CATALYST FUNDS RESEARCH
Alternative Income for Rising Rates
Since the U.S. presidential election in 2016, interest rates in the U.S. have been slowly creeping upward from the near zero interest rate environment set by the Federal Reserve on the heels of the 2008-2009 Great Recession. With the economy strong, rising wages, and record-low unemployment, the Fed is projected to raise interest rates for the fourth time this year in December and three more times in 2019. For investors seeking income this is very problematic, because bond prices move inversely to interest rates. The Barclays US Aggregate Index is down 2.38% as of 10/31/2018.
For investors exposed to traditional bonds, if interest rates continue to rise, the value of the bonds in their portfolio will continue to erode. To add potential diversification benefits to their portfolio, investors might want to consider alternative fixed income strategies like the Catalyst/CIFC Floating Rate Income Fund, the Catalyst/SMH High Income Fund, and the Catalyst/SMH Total Return Income Fund.
High Yield Index Returns During Periods of Rising Rates
Actively managed high yield funds might be considered as an investment choice for investors who are looking for higher income than investment grade managers, or are looking for an asset class to diversify from equities and traditional fixed income managers.
The Potential Bond Bear Market
How are you positioning your clients if we are in the start of a bond bear market?
We believe that investors might want to look at alternative fixed income strategies as a potential solution, such as the Catalyst Floating Rate Income Fund (CFRIX), which was the #1 Bank Loan fund for the 1-year period ending 12/31/2017 out of 237 funds in the Morningstar Bank Loan category based on a total return of +7.24%.
IMPORTANT RISK CONSIDERATIONS
Catalyst/SMH High Income Fund
Investing in the Fund carries certain risks. The value of the Fund may decrease in response to the activities and financial prospects of an individual security in the Fund’s portfolio. The Fund is nondiversified and may invest a greater percentage of its assets in a particular issue and may own fewer securities than other mutual funds. The Fund may be subject to substantial short-term changes. These factors may affect the value of your investment. The Fund invests in lower-quality, non-investment grade bonds, asset backed securities and convertible securities. Non-investment grade corporate bonds are those rated Baa or lower by Moody’s or BBB or lower by S&P (also known as “junk” bonds). Asset-backed securities are securities issued by trusts and special purpose entities that are backed by pools of assets, such as automobile and credit-card receivables and home equity loans, which pass through the payments on the underlying obligations to the security holders. Convertible securities are bonds or preferred stocks which are convertible into, or exchangeable for, common stocks. Lower-quality debt securities involve greater risk of default or price changes due to changes in the credit quality of the issuer. Asset Backed securities are subject to the risk that, if the issuer fails to pay interest or repay principal, the assets backing these securities may not be sufficient to support payments on the securities.
Catalyst/CIFC Floating Rate Income Fund
Investing in the Fund carries certain risks. The value of the Fund may decrease in response to the activities and financial prospects of an individual security in the Fund’s portfolio. Investments in foreign securities could subject the Fund to greater risks including, currency fluctuation, economic conditions, and different governmental and accounting standards. The Fund’s portfolio may be focused on a limited number of industries, asset classes, countries, or issuers. The Fund 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 Fund 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. These factors may affect the value of your investment.
Catalyst/SMH Total Return Income Fund
Investing in the Fund carries certain risks. The value of the Fund may decrease in response to the activities and financial prospects of an individual security in the Fund’s portfolio. The Fund may be subject to substantial short-term changes. The Fund is non-diversified and may invest a greater percentage of its assets in a particular issue and may own fewer securities than other mutual funds. The Fund invests in the securities of foreign companies which are generally not subject to the same regulatory requirements and have different accounting, auditing and financial reporting
standards from those applicable to U.S. companies. The Fund invests in lower-quality, noninvestment grade bonds rated Baa or lower by Moody’s or BBB or lower by S&P (also known as “junk” bonds). Lower-quality debt securities involve greater risk of default or price changes due to changes in the credit quality of the issuer. A credit rating is the rating firms opinion on the general creditworthiness of an obligor, or the creditworthiness of an obligor with respect to a particular debt security or other financial obligation. These factors may affect the value of your investment.
8416-NLD-11/7/2018
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