MAPF Portfolio Composition: June 2009

Trading activity increased in June, with portfolio turnover of about 130%, as the market extended its gains.

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 2009-6-30
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 10.7% (-0.4) 10.25% 6.99
Interest Rearing 0% N/A N/A
PerpetualPremium 0.0% N/A N/A
PerpetualDiscount 72.2 (+2.4) 6.58% 13.13
Fixed-Reset 11.5% (-1.0) 4.85% 4.28
Scraps (OpRet) 5.6% (-0.6) 11.54% 5.27
Cash +0.1% (-0.5) 0.00% 0.00
Total 100% 7.05% 11.00
Totals and changes will not add precisely due to rounding. Bracketted figures represent change from May 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.

Not much change in the sectoral distribution!

Credit distribution is:

MAPF Credit Analysis 2009-6-30
DBRS Rating Weighting
Pfd-1 0.4% (-40.0)
Pfd-1(low) 67.2% (+43.4)
Pfd-2(high) 13.6% (+4.1)
Pfd-2 0% (0)
Pfd-2(low) 13.2% (-6.5)
Pfd-3(high) 5.6% (-0.6)
Cash +0.1% (-0.5)
Totals will not add precisely due to rounding. Bracketted figures represent change from May month-end.

The dramatic change in reported credit quality is largely due to the DBRS Mass Downgrade of Banks. At month-end, the fund held positions affected by this change summarized as follows:

MAPF Month-End Positions
Affect by DBRS Mass Downgrade
Fraction of
Pfd-1 Pfd-1(low) 24.4%
Pfd-1 Pfd-2(high) 2.5%

Of the remainder, a significant contributor was a series of trades in the FixedReset sector:

Trades Contributing to
the Shift from Pfd-1 to Pfd-1(low)
June, 2009
26.65 26.68 26.76 26.56
6/3 Sold
6/11 Sold
6/25   Sold
6/30     Sold
Closing Bid
27.36 27.00 27.44 27.01
This is an attempt to show fairly the effect of numerous trades in tabular form. The trades shown are not necessarily precise dollar-for-dollar swaps. Trade details will be released on the main MAPF web page shortly.

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 downgrades of BCE and the banks).

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:

Liquidity Distribution is:

MAPF Liquidity Analysis 2009-6-30
Average Daily Trading Weighting
<$50,000 3.3% (+1.4)
$50,000 – $100,000 22.2% (+3.1)
$100,000 – $200,000 25.9% (-5.7)
$200,000 – $300,000 15.1% (-16.4)
>$300,000 33.5% (+18.0)
Cash +0.1% (-0.5)
Totals will not add precisely due to rounding. Bracketted figures represent change from May 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 is more exposed to PerpetualDiscounts
    • MAPF is much less exposed to Operating Retractibles
    • MAPF is more exposed to SplitShares
    • MAPF is less exposed to FixFloat / Floater / Ratchet
    • MAPF weighting in FixedResets is similar

One Response to “MAPF Portfolio Composition: June 2009”

  1. […] performance was hurt by the underweighting in FixedReset issues noted in MAPF Portfolio Composition: June 2009, as well as an underweighting in lower quality issues (which also outperformed), but these […]

Leave a Reply

You must be logged in to post a comment.