MARKET COMMENTARY

The quarter began with a strong earnings season with Q2 2021 reported earnings above expectations. The S&P
500 posted Q2 2021 earnings growth of 62.5% YoY, yet despite the strong numbers, one of the key reasons was due
to easier comps versus Q2 2020 during which the sharpest decline of company growth took place shortly after the
pandemic began. Many companies cautiously increased full-year 2021 forecasts, yet were intentional in managing
expectations in terms of slowing growth rates for Q3 2021 and beyond, and additionally voiced concerns over the
current and future impacts of supply chain disruptions, raw material inflation and labor shortages that remained
unabated. Notable events throughout the quarter included China intensifying its regulatory crackdown on various
industries, including Chinese internet companies such as Alibaba and Tencent, with this particular subsector down –
34.7% during the quarter. Additionally, global supply chains remained stuck in a bottleneck from the unceasing
surge in imported consumer goods from the West, causing shipping rates from Shanghai to Los Angeles to
skyrocket, as containerships continued to stack up outside of U.S. west coast ports in record numbers waiting to be
unloaded. Market sentiment began to sour towards the end of the quarter in September with three straight weeks of
worse-than-consensus initial jobless claims prints, causing tension relating to the current state of the economic
recovery as jobless claims increased in the midst of elevated inflation figures. During the September Federal
Reserve meeting, there was an indication that a reduction in the pace of asset purchases “may soon be warranted”,
with the potential for tapering to begin as early as the November 2021 meeting and would be completed by the first
half of 2022. Chairman Powell acknowledged that current inflation targets have been reasonably met, indicating the
Fed will be closely watching the labor market, with rate increases dependent on reaching levels consistent with the
Committee’s assessment of “maximum employment.”

The S&P 500 and Nasdaq ended Q3 2021 up 0.58% and 0.93% respectively, whereas the Dow ended the quarter
down –1.91%. The clear divergence between sector and style observed in the past two prior quarters remained fairly
muted in Q3 2021, yet the broader theme was the continued outperformance of growth names versus value over the
period. High yield bond spreads saw a small increase of 11 basis points during the quarter, Treasury yields remained
anchored at the front-end with the 2-year unchanged and the 10-year saw upward movement of 7 basis points as
expectations for the upcoming rate hike continued to materialize.

ALTERNATIVE INVESTMENT COMMENTARY*

Hedge funds extended their year-to-date positive returns as the HFRI Fund-of-Funds Composite Index increased by
1.3% during the third quarter. The alternative sector outperformed most equity indices as hedge funds did not
experience a selloff in September when equities underperformed amid growth and inflation concerns
(HFRI FoF Index +0.8% vs S&P 500 net return of -4.7% for September 2021). Specifically, in the hedge fund sector,
‘Equity Market Neutral’ and ‘Relative Value Multi-Strategy’ strategies were among the top performers as the HFRI
Equity Market Neutral Index and HFRI Relative Value Multi-Strategy Index rose by 1.3% and 0.6%, respectively
during the third quarter. The managers across our platform experienced mixed performance during the quarter.
Several managers were able to take advantage of the volatility at the end of the quarter and outperformed their
respective benchmarks while managers with directional long exposure experienced a drawdown along with equity
markets. We continue to remain excited about our existing managers and believe they are well-positioned to finish
the year on a positive note.

*Data taken from HFRI (Hedge Fund Research Indices) as of October 11th, 2021

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