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The distribution paid on 3/30/2020 was 100% ROC

The distribution paid on 4/29/2020 was 55% ROC

These are the links to PDFs that came in my email from brokerage -

https://materials.proxyvote.com/Approved/MC5611/20200501/19A_432893.PDF

https://materials.proxyvote.com/Approved/MC5611/20200501/19A_432894.PDF

This seems a little strange. I would think they would have cut their distribution for these months rather than return capital.

The also have some material on their website for Q1 of this year.

https://alphacentricfunds.com/products/

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Thank you everyone for your contributions to this thread. Good to see norbert is back.

I would like to apologize for my last post, in that I do not think that any of you are senile. I originally thought of posting this on the OEF Bond Fund thread, but then decided to put it on a separate thread. It seemed like some of the chatty back and forth banter moved over from that thread to this thread.

I agree with Gary that this a black box and unless the PM tells us what is inside we just don't know.

Good luck to everybody with their investment decisions!

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The fund site does not have any information about distributions I could find, which is unusual for a mutual fund company.  The section 19a notices came thru the brokerages.

ROC of a fixed income OEF and losses incurred in an OEF is worth discussing and I hope posters would be interested in discussing.

MY conjecture is that the fund incurred a lot of selling and other third party expenses during March which must have wiped out its ordinary (interest) income, resulting in 100% ROC.  A $3B fund yielding 5% would have had about $100-150M ordinary income - this fund spent that much and possibly more money on third party expenses (plus fund ER) in March!?  So, the March NAV loss was not entirely a mark to market loss - some of it is a permanent loss.

Their third party expenses continued into April to cause about $50+M in third party expenses (55% ROC). 

The dollar numbers are my estimates.

So, it is possible the fund's internal accounting controls are as bad as other areas of fund management and nobody caught the fact that it had ROC in March / April until the end of May.

The May distribution did not seem to have been dropped a lot (15% lower than April) to avoid ROC - may be we will see a section 19a notice for May as well.  This is not a managed distribution fund and so they should not be distributing what the fund does not earn, but governance incompetence and / or a desire to keep high AUM by keeping higher monthly distributions to play into retiree investor sentiments are overriding here.   

The fund now has a line of credit (upto 15% of the fund AUM), which would require it to pay a monthly fees even if no amount is drawn on the LOC.  This fees would be in addition to the hefty ER.   See slide 19 of the presentation from Q1 investor call, which I missed. 

http://alphacentricfunds.com/funds/IncomeOpp/presentation.pdf

I asked the fund manager by email to let me know the terms of the LOC, specifically the fees amount, and got no response.  Having the LOC before the March crash would have avoided the fund having to do a lot of fire sale but greed blinds intelligence. 

Interestingly, looking at M* quote page, the fund experienced the strongest two month inflows for April-May.  The investor call must have done the trick.  

P.S.: just as a disclosure, I put money back into this fund in the second half of April but I do not plan to add anymore and plan to keep it under a short leash. 

I would like to explore fixed income OEFs that make quarterly or annual distributions and not make monthly distributions (e.g., ANBGX), which would allow managers to focus on total return. 

 

 

 

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Using the M* Interactive chart one can see that if one would put $100 to IOFIX at the very bottom, then now it would become $131, and $100 invested there a month ago would become $110. That is of course because the bottom was really low. History tells that these many happy returns may not last, but perhaps the same can be said about many things now.

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Who would go anywhere near toxic dreck like this?

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@chang wrote:

Who would go anywhere near toxic dreck like this?


Perhaps some investors were influenced by reports like this or recommendations by certain "bond gurus" in these forums.

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@rila3400 wrote:

@chang wrote:

Who would go anywhere near toxic dreck like this?


Perhaps some investors were influenced by reports like this or recommendations by certain "bond gurus" in these forums.


The much touted funds like IOFIX, SEMMX, JMSIX, etc. were ultimately the proverbial "cure for what ails you" toxic tonics mentioned all too frequently by the momentum-bond gurus (FD, et al.). This is of course, if what "ails you" is having too much money.

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@VA-Tech wrote:

@rila3400 wrote:

@chang wrote:

Who would go anywhere near toxic dreck like this?


Perhaps some investors were influenced by reports like this or recommendations by certain "bond gurus" in these forums.


The much touted funds like IOFIX, SEMMX, JMSIX, etc. were ultimately the proverbial "cure for what ails you" toxic tonics mentioned all too frequently by the momentum-bond gurus (FD, et al.). This is of course, if what "ails you" is having too much money.


