yield on RiverPark Strategic Income (RSIVX)

David_Snowball

Dear friends,

As I've noted before, folks actually do notice your conversations (and are often struck by them). RiverPark's president, Morty Schaja, wrote this morning to give a little insight on the yield conundrum: the yield of the holdings being higher than the fund's yield. Morty writes:

I thought I would give you a heads up that given the growth of the fund, that the monthly dividend distribution will be seemingly less than normal for a few months. This is good news as the average income for each month is distributed over a large base of shareholders at the end of the month. I hope that this tax efficiency will last for a while.

We're trying to find time Monday to chat a bit more. I'll pass along what I learn. In the meantime, you might want to register for the December 9 call with David Sherman if you haven't already done so. I'll try to configure the call so that there's extra time for you to ask questions directly to him.

As ever,

David

msf

In essence, paying out over a larger base gives the later investors disproportionate amount of the dividends - it's like buying a dividend. The older shareholders are the winners - they get part their "income" in the form of appreciated shares, rather than all as interest dividends.

To see this, consider a simple example (1% return in a month):

Nov 1 - you own 100 shares @$10/share
Nov 30 - the fund has accrued $10 in interest (share prices have correspondingly risen to $10.10)
No 30 - the fund pays $10 in interest (ordinary income dividends); share price drops back to $10/share.

Now consider what happens when someone buys in the middle of the month.

Nov 1 - you own 100 shares @$10/share.
Nov 15 - the fund's portfolio has accrued 1/2% of interest ($5). Share prices have correspondingly risen to $10.05.
Nov 15 - someone else buys 100 shares @$10.05/share
Nov 30th - share prices have risen another nickel (1/2% interest embedded in share price) to $10.10.

Nov 30th - the fund's portfolio has accrued $15 of interest ($5 for the first half month, $10 for the second half). It pays out this interest, which is 7.5c/share. Share prices drop to $10.025.

For shareholders who bought at the beginning of the month, they get 3/4% in interest dividends, and 1/4% in capital appreciation (higher share price). For shareholders who bought in the middle of the month (who should net 1/2% for holding just a half month), they also get 3/4% in interest, but lose 1/4% in share price.

Note - this only works for funds that do not accrue dividends daily. Accruing daily means that each day, each share gets its share of interest for that day. That's the way MMFs work. If you buy a $1 share in the middle of the month, then at the end of the month, you get 1/2 month's interest. The fund's total interest is not divided equally over a growing base. Likewise, many bond funds accrue dividends daily. There are also many that do not, such as this one.

willmatt72

Does anyone else own this fund? I received the latest dividend and it seemed quite low, again for the second month. I've been fully invested for the entire month. Does anyone know what the current yield is on this fund?

TSP_Transfer

It appears the fund paid a dividend at an annual rate around 1.445 % per annum and the fund's NAV increased another $0.08 which approximates a return at an annual rate of 9.458 %. That increased NAV includes mostly accrued interest and possible capital gains that eventually will be paid out to shareholders in cash or additional shares.All accrued interest and cap gains held by the fund are accounted for on a daily basis in the day's end NAV. So if you sell shares on any one day,you will recieve your pro-rated accrued interest/cap gains amount.Most bonds do not pay interest monthly.This makes it difficult for a new fund to "pay " a dividend at months end but that accrued interest is included in the rising NAV.
http://financial-dictionary.thefreedictionary.com/accrued+interest
A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, but not yet paid or received.
From M* 12/02/2013
In October, RiverPark launched its second fixed income fund, the RiverPark Strategic Income Fund (RSIVX - Retail; RSIIX - Institutional), which seeks to deliver high current income and capital appreciation, consistent with conservation of capital. The RiverPark Strategic Income Fund, which takes a “go anywhere” approach, will also seek to remain nimble and because of its small size believes it can purchase securities with above market yields with limited risk if held to maturity.
In its first two months, the fund has gathered $88 million in assets through November 29, 2013, mostly from RiverPark Short Term High Yield fund shareholders. Both the Strategic Income and Short Term High Yield funds are managed by David Sherman of Cohanzick Management.

December Conference Call: David Sherman, RiverPark Strategic Income
We’d be delighted if you’d join us on Monday, December 9th, for a conversation with David Sherman of Cohanzick Asset Management and Morty Schaja, president of the RiverPark funds

expatsp

Reply to @TSP_Transfer: Wow, thanks for this, it was very informative.

willmatt72

I'm not sure that I understand all of this. The bottom line is: What is the expected yield on this fund moving forward? I'm seeing a lot of references to capital gains and accrued interest, but what kind of monthly yield can shareholders who bought the fund expect? Will the yield be the equivalent of a ST bond, IT Bond or what? Hopefully, this is explained during the conference call on Dec. 9.