While bond markets have generally floundered through much of the early 2020’s, funds like CFRIX, RFXIX, and IIXIX have added value to portfolios

A lost decade is a decade where an asset class generates negative (or flat) returns, which can threaten an investor’s long-term goals. As we hit the mid-point of the 2020’s, bonds, represented by the Bloomberg US Aggregate Total Return Index (Agg), have hovered around a negative to near-flat cumulative return so far this decade. Bonds generally underperformed early in the decade because of rising interest rates and high inflation. They’ve continued to underwhelm and remain volatile amid concerns over rising treasury yields and the long-term fiscal health of the United States. So, what are fixed income investors to do? We have some ideas…

While the overall bond market has generally struggled, the Catalyst/CIFC Senior Secured Income Fund (CFRIX), Rational Special Situations Income Fund (RFXIX), and Catalyst Insider Income Fund (IIXIX) have significantly outperformed bonds (as shown below). These strategies have the potential to diversify a portfolio by lowering correlation to traditional bonds and by offering an alternative source of returns.

Our Non-Traditional Strategies Have Outperformed During the First Half of the Decade

Past Performance is not a guarantee of future results. The investment return and principal value of an investment will fluctuate so that investor’s shares, when redeemed, may be worth more or less than their original cost. For performance information current to the most recent month –end, please call toll-free 866-447-4228.

INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE FUNDS. THIS AND OTHER IMPORTANT INFORMATION ABOUT EACH FUND IS CONTAINED IN SUCH FUND’S PROSPECTUS, WHICH CAN BE OBTAINED BY CALLNG 866-447-4228 OR AT WWW.CATALYSTMF.COM OR RATIONALMF.COM, AS APPLICABLE. THE RELEVANT PROSPECTUS SHOULD BE READ CAREFULLY BEFORE INVESTING. BOTH THE CATALYST FUNDS AND THE RATIONAL FUNDS ARE DISTRIBUTED BY NORTHERN LIGHTS DISTRIBUTORS, LLC, MEMBER FINRA/SIPC. NEITHER CATALYST CAPITAL ADVISORS, LLC NOR RATIONAL ADVISORS, INC. ARE AFFILIATED WITH NORTHERN LIGHTS DISTRIBUTORS, LLC.

Important Disclosures:
The CFRIX investment strategy changed on November 1, 2020, to permit the Fund to use derivative instruments for hedging purposes. RFXIX commenced operations by acquiring all of the assets and liabilities of ESM Fund I, L.P. (the “Predecessor Fund”) in a tax-free reorganization, which was consummated after the close of business on July 17, 2019 (the “Reorganization”). In connection with the Reorganization, investors in the Predecessor Fund received Institutional shares of the Fund. The Fund’s investment objectives, policies, guidelines and restrictions are, in all material respects, equivalent to those of the Predecessor Fund. However, the Predecessor Fund was not registered under the Investment Company Act of 1940, as amended (the “1940 Act”) and, therefore, was not subject to certain investment restrictions, limitations and diversification requirements that are imposed by the 1940 Act or Subchapter M of the Internal Revenue Code of 1986, as amended, which, if they had been applicable, might have adversely affected the Predecessor Fund’s performance. The Fund’s Sub-Advisor was the investment adviser to the Predecessor Fund. RFXIX commenced operations on July 17, 2019. The performance shown below prior to July 17, 2019, is that of the Predecessor Fund, which reflects all of the Predecessor Fund’s actual fees and expenses (i.e., the Predecessor Fund’s annual management fees and operating expenses before any fee waivers and/or expense subsidies), as adjusted to include any applicable sales loads and distribution (12b-1) fees of each class of shares of the Fund. The performance of the Predecessor Fund has not been restated to include the other fees, estimated expenses and fee waivers and/or expense subsidies applicable to each class of shares of the Fund. The Fund’s fees and expenses are expected to be higher than those of the Predecessor Fund, so if the Fund’s expenses were applied to the Predecessor Fund’s performance, the performance would have been lower. You cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges.

