Ninepoint Target Income Fund

The Ninepoint Target Income Fund Q1 2024 Update

The global equity rally continued in Q1 on sustained strength in technology shares and improving breadth from cyclical sectors. Index implied volatility was stable with muted correlation between equities and moderately lower single stock volatility expectations. While technology sectors continue to show strong earnings revisions and cyclical sectors are also seeing some earnings improvement; valuation multiple expansion not earnings growth, has driven the majority of recent equity market performance, potentially leaving markets susceptible to either a growth or rates scares.  US treasury markets have taken 2024 interest rate expectations from over 6 cuts at the beginning of the year, to less than 3 cuts as economic and inflation data have come in firm. With equity markets benefiting from expectations of a fed pivot, we could see more muted risk asset performance, if hawkish central bank rhetoric resumes and interest rates continue to rise. This would be in-line with the dynamics that drove last years fall sell-off, which saw volatility move higher and raised potential yields on newly initiated puts.

In the Ninepoint Target Income Fund, a quarter of the options portfolio rolled mid-March into new 1 year put options. The portfolio at quarter end, sat with strike prices greater than -15% out-the-money.  This continues to provide downside protection before options premiums and investment principal are at risk at expiry. This offers the strategy potential defensive benefits relative to a long equity position, if equity markets do experience more muted performance with higher potential for downside.

Until Next Time,

Colin Watson
Portfolio Manager
Ninepoint Partners

Why Invest in the Ninepoint Target Income Fund?

• Targeted Distribution: The Ninepoint Target Income Fund utilizes a cash covered put selling strategy offering 6% target distribution*, potentially offering a buffer against market declines
• Accessible: Offered in a low-medium risk rated traditional mutual fund structure with daily liquidity at NAV
• Income Potential & Diversification: options-based income strategies can offer a competitive yield and may provide diversification to traditional income portfolios during challenging markets
• Execution Partnership: Leverages RBC Quantitative Investment Solutions diversified, rules based put selling strategies to generate income and diversification

*The amount of the monthly distribution may be adjusted by the Manager without notice throughout the year as market conditions change. Monthly distributions will be comprised of net income, net realized capital gains and/or return of capital.