The investment objective of the Fund is primarily income and secondarily capital appreciation.
FUND OVERVIEW
The Denali Structured Return Strategy Fund seeks to provide investors with income and capital appreciation through direct and indirect investments of a substantial majority of its assets in income-generating investments of domestic issuers and through a modest (approximately one and a half to three percent of total assets) investment in call option spreads on the S&P 500® Index. Income-generating investments may be publicly traded or privately offered, and typically make interest, dividend, or other periodic payments, distributions, and/or accruals.
The Fund utilizes the income from the diversified pool of income-generating investments to systematically purchase quarterly S&P 500 call option spreads, providing defined exposure to potential market gains from the S&P 500 Index. Each quarter, the Fund resets its exposure with the goal of harvesting any realized equity upside. The Fund is structured as a continuously offered, non-diversified, interval fund. The Fund offers daily subscriptions and will offer to make quarterly repurchases at NAV (net asset value).
At the end of the first quarter of 2025, the Denali Structured Return Strategy completed its first full 12 months of operation. Over this period, the Denali Structured Return Strategy delivered a total return of 13.74 net of fees, significantly outperforming the S&P 500 Total Return of 8.25%. We view this positive return differential as validation of our structured return approach. During this period, the fund experienced substantial growth in assets under management, increasing from approximately $115,000 on 3/31/2024 to over $90 million as of the March 31 quarter-end.
| NET PERFORMANCE STATISTICS | |||||
| 1M | 3M | 1Y | YTD | Since Inception* | |
| DNLIX | -1.55% | -0.27% | 13.74% | -0.27% | 14.31% |
| S&P 500 Index | -5.63% | -4.28% | 8.26% | -4.28% | 11.22% |
*Inception 03/14/2024-3/31/2025.. Performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the most recent month-end performance, please call 1-800-632-4027.
Notably, this most recent quarter marked the first negative quarterly return for the S&P 500 since the Fund’s inception. During this challenging environment, the Fund demonstrated its intended value proposition by effectively mitigating the downside risk of the equity market. The S&P 500 declined by -4.27%, while the Fund limited its loss to -0.27%, underscoring our strategy’s emphasis on capital preservation during periods of market stress.
Past performance is no guarantee of future results.
The Fund’s structured approach seeks to limit volatility during significant market drawdowns. During the last 12 months, there were three notable market downturns, where the strategy was able to demonstrate reduced downside volatility relative to the S&P 500 Index:
3/28/24 to 4/19/24The combination of higher return and significantly reduced volatility has enabled the Fund to deliver a superior Sharpe ratio, validating the effectiveness of the Fund’s integration of income-producing investments and upside equity exposure. These results underscore our commitment to generating consistent returns while effectively managing risk.
The income-generating portion of the portfolio - primarily made up of niche private credit investments – has provided the consistent returns necessary to support the Fund’s quarterly call options exposure to the S&P 500 Index, while also playing a critical role in supporting both capital preservation and total return.
During the first quarter of 2025, the Fund experienced strong inflows, growing assets by more than 30%. While this growth is encouraging, the associated cash drag from the new capital negatively impacted the performance of the Fund during the quarter leading to a slight negative return for the quarter. Heading into Q2, the portfolio is now substantially invested and cash levels have come down. With the portfolio almost fully deployed, we believe the Fund is well positioned to pursue its investment objective.
At the time of writing, the S&P 500 Index has experienced a sharp two-day decline of over 10.5%, driven by renewed investor concerns surrounding the potential impact of tariffs on global financial markets. According to the Wall Street Journal, this marks only the fourth instance since WWII in which the index has fallen by more than 10% over a two-day period. During this same two-day period, the Fund declined by 1.88%.
DISCLOSURES
The Fund’s shares require a minimum initial investment of $1,000 and $100 for subsequent investments. Distributions are not guaranteed. As a Return of Capital, the Fund must distribute an amount equal to at least 90% of its taxable investment income, annually. There is no assurance a change in market conditions or other factors will not result in a change in future distributions.
The management fee is 1.65% with an expense cap at 1.99%. Total annual expenses are 3.16%. Total annual expenses (after fee waiver and expense reimbursement) are 2.77%. The Adviser and the Fund have entered into an Expense Limitation Agreement under which the Adviser has agreed to waive its management fees and to pay or absorb the ordinary operating expenses of the Fund (excluding borrowing costs, dividends, and interest on securities sold short, brokerage commissions, acquired fund fees and expenses and extraordinary expenses), to the extent that its management fees plus the Fund's ordinary annual operating expenses exceed 1.99% per annum of the Fund's average daily net assets. Such Expense Limitation Agreement will expire on July 31, 2025, and may not be terminated by the Adviser, but it may be terminated by the Board of Trustees, upon 60 days written notice to the Adviser. Any waiver and reimbursement by the Adviser is subject to repayment by the Fund within the three years from the date the Adviser waived such payment, if the Fund is able to make the repayment without exceeding the lesser of the expense limitation in place at the time of the waiver and reimbursement or the current expense limitation and the repayment is approved by the Board of Trustees.
