Rational Funds, a family of funds rooted in the investment philosophy of applying a rational approach to investing, has launched the Rational Funds Income Opportunities Fund (RTFIX).
The Fund offers a Commercial Mortgage Backed Securities (CMBS) strategy, and will be sub-advised by Cicero Capital Partners, which has managed a similar strategy in hedge fund form since September 2011.
RTFIX offers an alternative, tactically managed, fixed income strategy focused on mitigating risk while generating stable monthly cash flow. To achieve this, the Fund invests primarily in commercial mortgage backed securities (CMBS) and other commercial real estate structured securities such as REITs. Specifically, the strategy takes positions in duration legacy CMBS credit bonds, short duration CMBS that generate yields from fixed monthly coupon payments, and new issue CMBS when the market is suffering from dislocation and illiquidity. With these investments, the strategy offers the ability to outperform both equity and fixed income markets through price appreciation and trade generated gains.
“We are consistently looking to identify proven, rationally-driven investment strategies to add to the Rational Funds family,” says Jerry Szilagyi (pictured), CEO of Rational Funds. “The Rational Funds Income Opportunities Fund is not only reminiscent of a strategy that has performed well over the last six years, it also offers investors a CMBS-based strategy that seeks to generate a stable cash flow uncorrelated to the equity or fixed income markets. As such, RTFIX’s alternative strategy may be a perfect complement to an investor’s income-generating portfolio.”
Fundamental to this strategy is RTFIX’s comprehensive due diligence process on the underlying collateral of each investment, including, but not limited to: analysis of property cash flows, competitive sub-market, potential lease rollovers, capital expenditures budgets and bond cash flows. The portfolio management team identifies entry points for investing, including distressed selling situations and/or distressed sellers and periods of market illiquidity caused by new regulations that creates opportunity to purchase bonds below market value.