Sierra Total Return Fund is a closed-end investment company operated as an interval fund and sponsored by Medley1. Medley is an alternative asset management firm with over $5 billion of assets under management (“AUM”)2 that offers yield solutions to retail and institutional investors. Medley employs a proven investment process with over 85 professionals in its New York and San Francisco offices.
|•||Regulated under the Investment Company Act of 1940
|•||No fund level income tax when 90%+ of taxable income is distributed
|•||Shares continuously offered at a price based on net asset value (“NAV”)
|•||Liquidity via periodic share repurchases|
Sierra Total Return Fund provides investors with access to institutional quality investments through an interval fund structure offering current income with quarterly liquidity.
Total Return + Current Income
In today’s ever-changing markets, many investors are demanding more sophisticated investment choices. Rather than sticking to traditional mutual fund opportunities, everyday investors are looking to a new approach that combines what we believe are the best attributes of both open-end mutual funds and closed-end funds. Here’s what you should know about interval funds and why they’re quickly gaining popularity:
Open-End Mutual Fund
|Continuous Offering||Yes||One time through initial public offering (“IPO”)||Yes|
|Redemption Terms||Daily||Based on trading volume||Quarterly|
|Redemption Pricing||Net asset value (NAV)||Market||NAV|
|Access to Private Investments||Limited||Yes||Yes|
|1099 Tax Reporting||Yes||Yes||Yes|
Perhaps the biggest advantage of an interval fund is that it can invest in both public and private securities. Exposure to private companies and institutional products can help create a well-balanced portfolio with benefits including the potential for:
|Greater Yield||Reduced Volatility||Lower Correlation to Equities|
In summary, interval funds are possibly best described as a middle ground between open-end mutual funds and closed-end funds and, as illustrated below, interval funds share attractive attributes of both.
Bank consolidation has created a compelling yield
premium for non-bank lenders:
There are approximately 4,700a fewer domestic banks today than
there were 20 years ago
The participation rate of the remaining banks has been
reduced from ~70% to less than 10%a
Middle Market loans can provide a meaningful
opportunity regardless of interest rate movement:
Attractive yield in a low rate environment
Improved income potential from rising rates over time
a) Data as of: 12/31/94 - 9/30/16. Source: Federal Deposit Insurance Corporation, represents number of commercial banking institutions insured by the FDIC as of 9/30/2016. b) Data as of: 12/31/94 - 9/30/16. Source: 2016 Q3 LCD Quarterly, Primary Market for Highly Levered Loans Banks vs Non-Banks. c) Data as of: 1/31/02 - 9/30/16. Source: LCD Reports, S&P Global Market Intelligence. d) Data as of: 1/31/02 - 9/30/16. Source: U.S. Treasury Constant Maturity-3-Month.
Sierra Total Return Fund seeks to provide attractive risk-adjusted income and returns. It expects to achieve these investment objectives through a disciplined and balanced allocation among four distinct asset strategies. Through these strategies, Sierra Total Return Fund can access both public and private securities at all levels of the capital structure with varying correlation to equity and other markets.
Corporate loans and bonds
Secured and unsecured
Public Investment Funds
Business development companies (“BDCs”) and mortgage real estate investment trusts (REITs)
Closed-end funds and other income equities
Private Investment Funds
Institutional investment opportunities
Credit and real estate opportunities
Structured Credit Products
Debt and equity of Collateralized Loan Obligations (CLOs)
Real estate backed debt and securities
Sierra Total Return Fund has the flexibility to invest across varying asset strategies and create the potential for a balance between current income, liquidity and capital appreciation.
Sierra Total Return Fund seeks to provide total return though a combination of current income and long-term capital appreciation by investing in a portfolio of debt securities and equities.
Class A: SRNAX
Class L: SRNLX
Class T: SRNTX
Class I: SRNIX
Class A: 82653M109
Class L: 82653M505
Class T: 82653M406
Class I: 82653M307
Continuously offered closed-end interval fund
STRF Advisors LLC
Class A: $2,500 (non-qualified accounts) and $1,000 (qualified accounts)
Class L & T: $2,500
Class I: $2,000,000*
Net Asset Value ("NAV") determined daily
Once each quarter at net asset value no less than 5% of the outstanding shares of the Fund5
In the event of death, a shareholder’s descendants may request a redemption of shares pursuant to certain conditions and restrictions
An investment in the Fund is suitable only for investors who can bear the risks associated with the illiquidity of the Fund’s shares; the Fund should be viewed as a long-term investment
Sierra Total Return Fund is externally managed by STRF Advisors LLC, a majority owned subsidiary of Medley LLC, which is controlled by Medley Management Inc. (NYSE: MDLY;”Medley”), whose experienced team of investment professionals maintains a broad network of relationships and has deep expertise in originating, structuring, executing and managing investments.
