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@FD1000, you and Morningstar must have a different definition of maximum drawdown than me. -0.87% over the past three years?? I mean it declined 1.29% on just one day alone last November.
You are correct, PV has 2 choices monthly or yearly performance. This means the -0.87 is per one whole month. I looked carefully (I hope) and that day last Nov was the worse one day decline in 3 years, I found several more days with -0.6 to -0.8%
You are correct, PV has 2 choices monthly or yearly performance. This means the -0.87 is per one whole month. I looked carefully (I hope) and that day last Nov was the worse one day decline in 3 years, I found several more days with -0.6 to -0.8%
Yes, that was by far it’s worst one day performance. That was during the period when both stocks and bonds were being pummeled by rising rates. The current rise in the 10 year Treasury has me a bit spooked although it hasn’t impacted IOFIX much or its cousin DPFNX at all. The later holds less subprime. I may lighten up on IOFIX albeit not drastically. Me lightening to any degree works well as a contrarian indicator.
@Charles, talked with Brian Loo yesterday. They still feel their holdings in their subprime non agency ( I don’t believe they hold any prime or alt-a non agency) has many more years of life left. Trading around 70 cents on the dollar. An ever shrinking asset class equals scarcity value. A lot more we discussed but you can give us more details when you update your report after visiting with the other principals in the firm. Of course when speaking with any fund managers how often will you hear anything but a rosy forecast, IOFIX being a niche fund has some unique things going its way. That is unless there is some major collapse in home prices and all those subprime borrowers get upside down on their loans again and this time decide to walk away. .
For example, the prime, Alt-A, and option ARM legacy NA RMBS we target at the top of the capital structure are still at deep discounts relative to par at approximately 86 cents on the dollar.
So if it's 70 cents, I assume it is probably lower credit quality, which could be fine so long as one is willing to accept the additional default risk. I see the distinction in your post is sub-prime so that must be it.
Update: OK, I see here for AlphaCentric's own data, the portfolio is at 75 cents on the dollar and the entire market they say is 81 cents on the dollar: alphacentricfunds.com/funds/IncomeOpp/presentation.pdf Yet it is interesting--one word for it, scary is another--how far down the capital structure with regard to collateral and credit quality you have to go to get to such discounts now. See page 19 to look at their example of the debt tranches. I'm not saying this strategy won't work, but clearly there are risks here.
For example, the prime, Alt-A, and option ARM legacy NA RMBS we target at the top of the capital structure are still at deep discounts relative to par at approximately 86 cents on the dollar.
So if it's 70 cents, I assume it is probably lower credit quality, which could be fine so long as one is willing to accept the additional default risk. I see the distinction in your post is sub-prime so that must be it.
Update: OK, I see here for AlphaCentric's own data, the portfolio is at 75 cents on the dollar and the entire market they say is 81 cents on the dollar: alphacentricfunds.com/funds/IncomeOpp/presentation.pdf Yet it is interesting--one word for it, scary is another--how far down the capital structure with regard to collateral and credit quality you have to go to get to such discounts now. See page 19 to look at their example of the debt tranches. I'm not saying this strategy won't work, but clearly there are risks here.
These subprime borrowers have now been in their homes 12 to 16 years and have built up equity instead of being upside down when the housing market cratered in 07/08. Dan Ivascyn mentioned in his recent interview how unlikely these borrowers would be to default now even if they their economic situation worsens. There may be another economic crisis but next time it may finally be the much ballyhooed corporate credit crisis. From my experience investors always want to relive the previous crisis not realizing they never immediately repeat. A classic example is the inflation crisis of the 70s. How many times have we heard since then another inflation crisis is just around the corner.
I too am concerned this is illiquid. The NAV of funds like these as mentioned is estimated at fair value daily, and you have to take the funds word for it. If everyone wants out at the same time watch out. The fund has an incentive to fiddle with the fair value.
I owned a Catalyst fund a few years ago. I sold it at the M* and broker published NAV one day but then when the trade settled I got a lower price. Neither the broker nor the fund would acknowledge the difference. It was only a couple of cents but it was a stark example of how the funds can manipulate things to their advantage.
I cut back on IOFIX because as mentioned before I am really spooked with what is going on with the yield curve and longer dated Treasuries. Albeit continued strength in the economy as evidenced by a widening yield curve should be a positive for IOFIX. You and I have far different risk tolerances.
