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Destra Multi-Alternative Fund (NYSE: DMA)

Sub-Advised by Validus Growth Investors, LLC

Market Price Distribution Rate

9.90%

as of 12/6/22

Premium/(Discount)

(38.57%)

as of 12/6/22

Market Price

$6.80

as of 12/6/22

Net Asset Value

$11.07

As of 12/6/22

The Destra Multi-Alternative Fund (the “Fund”) is an exchange-listed closed-end fund featuring a monthly distribution. The Fund seeks to achieve long-term performance non-correlated to the broad stock and bond markets. It invests primarily in alternative strategies and asset classes including real estate, direct private equity, alternative credit, commodities and hedge strategies.

The Fund gives investors access to institutional alternative strategies that may provide more opportunity for total return from different sources than traditional investments, without the high minimum investments or lock ups that such strategies often require.

The Fund aims to maximize risk-adjusted returns and therefore does not try to directly compete with stocks or bonds. Instead, it consists of investments with historically low correlations to these traditional asset classes, seeking to lower overall volatility and add value to an investor’s existing investment portfolio across a variety of market cycles.

Alternative investments typically have a different return profile and different risks than traditional investments. There is no guarantee that the Fund will achieve its objectives, generate profits, or avoid losses.

The Alternative Closed-End Fund

The Fund seeks returns from capital appreciation and income with an emphasis on income generation. The closed-end fund structure allows the Fund to invest a substantial amount of its capital in institutional-quality, longer-horizon individual investments and strategies. Some of these strategies and assets may be less liquid, providing an opportunity to capture illiquidity premiums embedded in these instruments as they mature, for the benefit of the Fund’s shareholders.

As with most alternative investment strategies, a major objective of the Fund is to reduce volatility relative to traditional asset classes. This combination of alternative sources of return and risk and a goal of low correlation to traditional stocks and bonds may make the Fund a core alternative solution or component of a well-diversified portfolio.

Potential Benefits

 

Investment Strategy

Allocating to Alternatives

The Fund may invest across multiple alternative categories and strategies, including:

Institutional Endowment Approach Executed Within an Easy-to-Access Fund

The Destra Multi-Alternative Fund invests following a time-tested strategy used by many endowments and foundations. This process, sometimes called the “Endowment Model,” exploits the opportunities of long time horizons that endowments, foundations and closed-end funds can pursue because of their unique structures. This changes the nature of investments that may be considered, and the ability to commit capital to certain assets and strategies through a full investment cycle.

Income Focused. Growth Potential. Low Correlations.

There is no guarantee that any investment strategy will achieve its objectives, generate profits, or avoid losses.

Unique Total Return Model

  • Broadens CEF Exposure – Traditional CEFs have a heavy emphasis on income generation exclusively
  • DMA actively pursues non-correlated sources of income and NAV growth across a range of opportunity sets

Performance

Average Annual Total Returns as of 9/30/22

Share Class Ticker 3 MO 6 MO 1YR 3YR 5YR 10YR from incep.*
Market Price DMA -2.83% -23.56% n/a** n/a** n/a** n/a** n/a**
NAV XDMAX -2.07% -6.57% -6.19% -1.41% -0.94% 2.60% 2.65%

Source: Morningstar

Data presented reflects past performance, which is no guarantee of future results. Investment results and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, current performance may be higher or lower than the performance shown. Call 877.855.3434 or access our website at destracapital.com for performance current to the most recent month end. Returns for period of less than one year are not annualized, and include reinvestment of all distributions. The Fund’s Gross/Net Expense ratios are 2.11%/1.70%.