SETH TAUBE, CFA
Chief Executive Officer and the Chairman of the Board of Trustees
Seth Taube is the Chief Executive Officer and the Chairman of the Board of Trustees of the Fund. He also serves as co-Chief Executive Officer and co-Chairman of the Board of Directors of Medley Management Inc. (NYSE: MDLY), Director of Medley Capital Corporation (NYSE: MCC) and Chief Executive Officer and Chairman of the Board of Directors of Sierra Income Corporation. Prior to forming Medley, Mr. Taube previously worked with Tiger Management and held positions with Morgan Stanley & Co. in its Investment Banking and Institutional Equity Divisions. Mr. Taube received a BA from Harvard University, an M.Litt. in Economics from St. Andrew’s University in Great Britain, where he was a Rotary Foundation Fellow, and an MBA from the Wharton School at the University of Pennsylvania.
BROOK TAUBE, CFA
Brook Taube is a Trustee on the Board of Trustees of the Fund. He also serves as co-Chief Executive Officer and co-Chairman of the Board of Directors of Medley Management Inc. (NYSE: MDLY), Chief Executive Officer and Chairman of the Board of Directors of Medley Capital Corporation (NYSE: MCC) and Director of Sierra Income Corporation. Prior to forming Medley, Mr. Taube began his career in leveraged finance at Bankers Trust. Mr. Taube received a BA from Harvard University.
Jeff Tonkel is the President of the Fund. He also serves as President and Director of Medley Management, Inc. (NYSE: MDLY), Director of Medley Capital Corporation (NYSE: MCC) and President of Sierra Income Corporation. Prior to Medley, Mr. Tonkel was Managing Director with J.P. Morgan serving as CFO of a global financing and markets business. Prior to J.P. Morgan, Mr. Tonkel was Managing Director, Principal Investments, with Friedman Billings Ramsey, where he focused on merchant banking and corporate development investments. Mr. Tonkel began his investment career with Summit Partners. Mr. Tonkel received a BA from Harvard University and an MBA from Harvard Business School.
CHRIS MATHIEU, CPA
Chief Financial Officer, Treasurer and Secretary
Chris Mathieu is the Chief Financial Officer, Treasurer and Secretary of the Fund. He also serves as Managing Director of Medley Management Inc. (NYSE: MDLY) and Chief Financial Officer, Treasurer and Secretary of Sierra Income Corporation. Prior to joining Medley, Mr. Mathieu co-founded and was the Chief Financial Officer at Horizon Technology Finance Corporation, where he raised debt and equity capital commitments and provided oversight of all finance and administrative functions. Mr. Mathieu was a Vice President, Life Sciences both at GATX Ventures, Inc. and Transamerica Technology Finance. Mr. Mathieu was also a Vice President, Finance at Financing for Science International, Inc. Mr. Mathieu was a Manager at KPMG Peat Marwick in the Financial Services and Middle Market group. Mr. Mathieu is a CPA and received a BS in Business Administration degree in Accounting from Western New England College.
Chief Compliance Officer
John Fredericks is the Chief Compliance Officer of the Fund. He also serves as the General Counsel of Medley Management Inc. (NYSE: MDLY) and Chief Compliance Officer of Medley Capital Corporation (NYSE: MCC), Sierra Income Corporation, and Medley’s various registered investment advisers. Prior to joining Medley, Mr. Fredericks was a partner with Winston & Strawn, LLP, where he was a member of the firm’s restructuring and insolvency and corporate lending groups. Before joining Winston & Strawn, LLP, Mr. Fredericks was a partner with Murphy Sheneman Julian & Rogers and an associate at Murphy, Weir & Butler. Mr. Fredericks was admitted to the California State Bar. Mr. Fredericks received a BA from the University of California Santa Cruz and a JD from University of San Francisco.
David Richards is a Portfolio Manager of the Fund and Managing Director of Medley Management Inc. (NYSE: MDLY). Prior to Medley, he served as a member of the board of directors at American Capital LTD and served on its executive, audit and strategic review committees. Prior to American Capital LTD, Mr. Richards was a Portfolio Manager for Pine River Capital Management L.P., where he focused on credit and equity investments in the financial sector. He has also held positions with Goldentree Asset Management, Citadel Investment Group, Raymond James & Associates and SunTrust Banks, NA. Mr. Richards received a BS from Providence College and an MBA from Emory University.
