Category: MAPF

MAPF

MAPF : Results for April 2007

Malachite Aggressive Preferred Fund has been valued for March, 2007, month-end. The unit value is $9.4083. Returns over various periods are:

MAPF Returns to April 30, 2007
One Month -1.27%
Three Months -0.19%
One Year +6.67%
Two Years (annualized) +6.53%
Three Years (annualized) +7.59%
Four Years (annualized) +11.77%
Five Years (annualized) +9.71%
Six Years (annualized) +10.77%

Returns assume reinvestment of dividends, and are shown after expenses but before fees. Past performance is not  a guarantee of future performance. You can lose money investing in Malachite Aggressive Preferred Fund or any other fund.

For more information, see the fund’s main page.

Rather a dispiriting month! A few trades popped up, but it seemed that every trade I made was to catch a falling knife – sometimes trends are like that! The fund’s asset allocation is very heavily tilted towards Split-Share corporations, with additional exposure to very-high-dividend perpetuals, so it’s quite defensive. I will emphasize that the defensiveness of this position is not due to any market call on my part, it’s simply the math filtering through … one way to think of this process is to observe that, in situations such as now, with the ongoing BCE rout causing panic & confusion, issues in the marketplace have dropped in price indiscriminately. Which is to say, they’ve all dropped by the same amount, regardless of safety. Which is to say, the defensive issues have dropped more on a risk-adjusted basis than the more aggressive issues and hence have increased in relative attractiveness.

The above, please remember, is an over-simplification for visualization purposes, not a claim of any specific price movements by any issue or a recommendation of any particular class of preferred share for investment purposes.

Index Construction / Reporting

Split Share Discount

On the thread for April 27, Drew asked:

The YTW of split shares and perpetual premium shares seems to have risen over the last month substantially more than that of perpetual discount shares. My impression is that the bond yield curve has not flattened like this. Am I correct and, if so, do you have a theory?

Well, first off, let’s look at the index data: March 30:

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Op. Retract 4.72% 3.04% 85,479 2.16 17 -0.0828% 1,034.0
Split-Share 5.01% 3.14% 158,951 3.31 14 +0.0234% 1,052.8
Perpetual-Premium 5.02% 3.56% 219,123 5.15 53 -0.0031% 1,059.8
Perpetual-Discount 4.53% 4.54% 762,721 15.37 10 -0.0157% 1,066.8

…and for April 27:

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Op. Retract 4.73% 3.22% 84,115 2.38 17 -0.0108% 1,033.0
Split-Share 5.03% 4.29% 179,611 4.02 12 +0.1756% 1,046.1
Perpetual-Premium 5.07% 4.50% 222,579 6.25 54 -0.1567% 1,051.4
Perpetual-Discount 4.57% 4.59% 924,984 16.22 12 -0.0112% 1,056.4

From these indications, we see huge apparent changes in the yield of split shares. There are, as always, details of the analysis that must be understood before we pat ourselves on the back, however.

Consider the April 27 Split Share Index. Well, it looks like one thing that’s going to happen soon is that MUH.PR.A and ASC.PR.A will be moved to the “Scraps” index, on grounds of insufficient averageTradingValue, but never mind that.

One thing we notice is that DFN.PR.A & FFN.PR.A have much higher YTWs than FTN.PR.A, thanks to the recently approved term extensions on the former two issues. Be sure to write a thank-you note to your friendly neighborhood capital unit holder for the gift! Another thing we notice when looking at the index table is that the Split-Share index has been hit a lot harder than the Operating-Retractible index. This effect is due, I think, to a lack of understanding in the marketplace in general as to the nature of a split-share corporation. For example, one commenter on Financial Webring Forum stated that he was “not interested in … split shares that mature at NAV”.

Well, the preferred share component of a split share corp does not mature at NAV, absent default. The last two words are very important, because as I showed in the article Are Floating Prefs Money Market Vehicles?, Split Shares have, historically, been more susceptible to credit downgrades than other classes of share. However, readers who have read Using Credit Ratings When Buying Preferreds and Split Shares will know how to watch for the signs of an imminent downgrade. It seems to me that DBRS has been tightening its standards for Split Share credit ratings in the past year or two; as well, while the nature of a split share makes the rating more volatile, it also makes credit analysis a lot easier! So, while you have to watch them, so what? You have to watch everything in this uncertain world.

