Correspondence 0000894189-24-002976 from LOCORR INVESTMENT TRUST (CIK 0001506768)
LOCORR INVESTMENT TRUST (CIK 0001506768)
Date: April 30, 2024 · CIK: 0001506768 · Accession: 0000894189-24-002976
AI Filing Summary & Sentiment
File numbers found in text: 333-171360, 811-22509
Letter
VIA EDGAR TRANSMISSION Division of Investment Management 100 F Street N.E. Washington D.C. 20549 Re: LoCorr Investment Trust (the “Trust”) File Nos. 333-171360 and 811-22509
Dear Mr. Orlic:
We are responding to comments provided to Ryan Charles of U.S. Bank Global Fund Services, the Trust’s Administrator, by the U.S. Securities and Exchange Commission (the “SEC”) Division of Investment Management staff (the “Staff”) on April 16, 2024, regarding the Trust’s Post-Effective Amendment (“PEA”) No. 54 to its registration statement on Form N-1A. PEA No. 54 was filed on March 1, 2024 pursuant to Rule 485(a) under the Securities Act of 1933, as amended (the “Securities Act”), for the purpose of adding disclosure related to a change in the investment strategies for the LoCorr Macro Strategies Fund and the LoCorr Long/Short Commodities Strategy Fund (the “Funds”) concerning exposure in bitcoin and ether. The Staff’s comments, along with the Trust’s responses, are set forth below.
For your convenience, each comment has been reproduced below with a response following the comment. Capitalized terms not otherwise defined have the same meaning as in the PEA.
Comment 1. Please provide a completed fee table, Example and Performance disclosures for each fund.
Response: Each Fund’s completed fee table, Example and Performance chart/table are attached as Appendix A to this response letter.
Comment 2. With respect to Footnote 4 to the fee table for the LoCorr Long/Short Commodities Strategy Fund, please clarify whether the reference is to total assets or net assets.
Response. The disclosure has been revised as follows:
“Generally, the management fees and performance fees of the CTAs included in the Swap and Commodity Pool may range up to 1.50% of the Fund's allocated net assets and up to 20% of the returns, respectively.”
Comment 3: For each fund please present the most important principal investment risks first and after the most important risks have been disclosed the fund may revert back to alphabetical order.
Response: The Registrant respectfully declines to make the requested revision.
Comment 4: The principal investment strategy disclosure for each fund includes references related to the investment of up to 25% of total assets in a wholly-owned and controlled subsidiary. To the extent that the subsidiary is leveraged at the time of an investment please provide disclosure indicating that the fund's total exposure could exceed 25%.
Response: The Registrant will consider revising disclosure in future filings and notes the existing strategy and risk disclosures regarding leverage.
Comment 5: On page 26 there is a reference to contracts that make use of a reference index as LIBOR. Please include disclosure regarding how the transition from LIBOR could impact the fund's investments. Please also disclose how the transition to a new reference index could impact the value of the fund's investments that reference LIBOR.
Response: The reference to LIBOR is an example of a reference rate. The Registrant will consider deleting the reference in a revised filing.
Comment 6: Please confirm in correspondence that the Subsidiary and its board of directors will agree to inspection by the staff of the Subsidiary’s books and records, which will be maintained in accordance with Section 31 of the Investment Company Act and the rules thereunder. Please also confirm that the Subsidiary and its board of directors will agree to designate an agent for service of process in the United States.
Response: The Registrant so confirms.
Comment 7: Please include disclosure that the funds do not intend to create or acquire primary control of any entity which primarily engages in investment activities in securities or other assets, other than entities wholly-owned by a fund.
Response: The following disclosure has been added:
“The Fund does not intend to create or invest to gain primary control in an entity primarily engaged in investment activities other than the Subsidiary.”
Cyber-Asset Comments
Comment 8: Please confirm that the Fund does not intend to invest in spot Bitcoin or Ether and disclose in bold that a Fund will not invest in those or if the Fund intends to, explain how the Fund will comply with custody requirements of 1940 Act.
Response: The Funds do not intend to directly hold bitcoin or ether. Accordingly, the following disclosure has been added:
The Fund does not invest directly in or hold bitcoin or ether.
