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AltViews Monthly

After unprecedented volatility during the first half of 2020, second quarter upward momentum carried forward into the start of the third quarter. For July, the S&P 500 rose 5.6% and the Barclays US Aggregate Bond Index rose 1.5% for the month. Earnings season has seen a surprising percentage of estimate beats against previously-lowered expectations, which has helped fuel market optimism further. Certain market sectors in particular seem resilient almost to a point of being impermeable to broader economic struggles or geopolitical drama, at least for the moment.

In Treasury markets, the yield curve saw a near-parallel shift downwards, with short-term rates decreasing slightly less than longer-term yields. The 3-month, 2-year, and 10-year moved down 7, 5, and 11 bps, respectively. As such, the 2Y-10Y spread decreased by 6 basis points, from 0.50% to 0.44%, and the 3M-10Y spread decreased 4 basis points from 0.50% to 0.46%. The Fed held the Federal Funds Rate in the 0.00%-0.25% range in its July meeting. Notably, the Fed also announced it would increase its holdings of US Treasuries and mortgage-backed securities under its “QE infinity” program (our words, not theirs) spurred by the COVID pandemic. This massive liquidity makes it increasingly difficult to find high-yielding investments without taking inordinate risk to reach for the now lower “higher yields.”

Volatility, as defined by the CBOE Volatility index, continued to decline from intra-year highs, decreasing another -19.6% during the month. However, despite the monthly decline, the VIX is still up 78% for the year – showing the markets unease with financial market recoveries.

Alternative Asset Class Performance

Following equity markets, it was another positive month for most alternative investment arenas. REITs and commodities led the way, followed by slightly positive performances from BDCs, hedge funds, and diversified alternatives. Only MLPs lagged, despite oil, as measured by the NYM WTI Crude, rising by 2.5% as automotive demand increased, offsetting the continued lack of demand from airlines. It’s hard not to notice the significant runs that gold and silver have been on as well, likely due to a combination of future inflation/reflation concerns, declines in the USD$, and being viewed as a risk-hedge of sorts that can still move upwards on its own.

Returns (as of 7/31/2020)
Asset Class Index July 2020YTD 1 Year 3 Years 5 Years Since Inception1
Destra Fund
MSFDX Destra Multi-Alternative Fund (Class A) 0.16% -11.19% -8.26% -2.95% -0.42% 2.57%
Traditional
Bonds Barclays US Aggregate Bond 1.49% 7.72% 10.12% 5.69% 4.47% 3.69%
Equities S&P 500 Index 5.64% 2.38% 11.96% 12.01% 11.48% 12.94%
Non-Traditional
Multi-Asset Class Morningstar Diversified Alternatives TR USD 0.62% -7.67% -4.50% -1.28% -0.38% 1.40%
Multi-Asset Class Morningstar US Fund Multialternative Category 1.77% -3.79% -2.13% 0.39% 0.28% 0.91%
REITs FTSE NAREIT All Equity REITs 3.82% -9.99% -4.38% 4.37% 6.32% 8.30%
Mortgage REITs FTSE NAREIT Mortgage REITs 5.06% -36.46% -31.40% -8.23% 0.60% 3.07%
BDCs Wells Fargo BDC 0.74% -27.21% -22.65% -6.23% 0.78% 3.33%
MLPs Alerian MLP -3.55% -37.99% -43.40% -18.13% -12.90% -6.20%
Hedge Funds UBS ETF HFRX Global HF 1.24% -0.42% 2.50% 0.17% -0.17% 0.14%
Commodities Bloomberg Commodity Index 5.71% -14.80% -12.07% -5.09% -4.54% -7.98%
Volatility Chicago Board Options Exchange SPX Volatility Index -19.62% 77.50% 51.70% 33.58% 15.07% 6.47%

Source: Morningstar

1. The Since Inception returns are calculated using the Fund’s A Share class inception date of 3/16/2012.


Quarterly Risk and Return Metrics

July (7/1/2020-7/31/2020) Since Inception1 (3/17/2012-7/31/2020)
Asset Class Index Returns Standard Deviation Sharpe Ratio Sortino Ratio Returns Standard Deviation Sharpe Ratio Sortino Ratio
Destra Fund
MSFDX Destra Multi-Alternative Fund (Class A) 0.16% 3.34 0.75 0.91 2.57% 6.17 0.46 0.50
Traditional
Bonds Barclays US Aggregate Bond 1.49% 1.93 12.69 32.28 3.69% 4.01 1.07 1.24
Equities S&P 500 Index 5.64% 15.99 5.77 8.64 12.94% 20.21 0.92 1.07
Non-Traditional
Multi-Asset Class Morningstar Diversified Alternatives TR USD 0.62% 5.26 1.94 2.47 1.40% 7.86 0.16 0.17
Multi-Asset Class Morningstar US Fund Multialternative Category 1.77% 3.42 8.46 15.40 0.91% 5.15 0.08 0.08
REITs FTSE NAREIT All Equity REITs 3.82% 23.24 2.78 4.15 8.30% 23.44 0.57 0.63
Mortgage REITs FTSE NAREIT Mortgage REITs 5.06% 36.24 2.33 3.37 3.07% 31.27 0.26 0.31
BDCs Wells Fargo BDC 0.74% 21.26 0.67 0.77 3.33% 25.60 0.28 0.31
MLPs Alerian MLP -3.55% 43.56 -1.18 -1.72 -6.20% 35.28 -0.11 -0.12
Hedge Funds UBS ETF HFRX Global HF 1.26% 2.55 7.73 12.45 0.15% 4.15 -0.18 -0.19
Commodities Bloomberg Commodity Index 5.71% 11.13 8.33 13.46 -7.98% 15.47 -0.77 -0.86

