Second Quarter 2023 Commentary | Tactical Sovereign Bond Fund

Market Commentary

For the second quarter (Q2) 2023, the Tactical Sovereign Bond Fund (“Fund”) gained 0.4%1 vs a loss of -1.1% for the S&P Canadian Sovereign Bond Total Return Index.

Throughout the Q2, forecasts of weaker economic growth and recessions along with expectations of a Federal Reserve (“Fed”) pivot and interest rate cuts largely persisted.

However, stickier inflation and better-than-expected economic conditions delayed any change in direction from the Fed; interest rate cuts are also no longer anticipated through the remainder of 2023.

The yield on U.S. 10-Year Treasuries rose from 3.49% at the end of first quarter to 3.82% by the end of the Q2. The Fund’s approach to managing (extending) duration has been an opportunistic one – taking advantage of shorter-term cycles to benefit from the underlying bond market volatility.

Presently, markets are pricing in more than a 70% probability of a 100 basis points cut through 2024 despite no indication from the Fed. Our outlook as we enter the third quarter is for a continuation of market direction to predominantly be driven by Fed action and a response to likely better-than-expected economic conditions.

Duration of the Fund at the end of Q2 was 0.2 years. The Fund remains well positioned to benefit from its ability to tactically reposition in anticipation of changing market dynamics. As longer-term rates could move even higher, protecting capital remains a key tenet of the overall strategy.

1Series F, total return CAD terms

Standard performance as at June 30, 2023:

Company 1 Year 3 Year Since Reorganization**
(August 27, 2018)
5 Year Since Inception
(July 25, 2016)
Caldwell Tactical Sovereign Bond Fund Series F 1.9% -1.6% 0.5% 0.5% -0.1%
S&P Canadian Sovereign Bond Total Return Index 1.8% -3.5% 0.3% 0.2% -0.1%

**The Fund, following a security holder vote, changed its fundamental investment objective August 27, 2018 and also reclassified former Series I units to the current Series F. For more information refer to the Simplified Prospectus of the Fund.

The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Rates of returns, unless otherwise indicated, are the historical annual compounded returns including changes in unit value and reinvestment of all distributions and do not take
into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.

Publication date: August 3, 2023.

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