Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Mitch had a couple disastrous years in both absolute and relative terms. The "all offense, all the time" strategy, always risky, sort of imploded and the funds' small asset base shrank. He left both funds (long-only, long-short), and was replaced by Conrad on both. In a singularly terse exchange, the RiverPark folks would only allow that he had moved on from the firm.
Through luck or skill, both funds posted outstanding performances in 2023.
RiverPark is known here for some of its subadvised funds (RPHIX, RSIIX) and those are in the news here. But the firm itself has had issues with turnovers & AUM losses.
M* on RLSFX
"Co-founder and co-chief investment officer Mitch Rubin departed the firm in November 2022 on the heels of weak performance across the firm’s equity strategies. Meanwhile, RiverPark’s assets under management has declined 35% since December 2020 as outflows across most of its products have been persistent in recent years. As of March 2023, the firm’s AUM was USD 2.4 billion, 70% of which was in its two subadvised funds, including its largest fund, RiverPark Short Term High Yield. According to CEO and co-founder Morty Schaja, the firm intends to draw upon the research resources of equity subadvisor Wedgewood, where the firm owns a roughly 2% minority interest. It will take some time to assess how this collaboration will work and what impact it may have.
Other attributes of the firm are mixed. Across the board, the firm’s mutual fund fees remain high, though that is in part a function of their comparatively small size. But Schaja has invested more than USD 1 million in five of the six funds RiverPark offers, and he has broadened ownership of the firm to include other employees, which often helps retain personnel. Indeed, the firm has shown stability in the investment analyst ranks."
Thanks, Both. I recall the Rubin interview (Barrons, I think it was) when he commented that "most people don't use shorting correctly" or "most people don't short enough", or something similar. I am a shareholder in the fund, and that rakish, overconfident tone of the interview should have been a warning to me.
I'm guessing many folks left RPHYX (I am also currently a shareholder) because one could do better in treasuries over the past year or so. I was disappointed in the degree of downturn in this fund of late.
I'm guessing many folks left RPHYX (I am also currently a shareholder) because one could do better in treasuries over the past year or so.
Ah, there was a lot of talk about that, but it didn't happen. I believe RPHYX outperformed treasuries - again in 2023. I'm also a share holder in RPHYX, but I did 'blink' earlier in the year and cut my holding in half to include 1 year treasuries as they were increasing.
I've been buying 3-month treasuries for a year or so and have been was getting 4% at the start of the interval (took money out of RPHYX, in fact) and 5% more recently.
I'm guessing many folks left RPHYX (I am also currently a shareholder) because one could do better in treasuries over the past year or so.
Ah, there was a lot of talk about that, but it didn't happen. I believe RPHYX outperformed treasuries - again in 2023. I'm also a share holder in RPHYX, but I did 'blink' earlier in the year and cut my holding in half to include 1 year treasuries as they were increasing.
Yup.
At the end of 2022 (Dec. 29, 2022 issue date), one could get at auction a 52 week T-bill yielding 4.783% (price = 95.434833) over 364 days, or a 26 week T-bill, yielding 2.380% over 182 days (price = 97.674444) which comes out to 4.819% over 364 days with assumed constant rate compounding.
In comparison, RPHYX returned 5.5628% between 12/29/22 and 12/28/23 (per M* chart). Even after accounting for state income taxes, this is still over 5%, measurably better than T-bills. RPHIX did even better.
There was the risk with RPHYX that rates might go down and an investor would wind up with less than with T-bills. There was also the risk that rates might go up or even remain stable and an investor might wind up with more.
Evaluating these risks and looking at expected return (expectation value), RPHYX looked like the better choice at the time. Though for those who wanted certainty and were willing to pay a relatively small cost for that, T-bills might have been attractive.
"I'm guessing many folks left RPHYX (I am also currently a shareholder) because one could do better in treasuries over the past year or so. I was disappointed in the degree of downturn in this fund of late."
Do you mean the loss of AUM or total return of RPHYX?
For those of us that pay state income taxes, it would be a factor in deciding between RPHIX and T-Bills. I cut my RPHIX holding in half and also bought treasuries a year ago because of this reason.
As I wrote above, even taking state income taxes into account, T-bills purchased a year ago didn't beat RPHYX, let alone RPHIX, after taxes. Though the numbers do work out differently if you're in the 32% or higher federal bracket.
