MAPF Performance : November 2007

Malachite Aggressive Preferred Fund has been valued for November, 2007, month-end. The unit value is $8.7845. Returns over various periods are:

MAPF Returns to November 30, 2007
One Month -0.27%
Three Months -4.65%
One Year -4.98%
Two Years (annualized) +0.65%
Three Years (annualized) +2.53%
Four Years (annualized) +5.48%
Five Years (annualized) +10.09%
Six Years (annualized) +8.05%

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 November returns reflect outperformance against CPD (which returned -1.21%) and DPS.UN (estimated at -1.14%).

The quarterly performance still reflects October’s poor performance, which I attributed last month to a move into perpetualDiscount issues that proved to be somewhat early. However, given the quarterly performance of CPD (-4.52%) and DPS.UN (-3.87%), I think I am justified in thinking that the past three months, while disappointing and not reflective of the returns I aim to achieve for clients, have not been a disaster for the fund, which has a superb yield while retaining good credit quality and liquidity.

The BMO-CM-50 Index is not yet available, but I believe that I have outperformed it by about 200bp over the past twelve months. Update: I have just received the report: this index returned -0.83% for the month, -6.55% for the trailing 12 months; hence MAPF has outperformed the index by 157bp over the past twelve months (after expenses, before fees)

The yield is reflected in the current estimate of sustainable income.

Calculation of MAPF Sustainable Income
Month NAVPU Portfolio
April, 2007 9.4083 4.52% 0.89 $0.4778
May 9.3259 4.59% 0.95 0.4506
June 9.3114 5.16% 1.03 0.4665
July 9.3627 5.10% 1.01 0.4728
August 9.3309 4.55% 0.89 0.4770
September 9.1489 5.35% 0.98 0.4995
October 8.8084 5.71% 1.00 0.5030
November, 2007 8.7845 6.11% 1.00 0.5357
NAVPU is shown after distributions of 0.066279 in June
and 0.116224 in September

While I attempt at all times not to say anything that might be interpreted as an exhortation to time the markets, I will say that there are some signs the market is normalizing … it may still be very low, but a few things lead me to believe that irrationality is abating somewhat.

To illustrate my point, I present the following table tracing the flow of money through a series of trades in November within the perpetualDiscount sector that worked out quite well:

A Sequence of MAPF Trades, November 2007
Date 10/31 11/19 11/26 11/30
POW.PR.B Held at
Sold at 23.31  
GWO.PR.G   Bought at 22.99 Sold at 22.59
HSB.PR.D   Bought at 21.71
Held at
Return on Position    +0.78% -1.74%  +2.72% 
 905.0 903.09  900.2  904.3 
   -0.21% -0.32%  +0.46% 

I hope the table is clear! It makes perfect sense to me – but let me know in the comments if it’s really just a jumble of numbers. At any rate, the point is that the money flowing through this series of trades  had a total return of +1.72% for the month, while invested at all times in PerpetualDiscount issues. The PerpetualDiscount index returned -0.07% as has been previously reported.

It would, of course, have been much nicer to have held something other than GWO.PR.G during the period 11/19 to 11/26 – but I didn’t know that when I bought it, did I? And when the HSB.PR.D got cheap – the trade picked up credit, picked up yield AND increased the discount to call price – I had to sell something.

My point is that the sequence of trades was both rapid-fire and profitable. It may have been just a flash in the pan, but that is the sort of trading HIMIPref™ has historically indicated in “normal” markets and its success gives me hope that the market is normalizing.

I just wish the month had ended with December 3 prices … I would have been able to report a gain for November!

Leave a Reply

You must be logged in to post a comment.