Next Edge Bio-Tech Plus Fund: Commentary

FUND COMMENTARY – March 2018

Protecting Our Investors during the First Quarter Correction:

The focus of the Next Edge Bio-Tech Plus Fund (the “Fund”) is to position our investors in those select companies developing and commercializing breakthrough therapeutics, disrupting the treatment landscape, poised to appreciate hundreds of percent in the years ahead. We choose less than 50 companies out of a universe of almost 1,000. Each company has unique, non-economically sensitive attributes that may at times insulate them through market turmoil.

Nevertheless, market vicissitudes being what it is, we overlay protective hedges that insulate against market declines. The value of such insurance proved its worth during Q1 2018. When the correction runs its course, the Fund will advance from a higher level than it otherwise would have.  To this end, the Fund achieved an all-time high in mid-March. Furthermore, our investors were more likely shielded from the impact of the market decline than they were in any other of their equity allocations.

For March, the Fund’s Class A Units1 advanced +1.60% while the Class F Units1 rose +1.69%, versus -0.59% for the Fund’s Benchmark2. Year-to-date and for the first quarter of 2018, the Fund’s Class A Units1 and Class F Units1 advanced +9.65% and +9.94% respectively versus a decline of -4.24% for the Fund’s Benchmark2. An outperformance eclipsing +13% during this tumultuous period.

BIOTECH CORRECTED BACK TO SUPPORT:

Emerging off bear market lows in spring 2016 into a new Bull cycle, the percent of Nasdaq Biotech Index (NBI) companies above their 200-DMA has acted well during this correction. This ‘EKG’ reading has pulled back from 69% to 50%, continuing a pattern of higher-low readings for the past 25 months. The NBI trend support rests at 3,200. The sector remains among the deepest value sectors in the market based upon historic benchmarks.

As investments divest from crowded tech positions and look for alternatives, biotech stands separate as a low-risk option, providing an opportune entry at favorable risk-reward valuations.

Composition of Holdings for March 29th, 2018

During March, the weight of Canadian holdings increased 2% from 28% to 30% as monetized hedges were deployed in averaging down on some of our holdings. US holdings declined from 61% to 59% due to the decline in underlying holdings.  Cash remained stable at 11%.  We expect that to decline during April as it is allocated to core holdings that have declined in value.

 

 

Sincerely,

Eden Rahim

Portfolio Manager to the Next Edge Bio-Tech Plus Fund,

Michael Bird

Associate Portfolio Manager to the Next Edge Bio-Tech Plus Fund

 

 

1. Next Edge Bio-Tech Plus Fund returns are net of all fees and expenses associated with Class A Units charged from May 1st, 2015. Next Edge Bio-Tech Plus Fund returns are net of all fees and expenses associated with Class A1 Units, Class F Units, and Class F1 Units charged from March 1st, 2015. The historical annualized rates of return for March 29th, 2018 for Class A are 1 yr 5.98%, 3 yr – N/A, 5 yr – N/A, 10 yr – N/A, CARR 3.83%; for Class A1 are 1 yr 7.39%, 3 yr 17.09%, 5 yr – N/A, 10 yr – N/A, CARR 5.67%; for Class F are 1 yr 7.37%, 3 yr 16.25%, 5 yr – N/A, 10 yr – N/A, CARR 5.43%; for Class F1 are 1 yr 8.51%, 3 yr 20.12%, 5 yr – N/A, 10 yr – N/A, CARR 6.55%.
2. The Benchmark for the Next Edge Bio-Tech Plus Fund is:
(i) 40% of the percentage gain or loss of the S&P/TSX Capped Health Care Index; plus
(ii) 60% of the percentage gain or loss of the NASDAQ Biotechnology Index
The Benchmark returns are unaudited and subject to final confirmation. The historical annualized rates of return for the Benchmark for March 29th, 2018 are 1 yr 14.12%, 3 yr -18.59%, 5 yr – N/A, 10 yr – N/A, CARR -3.87%.
3. Part Year
* Part Month start date April 13th, 2015 to April 30th, 2015
** Part Month start date: February 17th, 2015 to Feb 27th, 2015.
There are inherent limitations in any comparison between a managed portfolio and a passive index. Each index is unmanaged and does not incur management fees, transaction costs or other expenses associated with a private fund. There are risks inherent in hedge fund investing programs.
Note to Investment Professionals: The information in the Monthly Report is being provided to current investors in the Fund and is being provided to their registered dealers for informational purposes only.
This is not a sales literature and cannot be used as such.
The Fund is not a trust company and does not carry on business as a trust company and, accordingly, the Fund is not registered under the trust company legislation of any jurisdiction. Units of the Fund are not ‘deposits’ within the meaning of the Canada Deposit Insurance Corporation Act (Canada) are not insured under provisions of that Act or any other legislation.
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended, or any state securities laws and may not be offered or sold in the United States or to U.S. persons except pursuant to an exemption from the registration requirements of those laws.
The information provided herein is for information purposes only and does not constitute a solicitation, public offering, advice or recommendations to buy or sell interests in the Fund, the Portfolio, Units or any other Next Edge Product. Please refer to the Fund’s prospectus for more information on the Fund as any information in this Report is qualified in its entirety by the disclosure therein.
Opinions expressed are those of the author as of the date of their publication, are subject to change and may not reflect the opinion of all members of the Company. Some statements contained in this material concerning goals, strategies, outlook or other non-historical matters may be “forward-looking statements” and are based on current indicators and expectations at the date of their publication. We undertake no obligation to update or revise them. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those implied in the statements.