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AltViews Monthly

For the first time in 2019, markets saw both increased volatility and a sustained, albeit gradual, sell-off hold for nearly the entire month of May, with the S&P 500 falling -6.4%. The likelihood of a trade deal with China grew increasingly tenuous towards the end of the month, as the US administration accused their Chinese counterparts of backing away from already-agreed-to terms. Concerns over this, when combined with the return of the slowing global growth story, pushed rates down as markets priced in a probability of a Fed interest rate cut during 2019 to 94.8%. The Barclays Aggregate rose 1.8% as investors sought safety in fixed income securities.

In terms of fixed income, flattening along the yield curve caused the re-emergence of an inversion at the 3-month to 10-year spread. The yield on the US 10-Year decreased from 2.50% to 2.13%, while the 3-month decreased only slightly, from 2.36% to 2.29%. The yield on the US 2-Year decreased from 2.28% to 1.97%. As a result, the 2-10 spread decreased from 0.23% to 0.16%. These moves in the fixed income market are very large for such a short period of time and reflect a dramatic change in sentiment.

Volatility as measured by the VIX rose by 42.6% during May. The complacency previously seen during the year reversed as rising trade tensions sparked fresh growth concerns, lower inflation expectations, and increasing fear over the ability for a trade deal and/or the Fed and its respective toolkit to stave off a future recession, or at the very least a significant correction. In addition, and perhaps more simplistically, with markets vaulting up by mid-teens returns during the first four months of the year, we were due for a sell-off / correction.

Alternative Asset Class Performance

During the month, alternative asset class returns displayed significant dispersion. Equity REITs and the US Dollar outperformed with slightly positive results, while all other alternative asset classes posted negative returns at varying levels. Crude Oil, as measured by the NYM WTI Crude, decreased by 16.4% from $63.98 to $53.50, yet encouraging MLPs did not suffer as dramatically. While decreasing rates is usually a positive for rate-sensitive asset classes such as BDCs and Mortgage REITs, a selloff in high-yield credit markets proved a stronger headwind.

Returns (as of 5/31/2019)
Asset Class Index May YTD 1 Year 3 Years 5 Years Since Inception1
Destra Fund
MSFDX Destra Multi-Alternative Fund (Class A) -1.48% 3.86% -2.00% 1.21% 1.33% 3.95%
Traditional
Bonds Barclays US Aggregate Bond 1.78% 4.80% 6.40% 2.50% 2.70% 2.71%
Equities S&P 500 Index -6.35% 10.74% 3.78% 11.73% 9.66% 12.11%
Non-Traditional
Multi-Asset Class Morningstar Diversified Alternatives TR USD -0.99% 2.62% 0.17% 1.14% 0.23% 2.11%
Multi-Asset Class Morningstar US Closed-End Multialternative Category -2.93% 2.80% -1.22% -2.61% 0.04% n/a1
REITs FTSE NAREIT All Equity REITs 0.64% 17.66% 16.15% 7.83% 8.81% 9.95%
Mortgage REITs FTSE NAREIT Mortgage REITs -6.90% 4.49% 2.89% 10.68% 6.79% 8.04%
BDCs Wells Fargo BDC -3.32% 14.63% 4.46% 8.14% 4.00% 6.99%
MLPs Alerian MLP -1.14% 13.95% -1.12% 0.38% -6.62% 0.12%
Hedge Funds UBS ETF HFRX Global HF -0.71% 2.17% -4.70% 0.51% -1.46% -0.47%
Commodities Bloomberg Commodity Index -3.36% 2.31% -12.37% -1.73% -9.52% -7.83%
Volatility Chicago Board Options Exchange SPX Volatility Index 42.61% -26.40% 21.26% 9.66% 10.42% 3.63%

Source: Morningstar


Monthly Risk and Return Metrics

May (5/1/2019-5/31/2019)
Asset Class Index Returns Standard Deviation Sharpe Ratio Sortino Ratio
Destra Fund
MSFDX Destra Multi-Alternative Fund (Class A) -1.48% 4.66 -5.86 -5.06
Traditional
Bonds Barclays US Aggregate Bond 1.78% 3.42 8.18 14.89
Equities S&P 500 Index -6.35% 16.90 -6.47 -5.89
Non-Traditional
Multi-Asset Class Morningstar Diversified Alternatives TR USD -0.99% 3.33 -5.63 -5.29
Multi-Asset Class Morningstar US Closed-End Multialternative Category -2.93% 8.96 -5.65 -5.28
REITs FTSE NAREIT All Equity REITs 0.64% 15.10 0.56 0.60
Mortgage REITs FTSE NAREIT Mortgage REITs -6.90% 10.83 -11.44 -8.88
BDCs Wells Fargo BDC -3.32% 10.85 -5.19 -4.77
MLPs Alerian MLP -1.14% 23.97 -0.82 -1.11
Hedge Funds UBS ETF HFRX Global HF -0.71% 2.48 -5.88 -5.41
Commodities Bloomberg Commodity Index -3.36% 14.49 -3.97 -4.07
Volatility Chicago Board Options Exchange SPX Volatility Index 42.61% 231.10 3.60 6.15

Source: Morningstar


Since Inception Risk and Return Metrics

Since Inception1 (3/17/2012-5/31/2019)
Asset Class Index Returns Standard Deviation Sharpe Ratio Sortino Ratio
Destra Fund
MSFDX Destra Multi-Alternative Fund (Class A) 3.95% 5.12 0.94 1.11
Traditional
Bonds Barclays US Aggregate Bond 2.71% 3.64 0.83 0.98
Equities S&P 500 Index 12.11% 15.59 1.08 1.27
Non-Traditional
Multi-Asset Class Morningstar Diversified Alternatives TR USD 2.11% 5.64 0.40 0.46
Multi-Asset Class Morningstar US Closed-End Multialternative Category n/a1 n/a1 n/a1 n/a1
REITs FTSE NAREIT All Equity REITs 9.95% 17.14 0.84 0.96
Mortgage REITs FTSE NAREIT Mortgage REITs 8.04% 16.32 0.71 0.83
BDCs Wells Fargo BDC 6.99% 14.94 0.67 0.76
MLPs Alerian MLP 0.12% 26.93 0.11 0.13
Hedge Funds UBS ETF HFRX Global HF -0.47% 3.91 -0.39 -0.42
Commodities Bloomberg Commodity Index -7.83% 14.83 -0.79 -0.89
Volatility Chicago Board Options Exchange SPX Volatility Index 3.63% 158.69 0.75 1.10

Source: Morningstar

1. The Since Inception returns are calculated using the Fund’s A Share class inception date of 3/16/2012. Since Inception returns are not shown for the Morningstar US Closed-End Multi-alternative Category as its inception date is 2/27/2013.

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.

Morningstar US Closed-End Multialternative Index represents closed end funds that have a majority of their assets exposed to alternative strategies. An investor’s exposure to different tactics may change slightly over time in response to market movements. Funds in this category include both funds with static allocations to alternative strategies and funds tactically allocating among alternative strategies and asset classes.

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. Pinhook Capital, LLC is not affiliated with Destra or Destra Capital Advisors LLC.