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That's the official answer, David's and mine. RSIVX has the potential for substantially more NAV volatility than does RPHYX. That's mostly a "mark to market" artifact. As you probably know, a fund's NAV is determined by answering the question, "what could I get for each security in the portfolio if I sold them today at 3:30 Eastern?" That's easy to determine with some securities; called "highly liquid," they're actively traded securities for which there are lots of buyers and lots of sellers and more-or-less reliable prices. It's a bit tougher for others ("illiquid securities," which might be rarely or never traded - imagine an entire apartment building owned by the REOC) and unreliable for still others ("distressed securities" or "special situations," where short term events distort the market for a particular security). Nonetheless, the rules say that a manager (i.e., a service hired by an advisor) must value every security every day.
It's also possible that one of the fund's securities might implode, but that worries me a bit less since David and his team are specialists in valuing this stuff and no individual position controls much of the portfolio.
There may well be periods where David could not sell some of his portfolio securities for - say - a tenth of their actual value. That doesn't bother him (or me) because he doesn't need to sell them (and I don't need to sell shares of the fund). It could, however, be a problem for someone with a very short time horizon; it's not inconceivable that some market gyration could trigger a mark-to-market drop in the fund's NAV, meaning that you might end up selling your shares at a loss.
You might want to listen to the conference call with David. Navigate using the top tabs to The Best, Featured Funds, RiverPark Short Term High Yield then check about two-thirds of the way down the page. David addresses his recommended holding period but I don't have my notes from the call here. He says something like, "if you're willing to wait a year (or some slightly longer period), we're comfortable that you'll be made whole. For shorter periods, there are no guarantees.
That's not highly probable but it's a serious distinction between this fund as RPHYX, much less a money market.
Okay: all of that having been said, my own "cash management" funds are T. Rowe Price Spectrum Income (which posted a drawdown of 15% during the '07-'09 meltdown) and the two RiverPark funds. Why? Because I'm really pretty frugal, I live well below my means and save a lot. My non-retirement portfolio (roughly half cash and bonds, half stocks) could drop by half and I'd still have the ability to cover six months of living expenses and medical bills from it. As a result, I'm more willing to absorb market risk than to book negative real returns.
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Welcome.
And no.
That's the official answer, David's and mine. RSIVX has the potential for substantially more NAV volatility than does RPHYX. That's mostly a "mark to market" artifact. As you probably know, a fund's NAV is determined by answering the question, "what could I get for each security in the portfolio if I sold them today at 3:30 Eastern?" That's easy to determine with some securities; called "highly liquid," they're actively traded securities for which there are lots of buyers and lots of sellers and more-or-less reliable prices. It's a bit tougher for others ("illiquid securities," which might be rarely or never traded - imagine an entire apartment building owned by the REOC) and unreliable for still others ("distressed securities" or "special situations," where short term events distort the market for a particular security). Nonetheless, the rules say that a manager (i.e., a service hired by an advisor) must value every security every day. There may well be periods where David could not sell some of his portfolio securities for - say - a tenth of their actual value. That doesn't bother him (or me) because he doesn't need to sell them (and I don't need to sell shares of the fund). It could, however, be a problem for someone with a very short time horizon; it's not inconceivable that some market gyration could trigger a mark-to-market drop in the fund's NAV, meaning that you might end up selling your shares at a loss. That's not highly probable but it's a serious distinction between this fund as RPHYX, much less a money market.
Okay: all of that having been said, my own "cash management" funds are T. Rowe Price Spectrum Income (which posted a drawdown of 15% during the '07-'09 meltdown) and the two RiverPark funds. Why? Because I'm really pretty frugal, I live well below my means and save a lot. My non-retirement portfolio (roughly half cash and bonds, half stocks) could drop by half and I'd still have the ability to cover six months of living expenses and medical bills from it. As a result, I'm more willing to absorb market risk than to book negative real returns.
Hope that doesn't muddy the waters too badly,
David
Regards,
Ted
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