Category: MAPF

Malachite Aggressive Preferred Fund has been valued for August, 2007, month-end. The unit value is $9.3309. Returns over various periods are:

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.

The fund underperformed this month; there were two major reasons for this:

• A position in BAM.PR.M / BAM.PR.N underperformed. What can I say? The fund bought them when they were cheap (according to me!) and they promptly declined to a level where they’re stupid-cheap (according to me!). It happens. Volume in these issues has picked up substantially since the mid-month price collapse and the price has recovered somewhat.
• The fund has a large weighting in split-shares, which underperformed this month. The market is currently deeply discounting split shares as a class, as I noted in a post on August 28 

A disappointing month, but beating the index every single month is a difficult thing to do!  I’ll just keep grinding away and swapping issues when the odds (according to me!) are in my favour.

Claymore has published their final monthly numbers and I have derived the following table:

It should be explicitly noted that the CPD returns are shown AFTER ALL FEES AND EXPENSES, while the MAPF numbers are shown after expenses, but before fees … so to make the numbers more comparable, take the annual fee from the fund’s web page and divide by the appropriate number to obtain the period’s fee.

So, while August’s returns were sub-par, the quarterly number still looks very good. 

Trading in August was actually very quiet (with the exception of a BAM.PR.M / BAM.PR.N swap). Volumes were low, spreads were high; I put in quite a few limit orders to try to take advantage of the high spreads, but there were only a few traders out there sufficiently desperate to trade that they were willing to accept my lousy prices. A return of volume in September will, I hope, lead to increased trading possibilities. 

The DPS.UN NAV for August 29 has been published, so we can calculate the August-ish returns for it:

Now, to see the DPS.UN quarterly NAV approximate return, we refer to the calculations for June-ish and July-ish to derive:

So we have the same pattern: underperformance over a one-month period, but out-performance over three months.  

Note that the DPS.UN returns are net of all fees and expense, while the MAPF returns shown above are after expenses, but BEFORE FEES.

To see MAPF performance for a wide variety of periods, with comparisons to the BMO Capital Markets 50 Index (formerly the BMO-NB 50 Index), please see the fund’s main page, where there are numerous links under the heading “Performance”.

Update: Portfolio composition as of August 31 is discussed here.

Not a lot of change in the sectoral composition of the fund’s holdings since the June 29, 2007 analysis. Were it not for the other tables, readers might be forgiven for wondering whether there have been any changes at all!

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.), and readers may make their own adjustments to reflect interest. 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.

Credit distribution is:

There has been a slight decline in credit quality,  but quality is still well within normal bounds. The variances in credit be constant as opportunistic trades are executed.

Liquidity Distribution is:

Liquidity has declined somewhat from June’s elevated levels and are now comparable to that found in the analysis of the Claymore ETF April Portfolio.

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 on 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 discussion of July’s performance is available here.

Malachite Aggressive Preferred Fund has been valued for July, 2007, month-end. The unit value is $9.3627. Returns over various periods are:

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.

I’m very happy with the results. The NAV for the Claymore ETF (CPD on the TSX) is not yet available, but as of July 30, they were up only 5bp-and-a-hair on the month, so it looks like I earned my fees. Note that last month I expressed concern that I would underperform this month, since the BCE/Teachers deal was announced subsequent to month-end and was expected to boost returns of the BCE Prefs considerably. Well, returns of BCE Prefs were outrageous this month, I didn’t hold any, CPD did … but I outperformed anyway. Sometimes it works! (Not all the time, unfortunately!)

I will discuss performance further tomorrow, in an update to this post.

Update & Bump, 2007-08-01:

Claymore has published their final monthly numbers and I have derived the following table:

It should be explicitly noted that the CPD returns are shown AFTER ALL FEES AND EXPENSES, while the MAPF numbers are shown after expenses, but before fees … so to make the numbers more comparable, take the annual fee from the fund’s web page and divide by the appropriate number to obtain the period’s fee.

Still, I’m very pleased with these recent results.

Trading during the month returned to normal levels (about 30-35% of the portfolio turned over in July) from June’s frenetic activity. I would certainly like to see more volatility, but I’ll take what I can get! The recent excitement with US Junk Bonds hasn’t really affected the Canadian Preferred market to any huge degree, but it should be noted that Pfd-3 credit spread has increased markedly. The spreads referred to in the linked graph, by the way, represents the spread between Pfd-2 and Pfd-3, and are shown on an after-tax basis.

