Turnover snapped up to 14% in June, aided by a big push into FTS.PR.M.
The distribution of terms-to-reset for the FixedReset portion of the portfolio showed an increasing preference for nearer-term resets, which makes sense given the continued increase in the GOC-5 yield.
Sectoral distribution of the MAPF portfolio on June 30, 2023, were:
| MAPF Sectoral Analysis 2023-6-30 | ||||
| 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 | 0% | N/A | N/A | |
| Interest Rearing | 0% | N/A | N/A | |
| PerpetualPremium | 0% | N/A | N/A | |
| PerpetualDiscount | 0% | N/A | N/A | |
| Fixed-Reset Discount | 78.1% | 9.11% | 10.72 | |
| Insurance – Straight | 0% | N/A | N/A | |
| FloatingReset | 0% | N/A | N/A | |
| FixedReset Premium | 0% | N/A | N/A | |
| FixedReset Bank non-NVCC | 0% | N/A | N/A | |
| FixedReset Insurance non-NVCC | 3.4% | 9.14% | 11.24 | |
| Scraps – Ratchet | 1.5% | 9.65% | 10.45 | |
| Scraps – FixedFloater | 0% | N/A | N/A | |
| Scraps – Floater | 0% | N/A | N/A | |
| Scraps – OpRet | 0% | N/A | N/A | |
| Scraps – SplitShare | 2.2% | 9.84% | 1.73 | |
| Scraps – PerpPrem | 0% | N/A | N/A | |
| Scraps – PerpDisc | 6.0% | 6.91% | 12.69 | |
| Scraps – FR Discount | 6.5% | 11.60% | 9.14 | |
| Scraps – Insurance Straight | 0% | N/A | N/A | |
| Scraps – FloatingReset | 0% | N/A | N/A | |
| Scraps – FR Premium | 0% | N/A | N/A | |
| Scraps – Bank non-NVCC | 0% | N/A | N/A | |
| Scraps – Ins non-NVCC | 2.6% | 9.02% | 11.41 | |
| Cash | -0.3% | 0.00% | 0.00 | |
| Total | 100% | 9.19% | 10.60 | |
| Totals and changes will not add precisely due to rounding. Cash is included in totals with duration and yield both equal to zero. | ||||
| The various “Scraps” indices include issues with a DBRS rating of Pfd-3(high) or lower and issues with an Average Trading Value (calculated with HIMIPref™ methodology, which is relatively complex) of less than $25,000. The issues considered “Scraps” are subdivided into indices which reflect those of the main indices. | ||||
| DeemedRetractibles were comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD, which are not exchangable into common at the option of the company or the regulator. These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31 in the case of banks or normally in the case of insurers and insurance holding companies, in addition to the call schedule explicitly defined. See the Deemed Retractible Review: September 2016 for the rationale behind this analysis and IAIS Says No To DeemedRetractions for the recent change in policy with respect to insurers.
Note that the estimate for the time this will become effective for insurers and insurance holding companies was extended by three years in April 2013, due to the delays in OSFI’s providing clarity on the issue and by a further five years in December, 2018; the estimate was eliminated in November. However, the distinctions are being kept because it is useful to distinguish insurance issues from others. The name of this subindex has been changed to “Insurance Straight” as of November, 2020 |
||||
| Calculations of resettable instruments are performed assuming a constant GOC-5 rate of 3.74%, a constant 3-Month Bill rate of 5.00% and a constant Canada Prime Rate of 6.95% | ||||
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 2023-6-30 | ||
| DBRS Rating | MAPF Weighting | |
| Pfd-1 | 0 | |
| Pfd-1(low) | 0 | |
| Pfd-2(high) | 40.8% | |
| Pfd-2 | 21.2% | |
| Pfd-2(low) | 28.0% | |
| Pfd-3(high) | 3.7% | |
| Pfd-3 | 2.5% | |
| Pfd-3(low) | 3.8% | |
| Pfd-4(high) | 0.3% | |
| Pfd-4 | 0% | |
| Pfd-4(low) | 0% | |
| Pfd-5(high) | 0% | |
| Pfd-5 | 0% | |
| Cash | -0.3% | |
| Totals will not add precisely due to rounding. | ||
| A position held in INE.PR.A is not rated by DBRS nor by S&P, but has been included as “Pfd-4(high)” in the above table on the basis of its last S&P rating of P-4(high) and its BB rating from Fitch. A “BB” rating would normally map to Pfd-3, but the company’s disdain for the two major preferred share agencies makes me nervous. | ||
