Strategy

Mutual Funds — Strategy

The [highlight color=”blue”]Stone Toro Long Short Fund’s (“The Fund”) [/highlight] investment objective is to seek capital appreciation while providing lower volatility and minimal correlation to the overall global securities markets.  There can be no assurance that the Fund will achieve its investment objective.

The Fund invests in long positions in stocks identified by the Adviser as undervalued and takes short positions in stocks that the Adviser has identified as overvalued.  Under normal circumstances, the Fund invests primarily in common stock of small to large size companies. The Adviser defines small to large size companies as those with market capitalizations greater than $1.5 billion at the time of purchase.  The Fund’s long portfolio will focus on companies that pay dividends.  The Fund may invest up to 45% of its net assets in American Depository Receipts (ADRs). The Fund may also invest in exchange traded fund (ETFs).

The Adviser employs the proprietary Relative Value Process to identify a security’s “special investment value”.  The Fund’s portfolio manager developed the Process, has applied for a patent for the Process, and has granted a license to the Adviser to use the Process in connection with its management of the Fund’s assets.  The Process is based on fundamental financial factors with an emphasis on valuation.  Under the Process, a security’s “special investment value” is defined relative to its own historic value and not relative to a benchmark, peer group, or index.  The Process utilizes fundamental variables that the Adviser believes historically have been successful in predicting stock price movement.  The Adviser considers investments across all sectors and does not focus on any one industry.

The Fund uses a hedged strategy.  The Adviser uses the Process to identify equity securities that are inexpensive based on their trading histories, which provide the basis for the Fund’s long portfolio.  The Process also identifies equity securities that are expensive compared to their histories, which provide the foundation for the Fund’s short portfolio.  The Fund intends to invest cash proceeds from short sales in short-term cash instruments to produce a return on such proceeds just below the federal funds rate.

Generally, the Fund’s long portfolio will consist of approximately 50 securities while the short portfolio will typically be comprised of 40 securities.  The Fund will seek to be approximately 110% long and approximately 85% short, resulting in a 25% net exposure to the market.  The Fund intends to combine the long and short portfolios to seek to reduce both volatility and correlation relative to the U.S. equity markets.

A short sale involves the sale of a security that the Fund does not own in the expectation of purchasing the same security (or a security exchangeable therefore) at a later date and at a lower price.  The Fund will incur a loss as a result of a short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the security sold short.  The Fund will realize a gain if the security declines in price between those two dates.  The Fund’s potential loss is limited only by the maximum attainable price of the security less then price at which the security was sold.

The Fund’s investment strategy involves active and frequent trading. As a result, the Fund’s portfolio turnover is expected to exceed 100% on an annual basis, which will result in the Fund incurring transaction costs that detract from performance and is also expected to affect the tax treatment of the Fund’s gains.

The Adviser may sell all or a portion of a portfolio holding of the Fund, when, in its opinion, one or more of the following occurs: (1) the security’s price exceeds its fair value; (2) the Fund’s position in a company becomes over-weighted due to appreciation; (3) the issuer’s fundamentals deteriorate; (4) the Adviser identifies a more compelling investment; or (5) the Fund requires cash to meet redemption requests.

When the Adviser believes that current market, economic, political or other conditions are unsuitable and would impair the pursuit of the Fund’s investment objective, the Fund may invest some or all of its assets in cash or cash equivalents, including, but not limited to obligations of the U.S Government, money market fund shares, commercial paper, certificates of deposit and/or bankers acceptances, as well as other interest bearing or discount obligations or debt instruments that carry and investment grade rating by a national rating agency.  When the Fund takes a temporary defensive position, the Fund may not achieve its investment objective.

 

FOR MORE INFORMATION:    email   stonetorofunds@umb.com      phone   (855) 478-8676

 

Before investing you should carefully consider the Stone Toro Long Short Fund’s investment objectives, risks, charges and expenses.  This and other information is in the Prospectus and Summary Prospectus, a copy of which may be obtained by calling 1-855-4ST-TORO (1-855-478-8676), or by visiting the Fund’s website at www.stonetoro.com. Please read the Fund’s prospectus and summary prospectus carefully.