For more information about investing in Sierra Total Return Fund please contact:
MAILING ADDRESSSierra Total Return Fund | c/o DST Systems, Inc.
Sierra Total Return Fund is new and has a limited operating history.
*The Fund reserves the right to waive the minimum investment amount on Class I shares.
1) Medley Management Inc. is the parent company of Medley LLC and several registered investment advisors (collectively, “Medley”). Assets under management refers to assets of our funds, which represents the sum of the net asset value of such funds, the drawn and undrawn debt (at the fund level, including amounts subject to restrictions) and uncalled committed capital (including commitments to funds that have yet to commence their investment periods). 2) Assets under management are as of June 30, 2017. 3) Distributions are not guaranteed and are made at the discretion of the Board of Trustees and will depend on Sierra Total Return Fund earnings, financial condition, maintenance of our Registered Investment Company (“RIC”) status and other factors the Sierra Total Return Fund Board may deem relevant. 4) There currently is no secondary market for Sierra Total Return Fund’s shares and the Fund expects that no secondary market will develop. To provide liquidity to shareholders, the Fund intends to make quarterly offers to repurchase its shares at net asset value. There can be no assurance, however, that the Fund will be able to provide this intended level of liquidity. 5) As described more fully in the prospectus, the Fund intends to offer to repurchase its outstanding shares on a quarterly basis. The Fund is an interval fund and, as such, has adopted a fundamental policy to make one repurchase offer of each class of outstanding shares at the NAV of that class of shares per year. In addition to this mandatory repurchase offer, the Fund intends to make three additional repurchase offers in each year.
There currently is no secondary market for Sierra Total Return Fund’s shares and the Fund expects that no secondary market will develop. To provide liquidity to shareholders, the Fund intends to make quarterly offers to repurchase its shares at net asset value. There can be no assurance, however, that the Fund will be able to provide this intended level of liquidity. Investments in lesser-known, small and medium capitalization companies may be more vulnerable than larger, more established organizations. The sales of securities to fund repurchases could reduce the market price of those securities, which in turn would reduce the Fund’s NAV.
Shares of the Fund will not be listed on any securities exchange, which makes them inherently illiquid. Regardless of how the Fund performs, an investor may not be able to sell or otherwise liquidate his or her shares whenever such investor would prefer and will be unable to reduce his or her exposure or any market downturn. The Fund may pay distributions in significant part from sources that may not be available in the future and that are unrelated to the Fund’s performance.
Investing in the Fund involves risks, including, but not limited to, the risk that you may receive little or no return on your investment or that you may lose part or all of your investment. The ability of the Fund to achieve its investment objective depends, in part, on the ability of its investment adviser to effectively allocate the assets of the Fund among the various securities and investments in which the Fund invests. There can be no assurance that the actual allocations will be effective in achieving the Fund’s investment objective or delivering positive returns. The Fund is newly organized and has a limited operating history.
Investors should be aware that traded and non-traded BDCs, senior loans, real estate investments and REITs, structured products and CLOs are all significantly different investments each with its own risks, rewards and limitations. Investors should understand these differences (which may include investment objectives, costs and expenses, liquidity, market risk, safety, fluctuation of principal or return, insurance, tax features, interest rate risk and consequences, etc.) before making an investment.
SC Distributors is the exclusive wholesale marketing agent for Sierra Total Return Fund. ALPS Distributors, Inc. is the distributor of Sierra Total Return Fund. SC Distributors and ALPS Distributors, Inc. are not affiliated. ALPS Distributor, Inc., 1290 Broadway, Suite 1100, Denver, CO 80203, member FINRA.
The Fund will concentrate its investments in debt and equity fixed income and its portfolio will be significantly impacted by the performance of the debt/credit markets. The value of companies engaged in the debt/credit industry is affected by: (i) changes in general economic and market conditions; (ii) changes in the value of debt investments; (iii) risks related to local economic conditions and increased competition and (iv) changes in interest rates and leverage.
Investors should carefully consider the investment objectives, risks, charges and expenses of Sierra Total Return Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained by contacting your financial advisor or visiting www.sierratotalreturnfund.com. The prospectus should be read carefully before investing.
|Distributed By:||© 2017 Copyright All Rights Reserved | Sierra Total Return Fund|