Do you realize that supposedly SAFE funds from Vanguard lost money too?...VCIT (investment grade corp) lost over 13%  :-)

vcit.PNG

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But it has great momo and the SD USED to be 3. ;-)


@chang wrote:

Who would go anywhere near toxic dreck like this?


 

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@Anitya wrote:

The fund site does not have any information about distributions I could find, which is unusual for a mutual fund company.  The section 19a notices came thru the brokerages.

ROC of a fixed income OEF and losses incurred in an OEF is worth discussing and I hope posters would be interested in discussing.

MY conjecture is that the fund incurred a lot of selling and other third party expenses during March which must have wiped out its ordinary (interest) income, resulting in 100% ROC.  A $3B fund yielding 5% would have had about $100-150M ordinary income - this fund spent that much and possibly more money on third party expenses (plus fund ER) in March!?  So, the March NAV loss was not entirely a mark to market loss - some of it is a permanent loss.

Their third party expenses continued into April to cause about $50+M in third party expenses (55% ROC). 

The dollar numbers are my estimates.

So, it is possible the fund's internal accounting controls are as bad as other areas of fund management and nobody caught the fact that it had ROC in March / April until the end of May.

The May distribution did not seem to have been dropped a lot (15% lower than April) to avoid ROC - may be we will see a section 19a notice for May as well.  This is not a managed distribution fund and so they should not be distributing what the fund does not earn, but governance incompetence and / or a desire to keep high AUM by keeping higher monthly distributions to play into retiree investor sentiments are overriding here.   

The fund now has a line of credit (upto 15% of the fund AUM), which would require it to pay a monthly fees even if no amount is drawn on the LOC.  This fees would be in addition to the hefty ER.   See slide 19 of the presentation from Q1 investor call, which I missed. 

http://alphacentricfunds.com/funds/IncomeOpp/presentation.pdf

I asked the fund manager by email to let me know the terms of the LOC, specifically the fees amount, and got no response.  Having the LOC before the March crash would have avoided the fund having to do a lot of fire sale but greed blinds intelligence. 

Interestingly, looking at M* quote page, the fund experienced the strongest two month inflows for April-May.  The investor call must have done the trick.  

P.S.: just as a disclosure, I put money back into this fund in the second half of April but I do not plan to add anymore and plan to keep it under a short leash. 

I would like to explore fixed income OEFs that make quarterly or annual distributions and not make monthly distributions (e.g., ANBGX), which would allow managers to focus on total return. 


Anitya - Thanks for this attempt to look under the hood - not easy to do with these puppies.

I remember years ago, aubergine and a few others posted warnings about these types of bond funds where the assets consist of bundles of loans. They are illiquid, and holding them in an OEF wrapper will mean that the PM will have to sell assets in a sell-off to meet redemptions. So I am aware of the risks here.

You people from the CEF thread who have experience in the business, please feel free to comment if you can shed some light on what might be going on here.

I’ve waded back into VCFIX and IOFIX, but not SEMMX. They all seem to be doing pretty well, but until things are stable, I’ve adopted FD’s trading style.

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@FD1001 wrote:

@VA-Tech wrote:

@rila3400 wrote:

@chang wrote:

Who would go anywhere near toxic dreck like this?


Perhaps some investors were influenced by reports like this or recommendations by certain "bond gurus" in these forums.


The much touted funds like IOFIX, SEMMX, JMSIX, etc. were ultimately the proverbial "cure for what ails you" toxic tonics mentioned all too frequently by the momentum-bond gurus (FD, et al.). This is of course, if what "ails you" is having too much money.


Do you realize that supposedly SAFE funds from Vanguard lost money too?...VCIT (investment grade corp) lost over 13%  :-)

vcit.PNG


???

Not sure what your point is unless you are suggesting that the smarter bond money should have been in something more like VCIT versus the one's you were routinely hyping.

Here are the 3-month and YTD Total Return % for those 3 bond funds and fund VCIT which you brought up for  a draw-down comparison:

IOFIX: 3-month: -28.32%; YTD: -26.28%
SEMMX: 3-month: -21.09%; YTD: -19.68%
JMSIX: 3-month: -7.75%; YTD:  -6.41%
VCIT: 3-month 0.13%; YTD: 3.49%

Correct me if I am wrong, but when evaluating Total Return, aren't small positive numbers better than large negative ones? To make matters worse, your penchant for lack of diversification could have easily concentrated that poor performance in 3 funds.

Oh, and the average performance of those 3 much ballyhooed bond funds is MUCH worse than a well diversified equity fund.  Concentration Risk is a real thing!

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@VA-Tech wrote:

@FD1001 wrote:

@VA-Tech wrote:

@rila3400 wrote:

@chang wrote:

Who would go anywhere near toxic dreck like this?


