Holdun Income Fund - Executive Summary Q3 2020 - Holdun

Holdun Income Fund

Executive Summary Q3 2020

Fund Update

The Holdun Income Fund (“HIF”) continued to rebound from the March 2020 NAV reduction. The Fund returned 2.87% over Q3 to bring the current NAV to 94.54 as at 30 September 2020.

As mentioned in previous updates, the Holdun Income Fund (HIF) is a balanced portfolio consisting of securities that benefit from decreasing interest rates and securities that benefit from increasing interest rates.

Prior to the end of February 2020, the HIF recorded a since inception (annualized) return to 5.3%, continuing to show the Fund’s ability to utilize GNMA securities to generate consistent and stable returns in both increasing and decreasing yield environments.

Following the outbreak of the Covid-19 pandemic, interest rates fell sharply to 70-year lows. This dramatic decrease in interest rates and lack of liquidity has disproportionally impacted the valuation of securities the HIF holds that benefit as interest rates increase, resulting in a write-down of the NAV in March.

This dramatic decrease in interest rates has disproportionally impacted the valuation of securities the HIF holds that benefit as interest rates increase.

In the last six months, the HIF has steadily increased in value by an average of 0.93% a month as a result of the cash flow generating nature of the GNMA securities, a rate of return that is set to increase as interest rates rise.

As the economic backdrop improves, longer-term interest rates will rise from current historic lows. The increase in the ‘HIF’ NAV will be accelerated as the securities structured to benefit from rising long-term interest rates increase in valuation while continuing to produce significant cash flow. Thus, compared to other similar duration AAA-rated securities yielding less than 1% and offering little upside potential, the HIF is now in a position to benefit as longer-term yields migrate from their historic lows.

Return Analysis

Portfolio

Benchmark

Compound Return

-1.26%

3.88%

Compound  Growth of $100,000

$94.832

$117,171

Volatility

15.65%

5.27%

Percentage Month Positive

96.0%

58.0%

Fund Performance:

*Since Inception returns as of the 31st of July 2016.

  Trailing Returns (Net)

1-month

3-month 1-yr 3-yr

Since Inception *

  Portfolio

0.34%

2.87% (19.60%) (3.93%)

(1.26%)

  Barclays 7-10 Year Treasury

0.25%

0.28% 10.07% 6.76%

3.88%

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