Comment 9: Please disclose and explain each Fund's strategy with respect to the "rolling" of ether futures contracts or bitcoin futures contracts, including the contract month the fund plans to invest in and generally how and when the fund expects to roll the contracts. If the funds are unable to provide this disclosure, please explain why.
Response: The following disclosure has been added to the Funds' SAI:
Rolling of the Crypto Futures
Futures contracts expire on a designated date, referred to as the "expiration date." The Fund generally seeks to invest in "front-month" CME bitcoin futures contracts and CME ether futures contracts but may invest in back-month, cash-settled bitcoin futures contracts and ether futures contracts. "Front- month" contracts are the monthly contracts with the nearest expiration date. Back-month contracts are those with longer times to maturity. CME bitcoin futures and CME ether futures are cash-settled on their expiration date unless they are "rolled" prior to expiration. The Fund intends to "roll" its CME bitcoin futures and CME Ether Futures prior to expiration. Typically, the Fund will roll to the next "nearby" CME bitcoin futures and CME ether futures. The "nearby" contracts are those contracts with the next closest expiration date.
Comment 10: Please describe ether and bitcoin and the Ethereum blockchain and Bitcoin blockchain; the relationship of ether and bitcoin to the Ethereum blockchain and Bitcoin blockchain, respectively; the applications and use cases that the Ethereum blockchain and Bitcoin Blockchain, and ether and bitcoin, have been designed to support; and how the Ethereum blockchain and Bitcoin blockchain, and ether and bitcoin, differ from one another in terms of such intended applications and use cases, among other things. Also, with regard to Ethereum, describe the role that the Ethereum Foundation plays in the development of the blockchain.
Response: The following disclosure has been added to the Fund’s prospectus:
Bitcoin and Ether
Bitcoin and ether are both digital assets. The ownership and operation of both Bitcoin and ether are determined by participants in online, peer-to-peer networks - the Bitcoin Network and the Ethereum Network, respectively. These networks connect computers running open-source software that follows the rules and procedures governing each network’s protocol.
The value of both bitcoin and ether is not backed by any government, corporation, or other identified body. Instead, their values are determined by the supply and demand in markets created to facilitate their trading. Ownership and transaction records for bitcoin and ether are protected through public-key cryptography. The supply of bitcoin and ether is determined by their respective protocols, and no single entity owns or operates either network. They are collectively maintained by decentralized groups of participants who run computer software that records and validates transactions (miners for bitcoin and validators for ether), developers who propose improvements to the protocols and the software that enforces them, and users who choose which version of the software to run.
The following disclosure has been added to the Fund’s Statement of Additional Information:
Bitcoin is the native token on the Bitcoin network. As with other cryptocurrencies, bitcoin and the Bitcoin blockchain have been designed to support a number of applications and use cases. For bitcoin, these include serving as a medium of exchange (e.g., digital cash) and as a durable store of value (e.g., digital gold). The Bitcoin network's uses and capabilities are narrower when compared to the Ethereum network, which facilitates smart contracts and the issuance of other non- native tokens.
Ether is the native token on the Ethereum network, but users may create additional tokens, the ownership of which is recorded on the Ethereum network. As with other
cryptocurrencies, ether and the Ethereum blockchain have been designed to support a number of applications and use cases. For ether, these include: serving as a medium or exchange and a durable store of value, facilitating the use of smart contracts and decentralized products and platforms, permitting the issuance and exchange of non-native tokens (including non-fungible tokens and asset-backed tokens), and supporting various "layer 2" projects. Compared to the Bitcoin network, which is solely intended to record the ownership of bitcoin, the intended uses of the Ethereum network are far more broad.
The Ethereum Foundation (EF) is a non-profit organization that is dedicated to supporting Ethereum and related technologies. The EF, alongside other organizations, supports Ethereum Protocol development through funding and advocacy. The EF finances its activities through its initial allocation of ether at the launch of the Ether Network in 2015. Although the EF does not control Ethereum and is one of many organizations within the Ethereum ecosystem, it is the most significant driving force for Ethereum Protocol development and support of Ethereum generally.
Comment 11: Please supplementally confirm that the Trust’s code of ethics applies to transactions in ether, bitcoin and their respective futures contracts and that access persons will be required to preclear such transactions.
