Destra Multi-Alternative Fund (DMA)

A closed-end fund pools capital from investors to buy and hold a portfolio of securities or assets. Unlike an open-end mutual fund, which allows investors to buy and redeem shares on any business day, a closed-end fund issues a fixed number of shares and trades them like a stock on an exchange. That constraint means the fund manager is not constantly receiving fresh capital or fielding redemptions; instead, the portfolio can be built on a longer time horizon and the manager can hold less cash for liquidity.

Destra Multi-Alternative Fund (ticker DMA) is a closed-end fund that holds a diversified allocation to hedge funds, private equity funds, and other non-traditional investment strategies — collectively called alternatives. The fund’s strategy is to be a fund of funds: instead of buying stocks and bonds directly, it buys shares in other funds that employ various alternative strategies. This indirect approach lets a smaller investor access an array of hedge funds and private vehicles that would otherwise be available only to institutions or high-net-worth individuals.

The fund is managed by Destra Capital Advisors, an alternative-focused investment manager. The stated intent is to deliver returns that are uncorrelated with traditional stock and bond markets — a smoother, less volatile ride than holding a 60/40 stock-bond portfolio. An investor who already owns a large stock allocation might add DMA to diversify; a pension fund might use it as one sleeve of a broader portfolio.

What you own is a set of positions in multiple underlying funds. Those funds might pursue long/short equity strategies (simultaneously betting on some stocks to rise and others to fall), distressed debt (buying bonds of troubled companies), real estate strategies, commodities, or any number of specialized approaches. The diversification across strategies and managers is the point: if one hedge fund underperforms or experiences trouble, the impact is diluted by the others.

The cost structure is a critical feature. Like most alternative funds, Destra charges a management fee (typically 0.5% to 1.5% of assets annually) plus a performance fee (commonly 5% to 15% of gains). The underlying hedge funds also charge their own fees, creating a layered structure where the investor pays both Destra and each underlying manager. This multi-layer fee structure is a frequent point of criticism: over a decade, the cumulative drag can be substantial, and it is difficult for most active strategies to beat a simple low-cost equity index fund after fees.

The fund’s net asset value is the sum of all its underlying fund positions. But like many closed-end funds, DMA typically trades at a discount to its NAV — investors might pay $9.50 per share for a fund whose underlying holdings are worth $10 per share. That discount reflects the costs of the fund wrapper, the difficulty of comparing alternative strategies, and market sentiment about the prospects of the underlying strategies. When sentiment shifts and alternatives are in favour, the discount can narrow or reverse into a premium. When the alternative space is out of favour, the discount widens.

DMA’s appeal lies in the hands-off delegated approach. Instead of researching and vetting individual hedge funds, an investor buys into Destra’s judgment about which managers and strategies are worth holding. The risk lies in exactly that delegation: if Destra’s manager selection is poor, or if alternatives themselves underperform for an extended period, the fund’s performance will lag. The high fee burden also compounds this risk — the more it costs to own the fund, the higher the bar for the underlying managers to clear.

A key watch for any investor considering DMA is the discount-to-NAV trend. If the fund chronically trades at a wide discount, there is an implicit tax on the shares: you are paying for a portfolio of underlying funds but getting less in return because the market has discounted the closed-end wrapper. Widening discounts can signal that investors are losing faith in the strategy or that the alternative space itself is falling out of favor.

The fund’s dividend or distribution policy is also relevant. Many alternative funds generate income through the gains and distributions from their underlying holdings and return those to shareholders as distributions. A high distribution yield is attractive to income-seeking investors but can also signal that the fund is distributing capital rather than pure earnings — a practice that is sustainable only if underlying performance is strong.