Critique on Current Period

First and foremost, The Tralucent Global Equity Fund has officially changed its name to the Tralucent Global Alternative (Long/Short) Equity Fund (“the Fund”). Over the last quarter, the Fund saw a 2.35% return over the last quarter, and a 26.48% return over the last year. Comparatively, the global market benchmark returned -1.36%, and 18.10%. Again, the Fund continues to outperform the benchmark, and we are extremely proud of this fact.

We attribute our outperformance to both our stock picks on the long side and on the short side. Of note, it is worth highlighting that the Fund has generated a 10.44% return from our shorting activities to date. Explicitly put, if you had $100,000, you would have realized $10,440 in gains from shorting alone.

We are continuing to make progress on launching our ETF. The official TSX listing and launch date is November 16^th, 2023! If we have not discussed this already with you, we will have more information about this shortly. This will include signing off on an agreement to convert your existing units to the ETF to unlock additional liquidity, and what this will all mean for our investors.

During this quarter, the Fund was nominated for two awards by the Canadian Hedge Fund Awards (CHFA): Best 1 Year Return, and Best 3 Year Sharpe Ratio in the ‘Equity Focused’ category. This is quite an achievement in and of itself and, even though we did not win in either category, it is a huge confidence boost for us and our methods, as well as a welcome third-party assessment of our relative and absolute performance.

AI has swung into focus. Scientists have been at work in this area for decades. It will have major ramifications for our society in general. We are firm believers it has a long way to go. Many of our technology holdings that have an AI presence – such as NVDA and MSFT – are still trading at all time highs, and we continue to monitor for signs of overheating. The broader market has not performed as well, if technology stocks were not considered, but we have continued to perform well due to our strong long and short portfolios.

Another interesting developing situation is the state of the bond markets. By the end of third quarter, the Fed has increased interest rates to their highest levels in 22 years. As a result, bonds indices reached their lowest point since October 2008. On top of this, we have seen a dramatic and sharp rise in 30-year fixed mortgage rates, and as a result, a slowdown in payment speeds. This does not help the state of the bond market at all. In more than one way, we at Tralucent feel vindicated. As our money buddies know, we have been advising for years that the safety of bonds is delusionary. As a matter of fact, Tralucent has made money by being short the treasury bonds. However, we do keep a close eye on this area should there ever be opportunities on either the long (or short) side.

Finally, we have recently been working on promoting our Fund in anticipation of the ETF launch. This includes providing in depth information to 3^rd party fund information websites such as Fundata and Morningstar. Fundata provided us with 3-year information as at June 30, 2023 and rankings for the Fund against others in Canada and we have ranked spectacularly! The details are as follows:

3 YEAR BASIS	Performance Rank	Sharpe Ratio	Sharpe Rank	Standard Deviation
TGF110 (Class A)	13/100	1.0618	12/100	13.94%
TGF120 (Class M)	11/100	1.0889	11/100	13.95%

The third quarter of 2023 was an eventful one for us, which seems to be the norm lately. Overall, 2023 has been a very exciting year thus far, and we are very excited to see what the next few months have in store for Tralucent, for the Fund, and for all our money buddies!

Background, Evolution, and Disclosures

A quick reminder of the inception and composition of the Tralucent Global Equity Fund

The Tralucent Global Equity Fund (TGF) was officially created on March 31, 2020, through the consolidation of holdings from approximately 260 different separately managed accounts.

Account holders were given an equivalent number of units of the TGF to the value of their holdings as of March 31, 2020. At inception, the value per unit of the TGF was $10.00.

Tralucent mandates that Tralucent management (Bill, Michelle, Irim, Tyler, Noreen, and Sarah) also contribute to the TGF. Currently, the value of Tralucent’s portfolios is approximately 4 million dollars.

TGF brings with it several benefits

Before owning shares of the TGF, your portfolio was already quite diversified. As a TGF holder you are even more diversified than before! As a unitholder of the TGF, you are an owner of almost 200 businesses from around the world. This greater diversification gives the confidence to say that it is nearly impossible – dare we say quite inconceivable – for your money to ever go to zero.

With very few exceptions, all the securities you own are established companies from around the world, from various sectors and industries, and are truly forces to be reckoned with. We firmly believe that these companies have strong management, are highly competitive in nature, and can withstand the test of time.

