MAPF Portfolio Composition: August 2009

Turnover slowed markedly in August to a little under 60%. This was both a normal summer slowdown and the effect of a sharply rising market in PerpetualDiscounts, which often has the effect of lifting all boats equally.

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 2009-8-31
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 10.4% (+0.3) 7.58%% 7.12
Interest Rearing 0% N/A N/A
PerpetualPremium 0.9% (+0.3) 3.4% 1.76
PerpetualDiscount 67.2% (-4.7) 5.71% 14.40
Fixed-Reset 17.4% (+6.1) 4.03% 4.12
Scraps (OpRet) 5.2% (0) 10.71% 5.98
Cash -0.8% (-1.5) 0.00% 0.00
Total 100% 5.85% 11.45
Totals and changes will not add precisely due to rounding. Bracketted figures represent change from July 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 small change in the sectoral distribution was due to some scrappy trades generated by the rapid increase in price of PerpetualDiscounts. In addition to changing yield relationships, this price rise was sufficient to cause the issuer’s redemption option to have an effect on valuation.

Trades Contributing to
the Shift from PerpetualDiscount to FixedReset
August, 2009
21.20 27.64 27.53 27.47
8/17 Sold
8/21   Sold
8/25   Sold
Closing Bid
22.93 27.81 27.75 27.60
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 in the future.

This is not the most immediately successful sequence of trades reported for MAPF, but it’s hardly a disaster! All I can do is trade the odds and recognize that not every trade will work out.

Credit distribution is:

MAPF Credit Analysis 2009-8-31
DBRS Rating Weighting
Pfd-1 0 (-0.3)
Pfd-1(low) 80.6% (-0.9)
Pfd-2(high) 3.8% (+1.8)
Pfd-2 1.3% (+1.0)
Pfd-2(low) 10.1% (+0.3)
Pfd-3(high) 5.2% (0)
Cash -0.8% (-1.5)
Totals will not add precisely due to rounding. Bracketted figures represent change from July month-end.

So credit quality is essentiall unchanged, while liquidity has improved somewhat:

Liquidity Distribution is:

MAPF Liquidity Analysis 2009-8-31
Average Daily Trading Weighting
<$50,000 0.3% (0)
$50,000 – $100,000 14.9% (+3.7)
$100,000 – $200,000 2.5% (-3.3)
$200,000 – $300,000 37.7% (-11.9)
>$300,000 45.6% (+13.7)
Cash -0.8% (-1.5)
Totals will not add precisely due to rounding. Bracketted figures represent change from June 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 17. When comparing CPD and MAPF:

  • MAPF credit quality is better
  • MAPF liquidity is a little better
  • MAPF Yield is higher
  • Weightings in
    • MAPF is much 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 much lower

One Response to “MAPF Portfolio Composition: August 2009”

  1. […] performance was helped by its overweighting in PerpetualDiscount issues, as shown in the post MAPF Portfolio Composition, but managed to outperform even the pure measure of PerpetualDiscount total return due to security […]

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