Riverpark Short Term High Yield - divs and availability

msf

RPHYX / RPHIX just paid a whopping monthly interest dividend - over 5x the next largest monthly dividend in 2022. For RPHIX, it was 14.11¢ per share vs. 2.5*¢ per share in Aug, Sept, and Oct.

This pattern of larger (but not this large!) December divs seems to have started in 2020, when the Dec div was about 10% higher than the next highest monthly div, and accelerated in 2021, when the Dec div was double that of the next highest monthly div.

http://riverparkfunds.com/assets/pdfs/rpsthyf/RiverPark_Short_Term_High_Yield_Institutional.pdf
http://riverparkfunds.com/assets/pdfs/rpsthyf/RiverPark_Short_Term_High_Yield_Retail.pdf

Any guesses as to what's happening? This fund does not invest internationally so currency hedging cannot be the cause, which is what Yogi speculated could explain FMIJX 's large div.

All I've turned up so far is Russell Investment's generic explanation for variable December income divs:

The last distribution of the year in mid-December may vary from other monthly distributions more significantly. This distribution reflects actual income received by the fund for part of the month of December plus an estimate for the remainder of the month of December. Also included in these distributions are tax adjustments and adjustments required as a result of the audit of financial statements, reflecting the full year of operations of a fund. Therefore, these adjustments may significantly increase or decrease the mid-December distributions relative to other monthly distribution

https://russellinvestments.com/-/media/files/us/funds/income-dividend-distributions-004519958.pdf

Setting aside mid-month estimates (Riverpark distributes at end of month), that leaves tax adjustments and financial statement adjustments. Whatever those mean.

---

This fund is mostly closed to new investors. The only investors who may open new accounts are those who already hold an existing account with the fund, or invest directly through Riverpark, or "are clients of any financial adviser or planner who has client assets invested in the Fund.”
http://riverparkfunds.com/assets/pdfs/RiverPark_STHYF_Summary_Prospectus.pdf

This is why the fund is closed through intermediaries like Fidelity, Schwab, and Vanguard. But RPHYX does seem to be open at Firstrade and at E*Trade. Even more interesting is that RPHIX seems to be open to new investors at E*Trade with no transaction fee, albeit with a $100K min.

MikeM

I own this fund. David Sherman's CrossingBridge Pre-Merger SPAC ETF, ticker SPC, also gave a .24/share distribution yesterday. Nice Christmas present from these 2 holdings.

AndyJ

Pimco has a habit of making special December income distributions, larger than the previous months' in their OEFs and CEFs (maybe their ETFs too, don't have much experience with them). They settle on a relatively consistent, usually conservative monthly distribution early in the year, with the result that most years, there's excess income to distribute at the end of the year. No idea if that's what's at work w/ Riverpark.

Two Pimco examples from this year: PDI had a consistent 0.2205 income distribution through the year and then issued a special income distribution of 0.65 Dec 27; PIMIX (which somewhat uncharacteristically boosted the monthly twice during the year) put out a special income distribution of 0.1036 the same day.

I'd guess that funds with shorter durations (and/or high turnover) during a period of rising rates might tend to land in that situation -- as they replace lower yielding securities with higher yielding ones.

msf

They settle on a relatively consistent, usually conservative monthly distribution early in the year, with the result that most years, there's excess income to distribute at the end of the year.

This is by design. Many CEFs including PDI have a managed distribution policy. It's a little hard to see this in the prospectus, but it is there.

Closed-end fund managed distribution programs are designed to facilitate regular, relatively consistent distributions to shareholders, typically by:

1. Estimating a fund’s long-term total return (both income and long-term appreciation, net of expenses)
   
2. Setting a regular monthly or quarterly distribution amount intended to match the fund’s total distributions to its total return over time

https://www.nuveen.com/en-us/insights/closed-end-funds/understanding-managed-distributions

From the PDI prospectus:

The Fund makes regular monthly cash distributions to Common Shareholders at a rate based upon the past and projected net income of the Fund. Subject to applicable law, the Fund may fund a portion of its distributions with gains from the sale of portfolio securities and other sources. The Fund’s dividend policy, as well as the dividend rate that the Fund pays on its Common Shares, may vary as portfolio and market conditions change, and will depend on a number of factors.

RPHYX/ RPHIX doesn't manage its distributions. Generally, what you see (earn as income) is what you get (as income divs).

----

David Sherman's CrossingBridge Pre-Merger SPAC ETF, ticker SPC, also gave a .24/share distribution yesterday. Nice Christmas present from these 2 holdings.

I hadn't taken a close look at SPC. Interesting fund. Follows Sherman's RPHYX approach of investing in "remnants", but in a different pool ("money good" SPACs, i.e. ones "trading at par value or at a discount" ).

These divs come out of NAV, unlike divs in funds that declare divs daily. Whether the fund sells more assets to pay a larger div, or the shareholder sells shares to generate the same cash flow, the effect is the same.

This is why I prefer to focus on total return. Though I do understand that receiving a dividend (especially a large one) "automatically" somehow feels different.

Mav123

Happy New Year everyone,

Just curious that despite such a good distribution, RPHYX/RPHIX still managed to return below 3% for the year, as compared to a few banks/CUs that pay above 4% on the liquid MMA accounts, even short-term treasuries such as 4, 8 weeks pay above 3%. So, the question to the people who hold RPHYX/RPHIX is, do you still find it valuable competitive, and a good return on your money?

msf

RPHYX/RPHIX still managed to return below 3% for the year, as compared to a few banks/CUs that pay above 4%

This is an apples to oranges comparison, comparing past one year return for RPHYX with the current APY on MMAs. A retrospective comparison would be between a bank's one year return and RPHYX's one year return.

