Underlying Portfolios to be Rebalanced effective January 31, 2013
/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES/
TORONTO, Jan. 24, 2013 /CNW/ - Marret Asset Management Inc. ("Marret" or the "Manager") as manager of Marret Multi-Strategy Income Fund (TSX:MMF.UN) (the "Fund") today announced an annual rebalancing of the Fund's underlying portfolios held by Marret MSIF Trust (the "Trust") as well as a portfolio addition to the underlying portfolios. The changes will become effective on January 31, 2013 (the "Rebalancing Date").
Annual Rebalancing and Portfolio Addition
The Fund was created to provide investors with attractive, risk adjusted returns and tax advantaged distributions through exposure to actively managed investment portfolios consisting primarily of income generating securities (the "Underlying Portfolios") held by the Trust. The Fund obtains exposure to the Underlying Portfolios of the Trust through a forward agreement.
As described in the Fund's prospectus dated February 25, 2011 (the "Prospectus"), Marret is required to rebalance the Trust's exposure to the Underlying Portfolios at least annually and as frequently as necessary to comply with the Trust's investment restrictions. On any such rebalancing, the Trust's exposure to each of the Underlying Portfolios will be adjusted such that the exposure to each of the Underlying Portfolios will be allocated among such portfolios in the Manager's discretion and without regard to equal weighting.
In addition, the Fund is required to maintain a minimum of four Underlying Portfolios. Prior to October 2012, the Trust's assets were comprised of four Underlying Portfolios: Marret High Yield Hedge Portfolio, Marret Investment Grade Hedge Portfolio, WARATAH Income Portfolio and East Coast Performance Portfolio. East Coast Performance Portfolio ceased to be an Underlying Portfolio in October 2012, as previously announced by the Manager. In order to satisfy the investment requirements of the Trust, Marret has selected the "Marret Resource Yield Portfolio" as the fourth Underlying Portfolio, and will rebalance the Trust's assets so as to reflect the inclusion of this portfolio. The Marret Resource Yield Portfolio will be allocated 15% of the Trust's assets. The complete allocation to the Underlying Portfolios is set out below.
The principal reasons for the inclusion of the Marret Resource Yield Portfolio are that the strategy offers a possibility for superior risk adjusted rate of returns, with investments primarily in income generating securities with a hedging component (therefore well suited to the Fund's strategy) and the strategy offers investors an opportunity to gain exposure to the natural resource sector through debt and equity investments at reasonable valuations in the current commodity cycle. The Marret Resource Yield Portfolio will be managed consistent with the Marret Resource Yield Strategy which Marret has been managing since 2008 in other portfolios outside the Fund (the "Marret Resource Yield Strategy").
The Marret Resource Yield Strategy has returned 9.86% on an annualized basis since November 2008 with an annualized volatility of 7.75%, compared to 5.48% and 18.28%, respectively, for the S&P/TSX Composite Energy Total Return Index and 13.89% and 25.81%, respectively, for the S&P/TSX Composite Materials Total Return Index (all data to December 31, 2012)*.
The current allocation of the Trust's assets is as follows:
|Underlying Portfolio||Allocated Percentage|
|Marret High Yield Hedge Portfolio||32.5%|
|Marret Investment Grade Hedge Portfolio||32.5%|
|WARATAH Income Portfolio||30%|
On the Rebalancing Date, the Trust's assets will be allocated among the Underlying Portfolios as follows:
|Underlying Portfolios||Allocation Percentage||Allocation Change|
|Marret High Yield Hedge Portfolio||22.5%||Decrease by 10%|
|Marret Investment Grade Hedge Portfolio||32.5%||No change|
|WARATAH Income Portfolio||30%||No change|
|Marret Resource Yield Portfolio||15%||New|
"The Marret Resource Yield Portfolio will permit the Fund to obtain exposure to the return and volatility profile of the Marret Resource Yield Strategy, which we have run since 2008 with approximately 10% annualized returns and one third the volatility of the comparable TSX sub-indexes", said Barry Allan, President, Chief Investment Officer and Chief Executive Officer of Marret. "This is an ideal time to increase our exposure to the resource sector. We think valuations are attractive and we don't subscribe to the view that China, a major influence on commodity prices, will suffer a hard landing", he said.