There is another tax factor to consider: when are taxes due? Interest from 52 week T-bills purchased at the beginning of January 2023 is not taxed until April 2025. That is, all the income is taxed as 2024 income. RPHIX pays periodic dividends, so divs from Jan 2023, Feb 2023, ..., Dec 2023 are all taxed in April 2024.
That's a point in favor of T-bills assuming you purchased T-bills in 2023 that still haven't matured.
Delving even deeper into tax differences, for 2023 RPHIX had a twelve month distribution yield of 5.08% and a total return of 5.87%. That means that only 5.08% is subject to taxes now. The rest of the return is unrealized appreciation. That isn't taxed this coming April, and might not be taxed for years. And when it is, it will be taxed on the federal level at a cap gains rate.
That's a point in favor of RPHIX.
People had lots of reasons to choose T-bills over RPHYX / RPHIX: I wanted more certainty, I wouldn't make that much less with T-bills because of tax issues, I would have to hold the shares for 60+ days to avoid a short term fee, I wanted to diversify/split my bets, etc. Add to that: I couldn't buy shares because the fund was not open a year ago.
Hindsight tells us what we could have done. What matters is what we can do now. RPHYX / RPHIX has reopened to new investors. So there are even more people facing this conundrum now.
@MSF. Thank you for your comments above. I did review your pros and cons before I made my decision last year. You have a wonderful ability to explain and tease out the issues with financial decisions for those who are not aware of them. My sister is a CPA and is a great resource for tax questions that I did not consider. Thanks again. Fundly
@msf - great comments; thanks. I checked my RPHYX statement last night, and it confirms what you've stated.
I made a simple calculation when I sold some RPHYX and went to T-Bills; I looked at the average return of RPHYX over the past several years (for sake of argument, let's call it 2.4%) and also looked at the downturn RPHYX had at some point last year (don't recall when exactly, but I think it approached 2%), and decided to sell most of my RPHYX and buy 3-month treasures at my broker.
Another consideration was the need for liquidity (I am expecting needing cash within the next 6 months, didn't want to have to sell any RPHYX at a 2% loss, for example), and the ability to readily flex from 3-months to other investments if I wanted to.
Clarity: yogibearbull RiverPark Strategic Income (RPHIX, RSIIX) is advised by CrossingBridge and there are no sub-advisors. The Fund left the RiverPark Family of Funds in 1H23. The same investment team guides RSIIX.
Shostakovich and MikeM RPHIX outperformed T-Bills. An investment grade ultrashort strategy CBUDX by CrossingBridge also outperformed T-Bills and the pre-merger SPAC ETC (SPC) which should be considered ultra short outperformed T-Bills. All are ultra short duration. I am also confused on downturn comment since I scratch my head as to the reference.
RPHIX RiverPark Short-Term High Yield is sub-advised by Cohanzick abd still part of the RiverPark family. Cohanzick is the controlling shareholder of CrossingBridge. Cohanzick only advises RPHIX, private funds and managed accounts. CrossingBridge only advises mutual funds, ETF and UCITs.
Msf, If one had millions in T-bills, couldn’t they be subject to fee if they didn’t withhold 90% of taxes due? If so, the taxes due are not in April 2025, rather quarterly estimated payments?
The tax deferral of T-bills depends not only on the fact that interest isn't paid until maturity but also that they mature in not more than 12 months.
People are generally aware that if they buy zero coupon bonds, interest is imputed and taxes owed yearly. The exception is for any debt instrument (not just bonds) with a maturity date not more than one year from date of issue. That's practically the definition of a T-bill. Likewise, interest is not imputed on CDs that mature in 12 months or less.
I believe the part of the tax code that exempts short-term maturities from imputed interest is 26 USC §1272(a)(2)(C). In essence, as yogi described, the debt instruments (including CDs) are viewed as being sold at a discount. From a tax perspective, it's not that you buy a $1000 CD and get $1050 in a year, but rather that you are buying a $1050 CD at a discount price of $1000.
Sort of like buying gasoline with a cash discount.
So T-bills are in special category different from regular stock and fund sales.
IRS: Q: If I anticipate a sizable capital gain on the sale of an investment during the year, do I need to make a quarterly estimated tax payment during the tax year? Answer: Generally, you must make estimated tax payments
So T-bills are in special category different from regular stock and fund sales.
