Merk Absolute Return Currency Fund: Adviser's Process

Fund Documents  Fact Sheet (PDF)  Prospectus / SAI (PDF)  Semi/Annual Reports (PDF)

Merk Investments, LLC (the “Adviser”) will determine and periodically revise currency exposure allocations based on both quantitative and qualitative analysis in seeking to achieve positive absolute returns from the Fund’s exposure to currencies.

Quantitative factors that the Adviser may consider include fundamental and technical analysis of currency and economic data. Fundamental considerations may include a country’s gross domestic product or the central bank’s benchmark interest rate. Technical considerations may include the relative performance of currencies over time. Additionally, the Adviser may utilize statistical currency analysis to assess overall portfolio risk. This process is referred to as “risk overlay”.

Qualitative factors that the Adviser may consider include an analysis of monetary policies pursued by central banks and economic environments; a country’s perceived political stability; the risk of government intervention in its financial markets; and proprietary analysis on the outlook of a country’s currency. This process is referred to as “macro overlay”.

Quantitative and qualitative analyses are integrated by:

• Determining currency allocations based on quantitative factors
  
• Balancing currency allocations based on a “risk overlay”
  
• Utilizing a “macro overlay” to adjust currency allocations based on qualitative factors

Once the Adviser has determined the desired currency exposure levels for the Fund, the Adviser will select instruments to create a liquid portfolio of short duration. To try to reduce the interest rate and credit risk to its portfolio, the Fund typically maintains a weighted average portfolio maturity of less than eighteen months and buys high quality debt securities. The Adviser may sacrifice yield in return for high credit quality of debt securities.

The Adviser may modify the Fund’s currency allocations as its analysis evolves. If the Adviser deems a currency crisis likely, the Adviser may concentrate the Fund’s exposure to a few currencies that meet the Adviser’s qualitative and quantitative investment factors. The Adviser may choose to exclusively buy U.S. fixed income instruments in conjunction with forward contracts to obtain exposure to currencies.

In order to respond to adverse market, economic, political or other conditions, the Fund may assume a temporary defensive position that is inconsistent with its principal investment strategies and invest, without limitation, in cash or prime quality cash equivalents (including commercial paper, certificates of deposit, banker’s acceptances and time deposits). A defensive position, taken at the wrong time, may have an adverse impact on the Fund’s performance. The Fund may be unable to achieve its investment objective during the employment of a temporary defensive measure.