Alternative Investing Through Small Businesses - Lynx Equity Income Trust

Diversifying Wealth with Lynx Equity Income Trust: A Path to Alternative Investing through Small Businesses 

For investors seeking to diversify their investments beyond traditional markets, Lynx Equity Income Trust (“the Trust”) offers an appealing option. The Trust offers a registered investment eligible for the following plans: RRSP, TFSA, LIRA, LIF, RRIF, RESP, RDSP, FHSA.  Designed with both stability and resilience in mind, the Trust provides access to a diversified portfolio of established businesses across the US. This trust, structured for capital preservation and steady returns, opens the door for investors to benefit from private markets with a focus on long-term security. 

A Unique Portfolio of Established Businesses 

At the heart of Lynx Equity Income Trust’s investment strategy is its focus on small to medium-sized businesses with proven track records. Lynx does not invest in start-up or “turnaround” companies. Instead, Lynx buys and maintains companies with stable cash flow, which is a key aspect of the Trust’s predictable and consistent performance. The portfolio includes companies like Midwest Floor Covering, a highly respected flooring contractor operating for over 30 years, and Creative Surfaces, a provider of custom countertops and casework with more than 36 years of industry experience. These legacy businesses are typically mid-market, between two and six million EBITDA, and acquired from retiring owners. With a combined portfolio revenue of over $341 million and EBITDA exceeding $31 million, these businesses operate in markets where they maintain strong customer loyalty and have high barriers to entry. 

Why Alternative Investments? 

In today’s rapidly evolving financial landscape, discerning investors are increasingly seeking alternatives to traditional public markets. Alternative investments encompass a variety of non-traditional assets, such as private equity, real estate, and private debt. Unlike publicly traded stocks and bonds, these assets are typically less volatile and offer the benefit of being uncorrelated with public market performance. By focusing on private businesses independent of the performance of public markets, the Trust enables investors to access stable cash flows, even during turbulent periods. Such private investments are often part of a portfolio stability investment strategy. As a testament to its stability, the Trust’s portfolio companies have averaged a 41% compound annual revenue growth over the last eleven years, weathering significant economic downturns, including the 2008 financial crisis and the 2020 pandemic. 

Investment Highlights 

At its core, Lynx Equity Income Trust provides a substantial yield to its investors, with a contracted annual distribution rate of up to 9.25%, paid quarterly. Designed to prioritize investor returns, investments in the trust hold a senior position over both equity and debt, offering an additional layer of security. Composed of Lynx Equity Limited’s US portfolio, the trust offers an appealing option for Canadian investors to diversify into international markets. As a registered investment, it allows investors to leverage tax-advantaged accounts like retirement and savings plans, making it easier to optimize their financial strategies and seamlessly integrate the trust into their long-term wealth-building goals. 

Proven Performance and Structure for Stability 

Backed by Lynx Equity Limited, a firm with over $800 million CAD in revenue and 17 years of acquisition experience, the Trust benefits from a portfolio of mature businesses across a range of industries. These companies contribute to a combined revenue of over $341 million and an EBITDA of more than $31 million, with consistent cash flow coverage of over three times the annual distributions paid to investors. Lynx' team has carefully structured each acquisition to reduce risk, with long transition periods, and either vendor take back payments or earn-outs, which ensure stable cash flow from trusted, well-established businesses. 

Unique Liquidity and Redemption Opportunities 

Unlike many private investments, the Trust offers quarterly redemption opportunities, subject to a monthly limit of $167,000. This liquidity feature allows investors the flexibility to redeem a portion of their investment if desired, without compromising the Trust’s private, alternative investment structure and benefits. 

A Path for Long-Term Growth and Security 

With a capital stack prioritizing investor security, the Trust’s assets are designed to withstand economic shifts. By maintaining a 72% owner equity buffer above the trust’s 14% investor capital and 14% bank debt, the Trust creates a protective barrier for investor returns. The Trust also allows for annual yield adjustments, rewarding long-term investors with incremental increases that have averaged over 20 basis points per year since inception, enhancing the value for those committed to a stable, long-term investment strategy. 

Join the Lynx Equity Income Trust 

For investors looking to diversify into private markets with a focus on security, yield, and growth, Lynx Equity Income Trust represents a thoughtful, structured approach to alternative investing. Reach out to a financial advisor to learn more about how Lynx Equity Income Trust can be a valuable addition to your portfolio.  

For more information, please contact: 

Lorne Bloomberg, Managing Director – lbloomberg@lynxincometrust.com 

Julie Wodehouse, Associate Director – jwodehouse@lynxincometrust.com 

Original Article by Investor Review Magazine.