Q:  What are the fundamental principles of your investment philosophy? A : Destra is focused on downside protection and income generating strategies. Downside protection is key to our investment philosophy. We identify institutional managers as we seek to create fund products. Our asset managers build sophisticated investment products with the objective to limit losses as the market falls while providing upside capture when the markets are on the rise. Since our funds are designed to limit downside risk, they do not have to rely on oversized gains in bull markets to offset earlier losses. Q:  Would you provide an overview of the strategies that you offer? A : Some of the funds that we currently offer are Destra Next Dimension Fund, Destra Preferred and Income Securities Fund, Destra High Dividend Strategy Fund, and Destra Focused Equity Fund. The asset managers that serve as subadvisors to the different funds are Zebra Capital Management, Flaherty & Crumrine Inc., Miller/Howard, and WestEnd Advisors. One of the first strategies that we launched was the Destra Next Dimension Fund, which was developed by Roger Ibbotson with a clear focus on liquidity. Roger’s studies have shown that historically stocks with the lowest liquidity premium tend to outperform over time regardless of their market cap, investment style or geographic characteristics. Additionally, he believes that as trading activity increases, the price of the equities will continue to rise. Another strategy that we have with a somewhat different philosophy is an open-end preferred securities fund called the Destra Preferred and Income Securities Fund. The objective of this product is to unlock hidden value in what the fund manager believes is an inefficient preferred securities market. We have noticed that most clients and their advisors tend to spend less time and effort on the income side, probably because there are not that many choices. However, Destra is committed to consulting and helping advisors and clients diversify their sources of income, whether by having a dividend income on common stocks, with the help of some floating rate investments, or through non-U.S. sources of income. We feel it is very important for our clients to have a well-diversified income portion of their portfolio, especially at a time when interest rates are at such extremely low levels. The Destra High Dividend Strategy Fund focuses on dividend income not just from high yielding stocks or high dividends, but also from stocks of companies that have a history of growing their dividends, or that are likely to start growing their dividends. Our belief is that financially strong stocks with rising dividends offer consistent performance as well as potential added value by generating superior risk-adjusted performance over time. The manager also includes some Master Limited Partnerships because they are even higher yielding than a lot of the common stocks. Our next strategy, the Destra Focused Equity Fund, is a concentrated portfolio of 20 stocks where managers apply a top-down approach. Here, WestEnd will determine which sectors to invest in and which ones to avoid based on where we are in the business cycle. The managers select sectors that they expect to experience economic tailwinds, and they tend to avoid sectors which they see as untimely. Within the favored sectors, the managers will target high-quality and market-leading companies as part of their selection. For example, at this point of the business cycle they have heavy allocations in the consumer discretionary and information technology sectors, whereas there is little or no exposure to energy names. Q:  How do you select fund managers? A : Our manager selection is a pretty comprehensive process that involves rigorous due diligence. As there are a lot of managers on our list that we want to meet and talk to, we start considering some of them only when we identify some interesting features in their strategies. For us, it is a matter of going through a rigorous due diligence checklist, visiting the manager, meeting all the people involved in the investment process, and observing their investment meeting. We try to find managers that are bound to offer protect on the downside. We pay particular attention to a manager’s approach to risk management, so we look at their performance history under various market scenarios. It is extremely important to ensure that when the markets might be down or the strategy is not in favor, they are not losing more than their competitors or the broader market, and that they are capable of adding value over the long term. Q:  Do you have any absolute return targets while evaluating fund managers? A : There is no absolute return performance target for a particular strategy. What we actually want to see is not how those managers do relative to the market but how they perform in their competitive space. Thus, for each manager on our screen we put together our own peer group of managers with a similar style so that we can compare the candidate relative to the competition in a relevant peer groups. The underlying thesis is that a manager has to have good and meaningful long-term return numbers. For instance, when we are sourcing a manager for an open-end preferred stock fund or a securities fund, we simply try to determine the best preferred manager. In other words, we are focusing on the strategy potential rather than its relevance, because advisors are the ones who typically make the decision whether or not they want to recommend preferred stocks to their clients. We are definitely not making that decision for them. Q:  When do you decide to change a strategy? A : Being a relatively young company, we are still not at a point when we are ready to drop any of our strategies. Our belief is that strategies come in and out of favour. In terms of what strategies we go after, we have a lot of interaction with advisors to find the best possible answer. A lot of our findings are based on what advisors are telling us about their clients’ particular needs. For example, on the income side, a lot of advisors do not spend enough time diversifying the sources of income in their clients’ portfolios. They are not focused on that and they will only see how they can add value when we bring some strategies to their attention. Q:  When would you consider a strategy as redundant? A : A particular strategy may not be effective due to various reasons such as regulatory change, a change in the market, or an investor’s desire for a particular type of strategy. We have no hard and fast rule when that might happen. What is more likely to happen, though, is that if there was continued poor performance by a manager, we would most probably look to hire somebody else rather than just change the strategy. Q:  How do you define and manage risks? A : We primarily focus on risks that are inherent in the investment process. We like to see that managers pay particular attention to the limits on particular stocks or sectors, and that they follow the trade execution to make sure there is no operational or process risk. Furthermore, we prefer managers who have very formal policies that they adhere to on a regular basis to address all possible risks in their portfolio.