However, MAPF doesn’t really care a lot about the Pfd-3 spread – holdings continue to be of higher quality and this is not expected to change. Those tempted by the higher yields on Pfd-3 issues should take to heart my cardinal rule: no more than 10% of total holdings in Pfd-3 issues, and no more than 5% in any single Pfd-3 name.

And now … we will see what August brings!

Update, 2007-08-03 The DPS.UN NAV for August 1 has been published, so we can calculate the July-ish returns for it:

It should be noted that the DPS.UN returns for July, estimated as +1.38%, slightly exceed the “BMO Capital Markets 50” index, which came in at +1.33%. DPS.UN strongly outperformed CPD, with a heartfelt ‘thank-you’ to its overweighting in BCE issues.

Now, to see the DPS.UN quarterly NAV approximate return, we refer to the calculations for June-ish and May-ish and construct the following table:

So by this measure MAPF did indeed underperform the competition in July, due to relative weightings in BCE, but out-performed quite handsomely over the prior three months. Note that the DPS.UN returns are net of all fees and expense, while the MAPF returns shown at the top of this post are after expenses, but BEFORE FEES.

To see MAPF performance for a wide variety of periods, with comparisons to the BMO Capital Markets 50 Index (formerly the BMO-NB 50 Index), please see the fund’s main page, where there are numerous links under the heading “Performance”.

Update #2, 2007-08-03: Y’know, something’s just occurred to me, looking at that quarterly data and particularly the monthly data whence it is derived.

At some point in the future some extremely sophisticated ultra-quantitative high-powered analytical shop is going to look at these results with a view towards recommending whether their client should allocate Hymas Investment some assets. They’ll put an MBA in charge of the research.

As we all know, a long time ago, MBA stood for “More Bad Assets”. Then it stood for “Mexico, Brazil, Argentina”. I suppose that someday soon it will stand for “Mortgages, Banks, ABXs”. But that’s beside the point.

Anyway, this MBA won’t know or care about what I held vis a vis the index in the past few months. “Meaningless details!”, he’ll bark. “I’m an extremely sophisticated high-powered ultra-quant! Just yesterday, I showed my mummy a spreadsheet! Results! Don’t give me stories, give me results! Do you know who I had lunch with last week?”

So he’ll look at my results. While the past few months, taken as a whole, will certainly improve the relative returns of my fund, they will also significantly increase the standard deviation of my returns.

I’ll end up losing the account. “Too much variance! Nice returns – but too risky!” Disdaining BCE prefs might end up costing me business.

Update, 2007-8-6: Portfolio composition is discussed here.

Well, if you thought portfolio composition changed dramatically from April 30 to May 31, just take a gander at the June 29 composition!

Sharp-eyed readers will observe that 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.), and may make their own adjustments to reflect interest. The average YTW on the securities-only portion of the portfolio, for instance, is actually about 5.01% … it is the 3% leverage factor that brings it up to 5.16%. MAPF will often have relatively large cash balances to facilitate trading.
These sharp-eyed readers will also note, with a certain amount of glee, that the percentages do not add up to exactly 100% in the above or the following tables. This is due to rounding. You know something? Sharp-eyed readers really bug me.
Credit distribution is:

Liquidity Distribution is:

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 on 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 discussion of June’s performance is available here.

Malachite Aggressive Preferred Fund has been valued for June, 2007, month-end. The unit value is $9.3114, after a dividend distribution of $0.066279. Returns over various periods are:

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.

Well, that’s the worst quarter for the fund since 2Q04. So why am I happy? Let’s have a look at how the Claymore ETF did on the month – regular readers of this blog will be familiar with this fund, which is a useful passive benchmark.

Diversified Preferred Share Trust, DPS.UN on the Toronto exchange, has the anti-social practice of not publishing month-end NAV numbers, but we’ll do what we can: 

So Malachite, after expenses but before fees, beat the passive alternative (after expenses & fees) by nearly two percent in a single month.

It is, of course, unpleasant to lose money. A sensible investor will expect such things to happen occasionally and will not attempt to time the market, but will make an overall asset allocation based on reasonable medium term expectations of returns. The asset allocation should be reviewed on a regular basis, of course, to ensure that changes in expectations and investment needs are reflected in the portfolio, but a rationally active investor will attempt to outperform within each relatively homogeneous asset class without market timing. From this perspective, an outperformance of nearly 2% in a bad month is just as good as the same outperformance in a good one.