T-bills are in a special category different from regular and muni bond sales. Bonds have their own rules dealing with appreciation. Unless bond appreciation is de minimus (under 1/4% per year), it is taxed as ordinary income (even for munis, except for OID).
Q: If I anticipate a sizable capital gain on the sale of an investment during the year, do I need to make a quarterly estimated tax payment during the tax year?
You can make substantially equal estimates or you can file Form 2210 Schedule AI (annualized income) to account for uneven income throughout the year. I've used that in the past for large 4th quarter Roth conversions, cap gains distributions, fund sales, etc.
You have to keep track of your income by period (Jan-March, April-May, June-Aug, Sept-Dec) and work through the tax liability for each quarter. In recent years before 2023 it wasn't worth the effort because interest rates were so low. Little interest income was lost in paying equal estimates.
Comments
Through luck or skill, both funds posted outstanding performances in 2023.
M* on RLSFX
"Co-founder and co-chief investment officer Mitch Rubin departed the firm in November 2022 on the heels of weak performance across the firm’s equity strategies. Meanwhile, RiverPark’s assets under management has declined 35% since December 2020 as outflows across most of its products have been persistent in recent years. As of March 2023, the firm’s AUM was USD 2.4 billion, 70% of which was in its two subadvised funds, including its largest fund, RiverPark Short Term High Yield. According to CEO and co-founder Morty Schaja, the firm intends to draw upon the research resources of equity subadvisor Wedgewood, where the firm owns a roughly 2% minority interest. It will take some time to assess how this collaboration will work and what impact it may have.
Other attributes of the firm are mixed. Across the board, the firm’s mutual fund fees remain high, though that is in part a function of their comparatively small size. But Schaja has invested more than USD 1 million in five of the six funds RiverPark offers, and he has broadened ownership of the firm to include other employees, which often helps retain personnel. Indeed, the firm has shown stability in the investment analyst ranks."
https://www.morningstar.com/funds/xnas/rlsfx/parent
I'm guessing many folks left RPHYX (I am also currently a shareholder) because one could do better in treasuries over the past year or so. I was disappointed in the degree of downturn in this fund of late.
I'll stay with that strategy for a while.
At the end of 2022 (Dec. 29, 2022 issue date), one could get at auction a 52 week T-bill yielding 4.783% (price = 95.434833) over 364 days, or a 26 week T-bill, yielding 2.380% over 182 days (price = 97.674444) which comes out to 4.819% over 364 days with assumed constant rate compounding.
Data from Treasury Direct: https://www.treasurydirect.gov/auctions/auction-query/
In comparison, RPHYX returned 5.5628% between 12/29/22 and 12/28/23 (per M* chart). Even after accounting for state income taxes, this is still over 5%, measurably better than T-bills. RPHIX did even better.
There was the risk with RPHYX that rates might go down and an investor would wind up with less than with T-bills. There was also the risk that rates might go up or even remain stable and an investor might wind up with more.
Evaluating these risks and looking at expected return (expectation value), RPHYX looked like the better choice at the time. Though for those who wanted certainty and were willing to pay a relatively small cost for that, T-bills might have been attractive.
"Schaja has invested more than USD 1 million in five of the six funds RiverPark offers"
If the answer is not known off hand, no need to look it up for me.
FYI only, Conrad evidently owns $100-500K of RLSFX.
Do you mean the loss of AUM or total return of RPHYX?
There is another tax factor to consider: when are taxes due? Interest from 52 week T-bills purchased at the beginning of January 2023 is not taxed until April 2025. That is, all the income is taxed as 2024 income. RPHIX pays periodic dividends, so divs from Jan 2023, Feb 2023, ..., Dec 2023 are all taxed in April 2024.
That's a point in favor of T-bills assuming you purchased T-bills in 2023 that still haven't matured.
Delving even deeper into tax differences, for 2023 RPHIX had a twelve month distribution yield of 5.08% and a total return of 5.87%. That means that only 5.08% is subject to taxes now. The rest of the return is unrealized appreciation. That isn't taxed this coming April, and might not be taxed for years. And when it is, it will be taxed on the federal level at a cap gains rate.
That's a point in favor of RPHIX.
