PrefBlog

Trading activity eased slightly in July, with portfolio turnover of about 100%, while the market extended its gains.

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.

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.

Not much change in the sectoral distribution!

Credit distribution is:

The shift from Pfd-2(high) to Pfd-1(low) is attributable to sale of some POW issues (Pfd-2(high)) in the PerpetualDiscount sector to fund the purchase of GWO PerpetualDiscounts (Pfd-1(low)):

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. The overall credit quality of the portfolio is now superior to the credit quality of CPD at August month-end (when adjusted for the downgrades of BCE and the banks).

Claymore provides the following ratings breakdown:

Three events have occurred since the Dec. 31 calculation date of CPD’s credit quality:

• Rebalancing of TXPR index with only a slight change in quality
  • January
  • July
• Downgrade of BCE: CPD holds about 4.3% of its portfolio in BCE issues
• Downgrade of Banks: HSB & NA are no longer in the “Pfd-1” class.

Liquidity Distribution is:

There is no real pattern to the increase in liquidity experienced this month. For instance, a positions in SLF.PR.C (ATV = 167,986) and SLF.PR.E (ATV = 185,774) were swapped into SLF.PR.B (ATV = 239,639). The trades from POW to GWO (partially noted above) also contributed to the increase, as did trades from BPO into YPG.

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 The Claymore Preferred Share ETF (symbol CPD) as of August 29. When comparing CPD and MAPF:

• MAPF credit quality is better
• MAPF liquidity is similar (although CPD now has a lot of entries in the ‘super-heavy’ >300,000 class)
• MAPF Yield is higher
• Weightings in
  • MAPF is more exposed to PerpetualDiscounts
  • MAPF is much less exposed to Operating Retractibles
  • MAPF is more exposed to SplitShares
  • MAPF is less exposed to FixFloat / Floater / Ratchet
  • MAPF weighting in FixedResets is much lower

This entry was posted on Sunday, August 2nd, 2009 at 12:49 am 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.