Response: The Registrant will revise its code of ethics to cover such instruments. Access Persons will be prohibited from engaging in transactions in bitcoin, ether and their respective futures contracts, unless such transactions have been cleared in advance by the Chief Compliance Officer.
Comment 12: Please disclose that ether may be determined to be a security or to be offered and sold as a security under federal or state securities laws as well potentially adverse consequences to the Fund and shareholders if such a determination is made.
Response: The following disclosure has been added to the Fund’s prospectus:
It is possible that ether may be determined to be a security for the purposes of federal or state securities laws. If ether is determined or is expected to be determined to be a security under the federal securities laws, that could materially and adversely affect the trading of ether futures contracts held by the Fund.
The following disclosure has been added to the Fund’s SAI:
It is possible that ether may be determined to be a security for the purposes of federal or state securities laws. If ether is determined or is expected to be determined to be a security under the federal securities laws, that could materially and adversely affect the trading of ether futures contracts held by the Fund. If ether is determined or alleged to be a security, it is possible that trading in ether futures contracts held by the Fund could be halted or otherwise disrupted, become illiquid and/or lose significant value and the Fund may have difficulty unwinding or closing out its ether futures contracts. In that event, value of an investment in the Fund – could decline significantly and without warning, including to zero. There is no guarantee that security futures contracts on ether would be begin trading on any particular timeframe or at all or that the Fund would be able to invest in such instruments.
Comment 13: Please disclose the risks related to the fragmentation and regulatory noncompliance and/or oversight of spot markets for crypto assets, including the potential for fraud and manipulation.
Response: The following disclosure has been added to the Fund’s SAI:
Unlike the exchanges for more traditional assets, such as equity securities and futures contracts, digital asset trading venues are largely unregulated and highly fragmented. As a result of the lack of regulation, individuals or groups may engage in fraud or market manipulation (including using social media to promote bitcoin in a way that artificially increases the price of bitcoin or ether). Investors may be more exposed to the risk of theft, fraud and market manipulation than when investing in more traditional asset classes. Over the past several years, a number of digital asset trading venues have been closed due to fraud, failure or security breaches. Investors in bitcoin and ether may have little or no recourse should such theft, fraud or manipulation occur and could suffer significant losses.
Comment 14: Please disclose that crypto asset trading platforms on which ether or bitcoin is traded, and which may serve as a pricing source for the calculation of the ether or bitcoin reference rate that is used for the purposes of valuing the Fund's investments, are or may become subject to enforcement actions by regulatory authorities, and that such enforcement actions may have a material adverse impact on the Fund, its investments, and its ability to implement its investment strategy.
Response: The following disclosure has been added to the Fund’s SAI:
Events impacting the price of bitcoin or ether across all digital asset trading venues should be expected to impact the price and market for bitcoin or ether futures, and therefore the performance of the Fund. Such trading venues may serve as a pricing source for the calculation of the CME CF Bitcoin Reference Rate or CME CF Ether Reference Rate which provides reference prices for final settlement of CME bitcoin and ether futures, respectively. These trading venues are or may become subject to regulatory actions that may have a material adverse impact on the Fund and its investments.
Comment 15: Please disclose risks related to new or changing laws and regulations affecting the use of blockchain technology and/or investments in crypto assets or crypto asset-related investments. Disclose that any future regulatory changes may have a materially adverse impact on the Fund, its investments, and its ability to implement its investment strategy.
Response: The following disclosure has been added to the Fund’s SAI:
The regulation of digital assets and related products and services continues to evolve. The inconsistent and sometimes conflicting regulatory landscape may make it more difficult for bitcoin and ether businesses to provide services, which may impede the growth of the bitcoin and ether economies and have an adverse effect on the adoption and the market value of crypto. There is a possibility of future regulatory change altering, perhaps to a material extent, the ability to buy and sell crypto and crypto futures. Similarly, future regulatory changes could impact the ability of the Fund to invest in bitcoin or ether futures contracts.
Comment 16: Please disclose that ether and ether futures are relatively new investments, present unique and substantial risks, and historically have been subject to significant price volatility. Also, disclose that the value of ether and bitcoin has been, and may continue to be, substantially dependent on speculation, such that trading and investing in these crypto assets generally may not be based on fundamental analysis.