See “Management of the Fund.” The Adviser uses call option spreads to capture a portion of positive equity market returns without exposing the Fund to significant equity market losses. Generally, when the Fund purchases a call option, the Fund has the right, but not the obligation, to buy an asset at a specified price (strike price) within a specific time period or at the end of a time period. Call options can expire worthless in a flat or down equity market, but are not further linked to equity losses. The Adviser anticipates investing in call spreads on a quarterly basis by investing in call options primarily with three-month maturities and strike prices that are near (within one percent above) the then-current level of the S&P 500® Index while writing the same amount of call options with three-month maturities and strike prices that are approximately 5% higher than the then-current level the index. The purchased call options are commonly referred to as being at-the-money if the strike price is at the then-current level of the index, or out-of-the money if the strike price is above the then-current level of the index. Investment
Advisory services are provided through Liquid Strategies, LLC located at 3550 Lenox Rd NE, Ste 2550 Atlanta, GA 30326.
The statements contained herein are based upon the opinions of Liquid Strategies and the data available at the time of publication and are subject to change at any time without notice. This communication does not constitute investment advice and is for informational purposes only, is not intended to meet the objectives or suitability requirements of any specific individual or account, and does not provide a guarantee that the investment objective of any model will be met. An investor should assess his/her own investment needs based on his/her own financial circumstances and investment objectives. Neither the information nor any opinions expressed herein should be construed as a solicitation or a recommendation by Liquid Strategies or its affiliates to buy or sell any securities or investments or hire any specific manager. Any offering may only be made pursuant to the securities laws, an offering document and related subscription materials all of which must be read and completed in their entirety. Liquid Strategies prepared this update utilizing information from a variety of sources that it believes to be reliable.
It is important to remember that there are risks inherent in any investment and that there is no assurance that any investment, asset class, style or index will provide positive performance over time. Diversification and strategic asset allocation do not guarantee a profit or protect against a loss in a declining markets. Past performance is not a guarantee of future results. All investments are subject to risk, including the loss of principal.
RISK FACTORS: An investment in the Fund’s shares is subject to risks. The value of the Fund’s investments will increase or decrease based on changes in the prices of the investments it holds. This will cause the value of the Fund’s shares to increase or decrease. You could lose money by investing in the Fund. By itself, the Fund does not constitute a complete investment program. Before investing in the Fund, you should consider carefully the following risks the Fund faces, together with the other information contained in the prospectus.
Since the Fund is non-diversified, it is subject to a higher reduction of capital and volatility than a fund more proportionately allocated among a large number of securities. An investment in the Fund involves risk. The Fund is new with no significant operating history by which to evaluate its potential performance. There can be no assurance that the Fund’s strategy will be successful. The Fund may leverage its investments by “borrowing.” The use of leverage increases both the risk of loss and profit potential.
Shares of the Fund are not listed on any securities exchange, which makes them inherently illiquid.
There is no secondary market for the Fund’s shares, and it is not anticipated that a secondary market will develop.
Shares of the Fund are not redeemable. Thus, an investment in the Fund may not be suitable for investors who may need the money they invest in a specified time frame.
Although the Fund will offer to repurchase at least 5% of outstanding shares at NAV on a quarterly basis in accordance with the Fund’s repurchase policy, the Fund will not be required to repurchase shares at a shareholder’s option nor will shares be exchangeable for units, interests or shares of any security.
The Fund is not required to extend, and shareholders should not expect the Fund’s Board of Trustees to authorize, or repurchase offers in excess of 5% of outstanding shares at NAV.
Regardless of how the Fund performs, an investor may not be able to sell or otherwise liquidate his, her or its shares whenever such investor would prefer and, except to the extent permitted under the quarterly repurchase offer, will be unable to reduce the shareholder’s exposure on any market downturn.
The Fund may invest a portion of its assets in securities that have speculative characteristics, e.g., lower-rated or unrated debt commonly referred to as “high-yield bonds” or “junk bonds.” The Fund will invest in call option spreads that may expire worthless and fail to provide participation in positive equity market returns.
Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus contains this and other important information about the investment company. For a prospectus or summary prospectus with this and other important information about the Fund, please visit the Documents section at www.LSfunds.com/DNLIX or call 1-800-632-4027. Read the prospectus carefully before investing.
Shareholder Services: 1-800-632-4027
Investment Professionals: 770-350-8700 or info@LSfunds.com
Distributed by Foreside Fund Services, LLC, which is not affiliated with the Adviser.