There was a substantial amount of trading in September, as a sometimes disorderly decline in prices of PerpetualDiscounts in a confused market brought many opportunities to the Fund. Turnover was again close to 100% for the month, but a high proportion of these trades were intra-issuer (trades between the CM issues were particularly frequent) and most others were intra-sector (PerpetualDiscounts rose at different rates).
Trades were, as ever, triggered by a desire to exploit transient mispricing in the preferred share market (which may the thought of as “selling liquidity”), rather than any particular view being taken on market direction, sectoral performance or credit anticipation.
| MAPF Sectoral Analysis 2008-9-30 | |||
| 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 | 18.5% (-2.0) | 10.43% | 5.20 |
| Interest Rearing | 0% | N/A | N/A |
| PerpetualPremium | 0.3% (0) | 6.28% | 13.49 |
| PerpetualDiscount | 78.0% (+4.9) | 6.61% | 13.09 |
| Scraps | 0% | N/A | N/A |
| Cash | +3.1% (-2.9) | 0.00% | 0.00 |
| Total | 100% | 7.11% | 11.23 |
| Totals and changes will not add precisely due to rounding. Bracketted figures represent change from August 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.
As may be seen, overall portfolio composition is little changed. There were a few small trades in WFS.PR.A which affected the weight in SplitShares; the change in the PerpetualDiscount weight was due to normal fluctuations as trades are entered to the extent that the market provides good prices; zero cash is targetted but is not an over-riding objective as long as the amount is relatively small.
Credit distribution is:
| MAPF Credit Analysis 2008-9-30 | |
| DBRS Rating | Weighting |
| Pfd-1 | 54.7% (+8.6) |
| Pfd-1(low) | 20.7% (-7.2) |
| Pfd-2(high) | 3.5% (+3.5) |
| Pfd-2 | 0.5% (0) |
| Pfd-2(low) | 17.4% (-2.0) |
| Cash | 3.1% (-2.9) |
| Totals will not add precisely due to rounding. Bracketted figures represent change from August month-end. | |
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 Liquidity Analysis 2008-9-30 | |
| Average Daily Trading | Weighting |
| <$50,000 | 0.6% (0) |
| $50,000 – $100,000 | 27.0% (-6.2) |
| $100,000 – $200,000 | 54.8% (+4.7) |
| $200,000 – $300,000 | 14.4% (+4.4) |
| >$300,000 | 0% (0) |
| Cash | 3.1% (-2.9) |
| Totals will not add precisely due to rounding. Bracketted figures represent change from August 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. 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 CPD as of May month end; it should be noted that the underlying TXPR index has been rebalanced and the rebalancing analyzed in Canadian Moneysaver; this article will be republished on PrefBlog in the near future. When comparing CPD and MAPF:
- MAPF credit quality is superior
- MAPF liquidity is somewhat lower
- MAPF Yield is higher
- But … MAPF is more exposed to PerpetualDiscounts and SplitShares
- MAPF is less exposed to Fixed-Resets and Operating Retractibles
[…] my point is that despite my strong disapproval of their actions with respect to the buy-back plan, I have still been willing to invest in WFS.PR.A. Another day, another dollar … if you do business only with people you agree with all the […]