Manager Discussion of Fund Performance
(Unaudited)

The Fund is currently managed by five independent money management firms and each invests a portion of the portfolio’s assets. Effective January 2022, AQR Capital Management, LLC (AQR) was terminated as a subadvisor to the Fund and Crabel Capital Management, LLC (Crabel) assumed responsibility for a portion of the Fund’s assets. As of August 31, 2022, AlphaSimplex Group, LLC (AlphaSimplex), Manulife Investment Management (US) LLC (Manulife), TCW Investment Management Company, LLC (TCW), Water Island Capital, LLC (Water Island) and Crabel managed approximately 16.32%, 18.03%, 27.49%, 25.18% and 12.98% of the portfolio, respectively.

For the 12-month period that ended August 31, 2022, Institutional Class shares of the Fund returned 2.60%. The FTSE Three-Month U.S. Treasury Bill Index returned 0.44% for the same time period.

Market overview

Market concerns towards the latter part of 2021 were marked by emerging inflationary pressures and the continuation of pandemic-related headwinds as the Delta variant of COVID-19 gave way to the more contagious Omicron variant. Notwithstanding the uptick in cases and increased transmissibility of the virus, the economy remained largely resilient with solid non-farm payroll reports and strong retail sales, leading the Federal Open Market Committee (FOMC) to announce (and later accelerate) a tapering timeline through year-end. The November Consumer Price Index (CPI) report highlighted growing price pressures faced by consumers, with essentials such as gas and rent largely contributing to the surging figure, while consumers also bore the brunt of cost pressures passed along by businesses combating supply chain bottlenecks and labor supply issues. Meanwhile, equity markets remained strong after bouncing back from the pandemic lows of 2020, illustrated by a 28% return for the 2021 calendar year by the S&P 500 Index, while Q4 2021 gross domestic product (GDP) also rebounded, posting a nearly 7% annualized increase.

As the calendar turned from 2021 to 2022, the combination of strong economic data and elevated inflation reports gave the FOMC cover to announce its first rate hike since late 2018, effective in March 2022. Markets quickly repriced, with the expectations of a more aggressive Federal Reserve (Fed) dragging down most risk assets while Treasury yields rose across the maturity spectrum in the early months of the year. Investors, already trying to navigate the removal of accommodative policy, lingering COVID-19 variants and elevated prices faced another headwind when Russia invaded Ukraine in February, adding geopolitical tension into the confluence of factors contributing to a difficult environment in the first half of the year. Commodity prices surged as supply and demand technicals became sharply skewed from the war, exacerbating inflationary concerns and leading to a 9.1% year-over-year increase in June’s CPI report – the largest increase since 1981. The FOMC delivered back-to-back 75 basis point (bps) rate hikes in the June and July meetings in an effort to combat this climbing inflation, resulting in a tightening of financial conditions and a drag on risk assets. (A basis point is 1/100 of a percent.) Treasury yields soared, led by more policy-sensitive short rates, which resulted in the inversion of the Treasury yield curve towards the end of the second quarter, with the climb in yields also accompanied by negative GDP reports. Investor sentiment, as measured by the University of Michigan Consumer Sentiment Index, reached a 40-year low amid elevated price pressures and slowing growth, though a brief rally in July (spurred mainly by optimism that financial conditions may loosen as inflation came in slightly below forecast) led to an improved reading during the summer months. Chair Powell’s speech at the FOMC’s annual retreat in Jackson Hole quickly dampened any ideas of less restrictive policy, however, as he reaffirmed the committee’s focus on fighting inflation despite the potential economic pain that may ensue.

Against this backdrop of rising rates, slowing growth, continued COVID-related concerns and sustained geopolitical tension, risk assets declined with both equity and fixed-income markets falling just over 11% for the trailing 1-year period, as measured by the S&P 500 Index and Bloomberg U.S. Aggregate Bond Index, respectively. Further, the Bloomberg U.S. Aggregate Bond Index suffered the largest drawdown since its inception during the second quarter of 2022, emphasizing the toll the challenging economic and financial conditions had on asset prices. Unsurprisingly, all fixed-income sectors posted negative total and excess returns, with asset-backed securities (ABS) the top performer during the past twelve months at “only” negative 32 bps excess returns. Investment-grade corporates fell nearly 15% over the period as rising rates weighed on corporate spreads, while agency mortgage-backed securities (MBS) also suffered amid the sustained rate volatility and prospect of active Fed sales as the announcement of tapering in late 2021 eventually gave way to the most aggressive hiking regime in four decades. Meanwhile, emerging markets were among the worst performers in the fixed-income space as rising rates, slowing growth and the conflict in Eastern Europe weighed on the sector, while the more levered and riskier high-yield corporate sector also severely underperformed.

6	Multi-Manager Alternative Strategies Fund | Annual Report 2022