Holdun Income Fund - Executive Summary Q4 2020 - Holdun

Holdun Income Fund

Executive Summary Q4 2020

Fund Update

The Holdun Income Fund (“HIF”) continues to rebound from the March 2020 NAV reduction. The Fund returned 1.22% over Q4 to bring the current NAV to 95.70 as at 31 December 2020. In the last nine months, the HIF has steadily increased in value by an average of 0.76% a month due to the cash flow generating nature of the GNMA securities. As mentioned in previous updates, the dramatic decrease in interest rates saw yields on the 10 year Treasury fall below 1% for the first time in history. These rates have remained suppressed for the remainder of the year, disproportionally impacting the valuation of securities the HIF holds that benefit as interest rates increase. As we move forward, assuming a path to stronger economic growth through the second half of the year, we envision a steepening of the yield curve, with the yield on the 10 Year Treasury perhaps approaching 1.6%. As a result, the increase in the HIF NAV will be accelerated as the securities structured to benefit from rising long-term interest rates increase in valuation.

10Y Treasury Yield Remained Suppressed for Much of 2020

While the continued uptick in interest rates is good news for the fund, rates are unlikely to revert to 2018 levels over the short to medium term. As a result, we are looking to increase the fund’s current rate of return by adding quality, higher-yielding commercial real estate assets.

Over the coming weeks, the HIF will invest in a high quality commercial real estate portfolio consisting of four trophy properties located in Boca Raton, Florida. The Boca Trophy Portfolio will contribute significant cash flow to the fund and will have an anticipated 14-16%, 5-year annualized total return. The Boca Raton area has benefited tremendously in recent months as the migration from northern states to less densely populated, tax-advantageous regions becomes more attractive. The Boca Trophy Portfolio has experienced no rent roll impact during the pandemic, speaking to the strength and diversity of current tenants.

We believe that the addition of these types of high-quality assets will accelerate the growth of the NAV of the HIF while increasing available cash flow.

Since Inception Return Analysis: as at 31 December 2020

Portfolio

Benchmark
Compound Return

-0.92%

3.36%

Compound  Growth of $100,000

 $95,994

 $115,695

Volatility

15.65%

5.30%

Correlation of the Fund

-0.31

Percentage Month Positive

96.2%

56.6%

Fund Performance: as at 31 December 2020:

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

  Trailing Returns (Net)

1-month

3-month 1-yr 3-yr Since Inception *
   Portfolio

0.47%

1.22%

-19.61%

-3.90%

-0.92%

   Barclays 7-10 Year Treasury

-0.24% -1.26% 10.04% 6.40%

3.36%

HOLDUN