Sub-Advised by ESM Management LLC, this milestone for RFXIX is a testament to investors’ confidence in the Fund’s potential to deliver positive returns in a variety of market environments.
(February 20, 2025) – Rational Funds is proud to announce that the Rational Special Situations Income Fund (RFXIX) has surpassed $1 billion in assets under management, as of January 2025. This achievement is, in part, a result of the diligence, hard work, and expertise of the Fund’s sub-advisor, ESM Management LLC (“ESM”), as well as the efforts of the dedicated professionals at Rational Funds. The Fund crossing $1 billion in AUM represents a 28.5% growth in assets since January 2024 and signifies the growing confidence that investors have in the strategy.
The Fund invests primarily in non-agency residential mortgage-backed securities (RMBS) and, to a lesser extent, a variety of other asset-backed securities, with a focus on “special situations” within the RMBS market that have the potential to provide asymmetric upside returns. RFXIX is rated 5-stars by Morningstar based on 3-year risk adjusted returns for the period ending 12/31/2024 (out of 334 funds in the Multisector Bond category).
“RFXIX reaching $1 billion in assets is something we always thought would occur once the market was able to appreciate the potential ways in which the Fund’s investment process and approach to special situations trading could deliver for investors,” said Jerry Szilagyi, CEO of Rational Funds. “ESM has been a great partner with Rational Funds, and I look forward to even more growth in RFXIX in the years to come.”
RFXIX seeks total return consisting of capital appreciation and income, while its “special situations” component provides the potential for asymmetric upside returns. The Fund will make opportunistic investments in securities that may be mispriced due to structural or market driven factors; in this regard, the sub-advisor seeks to identify complexities, inefficiencies or flaws in the underlying legal and technical structures of certain debt issuances that may have gone unnoticed, or are misunderstood, by other market participants. The portfolio management team works to exploit these opportunities through an advanced knowledge of both the legal framework governing such issuances and the technical structures related thereto, as well as an assessment of general market sentiment.
“We strongly believe in our disciplined investment approach and the team we’ve built here at ESM, and we are proud to see RFXIX cross the $1 billion threshold,” said Dr. Eric Meyer, CFA, Founder and Co-Portfolio Manager at ESM. “We look forward to further growth going forward, as other investors see what so many have already – that RFXIX offers a distinct approach to analyzing, evaluating, and investing in ‘special situation’ investment opportunities.”
For more information, please visit www.rationalmf.com. For media inquiries regarding this announcement, please contact Deborah Kostroun of Zito Partners at 201-403-8185.
About Rational Funds
Rational Funds currently offers 8 distinct funds that provide a variety of investment strategies with the goal of producing income- and/or equity-oriented returns, while seeking to prudently manage risk and volatility. Rational pursues these strategies via a team of in-house portfolio managers and boutique institutional investment management partners. The firm strives to provide innovative strategies to support financial advisors and their clients in meeting the investment challenges of an ever-changing global market. For more information on Rational Funds and its various offerings, please visit: Rational Funds | Intelligent Alternatives (rationalmf.com)
About ESM Management, LLC
ESM Management, LLC was founded in 2009 by Eric Meyer, a Harvard Physics Ph. D and Attorney; Mr. Meyer has since led the firm’s team of dedicated investment professionals in the management of RFXIX. The firm’s portfolio management team places a rigorous focus on “special situation” trades, which require significant experience across a variety of disciplines, including bond fundamentals, the legal and technical structure of issuances, and the ability to model complex mathematical relationships. ESM is perhaps distinctly positioned to identify and take advantage of such “special situation” trading opportunities, given the diverse skillset of the firm’s various investment professionals.
Important Risk Considerations:
Investors should carefully consider the investment objectives, risks, charges and expenses of the Rational Funds. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling (800) 253-0412 or at www.rationalmf.com. The prospectus should be read carefully before investing. The Rational Funds are distributed by Northern Lights Distributors, LLC member FINRA/SIPC. Rational Advisors, Inc., ESM Management, LLC, Jerry Szilagyi, Eric Meyer, Deborah Kostroun, Zito Partners are not affiliated with Northern Lights Distributors, LLC.
Investing in the Fund carries certain risks. The value of the Fund may decrease in response to the activities and financial prospects of an individual security or group of securities in the Fund’s portfolio. Investors in the Fund bear the risk that the Fund may not be successful in implementing its investment strategies. The Fund is subject to concentration risk. When the Fund invests in asset-backed securities and/or mortgage backed securities, the Fund is subject to the risk that, if the underlying borrowers fail to pay interest or repay principal, the assets backing these securities may not be sufficient to support payments on the securities. Interest rate risk is the risk that bond prices overall, including the prices of securities held by the Fund, will decline over short or even long periods of time due to rising interest rates. Bonds with longer maturities tend to be more sensitive to interest rates than bonds with shorter maturities. Lower-quality bonds, known as “high yield” or “junk” bonds, present greater risk than bonds of higher quality, including an increased risk of default. Credit risk is the risk that the issuer of a security will not be able to make principal and interest payments when due. These factors may affect the value of your investment.
The Fund commenced operations by acquiring all of the assets and liabilities of ESM Fund I, L.P. (the “Predecessor Fund”) in a tax-free reorganization on July 17, 2019 (the “Reorganization”). In connection with the Reorganization, investors in the Predecessor Fund received Institutional Shares of the Fund. The Fund’s investment objectives, policies, guidelines and restrictions are, in all material respects, equivalent to those of the Predecessor Fund. However, the Predecessor Fund was not registered under the 1940 Act and, therefore, was not subject to certain investment restrictions, limitations and diversification requirements that are imposed by the Investment Company Act of 1940 Act, as amended, or Subchapter M of the Internal Revenue Code, as amended, which, if they had been applicable, might have adversely affected the Predecessor Fund’s performance. The Fund’s Sub-Advisor was the investment adviser to the Predecessor Fund. The Fund’s fees and expenses are expected to be higher than those of the Predecessor Fund, so if the Fund’s expenses were applied to the Predecessor Fund’s performance, the performance would have been lower.
For the period ending December 31, 2024, RFXIX maintains an Overall Morningstar Rating of 5 stars and a 5-year Morningstar Rating of 5 stars (out of 334 and 286 funds, respectively, in the Multisector Bond category). © 2025 Morningstar; all rights reserved. The foregoing rating information (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. The Morningstar Rating TM for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life sub-accounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and ten-year Morningstar Rating metrics (as applicable).
The weights are: 100% applied to the three-year rating for total returns for months 36-59, 60% applied to the five-year rating/40% applied to the three-year rating for total returns for months 60-119, and 50% applied to the 10-year rating/30% applied to the five-year rating/20% applied to the three-year rating for total returns for months 120 or greater. While the 10-year overall star rating formula appears to weigh the 10-year period most heavily, the most recent three-year period actually exerts the greatest impact as it is included in the formula for all three rating period.
Glossary:
- Non-Agency Residential Mortgage-Backed Securities (RMBS): Debt-based assets backed by the interest paid on residential loans. These assets are constructed by a non-government agency investment-banking firm.
- Special Situation: An unusual event that compels investors to buy a stock or other asset in the belief that its price will rise.
- Asset-backed Securities: A type of financial investment that is collateralized by an underlying pool of assets – usually ones that generate a cash flow from debt.
- Asymmetric Upside Returns: A risk/reward profile that is imbalanced or skewed toward the upside than the downside.