Perhaps some investors were influenced by reports like this or recommendations by certain "bond gurus" in these forums.


The much touted funds like IOFIX, SEMMX, JMSIX, etc. were ultimately the proverbial "cure for what ails you" toxic tonics mentioned all too frequently by the momentum-bond gurus (FD, et al.). This is of course, if what "ails you" is having too much money.


Do you realize that supposedly SAFE funds from Vanguard lost money too?...VCIT (investment grade corp) lost over 13%  :-)

vcit.PNG


???

Not sure what your point is unless you are suggesting that the smarter bond money should have been in something more like VCIT versus the one's you were routinely hyping.

Here are the 3-month and YTD Total Return % for those 3 bond funds and fund VCIT which you brought up for  a draw-down comparison:

IOFIX: 3-month: -28.32%; YTD: -26.28%
SEMMX: 3-month: -21.09%; YTD: -19.68%
JMSIX: 3-month: -7.75%; YTD:  -6.41%
VCIT: 3-month 0.13%; YTD: 3.49%

Correct me if I am wrong, but when evaluating Total Return, aren't small positive numbers better than large negative ones? To make matters worse, your penchant for lack of diversification could have easily concentrated that poor performance in 3 funds. Oh, and the average performance of those 3 much ballyhooed bond funds is MUCH worse than a well diversified equity funds.  


Pretty simple, when a black swan shows up and VG IG fund like VCIT goes down over 13% then lower rated bond funds can go even lower.  IOFIX was, even more, an exception, I'm guessing that many sold a big portion of it at the same time and with illiquidity the price had to go a lot lower.

I can show many other cases, I worked with a GE retiree in 2000 and he had all high saving 6000 shares in GE at 60, look what it is today. There was another retiree and his money was all invested in Lucent, he lost everything.

Every investor should know what they own and what fits their style if they don't just own a target fund. If someone made a mistake they should look at the mirror and blame themselves, after all, they made the trade not me...and so it goes.

Lastly, I really don't care what you think, posters on these boards know my style and it looks like I did pretty well...correction, excellent in the last 3 years. Concentration is great if you know what you are doing and it doesn't mean you have to trade.  I set up a relative that retired in 2002 with just 2 funds and no trading and he has been doing great according to his goals. Bogle believed in only 2-3 funds too.

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@FD1001 wrote:

Lastly, I really don't care what you think, posters on these boards know my style and it looks like I did pretty well...correction, excellent in the last 3 years. Concentration is great if you know what you are doing and it doesn't mean you have to trade.  I set up a relative that retired in 2002 with just 2 funds and no trading and he has been doing great according to his goals. Bogle believed in only 2-3 funds too.


We agree, diversification is absolutely NOT necessary if you can always pick the best funds (or say you do/did as an anonymous poster on a public forum). Clearly, IOFIX, SEMMX, and JMSIX were NOT the right funds for the recent past.

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@VA-Tech wrote:

@FD1001 wrote:

Lastly, I really don't care what you think, posters on these boards know my style and it looks like I did pretty well...correction, excellent in the last 3 years. Concentration is great if you know what you are doing and it doesn't mean you have to trade.  I set up a relative that retired in 2002 with just 2 funds and no trading and he has been doing great according to his goals. Bogle believed in only 2-3 funds too.


We agree, diversification is absolutely NOT necessary if you can always pick the best funds (or say you do/did as an anonymous poster on a public forum). Clearly, IOFIX, SEMMX, and JMSIX were NOT the right funds for the recent past.


We have been discussing securitized/MBS, illiquidity and how different categories did in 2008-9 for years.  We had in 2020 a similar situation for different reasons but the outcome was similar.

So, if you want to discuss IOFIX, SEMMX, and JMSIX then I will mention VCIT where posters believe Vanguard can't do wrong and thought VCIT has decent protection but it was down over 13%.

 

 

 

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I'm sure everyone has good intentions but we're going a little off topic. What were we talking about? IOFIX distributions? The distribution paid -

  • 3/30/2020 was 100% ROC and 0% Net Investment Income
  • 4/29/2020 was 55% ROC and 45% Net Investment Income

A sell-off at low prices should affect capital gains, but not necessarily net income.

Anitya mentions expenses for a LOC below could be part of it. Unless IOFIX management tells us what happened, we probably don’t have a way to know exactly what happened with this fund.

I remember reading somewhere something to the effect that thru the use of derivations, funds can turn capital gains into income and vice versa. So maybe make the question a little more general --

Have you seen this type of loss of Net Investment Income with other bond funds (OEF or CEF), and if so, do you know what caused it?

