Fund Fact Sheet - Class F

Marret High Grade Hedge Fund – Series F
As at May 31, 2015
FundServ Codes
Investment Objective
The Fund provides investors with (i) monthly tax-advantaged distributions, initially targeted to be $0.50 per Unit per
annum, representing a yield of 5% per annum on the initial subscription price, and (ii) a total return based on the
performance of a portfolio of primarily non-investment grade securities with a focus on delivering consistent positive
absolute returns while maintaining low correlations with recognized fixed income and equity index returns.
Series F MAI201
Series USD-F MAI501
Details
Investment Strategy
Date of Inception May 1, 2012
Management Fee Series F: 1.00%
Performance Fee 15% over 5% hurdle
Subscriptions/ Monthly (5 days notice)
Redemptions
Total Fund Assets $30,305,928.62
To achieve its objective, the Fund will have exposure to the Marret HYP Trust through a forward agreement. The Marret HYP
Trust intends to invest primarily in a broad range of public and private debt securities, both investment and non investment
grade, including corporate bonds and bank loans, government debt and convertible debentures. The Marret HYP Trust may
also invest in equity securities, such as common shares, preferred shares and warrants, and utilize other financial instruments,
including exchange traded funds and credit and/or index derivatives. The Marret HYP Trust may take both long and short
positions in portfolio securities, and will also make use of leverage in furtherance of these objectives and strategies.
Portfolio Performance (Series A Units):
NAV per Unit $10.83
Distributions
HGHF-F
Growth of $1,000
1250 $1,218
1200
1150
1100
1050
1000
950
900
850
800
DEX Mid Corp.
Latest Distribution $0.0333
*Distribution Frequency Monthly
Cash Distributions $1.2333
Since Inception
**Estimated Pre-Tax 5.27
Interest Equivalent Yield
*The monthly distribution is fixed but not guaranteed
and may be adjusted quarterly.
**based on NAVpu for Series A Units as at
May 31, 2015 and top marginal tax rates in Ontario
Yield Information* (%)
13
14
1 Mth
3 Mth
6 Mth
YTD
0.21
1.04
3.00
3.00
15
1 Yr
2 Yr
(annualized) (annualized) Inception
3.80
5.68
6.60
Compound Returns
(%)*
Fund
*Based on the Opening NAV per Unit
Net Exposure 11.76
Yield to Maturity 4.47
Portfolio Allocations
Yield to Worst 4.10
Current Yield 4.61
Yields noted above are for the total portfolio, including
cash *at May 31, 2015
Annual Risk/Return %
10
Annual Return (%)
12
HGHF-F
DEX Mid
Corp.
5
Top Sectors
Banking
Real Estate
Telecommunications
Insurance
Basic Industry
Healthcare
Media
Financial Services
Transportation
Technology & Electronics
Gvt / Other
(%)
8.54
8.26
5.90
4.47
3.82
3.60
3.12
2.41
2.23
1.90
55.76
Credit Rating Breakdown
AAA
AA
A
BBB
BB
NR
(%)
1.24
2.90
19.31
69.99
4.19
2.37
Calculated as a proportion of gross invested capital excluding cash
0
0
1
3
2
Risk (%)
4
5
Top Long & Short Holdings
Long
Co-operators Financial S 5.778% 10Mar2020
Aimia Inc 5.6% 17May2019
Bell Canada 3.15% 29Sep2021
Viterra Inc 5.95% 01Aug2020 144A
Glencore Finance Europe 7.5% 06Oct2049
(%)
8.75
5.52
5.37
5.35
5.33
Short
US Treasury N/B 1.375% 30Apr2020
US Treasury N/B 2.125% 15May2025
Canadian Government 3.5% 01Jun2020
CDX.NA.IG.23
Canadian Government 2.5% 01Jun2024
(23.91)
(18.34)
(18.20)
(15.64)
(13.95)
Marret High Grade Hedge Fund – Series F
As at May 31, 2015
Marret High Grade Hedge Commentary – May 2015
Market Developments
The investment grade corporate bond market endured some formidable challenges during
the month of May. Greek debt negotiations, new issue supply (the largest month on record)
in the United States, increased volatility in interest markets, declining fund inflows and
weakening credit metrics combined to provide a strong headwind to credit spreads.
Investment grade credit spreads were 8, 2 and 5 basis points wider over the month in the
U.S., Canada and Europe markets respectively based on the JP Morgan JULI, FTSE/TMX
Corporate and the Main CDS indices.
In order to navigate these crosscurrents we took the following actions:
- Reduced overall exposure in the portfolio with a focus on trimming higher beta markets/
credits.
Market Outlook
Over the short-term, we believe many of the headwinds which impacted the market in
May will persist. The Greek debt talks have extended into June and increased volatility
in Government bond yields globally will likely prompt corporate treasurers to advance
financing plans (increasing new issuance) and could minimize positive fund inflows into
bond funds. Accordingly, we will maintain a defensive posture. The strategy employed this
past month will be accelerated. We want to reduce long market exposure and add both
cash and index hedges. Additionally, we may tactically employ interest rate overlays as an
additional hedging vehicle.
In the short-term, our priority is to preserve returns as the market has possibly entered
a period where the negatives may briefly outweigh the positives of the asset class’s
performance. If this is indeed a short-term shift in the cyclical move in credit, the hedges
should enable us to preserve return and capital. If the cycle is beginning to enter a new
phase, then we will be prompted to make more structural changes to the portfolio.
- Initiated a cash hedge against our overall European credit exposure in case of a Greek
tragedy.
- Selectively added credit short positions in sectors looking expensive to the market.
- Traded new issues with a very short time horizon.
These actions, combined with a 75 basis point tightening in our long Williams Companies
thirty year position (on the announcement of their acquisition and corporate restructuring
of Williams Partners), allowed us to produce modestly positive returns on the month. Given
Government bond yields were higher, cash credit spreads wider and the TSX -1.22% over
the month, we are comfortable with the Fund’s performance.
For the month, Funds returns were 0.21% and year-to-date 3.00%. This compares to 2.76%
for our benchmark, the FTSE/TMX All Corporate Bond Index. The benchmark is a long only
bond index. The Fund, conversely, invests long/short across U.S., Canadian and European
investment grade corporate bonds on a hedged basis.
Forward-Looking Statements
Some of the statements contained herein including, without limitation, financial and business prospects and financial outlook may be forward-looking
statements which reflect management’s expectations regarding future plans and intentions, growth, results of operations, performance and business
prospects and opportunities. Words such as “may,” “will,” “should,” “could,” “anticipate,” “believe,” “expect,” “intend,” “plan,” “potential,” “continue”
and similar expressions have been used to identify these forward-looking statements. These statements reflect management’s current beliefs and are
based on information currently available to management. Forward-looking statements involve significant risks and uncertainties. A number of factors
could cause actual results to differ materially from the results discussed in the forward-looking statements including, but not limited to, changes
in general economic and market conditions and other risk factors. Although the forward-looking statements contained herein are based on what
management believes to be reasonable assumptions, we cannot assure that actual results will be consistent with these forward-looking statements.
Investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof and we
assume no obligation to update or revise them to reflect new events or circumstances.
Marret Asset Management Inc. 200 King Street West, Suite 1902, Toronto, ON M5H 3T4 416-214-5800 I www.marret.com
FSC FPO
1506-0928-5_E (05/15)