Trading remained steady in April, with portfolio turnover of about 80%, as the market strongly advanced in a very consistent fashion: PerpetualDiscounts had only three down-days, against 18 gainers.
Trades were, as ever, triggered by a desire to exploit transient mispricing in the preferred share market (which may the thought of as “selling liquidity”), rather than any particular view being taken on market direction, sectoral performance or credit anticipation.
| MAPF Sectoral Analysis 2009-4-30 | |||
| HIMI Indices Sector | Weighting | YTW | ModDur |
| Ratchet | 0% | N/A | N/A |
| FixFloat | 0% | N/A | N/A |
| Floater | 0% | N/A | N/A |
| OpRet | 0% | N/A | N/A |
| SplitShare | 11.1% (+1.4) | 12.74% | 6.75 |
| Interest Rearing | 0% | N/A | N/A |
| PerpetualPremium | 0.0% | N/A | N/A |
| PerpetualDiscount | 63.3% (-10.5) | 7.13% | 12.39 |
| Fixed-Reset | 19.2% (+9.2) | 5.45% | 4.42 |
| Scraps (FixFloat) | 0% (-1.6) | N/A | N/A |
| Scraps (OpRet) | 5.7% (+2.0) | 14.69% | 5.87 |
| Scraps (SplitShare) | 0.0% (-0.5) | N/A | N/A |
| Cash | +0.6% (+0.1) | 0.00% | 0.00 |
| Total | 100% | 7.82% | 9.78 |
| Totals and changes will not add precisely due to rounding. Bracketted figures represent change from March month-end. Cash is included in totals with duration and yield both equal to zero. | |||
The “total” reflects the un-leveraged total portfolio (i.e., cash is included in the portfolio calculations and is deemed to have a duration and yield of 0.00.). MAPF will often have relatively large cash balances, both credit and debit, to facilitate trading. Figures presented in the table have been rounded to the indicated precision.
The important change was the shift of just under 10% of portfolio weight from PerpetualDiscounts into FixedResets. At month-end, the fund had positions in HSB.PR.E, CM.PR.M and BMO.PR.O. The position in HSB.PR.E was accumulated approximately as follows:
| April 2009 Accumulation of HSB.PR.E | |||||
| Date | HSB.PR.E | CM.PR.H | SLF.PR.A | CU.PR.B | TD.PR.K |
| 4/8 | Bot 25.17 |
Sold 17.00 |
|||
| 4/9 | Bot 25.23 |
Sold 16.51 |
Sold 22.90 |
||
| 4/14 | Bot 25.24 |
Sold 25.45 |
|||
| 4/30 Closing Bid |
26.20 | 17.63 | 16.90 | 24.08 | 26.20 |
| Trade reconstruction is approximate and represents a best-efforts attempt to show the flow of funds. Full trade details will be released with the MAPF Semi-Annual report | |||||
As may be seen, this accumulation has turned out very well so far – only the trade out of CU.PR.B has worked against the fund, which is a good ratio.
Credit distribution is:
| MAPF Credit Analysis 2009-4-30 | |
| DBRS Rating | Weighting |
| Pfd-1 | 54.0% (+4.1) |
| Pfd-1(low) | 19.1% (+2.6) |
| Pfd-2(high) | 0.9% (-8.0) |
| Pfd-2 | 0% (0) |
| Pfd-2(low) | 19.6% (+0.9) |
| Pfd-3(high) | 5.7% (+0.4) |
| Cash | +0.6% (+0.1) |
| Totals will not add precisely due to rounding. Bracketted figures represent change from March month-end. | |
The reduction in weighting of Pfd-2(high) reflects the sale of CU.PR.B, related to the shift in sectors shown above.
The fund does not set any targets for overall credit quality; trades are executed one by one. Variances in overall credit will be constant as opportunistic trades are executed. The overall credit quality of the portfolio is now superior to the credit quality of CPD at August month-end (when adjusted for the downgrade of BCE).
Claymore provides the following ratings breakdown:
| Ratings Breakdown as of 12/31/08 |
|
| Pfd-1 | 61.15% |
| Pfd-2 | 23.26% |
| Pfd-3 | 15.60% |
Two events have occurred since the Dec. 31 calculation date of CPD’s credit quality:
- Rebalancing of TXPR index with only a slight change in quality
- Downgrade of BCE: CPD holds about 4.3% of its portfolio in BCE issues
Liquidity Distribution is:
| MAPF Liquidity Analysis 2009-4-30 | |
| Average Daily Trading | Weighting |
| <$50,000 | 0.4% (-0.1) |
| $50,000 – $100,000 | 20.7% (-16.9) |
| $100,000 – $200,000 | 53.3% (+38.5) |
| $200,000 – $300,000 | 5.7% (-18.1) |
| >$300,000 | 19.2% (-3.4) |
| Cash | +0.6% (+0.1) |
| Totals will not add precisely due to rounding. Bracketted figures represent change from March month-end. | |
MAPF is, of course, Malachite Aggressive Preferred Fund, a “unit trust” managed by Hymas Investment Management Inc. Further information and links to performance, audited financials and subscription information are available the fund’s web page. A “unit trust” is like a regular mutual fund, but is sold by offering memorandum rather than prospectus. This is cheaper, but means subscription is restricted to “accredited investors” (as defined by the Ontario Securities Commission) and those who subscribe for $150,000+. Fund past performances are not a guarantee of future performance. You can lose money investing in MAPF or any other fund.
A similar portfolio composition analysis has been performed on The Claymore Preferred Share ETF (symbol CPD) as of August 29. When comparing CPD and MAPF:
- MAPF credit quality is better
- MAPF liquidity is similar
- MAPF Yield is higher
- Weightings in
- MAPF weighting in PerpetualDiscounts is similar
- MAPF is much less exposed to Operating Retractibles
- MAPF is more exposed to SplitShares
- MAPF is less exposed to FixFloat / Floater / Ratchet
- MAPF is more exposed to Fixed-Resets
[…] discussed in the post MAPF Portfolio Composition: April 2009, the fund has positions in splitShares (almost all BNA.PR.C) and an operating retractible […]