Some of the 4% accounts didn't even exist at the beginning of 2022. For example, Republic Bank of Chicago's Digital Money Market Account (4.25% APY) only started last August. Starting new account types (often requiring new money) is a common tactic among banks.

Or look at All America Bank's Mega Money Market Account, also with a 4.25% APY. That started the year with a 0.30% APY, not rising above 1% until nearly the end of June. Even by the end of October, it was only up to 2.5% APY.

Banks do look better prospectively. For bond funds, prospective means looking at SEC yield. RPHIX's last reported SEC yield is 3.27%. At first blush, that looks inferior to several higher yielding banks, including those that don't play fast and loose with new accounts and rates.

But compare carefully. That 3.27% is the SEC yield as of November 30th. American Bank's Mega MMA's rate was 2.5% APY until the last week of November when it jumped to 4.0% APY. For the moment, a few banks seem competitive, though not necessarily superior.

despite such a good distribution

This suggests a common confusion between YTM and current yield. What counts in the end is total return. Each time RPHYX / RPHIX makes a distribution, whether large or small, the NAV drops by about the size of the distribution. The size of the distribution has little bearing on total return.

Suppose a fund holds a single, deep discount bond. (HY funds typically buy bonds at substantial discounts.) The fund's NAV gradually increases as the bond ages. This "appreciation" is actually interest - that's part of the YTM.

When a bond finally matures (or is sold), that "appreciation" (interest) is recognized all at once, even though it really accrued over time. If the fund gathers up all this recognized "appreciation" (interest) and distributes it in December, that could explain the unusually large December div.

It might be more meaningful to take the excess distribution (above what one expected for the Dec div) and mentally allocate it evenly across all the months. This large div may be nothing more than an accounting artifact, much as annual cap gains distributions don't mean that a fund realized all its gains in December.

MikeM

Thanks @msf.

If I take the data from Portfolio Visualizer, from Jan 1 to Dec 31, 2022, RPHYX returned 2.71%. To echo your point, there were no 1 year CD's, MM or Treasuries to buy on Jan 1, 2022 that would have paid that. In betting on which will return more in 2023, RPHYX total return in the 4th quarter was 1.7%. Always a risky venture, but if you extrapolate that for 1 year you might say RPHYX is on trend to return 1.7x4 = 6.8% moving forward. Obvious risk and no sure bet to saying that, but that might be more comparable to the 1 year treasuries and CD's available now.

In any case, comparing last year's RPHYX's 1 year return is not a representative comparison to future CD/treasury rates available now. You can only make that comparison 1 year from now. I'm betting and hoping for higher total return with RPHYX.

So, my answer to your question @Mav123, I'm going to play both. I'll separate my eggs to both baskets

Mav123

@MikeM, that is a good allocation.

Mav123

All of you mention valid arguments about the past performance of MMAs, but I am looking at this from today's perspective, the momentum shifted, at least for the next 3, 6, and 10 months in favor of treasuries and MMAs. CDs provide a way to lock in the rate now for the next 6 yrs. Historically, RPHIX had not returned 4% per year.

Another point to consider is taxation, US Treasuries are not taxed at the State level.

davidsherman

You should execute your investment strategy as you determine appropriate. You are also correct that RPHIX has not historically generated a 4% calendar year ending Dec 31st return of 4%. However, RPHIX has generated total returns in excess of 4% on a rolling 12 month basis in the past (few but has). Below is a chart comparing the 12 month trailing 12 month return of RPHIX to the 1 year UST yield at the beginning of the measured period (T+0). The only underperformance was as a consequence of COVID volatility.

If you compare 12 month rolling total return of RPHIX since inception to the beginning 1 year UST, there are 136 measurable periods. Below is the max, min and average excess return:
Max 5.09%
Min -1.71%
Avg 2.13%

On a distribution basis for 136 measured periods, the first column represents the 1 year excess total return (RPHIX Total Return - I Yr UST Yield) and the second column shows the % of times of the occurance
Negative 7%
0-1% 11%
1%-2% 29%
2%-3% 23%
3%-4% 22%
>4% 7%

That said, RPHIX is not a substitute for a 3, 6, 10 month UST or CD.

yogibearbull

StockCharts ROC(250) is close to 12-mo rolling returns.

For RPHIX,

fundly

@ybb. Kindly interpret this chart and what is ROC? Thanks.

yogibearbull

ROC(250) = Rate of Change over 250 trading days, so that is close to 12-mo. If you prefer 252 or some other number, you can adjust.
https://school.stockcharts.com/doku.php?id=technical_indicators:rate_of_change_roc_and_momentum

sfnative

davidsherman said:

If you compare 12 month rolling total return of RPHIX since inception to the beginning 1 year UST, there are 136 measurable periods. Below is the max, min and average excess return:
Max 5.09%
Min -1.71%
Avg 2.13%

Those seem like pretty good odds.

dtconroe

I own a small position in RPHIX, just in case I want to use it in the future, but with money markets paying over 4%, I have not found a reason to have anymore than a small token position. I will maintain it, but it would have to establish itself as a better total return investment than has been the case historically.

carew388

+1