MAPF Portfolio Composition: October 2009

Turnover slowed markedly in October to about 46%. This is the lowest monthly turnover in 2009 and about one-third of this year’s peak in February – the waves of alternating panic and euphoria are declining!

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 2009-10-30
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 8.9% (-1.0) 8.09%% 7.14
Interest Rearing 0% N/A N/A
PerpetualPremium 0.5% (-0.1) 6.10% 13.65
PerpetualDiscount 67.3% (-0.2) 6.16% 13.66
Fixed-Reset 15.3% (-1.5) 4.25% 3.96
Scraps (OpRet) 4.6% (-0.5) 10.91% 5.91
Cash 3.1% (+2.9) 0.00% 0.00
Total 100% 6.06% 10.81
Totals and changes will not add precisely due to rounding. Bracketted figures represent change from September 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.

Virtually all trades during the month were intra-sector; that is, there were no major moves back and forth between sectors.

Credit distribution is:

MAPF Credit Analysis 2009-10-30
DBRS Rating Weighting
Pfd-1 0 (0)
Pfd-1(low) 73.9% (+1.1)
Pfd-2(high) 5.4% (-5.1)
Pfd-2 2.9% (+1.3)
Pfd-2(low) 9.8% (-0.1)
Pfd-3(high) 4.6% (-0.5)
Cash +3.1% (+2.9)
Totals will not add precisely due to rounding. Bracketted figures represent change from September month-end.

The decline in Pfd-2(high) holdings is mainly due to selling of HSB.PR.E:

Trades affecting MAPF holdings of HSB.PR.E
October, 2009
27.50 27.76 27.60 27.61
10/1 Sold
10/14 Sold
10/21 Bot
10/23 Sold
10/26 Sold
27.40 26.93 27.42 26.86
Dividends   Missed
Note: This table represents an extract from the trades actually executed. It represents an attempt to show fairly the major trades influencing the change in fund credit quality during October. Swaps shown were not necessarily executed on a 1:1 basis. Full disclosure of trades actually executed will be made simultaneously with the release of the fund’s audited financial statements for 2009.

Note that the swap from RY.PR.R to HSB.PR.E was discussed in the September composition report: that swap was executed at approximately even price, while earning the September dividend on HSB.PR.E of $0.4125. I’d say the round-trip worked out rather well!

Liquidity Distribution is:

MAPF Liquidity Analysis 2009-10-30
Average Daily Trading Weighting
<$50,000 0.0% (0)
$50,000 – $100,000 8.9% (-1.6)
$100,000 – $200,000 9.1% (+9.0)
$200,000 – $300,000 53.8% (+3.6)
>$300,000 24.3% (-14.8)
Cash +3.1% (+2.9)
Totals will not add precisely due to rounding. Bracketted figures represent change from September 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 the Claymore Preferred Share ETF (symbol CPD) as of August 17. When comparing CPD and MAPF:

  • MAPF credit quality is better
  • MAPF liquidity is a little better
  • MAPF Yield is higher
  • Weightings in
    • MAPF is much 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

One Response to “MAPF Portfolio Composition: October 2009”

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