DEF: BlueBay Destra Seeks Flexibility with Sub-Adviser & Non-Diversified Status

BlueBay Destra International Event-Driven Credit Fund shareholders will vote on proposals to amend its sub-advisory agreement and reclassify as non-diversified for enhanced portfolio management flexibility.

Summary

• Shareholders of BlueBay Destra International Event-Driven Credit Fund will vote on two proposals at a Special Meeting on December 9, 2025.
• The first proposal is to approve an amended and restated sub-advisory agreement with RBC Global Asset Management (UK) Limited (RBC BlueBay), allowing RBC BlueBay to use affiliated personnel for services, with all associated costs borne by RBC BlueBay.
• The second proposal is to reclassify the Fund from diversified to non-diversified status under the Investment Company Act of 1940, aiming to provide the Sub-Adviser with enhanced flexibility in portfolio management.
• Neither proposal will result in changes to the Fund's current investment strategy, portfolio management team, or an increase in fees paid by shareholders.
• The Board of Trustees unanimously recommends voting FOR both proposals.
• The Fund previously operated as non-diversified until March 31, 2024, when it became diversified, and now seeks to revert.
• The Sub-Adviser will bear all costs associated with the Special Meeting and proxy solicitation, estimated at $37,900.

Sentiment

Score: 7

Explanation: The filing presents two proposals that are framed as beneficial for the Fund's long-term strategic objectives and management flexibility, with no increase in shareholder fees or changes to the investment team. While the reclassification to non-diversified status introduces higher risk, it is presented as a necessary step for strategic opportunities. The Board's unanimous recommendation and RBC's supportive vote indicate strong internal confidence. The Sub-Adviser bearing all meeting costs is also a positive. The slight underperformance in recent one-year periods is a minor negative but outweighed by longer-term outperformance and the strategic rationale.

Positives

• The proposed changes will not result in any increase in the Fund's aggregate fees or fees paid by shareholders.
• No changes to the current investment strategy or portfolio management team are anticipated.
• The reclassification to non-diversified status is intended to provide enhanced flexibility for the Sub-Adviser to position the portfolio for strategic opportunities and align with long-term investment objectives.
• The Fund's performance has generally outperformed its peer group and category average over 3-year, 5-year, and since inception periods, indicating satisfactory management.
• RBC BlueBay, the Sub-Adviser, is a large, experienced global investment manager with $560 billion in assets under management as of September 30, 2025.
• The Sub-Adviser will bear all costs of the Special Meeting and proxy solicitation, estimated at $37,900, preventing these costs from impacting the Fund's shareholders.

Negatives

• Reclassifying as non-diversified means the Fund will be more susceptible to negative events affecting a smaller number of issuers, increasing risk of loss and share price volatility.
• Economies of scale are not currently present for the Fund due to its size.
• The Fund slightly underperformed its peer group median over the one-year period ended September 30, 2024.
• The Fund underperformed its category average for the one-year period ended June 30, 2025.

Risks

• Increased susceptibility to negative events affecting a smaller number of issuers if the Fund invests a larger percentage of its assets in fewer issuers as a non-diversified fund.
• Higher risk of loss and share price volatility due to concentrated investments in a non-diversified portfolio.
• Failure to achieve a quorum for the Special Meeting could lead to additional proxy solicitations and associated costs (though the Sub-Adviser is covering these).

Future Outlook

The Fund seeks to return to non-diversified status to better position the portfolio for strategic opportunities and align more closely with its long-term investment objectives. This change is also expected to provide the Sub-Adviser with enhanced flexibility to manage the Fund's portfolio. The Fund intends to continue to maintain the required level of diversification to qualify as a regulated investment company for tax purposes.

Management Comments

• The Board of Trustees recommends that you vote FOR the proposals.
• The Board of Trustees has concluded that (i) amending the current sub-advisory agreement to allow for such use of affiliates and (ii) reclassifying the Fund as non-diversified would serve the best interests of the Fund and its shareholders.
• The Fund's investment strategy will not change and there will be no increase in the Fund's aggregate fees as a result of either proposal.
• Destra and RBC BlueBay believe that changing the Fund's classification to non-diversified will benefit the Fund by providing the Fund the flexibility to better position the portfolio for strategic opportunities and align more closely with its long-term investment objectives.
• RBC BlueBay believes that its size, infrastructure and presence in the global credit markets offer benefits in terms of resources and deal sourcing, but that due to the Fund's size, economies of scale were not present at this time.