A detailed description of the investment objective, strategy and restrictions of the Marret Resource Yield Portfolio is set out below.
Barry Allan will be the lead manager of the Marret Resource Yield Portfolio. Mr. Allan has over 30 years of experience managing fixed income securities and currently manages 20 portfolios which represent over $5.2 billion of assets under management as of December 31, 2012. Marret currently manages approximately $6 billion in total assets under management and $108 million in resource yield oriented portfolios.
The investment objective of the Marret Resource Yield Portfolio is to achieve a high level of income and potential capital gains, with an attractive risk-adjusted return and moderate volatility.
To achieve its objective, the Marret Resource Yield Portfolio intends to invest primarily in public and private debt securities and invest in term loans (including bridge and mezzanine debt) made to issuers in a broad range of natural resource sectors, including but not limited to energy (including exploration and development, services and related businesses), base and precious metals, other commodities. The Marret Resource Yield Portfolio may invest in, and may sell short, non-investment grade and investment grade corporate debt, bank loans and commitments, debt with equity warrants attached and convertible debt. The securities in which it invests may be unrated. The Marret Resource Yield Portfolio may also purchase and sell short common equities, preferred shares, futures, various over-the counter credit and/or index derivatives and other securities. The Manager expects to invest primarily in North American securities, however, the Marret Resource Yield Portfolio may be invested in other global markets should attractive opportunities arise. The Marret Resource Yield Portfolio may also invest in government debt securities of emerging markets with resource-based economies. The Marret Resource Yield Portfolio will invest across all market capitalization sizes, including small and medium-sized business entities and will also make use of leverage in the form of borrowings.
Leverage and Risk Reducing Techniques of the Marret Resource Yield Portfolio
The Marret Resource Yield Portfolio may utilize various forms of leverage, including through borrowings by way of loan facilities, margin purchases, short selling securities and through derivative instruments when deemed appropriate by Marret and subject to the maximum Total Exposure, Net Long Exposure and Net Short Exposure (as those terms are defined in the Prospectus) set out below.
While utilizing leverage to enhance returns, the Marret Resource Yield Portfolio will also engage in risk reducing techniques such as the short selling of securities that Marret believes to be overvalued, thereby offering the potential for gains as well as limiting the overall credit risk exposure of the Marret Resource Yield Portfolio. The degree of short selling will depend on the credit environment and the maximum Net Short Exposure set out below. In some cases, the equity securities of a company may be sold short to hedge a long position of the same company's debt. Marret believes that this is an effective hedging strategy, since deteriorating company fundamentals hurt the equity securities of a company more than its debt, which tend to be protected by legal covenants and have a more senior claim on the company's assets. Marret will also reduce risk by limiting issuer concentration.
The investment restrictions of Marret Resource Yield Portfolio, which are to be set out in the Trust's Declaration of Trust (as amended), will provide that Marret Resource Yield Portfolio will not:
|a)||have Total Exposure** in excess of 200%;|
|b)||have Net Long Exposure** in excess of 150%;|
|c)||have Net Short Exposure** in excess of 35%;|
|d)||invest more than 10% of its net assets in any single long position or hold more than 10% of its net assets in any single short position (with the exception in either case of U.S. Treasury securities, Canadian government bonds, futures contracts thereof, and index tracking securities);|
|e)||purchase an Illiquid Asset if, immediately after the purchase, more than 10% of the net assets of the Marret Resource Yield Portfolio would be represented by Illiquid Assets. If at any time more than 10% of the net assets of the Marret Resource Yield Portfolio consists of Illiquid Assets, Marret will, as quickly as is commercially reasonable (and in any event within ninety (90) days), take all necessary steps to reduce the percentage of the net assets of the Marret Resource Yield Portfolio represented by Illiquid Assets to 10% or less;|
|f)||invest in derivative instruments, other than foreign exchange forward contracts, interest rate futures contracts, credit default swaps, equity options (both listed and unlisted) and exchange traded funds;|
