Braddock Multi-Strategy Income Fund
BDKNX, BDKCX, BDKAX
Top Holdings Braddock
|As of 9/30/2020||% of Net Assets (Excluding Cash)|
|FHMS KF74 AL VAR RT 01/25/2027||1.75|
|PNMSR 18-GT2 VAR RT 08/25/2025||1.62|
|MCAS 2019-01 M10 VAR RATE 10/15/2049||1.43|
|CAS 2013-C01 M2 VAR RT 10/25/2023||1.40|
|MCAS 2020-01 M7 VAR RATE 03/25/2050||1.38|
|HPA 2018-1 E VAR RT 07/17/2037||1.36|
|CMLTI 2019-C A2 MTGE VAR RT 09/25/2059||1.32|
|LPSLT 2020-1GS C VAR RT 06/20/2047||1.27|
|VOLT 2019-NPL9 A2 MT VAR RT 11/26/2049||1.25|
|HMIR 2018-1 M2 VAR RT 10/25/2028||1.21|
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The Fund seeks total return with an emphasis on providing current income.
Primarily, the Fund will invest in asset-backed debt securities, with a focus on non-agency (i.e., private) mortgage-related securities. The Fund may also invest a portion of the portfolio in collateralized loan obligations. Interest rate duration is expected to be short given that Fund holdings primarily have floating rate coupons. The Fund has the ability to take short positions to dampen volatility or to express relative value views. Asset-backed debt securities represent interests in “pools” of mortgages or other asset based loans, including securities backed by assets such as residential and commercial real estate, senior secured bank loans, credit card and business receivables, student loans, personal and consumer loans and automobile loans.
Braddock Financial, LLC, the sub-advisor to the Fund, is an SEC registered investment advisor founded in 1994. Braddock has managed various private investment partnerships and separately managed accounts that invested in asset-backed debt securities. The Fund offers retail investors access to a distinctive fixed income strategy, previously available only through a private limited partnership but converted into this mutual fund on December 31, 2015.
The Fund’s portfolio managers will select securities they believe are undervalued, demonstrate attractive risk/reward profiles, and aim to provide investors a consistent return in various interest rate environments. Braddock performs an extensive bottom-up analysis of the market and evaluates the following variables in assessing each potential position.
- Deal structure and asset credit support
- Quality of the collateral that underlies the security
- Diversification across collateral characteristics
- Capital appreciation opportunity
- Duration risk
In selecting securities for investment, Braddock favors investments that it believes are undervalued and will produce consistent returns in most interest rate environments. Braddock selects those securities for investment that it believes offer the best risk/return opportunity based on its analyses of a variety of factors including collateral quality, duration, structure, excess interest, credit support, potential for greater upside and less downside capture, liquidity, and market conditions. Braddock attempts to diversify the Fund’s investments geographically (i.e., by the location of the underlying mortgage properties) and, with respect to asset backed debt securities, among the loan servicing institutions. Under normal market conditions the Fund expects to invest primarily in non-investment grade securities, which aim to provide a higher level of income relative to broader fixed income markets, while remaining relatively liquid within a market of investors such as insurance companies, institutional investors and pension plans.
IMPORTANT RISKS & DISCLOSURES
Before investing you should carefully consider the Braddock Multi-Strategy Income Fund’s investment objectives, risks, charges and expenses. This and other information about the Fund is in the prospectus and summary prospectus, a copy of which may be obtained by calling 800-207-7108 or by visiting the Fund’s website at www.libertystreetfunds.com. Please read the Fund’s prospectus or summary prospectus carefully before investing.
