Trading activity increased slightly in May, with portfolio turnover of about 90%, as the market extended its gains.
Trades were, as ever, triggered by a desire to exploit transient mispricing in the preferred share market (which may the thought of as “selling liquidity”), rather than any particular view being taken on market direction, sectoral performance or credit anticipation.
| MAPF Sectoral Analysis 2009-5-29 | |||
| 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 | 11.1% (0) | 11.67% | 6.93 |
| Interest Rearing | 0% | N/A | N/A |
| PerpetualPremium | 0.0% | N/A | N/A |
| PerpetualDiscount | 69.8% (+6.5) | 6.73% | 12.90 |
| Fixed-Reset | 12.5% (-6.7) | 5.38% | 4.32 |
| Scraps (OpRet) | 6.2% (+0.5) | 13.19% | 5.02 |
| Cash | +0.6% (0) | 0.00% | 0.00 |
| Total | 100% | 7.47% | 10.61 |
| Totals and changes will not add precisely due to rounding. Bracketted figures represent change from April month-end. Cash is included in totals with duration and yield both equal to zero. | |||
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.
The important change was the shift from FixedResets into PerpetualDiscounts. The initial trade spawned important knock-on trades towards the end of the month:
| Shift from FixedReset to PerpetualDiscounts | ||||
| Date | CM.PR.M | CM.PR.D | HSB.PR.C | SLF.PR.B |
| 5/1 | Sold 26.90 |
Bot 20.85 |
||
| 5/27 | Sold 22.15 |
Bot 19.95 |
||
| 5/29 | Sold 20.49 |
Bot 18.10 |
||
| 5/29 Close |
26.68-80 | 22.00-27 | 20.00-46 | 18.05-19 |
Credit distribution is:
| MAPF Credit Analysis 2009-5-29 | |
| DBRS Rating | Weighting |
| Pfd-1 | 40.4% (-13.6) |
| Pfd-1(low) | 23.8% (+4.7) |
| Pfd-2(high) | 9.5% (+8.6) |
| Pfd-2 | 0% (0) |
| Pfd-2(low) | 19.7% (+0.1) |
| Pfd-3(high) | 6.2% (+0.5) |
| Cash | +0.6% (0) |
| Totals will not add precisely due to rounding. Bracketted figures represent change from April month-end. | |
The increase in weighting of Pfd-2(high) reflects the purchase of POW.PR.D, accumulated as follows:
| Accumulation of POW.PR.D | |||
| Date | GWO.PR.I | SLF.PR.B | POW.PR.D |
| 4/30 Close |
16.33-50 | 17.17-37 | 18.54-59 |
| 5/20 | Sold 17.08 |
Bot 18.65 |
|
| 5/21 | Sold 17.47 |
Bot 18.80 |
|
| 5/26 | Sold 18.25 |
Bot 18.74 |
|
| 5/29 Close |
17.50-78 | 18.05-19 | 18.75-79 |
| Dividends | Missed 0.28125 |
Earned 0.30 |
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. The overall credit quality of the portfolio is now superior to the credit quality of CPD at August month-end (when adjusted for the downgrade of BCE).
Claymore provides the following ratings breakdown:
| Ratings Breakdown as of 12/31/08 |
|
| Pfd-1 | 61.15% |
| Pfd-2 | 23.26% |
| Pfd-3 | 15.60% |
Two events have occurred since the Dec. 31 calculation date of CPD’s credit quality:
- Rebalancing of TXPR index with only a slight change in quality
- Downgrade of BCE: CPD holds about 4.3% of its portfolio in BCE issues
Liquidity Distribution is:
| MAPF Liquidity Analysis 2009-5-29 | |
| Average Daily Trading | Weighting |
| <$50,000 | 1.9% (+1.5) |
| $50,000 – $100,000 | 19.1% (-1.6) |
| $100,000 – $200,000 | 31.6% (-21.7) |
| $200,000 – $300,000 | 31.5% (+25.4) |
| >$300,000 | 15.5% (-3.7) |
| Cash | +0.6% (0) |
| Totals will not add precisely due to rounding. Bracketted figures represent change from April month-end. | |
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 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 similar portfolio composition analysis has been performed on The Claymore Preferred Share ETF (symbol CPD) as of August 29. When comparing CPD and MAPF:
- MAPF credit quality is better
- MAPF liquidity is similar
- MAPF Yield is higher
- Weightings in
- MAPF is more exposed to PerpetualDiscounts
- MAPF is much less exposed to Operating Retractibles
- MAPF is more exposed to SplitShares
- MAPF is less exposed to FixFloat / Floater / Ratchet
- MAPF weighting in FixedResets is similar
BPO & BPP: S&P Revises Outlook to Negative
Monday, June 1st, 2009Standard and Poor’s has announced:
BPO has the following preferred issues outstanding: BPO.PR.F, BPO.PR.H, BPO.PR.I, BPO.PR.J, BPO.PR.K.
BPP has the following preferred issues outstanding: BPP.PR.G, BPP.PR.J & BPP.PR.M. Each of these issues were mentioned on PrefBlog in the post BAM / BPP Floater Credit Inversion.
BPO.PR.F & BPO.PR.H were added to the S&P/TSX Preferred Share Index in the July 2007 rebalancing. BPO.PR.I was added and BPO.PR.J was removed in the July 2008 rebalancing.
All are tracked by HIMIPref™ all have been relegated to the Scraps index on credit concerns.
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