Mulvihill Premium Yield Fund

As of September 30, 2021, the net asset value (“NAV”) per Class I unit was $11.23, per Class F unit was $11.21 and per Class A unit was $10.93. This compares to $11.11 per Class I unit, $11.11 per Class F unit and $10.88 per Class A unit on June 30, 2021. Unitholders received cash distributions of $0.125 per unit during the period.

The Mulvihill Premium Yield (“MPY”) Fund Class I, Class F and Class A units returned 2.2%, 2.0% and 1.6% respectively in the third quarter of 2021 vs the S&P/TSX Composite Index return of 0.2%.
Since inception, MPY Class I, Class A and Class F units have returned 11.6%, 11.5% and 10.0% annualized respectively, capturing approximately 85% of the move in the market with less than 2/3rds the volatility, beta and drawdowns, while providing a 5%, tax-efficient yield on initial NAV to investors.

Asset class returns were broadly uneventful in the third quarter. The S&P 500 and S&P/TSX Composite Index were able to eke out small gains up 0.6% and 0.2% respectively. Emerging market equities, led by the rapid decline in Chinese stocks, declined 8% in the past three months. Rising interest rates have been a popular topic as of late. The US ten-year yield traded as low as 1.17% and as high as 1.54% in Q3. It ended at 1.49%, marginally higher than the 1.47% at the start of the quarter. This flat interest rate environment was reflected in fixed income returns with US treasuries and Investment Grade bonds essentially flat for the quarter. US High Yield bonds returned 0.9% and remain an area worth watching as HY spreads sit near record lows. Commodities remain an area of interest for investors as the inflation narrative has spurred moves in the industrial metals and energy reminiscent of the early 2000’s bull market. Gold appears to be the odd man out in the commodity complex with a -7.9% return in 2021, vs WTI up 58% and copper up 16%.

As of March 31, 2021 the net asset value (“NAV”) per unit was $10.39 (Class I & F) and $10.20 per unit (Class A) compared to $10.51 per unit (Class I & F) and $10.35 per unit (Class A) at December 31, 2020. Unitholders received cash distributions of $0.125 per unit during the period.

The first quarter of 2021 was marked by continued strength in North American equity markets which closed at or near all-time highs on expectations the rollout of vaccines around the world will lead to strong global GDP growth and corporate earnings in 2021. Central banks in the meantime remained committed to a policy of monetary easing in spite of stronger economic growth and inflation numbers while governments continued to pass significant stimulus packages despite substantial deficits.

The total return of the Fund, including reinvestment of distributions, for the three months ended March 31, 2021 was 0.06 percent (Class I & F) and negative 0.22 percent (Class A). In comparison, the S&P/TSX Composite Index and S&P 500 Index returned 8.1% percent and 6.2 percent, respectively. The best performing stock was Bank of Montreal up 17.0 percent while held in the portfolio. At the other end of the spectrum, Lightspeed POS Inc was the laggard, down 21.5 percent while held in the Fund.

Volatility as measured by the CBOE Volatility Index (“VIX”) continued to decline in the first quarter with the exception of late January as the so-called “Reddit Rally” fueled fierce price jumps in stocks such as Gamestop and AMC before regulators stepped in to limit trading. For the three month period ended March 31, 2021 the Fund had on average 21.1% percent of the portfolio subject to covered calls. The average cash position during this period was 5.0 percent.

The Fund did not have any of the U.S. dollar exposure hedged back into Canadian dollars as of March 31,2021.

The Mulvihill Premium Yield Fund “MPY” returned 5.9% in the fourth quarter of 2020, and 10.9% for the year. MPY outperformed the S&P/TSX Composite Index by 5.3% with lower volatility and a higher yield.

The fourth quarterly distribution of $0.125 was paid at the end of December. Total distributions received in 2020 were $0.50 per unit.

The number of market moving events in 2020 are simply too long to list. From the emergence of COVID-19, the continued mess that is the US political landscape, negative oil prices, to the nearly 750% surge in shares of Telsa Inc., 2020 was certainly a memorable one. As lockdowns shuttered the global economy and tipped the US into its first recession since the Global Financial Crisis, most asset classes were able to eke out positive returns, if not downright impressive results. Gold led the way returning 25.1% in the last twelve months followed by US small cap and Emerging Market stocks. Fixed Income also performed well in 2020 with long duration treasuries returning 18.1%, benefiting from a rapid decline in yields. The S&P/TSX Composite Index finished the year up 5.6% while Real Estate and Commodities (in particular energy) were the laggards.

