Regal Investment Fund (ASX: RF1) (“RF1” or the “Fund”) is a listed investment trust (LIT) that provides exposure to a selection of alternative investment strategies managed by Regal Funds Management Pty Ltd (“Regal” or the “Manager”) and associated managers. Regal is a specialist investment manager that was founded in 2004 and forms part of Regal Partners Limited (ASX: RPL), an ASX-listed asset manager that comprises four alternative investment management businesses with $5.5 billion AUM at 30 April 2023. RF1 listed on the ASX in June 2019, raising $281.8 million through the issue of 112.7 million units at $2.50 per unit. Since listing, RF1 has grown to a market cap in excess of $530 million with 204.6 million units on issue. The primary objective of RF1 is to produce attractive risk-adjusted absolute returns over a period of more than five years with limited correlation to equity markets. The Manager considers attractive returns to be 15%-20%p.a. over the long-term. The Fund does not have a sufficient track record as yet to determine whether it will achieve this objective over the long-term, however, to date the Fund has delivered on this objective. We note that historical returns for the Fund will not represent future returns given the recent addition of several strategies. At listing, the Fund provided exposure to 5 alternative investment strategies. The Manager has added to the selection of strategies the Fund is exposed to with the Fund providing exposure to 8 alternative investment strategies at 31 May 2023. There are some high level portfolio diversification requirements with the Fund able to have up to 50% of the portfolio allocated the Market Neutral strategy and a maximum allocation of 25% for all other strategies. The allocation to strategies will be determined by the Investment Committee with the Manager able to adjust the allocations to the strategies depending on prevailing market conditions or other factors it considers relevant in order to achieve the Fund’s investment objective. An investment in RF1 is suitable for those investors seeking exposure to a diversified alternative investment. RF1 provides exposure to a range of strategies that invest in both public and private markets and provides access to strategies that are not easily replicated by retail investors. RF1 provides investors the opportunity to diversify their traditional holdings with an investment that seeks to generate an attractive absolute return over the long-term and have a low correlation with equity markets. The Fund is exposed to long/short strategies that employ high levels of leverage through shorting stocks and gearing. There are additional risks associated with leveraged vehicles and shorting stocks. While leverage can enhance returns it can also magnify losses and result in heightened levels of volatility. Investors should be comfortable with the additional risks associated with the use of leverage before making an investment in RF1 with higher levels of risk tolerance required for an investment in the Fund. The trust structure of RF1 means distributions will reflect distributable income in any given year and as such will be volatile and likely unfranked. As such, investors should not be seeking a regular steady income stream from this investment. IIR views an investment in RF1 to be suited to long-term investors to realise the full benefits of the investment. RF1 provides retail investors exposure a diversified portfolio of alternative investment strategies with the long/short strategies providing exposure to what IIR considers a traditional hedge fund style of investing. The recent strategy additions to the portfolio provide asset diversification to the portfolio with the latest additions expected to have low levels of correlation to equity markets. However, we are cognisant of the fact that the Resources Royalties Strategy has a significant weighting in the portfolio and is a strategy that currently has a low level of diversification with the underlying fund providing exposure to three investments at this stage. Given the weighting to the strategy, concentration risks are elevated with the adverse performance of one of the assets/investments likely to significantly impact the performance of the broader RF1 portfolio. We do note that the Manager is seeking to diversify this portfolio. Further to this, while currently only a small weighting of the portfolio, the Private Credit Strategy has a limited performance history with the underlying fund being established in October 2022. The Manager is seeking to deploy capital as quickly as possible, however investors have been exposed to cash while the capital is deployed and investors are taking on the risks associated with a new strategy for the Manager. Finally, while asset diversification has increased with the recent strategy additions, the three additions made over the last 12-months are indirect and therefore RF1 is exposed the redemption requirements of the underlying funds, including a capital lock up period for the Private Credit Strategy. The portfolio has performed strongly since listing both compared to the broader domestic equity market and its peers, however future performance is expected to be differentiated from past performance given the exposure to the new strategies combined with the changes in exposure to the underlying strategies that has resulted from a reallocation of capital. For example, the recent exit from the Long Short Strategy and the allocation to the Market Neutral Strategy at 31 May 2023 of 15%, which is below the average weighting to this strategy of 28% and below the initial guidelines of at least 40% being allocated to this strategy. As noted throughout this report, there are heightened risks associated with RF1 given the use of leverage and the large exposure to small and emerging companies. As a result of this exposure, the portfolio will likely experience greater levels of volatility than the domestic equity market. Investors should be comfortable with the additional risks before making an investment in the Fund.