PrefBlog

There was heavy trading in November.

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.), which doesn’t make much of a difference this month. 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 shift from PerpetualDiscount issues into SplitShares was very dramatic, but I must stress that this was not done – and is never done – as a market call on the overall direction of the market. During the month it appeared that there were dramatic undervaluations in specific issues in the SplitShare sector; in order to buy them, something had to get sold!

It’s always useful to do a post-mortem on trades. The following tables are as accurate as I can make them, but I will stress that the trades are rarely precisely cash neutral. If, for instance, I have bought half the number I want of a particular issue at 21.00 during the day, I will not lift an offer at 21.50 just to complete the buying programme! Maybe there is something else that’s attractive on offer; maybe I’ll just keep the cash exposure overnight and put in another bid the next day. It’s important to avoid being too mechanical when trading in a relatively thin market such as preferred shares.

Anyway, here are the basic trades involving the sale of PerpetualDiscounts and the purchase of SplitShares, as well as I can disentangle them!

It should be noted that I am reporting only the specific trades illustrating the transfer of assets from the PerpetualDiscount sector to SplitShares; and at that, there are a few scrappy pieces missing. Full disclosure of all trades is made regularly; the full reports are regularly published on the fund’s main page together with the annual and semi-annual reports.

I will emphasize again that these trades were opportunistic and do not reflect any view on the market; I will also note that I considered BNA.PR.C to be ludicrously cheap, but had to sell the BAM.PR.N perpetuals to get into it in good size without overweighting my exposure to BAM (recall that BNA.PR.C is backed by BAM.A shares).

Credit distribution is:

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.

Liquidity Distribution is:

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.

I’m happy with the portfolio as it now stands. Credit quality and liquidity are good, and yields are well in excess of benchmarks. The positions should do very well as the situation normalizes.

A discussion of November’s performance will be posted shortly.

This entry was posted on Tuesday, December 4th, 2007 at 3:53 pm and is filed under MAPF. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.