The Mulvihill Premium Yield Fund “MPY” returned 7.7% in the third quarter, bringing YTD returns to 4.7%. MPY has outperformed the S&P/TSX Composite Index by 7.8% this year with lower volatility and a higher yield.

The third quarterly distribution of $0.125 was paid at the end of September. Total distributions received YTD is $0.375 per unit.

The stock market, and most other asset classes, continue to be a curious case of contradictions. Stocks seemingly refuse to decline in the face of ever greater hurdles. Deteriorating economic data, declining earnings, record high valuations, a US President that refuses to commit to a peaceful transition of power and a resurgent COVID-19 virus lead a long list of major risks investors digested in the last three months as the S&P 500 Index trucked to new all-time highs.

The volume of market moving events continues to impact the performance of every asset class. In the first nine months of 2020, asset classes that historically provided safety in volatile markets have done just that. Long duration treasuries and gold have returned 21.8% and 24.3% respectively. Stock markets extended the rally from the March lows, with the S&P 500 returning 8.9% in Q3 while the S&P/TSX Composite Index returned 4.7% in the quarter and -3.1% for the year.

As of June 30,2020 the net asset value (“NAV”) per unit was $9.45 (Class I & F) and $9.35 per unit (Class A) compared to $8.53 per unit (Class I & F) and $8.47 per unit (Class A) at March 31, 2020. Unitholders received cash distributions of $0.125 per unit during the period.

North American equity markets surged after a volatile first quarter of 2020 as investors believe central banks around the world will continue with unprecedented stimulus. The S&P/TSX Index rose 17.0% while the S&P 500 Index rose 20.5%. In Canada, Technology stocks led the advance with a 68% return in the quarter while Communication stocks were the only group in the red, down 1%. In the U.S. every group had positive performance in the second quarter with Consumer Discretionary stocks returning the most, up 33%

The total return of the Fund, including reinvestment of distributions, for the three months ended June 30, 2020 was 12.14 percent (Class I & F) and 11.87 percent (Class A). In comparison, the S&P/TSX Composite Index and S&P 500 Index returned 17.0% percent and 20.5 percent, respectively. The best performing stock was Shopify Inc up 93.4 percent while held in the portfolio. At the other end of the spectrum, Lam Research Corp was the laggard, down 10.0 percent while held in the Fund.

Volatility increased significantly in March as markets sold off but declined for the rest of the period as markets have recovered significantly from the lows. However, volatility remains elevated relative to levels experienced over the past few years. For the three month period ended June 30, 2020 the Fund had on average 21.7% percent of the portfolio subject to covered calls. The average cash position during this period was 7.0 percent.

The Fund did not have any of the U.S. dollar exposure hedged back into Canadian dollars as of June 30,2020.

The NAV of the Fund on December 31, 2019 was $9.99 per unit (Class I & F) and $9.95 per unit (Class A) compared to $10.00 per unit at inception of the fund on December 1, 2019 (Class I & F) and December 12, 2019 (Class A). Unitholders received no cash distributions in this period.

North American equity markets continued their impressive rally from the first three quarters of 2019 with most indices ending the year near all-time highs. U.S. markets led the way in the fourth quarter on expectations a trade resolution between the U.S. with China was to be announced in early 2020. The total return for the S&P/TSX Index in the fourth quarter was 3.2%, while the S&P 500 Index had a total return of 9.1%. In Canada, 7 of 11 sectors generated a positive total return for the quarter, with Information Technology sector leading the way up 10.8%, while Health Care lagged for the third consecutive quarter, down 5.9%, as Cannabis stocks continued to decline. The U.S. market saw 10 of 11 sectors generate positive performance, with the Information Technology sector also leading the way, up 14.4%, while the defensive Real Estate sector lagged during the quarter, down 0.5%.

The total returns for the S&P/TSX Composite Index and the S&P 500 Index (CAD) since inception of the fund were 0.45% and 0.65% respectively and the return for the MX Covered Call Writers Index and CBOE S&P 500 BuyWrite Index (CAD) was 0.64% and negative 1.39% respectively over the same period. Stock within the Portfolio had varied results with Power Corp of Canada rising 4.66 percent followed by Gibson Energy Inc. rising 2.75 percent. The Walt Disney Co was the worst performing stock in the portfolio during the period with a total return of -5.84% in CAD.

Volatility levels as measured by the CBOE SPX Volatility Index (“VIX”) were at the low end of the range for most of the period. The fund opportunistically used option writing strategies to generate additional portfolio income. The Fund had on average 12.9 percent of the portfolio subject to covered calls and 7.8 percent to cash covered puts in the quarter.

The Fund did not hedge any of the U.S. dollar exposure back into Canadian dollars during the period.