Industry Context

The move to reclassify as non-diversified reflects a strategic shift towards potentially more concentrated, high-conviction investing, a trend observed in certain specialized credit funds seeking to capitalize on specific market opportunities. This allows for greater agility in portfolio construction, which can be advantageous in event-driven credit strategies. The use of affiliated personnel by the sub-adviser is a common practice in large asset management groups like RBC Global Asset Management, enabling better resource allocation and potentially leveraging broader institutional expertise, while ensuring cost responsibility remains with the sub-adviser.

Comparison to Industry Standards

• The Fund's performance for the three-year, five-year, and since inception periods ended September 30, 2024, outperformed the peer group median of funds with similar investment strategies.
• The Fund's performance for the three-year and since inception periods ended June 30, 2025, outperformed its category average.
• The Fund's performance for the one-year period ended September 30, 2024, slightly underperformed the peer group median.
• The Fund's performance for the one-year period ended June 30, 2025, underperformed its category average.
• RBC BlueBay does not serve as sub-adviser to other funds registered under the 1940 Act with similar investment strategies and objectives, limiting direct comparisons of sub-advisory fees for comparable accounts.

Corporate Governance

Related Party Transactions

• The amended sub-advisory agreement allows RBC BlueBay to utilize persons employed by an affiliated person (as defined in the 1940 Act) to assist in providing services. All fees and/or other compensation payable to such affiliates will be the sole responsibility of the Sub-Adviser, not the Fund.
• RBC, the parent company of RBC BlueBay, owns approximately 1.0% of the Fund's shares and intends to vote in favor of the proposals.

Stakeholder Impact

• Shareholders: Will experience no increase in fees or changes to the investment team. The reclassification to non-diversified status introduces higher investment risk and potential volatility but aims for better strategic opportunities and long-term objectives. Their vote is crucial for the proposals' approval.
• Investment Manager (Destra Capital Advisors LLC): Will continue to pay sub-advisory fees to RBC BlueBay at the same rate, with no direct financial impact from the changes.
• Sub-Adviser (RBC Global Asset Management (UK) Limited): Gains enhanced flexibility to manage the portfolio and utilize affiliated personnel, potentially improving efficiency and leveraging broader resources. Bears the cost of the proxy solicitation.
• Employees (of RBC BlueBay affiliates): May be utilized to assist in providing services, potentially increasing their involvement in the Fund's management.

Next Steps

• Shareholders to review proxy statement and vote on proposals.
• Special Meeting of Shareholders to be held on December 9, 2025, to consider and act upon the proposals.
• If approved, the A&R Sub-Advisory Agreement will become effective, permitting RBC BlueBay to use affiliated personnel.
• If approved, the Fund will be reclassified from diversified to non-diversified status.
• The Fund will continue to maintain the required level of diversification to qualify as a regulated investment company for tax purposes.

Key Dates

Recommendation

The proposals are primarily administrative and strategic, aimed at enhancing the Sub-Adviser's flexibility without altering the core investment strategy or increasing shareholder fees. While the reclassification to non-diversified status introduces higher risk due to potential concentration, it is presented as a means to pursue strategic opportunities and align with long-term objectives. The Fund's historical performance has been satisfactory over longer periods, but recent one-year underperformance suggests no immediate catalyst for a 'buy' rating. The increased risk from non-diversification balances the potential for strategic gains, leading to a 'hold' recommendation as investors should monitor the impact of the new classification on risk-adjusted returns.

Keywords

BlueBay Destra, Event-Driven Credit Fund, SEC Filing, Proxy Statement, Sub-Advisory Agreement, RBC Global Asset Management, Fund Reclassification, Diversified Fund, Non-Diversified Fund, Investment Company Act of 1940, Shareholder Vote, Investment Strategy, Portfolio Management, Financial Reporting, Asset Management