Turnover remained steady in November at about 48%. While activity both this month and last has been much lower than normal throughout the Credit Crunch – particularly since the Lehman bankruptcy brought chaos to the market – it at least marks a return to normalcy.
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 2009-11-30 | |||
| 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 | 4.3% (-4.6) | 7.90% | 7.17 |
| Interest Rearing | 0% | N/A | N/A |
| PerpetualPremium | 0.5% (0) | 4.74% | 0.57 |
| PerpetualDiscount | 72.6% (+5.3) | 6.01% | 13.90 |
| Fixed-Reset | 18.2% (+2.9) | 3.90% | 3.99 |
| Scraps (OpRet) | 4.5% (-0.1) | 10.70% | 5.84 |
| Cash | -0.2% (-3.3) | 0.00% | 0.00 |
| Total | 100% | 5.92% | 11.39 |
| Totals and changes will not add precisely due to rounding. Bracketted figures represent change from October 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.
Of interest during the month was a swap out of BNA.PR.C into BAM.PR.N, at a take-out of approximately $2.00, executed in numerous small pieces. Approximately half of the position was swapped. This is a lazy little swap that goes back and forth from time to time; the last time was reported in August 2008. The format of the trade analysis at that time will be retained:
| Post Mortem: BNA.PR.C / BAM.PR.N Swaps | |||||
| Date | BNA.PR.C | BAM.PR.N | |||
| August 2008 Trade |
Bought 17.25 |
Sold 16.85 |
|||
| November 2009 Trade |
Sold 19.55 |
Bought 17.60 |
|||
| Dividends | Earned about 2/3 of August ’08; Nov ’08; Feb, May, Aug & about 2/3 of Nov; Total ~$1.45 | Missed Sep & Dec 08; Missed Mar, Jun, Sep 09; Total ~$1.48 | |||
| The August ’08 trades were executed in pieces that spanned the BNA.PR.C ex-dividend date; dividends were earned on about 2/3 of the final position | |||||
| The November ’09 trades were executed in pieces that spanned the BNA.PR.C ex-dividend date; dividends were earned on about 2/3 of the final position | |||||
| This table attempts to present fairly the aggregate effect of a series of trades. Full disclosure of the 2008 trades is available on the Fund’s main page; full disclosure of the 2009 trades will be made at the time the audited 2009 Financials are published. | |||||
As can be seen, the swap has proved immensely profitable, but the long time-span of the holding masks a great deal of excitement! When market movements reduced the portfolio weight of BNA.PR.C to a lower than anticipated number, the position was topped up in December 2008 at 8.65.
Credit distribution is:
| MAPF Credit Analysis 2009-11-30 | |
| DBRS Rating | Weighting |
| Pfd-1 | 0 (0) |
| Pfd-1(low) | 78.3% (+4.4) |
| Pfd-2(high) | 4.9% (-0.5) |
| Pfd-2 | 2.4% (-0.5) |
| Pfd-2(low) | 10.1% (+0.3) |
| Pfd-3(high) | 4.5% (-0.1) |
| Cash | -0.2% (-3.3) |
| Totals will not add precisely due to rounding. Bracketted figures represent change from October month-end. | |
Liquidity Distribution is:
| MAPF Liquidity Analysis 2009-10-30 | |
| Average Daily Trading | Weighting |
| <$50,000 | 0.0% (0) |
| $50,000 – $100,000 | 5.0% (-3.9) |
| $100,000 – $200,000 | 6.9% (-2.2) |
| $200,000 – $300,000 | 57.9% (+4.1) |
| >$300,000 | 30.5% (+6.2) |
| Cash | -0.2% (-3.3) |
| Totals will not add precisely due to rounding. Bracketted figures represent change from October 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 and published in the September PrefLetter. 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
[…] discussed in the post MAPF Portfolio Composition: November 2009, the fund has a position in the high-yielding split-share BNA.PR.C, about half of which was sold […]
[…] discussed in the post MAPF Portfolio Composition: November 2009, the fund has a position in the high-yielding split-share BNA.PR.C, about half of which was sold in […]