Effective January 13, 2022, the Investment Manager and the Fund have entered into an expense limitation and reimbursement agreement (the “Expense Limitation Agreement”) under which the Investment Manager has agreed to reimburse and/or pay or absorb, on a quarterly basis, the “ordinary operating expenses” (as defined below) of the Fund to the extent that such expenses exceed 0.53% per annum of the Fund’s average daily net assets (the “Expense Limitation”). For the purposes of the Expense Limitation Agreement, “ordinary operating expenses” consist of all ordinary expenses of the Fund, including administration fees, transfer agent fees, organization and offering expenses, fees paid to the Fund’s trustees, administrative services expenses, and related costs associated with legal, regulatory compliance and investor relations, but excluding the following: (a) investment management fees, (b) portfolio transaction and other investment-related costs (including brokerage commissions, dealer and underwriter spreads, and commitment fees on any leverage facilities, prime broker fees and expenses, and dividend expenses related to short sales), (c) interest expense and other financing costs, (d) taxes, (e) distribution fees and/or shareholder servicing fees, if any, (f) acquired fund fees and expenses and (g) extraordinary expenses. Any waiver or reimbursement by the Investment Manager under the Expense Limitation Agreement is subject to repayment by the Fund within three years from the date the Investment Manager waived any payment or reimbursed any expense, provided that the Fund is able to make the repayment without exceeding the expense limitation in place at the time of waiver or the current expense limitation and the repayment is approved by the Board. Unless terminated by the Board, the Expense Limitation Agreement will continue in effect until at least January 13, 2027. The Board may terminate this Expense Limitation Agreement upon sixty (60) days’ written notice to the Investment Manager.

*The Fund’s Since Inception return is based on the Fund’s class A Share inception date on 3/16/2012. The class A Share returns, net of A share expenses, were used from 3/16/2012 inception until the class I share inception date on 7/2/2014. From 7/2/2014, the class I share returns net of I share expenses were used thereafter until the Fund listing date and conversion into common listed share class on 1/13/2022. No synthetic expenses have been retroactively applied to the combined historical performance.

** The Fund listed on the NYSE on 1/13/22.

Investors cannot invest directly in an index and index returns do not reflect any fees, expenses or sales charges directly in an index.

Investors buy and sell shares at the MKT rate now that the Fund is listed. The risk metrics and performance stats shown here are at NAV since inception of the Fund and reflect the performance of the underlying portfolio. MKT price can and usually does deviate from NAV, sometimes significantly.

Fund Basics

Ticker DMA
NAV Ticker XDMAX
CUSIP 250 65A 502
Fund Inception Date 3/16/2012
NYSE Listing Date 1/13/2022

1 The closing price at which the Fund’s shares were traded on the exchange.

2 Per-share dollar value of the Fund, calculated by dividing the total value of all the securities in its portfolio, plus any other assets and less liabilities, by the number of Fund shares outstanding.

Portfolio Characteristics

as of 9/30/22

Market Price1 $6.50
NAV2 $10.73
Premium/(Discount) (39.42%)
Average 30-Day Volume 16,171
Net Assets $96M
Leverage Outstanding $15M
Total Leverage Ratio 13.19%
Manager Destra Capital Advisors LLC
Sub-Advisor Validus Growth Investors, LLC

Asset Allocation

as of 9/30/22

Alternative Sector Breakdown

as of 9/30/22

Top 10 Holdings (% of total assets)

as of 9/30/22

Clarion Lion Industrial Trust14.59%
Canyon CLO Fund II L.P.8.03%
Preservation REIT6.41%
Treehouse REIT, Inc6.13%
Aventine Property Group4.93%
GoSite, Inc.4.12%
Healthcare Trust, Inc.3.71%
Ready Capital Corp3.35%
NewLake Capital Partners3.27%
Canyon CLO Fund III L.P.3.16%

Holdings are subject to change without notice. There is no assurance that the investment process will lead to successful investing.

All compositions are subject to daily changes with market actions.

Literature & Communications

Distributions

Declaration Date Ex-Distribution Date Record Date Payable Date Total Distribution
11/8/2022 10/17/2022 10/18/2022 10/30/2022 $0.0561
10/11/2022 10/20/2022 10/21/2022 10/31/2022 $0.0541
9/9/2022 9/19/2022 9/20/2022 9/30/2022 $0.0563
8/9/2022 8/18/2022 8/19/2022 8/31/2022 $0.0572
7/8/2022 7/18/2022 7/19/2022 7/29/2022 $0.0560
6/7/2022 6/16/2022 6/17/2022 6/30/2022 $0.0590
5/10/2022 5/19/2022 5/20/2022 5/31/2022 $0.0593
4/8/2022 4/18/2022 4/19/2022 4/29/2022 $0.0599
3/11/2022 3/18/2022 3/21/2022 3/31/2022 $0.0593
2/8/2022 2/17/2022 2/18/2022 2/28/2022 $0.0597
1/14/2022 1/24/2022 1/25/2022 2/3/2022 $0.0604

See the Funds Section 19a-1 letters, if any, located on the Fund's website under the "Section 19(a)" section for estimates of distribution sources other than income.

