FS Multi-Strategy
Alternatives Fund

A mutual fund designed to smooth portfolio returns even when markets become volatile

Helping individuals navigate volatility

FS Multi-Strategy Alternatives Fund’s blend of active managers and rules-based strategies provides a better way to access low-correlated returns with a focus on reducing portfolio volatility for its investors.

FSMSX PERFORMANCE VS. 10 WORST TRADING DAYS FOR S&P 500 SINCE INCEPTION (5/17/2017–9/30/2020)1

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What individuals can learn from institutions

Institutional investors have historically outperformed individual investors – partly thanks to an allocation approach that devotes a meaningful portion of their portfolios to alternative investment strategiesAlternative investment strategies seek to generate positive returns, irrespective of broader market performance. These strategies tend to differ from long-only strategies by incorporating both long and short investments and alternative assets (e.g., private credit, private equity, real estate, natural resources, infrastructure, currencies).. Many institutions rely on alternative strategies for their potential to generate returns that are uncorrelated to traditional assets, manage portfolio volatility and limit the impact of market downturns.

Understanding how institutions build portfolios with alternative strategies may provide individuals important insight into ways to achieve their financial goals.

Explore how institutions invest

ANNUAL GROWTH OF $100,000 BASED ON ANNUALIZED RATE OF RETURN (12/31/1997–12/31/2019)2

Why alternative investment strategies?

The strong returns and low volatility generated by stocks and bonds over the last 10 years may be difficult to replicate in the years ahead. Turning to alternative strategies is one way investors can prepare for a higher-volatility outlook. Alternative strategies are designed to be less sensitive to market movements and offer the potential for positive returns regardless of market direction.

ANNUAL RETURNS 01/01/1999–12/31/2019 (%)

Pre-crisis Wide variation in asset class performance										Post-crisis Rise of passive investing									Today’s volatility
44.2	13.4	12.2	7.4	28.7	15.0	10.6	15.8	12.5	4.8	26.5	15.1	2.1	16.0	32.4	13.7	1.4	12.0	21.8	1.0	31.5%
25.2	9.1	8.9	5.4	25.3	10.9	7.7	15.3	12.0	-15.4	25.8	11.9	-0.2	11.0	14.3	5.6	-0.3	8.7	12.8	0.6	13.9%
24.3	7.8	7.1	1.0	21.4	8.2	7.3	12.4	10.9	-18.0	25.0	11.4	-3.1	8.7	12.5	4.0	-1.0	6.4	8.0	0.6	8.8%
21.0	6.7	6.9	-4.3	20.5	7.7	6.8	11.9	10.7	-21.8	24.6	10.5	-3.7	6.4	8.4	3.1	-1.3	5.0	7.2	-3.0	7.6%
17.6	2.0	0.4	-4.7	19.3	5.6	6.0	11.7	8.4	-26.7	19.9	10.5	-3.9	6.4	7.1	1.8	-1.5	4.6	5.5	-4.4	7.4%
14.7	-9.1	-11.9	-22.1	9.7	4.6	4.9	8.2	5.5	-37.0	4.3	8.1	-7.5	-0.3	-0.4	1.1	-3.6	0.1	2.5	-5.7	6.2%
1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019

Past performance is not indicative of future results. Source: Bloomberg. See endnotes for information on the benchmarks referenced above.

FSMSX: Bringing institutional-style investing to individuals

FS Multi-Strategy Alternatives Fund seeks to provide:

Institutional access

Invests like an institution to generate returns that are independent of broad market performance

Total return since inception

0.95%

FSMSX

Diversification

Targets returns with low correlation to traditional assets

Correlation to major benchmarks 3

+0.47

S&P 500

+0.26

Barclays Agg

Beta

0.11

S&P 500

0.32

Barclays Agg

Volatility management

Focuses on managing volatility to help lower a traditional portfolio’s risk profile

Downside capture A negative downside capture indicates positive fund returns during down months.

