Stocks advanced in the second quarter of 2021 as investors cheered a stronger than expected reopening. Sectors
such as travel, leisure, and consumer discretionary saw large impulsive spending increases. Meanwhile, the
Federal Reserve grappled with whether the price increases seen in the economy were temporary, as a supply
constrained environment failed to meet enough capacity of the reopening demand. Later in the quarter, the Fed
stated a willingness to move more quickly toward tightening monetary policy. As a reminder, investors had
expected the Fed to allow inflation to stay above target for a prolonged period. This rhetoric changed the sentiment
and positioning in the market as longer-term interest rates fell while shorter term rates rose.

The 2 year US Treasury Note rose 9 basis points over the quarter while the 10 year fell by 28 basis points. High
yield bond spreads dropped by 42 basis points as investors accepted lower risk premiums to hold non-investment
grade credit. In sympathy with these moves in interest rates and monetary policy expectations, the S&P 500
growth index rallied 11.7% during the quarter while the S&P 500 value index advanced just 3.6%. Higher growth
names benefited from this change in interest rate environment as a larger percentage of their earnings are in future
years. Investors must now come to terms with an environment where ample fiscal and monetary stimulus exists
against a backdrop of higher than expected inflation and a recent resurgence in variants of COVID-19. On the
positive side, personal savings remains high from the COVID stimulus payments, 30 year mortgage rates are now
below 3% again, and the employment market continues to claw back lost jobs.

ALTERNATIVE INVESTMENT COMMENTARY*

Hedge funds continued to generate positive returns as the HFRI Fund-of-Funds Composite Index increased by
2.7% during the second quarter, which brings YTD performance to positive 4.8%. The alternative sector extended
its upward trend alongside equity markets as economies continued to reopen and government stimulus measures
fueled investor optimism. Growth stocks outperformed their value counterparts during the second quarter after
experiencing an underperformance in the previous two quarters. Specifically, in the hedge fund sector, ‘Equity
Hedged’ and ‘Event-Driven’ strategies sustained their outperformance as the HFRI Equity Hedged (Total) Index
and HFRI Event-Driven (Total) Index rose by 5.5% and 3.7%, respectively. We were pleased that every manager
across our platform produced a positive return during the second quarter. We remain confident in our manager’s
positioning going into the second half of the year and look forward to introducing new managers to our platform.

*Data taken from HFRI (Hedge Fund Research Indices) as of July 13th, 2021

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