While June 29 BMO-NB50 index numbers are not yet available, I expect to see a return of roughly -5.25% on the quarter … which makes the MAPF return (after expenses, before fees) of -1.59% look pretty good! If the fund can outperform at the rate of about 3.6% per quarter forever … well, I’d be very happy, but I’m not going to bet on it! I’m happy when I can earn my fees by delivering net out-performance within the asset class to unitholders. 

Trading during the month was frantic, as I predicted last month. Shares with a book value in excess of 90% of the total book value at the end of May were sold and replaced with new purchases. This incurred commission expenses of about 0.50% , so those who have been hoodwinked into the belief that the Trading Expense Ratio is an important number will certainly not wish to invest in the fund! I suspect that the BCE/Teachers deal and the proposed redemption of the BCE Preferreds at a very high price relative to current market will lead to continued turmoil in the market and lots more trading in July … but we will see!

The noted BCE/Teachers deal may be expected to boost the market price of BCE preferreds considerably when markets re-open on July 3 – and MAPF doesn’t hold any! Such is life … as I’ve noted before, in the absence of good information about a deal (and remember, preferred shareholders haven’t actually seen any Teachers’ money yet) BCE preferreds are just a crapshoot on credit … and MAPF doesn’t play craps! The underlying philosophy of the fund continues to be that investment-grade preferred shares are bundles of cash-flows trading at fluctuating prices and that money can be made by weighing these bundles of cash-flows to determine value based on reliable public information and trading to exploit inefficiencies – not by taking a wild guess and hoping to strike the jackpot.

If the BCE Prefs move to within “arbitrage difference” of the offering prices disclosed in the BCE press release, I expect DPS.UN & CPD to outperform MAPF over the next month. However, if something should happen to the deal … like, maybe, Telus moving in, or some private equity guys coming along with a credible hostile bid, negatively affecting perceptions of the BCE prefs’ quality … maybe they won’t. But you will not see MAPF making bets like that! Once credit gets called into question, I start getting very nervous! At worst, I do not anticipate that MAPF underperformance due to BCE will exceed the outperformance in the second quarter that is largely due to not holding in on the downside. Note that BCE prefs represent about 7-10% of the value of the passive funds.

The distribution of dividend income for the quarter was small, which is most gratifying. Given that the fund now has a realized capital loss on the year to date, it is tax-efficient to emphasize capital gains (or reduced capital losses!) over receipt of dividend income and some trading took advantage of this … particularly since it seemed that RBC had a client pursuing an aggressive dividend capture strategy! I don’t have a lot of control over the capital gain/dividend split, but HIMIPref™ does account for the difference in taxation and potential trades are nudged a little.

Portfolio characteristics as of the end of June are discussed in another post.

Malachite Aggressive Preferred Fund has been valued for May, 2007, month-end. The unit value is $9.3259. Returns over various periods are:

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.

Well, this month’s returns remind me of the story about the broken-down old gambler, heading to the racetrack with the milk money and telling his buddy “I hope I break even today – I need the money!”.

The total return before fees was -0.88% and I certainly don’t want too many more months in a row of that stuff! However, when it is compared with the various HIMI indices, one realizes that it could have been a lot worse.

When one examines the returns of the passive funds in that last link, one realizes that for most people, it was indeed a lot worse: the Net Asset Value Per Share of CPD was down 2.36% on the month and DPS.UN probably did worse.

The markets will fluctuate. An investor who does not indulge a penchant for market-timing will simply select an appropriate asset allocation and try to outperform within each asset class … and, when looked at from the perspective of such an investor, losing less money in a bad month is just as good as making more money in an up month. I’m very pleased that the fund was fully invested throughout May and yet still managed to lose so little money.

The fund did a fair amount of trading during the month and a fair amount of investment was shifted from the SplitShare sector into the PerpetualPremium sector, as retail scrambled to sell anything with the word “Perpetual” in its description. I have already posted the sectoral characteristics at month-end.

I anticipate a heavy trading volume in June, when the non-engaged segment of retail gets a look at their statements and as the fundcos attempt to beautify their portfolio statements for their semiannual reports. But who knows? Stay tuned!

Update, 2007-6-15: Sentry Select has posted the historical returns for DPS.UN:

There have been a fair number of changes in portfolio composition since the April 30 analysis. With the huge volatility in the market, trading opportunities have been numerous!

Sharp-eyed readers will observe that 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.), and may make their own adjustments to reflect interest. The average YTW on the securities-only portion of the portfolio, for instance, is 4.85%. MAPF will often have relatively large cash balances to facilitate trading.