Liquidity Distribution is:
| MAPF Liquidity Analysis 2023-6-30 | ||
| Average Daily Trading | MAPF Weighting | |
| <$50,000 | 22.6% | |
| $50,000 – $100,000 | 25.2% | |
| $100,000 – $200,000 | 46.7% | |
| $200,000 – $300,000 | 4.8% | |
| >$300,000 | 1.0% | |
| Cash | -0.3% | |
| Totals will not add precisely due to rounding. | ||
The distribution of Issue Reset Spreads is:
| Range | MAPF Weight |
| <100bp | 0% |
| 100-149bp | 6.0% |
| 150-199bp | 11.8% |
| 200-249bp | 66.7% |
| 250-299bp | 2.4% |
| 300-349bp | 2.6% |
| 350-399bp | 1.1% |
| 400-449bp | 0% |
| 450-499bp | 0% |
| 500-549bp | 0% |
| 550-599bp | 0% |
| >= 600bp | 0% |
| Undefined | 9.4% |
Distribution of Floating Rate Start Dates is shown in the table below. This is the date of the next adjustment to the dividend rate, if the issue is currently paying a fixed rate for a limited time; which in practice is successive terms of 5 years. Issues that adjust quarterly are considered “Currently Floating”.
| Range | MAPF Weight |
| Currently Floating | 1.5% |
| 0-1 Year | 27.0% |
| 1-2 Years | 35.8% |
| 2-3 Years | 16.7% |
| 3-4 Years | 10.0% |
| 4-5 Years | 1.1% |
| 5-6 Years | 0% |
| >6 Years | 0% |
| Not Floating Rate | 7.9% |
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 directly from Hymas Investment Management. A “unit trust” is like a regular mutual fund, but are not sold with a prospectus This is cheaper, but means subscription is restricted to “accredited investors” (as defined by the Ontario Securities Commission). Fund past performances are not a guarantee of future performance. You can lose money investing in MAPF or any other fund.
MAPF has a new competitor, of sorts.
I was looking at Brompton’s website and they have created a new ETF, symbol SPLT, which invests solely in split share preferred issues. Brompton states this is a first. The prospectus available on the website states that an unlimted number of shares can be issued. There is a summary of Investment portfolio dated June 14, 2023 which shows a NAV of $1,197,572. At roughly $10.00/share there were about 119,000 shares that day. From the tsx.com websire I see the first day of trading was June 15 and that day 59,698 shares traded.
A distribution rate of 6.25% is promised. The managemnt fee is said to be .5%/year.
The summary of Investment portfolio lists all the holdings and the top 3 holdings are DFN.PR.A, FFN.PR.A and DGS.PR.A. SPLT holds split share preferred issues from Quadravest, Middlefield and PVS as well as Brompton issues. In a brochure promting SPLT on their website there is a chart showing that 4 of the Brompton split share preferreds have outperformed Canadian Corporate Preferred Shares (about .4%/year for 10 years) with returns from 4% to 6%/year for 10 years. If the chart is right MAPF also lags these past returns.
If SPLT trades at a price higher than its NAV I do not plan to be an investor. I do invest in split share preferred stocks. I feel an important right I have is the right to force the retraction of the shares at par periodically. I can make my holdings mature, if it is to my advantage (and if there are enough funds available).
In a brochure promting SPLT on their website there is a chart showing that 4 of the Brompton split share preferreds have outperformed Canadian Corporate Preferred Shares (about .4%/year for 10 years) with returns from 4% to 6%/year for 10 years. If the chart is right MAPF also lags these past returns.
I cannot say I’ve checked every decimal place, but underperformance is reasonable, though of course unfortunate. The fund’s establishing regulation states:
Well, the market’s been incredibly lousy for the past 10+ years, so capital growth has been hard to come by; but it has outperformed most direct competitors and the indices. The outperformance by SplitShare preferreds has been due to their shorter term in a terrible market.