Holdun Income Fund

Performance Q4 2019

Executive Summary Q3 2019

Over the past several years, Holdun has developed a fixed income strategy to achieve attractive yields while maintaining a “preservation of principal” investment profile. The cornerstone of the strategy is the purchase of GSE (Government Sponsored Enterprise) bonds issued by the Government National Mortgage Association (commonly referred to as Ginnie Mae and
abbreviated to GNMA) – a U.S. government agency.

By utilizing securities issued by GNMA, the strategy benefits from a guarantee of timely payments of principal and interest by the U.S. government (“preservation of principal”), while taking advantage of customizable cash flow streams that provide the opportunity for above market yields when compared to similar credit rated securities (AAA).

Safety: Ginnie Mae Bonds are backed by the full faith and credit of the U.S. government.

Guarantees and Collateral: The Ginnie Mae bonds are not only backed by the full faith and credit of the U.S. government, but as mortgage-backed securities they are collateralized by pools of mortgage loans, most commonly on residential single family properties.

Consistency: The securitization process is seamless and the bond holder never realizes a disruption of any principal or interest payments due on their investment.

Above Average Yield: The streams of principal and interest from the cash flow from the large pools of mortgages are distributed to the different classes (known as tranches) within the Ginnie Mae bonds. These cash flow streams can be customized in an effort to deliver above average yields in the current low yield interest rate environment while maintaining safety of principal.

Liquidity: The bonds can be utilized as collateral (can be leveraged), in the event an emergency need for liquidity should arise. They also pay principal and interest monthly.

Low Volatility: Ginnie Mae bonds offer the potential for above average rate of return while having a more attractive volatility profile than traditional fixed rate bonds.

Enhanced Cash Flow: Ginnie Mae bonds offer enhanced cash flow via monthly amortization of principal and interest payments.

Proven Strategy: The strategy of utilizing customizable cash flow streams of Ginnie Mae bonds has proven to be successful for the Holdun Income Fund from inception through the end of Q3 2019. The following charts outline the past 18 month performance of the Holdun Income fund versus various benchmark indices.

Other Features: Ginnie Mae mortgage-backed securities offer the following added benefits to the portfolio:

  1. Monthly principal and interest payments allow for monthly reinvestment into current rate environments.
  2. Various coupon structures that benefit with rising and declining rates.
  3. Most of the support bonds in the Ginnie Mae strategy are comprised of tranches that are relatively smaller and sold in smaller denominations (typically 1 million to 10 million dollars) that the larger institutions do not bother to bid on. As a result, these relatively smaller size pieces can be bought at attractive discounts.

Summary: Current equity market conditions have risk adverse investors desperately searching for fixed income investments that deliver high and predictable yields and cash flows. The Holdun Income Fund’s Ginnie Mae strategy meets these requirements by offering an attractive fixed income alternative for investors seeking above average yields with safety of principal.

Whilst the Fund’s strategy calls for a portfolio of bonds issued by U.S. agencies and bonds with U.S. government guarantees there are no ventures without risks and investors are asked to read the full Risk Disclosure Supplement and confirm they have done so prior to their subscribing for the acquisition of shares. Prospective investors should give careful consideration to certain risk factors in evaluating the merits and suitability of an investment in the Fund as described in greater detail in the Risk Disclosure Supplement.