By reducing the number of individually managed accounts – such that most accounts are represented in the TGF – it is even easier than before for Tralucent to direct our focus to identify and buy ferociously competitive companies from all over the world that are/will be forces to be reckoned with and will continue to be such forces some fifty years from now.

Fund Performance as measured by A units

We urge investors to judge performance for as long a period as available. Short term results are highly unpredictable.

Q3 2023	Up 2.35%
One year ending Q3 2023	Up 26.48%
From Inception to Q3 2023	Up 85.44%

Because the Fund has only existed since March 31, 2020, and in the absence of ten years of returns, investors should consider the longest history available, which is since its inception on March 31, 2020.

Although it is tempting to narrow our focus to the available history of the Fund, we urge all our clients who were rolled into the Fund from your managed account to judge the performance of your account for the entire duration of time you have been our client.

This period will be remembered for the COVID-19 pandemic. Governments around the world shut their economies down to prevent the virus from spreading. It may also be remembered as a period when the stock market shrugged off the worries of economic slow down and simply marched on higher.

The historical performance of the Fund is graphically given below:

Objectives and Strategies

Objectives

The Fund has an objective to generate the highest return it can, while not taking on any unnecessary or overly risky positions or stances. Over a rolling five-year period, we aim for it to grow at a rate faster than the world equity markets. If this happens, there is a high probability that this growth will exceed inflation and preserve purchasing power.

Strategies

We take the approach that markets are inefficient: one can buy undervalued securities and make money when those securities are properly valued in the future. Conversely, we can identify securities that do not have the potential to appreciate and can make money by shorting such securities.

Long Strategy

Apart from short-term borrowing to facilitate withdrawals, TGF does not borrow any money.

In the TGF long portfolio – where we are owners of almost 200 stocks around the world – we buy businesses that we believe to be fiercely competitive. We at Tralucent are long term investors in companies with very high conviction, we tend to invest every dollar we can and not carry much cash.

During the fourth quarter, Tralucent did not make any notable moves.

Short Strategy

Shorting is primarily accomplished by writing call options. We encourage you to Google and learn for yourself what options are and what writing call options – particularly naked call options are.

The advantage to writing call options is that we collect a premium from writing each call option. If we are wrong, the premium collected can cushion our mistake. When we are wrong, we cover our position by buying back the call and writing another one at the higher stock price.

We have enhanced our total returns significantly since we launched our fund in 2020. Since inception, our shorting activities have returned a total of 10.77%. This has let us significantly dampen the volatility of our fund and soften the downturn experienced in the markets.

The Fund is authorized to be short the equivalent of 50% of its equity capital. Currently the TGF is short 50 different names, equalling approximately 32.42% of the Fund’s equity capital on a delta dollar basis. On average, one position is less than 1%, which is very conservative. Each of the names are then subdivided into over a hundred sub positions in total.

The profit and loss from our shorting activities over time can and will vary a lot. It is our hope that this activity will offset the management costs. Every now and then our shorting activities will lead to a loss but over long periods of time we hope that in market downturns we will gain enough to meaningfully offset some of the losses on the long side. Over long periods of time, it is our hope to enhance the fund’s total rate of return in a meaningful way.

Risks

To be clear, there is the chance that we can be wrong on both the long and short side. However, given our approach of diversifying risk across hundreds of positions, in addition to our conservatism, we believe it is unlikely that we will suffer the fate of those who are leveraged beyond reason (the current fiasco in the market is no exception either). As well, because the relative size of any given short position is rather small, even large movements against us will not result in any meaningful erosion of capital.

Outlook

Although the prices of equity investments have risen handsomely in the last ten years, the earnings yield of the equity markets have shown to be vastly superior to the prevailing yields in the fixed income markets. This is especially true given the current climate of the bond markets in the face of the Fed raising interest rates. We expect the equity markets to yield 7%-10% per annum over the next ten to thirty years. This is vastly superior to the approximate 4% yield available on long term Treasury Bonds. We remind investors that over time, the equity markets significantly outperform other asset classes. Looking ahead to the next ten years, we have little reason to believe otherwise.

As is our firm belief that equity markets are highly unpredictable over the short-term, we decline to provide any short-term outlook.

We would urge investors to remember that equity markets are not black boxes. Instead, they represent businesses run by millions of human beings that are continuously striving to be better and provide positive returns to their shareholders. It is this human aspiration to succeed which results in higher earnings of the underlying businesses and stock prices.