8.95%

of S&P 5004

Standard deviation

3.84%

FSMSX5

16.35%

S&P 5005

Past performance is not indicative of future results. All FSMSX portfolio data is as of September 30, 2020. The expense ratios for Class I Shares are 3.30% total annual fund operating expenses,6 1.97% total annual fund operating expenses (after expense reductions)7 and 1.50% total annual fund operating expenses after expense reductions, excluding dividend and interest expenses.6 The expense ratios for Class A Shares are 3.55% total annual fund operating expenses,7 2.22% total annual fund operating expenses (after expense reductions)7 8 and 1.75% total annual fund operating expenses after expense reductions, excluding dividend and interest expenses. 7 8 Performance with sales charge is calculated with maximum sales charge of 5.75% for Class A Shares. Performance data quoted represents past performance and is no guarantee of future results. Returns for time periods greater than one year are annualized. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost, and current performance may be lower or higher than the performance quoted. Please call 877-628-8575 or visit our website at www.fsinvestments.com for performance data current to the most recent month-end. One cannot invest directly in an index.

An adaptive allocation strategy

FS Multi-Strategy Alternatives Fund takes a hybrid approach by combining active managers and rules-based strategies to help generate returns that have low correlation to stocks and help manage volatility. This allows the fund to pursue its objectives though dynamic positioning and strategic allocations.

58%

Active managers

Category	Allocation*
Chilton equity long/short Our long/short equity strategy focuses on high-quality companies with strong business models and growth potential at reasonable valuations.	21%
MidOcean credit long/short Our long/short credit strategy seeks to capture current income and growth from three primary pockets of inefficiencies in the credit market: callable bonds, short-dated credit and crossover credit.	37%

42%

Rules-based strategies

Category	Allocation*
Equity hedge Equity hedge strategies typically buy stocks expected to appreciate while incorporating shorting or hedging to mitigate market risk and/or generate additional alpha.	11%
Event driven Event driven strategies seek to exploit mispricing due to corporate events, such as bankruptcy, merger, acquisition or spinoff, to capitalize on price inefficiencies.	2%
Global macro Global macro strategies seek to invest through the use of futures instruments and often across a variety of asset classes. They tend to place directional bets on the prices of underlying assets driven by macro views or price trends.	16%
Relative value Relative value strategies attempt to monetize the expected price convergence or divergence of related securities by buying and selling related assets.	13%

*Percentages may not total 100% due to rounding. Portfolio allocation as of September 30, 2020. Holdings are subject to change.

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MONTHLY ALLOCATION BY CATEGORY

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FS Multi-Strategy Alternatives Fund seeks to generate positive, low-correlated returns over a complete market cycle.

Partnered with an industry leader in hybrid portfolios

Together, FS Investments and Wilshire Associates actively manage portfolio positioning that is based on fund objectives, both firms’ macro views, and historical risk and return profiles.

Learn more about our partnership with Wilshire.

See more details on FS Multi-Strategy Alternatives Fund

View Footnotes 1 2 3 4 5 6 7 8 Definitions and Summary of Risks

1Bloomberg, as of September 30, 2020. Performance data quoted represents past performance and is no guarantee of future results. For illustrative purposes only.

2Past performance is not indicative of future results. Wilshire Compass, DALBAR’s 2019 Annual Quantitative Analysis of Investor Behavior Report (“DALBAR Report”) and the Wilshire Trust Universe Comparison Services® (“Wilshire TUCS®”). Individual investor is calculated as 60% average equity fund investor and 40% average fixed income investor. Data for average equity fund investor and average fixed income fund investor are from the DALBAR Report. Data for average institutional investor is from Wilshire TUCS®, defined as the median total return, gross of fees, of master trusts—all plans.

3Bloomberg, as of September 30, 2020. Based on Class I Shares.

4Bloomberg. Data reflects period from May 16, 2017 to September 30, 2020. Based on Class I Shares. Downside capture is a statistical measure of the percentage of market losses endured by a manager when stock markets are down. Down months include February 2018, March 2018, October 2018, December 2018, May 2019, August 2019, January 2020, February 2020, March 2020 and September 2020.