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@FD1001 wrote:

So, if you want to discuss IOFIX, SEMMX, and JMSIX then I will mention VCIT where posters believe Vanguard can't do wrong and thought VCIT has decent protection but it was down over 13%.

 

 

 


Big difference though, while VCIT has made a comeback, IOFIX, SEMMX, and JMSIX are still in the toilet  bowl.

Here is my evidence this time:

https://www.morningstar.com/etfs/xnas/vcit/quote

https://www.morningstar.com/funds/xnas/jmsix/quote

much worse: https://www.morningstar.com/funds/xnas/iofix/quote and https://www.morningstar.com/funds/xnas/semmx/quote

I'll give you one point in your favor, they may have worked out well for the trader who reads the signs and gets out ahead of the game. This does not mean comparing VCIT with these high risk funds is rational.

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@PN wrote:

I'm sure everyone has good intentions but we're going a little off topic. What were we talking about? IOFIX distributions? The distribution paid -

  • 3/30/2020 was 100% ROC and 0% Net Investment Income
  • 4/29/2020 was 55% ROC and 45% Net Investment Income

A sell-off at low prices should affect capital gains, but not necessarily net income.

Anitya mentions expenses for a LOC below could be part of it. Unless IOFIX management tells us what happened, we probably don’t have a way to know exactly what happened with this fund.

I remember reading somewhere something to the effect that thru the use of derivations, funds can turn capital gains into income and vice versa. So maybe make the question a little more general --

Have you seen this type of loss of Net Investment Income with other bond funds (OEF or CEF), and if so, do you know what caused it?

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@FatKat wrote:

@FD1001 wrote:

So, if you want to discuss IOFIX, SEMMX, and JMSIX then I will mention VCIT where posters believe Vanguard can't do wrong and thought VCIT has decent protection but it was down over 13%.

 

 

 


Big difference though, while VCIT has made a comeback, IOFIX, SEMMX, and JMSIX are still in the toilet  bowl.

Here is my evidence this time:

https://www.morningstar.com/etfs/xnas/vcit/quote

https://www.morningstar.com/funds/xnas/jmsix/quote

much worse: https://www.morningstar.com/funds/xnas/iofix/quote and https://www.morningstar.com/funds/xnas/semmx/quote

I'll give you one point in your favor, they may have worked out well for the trader who reads the signs and gets out ahead of the game. This does not mean comparing VCIT with these high risk funds is rational.


The rationale is pretty easy but let's explain it 100 more times. When a black swan arrives, many categories have a meltdown.  It's hard to predict in advance what will be the results.  Did you think VCIT will go down that much? Did you think SP500 will be down almost 35% in less than 5 weeks? or maybe PCI down over 40%?  the answer is no, if you knew then you would sell.

So, let's say again, know what you own and your style, and set your account accordingly. If you held a fund that went down too much look in the mirror, you made all the decisions.

BTW, VCIT was up because of Fed intervention, without it, it could be a lot worse...and from the bottom(3/25), VCIT made 13+% while IOFIX made over 25+%.  It's all about perspective.

and for you..why not invest only in Vanguard funds and buy and hold forever.

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@FD1001 wrote:


The rationale is pretty easy but let's explain it 100 more times. When a black swan arrives, many categories have a meltdown.  It's hard to predict in advance what will be the results.  Did you think VCIT will go down that much? Did you think SP500 will be down almost 35% in less than 5 weeks? or maybe PCI down over 40%?  the answer is no, if you knew then you would sell.

 


Not if I held VFIAX and my average share cost was $160; I had to just sit there and take it! I was able to buy some fresh fruit (Stocks) and ride those up, yet there is some luck there.

 

 

"BTW, VCIT was up because of Fed intervention, without it, it could be a lot worse...and from the bottom(3/25), VCIT made 13+% while IOFIX made over 25+%.  "

VCIT would have more likelihood of correcting, unless we went into a major depression. IOFIX is another story, and you know it well.

 

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Are these people who post off topic comments senile? I've stopped checking in with M* discuss as often as I used to. Part of this is a feeling that all of this could be a positive exchange of helpful information, but it seems to fall short sometimes.

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@chang wrote:

Who would go anywhere near toxic dreck like this?


Several posters used to emphasize this fund's combination of high returns and (until March) low price volatility. The thinking was that low trailing volatility is predictive of future low volatility. Only one or two posters noted that IOFIX is loaded with junk.

This last point proved to be important. IOFIX crashed hard and, unlike higher quality funds, has not recovered strongly.

N.

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