Risk Considerations:
Investing in the Funds carries certain risks. The value of the Funds may decrease in response to the activities and financial prospects of an individual security in the Funds’ portfolio. Investments in foreign securities could subject the Funds to greater risks including, currency fluctuation, economic conditions, and different governmental and accounting standards. The Funds’ portfolio may be focused on a limited number of industries, asset classes, countries, or issuers. The Funds may invest in high yield or junk bonds which present a greater risk than bonds of higher quality. Other risks include credit risks and interest rate for Floating Rate Loan Funds. Changes in short-term market interest rates will directly affect the yield on the shares of a fund whose investments are normally invested in floating rate debt. Floating Rate Loan Funds tend to be illiquid, the Funds might be unable to sell the loan in a timely manner as the secondary market is private, unregulated inter-dealer or inter-bank re-sale market. Fixed income investments are affected by a number of risks, including fluctuation in interest rates, credit risk, and prepayment risk. In general, as prevailing interest rates rise, fixed income prices will fall. MBS and ABS may be more sensitive to changes in interest rates and may results in prepayments which can include the possibility that securities with stated interest rates may have the principal prepaid earlier than expected, which may occur when interest rates may have the principal prepaid earlier than expected, which may occur when interest rates decline. Rates of prepayment faster or slower than expected could reduce the Fund’s yield, increase the volatility of the Fund ad/or cause a decline in NAV. These factors may affect the value of your investment.

Glossary:
Alpha: A term used to describe an investment strategy’s ability to beat the market, or its “edge”. Bloomberg US Aggregate Total Return Index: A market capitalization weighted index that is designed to measure the performance of the U.S. investment grade bond market with maturities of more than one year. Bloomberg US Mortgage-Backed Securities (MBS) Total Return Index: Tracks agency mortgage pass-through securities. Bloomberg US Corporate TR Index: Measures the U.S. investment grade, fixed-rate, taxable corporate bond market. Bloomberg US Corporate High Yield TR Index: Measures the USD denominated, high yield, fixed-rate corporate bond market. Bloomberg Aaa Corporate TR Index: A market-value–weighted, total return index tracking USD denominated, fixed rate, investment grade corporate bonds rated A– or higher and outstanding ≥ $500 million. Bloomberg US Agency CMBS Agg Eligible TR Index: Measures the market performance of U.S. Agency CMBS (and eligible non Agency CMBS) that qualify for inclusion in the Bloomberg U.S. Aggregate Bond Index. Bloomberg Non-Agency CMBS TR Index: Measures the CMBS bonds in the Bloomberg US Aggregate Index that are non-agency. Bloomberg US Treasury TR Index: Measures U.S. dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury. Bloomberg US Agg ABS TR Index: Serves as a sector-focused subset of the broader Bloomberg U.S. Aggregate Bond Index, tracking only investment grade ABS (asset backed securities) denominated in USD. Correlation: A statistic that measures the degree to which two securities move in relation to each other. Effective Duration: A duration calculation for bonds that have embedded options. Estimated Loss-Adjusted Yield: a measure of a bond or fixed income portfolio’s expected yield to maturity after adjusting for expected credit losses. Modified Duration: Measures the change in the value of a bond in response to a 100-basis-point (1%) change in interest rates. Sharpe Ratio: A measure of an investment’s risk-adjusted performance, calculated by comparing its return to that of a risk-free asset. Standard Deviation: A statistical measurement that looks at how far discrete points in a dataset are dispersed from the mean of that set. Yield-to-Maturity (YTM): The internal rate of return that equates all future cash flows of a bond to its current price. Non-Agency Residential Mortgage-Backed Securities (NARMBS): Debt-based assets backed by the interest paid on residential loans. Special Situations: An investment strategy that focuses on capturing value created by atypical events.

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