People had lots of reasons to choose T-bills over RPHYX / RPHIX: I wanted more certainty, I wouldn't make that much less with T-bills because of tax issues, I would have to hold the shares for 60+ days to avoid a short term fee, I wanted to diversify/split my bets, etc. Add to that: I couldn't buy shares because the fund was not open a year ago.
Hindsight tells us what we could have done. What matters is what we can do now. RPHYX / RPHIX has reopened to new investors. So there are even more people facing this conundrum now.
I made a simple calculation when I sold some RPHYX and went to T-Bills; I looked at the average return of RPHYX over the past several years (for sake of argument, let's call it 2.4%) and also looked at the downturn RPHYX had at some point last year (don't recall when exactly, but I think it approached 2%), and decided to sell most of my RPHYX and buy 3-month treasures at my broker.
Another consideration was the need for liquidity (I am expecting needing cash within the next 6 months, didn't want to have to sell any RPHYX at a 2% loss, for example), and the ability to readily flex from 3-months to other investments if I wanted to.
Not the first time & probably not the last !
yogibearbull
RiverPark Strategic Income (RPHIX, RSIIX) is advised by CrossingBridge and there are no sub-advisors. The Fund left the RiverPark Family of Funds in 1H23. The same investment team guides RSIIX.
Shostakovich and MikeM
RPHIX outperformed T-Bills. An investment grade ultrashort strategy CBUDX by CrossingBridge also outperformed T-Bills and the pre-merger SPAC ETC (SPC) which should be considered ultra short outperformed T-Bills. All are ultra short duration. I am also confused on downturn comment since I scratch my head as to the reference.
RPHIX
RiverPark Short-Term High Yield is sub-advised by Cohanzick abd still part of the RiverPark family. Cohanzick is the controlling shareholder of CrossingBridge. Cohanzick only advises RPHIX, private funds and managed accounts. CrossingBridge only advises mutual funds, ETF and UCITs.
If one had millions in T-bills, couldn’t they be subject to fee if they didn’t withhold 90% of taxes due? If so, the taxes due are not in April 2025, rather quarterly estimated payments?
https://public.com/learn/how-are-treasury-bills-taxed
More https://www.treasurydirect.gov/marketable-securities/treasury-bills/
People are generally aware that if they buy zero coupon bonds, interest is imputed and taxes owed yearly. The exception is for any debt instrument (not just bonds) with a maturity date not more than one year from date of issue. That's practically the definition of a T-bill. Likewise, interest is not imputed on CDs that mature in 12 months or less.
https://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/articles/2017-03-03/4-tax-considerations-for-cd-investors
I believe the part of the tax code that exempts short-term maturities from imputed interest is 26 USC §1272(a)(2)(C). In essence, as yogi described, the debt instruments (including CDs) are viewed as being sold at a discount. From a tax perspective, it's not that you buy a $1000 CD and get $1050 in a year, but rather that you are buying a $1050 CD at a discount price of $1000.
Sort of like buying gasoline with a cash discount.
IRS:
Q: If I anticipate a sizable capital gain on the sale of an investment during the year, do I need to make a quarterly estimated tax payment during the tax year?
Answer:
Generally, you must make estimated tax payments
https://www.irs.gov/faqs/estimated-tax/large-gains-lump-sum-distributions-etc/large-gains-lump-sum-distributions-etc
T-bills are in a special category different from regular and muni bond sales. Bonds have their own rules dealing with appreciation. Unless bond appreciation is de minimus (under 1/4% per year), it is taxed as ordinary income (even for munis, except for OID).
Q: If I anticipate a sizable capital gain on the sale of an investment during the year, do I need to make a quarterly estimated tax payment during the tax year?
You can make substantially equal estimates or you can file Form 2210 Schedule AI (annualized income) to account for uneven income throughout the year. I've used that in the past for large 4th quarter Roth conversions, cap gains distributions, fund sales, etc.
You have to keep track of your income by period (Jan-March, April-May, June-Aug, Sept-Dec) and work through the tax liability for each quarter. In recent years before 2023 it wasn't worth the effort because interest rates were so low. Little interest income was lost in paying equal estimates.
2022 IRS pages:
https://www.irs.gov/pub/irs-pdf/f2210.pdf (Form 2210)
https://www.irs.gov/pub/irs-pdf/i2210.pdf (Instructions)
Also, taxpayers are not required to file a 4th quarter estimate if they file their tax return including amount due by January 31st.
Thank you for your time, Derf