By: Robert Koloshuk
Chief Investment Officer at WaveFront GAM
May 2025 Version
Markets experienced a broad-based rebound in May, driven by easing recession fears, temporary tariff rollbacks, and strong U.S. earnings data. Risk assets rallied, with U.S. equities leading the way and cyclical sectors regaining momentum. Despite this recovery, the macro backdrop remains defined by heightened volatility, shifting inflation expectations, and mounting fiscal concerns - a combination that underscores the need for portfolio resilience and diversification.
From a performance perspective, the Fund posted a positive return in May, advancing +0.87% for the month. Since its inception in 2019, the Fund has now delivered +7.71% net annualized return with volatility under 10% and continued low correlation to traditional asset classes; 0.29 to the S&P 500, 0.31 to the TSX Composite, and -0.08 to 20-year Treasuries, reinforcing its role as a differentiated core holding.
Performance Highlights - as of May 31, 2025*
* Performance Disclaimer
*Performance is past performance and does not guarantee future results. Data Source: WaveFront & Bloomberg. Blended Benchmark Constituents: 20% SG CTA PR USD, 20% iShares MSCI ACWI ETF, 20% S&P GSCI Precious Metal TR, 20% Morningstar Canada REIT GR USD, 20% iShares 20+ Yr Treasury Bond ETF.
Within the portfolio, Global Equities were the strongest contributor to monthly returns and continue to deliver a net positive impact year-to-date. Our diversified exposure across North American and international markets allowed the Fund to participate in the rebound in risk appetite, supported by improving consumer sentiment and resilient earnings data.
Real Estate allocations also contributed positively. The real estate sleeve has provided a steady ballast and helped reduce overall portfolio volatility.
After an impressive multi-month rally, our Alternative Defensive allocation (currently via exposure to Gold) experienced a modest pullback in May as risk appetite improved. However, it remains among the top contributors year-to-date, supported by persistent geopolitical risk and continued skepticism around fiat currencies and fiscal discipline.
Portfolio Highlights - as of May 31, 2025*
* Portfolio Disclaimer
*Performance is past performance and does not guarantee future results. Data Source: WaveFront & Bloomberg. Portfolio exposure and holdings are as of May 31, 2025. Portfolio holdings and sectors will fluctuate over the life of the mutual fund as the portfolio holdings and market value of each security changes. The portfolio manager(s) may change the portfolio allocations in some or all of the sectors.
On the downside, Systematic Macro & Trend strategies detracted again in May and remain the primary YTD laggard. The current environment, characterized by volatile reversals and a lack of persistent directional trends, has posed challenges for managed futures strategies. That said, history shows that such periods are often precursors to strong recoveries in trend models, particularly as macro signals normalize and momentum regimes reassert themselves.
Fixed Income was another detractor in May and YTD, with U.S. Treasury yields rising on the back of strong labor market data, fiscal stress, and weaker demand at longer-dated auctions. While short-term pain has been notable, we continue to view duration exposure as a critical hedge against downside growth surprises, especially in a landscape where central banks may soon need to respond more proactively.
Our Special Situations allocation remains a small (~10bps) tactical exposure, designed to target asymmetric upside opportunities without compromising liquidity or style discipline.
Looking Ahead
Looking ahead, we expect volatility to persist as markets digest evolving policy developments, sticky inflation prints, and fiscal pressures across major economies. In our view, investors should be preparing - not predicting. The All Weather approach is designed for exactly this type of environment: one where both inflation and growth outcomes remain deeply uncertain, and diversification across asset classes, geographies, and economic regimes is essential.
About the WaveFront All-Weather Alternative Fund
Introducing Canada's premiere all-weather investment solution, the WaveFront All-Weather Alternative Fund. Engineered to deliver stability and consistent performance, regardless of the market environment, now available as both a mutual fund and ETF.
The WaveFront All-Weather Alternative Fund is engineered to deliver consistent, superior risk-adjusted returns across diverse market conditions. With a dynamic multi-asset and multi-strategy approach, it offers a next-generation liquid alternative designed for stability and growth.
IMPORTANT DISCLAIMER: For the period from inception to December 31, 2024, the performance data of Series ETF reflects the historical return of the LP, which for this period had substantially similar fees as the LP. Effective January 2, 2025, WaveFront All-Weather Fund, LP (“the “LP”) was merged into WaveFront All-Weather Alternative Fund. Prior to the merger, the LP was distributed to investors on a prospectus-exempt basis in accordance with National Instrument 45-106 and was not a reporting issuer from its inception on November 1, 2019 until the merger. Financial statements of the LP are posted on Arrow’s website and are available to investors upon request.
Commissions, trailing commissions, management and performance fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compound total returns net of fees and expenses payable by the fund (except for figures of one year or less, which are simple total returns) including changes in security value and reinvestment of all distributions and do 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. The risk level of a fund has been determined in accordance with a standardized risk classification methodology in National Instrument 81-102, that is based on the fund’s historical volatility as measured by the 10-year standard deviation of the fund’s returns. Where a fund has offered securities to the public for less than 10 years, the standardized methodology requires that the standard deviation of a reference mutual fund or index that reasonably approximates the fund’s standard deviation be used to determine the fund’s risk rating. Please note that historical performance may not be indicative of future returns and a fund’s historical volatility may not be indicative of future volatility. The rates of return are used only to illustrate the effects of the compound growth rate and are not intended to reflect future values or returns on an investment fund. The Investment Growth chart shows the final value of a hypothetical investment in securities in this series of the fund as at the end of the investment period indicated and is not intended to reflect future values or returns on investment in such securities. The comparison presented is intended to illustrate the historical performance of the fund as compared with the historical performance of a widely quoted market index or a weighted blend of widely quoted market indices. There are various important differences that may exist between the fund and the stated indices that may affect the performance of each. The objectives and strategies of the fund result in holdings that do not necessarily reflect the constituents of and their weights within the comparable indices. Indexes are unmanaged and their returns do not include any sales charges or fees. It is not possible to invest directly in market indices.