Some institutional investors, as well, don’t like Split Shares: one reasonably good reason is that not only are issue sizes relatively small, but they are rarely available as a new issue bought en bloc unless you also buy the Capital Units. One relatively bad reason is that many institutional guys don’t understand them either, another is that buying them might give the impression that they are sub-contracting asset management to the Split-Share’s sponsor, or at least have to explain to clients why that is not a fair characterization.

So in the end, Split Shares become not just a playground for retail, but for a relatively small component of the retail preferred share buying populace at that. This makes them much more susceptible to volatility and what I currently believe is contagion from the continuing woes of BCE.

I’ve uploaded a graph of the yieldCurvePremiumRetractible and the yieldCurvePremiumSplitShareCorp. On April 27, these values stood at -0.44% and +0.40%, respectively, changing from -0.42% and +0.34%, respectively, on March 30. So, yeah, Split Share spreads have widened quite noticeably over the past month. I’ve also uploaded a graph of the core yield curves at year-end, March month-end and now, for your inspection. All these curves and spreads, I hasten to note before I forget, are AFTER TAX.

Malachite Aggressive Preferred Fund currently has a relatively high exposure to Split Shares, so I could be accused of talking up my inventory. I could also be accused of putting my money where my mouth is. Take your pick – you have been warned!

 

MAPF

MAPF Results : March, 2007

Malachite Aggressive Preferred Fund has been valued for March, 2007, month-end. The unit value is $9.5292 after a distribution of $0.103149 dividend income. Returns over various periods are:

MAPF Returns to March 30, 2007
One Month +0.42%
Three Months +0.11%
One Year +5.48%
Two Years (annualized) +5.48%
Three Years (annualized) +6.41%
Four Years (annualized) +14.00%
Five Years (annualized) +10.26%
Six Years (annualized) +11.21%

Returns assume reinvestment of dividends, and are shown after expenses but before fees. Past performance is not  a guarantee of future performance. You can lose money investing in Malachite Aggressive Preferred Fund or any other fund.
For more information, see the fund’s main page.

MAPF

Malachite Aggressive Preferred Fund : Financials Posted

There’s not much that I can say that isn’t in the headline!

The MAPF Main Page has been updated to incorporate links to the 2006 Financial Statements and to the 2006 Portfolio Transactions.

I eagerly await criticism for my bloated Trading Expense Ratio that everybody seems so concerned about nowadays – even when talking about fixed income – to which I have only one thing to say.

MAPF

Malachite Fund : February Results

Malachite Aggressive Preferred Fund has been valued for February month-end. The unit value is $9.5917. Returns over various periods are:

MAPF Returns to February 28, 2007
One Month +0.67%
Three Months +0.63%
One Year +6.66%
Two Years (annualized) +6.16%
Three Years (annualized) +7.16%
Four Years (annualized) +12.56%
Five Years (annualized) +10.15%

Returns assume reinvestment of dividends, and are shown after expenses but before fees. Past performance is not  a guarantee of future performance. You can lose money investing in Malachite Aggressive Preferred Fund or any other fund.

For more information, see the fund’s main page.

MAPF

MAPF Returns : January, 2007

The monthly return for Malachite Aggressive Preferred Fund has been calculated. A poor month, but sometimes the preferred share market behaves in an … unusual … manner.

The unit price as of January 31, 2007, was $9.5275.

Returns may therefore be calculated as:

Periods Ending January 31, 2007 Return (see Note)
Month -0.97%
Quarter +1.70%
Year +5.57%
Two Years (Annualized) +5.66%
Three Years (Annualized) +7.61%
Four Years (Annualized) +12.21%
Five Years (Annualized) +10.25%
MAPF returns are shown after expenses, but before fees.

Note that past performance should not be taken as a guarantee of future performance. You can lose money investing in MAPF or any other investment.

More later.

MAPF

MAPF Returns: December 2006

The monthly return for Malachite Aggressive Preferred Fund has been calculated.

The unit price as of December 29, 2006, was $9.6213 after distribution of $0.121966 Capital Gains and $0.180846 Dividends.
Returns may therefore be calculated as:

Periods Ending December 29, 2006 Return (see Note)
Month +0.94%
Quarter +3.32%
Year +6.89%
Two Years (Annualized) +6.40%
Three Years (Annualized) +8.69%
Four Years (Annualized) +14.43%
Five Years (Annualized) +11.65%
MAPF returns are shown after expenses, but before fees.

