Month: September 2007

Not a lot of change in the sectoral composition of the fund’s holdings since the July 31, 2007 analysis. There is an increased allocation (up 6%) to PerpetualDiscount issues, a decreased amount (down 13%) to PerpetualPremium and an increase (+12%) in cash. As always, these changes do not imply a change in view of overall future market performance, but are the result of tactical trades which aim to take advantage of pricing inefficiencies between issues.

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.

The cash is not held in the portfolio for any kind of market-timing reason – I have bids in the marketplace to get it invested … as soon as someone gets desperate to unload their holdings! 

Credit distribution is:

Credit quality of the portfolio has improved a little since last month and remains within normal bounds. The variances in credit be constant as opportunistic trades are executed.

Liquidity Distribution is:

Liquidity has increased over the month.

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 August’s performance is available here.

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.