HOBEX

sma3

Quite a drop, especially last week, even accounting for the distribution. While the projected inflation increases have cooled off, as best I can tell HOBEX/HOBIX got killed because of it's large holdings of BDC bonds. BDC stocks are down 15 t0 20%, and over 10% last week alone. Even pure junk bond funds like JNK have not done any worse than HOBEX. HOBEX looks more like a junk bond fund now than anything else. Anybody else thinking of selling?

randynevin

I don't own this fund, but I disagree with your analysis. According to M* 93% of the bonds this fund owns are BBB or better, so it's not junk. It did drop last week, but is still up 0.5% ytd, which is better than the vanguard total bond market index (-0.8% ytd), a good proxy for the bond market in general. HOBIX is a tiny, new fund ($31M in assets, inception mid-2016), and expenses for a bond fund are high (1.34%). If I owned it I wouldn't be panicking.

Dennis Baran

I reached out to Holbrook Holdings this afternoon about the fund's 3 and 1-month underperformance.

Here's the reply:

The fund is struggling in this environment because all corporate credit is weak, but it is particularly bad in the BDC space. A fund that tracks BDC’s is down 11.5% over the last month, which is indictive of where these have traded. Since there is so much retail money in these, they tend to become extremely oversold in environments like this, where they seem to be thrown out at all levels. Issues that were paying 4-5% 3 months ago are now yielding 8-10%, and not a lot has changed except sentiment in that space. The spread on these has widened out to over 1 point which is as severe as it has been since August 2011, so we are continuing to hold and anticipate that after tax loss selling abates, but it is no fun in the meantime.

Hope this helps.

I profiled the fund in the July Observer.