An investment in the Braddock Multi-Strategy Income Fund is subject to risk, including the possible loss of principal amount invested and including, but not limited to, the following risks, which are more fully described in the prospectus: Market Turbulence Resulting from COVID-19. the outbreak of COVID-19 has negatively affected the worldwide economy, including the U.S. The future impact of COVID-19 is currently unknown, and it may exacerbate other risks that apply to the Fund. Market Risk: the market price of a security may decline, sometimes rapidly or unpredictably, due to general market conditions that are not specifically related to a particular issuer, company, or asset class. Local, regional or global events such as the spread of infectious illness or other events could have a significant impact on a security or instrument. Valuation Risk: From time to time, the Fund will need to fair-value portfolio securities at prices that differ from third party pricing inputs in order to more accurately reflect the sales price the Fund could receive in a reasonable period of time for any particular portfolio investment or groups of investments. Investors who purchase or redeem Fund shares on days when the Fund is pricing or holding fair-valued securities may pay a higher or lower price for the shares or may receive more or less redemption proceeds than they would have received if certain of the Fund’s securities had not been fair-valued, or if a different valuation methodology had been used. Such pricing differences can be significant and can occur quickly during times of market volatility, particularly for securities that trade in thin or illiquid markets. Mortgage-backed securities: subject to “prepayment risk” (the risk that borrowers will repay a loan more quickly in periods of falling interest rates) and “extension risk” (the risk that borrowers will repay a loan more slowly in periods of rising interest rates). If the Fund invests in mortgage-backed or asset-backed debt securities that are subordinated to other interests in the same pool, the Fund may receive payments only after the pool’s obligations to other investors have been satisfied. The risk of defaults is generally higher in the case of mortgage pools that include so-called “subprime” mortgages. Liquidity risk: the Fund may not be able to sell some or all of the investments that it holds due to a lack of demand in the marketplace or other factors such as market turmoil, or it may only be able to sell those investments at a loss. Liquid investments may become illiquid or less liquid after purchase by the Fund, particularly during periods of market turmoil. Illiquid and relatively less liquid investments may be harder to value, especially in changing markets. High Yield (“Junk”) bond risk: junk bonds are speculative investments which involve greater risk of default, downgrade, or price declines, can be more volatile and tend to be less liquid that investment-grade securities. Management and Strategy. The evaluation and selection of the Fund’s investments depend on the judgment of the Fund’s Sub-Advisor about the quality, relative yield, value or market trends affecting a particular security, industry, sector or region, which may prove to be incorrect. Credit Risk: If an issuer or guarantor of a debt security held by the Fund or a counterparty to a financial contract with the Fund defaults or is downgraded or is perceived to be less creditworthy, or if the value of the assets underlying a security declines, the value of the Fund’s portfolio will typically decline. The Fund’s securities are generally not guaranteed by any governmental agency. Sector Focus Risk: The focus of the Fund’s portfolio on a specific sector, such as in mortgage-related securities, may present more risks than if the portfolio were broadly diversified over numerous sectors. Fixed Income Securities Risk: The prices of fixed income securities respond to economic developments, particularly interest rate changes, as well as to changes in an issuer’s credit rating or market perceptions about the creditworthiness of an issuer. Generally fixed income securities decrease in value if interest rates rise and increase in value if interest rates fall, and longer-term and lower rated securities are more volatile than shorter-term and higher rated securities. Interest rate risk: your investment may go down in value when interest rates rise, because when interest rates rise, the prices of bonds and fixed rate loans fall. Generally, the longer the maturity of a bond or fixed rate loan, the more sensitive it is to this risk. Falling interest rates also create the potential for a decline in the Fund’s income. These risks are greater during periods of rising inflation. Real Estate Market Risk: The Fund’s investment in mortgage-related securities, including RMBS, will subject the Fund to risks similar to those associated with direct ownership of real estate, including reduction in the value of the real estate serving as loan collateral, losses from casualty or condemnation, and changes in local and general economic, supply and demand factors, interest rates, zoning laws, regulatory limitations on rents, property taxes and operating expenses. Non-diversification risk: as a non-diversified fund, the Fund may focus its assets in the securities of fewer issuers, which exposes the Fund to greater market risk that if its assets were diversified among a greater number of issuers. CLO risk: Collateralized Loan Obligations (CLOs) largely depend on the type of underlying collateral securities and the tranche in which the Fund invests. While CLOs are subject to the typical risks associated with debt instruments (i.e., interest rate risk and credit risk), the Fund is also subject to asset manager, legal and regulatory, limited recourse, liquidity, redemption, and reinvestment risks as a result of the structure of CLOs in which the Fund may invest. Repurchase agreement risk: may be viewed as loans made by the Fund which are collateralized by the securities subject to repurchase. The Fund’s investment in repurchase agreements may be subject to market and credit risk with respect to the collateral securing the repurchase agreements. Reverse repurchase agreement risk: reverse repurchases provide the Fund with cash for investment purposes, which creates leverage and subjects the Fund to the risks of leverage. Reverse repurchase agreements also involve the risk that the other party may fail to return the securities in a timely manner or at all. Leverage risk: as a result of borrowing or other investment techniques, the Fund may be leveraged. The use of leverage may magnify the Fund’s gains and losses and make the Fund more volatile. Leverage creates a risk of loss of value on a larger pool of assets than the Fund would otherwise have had, potentially resulting in the loss of all assets. LIBOR risk: The financial instruments in which the Fund may invest may be a party use or may use a floating rate based on the London Interbank Offered Rate (“LIBOR”), the most common benchmark interest rate index used to make adjustments to variable-rate loans, which is expected to expire by the end of 2021. Any effects of the transition away from LIBOR could result in losses to the financial instruments in which the Fund invests and to the Fund. These effects could occur prior to the end of 2021. Derivatives risk: derivative instruments, futures contracts, options, swap agreements, and/or selling securities short involve risks different from direct investment in the underlying assets, including but not limited to: futures contracts may cause the value of the Fund’s shares to be more volatile; the Fund may not fully benefit from or may lose money on option or shorting strategies; swaps may be leveraged, are subject to counterparty risk and may be difficult to value or liquidate. ETF Risk: Investing in an ETF will provide the Fund with exposure to the securities comprising the index on which the ETF is based and will expose the Fund to risks similar to those of investing directly in those securities.
The Fund may not be suitable for all investors. We encourage you to consult with appropriate financial professionals before considering an investment in the Fund.