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Like our host David, I'm fond of FAPACX. However it has a high expense ratio and is not available as a transaction free fund. on Fidelity, Schwab or Vanguard. Now I'm aware that Fidelity has a good follow on purchase program for additional shares for the purchase price of $5 based on signing up for for a series of purchases. However you will not get the purchase done the day you sign up for the automatic investment. This is not desirable. I like to buy more shares on days the market drops.

In addition you have to commit for additional purchases for designated purchases by date, time period and amount. Fidelity is lenient and will let you cancel the follow on purchase from what I have read.

Now I've been buying SOR which is managed by the same advisors and appears to hold the same stocks. There bond portfolio is a little different but somewhat similar as SOR can buy less liquid structed credit. SOR's expense ratio is lower and 1.21 versus .97. In addition SOR is selling currently at an 8% discount to NAV. the only issue I have with SOR that it's daily volume is very low so the bid ask spread is wide. I generally place only limit orders to prevent unpleasant surprises.

Is their any reason why I should buy FPACX instead of SOR?


  • Did you notice that their monthly distributions fluctuate depending upon their returns? Also notice that the bulk of those distributions are comprised of long-term capital gains. If you're okay with that then I see no reason to not go forward. (As a point of curiosity how does the distribution and it's composition differ between the CEF version and the mutual fund version?)
  • edited March 2021
  • SOR looks like a reasonable alternative for FPACX if you're interested in a different fund from the same management team. As such it's somewhat similar, and has a fair coefficient of correlation (0.72, meaning an R² of 0.52), per Portfolio Visualizer.

    FPACX vs. SOR chart over lifetime of FPACX

    One (SOR) holds 43 stocks, the other 56 (both as of Dec 31, per M*). One (SOR) is 35% in US stocks, the other 50%. One (SOR) is short 5% in cash (still net 12% positive), the other isn't shorting but is long 21% in cash. Same management, same investment space, yes. Clones or near copies, no.

    The 8% discount is the lowest discount in 3 years, looking at the 3 year graph at CEFConnect (click on "pricing", then select the graph's 3 year tab). Its one year Z score is 1.96, its six month score is 3.54. I'm not a closed end fund investor, so I can't suggest what time frame is best to look at, but this doesn't strike me as a good time to buy if what you're looking at is the size of the discount.

    M* (via Fidelity) writes: "In our opinion, a z-score of less than -2 signals that a fund is relatively inexpensive, and a z-score greater than +2 signals that a fund is relatively expensive."

    On the topic of discounts, just as a discount boosts the effective yield of a bond fund, it also boosts the effective expense ratio of a fund. That 0.97% ER is 0.97% of NAV. Since you'd be purchasing at an 8% discount, the effective ER for you would be 0.97%/0.92 = 1.05%. That's the same ER as FPACX according to M* if you exclude borrowing costs. (Some people think this is more meaningful, many do not.)

    If you like SOR, that's fine, go for it. But don't do it as an attempt to buy an FPACX clone and save a few bucks in the process.
  • Thanks for the comments particularly MSF. A couple of things have changed in the recent past. SABA Capital Management increased their stake in SOR and now holds 9% of he shares. "Saba selectively pursues an activist approach where corporate actions may be an effective tool to unlock shareholder value and monetize the discount to NAV." The dividend for March, April and May was increased by 42%. I suspect these actions have resulted in the narrowing of the discount. It was over 13% at the end of DEC. It does look though that this may not be a good time for purchasing more. Your correct FPACX lowered the ER at least until September. Maybe it's a good time to sell?
  • PM Romick has a good record in smallish allocation of $ in closed end bond funds in recessions with hefty yields. They have a tendency to rebound quicker than equities if the right vehicle is chosen.
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