Q2 2026 Quarterly Commentary

Q2 2026 Overview

In Q2 2026, the WaveFront All-Weather ETF returned +4.70%, compared with +2.21% for its blended benchmark, representing outperformance of +249 basis points.

For the first six months of the year, the Fund returned +6.44%, compared with +4.75% for its blended benchmark. Over the trailing one-year period, WAAV returned +17.44%. Since inception in 2019, the Fund has delivered a +9.24% annualized net return, ahead of the blended benchmark's +7.47%.

The first half of 2026 saw an acceleration in the fundamental transition of the global macroeconomic landscape. The global economy continued to shift away from a period of relatively predictable, demand-driven fluctuations in a highly globalized world and toward a more complex era of supply-side-driven volatility and economic fragmentation.

This transition was further complicated by transformative technological progress and the disruptive effects of supply-chain problems brought on by geopolitics.

For the WaveFront All-Weather Fund, this new macro reality created a landscape of extreme dispersion. Persistent inflation and energy-related supply shocks pressured certain asset classes, while the Fund's structural focus on capital efficiency and multi-asset resilience allowed it to participate in the upside across energy, equities, and real assets while maintaining exposure to strategies intended to hedge the systemic risks of a more fragmented global order.

Navigating the Era of Supply-Side Volatility

The current macroeconomic environment is increasingly being shaped by supply-side forces rather than traditional changes in aggregate demand. Energy disruptions, geopolitical conflict, trade barriers, and fragmented supply chains can now affect inflation, growth, and asset prices simultaneously.

The Fund's all-weather design is intended to address this type of environment. Rather than depending on one economic forecast or a single source of market beta, the portfolio combines global equities, real estate, precious metals, sovereign bonds, managed futures, and other differentiated sources of return.

Capital-efficient implementation allows the Fund to maintain these exposures without concentrating its capital in one macroeconomic outcome. This is particularly important in an environment where markets can experience inflationary pressures, technological disruption, geopolitical risk, and abrupt changes in growth at the same time.

The AI Paradox: Managing Structural Equity Risk

A central theme of the 2026 investment landscape is the AI paradox. While the rapid integration of artificial intelligence is generally expected to produce significant long-term productivity gains, it also introduces profound structural risks.

These include the capital-intensive nature of AI-driven growth and the potential for sudden, technology-driven demand shocks. Massive investment in semiconductors, data centres, power generation, cooling, and related infrastructure may create inflationary pressure even as technological disruption introduces uncertainty for employment, consumption, and individual businesses.

The Fund's Global Equities sleeve returned +3.81% during the first half of 2026, while its Real Estate sleeve returned +3.66%.

The Fund's diversified equity approach is intended to mitigate the risk of extreme sector concentration. While the AI boom can create intense and localized momentum, the Fund seeks to avoid the winner-take-all trap by focusing on three distinct sources of structural equity beta.

The Fund therefore maintains exposure to the upside potential of semiconductors and AI as one of its central equity pillars, but it does not rely on that theme alone.

Volatility-based allocations across each distinct pillar reduce the need to time investments in any one macro narrative and help prevent a single source of equity risk from dominating the broader portfolio.

Geopolitical Fragility and the Energy-Inflation Nexus

The shift toward supply-driven inflation has been reinforced by geopolitical tensions in the Middle East and the vulnerability of critical trade corridors, including the Strait of Hormuz.

The risk of sudden supply-side energy shocks has fundamentally altered the inflation-expectation landscape. A disruption in the availability or transportation of energy can raise prices throughout the global economy, even when underlying demand is not especially strong.

The Fund's exposure to energy and base metals was obtained through its investment in the WaveFront Global Diversified managed futures strategy.

Significant price movement in crude oil, zinc, and aluminum reflected the market's pricing of supply-chain fragmentation and the heightened risk of energy-driven price spikes.

By maintaining exposure to these real assets, the Fund was able to participate in the inflationary premium associated with supply-side fragility, providing an important buffer against the rising costs and economic effects of fossil-fuel dependency.

Monetary Policy Complexity and Precious Metals

The Bank for International Settlements has noted that the current environment presents a significant challenge for central banks. Supply-side shocks, including sudden energy-price increases, are much more difficult to address with traditional interest-rate tools than demand-side shocks.

Raising interest rates may restrain demand, but it cannot directly increase the supply of energy, repair a disrupted trade route, or resolve a geopolitical conflict.

This monetary-policy complexity contributed to intense policy uncertainty and shifting inflation expectations during the first half of 2026.

The effects were visible in precious-metals markets. Following record highs earlier in the year, gold and silver experienced a technical correction as investors reassessed inflation expectations, monetary policy, and the credibility of traditional policy responses.

The Fund continued to use highly efficient, low-cost instruments rather than expensive leveraged ETFs to maintain exposure to these long-term monetary-debasement hedges.

This implementation approach allows WAAV to preserve the intended portfolio exposure without incurring the higher financing costs currently affecting broader credit markets.

Return Is Only Part of the Story

Since inception, WAAV has delivered a higher annualized return than its blended benchmark with lower overall volatility, lower downside deviation, stronger risk-adjusted performance, and materially lower correlation to both U.S. and Canadian equities.

Attribution

Q2 performance was led by the Fund's equity and real-asset exposures. Global Equities contributed +420 basis points, while Real Estate added +293 basis points. Fixed Income also made a positive contribution of +56 basis points.

These gains were partially offset by the Fund's defensive and systematic allocations. Alternative Defensive detracted 223 basis points, primarily reflecting weakness across the Fund's gold futures positions, while Systematic Macro & Trend detracted 76 basis points.

In aggregate, the five portfolio sleeves contributed +470 basis points, consistent with the Fund's +4.70% return for the quarter.

At the individual-position level, the largest contributors were concentrated across public real estate, semiconductor exposure, and U.S. small-cap equities. RioCan REIT led positive attribution, followed closely by ARM Holdings, the S&P SmallCap 600 futures position, Taiwan Semiconductor, and Primaris REIT.

The principal detractors were the Fund's August and June gold futures positions, along with the WaveFront Global Diversified allocation. Xiaomi and Palantir were more modest detractors.

Conclusion: Resilience Through Diversification

As the global economy enters a period of heightened fragmentation and economic decoupling, the necessity of an all-weather approach has become increasingly apparent.

The risks of the 2026 economic landscape, including inflationary pressures and the structural shifts associated with the AI era, require a portfolio that can move between themes without sacrificing its core defensive mandate or its long-term return potential.

By balancing participation in inflationary momentum across energy and real assets with a disciplined, capital-efficient approach to the volatility in growth equities, precious metals, and sovereign bonds, the WaveFront All-Weather Fund remains positioned to pursue resilient, differentiated returns in an increasingly unpredictable world.