Response: The Registrant notes the current disclosure in the Fund’s prospectus:
Bitcoin and Ether may experience very high volatility and related investments, s
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Document
LoCorr Investment Trust
c/o U.S. Bank Global Fund Services
615 East Michigan Street
Milwaukee, WI 53202
April 30, 2024
VIA EDGAR TRANSMISSION
Mr. David Orlic
U.S. Securities and Exchange Commission
Division of Investment Management
100 F Street N.E.
Washington D.C. 20549
Re: LoCorr Investment Trust (the “Trust”)
File Nos. 333-171360 and 811-22509
Dear Mr. Orlic:
We are responding to comments provided to Ryan Charles of U.S. Bank Global Fund Services, the Trust’s Administrator, by the U.S. Securities and Exchange Commission (the “SEC”) Division of Investment Management staff (the “Staff”) on April 16, 2024, regarding the Trust’s Post-Effective Amendment (“PEA”) No. 54 to its registration statement on Form N-1A. PEA No. 54 was filed on March 1, 2024 pursuant to Rule 485(a) under the Securities Act of 1933, as amended (the “Securities Act”), for the purpose of adding disclosure related to a change in the investment strategies for the LoCorr Macro Strategies Fund and the LoCorr Long/Short Commodities Strategy Fund (the “Funds”) concerning exposure in bitcoin and ether. The Staff’s comments, along with the Trust’s responses, are set forth below.
For your convenience, each comment has been reproduced below with a response following the comment. Capitalized terms not otherwise defined have the same meaning as in the PEA.
Comment 1. Please provide a completed fee table, Example and Performance disclosures for each fund.
Response: Each Fund’s completed fee table, Example and Performance chart/table are attached as Appendix A to this response letter.
Comment 2. With respect to Footnote 4 to the fee table for the LoCorr Long/Short Commodities Strategy Fund, please clarify whether the reference is to total assets or net assets.
Response. The disclosure has been revised as follows:
“Generally, the management fees and performance fees of the CTAs included in the Swap and Commodity Pool may range up to 1.50% of the Fund's allocated net assets and up to 20% of the returns, respectively.”
Comment 3: For each fund please present the most important principal investment risks first and after the most important risks have been disclosed the fund may revert back to alphabetical order.
Response: The Registrant respectfully declines to make the requested revision.
Comment 4: The principal investment strategy disclosure for each fund includes references related to the investment of up to 25% of total assets in a wholly-owned and controlled subsidiary. To the extent that the subsidiary is leveraged at the time of an investment please provide disclosure indicating that the fund's total exposure could exceed 25%.
Response: The Registrant will consider revising disclosure in future filings and notes the existing strategy and risk disclosures regarding leverage.
Comment 5: On page 26 there is a reference to contracts that make use of a reference index as LIBOR. Please include disclosure regarding how the transition from LIBOR could impact the fund's investments. Please also disclose how the transition to a new reference index could impact the value of the fund's investments that reference LIBOR.
Response: The reference to LIBOR is an example of a reference rate. The Registrant will consider deleting the reference in a revised filing.
Comment 6: Please confirm in correspondence that the Subsidiary and its board of directors will agree to inspection by the staff of the Subsidiary’s books and records, which will be maintained in accordance with Section 31 of the Investment Company Act and the rules thereunder. Please also confirm that the Subsidiary and its board of directors will agree to designate an agent for service of process in the United States.
Response: The Registrant so confirms.
Comment 7: Please include disclosure that the funds do not intend to create or acquire primary control of any entity which primarily engages in investment activities in securities or other assets, other than entities wholly-owned by a fund.
Response: The following disclosure has been added:
“The Fund does not intend to create or invest to gain primary control in an entity primarily engaged in investment activities other than the Subsidiary.”
Cyber-Asset Comments
Comment 8: Please confirm that the Fund does not intend to invest in spot Bitcoin or Ether and disclose in bold that a Fund will not invest in those or if the Fund intends to, explain how the Fund will comply with custody requirements of 1940 Act.
Response: The Funds do not intend to directly hold bitcoin or ether. Accordingly, the following disclosure has been added:
The Fund does not invest directly in or hold bitcoin or ether.
Comment 9: Please disclose and explain each Fund's strategy with respect to the "rolling" of ether futures contracts or bitcoin futures contracts, including the contract month the fund plans to invest in and generally how and when the fund expects to roll the contracts. If the funds are unable to provide this disclosure, please explain why.
