Why This Fund Has the Potential to Thrive and Generate a Strong Dividend as Stocks and Bonds Tank

By Michael Schoonover | June 2022

In this adverse environment where inflation has derailed both stock and bond portfolios, MLXIX has, up to this point, generated a double-digit return and offers a compelling dividend.

From the gas pump to the grocery store, the highest inflation in 40 years has had a meaningful impact on everyday life. Unfortunately, the impact to the average investment portfolio has been far worse financially in many cases, with many stocks and bonds down significantly thus far in 2022 and investors questioning whether or not they are able to meet their long-term financial goals.

With rising rates, inflation that has been anything but transitory, and geopolitical uncertainty abound, it’s difficult to find a promising outlook for the coming years. However, investors do have options that have not only worked in this environment, but can continue to thrive. Consider the Catalyst Energy Infrastructure Fund (MLXIX), which has outperformed stocks and bonds this year and is positioned to prosper even in the face of inflation.

MLXIX has thrived in the face of inflation even as the broad stock and bond markets suffer

Source: Catalyst Capital Advisors LLC and Bloomberg LP. Data as of 06/22/2022.

In our opinion, very few traditional investment strategies are positioned to weather inflation and the potential recession that could follow. However, strategies like MLXIX are one of the few options that are positioned to potentially outperform in this type of environment while also being able to potentially maintain a compelling dividend to investors.

In an environment where inflation is quickly eroding
the value of investment portfolios, many investors
have been looking to strategies like MLXIX to potentially help
meet their long-term financial goals.

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Here are three reasons why investors have been allocating from their traditional stock and bond allocations to strategies like MLXIX.

1. MLXIX FOCUSES ON A BUSINESS MODEL THAT MAY THRIVE REGARDLESS OF WHAT HAPPENS WITH INFLATION AND THE ECONOMY

It is our belief that, regardless of economic conditions, oil and gas need to be gathered, processed, treated, stored, and transported (also known as “midstream” energy infrastructure). This is a capital-intensive business in an industry that has been under political pressure but also operating as a vital part of the economy. These companies therefore generally have leverage to react to changing conditions.

MLXIX focuses on these midstream energy infrastructure businesses. Like traditional commodities, these companies can outperform in an inflationary environment. Unlike traditional commodities, these businesses, which operate in a toll-road-like model, tend to generate more stable cash flows, which can help them weather changing economic environments.

2. FOLLOWING YEARS OF UNDERINVESTMENT, IN OUR VIEW, THE SECTOR IS WELL POSITIONED FOR FUTURE GROWTH

The midstream energy infrastructure sector has experienced underinvestment for the past five years. As a result, capex for growth projects is down two-thirds from its 2014 peak which is allowing dividend hikes, stock buybacks, and debt reduction. Court challenges from environmentalists have also made it hard to build new pipelines in most of the U.S., which is increasing the value of existing infrastructure.

3. WITH AN AVERAGE YIELD ON HOLDINGS AT 6.75%, THE STRATEGY IS POSITIONED TO DELIVER A STRONG DIVIDEND TO INVESTORS

Many investors are not only trying to avoid more market downside, but also generate a dividend that has the potential to keep up with or surpass the rate of inflation. Consider the Bloomberg Aggregate Bond Index, a broad-based bond index which is yielding about 3.9% and down -11.1% this year (as of June 22). This clearly is not a sustainable solution for investors. On the other hand, MLXIX has already distributed $0.58 in dividends during the first five months of this year (or $1.39 on an annualized rate) on a current price of $18.01, implying a high single-digit distribution yield. This makes sense when you consider that the average holding in the fund has a trailing 12-month dividend yield of 6.75%.

Source: Catalyst Capital Advisors LLC, yCharts and Bloomberg LP. Data as of 06/22/2022. Bloomberg Aggregate Bond Index yield reported from yield to worst.

Attempting to Reduce Exposure with MLXIX

While there’s no crystal ball to tell us how 2022 (or the 2020’s) will end, the outlook for traditional asset classes is not bright as sustained inflation continues and concerns about a recession loom.

It is for this reason that we believe it is an ideal time to replace either equity or fixed income exposure with a strategy like MLXIX, which is not only designed to thrive and generate positive returns in this environment, but also provide a yield that can keep up with or surpass inflation.

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About the Author

Michael Schoonover is Chief Operating Officer of Catalyst Capital Advisors LLC, Catalyst International Advisors LLC and Rational Advisors, Inc. He is an experienced financial professional having worked in various portfolio management, operations management, and trust officer roles. He serves in various executive roles for U.S. registered investment advisers and marketing and consulting companies in the investment management industry. He is President of Mutual Fund Series Trust, President of Mutual Fund & Variable Insurance Trust, and President of Strategy Shares. Mr. Schoonover has a Bachelor of Science degree in biochemistry from the University of Michigan and a Master of Business Administration degree with high distinction from the University of Michigan.

Performance (%): Ending March 31, 2022
Annualized if greater than a year

Share Class/Benchmark	3 MOS	YTD	1 YEAR	3 YEARS	5 YEARS	Since Inception*
Class A	27.14	27.14	49.55	4.97	-0.06	-1.63
Class C	26.89	26.89	48.35	4.14	-0.82	-2.33
Class I	27.24	27.24	49.86	5.26	0.21	-1.37
Alerian MLP TR Index	18.81	18.81	36.56	2.70	-0.07	-2.45
Class A w/Sales Charge	19.85	19.85	40.99	2.93	-1.23	-2.42

There is no assurance that the Fund will achieve its investment objective. You cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. The Fund’s maximum sales charge for Class “A” shares is 5.75%. Investments in mutual funds involve risks. Performance is historic and does not guarantee future results. Investment return and principal value will fluctuate with changing market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month end performance information please call the fund, toll free at 1-866-447-4228 or visit www.CatalystMF.com.

IMPORTANT RISK CONSIDERATIONS:

Past performance is not a guarantee of future results. Investors should carefully consider the investment objectives, risks, charges and expenses of the Catalyst Funds. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling 866-447-4228 or at www.CatalystMF.com. The prospectus should be read carefully before investing. The Catalyst Funds are distributed by Northern Lights Distributors, LLC, member FINRA/SIPC. Catalyst Capital Advisors, LLC is not affiliated with Northern Lights Distributors, LLC.

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 focuses its investments in the energy infrastructure sector, which may cause the performance of the Fund to be tied closely to developments in the energy sector. The Fund investments may include foreign securities. Foreign companies are not subject to the same regulatory requirements as domestic securities thereby resulting in less publicly available information. Investments in lesser-known, small and medium capitalization companies may be more vulnerable than larger, more established organizations. Investments in MLPs and MLP-related securities involve risks different from those of investing in common stocks. Potential risks include conflicts of interest between an MLP and the MLP’s general partner, cash flow risks, and dilution risks. MLPs and MLP-related securities are generally considered interest-rate sensitive investments. Depending on the state of interest rates in general, the use of MLPs could enhance or harm the overall performance of the Fund. These factors may affect the value of your investment.

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