cancel
Showing results for 
Search instead for 
Did you mean: 
     
Highlighted
Participant ○

Re: IOFIX special report

I had IOFIX in our 2 IRA accounts. Sold on march 18 with  6% loss in that fund. I did not understand why it was coming down.I was following the market the best way I could. I was reading the forum. Based on the postings here I am beginning to understand the reasons for the drop in IOFIX. I had about 50% my portfolio in Bond funds and Municipal bond funds. Now I have sold all of it.

FD and YBB - Thank you both. 

SRT

 

0 Kudos
Highlighted
Valued Contributor

Re: IOFIX special report

Note the ominous part of warning for its other funds that include futures and options based Premium Opportunity Fund HMXIX [it has done quite well in fact, but buyers beware].

"In times of severe market disruptions you could lose your entire investment."

Late but that warning sounds just about right for that fund.

YBB
0 Kudos
Highlighted
Participant ○○○

Re: IOFIX special report

I have an interesting and ongoing thing with IOFIX in my Fido account. On Fri I placed an order to sell $30K which was a few K short of my total. At the close I only had $27K and change, so the order was automatically canceled. Fido then automatically put in an order for today for the total held in my PF, which was unable to be sold again due to IOFIX closing lower, or so I was told by fido rep who is exploring this for me. When I saw that the order Fri was moved to today, I tried to cancel it and it wouldn't let me! And at this point I am reluctant to sell as it has lost so much and I am continuing to earn distributions but only $155/mo, and the dollar amount of future losses is declining due to how far it has fallen to date. Fido rep is looking into why I am unable to cancel online. He was unable to close it himself because the market closed as we were on the phone together.

I'd be interested in others thoughts on selling vs riding out at this point. Part of me hates to sell this low, but going forward there will be many options for what to do with the proceeds. If I decide to hang on and let it build back again, I will have to get Fido to straighten out their default of bumping the previous sale order to the next day.

0 Kudos
Highlighted
Valued Contributor

Re: IOFIX special report

@archer , Fido, Schwab, etc also have sell-all-shares option for mutual funds.

Schwab typically doesn't allow $amount that exceed 80% of mutual fund holding and says to enter #shares.

YBB
0 Kudos
Highlighted
Participant ○○

Re: IOFIX special report


@archer wrote:

On Fri I placed an order to sell $30K which was a few K short of my total.


That's why I never put in a dollar amount to sell as it can vary based on the closing price. I always put the number of shares to sell, so there is no ambiguity. In your case, it's too late now as it fell another 13.74% today. It's trading worse than penny stocks - I wonder what the heck they were holding? SEMMX lost 1.47% today and the magnitude of IOFIX losses is frightening, to say the least.

When IOFIX beat all the other OEF funds handily, the momentum chasers kept it going and now it's falling apart at a super fast pace. In hindsight, if it's good to be true, then it truly is.

Highlighted
Contributor ○○○

Re: IOFIX special report


@sthanga wrote:

I had IOFIX in our 2 IRA accounts. Sold on march 18 with  6% loss in that fund. I did not understand why it was coming down.I was following the market the best way I could. I was reading the forum. Based on the postings here I am beginning to understand the reasons for the drop in IOFIX. I had about 50% my portfolio in Bond funds and Municipal bond funds. Now I have sold all of it.

FD and YBB - Thank you both. 

SRT

 


The tremendous risks of this fund has been presented for the last couple of years.  Did you not understand the risks?

0 Kudos
Highlighted
Valued Contributor

Re: IOFIX special report

https://www.barrons.com/articles/mortgage-backed-securities-get-hammered-feds-move-may-not-be-enough...