Response: The following disclosure has been added to the Funds' SAI:
Rolling of the Crypto Futures
Futures contracts expire on a designated date, referred to as the "expiration date." The Fund generally seeks to invest in "front-month" CME bitcoin futures contracts and CME ether futures contracts but may invest in back-month, cash-settled bitcoin futures contracts and ether futures contracts. "Front- month" contracts are the monthly contracts with the nearest expiration date. Back-month contracts are those with longer times to maturity. CME bitcoin futures and CME ether futures are cash-settled on their expiration date unless they are "rolled" prior to expiration. The Fund intends to "roll" its CME bitcoin futures and CME Ether Futures prior to expiration. Typically, the Fund will roll to the next "nearby" CME bitcoin futures and CME ether futures. The "nearby" contracts are those contracts with the next closest expiration date.
Comment 10: Please describe ether and bitcoin and the Ethereum blockchain and Bitcoin blockchain; the relationship of ether and bitcoin to the Ethereum blockchain and Bitcoin blockchain, respectively; the applications and use cases that the Ethereum blockchain and Bitcoin Blockchain, and ether and bitcoin, have been designed to support; and how the Ethereum blockchain and Bitcoin blockchain, and ether and bitcoin, differ from one another in terms of such intended applications and use cases, among other things. Also, with regard to Ethereum, describe the role that the Ethereum Foundation plays in the development of the blockchain.
Response: The following disclosure has been added to the Fund’s prospectus:
Bitcoin and Ether
Bitcoin and ether are both digital assets. The ownership and operation of both Bitcoin and ether are determined by participants in online, peer-to-peer networks - the Bitcoin Network and the Ethereum Network, respectively. These networks connect computers running open-source software that follows the rules and procedures governing each network’s protocol.
The value of both bitcoin and ether is not backed by any government, corporation, or other identified body. Instead, their values are determined by the supply and demand in markets created to facilitate their trading. Ownership and transaction records for bitcoin and ether are protected through public-key cryptography. The supply of bitcoin and ether is determined by their respective protocols, and no single entity owns or operates either network. They are collectively maintained by decentralized groups of participants who run computer software that records and validates transactions (miners for bitcoin and validators for ether), developers who propose improvements to the protocols and the software that enforces them, and users who choose which version of the software to run.
The following disclosure has been added to the Fund’s Statement of Additional Information:
Bitcoin is the native token on the Bitcoin network. As with other cryptocurrencies, bitcoin and the Bitcoin blockchain have been designed to support a number of applications and use cases. For bitcoin, these include serving as a medium of exchange (e.g., digital cash) and as a durable store of value (e.g., digital gold). The Bitcoin network's uses and capabilities are narrower when compared to the Ethereum network, which facilitates smart contracts and the issuance of other non- native tokens.
Ether is the native token on the Ethereum network, but users may create additional tokens, the ownership of which is recorded on the Ethereum network. As with other
cryptocurrencies, ether and the Ethereum blockchain have been designed to support a number of applications and use cases. For ether, these include: serving as a medium or exchange and a durable store of value, facilitating the use of smart contracts and decentralized products and platforms, permitting the issuance and exchange of non-native tokens (including non-fungible tokens and asset-backed tokens), and supporting various "layer 2" projects. Compared to the Bitcoin network, which is solely intended to record the ownership of bitcoin, the intended uses of the Ethereum network are far more broad.
The Ethereum Foundation (EF) is a non-profit organization that is dedicated to supporting Ethereum and related technologies. The EF, alongside other organizations, supports Ethereum Protocol development through funding and advocacy. The EF finances its activities through its initial allocation of ether at the launch of the Ether Network in 2015. Although the EF does not control Ethereum and is one of many organizations within the Ethereum ecosystem, it is the most significant driving force for Ethereum Protocol development and support of Ethereum generally.
Comment 11: Please supplementally confirm that the Trust’s code of ethics applies to transactions in ether, bitcoin and their respective futures contracts and that access persons will be required to preclear such transactions.
Response: The Registrant will revise its code of ethics to cover such instruments. Access Persons will be prohibited from engaging in transactions in bitcoin, ether and their respective futures contracts, unless such transactions have been cleared in advance by the Chief Compliance Officer.
