There was a good level of trading in December, most of it intra-sector.
| MAPF Sectoral Analysis 2007-12-31 | |||
| 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 | 29% (-9) | 6.82% | 5.56 |
| Interest Rearing | 0% | N/A | N/A |
| PerpetualPremium | 0% | N/A | N/A |
| PerpetualDiscount | 64% (+2) | 5.48% | 14.70 |
| Scraps | 0% | N/A | N/A |
| Cash | 6% (+6) | 0.00% | 0.00 |
| Total | 100% | 5.53% | 11.10 |
| Totals will not add precisely due to rounding. Bracketted figures represent change from November month-end. |
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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.
Credit distribution is:
| MAPF Credit Analysis 2007-12-31 | |
| DBRS Rating | Weighting |
| Pfd-1 | 44.5% (+10.5) |
| Pfd-1(low) | 13.0% (-4.0) |
| Pfd-2(high) | 7.8% (+7.8) |
| Pfd-2 | 13.7% (-7.3) |
| Pfd-2(low) | 15.1% (-11.9) |
| Cash | 5.8% (+5.8) |
| Totals will not add precisely due to rounding. Bracketted figures represent change from November month-end. |
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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.
Liquidity Distribution is:
| MAPF Liquidity Analysis 2007-12-31 | |
| Average Daily Trading | Weighting |
| <$50,000 | 0.9% (-0.1) |
| $50,000 – $100,000 | 0.5% (+0.5) |
| $100,000 – $200,000 | 7.8% (-55.2) |
| $200,000 – $300,000 | 28.3% (+10.3) |
| >$300,000 | 56.6% (+38.6) |
| Cash | 5.8% (+5.8) |
| Totals will not add precisely due to rounding. Bracketted figures represent change from November month-end. |
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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.
The fund’s performance and the performance of the indices has already been discussed.
Update: Some doubting Thomases, unconvinced of the abject failure of the Efficient Market Hypothesis in characterizing the Canadian preferred share market, might object that outperformance this month is due simply to long duration in an up-month.
I attach a graph and an associated Regression Report plotting total return against Modified Duration (YTW) of issues in the HIMIPref™ Universe that are in the top three rating classes (by DBRS). It may be seen that although Specific Risk increases with MD-YTW, there does not appear to be any Systemic Risk associated with term … at least, not this month!
As a further illustration, I attach an evaluation of the December performances of the individual issues in the PerpetualDiscount index, sorted by performance and by issuer.
While classes will very often show a normal qualitative relationship amongst themselves, variance is generally very high compared to the average (in other words, there’s a lot of noise around each signal).