[Some Details] ".....The mortgage carnage has already hit at least one mutual fund. The $2.3 billion mortgage-focused AlphaCentric Income Opportunities Fund  (IOFIX) lost 31% last week alone, and reportedly put $1 billion of securities up for sale  on Sunday.....The fund focused on lower-rated tranches of residential mortgage-backed securities, with about 60% of its holdings rated BBB or lower, according to Morningstar, which had a five-star rating on the fund.....It was also said to have relatively high exposure to “credit risk transfer securities,” or CRTs, a type of mortgage-backed security introduced after the financial crisis. Those CRTs face especially high risk for losses tied to loan modifications. For example, if a distressed borrower negotiates a lower interest rate with an agency, that interest reduction would be passed along to the CRT holder at a loss, according to Goldman Sachs....."

I was not familiar with mortgage CRTs, so I looked it up. These transfer credit risk from GSE's to private investors.  https://apinstitutional.invesco.com/dam/jcr:11f1e101-5f50-483f-9109-94fbfc646d00/Investment%20Insigh...

"How CRTs work
Each CRT transaction generally includes several tranches that cover a range of cash flows,
credit risk and potential return profiles. Historically, tranches with the highest credit quality
have been rated A and feature a relatively short expected cash flow window and a large amount
of credit protection in the form of a higher level of subordination. BBB rated tranches feature
longer expected cash flow windows and lower levels of subordination. Finally, unrated tranches
represent the longest expected cash flows and have the least credit protection, but typically
offer the highest potential returns. Tranche prepayments and write-downs are based on the
performance of the reference mortgage loan pool. As loans are prepaid, the most senior tranche
is first in line to receive the proceeds, followed by lower-rated tranches as outstanding balances
are paid off. As defaults occur, losses are allocated sequentially from the tranches with the
lowest rating to the highest. Thus, unrated tranches experience write-downs, first, and if they are
written down entirely, BBB rated tranches begin to take write downs, and so on."

I see them as "...Credit Risk Debt..." or "...Credit Risk Transfer..."  in December 2019 holdings linked earlier,   https://www.sec.gov/Archives/edgar/data/1355064/000175272420044826/alphacentricnport.htm

YBB
0 Kudos
Highlighted
Participant ○○○

Re: IOFIX special report


@RainGater wrote:

@archer wrote:

On Fri I placed an order to sell $30K which was a few K short of my total.


That's why I never put in a dollar amount to sell as it can vary based on the closing price. I always put the number of shares to sell, so there is no ambiguity. In your case, it's too late now as it fell another 13.74% today. It's trading worse than penny stocks - I wonder what the heck they were holding? SEMMX lost 1.47% today and the magnitude of IOFIX losses is frightening, to say the least.

When IOFIX beat all the other OEF funds handily, the momentum chasers kept it going and now it's falling apart at a super fast pace. In hindsight, if it's good to be true, then it truly is.


Good point on selling shares rather than $. I never sold in this kind of volatility before. Fid actually doesn't allow a $ amount in excess of 90% of total. COme to think of it, that should be a reason for Fid to bump the order into the next day where $ amount is 100%. Seems it would have canceled by their default settings.

Seems IOFIX would not have passed much of a stress test had there been one. :-) 

0 Kudos
Highlighted
Contributor ○○○

Re: IOFIX special report

Not sure that would be accurate. It has already been determined it’s not the risk of the assets but the severe selling that required the sale of assets to fund investor liquidity. 


@archer wrote:

Good point on selling shares rather than $. I never sold in this kind of volatility before. Fid actually doesn't allow a $ amount in excess of 90% of total. COme to think of it, that should be a reason for Fid to bump the order into the next day where $ amount is 100%. Seems it would have canceled by their default settings.

Seems IOFIX would not have passed much of a stress test had there been one. :-) 


 

Highlighted
Participant ○○

Re: IOFIX special report

Holy cow! Look at BDKAX today... Down 41.95% today.

Oh my goodness! From $10.12 to $3.39 in 5 days for a mutlisector bond OEF!

SD is 1.11 and CAGR of 4.98% and looks much better on the paper until 5 days ago - Link.  Holy smokes!

https://finance.yahoo.com/quote/BDKAX?p=BDKAX

PS: BDKAX charges a whopping 1.760% ER for this amazing performance!

0 Kudos
Announcements

Morningstar is here to help you respond to the Coronavirus crisis.