COUNTERPOINT LONG-SHORT EQUITY FUND

The Counterpoint Long-Short Equity Fund targets a market-neutral (zero beta) allocation to individual stocks while seeking broad market exposure of an average of 0.5 beta to equity markets (although the Fund’s actual beta may range from 0.4 to 0.6). The Fund allocates its portfolio between these two sleeves.

Stock Selection

For the market-neutral portion of the strategy, the Adviser selects the particular stocks on which to go long and short based on quantitative ranking models. The target portfolio typically holds:

  • More than 600 individual securities
  • Invests in both US and International developed-market stocks
  • Targets sector and currency neutrality.

The Fund’s ranking model is based on research of investment anomalies found in peer-reviewed academic journals, and uses machine-learning techniques to most optimally score the universe of input stocks. The Fund seeks to target the best performing, recent, and persistent anomalies. The Fund’s strategy seeks to capitalize on many market anomalies at any one time.

An example of such an anomaly would be the Asset Growth, where the literature has shown that companies that are more aggressive with spending their capital (Aggressive Asset Growers) have worse average stock performance than companies that are more conservative in their capital expenditures (Timid Asset Growers). This is evidence that shareholders systematically overestimate the investment decision capabilities of company management.

The figure above represents the total compounded return on $1 invested initially in January of 1995 in a monthly rebalanced even-weighted portfolio without transaction costs of U.S. stocks deciled by asset growth ranks. Asset Growth is defined as the annual percentage change in book value of assets in the prior fiscal year. Timid Asset Growers represents the top 10% of stocks with the lowest asset growth while Aggressive Asset Growers represents the 10% of stocks with highest asset growth.

Static Index Position

For the market exposure portion of the strategy, the Adviser selects a blend of equity index futures, equity index ETFs, and/or equity index swaps based on various factors (liquidity, tracking error, and cost) to achieve exposure to the equity markets with a beta of 0.5.

Portfolio Managers

Headshot_CPT_flat2

Joseph Engelberg, Ph.D

Ph.D. in Finance, Northwestern University

mbk-headshot-color

Michael Krause, CFA

MBA, University of California San Diego

Performance of the fund may be found on the Morningstar CPQIX quotation page..

FUND FACTS

TickerCPQAXCPQCXCPQIX
CUSIP66538G13066538G12266538G114
Share ClassClass AClass CInstitutional
Minimum Investment$5,000$5,000$100,000
Minimum IRA Investment$1,000$1,000$100,000
Management Fee1.25%1.25%1.25%
Estimated Other Fund Expenses (Maximum)0.47% (0.50%)0.47% (0.50%)0.47% (0.50%)
Estimated Interest/Dividend Expense on Securities Sold Short and Acquired Fund Fees and Expenses0.75%0.75%0.75%
12b-1 Distribution & Marketing0.25%1.00%None
Total Annual Operating Fees2.74%3.49%2.49%
Estimated Net Expense Ratio Exclusive of Acquired Fund Fees and Interest/Dividends on Short Sales1.97%2.72%1.72%
Fund Inception DateOctober 4, 2017
Prospectus
buttons_v1f

The Fund’s investment adviser has contractually agreed to reduce its fees and/or absorb expenses of the Fund, at least until January 31, 2019 to ensure that the net annual fund operating expenses exclusive of Acquired Fund Fees and Interest/Dividends on Short Sales will not exceed 2.00%, 2.75%, and 1.75% attributable to Class A, Class C, and Class I shares, subject to possible recoupment from the Fund in future years.  Without these waivers and expense exclusions, the Fund’s total annual operating expenses would be 2.74%, 3.49%, and 2.49% attributable to Class A, Class C, and Class I shares.

Download US Total Return Swap Basket Holdings as of 12/29/2017

DISCLOSURES

Mutual Funds involve risk including the possible loss of principal. The Fund is a new mutual fund as has a limited history of operations for investors to evaluate. 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. A higher portfolio turnover will result in higher transactional and brokerage costs. Derivative instruments involve risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments.

Overall equity and fixed income market risk, including volatility, may affect the value of individual instruments in which the Fund invests. The net asset value of the Fund will fluctuate based on changes in the value of the U.S. and/or foreign equity securities held by the Fund. Fixed income risk factors include credit risk and prepayment risk. When the Fund invests in other investment companies, it will bear additional expenses based on its pro rata share of the other investment company’s operating expenses, including the potential duplication of management fees.

The fund may invest in options which hold an underlying risk greater than securities. The Fund’s losses are potentially large in a written put transaction and potentially unlimited in an unhedged written call transaction. The earnings and prospects of small and medium sized companies are more volatile than larger companies and may experience higher failure rates than larger companies. The Fund may use swaps to enhance returns and manage risk, which involves risks possibly greater than, the risks associated with investing directly in securities and other traditional investments.

The Adviser’s reliance on its strategy and its judgments about the value and potential appreciation securities in which the Fund invests may prove to be incorrect, including the Adviser’s tactical allocation of the Fund’s portfolio among its investments. The adviser’s investment model carries a risk that the mathematical model used might be based on one or more incorrect assumptions.

Long positions entail purchasing securities with the intention of holding them in anticipation of a price increase. Short positions entail borrowing securities with the intention of holding them in anticipation of a price decrease.


Investors should carefully consider the investment objectives, risks, charges and expenses of the Counterpoint Tactical Equity Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained at counterpointmutualfunds.com or by calling 844-273-8637. The prospectus should be read carefully before investing. The Counterpoint Tactical Equity Fund is distributed by Northern Lights Distributors, LLC member FINRA/SIPC.
4035-NLD-1/8/2018
Back to Top