Third Lake Partners, LLC (“Third Lake Partners” or the “Firm”), is pleased to announce the launch of the Alternative Yield Strategy Fund (Ticker: PAYSX) (“PAYS” or the “Fund”), a closed-end interval fund registered under the Investment Company Act of 1940, designed to provide investors with access to a diversified, actively managed portfolio of callable yield-enhancement structured products linked to major global equity indices.
PAYS seeks to generate yield while emphasizing capital preservation through investments in equity-linked structured notes with defined downside barriers. The Fund was established through the conversion of a private fund that Third Lake Partners has managed since February 2021, bringing a track record of more than five and a half years and more than $2.2bn notional of structured notes traded since inception.
PAYS is designed for investors seeking a differentiated income source with return drivers distinct from traditional fixed income, high yield and private credit. The Fund seeks to generate income through contingent coupon payments from a laddered portfolio of structured notes referencing highly liquid public equity market indices. The portfolio construction process is intended to maintain ongoing reinvestment opportunities, diversify issuer exposure and support liquidity through regular maturities, early calls, coupon income and a standing cash allocation.
“We created this strategy for our core investors more than five years ago as a yield enhancement play, a way to generate meaningful income without giving up liquidity,” said Robert Forsythe, Founder and Senior Managing Partner of Third Lake Partners. “It’s turned into a great complement to our private credit exposure and has exceeded the other liquid fixed income options available to us. We are proud to bring a product we’ve incubated internally to a broader audience, now in a registered fund wrapper.”
The Fund’s typical structure consists of 24 to 30 equity-linked yield notes issued by major global investment-grade issuers. These notes are designed to pay periodic coupons and return principal so long as the underlying reference indices are above pre-defined barrier levels at maturity. The strategy emphasizes broad diversification across issuers, indices, maturities, initial strike levels and risk mitigation (e.g. barrier) levels, while seeking to reduce reliance on any single market environment, issuer, or payoff path.
The Firm believes the interval fund structure is well suited to the strategy because it facilitates periodic liquidity while allowing the portfolio to be managed with a focus on longer-term income generation and disciplined risk management. The Fund intends to offer quarterly repurchases for up to 25% of the Fund’s net asset value, five times the 5% regulatory minimum under Rule 23c-3 of the Investment Company Act of 1940 and common market practice, and the portfolio has been designed to support those repurchases through natural cash flows generated by note maturities, early calls, coupon income and cash or cash equivalents.
“The income landscape has changed meaningfully, and many investors are looking for alternative sources of income that are not simply another form of credit or duration risk,” said Nate Sheldon, CFA, Partner and Head of Structured Products of Third Lake Partners. “PAYS fills that gap by monetizing equity volatility, a return driver genuinely distinct from lending. The interval fund is a natural fit: the portfolio replenishes its cash in the ordinary course each quarter, which allows the Fund to pair daily NAV and active management with meaningful quarterly liquidity.”
Sheldon, who leads the strategy, has more than 20 years of structured derivatives experience, most recently as Co-Head of the Managed Solutions Group at Morgan Stanley Investment Management, where he created and managed structured notes strategies identical in structure to the Fund’s.
For more information on the Fund, please visit www.thirdlakepays.com.
Distributor: Ultimus Fund Distributors, LLC
Press Contact: Joshua Apfel (japfel@thirdlake.com)
About Third Lake Partners, LLC
Third Lake Partners, LLC (“Third Lake Partners” or the “Firm”), is a Tampa-based investment advisory firm focused on real estate, structured strategies and asset management solutions, which includes public market, fixed income, private equity, private credit and venture capital. Third Lake Partners also serves as investment adviser to the Third Lake Partners Alternative Yield Strategy Fund (Ticker: PAYSX), a closed-end interval fund registered under the Investment Company Act of 1940, designed to provide a broader set of investors with institutional-quality access to the Firm’s alternative yield strategy. Through strategic partnerships and disciplined execution, the Firm seeks to create long-term value for investors.
DISCLOSURE
Past performance is no guarantee of future results. An offer can only be made by the prospectus and only in jurisdictions in which such an offer would be lawful. Investors should consider the investment objectives, risks and charges and expenses of the Fund before investing. The prospectus contains this and other information about the Fund and should be read carefully before investing. The prospectus may be obtained at thirdlakepays.com or (844) 879-7297 (TRY-PAYS). Third Lake Partners Alternative Yield Strategy Fund is distributed by Ultimus Fund Distributors, LLC, Member FINRA/SIPC, which is not affiliated with Third Lake Partners or its affiliates.
RISKS
The Fund is suitable only for investors who can bear the risks associated with the limited liquidity of the Fund and should be viewed as a long-term investment. The Fund intends to provide limited liquidity through quarterly offers to repurchase a limited amount of the Fund’s shares (at least 5% of shares outstanding); however, there is no guarantee that an investor will be able to sell all the shares that the investor desires to sell in the repurchase offer. The Fund will ordinarily declare and pay distributions from its net investment income, if any, once a quarter, and net realized capital gains annually; however, the amount of distributions that the Fund may pay, if any, is uncertain. 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, such as borrowings. Such distributions may constitute a return of capital and reduce a shareholder’s adjusted tax basis in Fund shares, thereby increasing the shareholder’s potential taxable gain or reducing the potential taxable loss on the sale of Fund shares. To the extent such distributions are a return of capital, the distributions should not be considered the dividend yield or total return of an investment in Fund shares. The Fund does not intend to list Fund shares on any securities exchange, and the Fund does not expect a secondary market for Fund shares to develop. You should not expect to be able to sell your shares regardless of how we perform. You should consider that you may not have access to the money you invest in Fund shares for an extended period of time.