MAPF Performance: September 2008

The fund underperfomed its benchmark in September, but strongly outperformed the index over the quarter. As an investor, I can’t say I like the volatility any more than my clients do, but as an investment manager I have to say that the immense volatility of the market is leading to most unusual trading opportunities.

The fund’s price at September 30 was $8.1886, after a distribution of $0.168825 per unit, after expenses, but before fees (which are billed individually to each client).

Returns to September 30, 2008
Period MAPF Index
One Month -3.13% -2.59%
Three Months +0.19% -1.88%
One Year -3.72% -6.64%
Two Years (annualized) -1.31% -4.36%
Three Years (annualized) +1.06% -1.64%
Four Years (annualized) +2.53% +0.04%
Five Years (annualized) +5.01% +1.01%
Six Years (annualized) +9.07% +2.02%
Seven Years (annualized) +6.97% +2.20%
The Index is the BMO-CM “50”

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 yields available on high quality preferred shares remain elevated, which is reflected in the current estimate of sustainable income.

Calculation of MAPF Sustainable Income Per Unit
Month NAVPU Portfolio
June, 2007 9.3114 5.16% 1.03 5.01% 0.4665
September 9.1489 5.35% 0.98 5.46% 0.4995
December, 2007 9.0070 5.53% 0.942 5.87% 0.5288
March, 2008 8.8512 6.17% 1.047 5.89% 0.5216
June 8.3419 6.034% 0.952 6.338% $0.5287
September, 2008 8.1886 7.108% 0.969 7.335% $0.6006
NAVPU is shown after quarterly distributions.
“Portfolio YTW” includes cash (or margin borrowing), with an assumed interest rate of 0.00%
“Securities YTW” divides “Portfolio YTW” by the “Leverage Divisor” to show the average YTW on the securities held; this assumes that the cash is invested in (or raised from) all securities held, in proportion to their holdings.
“Sustainable Income” is the best available estimate of the fund’s dividend income per unit, before fees and expenses.

The fund has positions in two “Split Share” preferreds – terribly out of fashion at this time and trading at yields higher than the perpetuals – which, as explained last month results in the calculation being rendered somewhat suspect. If these positions were sold – at the closing bid on 9/30 – and the proceeds reinvested in rest of the portfolio, the resultant portfolio would yield 6.608% and the estimated sustainable dividend per unit (before fees and expenses) would be $0.5411; significantly less than the figure calculated above, but still an increase from last month’s adjusted figure and continuing the long-term upward trend.

It will be noted that if there was no trading in the portfolio, one would expect the sustainable yield to be constant (before fees and expenses). The success of the fund’s trading is showing up in

  • the very good performance against the index
  • the long term increases in sustainable income per unit

At some point – and I won’t guess when that time will be! – the market will cease its decline and, probably, return to its normal levels of between 100bp and 150bp above long term corporates, which in turn will return to more normal levels against long term Canadas. At the moment, however, people are scared, the market is sloppy and trading opportunities abound.

More later.

Update, 2008-10-19: I note that according to Claymore the performance of CPD – as measured by its NAV – was -8.38% in the year to September 30. This figure is net of all fees and expenses; but is significantly worse than the actively traded MAPF.

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