I'm sure we are different. I'm looking for my bond OEFs to make 6+% annually with the lowest SD and most times invested at 99+% but I trade several times per year using stocks, indexes(most times), CEFs and more for several days to make 1-3% when I see favorable technical analysis. I just got out today of VTI that I bought last week.
I cut back on IOFIX because as mentioned before I am really spooked with what is going on with the yield curve and longer dated Treasuries. Albeit continued strength in the economy as evidenced by a widening yield curve should be a positive for IOFIX. You and I have far different risk tolerances.
I'm sure we are different. I'm looking for my bond OEFs to make 6+% annually with the lowest SD and most times invested at 99+% but I trade several times per year using stocks, indexes(most times), CEFs and more for several days to make 1-3% when I see favorable technical analysis. I just got out today of VTI that I bought last week.
I couldn’t find here where you entered VTI. Are you bringing your after the fact posting style over to this forum? And why are you even here in light of your not very complimentary comment about Mutual Fund Observer in the link above, If MFO is such a “yawn” why even bother.
Comments
@FD1000, you and Morningstar must have a different definition of maximum drawdown than me. -0.87% over the past three years?? I mean it declined 1.29% on just one day alone last November.
I looked carefully (I hope) and that day last Nov was the worse one day decline in 3 years, I found several more days with -0.6 to -0.8%
@Charles, talked with Brian Loo yesterday. They still feel their holdings in their subprime non agency ( I don’t believe they hold any prime or alt-a non agency) has many more years of life left. Trading around 70 cents on the dollar. An ever shrinking asset class equals scarcity value.
A lot more we discussed but you can give us more details when you update your report after visiting with the other principals in the firm. Of course when speaking with any fund managers how often will you hear anything but a rosy forecast, IOFIX being a niche fund has some unique things going its way. That is unless there is some major collapse in home prices and all those subprime borrowers get upside down on their loans again and this time decide to walk away.
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I'm not sure where they're still finding non-agency debt trading at 70 cents on the dollar of par value today. One of their major competitors, Angel Oak, at the end of 2018 said they were buying at 86 cents on the dollar: https://angeloakcapital.com/wp-content/uploads/2018/4Q/Seeking_to_Improve_Quality_While_Maintaining_Income_Whitepaper-web.pdf
Here's what Angel Oak says: So if it's 70 cents, I assume it is probably lower credit quality, which could be fine so long as one is willing to accept the additional default risk. I see the distinction in your post is sub-prime so that must be it.
Update: OK, I see here for AlphaCentric's own data, the portfolio is at 75 cents on the dollar and the entire market they say is 81 cents on the dollar: alphacentricfunds.com/funds/IncomeOpp/presentation.pdf
Yet it is interesting--one word for it, scary is another--how far down the capital structure with regard to collateral and credit quality you have to go to get to such discounts now. See page 19 to look at their example of the debt tranches. I'm not saying this strategy won't work, but clearly there are risks here.
I owned a Catalyst fund a few years ago. I sold it at the M* and broker published NAV one day but then when the trade settled I got a lower price. Neither the broker nor the fund would acknowledge the difference. It was only a couple of cents but it was a stark example of how the funds can manipulate things to their advantage.
I couldn’t find here where you entered VTI. Are you bringing your after the fact posting style over to this forum? And why are you even here in light of your not very complimentary comment about Mutual Fund Observer in the link above, If MFO is such a “yawn” why even bother.
and the photo he posted really shows strength
all interesting to me --- FD100nn has done solid work and solid posting
but check out not just that baby pic but also the other comments, gawd
I wonder how much moolah DS and Charles et alia are raking in from their labors here
I bet it is not to be believed
But we do it for the love.
why I said 'not to be believed'
I hope FD1xxx sticks around and contributes data and informed experience here
but MFO yawn, come on, screw off, I say
the monthly columns are a lot more informative than a month of reading marketwatch and many other places
Bolstered by feedback (from folks in/from the business) like:
"... it is an amazing site."
"... the best bargain in investing."
"Overall, one of the most powerful and comprehensive fund screeners I've come across. And much faster than Morningstar's, too!"
Yay!
c
now for you to include liquidity in UI calc