The fund was able to post superb performance in January, greatly in excess of its benchmark. In fact, all I need to do to have a great year is to break even for the next eleven months!
For clients, I must say that I am relieved that absolute return has finally joined relative return in the black.
| Returns to January 30, 2009 |
| Period |
MAPF |
Index |
CPD
according to
Claymore |
| One Month |
+10.45% |
+3.98% |
N/A% |
| Three Months |
+17.34% |
-1.22% |
N/A% |
| One Year |
+4.86% |
-13.84% |
N/A |
| Two Years (annualized) |
+2.71% |
-9.68% |
|
| Three Years (annualized) |
+3.66% |
-5.26% |
|
| Four Years (annualized) |
+4.18% |
-3.15% |
|
| Five Years (annualized) |
+5.63% |
-1.65% |
|
| Six Years (annualized) |
+8.95% |
0.00% |
|
| Seven Years (annualized) |
+8.05% |
+0.40% |
|
| The Index is the BMO-CM “50” |
| CPD Returns are for the NAV and are after all fees and expenses. |
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.
All I can say is … don’t expect this every month, folks! Extreme inefficiency in the preferred share market made trading highly profitable and returns were also enhanced by receipt of retraction proceeds from the split-shares WFS.PR.A and FFN.PR.A
When it works, it really, really works!
The yields available on high quality preferred shares remain elevated, which is reflected in the current estimate of sustainable income.
| Calculation of MAPF Sustainable Income Per Unit |
| Month |
NAVPU |
Portfolio
Average
YTW |
Leverage
Divisor |
Securities
Average
YTW |
Sustainable
Income |
| June, 2007 |
9.3114 |
5.16% |
1.03 |
5.01% |
0.4665 |
| September |
9.1489 |
5.35% |
0.98 |
5.46% |
0.4995 |
| December, 2007 |
9.0070 |
5.53% |
0.942 |
5.87% |
0.5288 |
| March, 2008 |
8.8512 |
6.17% |
1.047 |
5.89% |
0.5216 |
| June |
8.3419 |
6.034% |
0.952 |
6.338% |
$0.5287 |
| September |
8.1886 |
7.108% |
0.969 |
7.335% |
$0.6006 |
| December, 2008 |
8.0464 |
9.24% |
0.992 |
9.166% |
$0.7375 |
| January 2009 |
8.8875 |
8.17% |
1.008 |
8.105% |
$0.7203 |
NAVPU is shown after quarterly distributions.
“Portfolio YTW” includes cash (or margin borrowing), with an assumed interest rate of 0.00%
“Securities YTW” divides “Portfolio YTW” by the “Leverage Divisor” to show the average YTW on the securities held; this assumes that the cash is invested in (or raised from) all securities held, in proportion to their holdings.
“Sustainable Income” is the best available estimate of the fund’s dividend income per unit, before fees and expenses. |
As discussed in the post MAPF Portfolio Composition: January 2009, the fund has positions in splitShares, which complicate the calculation greatly. Since the yield is, by and large, higher than that of the perpetuals despite the fact that the term is limited, the sustainability of the calculated “sustainable yield” is suspect, as discussed in August.
Additionally, the calculated yield for the fixed-floater in the portfolio, BCE.PR.I, depends on the presumed value of Canada Prime (3.00%) and the percentage of Canada Prime paid on par value (100%); both of these figures may change. Prime did, in fact, change this month and the presumed future dividend payments for BCE.PR.I changed from $25 * 0.035 = 0.875 to $25 * 0.03 = 0.75. This effect accounted for the bulk of the decline in estimated sustainable income … but frankly, I’m happy that trading in the fund was effective in offsetting the negative effects on the calculation of reducing the holdings of high-yielding short-term instruments, the split shares.
However, if the entire portfolio except for the PerpetualDiscounts were to be sold and reinvested in these issues, the yield of the portfolio would be the 7.28% shown in the January 30 Portfolio Composition analysis (which is in excess of the 6.85% index yield on January 30). Given such reinvestment, the sustainable yield would be 8.8875 * 0.0728 = $0.6470, an increase from the $0.6027 derived by a similar calculation last month.
Different assumptions lead to different calculations, but the overall positive trend is apparent. I’m very pleased with the results! It will be noted that if there was no trading in the portfolio, one would expect the sustainable yield to be constant (before fees and expenses). The success of the fund’s trading is showing up in
- the very good performance against the index
- the long term increases in sustainable income per unit
As has been noted, the fund has maintained a credit quality equal to or better than the index; outperformance is due to constant exploitation of trading anomalies.
The fixed-floater postion discussed last month remains – but is much more profitable than it was
| Post-Mortem on BCE.PR.I Purchase |
| Date |
BCE.PR.I |
SLF.PR.E |
BMO.PR.K |
NA.PR.L |
| Nov. 28 |
17.00 |
13.60 |
16.75 |
15.00 |
| Dec. 22 |
Bought
13.00 |
Sold
12.50 |
|
|
| Dec 23 |
Bought
13.03 |
|
Sold
15.50 |
Sold
14.36 |
Closing Bid
Dec 31 |
13.50 |
15.18 |
18.51 |
15.58 |
Closing Bid
Jan. 30 |
15.80 |
15.48 |
19.58 |
17.66 |
Dividend
Effects
December |
Earned
$0.29 |
None |
None |
None |
Dividend
Effects
January |
None |
None |
None |
Missed $0.30 |
So, again, there are no predictions for the future. The fund will continue to trade between issues in an attempt to exploit market gaps in liquidity, in an effort to outperform the index and keep the sustainable income per unit – however calculated! – growing.