Note that past performance should not be taken as a guarantee of future performance. You can lose money investing in MAPF or any other investment.
“But what about risk?” you ask, and I’m glad you asked that question. The following data is based on the Value Date portfolio.

All issues held in the portfolio are rated Pfd-2(low) or better by DBRS. 45% are rated Pfd-1(low) or better, 53% are rated either  Pfd-2(low) or Pfd-2, 2% of the portfolio is cash.

The composition of the portfolio in terms of the HIMI Preferred Indices is:

Index MAPF Composition
Ratchet 0%
Fixed-Floater 0%
Floating Rate 0%
OpRet 0%
SplitShare 42%
InterestBearing 0%
PerpetualPremium 54%
PerpetualDiscount 2%
Cash 2%

The nice thing about the returns is that they have been virtually entirely dividends and capital gains, resulting in a generally lower tax rate than for interest for most taxable investors.

The fund is now available to investors across Canada, provided they meet the definition of “accredited investors”. This is a new development, requiring a trivial amount of extra disclosure on my part (basically, I have to give you the right to back out of the purchase agreement within a week of subscription AND tell you that you have that right) and I’m very pleased. I’ll be issuing a press release in early January announcing this availability. 

For more information and documents regarding the fund, see the HIMI website

MAPF

MAPF Returns : November, 2006

The monthly return for Malachite Aggressive Preferred Fund has been calculated.
The unit price as of November 30, 2006, was $9.8314

Returns may therefore be calculated as:

Period Ending November 30, 2006 Return (see Note)
Month +1.74%
Quarter +3.71%
Year +6.61%
Two Years (Annualized) +6.51%
Three Years (Annualized) +9.22%
Four Years (Annualized) +14.22%
Five Years (Annualized) +10.87%
MAPF returns are shown after expenses, but before fees.

Note that past performance should not be taken as a guarantee of future performance. You can lose money investing in MAPF or any other investment.

“But what about risk?” you ask, and I’m glad you asked that question. All issues held in the portfolio are rated Pfd-2(low) or better by DBRS. 43% are rated Pfd-1(low) or better, the remainder are rated Pfd-2(low) or better.

The composition of the portfolio in terms of the HIMI Preferred Indices as of November 30, 2006 is:

Index MAPF Composition
Ratchet 0%
Fixed-Floater 0%
Floating Rate 0%
OpRet 25%
SplitShare 23%
InterestBearing 0%
PerpetualPremium 34%
PerpetualDiscount 20%
Cash -2%

The nice thing about the returns is that they have been virtually entirely dividends and capital gains, resulting in a generally lower tax rate than for interest for most taxable investors.
The fund is available only to accredited investors in Ontario. If you are a Canadian accredited investor not in Ontario with a substantial amount of money to invest, contact me and we can discuss the possibility of Hymas Investment Management Inc. (HIMI) applying for registration in your province or territory.
For more information and documents regarding the fund, see the HIMI website

MAPF

MAPF Returns : October 31, 2006

The monthly return for Malachite Aggressive Preferred Fund has been calculated – it was calculated some time ago, actually, and I’m just getting around to updating the websites!

 The unit price as of October 31, 2006, was $9.6628
Returns may therefore be calculated as:

Period Ending October 31, 2006 Return (see Note)
Month +0.48%
Year +6.32%
Two Years (Annualized) +6.38%
Three Years (Annualized) +9.31%
Four Years (Annualized) +13.36%
Five Years (Annualized) +10.30%
MAPF returns are shown after expenses, but before fees.

Note that past performance should not be taken as a guarantee of future performance. You can lose money investing in MAPF or any other investment.
The nice thing about these returns is that they have been virtually entirely dividends and capital gains, resulting in a generally lower tax rate than for interest for most taxable investors.

The fund is available only to accredited investors in Ontario. If you are a Canadian accredited investor not in Ontario with a substantial amount of money to invest, contact me and we can discuss the possibility of Hymas Investment Management Inc. (HIMI) applying for registration in your province or territory.

For more information and documents regarding the fund, see the HIMI website

I have resumed transmission of information regarding the fund to Globefund. I confess to some amusement at the fact that MAPF – 100% invested in TSX listed preferred shares and the occasional preferred security – is categorized as “Canadian Equity” and gets THREE STARS anyway, despite the very favourable conditions for actual equity funds over the past few years.