MAPF Portfolio Composition: March 2011

Turnover declined dramatically in March, to about 17%. Now that the portfolio has repositioned itself to account for OSFI’s refusal to grandfather extant Tier 1 Capital, we are back to the slow trading of positions based on changes in relative value.

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 2011-3-31
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 4.2% (+2.4) 6.28% 6.43
Interest Rearing 0% N/A N/A
PerpetualPremium 0.0% (0) N/A N/A
PerpetualDiscount 5.9% (-5.2) 5.60% 14.54
Fixed-Reset 8.4% (-2) 3.43% 2.86
Deemed-Retractible 71.9% (+6.6) 6.12% 8.18
Scraps (Various) 10.2% (+0.4) 7.06% 10.68
Cash -0.6% (-2.0) 0.00% 0.00
Total 100% 6.00% 8.33
Totals and changes will not add precisely due to rounding. Bracketted figures represent change from February month-end. Cash is included in totals with duration and yield both equal to zero.
DeemedRetractibles are comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD. These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31, in addition to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital and the January, February and March, 2011, editions of PrefLetter for the rationale behind this analysis.

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 2011-3-31
DBRS Rating Weighting
Pfd-1 0 (0)
Pfd-1(low) 43.1% (+3.4)
Pfd-2(high) 28.0% (+1.8)
Pfd-2 0 (0)
Pfd-2(low) 18.7% (-4.1)
Pfd-3(high) 6.6% (+1.5)
Pfd-3 3.6% (+0.3)
Pfd-3(low) 0.0% (-1.6)
Cash -0.6% (-2.0)
Totals will not add precisely due to rounding. Bracketted figures represent change from February month-end.
A position held in ELF preferreds has been assigned to Pfd-2(low)

Liquidity Distribution is:

MAPF Liquidity Analysis 2011-3-31
Average Daily Trading Weighting
<$50,000 0.0% (-1.6)
$50,000 – $100,000 14.2% (-9.3)
$100,000 – $200,000 40.0% (+16.0)
$200,000 – $300,000 5.8% (-7.5)
>$300,000 40.5% (+4.4)
Cash -0.6% (-2.0)
Totals will not add precisely due to rounding. Bracketted figures represent change from February 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. 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) or 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 31, 2010, and published in the September, 2010, PrefLetter. While direct comparisons are difficult due to the introduction of the DeemedRetractible class of preferred share (see above) it is fair to say:

  • MAPF credit quality is better
  • MAPF liquidity is a higher
  • MAPF Yield is higher
  • Weightings in
    • MAPF is much more exposed to DeemedRetractibles
    • MAPF is much less exposed to Operating Retractibles
    • MAPF is slightly more exposed to SplitShares
    • MAPF is less exposed to FixFloat / Floater / Ratchet
    • MAPF weighting in FixedResets is much lower

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