Based on strong feedback we’ve received from current and prospective shareholders, we are changing our distribution frequency from quarterly to monthly for both the Matisse Discounted Closed-End Fund Strategy (MDCEX) and Matisse Discounted Bond CEF Strategy (MDFIX).
This change will be implemented starting in January 2024, with distribution ex-dates scheduled for the next-to-last business day of each month.
The table below shows the new (and exact) monthly distribution amounts that will start in January for both MDCEX and MDFIX:
| Monthly Distribution Amount | |
|---|---|
| Matisse Discounted Closed-End Fund Strategy (MDCEX) | $0.044 |
| Matisse Discounted Bond CEF Strategy (MDFIX) | $0.061 |
The new monthly amounts are simply the previous quarterly amounts divided by 3, which provides a smoother and more regular income stream for our shareholders (and reflects the regularity of the cash we receive from our underlying CEF holdings). Note that the frequency of distributions (whether quarterly or monthly) is immaterial to our investment process and the overall management of our funds. Both MDCEX and MDFIX have demonstrated track records of paying out healthy and consistent distributions — a testament to our approach in making opportunistic investments in highly discounted CEFs.
To reiterate the income-related advantages that our Funds offer:
1) Our CEF holdings trade at a discount to NAV, but pay distributions out of that higher NAV, which increases the effective yield our Funds capture.
2) Although there is some CEF price volatility (which allows us to execute our alpha-producing trading strategy), the cash payouts from CEFs have been attractive (and remarkably consistent) over time. Our Funds have in turn made attractive regular cash distributions to shareholders. See the yellow line in the chart below for the cumulative cash distributions from MDCEX, which have averaged over 7% per year!
3) Unlike most other sources of income in the securities market, the cash paid out from a diversified portfolio of discounted CEFs—as from our Funds—springs from a myriad of potential sources including:
- Dividend income from US and Foreign stocks;
- Interest on bonds;
- Preferred stocks;
- Many different CEF issuers;
- Short-term and long-term capital gains generated within each CEF;
- Return of capital paid from some CEFs at some times; and
- Capital gains that we ourselves generate by trading CEFs.
Cash payouts from our Funds, due to this diversification, can be thought of as much more solid.
4) Retirees (and others) can receive their distributions in cash to support their spending needs, or reinvest those distributions to purchase more shares of our Funds, thereby increasing their income-producing power into the future.
| Performance as of 3/31/2024 | 3-Month | YTD | 1-Year | 3-Year Annualized | 5-Year Annualized | 10-Year Annualized | Since Inception MDCEX 10/31/2012 (average annual) |
|---|---|---|---|---|---|---|---|
| MDCEX | 7.52% | 7.52% | 26.15% | 11.57% | 9.23% | 8.43% | 8.31% |
| Performance as of 3/31/2024 | 3-Month | YTD | 1-Year | 3-Year | Since Inception MDFIX 4/30/2020 (average annual) |
|---|---|---|---|---|---|
| MDFIX | 4.32% | 4.32% | 13.65% | 1.78% | 8.67% |
| Bloomberg US Aggregate Bond Index | -0.78% | -0.78% | 1.70% | -2.46% | -2.15% |
| Bloomberg VLI High Yield Index | 1.27% | 1.27% | 10.99% | 1.80% | 5.41% |
| FT Taxable Fixed Income CEF Index | 6.57% | 6.57% | 17.83% | 1.00% | 8.19% |
Returns longer than one year are annualized. Performance data quoted is past performance, which is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. An investment’s return and principal value will fluctuate such that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance current to the most recent month end can be obtained by calling 1-800-773-3863. Performance shown assumes reinvestment of dividends and capital gains distributions. Total Fund Expenses are 3.70% for MDCEX and 3.50% for MDFIX (as of August 1, 2023).
Bloomberg US Aggregate Bond Index: is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).
Bloomberg VLI High Yield Index: a component of the US Corp High Yield Index that is designed to track a more liquid component of the USD-denominated, high yield, fixed-rate corporate bond market. The US High Yield VLI uses the same eligibility criteria as the US Corp High Yield Index, but includes only bonds that have a minimum amount outstanding of USD500mn and less than five years from issue date.
FT Taxable Fixed Income CEF Index: a capitalization weighted index designed to provide a broad representation of the taxable fixed income closed-end fund universe. The taxable fixed income closed-end fund market is comprised of the following sectors; high yield corporate, senior loan, global income, emerging market income, multi-sector, government, convertible, and mortgage funds.
| Yield as of 3/31/2024 | MDFIX | MDCEX |
|---|---|---|
| Distribution Rate | 7.06% | 7.59% |
| Subsidized 30-Day SEC Yield | 5.24% | 6.00% |
| Unsubsidized 30-Day SEC Yield | 4.98% | 5.80% |
Distribution Rate is calculated by annualizing actual distributions for the quarterly period ended on the date shown and dividing by the net asset value on the last business day for the same period. Distributions may include capital gains distributions or a return of capital.
Subsidized yield reflects fee waivers and/or expense reimbursements during the period. Without waivers and/or reimbursements, yields would be reduced. Unsubsidized yield does not adjust for any fee waivers and/or expense reimbursements in effect. The Expense Limitation Agreement runs through July 31, 2024 and may be terminated by the Board of Trustees of the Funds at any time.
An investment in the Funds is subject to investment risks, including the possible loss of some or all of the principal amount invested. There can be no assurance that the Funds will be successful in meeting their investment objectives. Generally, the Funds will be subject to the following additional risks: Closed-End Fund Risk, Control of Closed-End Funds Risk, Convertible Securities Risk, Credit Risk, Cybersecurity Risk, Derivatives Risk, Equity Securities Risk, Fixed Income Securities Risk, Foreign Securities Risk, Fund of Funds Risk, General Investment Risks, Interest Rate Risk, Investment Advisor Risk, Junk Bond Risk, Leverage Risk, Limited History of Operations Risk, Loans Risk, Management Style Risk, Market Risk, Money Market Mutual Fund Risk, Pandemic Risk, Prepayment Risk, and Quantitative Model Risk. More information about these risks and other risks can be found in the Funds’ prospectus.
Distributor: Capital Investment Group, Inc., Member FINRA/SIPC. There is no affiliation between Matisse Capital, including its principals, and Capital Investment Group, Inc. Serial #RCMAT1223004.
An investor should consider the investment objectives, risks, and charges and expenses of the Funds carefully before investing. The prospectus contains this and other information about the Funds. A copy of the prospectus is available at www.ncfunds.com or by calling Shareholder Services at 1-800-773-3863. The prospectus should be read carefully before investing. Current and future holdings are subject to change and risk.