Turnover declined in August to an anemic 13%.
Trades were, as ever, triggered by a desire to exploit transient mispricing in the preferred share market (which may be thought of as “selling liquidity”), rather than any particular view being taken on market direction, sectoral performance or credit anticipation.
| MAPF Sectoral Analysis 2010-8-31 | |||
| 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 | 0.6% (-2.3) | 6.99% | 6.79 |
| Interest Rearing | 0% | N/A | N/A |
| PerpetualPremium | 0.0% (0) | N/A | N/A |
| PerpetualDiscount | 86.7% (+4.1) | 5.88% | 14.10 |
| Fixed-Reset | 8.9% (-1.2) | 4.11% | 3.43 |
| Scraps (FixedReset) | 4.0% (-0.2) | 6.77% | 12.59 |
| Cash | -0.2% (-0.4) | 0.00% | 0.00 |
| Total | 100% | 5.77% | 13.08 |
| Totals and changes will not add precisely due to rounding. Bracketted figures represent change from July 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.
During the month, almost the entire remaining position of BNA.PR.C, a split share based on BAM.A, was swapped into BAM.PR.N, a PerpetualDiscount.
Credit distribution is:
| MAPF Credit Analysis 2010-8-31 | |
| DBRS Rating | Weighting |
| Pfd-1 | 0 (0) |
| Pfd-1(low) | 62.0% (-10.6) |
| Pfd-2(high) | 19.4% (+11.2) |
| Pfd-2 | 0 (0) |
| Pfd-2(low) | 14.8% (-0.1) |
| Pfd-3(high) | 4.0% (-0.2) |
| Cash | -0.2% (-0.4) |
| Totals will not add precisely due to rounding. Bracketted figures represent change from June month-end. | |
The shift of about 11% (net) of the portfolio from Pfd-1(low) to Pfd-2(high) was set in motion by the downgrade of MFC early in the month. As at 2010-7-30, the fund held 16.2% of its portfolio in MFC issues; this figure was 14.7% at month end. The decline was due to both the poor performance of MFC issues in August, and to the fact that these shares went ex-dividend on August 13. A net reduction of less than 0.2% in portfolio weight resulted from a net disposition of MFC shares that occurred when a swap from MFC.PR.C to MFC.PR.B could not be executed in its entirety.
Liquidity Distribution is:
| MAPF Liquidity Analysis 2010-8-31 | |
| Average Daily Trading | Weighting |
| <$50,000 | 0.0% (0) |
| $50,000 – $100,000 | 11.9% (+9.1) |
| $100,000 – $200,000 | 25.5% (-12.0) |
| $200,000 – $300,000 | 31.1% (+2.7) |
| >$300,000 | 31.7% (+0.6) |
| Cash | -0.2% (-0.4) |
| Totals will not add precisely due to rounding. Bracketted figures represent change from July month-end. | |
The increase in holdings of issues with an average daily trading value of less than $100,000 (as defined by HIMIPref™) was due not to trades but to changes in the market: the fund maintains positions in W.PR.J and PWF.PR.L, both of which saw this metric decline from just over the line to just under during August.
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. The fund may be purchased either directly from Hymas Investment Management or through a brokerage account at Odlum Brown Limited. 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 17, 2009, and published in the September, 2009, PrefLetter. When comparing CPD and MAPF:
- MAPF credit quality is better
- MAPF liquidity is a higher
- MAPF Yield is higher
- Weightings in
- MAPF is much more exposed to PerpetualDiscounts
- MAPF is much less exposed to Operating Retractibles
- MAPF is now about equally exposed to SplitShares
- MAPF is less exposed to FixFloat / Floater / Ratchet
- MAPF weighting in FixedResets is much lower