 Distributions
December – Income & Capital Gains Distributions per share.

 
Class Income Long-Term Capital Gains Short-Term Capital Gains
Class ARBIX Income $0.04028
 Long-Term Capital Gains $0.19170
 Short-Term Capital Gains $0.00
Class Ex Date Income 12/31/19 Long-Term Capital Gains 12/13/19 Short-Term Capital Gains 12/13/19
Class Record Date Income 12/30/19 Long-Term Capital Gains 12/12/19 Short-Term Capital Gains 12/12/19

.

June – Income Distributions per share
Class Income
Class ARBIX $0.06637
Class Ex Date Income 6/28/19
Class Record Date Income 6/27/19
2018 Distributions
December – Income & Capital Gains Distributions per share.
Class Income Long-Term Capital Gains Short-Term Capital Gains
Class ARBIX Income $0.00
 Long-Term Capital Gains $0.05991
 Short-Term Capital Gains $0.09121
Class Ex Date Income 12/31/18 Long-Term Capital Gains 12/14/18 Short-Term Capital Gains 12/14/18
Class Record Date Income 12/28/18 Long-Term Capital Gains 12/13/18 Short-Term Capital Gains 12/13/18

.

June – Income Distributions per share
Class Income
Class ARBIX Income $0.04955
Class Ex Date Income 6/29/18
Class Record Date Income 6/28/18
2017 Distributions
December – Income & Capital Gains Distributions per share.
Class Income Long-Term Capital Gains Short-Term Capital Gains
Class ARBIX Income $0.00 Long-Term Capital Gains $0.00
 Short-Term Capital Gains $0.02409
Class Ex Date Income 12/29/17 Long-Term Capital Gains 12/15/17 Short-Term Capital Gains 12/15/17
Class Record Date Income 12/28/17 Long-Term Capital Gains 12/14/17 Short-Term Capital Gains 12/14/17

Investing in the Fund

Purchasing Through a Financial Adviser:
The Absolute Convertible Arbitrage Fund may serve as an important piece of a diversified portfolio. We encourage investors to consult their financial advisers for guidance on asset allocation and the role of the Fund. Financial Advisers should contact us directly for information on the Fund and how it may be purchased. Go to Contact Information Page

Direct Investment in the Fund:
Investors may purchase the Fund directly from the Fund using the applications below. Please complete the applications and follow the purchasing instructions. For additional information, please call the Fund’s shareholder servicing department at 1-888-99-ABSOLUTE

Important Fund Risks & Disclosure

Definitions: Beta is the measure of a fund’s relative volatility as compared to the S&P 500 Index which by definition is 1.00.  A drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund. The S&P 500 Index, is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.  It is not possible to invest directly in an index.

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.

Asset allocation decisions may not always be correct and may adversely affect Fund performance. The value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on a convertible security’s investment value. Debt securities have interest rate, inflation and credit risks and are subject to prepayment and default risk. High yield and junk securities involve greater risk and tend to be more sensitive to economic conditions and credit risk. Short sales may be considered speculative and it may be difficult to purchase securities to meet delivery obligations. 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. Diversification does not prevent loss or enhance returns. Foreign investments present additional risk due to currency fluctuations, economic and political factors, government regulations, differences in accounting standards and other factors. Investments in emerging markets involve even greater risks. Small, mid and large cap stocks are subject to substantial risks such as market, business, size volatility, management experience, product diversification, financial resource, competitive strength, liquidity, and potential to fall out of favor that may cause their prices to fluctuate over time, sometimes rapidly and unpredictably. The Fund is actively managed and may experience high turnover. This may cause higher fees, expenses and taxes, which could detract from Fund performance. The Fund is new and has a limited history of operations.

These views are subject to change at any time based on market and other conditions, and Absolute Investment Advisers disclaims any responsibility to update such views. No forecasts can be guaranteed. These views may not be relied upon as investment advice or as an indication of trading intent on behalf of any Absolute Investment Advised investment product.

Alpha is the excess return on an investment after adjusting for market-related volatility. It is often considered to represent the value that a portfolio manager adds to or subtracts from a fund’s return.