Marret High Grade Hedge Fund – Series F As at May 31, 2015 FundServ Codes Investment Objective The Fund provides investors with (i) monthly tax-advantaged distributions, initially targeted to be $0.50 per Unit per annum, representing a yield of 5% per annum on the initial subscription price, and (ii) a total return based on the performance of a portfolio of primarily non-investment grade securities with a focus on delivering consistent positive absolute returns while maintaining low correlations with recognized fixed income and equity index returns. Series F MAI201 Series USD-F MAI501 Details Investment Strategy Date of Inception May 1, 2012 Management Fee Series F: 1.00% Performance Fee 15% over 5% hurdle Subscriptions/ Monthly (5 days notice) Redemptions Total Fund Assets $30,305,928.62 To achieve its objective, the Fund will have exposure to the Marret HYP Trust through a forward agreement. The Marret HYP Trust intends to invest primarily in a broad range of public and private debt securities, both investment and non investment grade, including corporate bonds and bank loans, government debt and convertible debentures. The Marret HYP Trust may also invest in equity securities, such as common shares, preferred shares and warrants, and utilize other financial instruments, including exchange traded funds and credit and/or index derivatives. The Marret HYP Trust may take both long and short positions in portfolio securities, and will also make use of leverage in furtherance of these objectives and strategies. Portfolio Performance (Series A Units): NAV per Unit $10.83 Distributions HGHF-F Growth of $1,000 1250 $1,218 1200 1150 1100 1050 1000 950 900 850 800 DEX Mid Corp. Latest Distribution $0.0333 *Distribution Frequency Monthly Cash Distributions $1.2333 Since Inception **Estimated Pre-Tax 5.27 Interest Equivalent Yield *The monthly distribution is fixed but not guaranteed and may be adjusted quarterly. **based on NAVpu for Series A Units as at May 31, 2015 and top marginal tax rates in Ontario Yield Information* (%) 13 14 1 Mth 3 Mth 6 Mth YTD 0.21 1.04 3.00 3.00 15 1 Yr 2 Yr (annualized) (annualized) Inception 3.80 5.68 6.60 Compound Returns (%)* Fund *Based on the Opening NAV per Unit Net Exposure 11.76 Yield to Maturity 4.47 Portfolio Allocations Yield to Worst 4.10 Current Yield 4.61 Yields noted above are for the total portfolio, including cash *at May 31, 2015 Annual Risk/Return % 10 Annual Return (%) 12 HGHF-F DEX Mid Corp. 5 Top Sectors Banking Real Estate Telecommunications Insurance Basic Industry Healthcare Media Financial Services Transportation Technology & Electronics Gvt / Other (%) 8.54 8.26 5.90 4.47 3.82 3.60 3.12 2.41 2.23 1.90 55.76 Credit Rating Breakdown AAA AA A BBB BB NR (%) 1.24 2.90 19.31 69.99 4.19 2.37 Calculated as a proportion of gross invested capital excluding cash 0 0 1 3 2 Risk (%) 4 5 Top Long & Short Holdings Long Co-operators Financial S 5.778% 10Mar2020 Aimia Inc 5.6% 17May2019 Bell Canada 3.15% 29Sep2021 Viterra Inc 5.95% 01Aug2020 144A Glencore Finance Europe 7.5% 06Oct2049 (%) 8.75 5.52 5.37 5.35 5.33 Short US Treasury N/B 1.375% 30Apr2020 US Treasury N/B 2.125% 15May2025 Canadian Government 3.5% 01Jun2020 CDX.NA.IG.23 Canadian Government 2.5% 01Jun2024 (23.91) (18.34) (18.20) (15.64) (13.95) Marret High Grade Hedge Fund – Series F As at May 31, 2015 Marret High Grade Hedge Commentary – May 2015 Market Developments The investment grade corporate bond market endured some formidable challenges during the month of May. Greek debt negotiations, new issue supply (the largest month on record) in the United States, increased volatility in interest markets, declining fund inflows and weakening credit metrics combined to provide a strong headwind to credit spreads. Investment grade credit spreads were 8, 2 and 5 basis points wider over the month in the U.S., Canada and Europe markets respectively based on the JP Morgan JULI, FTSE/TMX Corporate and the Main CDS indices. In order to navigate these crosscurrents we took the following actions: - Reduced overall exposure in the portfolio with a focus on trimming higher beta markets/ credits. Market Outlook Over the short-term, we believe many of the headwinds which impacted the market in May will persist. The Greek debt talks have extended into June and increased volatility in Government bond yields globally will likely prompt corporate treasurers to advance financing plans (increasing new issuance) and could minimize positive fund inflows into bond funds. Accordingly, we will maintain a defensive posture. The strategy employed this past month will be accelerated. We want to reduce long market exposure and add both cash and index hedges. Additionally, we may tactically employ interest rate overlays as an additional hedging vehicle. In the short-term, our priority is to preserve returns as the market has possibly entered a period where the negatives may briefly outweigh the positives of the asset class’s performance. If this is indeed a short-term shift in the cyclical move in credit, the hedges should enable us to preserve return and capital. If the cycle is beginning to enter a new phase, then we will be prompted to make more structural changes to the portfolio. - Initiated a cash hedge against our overall European credit exposure in case of a Greek tragedy. - Selectively added credit short positions in sectors looking expensive to the market. - Traded new issues with a very short time horizon. These actions, combined with a 75 basis point tightening in our long Williams Companies thirty year position (on the announcement of their acquisition and corporate restructuring of Williams Partners), allowed us to produce modestly positive returns on the month. Given Government bond yields were higher, cash credit spreads wider and the TSX -1.22% over the month, we are comfortable with the Fund’s performance. For the month, Funds returns were 0.21% and year-to-date 3.00%. This compares to 2.76% for our benchmark, the FTSE/TMX All Corporate Bond Index. The benchmark is a long only bond index. The Fund, conversely, invests long/short across U.S., Canadian and European investment grade corporate bonds on a hedged basis. Forward-Looking Statements Some of the statements contained herein including, without limitation, financial and business prospects and financial outlook may be forward-looking statements which reflect management’s expectations regarding future plans and intentions, growth, results of operations, performance and business prospects and opportunities. Words such as “may,” “will,” “should,” “could,” “anticipate,” “believe,” “expect,” “intend,” “plan,” “potential,” “continue” and similar expressions have been used to identify these forward-looking statements. These statements reflect management’s current beliefs and are based on information currently available to management. Forward-looking statements involve significant risks and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including, but not limited to, changes in general economic and market conditions and other risk factors. Although the forward-looking statements contained herein are based on what management believes to be reasonable assumptions, we cannot assure that actual results will be consistent with these forward-looking statements. Investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof and we assume no obligation to update or revise them to reflect new events or circumstances. Marret Asset Management Inc. 200 King Street West, Suite 1902, Toronto, ON M5H 3T4 416-214-5800 I www.marret.com FSC FPO 1506-0928-5_E (05/15)
© Copyright 2024