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TGF: report for Q4 2024

UPDATE to December 31, 2024

Dear investor,

Tralucent Asset Management Inc. (“Tralucent”) launched the Tralucent Global Alternative (Long/Short) Equity Fund (“the Fund”) on March 31, 2020. The Fund became a public fund on October 11, 2023, and Class E units of the Fund began trading on the Toronto Stock Exchange on November 16, 2023.

Allow us to update you on our results:

Mar 31, 2020 – Dec 31, 20202021202220232024Total
 Return from shorts-0.07%1.90%7.95%1.40%-7.73%2.85%
 Return from long40.73%30.53%-17.03%24.51%34.62%140.79%
 Total return of Tralucent Global Equity Fund (Class A)38.18%30.05%-10.84%23.85%26.89%151.45%
                             Indices and popular ETFs
 MSCI ACWI (in CAD)32.68%18.03%-12.79%19.33%27.82%108.33%

The above performance of the Fund is not a discrete event. It is a continuation of our solid performance over the past few decades.

Here is our composite performance from inception in September 2008:

Tralucent Composite to December 31, 2024, after ALL Fees
Last year27.83%
Last three years26.16%
Last five years11.71%
Last ten years16.18%
Since Inception Sept 30, 200813.83%
$100,000 since Sept 2008 has grown to:$739,606.38

Critique on Current Period

The Fund has continued to enjoy solid performance over the past quarter, and year. Class A units of the Fund saw an 8.31% return over the past quarter, and a 26.89% return over the past year. Comparatively, the global market benchmark returned 5.33%, and 27.82% respectively.

This quarter, we saw the Fund outperform our global benchmark. We attribute our outperformance to our portfolio on the long side. The global markets had an extremely strong quarter to close out 2024.

Most notably, we have seen AI continue to be a main focus. We are firm believers that AI will have major ramifications for our society in general, that AI has a long way to go, and that it is certainly here to stay. Many of our technology holdings that have an AI presence continue to trade at all time highs, and we continue to monitor for signs of overheating. Of note, our holdings in AVGO and NVDA continue to do exceedingly well. AVGO is now the Fund’s largest holding, a result of how well it has done of late.

Conversely, the strength of the markets mean that we have been challenged by our short portfolio. Times in which the benchmark outperforms the Fund should be expected and are likely to occur in the future as well. However, we maintain a patient and long-term view of our shorting activities: although our shorts have underperformed in 2024, our total return from shorting is accretive. 

Overall, we remain confident. The combination of our long and short strategies is and has been very effective. Not only does the Fund provide robust returns, but these returns are worth the periods of volatility that the Fund experiences.

The fourth quarter closes out 2024. We are thrilled that this marks one more year of the Fund. These first few years since the launch of the Fund have been an incredible time to be invested in the market. We are very excited to see what the next year and beyond will have in store for Tralucent and the Fund.

Outlook

Although the prices of equity investments have risen handsomely in the last ten years, the earnings yield of the equity markets are vastly superior to the prevailing yields in the fixed income markets during this period. We expect the equity markets to yield 7%-8% per annum over the next ten to thirty years. This is superior to the approximate 4.6% yield available on long term Treasury Bonds. Though the equity markets may not be as attractive as they once were, they are still certainly more attractive than the bond markets. 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.

We must also weigh on two subjects that are likely to be top of mind for most: the re-election of Donald Trump, and the likely course of interest rates and stock prices.

First, the re-election of Donald Trump for a second term. All else aside, his platform has been described as extremely pro-business. As such, his agenda is likely to be a tailwind for equities for years to come. We also remind investors that generally, it does not matter who ultimately ends up in the White House – equities will rise, and the future of earnings remains bright.

Second, interest rates. As we write this, 30 year Treasury bonds, which are at almost 5 percent, have climbed to their highest level in almost fifteen years. For the most part, this has happened out of concern that Trump’s policies will add to the already heightened upward pressure on inflation. Tralucent believes that Trump’s policies will be gradually phased in, and most fears are overblown. The Federal Reserve will gradually control inflation and, in a few years, will settle back around 2 percent, and long-term bond yields will likely be lower then current levels. Lowered interest rates will provide fuel to a strong equity market. In these times we remind investors to take a long-term view of equity investments.

We also 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.

Tralucent and you:

We would be pleased to meet with you if you are interested in investing in the Fund or learning more about the Fund. Please feel free to contact us at general@tralucent.ca or at +1 (519) 835-7183.

Disclaimers:

Prior to October 11, 2023, the Fund was offered via offering memorandum only and the Fund was not a reporting issuer during such prior period. The expenses of the Fund would have been higher during such prior period had the Fund been subject to the additional regulatory requirements applicable to a reporting issuer. Tralucent has obtained exemptive relief on behalf of the Fund to permit the disclosure of the prior performance data for the Fund for the period prior to it becoming a reporting issuer.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus of the Fund before investing. The indicated rates of return are the historical annual compounded total returns of the Fund including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.

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