UPDATE to September 30, 2025

Dear investor,

Tralucent Asset Management Inc. (“Tralucent”) launched the Tralucent Global Alternative (Long/Short) Equity Fund (“the Fund”) on March 31, 2020. It 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:

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:

Critique on Current Period

Although there is still much uncertainty in the global markets – an opaque macroeconomic environment, inconsistent trade and tariff policies, the shutdown of the US government – we are seeing some settling and normalizing. There are several reasons for this, but quite frankly, we think that it is largely due to the fact that investors and the market are less likely to react as strongly to Trump as they have in the first half of the year.

The world is starting to see a pattern emerge: typically, after making an aggressive, headline grabbing statement regarding some potential policy change, Trump will quietly walk back or concede these proposed changes. We believe that the market has come to see this as the way that Trump prefers to negotiate and so has begun to take every statement made by the White House with a grain of salt, relying on his “chickening out” as the norm.

As such, the global markets strengthened and recovered quite nicely from a tumultuous first half of the year. Overall, Class A units of the Fund delivered a 7.08% return year to date, with a one-year return of 16.75%, and a five-year return of 17.41%. In comparison, our global market benchmark returned 14.85% year to date, 20.98% for the year, and 14.57% over the last five years.

Unfortunately, the Fund underperformed our global benchmark. In these moments, it is crucial to remind investors that there will be times where our benchmark outperforms the Fund, and that it is likely expected to happen again.

This underperformance can largely be attributed to the strength of tech and AI names, and our short position.

It is no question that the hype around AI has rallied the markets as a whole. As an example, the TSX Venture Information Technology sector index is up 27.8% year-to-date. Ten tech and AI companies currently make up over 30% of the value of the S&P500. Conversely, the Fund comprises of over 197 names, where no one, five, or ten names will tip the scale.  Our year-to-date return from our long positions for Class A units of the Fund is a strong 13.29% and reflects the diversification of our holdings, rather than a sector specific approach.

Year to date, our shorts have delivered a return of -5.48%. Our shorting strategy has historically focused on poor quality, zero or negative growth companies, or those companies that are extremely overvalued. However, we have noticed a trend in the market that is affecting our short portfolio: momentum trading. Instead of “buy low, sell high”, momentum investing follows a strategy of “buy high, sell higher”. Momentum traders will buy/sell based on stock price trends alone. That is, if a stock price is rising, momentum traders will buy that stock in hopes to sell it at an even higher price. This trend causes stock prices to inflate without any consideration of the underlying fundamentals.

Unfortunately, this means that our short portfolio has been affected by momentum trading. Fundamentally, our decision to short is not wrong (the company shows stalled, zero, or negative growth, and is highly overvalued), and if you take away the stock’s momentum, it will crumble. We firmly believe that the return on our shorts moving forward will reflect our taking momentum into the equation.

Overall, we remain confident. We urge investors to think long term. One quarter of underperformance does not meaningfully shape long term returns. Our composite outperforms the global benchmark over a 5 and 10-year time horizon. As well, 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 the Fund experiences.

Outlook

Overall, our outlook is very similar to the past few quarters:

This year has shown that volatility is normal, and to be expected. We remind investors that these are the moments to maintain composure and stay the course. By remaining calm during times of market turbulence, investors can position themselves to benefit when the markets eventually recover.

The ever-present risk of uncertainty cannot be discounted: geopolitical tensions, sudden changes in policy, and overvalued markets can all lead to increased to market volatility. However, a well-diversified portfolio that focuses on high quality companies with solid fundamentals coupled with a long-term outlook remains crucial to overcoming uncertainty and turbulence in the markets.

As ever, we are optimistic about the future of equities. This is underlined by the fact that the Fed has started to cut interest rates, affirming our feelings about the strength of the markets.

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. We see that globally, economies continue to grow despite policy uncertainty. As well, central banks have signalled their willingness to support markets with the possibility of low interest rates.

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 encourage those with available cash to consider entering the market or adding to their current holdings.

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