The dividend history represents dividends that were paid by the Fund and is not a guarantee of the Fund's future dividend-paying ability.

Pursuant to the DRP, unless the registered owner of the Fund’s Common Shares elects otherwise by contacting AST, all dividends declared on the Common Shares will be automatically reinvested in additional Common Shares by AST. Common Shareholders who elect not to participate in the DRP will receive all dividends and other distributions in cash paid by check mailed directly to the shareholder of record. After the Common Shares are listed on the NYSE, whenever the Fund declares a dividend payable in cash on such Common Shares, non-participants in the DRP will receive cash and participants in the DRP will receive the equivalent in additional Common Shares. The shares will be acquired by AST for the participants’ accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized shares from the Fund or (ii) by purchasing outstanding shares on the open market on the NYSE or elsewhere. If, on the payment date for any dividend, the closing market price plus estimated brokerage commissions per share is equal to or greater than the NAV per share, AST will invest the dividend amount in newly issued shares. The number of newly issued shares to be credited to each participant’s account will be determined by dividing the dollar amount of the dividend by the Fund’s NAV per share on the payment date. If, on the payment date for any dividend, the NAV per share is greater than the closing market value plus estimated brokerage commissions (i.e., the Fund’s shares are trading at a discount), AST will invest the dividend amount in shares acquired in open-market purchases.

In the event of a market discount on the payment date for any dividend, AST will have until the last business day before the next date on which the Common Shares trade on an “ex-dividend” basis or 30 days after the payment date for such dividend, whichever is sooner, to invest the dividend amount in shares acquired in open-market purchases. It is contemplated that the Fund will pay monthly income dividends. If, before AST has completed its open-market purchases, the market price per share exceeds the NAV per share, the average per share purchase price paid by AST may exceed the NAV of the shares, resulting in the acquisition of fewer shares than if the dividend had been paid in newly issued shares on the dividend payment date. Because of the foregoing difficulty with respect to open-market purchases, the DRP provides that if AST is unable to invest the full dividend amount in open-market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, AST may cease making open-market purchases and may invest the uninvested portion of the dividend amount in newly issued shares at the NAV per share at the close of business on the last purchase date. All correspondence or questions concerning the Plan should be directed to the Plan Administrator at American Stock Transfer & Trust Company, LLC - Plan Administration Department, P.O. Box 922 Wall Street Station, New York NY 10269-0560.

Portfolio Managers

Validus Growth Investors, LLC

Validus is a research-focused, fundamentally-driven manager of direct equity, alternative, and asset allocation strategies. As part of its proprietary research methods, Validus implements systematic scoring regimes to identify specific investment opportunities which are combined with active risk-mitigation techniques to construct portfolios. Validus currently has over $215 million in assets under management and administration.

Investment Team

Mark Scalzo
Portfolio Manager

Zach Leeds
Assistant Portfolio Manager

Glossary

Gross Expense Ratio: Expense ratio is a measure of what it costs to operate an investment, expressed here as a percentage of its assets. These are costs the investor pays through a reduction in the investment’s rate of return. The gross expense ratio is the total annual fund or class operating expenses directly paid by the fund from the fund’s most recent prospectus (before waivers or reimbursements). This ratio also includes Acquired Fund Fees & Expenses, which are expenses indirectly incurred by a fund through its ownership of shares in other investment companies. Net Expense Ratio: Expense ratio is a measure of what it costs to operate an investment, expressed here as a percentage of its assets. These are costs the investor pays through a reduction in the investment’s rate of return. The net expense ratio is the total annual fund or class operating expenses directly paid by the fund from the fund’s most recent prospectus, after any fee waiver &/or expense reimbursements that will reduce any fund operating expenses. This ratio also includes Acquired Fund Fees & Expenses, which are expenses indirectly incurred by a fund through its ownership of shares in other investment companies. This number does not include any fee waiver arrangement or expense reimbursement that may be terminated without agreement of the fund’s board of trustees during the one-year period.

Alpha: A measure of performance on a risk-adjusted basis. Alpha compares the volatility (price risk) of the Fund to risk-adjusted performance of the benchmark Index. The excess return of the Fund relative to the return of the Index is the Fund’s alpha.

