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Hedged Equity Q4 Fund and Market Commentary

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The 4th quarter of 2021 was what we believe to be a powerful continuation of the bull market that seemed to confound the realities of an uncertain Omicron outlook and a more hawkish communicating Federal Reserve. After a muted 3rd quarter where a convergence of negative factors dimmed equities (frustrations over fiscal policy, elevated inflation-supply chain difficulties and a late to return to the workforce labor dynamic served as major headwinds), improving non-farm payrolls data and expectations of a more moderate and passable fiscal approach drove the S&P from the outset of the quarter. Along with that improved macro sentiment, the expectations around volatility dropped noticeably as VIX dropped from 23, where we entered the quarter to 17 as we exited the year. That lowered the perception of risk and drove realized S&P volatility to under 9% as we exited the year. What was interesting as we entered December, however, was the greater acceptance that the Omicron variant of Covid-19 would spread far faster and deeper into U.S. populations but in our assessment did not dramatically alter overall equity appetite. If that was driven by the thought that the Fed might amend their hawkish tone, that proved premature as Chair Powell recommitted several times in testimony through the quarter that the U.S. economy no longer needed extreme support. We believe some of the optimism may have also been driven by the data that showed Omicron symptoms for the vaccinated as less severe. During the bullish quarter, JDIEX provided a 4.39% return versus the SPX 11.03% return for an ~40% participation rate. With our risk at about 33% of the market that return represents a very solid risk adjusted return or Sharpe Ratio. Given that volatility dropped so meaningfully during the quarter, taking away one of the factors that often helps contribute to return, we see the solid risk adjusted return as a reminder of the benefits of the structure and disciplined approach we take to participate and defend the portfolio.

While Omicron fears didn’t seem to dampen equity ardor, concerns about the Fed’s normalization process did start to affect the perception of the attractiveness of high PE stocks and the sector in general. Interestingly, this hasn’t dramatically affected the level of the VIX. However, we believe inflation and supply chain disruptions continue to be a concern in Q1 2022 and as such believe volatility may get bid at some point in the near future. Looking at asset allocation and diversification, we continue to espouse using JDIEX as a component of market diversification because of its lack of interest rate sensitivity and greater correlation to volatility when equity declines arise. As we see the potential nature of a market valuation adjustment related to interest rate hikes, we think these characteristics will serve our investors very well through this normalization process. We think this is particularly important for investors that have traditionally relied on fixed income for diversification. With rates still at low historical levels and credit exposures increasingly correlated to equities, we think JDIEX can be a solid diversification tool for our investors.


9/30/2021 1-Year 3-Year 5-Year Since Inception (8/3/2015)
I Shares 11.27% 10.21% 7.71% 6.06%
Morningstar Options Trading Category 10.86% 10.07% 6.24% 4.81%
S&P 500 28.71% 26.06% 18.48% 15.79%


Performance data quoted above is historical. Past performance does not guarantee future results and current performance may be lower or higher than the performance data quoted. The investment return and principal value of an investment will fluctuate, so that shares when redeemed may be worth more or less than their original cost. Investors cannot directly invest in an index, and unmanaged index returns do not reflect any fees, expense, or sales charges. For performance information current to the most recent month-end, please call 888-814-8180.

Source: Morningstar Direct.

Total return for all periods less than one year is an aggregate number (not annualized and is based on the change in net asset value plus the reinvestment of all income dividends and capital gains distributions.

The Fund’s management has contractually waived a portion of its management fees until March 19, 2023 for I, A, C and R6 Shares. The performance shown reflects the waivers without which the performance would have been lower. Total annual operating expenses before the expense reduction/reimbursement are 1.92%, 2.12%, 2.76% and 1.92% respectively; total annual operating expenses after the expense reduction/reimbursement are 1.38%, 1.63%, 2.38% and 1.12% respectively. 5.75% is the maximum sales charge on purchases of A shares.

The Fund’s investment adviser has contractually agreed to reduce and/or absorb expenses until at least March 19, 2023, for I, A, C and R6 Shares, to ensure that net annual operating expenses of the fund will not exceed 1.79%, 1.99%, 3.00% and 1.34%, respectively, subject to possible recoupment from the Fund in future years.


About EAB Investment Group, LLC:

EAB Investment Group, LLC specializes in risk mitigation strategies and works with hedge funds, family offices, high-net-worth individuals, investment companies and other advisors. EAB Investment Group uses equity and index option strategies based on a proprietary process with the goal to reduce portfolio risk and increase the probability of success. A deep understanding of options pricing enables EAB Investment Group to manage carry and attempt to mitigate costs over time, and potentially optimize monetization.


VIX: The Cboe Volatility Index (VIX) is a real-time index that represents the market’s expectations for the relative strength of near-term price changes of the S&P 500 index (SPX). Because it is derived from the prices of SPX index options with near-term expiration dates, it generates a 30-day forward projection of volatility.


Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund. This and other information is contained in the Fund’s prospectus, which can be obtained by calling 888-814-8180 and should be read carefully before investing. Additional Fund literature may be obtained by visiting

Past performance is not a guarantee nor a reliable indicator of future results. As with any investment, there are risks. There is no assurance that any portfolio will achieve its investment objective. Mutual funds involve risk, including possible loss of principal. The Easterly Funds are distributed by Ultimus Fund Distributors, LLC. Easterly Funds, LLC and EAB Investment Group, LLC are not affiliated with Ultimus Fund Distributors, LLC, member FINRA/SIPC. Certain associates of Easterly Funds, LLC are registered with FDX Capital LLC, member FINRA/SIPC

Important Risk Disclosures

The Fund will borrow money for investment purposes. Leveraging investments, by purchasing securities with borrowed money, is a speculative technique that increases investment risk while increasing investment opportunity. Derivatives may be volatile, and some derivatives have the potential for loss that is greater than the Fund’s initial investment. If the Fund sells a put option, there is risk that the Fund may be required to buy the underlying investment at a disadvantageous price. If the Fund purchases a put option or call option, there is risk that the price of the underlying investment will move in a direction that causes the option to expire worthless. The Fund’s ability to achieve its investment objective may be affected by the risk’s attendant to any investment in equity securities.

Shares of ETFs have many of the same risks as direct investments in common stocks or bonds. In addition, their market value is expected to rise and fall as the value of the underlying index or bonds rise and fall. It is possible that the hedging strategy could result in losses and/or expenses that are greater than if the Fund did not include the hedging strategy. The use of leverage by the Fund or an Underlying Fund, such as borrowing money to purchase securities or the use of derivatives, will indirectly cause the Fund to incur additional expenses and magnify the Fund’s gains or losses. Because a large percentage of the Fund’s assets may be invested in a limited number of issuers, a change in the value of one or a few issuers’ securities will affect the value of the Fund more than would occur in a diversified fund.