These sharp-eyed readers will also note, with a certain amount of glee, that the percentages do not add up to exactly 100% in the above or the following tables. This is due to rounding. You know something? Sharp-eyed readers really bug me.

Credit distribution is:

Liquidity Distribution is:

Update: I forgot the ad! 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 on 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.

For reasons that will become clear with the release of the June edition of Canadian Moneysaver, I thought I would disclose the broad characteristics of the MAPF Portfolio as of last month end:

Sharp-eyed readers will observe that the “total” reflects the un-leveraged total portfolio, and may make their own adjustments to reflect interest costs incurred on the cash debit. MAPF will often have relatively large cash balances to facilitate trading.

They will also note, with a certain amount of glee, that the percentages do not add up to exactly 100% in this or the following tables. This is due to rounding. You know something? Sharp-eyed readers really bug me.

Credit distribution is:

Liquidity Distribution is:

Just in case anybody’s interested! Incidentally … cash, calculated on a trade-date basis on 2007-5-11, is basically as close to zero as it ever will be. But who knows? I might get half a trade done on Monday!

A number of questions regarding the fund were asked on Financial Webring Forum. While that is certainly a great venue for asking questions, I don’t feel comfortable answering them there – so I’ll answer here.

Is Malachite MAPF good alternative (to DPS.UN) for qualified accredited investors? Well, I certainly like to think so! DPS.UN is a closed-end passive fund trading on the TSX with a MER of about 56bp. As far as MAPF is concerned, it is my belief that the preferred share market is sufficiently inefficient that significant gains can be made by trading between issues from time to time. The historical results that the fund has been able to achieve support this view. There can be no guarantee that outperformance will continue, but I think that index +2% (after expenses, before fees) is achievable with a portfolio size much greater than I currently have. With the fee schedule currently in place, net return to unitholders should handsomely exceed the 56-bp-less-than-Index returns expected from a diversified passive fund with a 56bp MER.

What is its MER besides 1% annual fee? Fund expenses have been capped at 50bp, with excess expenses being absorbed by the manager. The fund’s total expenses are sufficiently low that the fund will not have to grow very much before I can stop paying out this money and the rate goes down. Fund expenses are almost entirely due to Audit Fees. Further details are available from the Annual Reports of the fund, which are published on my website.

If its duration is same as 10 year bond, is it safe investment for redemption after 10 years? That depends largely on what you mean by “safe”! It is my opinion that, given the high credit quality of the fund’s investments and their nature, the risk profile of the fund is similar to a corporate bond fund such as iShares CDN Corporate Bond Index Fund (XCB) , with a greater expected after-tax return due to the Dividend Tax Credit and trading based on market inefficiency.

Its returns are better than index since inception. Why is its fund size so small after 5 years? There are a number of hurdles that have to be overcome before the fund can grow in size.

• Investor disbelief that active trading is possible. Liquidity is a problem in the preferred share marketplace, but can be turned into an opportunity. It is difficult for an investor to place an order of, say, 10,000 shares on the TSX and get filled at a known and reasonable price in a short period of time. Patience is required. Many investors are completely unaware of the existence of the Institutional “Upstairs” Market – every brokerage has a pref trader. Institutions can call and ask him to execute a trade – it then becomes his job to find a counterparty and charge both sides a nickel per share commission (or, sometimes, do the trade out of inventory, like David Berry!). Sometimes you get filled, sometimes you get a partial fill, sometimes you get no fill at all. But the market is there – look at the daily volumes I report as part of the highlights every day! Virtually every cross that I mention happened in this manner.
• Pre-tax Returns are (generally) lower than on bonds A silly reason, but important. People compare performances based on pre-tax returns.
• I’m not big enough to be sold through brokers Hymas Investment is not (yet) as big as Investors Group. The brokerage houses will not put MAPF on their permitted list.
• I might run away with all the money. I hate this reason, but I have to face facts. Anybody who knows me won’t worry about this, but those who don’t will account for this risk and sometimes make it the deciding factor. There’s nothing I can do about it, except offer segregated accounts.
• I am a lousy salesman People don’t like being told that everything they thought they knew about the preferred share market is wrong. Those who are willing to believe that active management is possible want a somewhat more exciting story than I’m able to tell … they want to hear that my Crystal Ball tells me the direction of interest rates, and my chicken entrails tell me what’s going to happen to the credit ratings of particular companies … not that there are frequent supply-and-demand imbalances in the marketplace and that you can frequently make as much as twenty cents a share by catering to them. I don’t like going out and chit-chatting – what I like best is to work on my analytical systems and keep improving them. I took the view, when I started the firm, that if I was able to deliver three years of outperformance (five at the outside) the fund would sell itself. I was wrong – but I’m learning a lot about how the fund selling business really works.