5Data as of September 30, 2020. Based on Class I Shares. Standard deviation is a statistical measure of the dispersion of an asset’s rate of return relative to its mean and is typically used to assess its historical volatility.

6The total annual fund operating expenses ratio calculation is a percentage of average net assets for the year ended December 31, 2019.

7The total annual fund operating expenses after expense reductions, excluding dividend and interest expenses and total operating expenses (after expense reduction) ratios, are a percentage of average net assets for the year ended December 31, 2019 and are based on the expense limitation for such period. The expense limitation may be different in future years. The Adviser has entered into an expense limitation agreement with the Fund under which it has agreed to waive or reduce its fees and to assume other expenses of the Fund, if necessary, in an amount that limits ordinary operating expenses (exclusive of management fees, distribution or servicing fees, interest, taxes, brokerage fees and commissions, dividends and interest paid on short positions, acquired fund fees and expenses and extraordinary expenses (as determined in the sole discretion of the Adviser)) to not more than 0.25% of the average daily net assets for the Fund at least until April 30, 2021. The Fund may terminate the expense limitation agreement at any time. The expense limitation agreement permits the Adviser to recoup waived or reimbursed amounts within the three-year period from the date of the waiver after the Adviser bears the expense, provided total expenses, including such recoupment, do not exceed the annual expense limit in effect at the time of such waiver/reimbursement or recoupment.

8The total annual fund operating expenses after expense reductions, excluding dividend and interest expenses ratio, does not include dividend expense on short sales of 0.19% and interest, commitment fees and other borrowing costs of 0.28%.

Equity hedge is represented by the HFRI Equity Hedge (Total) Index and includes funds in which the investment managers maintain positions both long and short in primarily equity and equity derivative securities.

Event driven is represented by the HFRI Event Driven (Total) Index and includes funds in which the investment managers maintain positions in companies currently or prospectively involved in corporate transactions of a wide variety including, but not limited to, mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance and other capital structure adjustments.

Global macro is represented by the HFRI Macro (Total) Index and includes funds in which the investment managers trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets. is designed to track the performance of U.S. dollar-denominated below investment grade corporate debt publicly issued in the U.S. domestic market.

Relative value is represented by the HFRI Relative Value (Total) Index and includes funds in which the investment managers maintain positions in which the investment thesis is predicated on realization of a valuation discrepancy in the relationship between multiple securities.

Multi-strategy blend represents equal weights of the HFRI Equity Hedge (Total) Index, the HFRI Macro (Total) Index, the HFRI Relative Value (Total) Index and the HFRI Event Driven (Total) Index.

Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market.

S&P 500 is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies by market value.

Alpha measures excess return relative to expected returns based on the fund’s degree of beta. A positive alpha indicates the portfolio is earning excess returns. A negative alpha indicates the portfolio is lagging in returns.

Beta is a measure of an asset’s or a portfolio’s volatility in comparison to a benchmark or the market as a whole, reflecting the tendency of returns to respond to market swings.

Correlation is a statistical measure of the extent to which two securities move in relation to each other, often expressed via a coefficient ranging from +1 to -1.

Investing in the Fund involves risk, including the risk that a shareholder may receive little or no return on their investment or that a shareholder may lose part or all of its investment. The Fund is subject to interest rate risk and will decline in value as interest rates rise. The Fund may engage in leveraging and other speculative investment practices that may increase the risk of loss of investment and accelerate the velocity of potential losses. In addition to the normal risks associated with investing, international and emerging markets may involve risk of capital loss from unfavorable fluctuations in currency values, differences in generally accepted accounting principles or from social, economic or political instability in other nations. The Fund may invest in derivatives, which are often more volatile than other investments and may magnify the Fund’s gains or losses.

There is no assurance that the investment process will consistently lead to successful investing. Diversification does not eliminate the risk of experiencing investment losses.

FS Multi-Strategy Alternatives Fund

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