Source: Morningstar

1. The Since Inception returns are calculated using the Fund’s A Share class inception date of 3/16/2012.

Important Disclosures

An investment cannot be made directly in an index. Past performance is no guarantee of future results.

Investing in the stock market involves gains and losses and may not be suitable for all investors. The value of an investment may move up or down, sometimes rapidly and unpredictably, and may be worth more or less than what you invested.

Investments in securities of Master Limited Partnerships (MLP) involve risks that differ from an investment in common stock. MLPs are controlled by their general partners, which generally have conflicts of interest and limited fiduciary duties to the MLP, which may permit the general partner to favor its own interests over the MLPs. The benefit you are expected to derive from the Fund’s investment in MLPs depends largely on the MLPs being treated as partnerships for federal income tax purposes. As a partnership, an MLP has no federal income tax liability at the entity level. Therefore, treatment of one or more MLPs as a corporation for federal income tax purposes could affect the Fund’s ability to meet its investment objective and would reduce the amount of cash available to pay or distribute to you. Legislative, judicial, or administrative changes and differing interpretations, possibly on a retroactive basis, could negatively impact the value of an investment in MLPs.

There currently is no secondary market for the Fund’s shares, and the Fund expects that no secondary market will develop. Very limited liquidity is provided to shareholders only through the Fund’s quarterly repurchase offers of up to 5% of the shares outstanding at net asset value. The sale of securities to fund repurchases could reduce the market price of those securities, which in turn would reduce the Fund’s NAV. Closed-end funds involve 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 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. Investments in companies that are the subject of a publicly announced transaction carry the risk that the proposed or expected transaction may not be completed or may be completed on less favorable terms than originally expected, which may lower the portfolio’s performance.

Index Definitions

FTSE NAREIT All Equity REIT index is a free-float adjusted, market capitalization weighted index of U.S. equity REITs. Constituents of the index include all tax qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property.

FTSE NAREIT Mortgage REIT index is a free-float adjusted, market capitalization weighted index of U.S. Mortgage REITs. Mortgage REITs include all tax-qualified REITs with more than 50 percent of total assets invested in mortgage loans or mortgage-backed securities secured by interests in real property.

Wells Fargo BDC Index is a float adjusted, capitalization-weighted Index that is intended to measure the performance of all Business Development Companies that are listed on the New York Stock Exchange or NASDAQ and satisfy specified market capitalization and other eligibility requirements. To qualify as a BDC, the company must be registered with the Securities and Exchange Commission and have elected to be regulated as a BDC under the Investment Company Act of 1940.

Alerian MLP Index is the leading gauge of energy Master Limited Partnerships (MLPs). The capped, float-adjusted, capitalization-weighted index, whose constituents represent approximately 85% of total float-adjusted market capitalization. An investment may not be made directly in an index. Past performance is no guarantee of future results.

UBS ETF HFRX Global Hedge Fund Index is designed to be a representative benchmark of the overall hedge fund universe and is asset weighted based on the distribution of assets in the hedge fund industry. The Index is comprised of all the eligible hedge funds falling within the four principal strategy groups: equity hedge, event driven, macro/CTA, and relative value arbitrage.

Barclays US Aggregate Bond Index: An index commonly used as a benchmark by both passive and active investors to measure portfolio performance relative to the U.S. dollar-denominated, investment-grade, fixed-rate, taxable bond market. It is also an informational measure of broad market returns commonly applied to fixed income instruments.

An investment cannot be made directly in an index. Past performance is no guarantee of future results.

Note that comparing the performance to a different index might have materially different results than those shown. Any views and opinions expressed herein are not meant to provide investment advice and there is no guarantee that they will come to pass.

Investors should carefully consider the investment objectives, risks, charges, and expenses of the Destra Multi-Alternative Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling (855) 601-3841. The prospectus should be read carefully before investing.

The Destra Multi-Alternative Fund (the “Fund”) is distributed by Destra Capital Investments LLC, member FINRA/SIPC (“Destra”). Destra Capital Advisors LLC is an affiliate of Destra. Validus Growth is not affiliated with Destra or Destra Capital Advisors LLC.