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RAIT Financial Trust Message Board

  • intrstdbystndr intrstdbystndr Sep 8, 2013 7:26 PM Flag

    Effective duration of RAS common?

    Curious if anyone on the board has thought about being long the common and hedging out some of the rate risk with bond futures. Hard to get a good handle on it given RAIT's longer term circumstances, but performance YTD looks similar to a lot of interest rate sensitive stocks, closed-end funds, etc. Looking at it since BOY, I get roughly a 10-13 year effective duration. If business is stable, dividends improving, and the relationship reasonably robust going forward, looks like you can clip 4.5+% yield on a (semi)-hedged basis.

    Similar opportunities appear to exist looking at some muni CEF's trading at discount to NAV w long AAA munis now yielding ~120% of long bonds.

    Given tax status of RAS distributions and obviously muni CEF's, trade has even more appeal if you are in a high tax bracket.

    Kicking myself a bit for not seeing this 3 months ago...

    Thoughts appreciated. Thx

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    • what is the rate risk? the portfolio is mostly floating rate and duration matched. the dividend yield should be around 10% by year end, which is a wide enough spread vs. treasuries that another few basis points on the long end of the curve shouldn't matter. if you want to short bonds that's fine, but it's not a hedge for this company.

    • U Were Lucky Not Getting In 3 Months Ago But If Like U Said U Have Up To 13 Years, Now Seems To Be A Good Time To Get In. But For The Last Year Or 2 The Money Being Made In Ras Was In & Out Meaning It Would Get Way Ahead Of It Self & Then Come Down Big Time. There Are Many Pumpers On This Board As Most So U Have To Watch Which Way The Wind Blows.& Watch Out 4 SnakeHd . Good Hunting

 
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