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RPIEX: Contrarian Bond Fund

Not long ago, I purchased a toe-hold in RPIEX. As I’ve watched this global bond fund, it has consistently zagged when the market zigged. Case in point, yesterday, while short term BSV dipped .18% and intermediate-term BIV dropped .49%, RPIEX gained .62%. This is not a complaint; just don’t know why, especially given the generous cash holding. Thoughts?


  • Non-traditional/global bond fund with lots of futures/derivatives. That is why there is lot of cash. Look beyond how it does daily.
  • Okay thanks, got it. “…..The fund also uses interest rate futures, interest rate and credit default swaps, and forward currency exchange contracts, primarily to manage interest rate exposure and limit the fund's overall volatility.” Still, it’s seems quite unusual to be so consistently opposite short term bonds. In retrospect, I think I had no business investing in it.
  • Look at almost any large bond fund’s annual report today and you will most likely find a virtual stew of derivatives like this one’s. The difference I suspect here is the fund isn’t just using derivatives to bet for certain bonds or types of bonds, but against them as well with short positions or put options. But derivative use is widespread. Could it end badly? See 2008. But there are more safeguards hopefully in place.
  • While many bond funds use some derivatives, here were some flags for RPIEX:

    High cash
    Low genuine bonds/FI
    Low duration M* 2.05, YF -0.04
    SD OK at 4.4
    Top 10 holdings showing several derivative positions. Normally, one has to scroll to the end of portfolio list to find derivatives mentioned.

    All these indicated to me rather heavy use of derivatives for exposure (small $s needed for full nominal exposure) and duration control. Some derivatives were for currencies.

    Nothing wrong with such funds so long the holders understand the strategy, risks and atypical price movements.

    I have mentioned this elsewhere that when there are large moves in the markets (credit market here), derivative losses tend to be permanent - it isn't possible to just hang on to them hoping for some recovery as one may hope for genuine stocks and bonds holdings.
  • Top 10 holdings showing several derivative positions. Normally, one has to scroll to the end of portfolio list to find derivatives mentioned.
    I'm not sure that's accurate, even though Morningstar has it as such.

    Morningstar's data on bond fund holdings can sometimes be misleading. You can also see a number of derivatives in the top ten holdings of more popular bond funds:
  • edited August 23
    “ Although the benchmark is the ICE BofA US 3-Month Treasury Bill Index, the portfolio’s unconstrained approach makes direct positioning comparisons with the benchmark much less informative than for traditional fixed income funds whose holdings are more closely aligned with an index. As a result, we refer to positions as long (those benefiting from an increase in price) or short (those benefiting from a decrease in price) as opposed to overweight or underweight relative to the benchmark.”

    So then as noted by @yogibearbull, this is one of the important lines in their portfolio:
    Asset Class Net Short Long Cat. Index
    U.S. Equity 1.11 0.00 1.11 0.75 –
    Non-U.S. Equ 0.52 0.00 0.52 0.05 –
    Fixed Income 29.50. 76.30 105.79 91.65
    Other 0.00 0.00 0.00 6.28 –
    Cash 68.75. 0.00 68.75 47.93 –
    Not Classified 0.12 0.00 0.12 1.70 –
  • edited August 23

    I question whether this fund should any longer be considered “contrarian”. ISTM that for the past year or more it’s been “going with the trend” - that being betting on generally rising interest rates.

    If you really want to be “contrarian” today buy a traditional long-only investment grade bond fund having an average maturity of 15 years or more. I recently speculated that such bonds / bond funds appear ripe to have a good year. Received a “thumbs down” from member. Suspect that would be the prevailing opinion / conventional wisdom today.

    Enjoying the discussion and everyone’s comment.
  • HY TUHYX taking it on the chin for about the past week. But if it's just a rather permanent monthly dividend source, I'm not sweating it much. That's what it is for me. Something to make me smile at least once a month, even if everything else is in the toilet.
  • Seems to be shorting QQQ or some components thereof. I own the fund.
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