|g)||purchase securities from, sell securities to, or otherwise contract for the acquisition or disposition of securities with Marret or any of its affiliates, any officer, director or shareholder of Marret, any person, trust, firm or corporation managed by Marret or any of their respective affiliates or any firm or corporation in which any officer, director or shareholder of Marret or any of their respective affiliates or any firm or corporation in which any officer, director or shareholder of Marret may have a material interest (which, for these purposes, includes beneficial ownership of more than 10% of the voting securities of such entity) unless such transaction complies with NI 81-107;|
|h)||invest in the securities of any mutual fund;|
|i)||make or hold any securities in any non-resident trusts, other than "exempt foreign trusts" as defined in proposed subsection 94(1) of the Tax Act as set forth in draft legislation released on August 27, 2010 (or pursuant to any amendments to such proposals, subsequent provisions enacted into law, or successor provisions thereto);|
|j)||make or maintain any direct or indirect investment that would result in Marret MSIF Trust being a "tax shelter investment" for the purposes of section 143.2 of the Tax Act;|
|k)||invest in an offshore investment fund property such that Marret MSIF Trust would be required to include any material amounts in income under section 94.1 of the Tax Act as modified by draft legislation released on August 27, 2010 (including any amendments to such provision as enacted into law and any successor provisions thereto);|
|l)||acquire any interest in a trust (or a partnership which holds such an interest) which would require the Trust (or the partnership) to report income in connection with such interest pursuant to the rules in proposed section 94.2 of the Tax Act, as set forth in the proposed amendments to the Tax Act dated August 27, 2010 (or amendments to such proposals, provisions as enacted into law or successor provisions thereto);|
|m)||at any time, hold any property that is a "non-portfolio property" for the purposes of the SIFT Rules; or|
|n)||make or hold any investments in entities that would be "foreign affiliates" of Marret MSIF Trust for the purposes of the Tax Act.|
Marret has reported to the Independent Review Committee of the Fund and the Trust on the performance of the Underlying Portfolios and the rebalancing set forth above. As described in the Prospectus, the Independent Review Committee is required to determine if the rebalancing gives rise to a conflict of interest, and, if so, the Independent Review Committee will report its determination to unitholders of the Trust and the Fund in its annual report, which will be available on the Marret's website at www.marret.com, or at the unitholder's request at no cost, by contacting Marret at 416-214-5800 or [email protected].
* Performance and volatility for the Marret Resource Yield Strategy is based on the returns of investment funds with a similar strategy to the Marret Resource Yield Portfolio over the periods shown, with the exception of the period from February 1 through April 16, 2012, in which the strategy was not managed and for which the returns are assumed to be zero. Performance is net of fees and other expenses. Fees, sales charges and other expenses will differ from those that may apply to the Marret Resource Yield Portfolio which will affect the comparability of returns. Past performance is not indicative of future results.
**As defined in the Prospectus
About Marret Asset Management Inc.
Marret Asset Management Inc. is an employee owned credit fixed income manager based in Toronto. Marret's experienced team of investment professionals led by Barry Allan specialize exclusively in fixed income and, particularly, in high yield debt strategies.
This press release contains forward-looking statements and information within the meaning of applicable securities legislation. Forward-looking statements can be identified by the expressions "seeks", "expects", "believes", "estimates", "will", "target" and similar expressions. The forward-looking statements are not historical facts but reflect the current expectations of Marret and the managers of the Underlying Portfolios regarding future results or events and are based on information currently available to them. Certain material factors and assumptions were applied in providing these forward-looking statements. All forward-looking statements in this press release are qualified by these cautionary statements. Marret believes that the expectations reflected in forward-looking statements are based upon reasonable assumptions; however, Marret can give no assurance that the actual results or developments will be realized. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including the matters discussed under "Risks Factors" in the prospectus. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking statement speaks only as of the date on which such statement is made. Marret undertakes no obligation to publicly update any such statement or to reflect new information or the occurrence of future events or circumstances except as required by securities laws. These forward-looking statements are made as of the date of this press release.
SOURCE: Marret Multi-Strategy Income Fund
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