Quarterly Update

Garrett R. D'Alessandro, Chief Executive Officer | Oct. 2020

Is This Time Different?

Despite our inability to process all that we are living through, our focus remains on dealing with the uncertainty COVID-19 is causing in our narrow world of investments and economics.

As history shows, not often can one answer this question positively without subsequent regret.

The COVID-19 pandemic has caused significant human costs on many levels across the globe. There are no words we could write to convey the extent of the impact of COVID-19 on our lives. Despite our inability to process all that we are living through, our focus remains on dealing with the uncertainty COVID-19 is causing in our narrow world of investments and economics.

In the context of the response to the COVID-19 pandemic, the U.S. government and Federal Reserve central bank have applied trillions of dollars in spending and monetary stimulus to stem the decline of the economy.

There is significant research and historical evidence that show those actions were both justified and beneficial to lessen the depth and duration of the recession. In fact, it was so beneficial that stock markets rebounded significantly, and the recession was the shortest in U.S. history.

The stock market has rebounded to a new record high, yet millions of people remain unemployed and hundreds of thousands of businesses are experiencing significant financial hardship.

The apparent contradiction between the stock market and the economy is attributable to several factors. COVID-19 is being viewed as an isolated natural disaster, which will substantially end in 2021. Forward-looking investors anticipate strong future profits for the leading stock market companies and have raised the valuation of these companies to high levels. Fiscal and monetary policies are likely to bridge the lost incomes of many unemployed people and businesses until a COVID-19 vaccine starts allowing normalizing of our economy. Finally, the stock market is only a semblance of the U.S. economy. There are hundreds of thousands of nonpublic businesses that are enduring hardship that are not counted in the major stock market indexes.

In time we will learn the outcome from the unprecedented amount of spending the U.S. government has done, but this is not a near-term concern for investors.

The immense global central bank response to the COVID-19 pandemic also fueled trillions of dollars being injected into economies all around the world. The effects of this can be seen in the chart below, which shows the connection between the U.S. stock market, the S&P 500 Index, and the impact from trillions of dollars from global central banks’ monetary policies. As long as central banks continue their stimulative programs, we believe stock markets will remain high.

Key Points

Despite our inability to process all that we are living through, our focus remains on dealing with the uncertainty COVID-19 is causing in our narrow world of investments and economics.

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Important Disclosures

Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as of the date of this document and are subject to change.

The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. This presentation is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein.

Certain statements contained herein may constitute projections, forecasts, and other forward-looking statements, which do not reflect actual results and are based primarily upon a hypothetical set of assumptions applied to certain historical financial information. Certain information has been provided by third-party sources and, although believed to be reliable, it has not been independently verified and its accuracy or completeness cannot be guaranteed.

Concentrating assets in a particular industry, sector of the economy, or markets may increase volatility because the investment will be more susceptible to the impact of market, economic, regulatory, and other factors affecting that industry or sector compared with a more broadly diversified asset allocation.

Private investments often engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuation information to investors, and may involve complex tax structures and delays in distributing important tax information.

Alternative investments are speculative, entail substantial risks, offer limited or no liquidity, and are not suitable for all investors. These investments have limited transparency to the funds’ investments and may involve leverage which magnifies both losses and gains, including the risk of loss of the entire investment. Alternative investments have varying and lengthy lockup provisions. Please see the Offering Memorandum for more complete information regarding the Fund’s investment objectives, risks, fees, and other expenses.

There are inherent risks with equity investing. These risks include, but are not limited to, stock market, manager, or investment style. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. Investing in international markets carries risks such as currency fluctuation, regulatory risks, and economic and political instability. Emerging markets involve heightened risks related to the same factors, as well as increased volatility, lower trading volume, and less liquidity. Emerging markets can have greater custodial and operational risks and less developed legal and accounting systems than developed markets.

There are inherent risks with fixed-income investing. These risks may include interest rate, call, credit, market, inflation, government policy, liquidity, or junk bond. When interest rates rise, bond prices fall. This risk is heightened with investments in longer-duration fixed-income securities and during periods when prevailing interest rates are low or negative. The yields and market values of municipal securities may be more affected by changes in tax rates and policies than similar income-bearing taxable securities. Certain investors’ incomes may be subject to the Federal Alternative Minimum Tax (AMT), and taxable gains are also possible. Investments in below-investment-grade debt securities, which are usually called “high yield” or “junk bonds,” are typically in weaker financial health and such securities can be harder to value and sell, and their prices can be more volatile than more highly rated securities. While these securities generally have higher rates of interest, they also involve greater risk of default than do securities of a higher-quality rating.

All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.

Indices are unmanaged and one cannot invest directly in an index. Index returns do not reflect a deduction for fees or expenses.

Alternative investments are speculative, entail substantial risks, offer limited or no liquidity and are not suitable for all investors. These investments have limited transparency to the funds’ investments and may involve leverage which magnifies both losses and gains, including the risk of loss of the entire investment. Alternative investments have varying, and lengthy lockup provisions.

CNR is free from any political affiliation and does not support any political party or group over another.

Index Definitions

The S&P 500 Growth Index measure growth stocks using three factors: sales growth, the ratio of earnings change to price, and momentum.

The Dow Jones U.S. High Dividend Yield Index serves as a benchmark for income seeking equity investors. The index is designed to measure the performance of 80 high yield companies within the S&P 500 and is equally weighted to best represent the performance of this group, regardless of constituent size.

Bloomberg Barclays Municipal Bond Index is a market-value-weighted index for the long-term tax-exempt bond market. To be included in the index, bonds must have a minimum credit rating of Baa. They must have an outstanding par value of at least $7 million and be issued as part of a transaction of at least $75 million. The bonds must be fixed rate, have a dated-date after December 31, 1990, and must be at least 1 year from their maturity date.

The Bloomberg Barclays Global High Yield Index is a multi-currency flagship measure of the global high yield debt market.

Indices are unmanaged and one cannot invest directly in an index.

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