INVESTING OBJECTIVE:

The strategy seeks to replicate a passive income approach by selecting the most appropriate fixed income instruments with the intention to position for capital appreciation and yield generation.

INVESTMENT APPROACH:

By using the expertise of professional discretionary traders, this strategy aims to buy undervalued fixed income instruments, collect interest and/or dividends and take advantage of capital appreciation.

The unique approach of the strategy is in the timing of rebalancing the portfolio and implementation of hedges.

The fund’s investment portfolio will consist of 30 to 50 instruments from the following fixed income universe: Corporate and Sovereign bonds, Preferred Stocks, Closed-end funds and Business Development Companies. The strategy allows shorting any instrument from the universe and using futures contracts and ETFs to hedge existing portfolio exposure against unfavorable market environments.

WHY TRACK THE STRATEGY:

Most investors are unable to get access to sophisticated discretionary strategies created by experienced traders. If they do it is usually in a costly Hedge Fund structure which tends to eat away a large chunk of the profits. This strategy aims to provides positive returns in both bull and bear markets with limited drawdown  

HOTF is seeking to publicly display its strategy to institutional and retail investors interested in investing into an investor friendly structure such as an ETF or Closed-End Fund.

POSITIONING:

The strategy seeks to achieve bond like returns with less drawdown and less correlation compared to benchmark ETFs such as $LQD , $HYG , $EMB and $PFF.

STRATEGY RISKS:

The strategy may incur higher slippage costs due to the inherent nature of less liquid instruments. There is also the risk the strategy may incur borrow fees on its short positions which may hinder the performance of the portfolio. The strategy will be subject to the same risks as those associated with the direct ownership of securities held in the portfolio.

DERIVATIVES RISK:

The Strategy’s derivative investments have risks, including the imperfect correlation between the value of such instruments and the underlying assets or index; the loss of principal, including the potential loss of amounts greater than the initial amount invested in the derivative instrument; the possible default of the other party to the transaction; and illiquidity of the derivative investments

FIXED INCOME SECURITIES RISK:

The Strategy may invest in Underlying ETFs that invest in fixed income securities. The prices of fixed income securities may be affected by changes in interest rates, the creditworthiness and financial strength of the issuer and other factors. An increase in prevailing interest rates typically causes the value of existing fixed income securities to fall and often has a greater impact on longer duration and/or higher quality fixed income securities

SHORT SELLING RISK:

The Strategy may make short sales of securities of Underlying ETFs, which involves selling a security it does not own in anticipation that the price of the security will decline. Short sales may involve substantial risk and leverage

NEW STRATEGY RISK:

This is a newly established strategy with no history. As a result, interested parties do not have a track record or historical performance to base their decision on.