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River Park High Yield(RPHYX) Is the cost too high?

edited May 2013 in Fund Discussions
We all know that the one thing we can control is cost. With that in mind I checked out my cast of great managers to get a relative sense of what I am spending. I was shocked to see that I am paying 26% more for management of RPHYX than to the great D. Fuss over at LSBRX. Or 40% more than I am paying the illustrious Gundlach/Barach team over at DLTNX. In an era of diminishing FI returns isn't this relatively high ER a giant hurdle for RPHYX to overcome? Or put another way,,,,,, won't they have to add another layer of risk to get the same net return?


  • edited May 2013
    For me, it depends on whether or not RPHYX holds up whenever we have the next "2008".

    I'd gladly pay the extra 25-40 basis points if I can sleep well at night.
  • Just a guess -- but the market is much more thinly traded, the fund is more conservative, and the portfolio turnover is higher. The segment of the market the fund is devoted to is also likely more highly specialized.

    (Disclosure: I'm a shareholder in the fund as well).
  • Reply to @Shostakovich:
    Worth mentioning about the turnover - more turnover (because the fund focuses on bonds that are about to mature/be called) means more research has to be done, meaning higher management costs.

    Trading costs are not included in ERs. Normally, higher turnover result in higher trading costs. But here, since many of the bonds are redeemed (not sold), the costs may not be as bad as one might expect. That is, rather than paying commissions for a round trip, the fund may only have to pay for a one way "ride".
  • Reply to @msf: " rather than paying commissions for a round trip" is not quite relevant for fixed income securities. the price of trading is 'spread', not 'commission'. i do agree however that nothing is spent if the notes keep maturing and principal is repaid by the issuer. i would think the expense is high due to the 'odd lot' nature of the investments, required access to research, and limited AUM...
  • I've made modest gains despite the ER in the 2 plus years I've held the fund. It has delivered as I hoped it would. Despite being advised otherwise, I do consider it a money market substitute and will park cash there as long as it continues to avoid volatility and perform better than a money market or CD.
  • AUM are much lower for RPHYX as well. The other funds have AUM's in the tens of billions.
  • Reply to @fundalarm: You say potato, I say po-tah-to. You say markup, I say embedded commission.

    "In the bond market, bond prices include commission, which is computed as a percentage of the bond's price. The difference between what you pay and what the dealer pays is the markup. ..."

    Scottrade: Investing In Bonds.
  • Lets hear from David on the above comments.
  • Reply to @Ralph: If I remember correctly, David has some of his money with RPHYX. If that's right, then you have heard from him.
  • edited May 2013
    The problem is that you are comparing very different types of funds. RPHYX has a very different risk/return profile than LSBRX, DLTNX, PTTDX etc. In order to say the cost of RPHYX is "too high", you would need to compare it with other funds that perform similarly but have lower costs. Or you would have to say that RPHYX's costs are so high that it is unlikely to achieve its performance objective (money market + 3-4% with very little volatility). Right now, Morningstar reports a yield of 3.83% so that seems about right.
  • Reply to @Ralph: Hi, Ralph.

    Old Joe's right: both chip and I have investments in the fund and have added to them regularly. They're part of my and her "cash management" portfolios.

    As I've talked with David S. about managing the fund, it seems to me to be a high maintenance / high cost strategy. His estimate, if I recall correctly, is that he has to place $4 in purchases for every $1 in the portfolio because these positions are redeemed so quickly. He's investing in orphaned securities which don't have a lot of deal-makers for them, so there's a fair amount of legwork involved.

    He seems comfortable that, after expenses, he can outperform a money market by 250 - 350 bps. And he seems adamant that he will not knowingly expose his investors to an appreciable risk of losing capital; he'd rather go to cash than participate in trades where he's reaching beyond the comfort zone. In the 32 months since launch, he's turned a $10k portfolio into an $11,000 portfolio with negligible volatility. Over that same period, Vanguard's Prime Money Market turned $10k into $10,010 and their short-term bond index fund turned $10k into $10,500.

    For what interest it holds,

  • Thanks David for your reply--I plan to soon buy RPHYX @ VBS
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