When will passive fund version be available? As soon as I am in a position to offer it. MAPF is small and doesn’t make me any net management fees. That’s OK (if disappointing) – the fund serves as an advertisement for my software, for the consulting side of my business (I offer advice to other firms about preferred shares in particular, fixed-income in general and quantitative systems) and for the possibility that a major fundco will (finally!) put their sales force behind an active preferred share product with my firm as manager. But I don’t need two advertisements, especially if the second one advertises passive management! I’ll start a passive fund as soon as I get committments for investment that will allow me to offer a good product and make a little money on the deal … that would be about $5-million, done for fund expenses + 20bp management fee (which would put the total MER in the 30-35 bp range)

Update & Bump, 2007-05-07 from 2007-2-2: A careful reader commented on this thread and I thought it was an important enough question to be worth a reply in the body of the post. The comment is:

MAPF is a very interesting alternative to DPS.UN or CPD. However there is very high turnover on MAPF, with consequent transaction costs and tax implications. Assuming MAPF outperformance of +2% over index, won’t the 1% to 1.5% fee + transaction costs + c.g. taxes minimize any potential outperformance for segregated fund? Thanks.

OK, there are several parts to this question!

The first has to do with turnover & transaction costs. Yes, MAPF has a very high turnover and proportionately high transaction costs. However, I will note that the performance figures presented are NET of transaction costs – I’m not trying to present returns as if commissions were zero! They’re all right there, embedded in the reported returns.

The current focus on Transaction Costs is, I am convinced, a plot by the banks (who just want to sell plain-vanilla closet-index funds run by plain-vanilla portfolio managers making plain-vanilla salaries … but to sell these funds at a high fee), aided and abetted by the securities commissions staff (very few of whom have ever gotten on the ‘phone and told the dealer “Done” in their lives). Because, in and of itself, Transaction Costs don’t mean squat.

Reporting transaction costs for an investment fund is like reporting “Cost of Pencils” for a Bank. Does the bank spend money on pencils? Yup. Would the bank make more money if it got all its pencils for free? Yup. Does breaking out this figure give you any idea as to whether the bank is wisely using its pencil budget to make (however indirectly) more profit? Um … no.

The philosophy of the fund is the same as my philosophy towards investing: you can make good money selling liquidity. When the price of a particular issue goes – as far as I can tell, to the best of my ability – out of bounds by $0.25, do you really want me to forgo the opportunity to trade on this, because I’ll have to pay $0.10 commission? I don’t think you do, really. The $0.10 is simply a cost of doing business and how good I am at judging the potential for such business will be reflected in my returns net of transaction costs versus the index.

“Tax implications” is a much more reasonable concern, but you must remember that preferred shares are – in terms of investment behaviour – fixed income instruments. They are not equities. Equities can double – octuple – n-tuple, which is why turnover & tax is a much more important factor. It’s a very nice thing to defer punishing amounts of capital gains tax until your estate is wound up. Pref’s ain’t gonna do that. The most optimistic long-term view you can take on a pref – or a bond – is that eventually it will be priced at par, when the company forces you to sell it.

While tax implications are accounted for in HIMIPref™ it’s not a major factor. In simulations, I do see some tax-loss selling (for instance, most parameterizations for simulations will swap the Transcanada issues when they went down to about $35 (from par value $50) in 1999/2000), but not much. The tax implications in the system are mainly: do I sell this today and take a capital gain? Or do I sell it tomorrow and take a dividend? Now that these forms of income are taxed very similarly, even this little finesse isn’t very important any more … I just sell when I think I can make some money!

So that takes care of two things: it is mainly through incurring transaction costs that I am able to make some money in the first place; and long term capital gains on bonds are zero (OK, sometimes a pref gets called at a premium. That’s a minor detail.), so you should be happy – no, thrilled! – to pay lovely capital gains taxes on a consistent basis.

Fees. Yes, fees will reduce your returns relative to no fees but, as with transaction costs, it’s the price of doing business. Note that a passively managed fund (such as DPS and CPD) should not be expected to outperform the index gross of fees and expenses on a long term basis; therefore, your expected long term return is the index less fees and expenses, currently 45-50bp on these products. I’m happy with my past track record of delivering returns that exceed the index net of fees and expenses and spend a lot of time trying to figure out how to continue doing it.

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

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.