Beta: A measure of a fund’s sensitivity to market movements - market movements are represented by a benchmark index. A benchmark index has a beta of 1.0. A beta greater than 1.0 indicates that a fund’s historical returns have fluctuated more than the benchmark index. A beta less than 1.0 indicates that a fund’s historical returns have fluctuated less than the benchmark index. Correlation: a statistic that measures the degree to which two securities move in relation to each other.

Excess Return: Excess returns are returns achieved above and beyond the return of a proxy.

Market Capture Ratios: A statistical measure of the Fund’s overall performance in up-markets (positive return periods) and down markets (negative return periods). The ratio is calculated by dividing the Fund’s returns by the returns of the index during the up-market or the down-market, and multiplying that factor by 100.

R2: R-squared measures the relationship between a fund and a benchmark. A higher R2 (closer to 100%) indicates that the portfolio moves like the benchmark.

Sharpe Ratio: A measure of historical risk-adjusted performance calculated by dividing the fund’s excess returns over a risk-free rate by the standard deviation of those returns. The higher the ratio, the better the fund’s return per unit of risk.

Sortino Ratio: The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset’s standard deviation of negative portfolio returns deviation, instead of the total standard deviation of portfolio returns.

Standard Deviation: An annualized statistical measure of how much a fund’s returns have varied over a period of time. The more variable the returns, the higher the standard deviation. A higher standard deviation also indicates a wider dispersion of past returns and thus greater historical volatility.

Bloomberg Barclays US Aggregate Bond Index - measures the performance of the U.S. investment grade bond market.

IA SBBI US 30 Day T-Bills Index - measures the performance of one-month maturity US Treasury Bills.

Morningstar Broad Hedge Fund Index – rules-based, asset-weighted index designed to capture the performance of the most investable hedge funds.

Morningstar Diversified Alts Index - provides diversified exposure to alternative asset classes in the ProShares ETF lineup.

Morningstar US Fund MultiStrategy Category - Multistrategy funds allocate capital to a mix of alternative strategies (at least 30% combined), as defined by Morningstar’s alternative category classifications.

S&P 500 Index – measures the performance pf the largest 500 U.S. common stocks chosen to reflect the industries in the U.S. economy.

Risks

Investing in the Fund involves risks, including the risk that you may receive little or no return on your investment or that you may lose part or all of your investment. Please see below risk for underlying holdings of the Fund. The Fund’s distribution rate amounts were calculated based on the ordinary income received from the underlying investments net of Fund expenses. Net capital gains realized from the disposition of Fund investments, if any, will be paid out annually. The distribution rate does not reflect other non-income items and has not been adjusted for tax reporting purposes. Distribution amount is not indicative of Fund performance. Current distributions and monthly target yields are not guaranteed and may not be met in the future. Shareholders receiving periodic payments from the Fund may be under the impression that they are receiving net profits. However, all or a portion of a distribution may consist of a return of capital. A portion of the Fund’s distributions consisting of a return of capital are often based on the character of the distributions received from the underlying holdings, primarily real estate investment trusts. Investing involves risk including the possible loss of principal. Alternative investment funds, ETFs, mutual funds, and closed-end funds are subject to management and other expenses, which will be indirectly paid by the Fund. Issuers of debt securities may not make scheduled interest and principal payments, resulting in losses to the Fund. Typically, a rise in interest rates causes a decline in the value of fixed-income securities. Lower-quality debt securities, known as “high-yield” or “junk” bonds, present greater risk than bonds of higher quality, including increased default risk and non-diversification risk as the funds are more vulnerable to events affecting a single issuer. The use of leverage, such as borrowing money to purchase securities, will cause the Fund to incur additional expenses and will magnify the Fund’s gains or losses. Investments in lesser-known, small- and medium-capitalization companies may be more vulnerable than those in larger, more established organizations. The Fund will not invest in real estate directly, but, because the Fund will concentrate its investments in securities of REITs, its portfolio will be significantly impacted by the performance of the real estate market. The value of a structured note will be influenced by time to maturity; type of note; market volatility; changes in the issuer’s credit quality rating; and economic, legal, political, or geographic events that affect the reference index.

Validus Growth Investors is the Fund’s sub-advisor. Destra Capital Advisors LLC, a registered investment advisor, is the Fund’s investment manager and is providing secondary market servicing for the Fund.