Comment 12: Please disclose that ether may be determined to be a security or to be offered and sold as a security under federal or state securities laws as well potentially adverse consequences to the Fund and shareholders if such a determination is made.
Response: The following disclosure has been added to the Fund’s prospectus:
It is possible that ether may be determined to be a security for the purposes of federal or state securities laws. If ether is determined or is expected to be determined to be a security under the federal securities laws, that could materially and adversely affect the trading of ether futures contracts held by the Fund.
The following disclosure has been added to the Fund’s SAI:
It is possible that ether may be determined to be a security for the purposes of federal or state securities laws. If ether is determined or is expected to be determined to be a security under the federal securities laws, that could materially and adversely affect the trading of ether futures contracts held by the Fund. If ether is determined or alleged to be a security, it is possible that trading in ether futures contracts held by the Fund could be halted or otherwise disrupted, become illiquid and/or lose significant value and the Fund may have difficulty unwinding or closing out its ether futures contracts. In that event, value of an investment in the Fund – could decline significantly and without warning, including to zero. There is no guarantee that security futures contracts on ether would be begin trading on any particular timeframe or at all or that the Fund would be able to invest in such instruments.
Comment 13: Please disclose the risks related to the fragmentation and regulatory noncompliance and/or oversight of spot markets for crypto assets, including the potential for fraud and manipulation.
Response: The following disclosure has been added to the Fund’s SAI:
Unlike the exchanges for more traditional assets, such as equity securities and futures contracts, digital asset trading venues are largely unregulated and highly fragmented. As a result of the lack of regulation, individuals or groups may engage in fraud or market manipulation (including using social media to promote bitcoin in a way that artificially increases the price of bitcoin or ether). Investors may be more exposed to the risk of theft, fraud and market manipulation than when investing in more traditional asset classes. Over the past several years, a number of digital asset trading venues have been closed due to fraud, failure or security breaches. Investors in bitcoin and ether may have little or no recourse should such theft, fraud or manipulation occur and could suffer significant losses.
Comment 14: Please disclose that crypto asset trading platforms on which ether or bitcoin is traded, and which may serve as a pricing source for the calculation of the ether or bitcoin reference rate that is used for the purposes of valuing the Fund's investments, are or may become subject to enforcement actions by regulatory authorities, and that such enforcement actions may have a material adverse impact on the Fund, its investments, and its ability to implement its investment strategy.
Response: The following disclosure has been added to the Fund’s SAI:
Events impacting the price of bitcoin or ether across all digital asset trading venues should be expected to impact the price and market for bitcoin or ether futures, and therefore the performance of the Fund. Such trading venues may serve as a pricing source for the calculation of the CME CF Bitcoin Reference Rate or CME CF Ether Reference Rate which provides reference prices for final settlement of CME bitcoin and ether futures, respectively. These trading venues are or may become subject to regulatory actions that may have a material adverse impact on the Fund and its investments.
Comment 15: Please disclose risks related to new or changing laws and regulations affecting the use of blockchain technology and/or investments in crypto assets or crypto asset-related investments. Disclose that any future regulatory changes may have a materially adverse impact on the Fund, its investments, and its ability to implement its investment strategy.
Response: The following disclosure has been added to the Fund’s SAI:
The regulation of digital assets and related products and services continues to evolve. The inconsistent and sometimes conflicting regulatory landscape may make it more difficult for bitcoin and ether businesses to provide services, which may impede the growth of the bitcoin and ether economies and have an adverse effect on the adoption and the market value of crypto. There is a possibility of future regulatory change altering, perhaps to a material extent, the ability to buy and sell crypto and crypto futures. Similarly, future regulatory changes could impact the ability of the Fund to invest in bitcoin or ether futures contracts.
Comment 16: Please disclose that ether and ether futures are relatively new investments, present unique and substantial risks, and historically have been subject to significant price volatility. Also, disclose that the value of ether and bitcoin has been, and may continue to be, substantially dependent on speculation, such that trading and investing in these crypto assets generally may not be based on fundamental analysis.
Response: The Registrant notes the current disclosure in the Fund’s prospectus:
Bitcoin and Ether may experience very high volatility and related investments, s