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  • PHAGE1998_99 PHAGE1998_99 Mar 8, 1999 5:33 PM Flag

    REITS/ Mortgage Reits

    Had a look at those two REITS: interesting,
    especially the one with the 19% return
    on
    equity.

    Hey, but what do you think about Annaly?
    What
    happens to them if we get another sharp liquidity
    contraction? (How strong are they
    relative to other
    mortgage REITS?)

    Found another interesting wrinkle
    on the income
    hunt. The Liberty All Star Fund
    (USA) is now
    yielding something like 10.88. Right
    now, it
    is selling at larger-than-usual discount
    to
    its NAV. But, get this: a 10% payout is a matter of
    policy. If they don't make it for the year on NAV, they
    pay as a "return of
    capital," reducing your cost
    basis in the shares.

    I looked through a report
    from late last year.
    They have a good portfolio,
    similar to the
    S&P but not cap weighted. So, its
    probably
    overvalued but not so grossly as the index.

    Kind of
    an interesting idea--a way to take
    part in all
    this common stock craziness, while
    "hedged" by an
    above-average yield.

    I believe that the five-year total
    return has
    been around 19%. They periodically
    offer
    "warrants" for discounted share purchase that
    have given
    quite a kick to that average
    if
    exercised.

    Worth a look anyway.

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    • Have you looked at Pilgrim Prime Rate Trust
      (PPR)? It's a closed end fund that holds a portfolio of
      senior secured corporate loan participations.

      Currently yields a bit over 8% at present price which is a
      slight premium to net asset value. It pays a monthly
      cash dividend.
      Have owned this fund for about four
      years now and price is fairly stable except for last
      fall during the credit crunch when price was hammered
      (due to guilt by association, I guess)and dropped as
      low as 8 1/2. Bought some then that now yields about
      10%.
      Risk of the fund is credit risk of the individual
      companies and general economic risk. However, the loans are
      senior secured instruments which mitigates some of the
      risks involved. Also, fund holds about 120 loans which
      allows for fair diversification.
      Cash dividends are
      declared and paid monthly - which is nice.
      Worth a look
      in the hunt for yield.

      • 1 Reply to JakSiemas
      • Thanks. Will have a look.

        Do you know what
        Pilgrim's average discount or
        premium to NAV
        is?

        Had a look for income investments, offering high
        yield with good security for principal, for some of the
        older members of the family.

        Things being what
        they are, I'm inclined to
        favor some of the
        "retail" hedged stock funds.
        (One takes the
        distribution and sells some or
        all of the annual capital
        appreciation.)

        Our large holding is this area is COAGX, which
        has
        a five year average return of about 18% with an
        extraordinarily high Sharpe Ratio, (risk-adjusted return.)
        Unfortunately, its now
        closed to new investors.

        I've
        been keeping an eye on Barr Rosenberg's
        two "market
        neutral" funds. Since they took
        these partnerships
        "public," they've had problems; but I believe that they
        will get it
        right in time.

        The nine-year
        pro-forma for US Market Neutral
        showed an annual return
        of around 15% with a
        standard deviation of about
        7--extremely good
        security for principal.

        Pooled
        hedges have long been utilized by the
        very rich,
        primarily in the form of investment
        partnerships
        available only to accredited investors,
        (millionaires.)

        Since the tax laws governing short sales in mutual
        funds changed in 1997, they have started
        becoming
        available to the general public.

        I'm expecting this
        kind of risk-adjusted investing to gain in popularity,
        given the aging of the investing population and
        the
        extreme character of the financial
        markets.

        Another fund with a long history of successful
        hedging
        is PADEX, (Analytic Optioned Equity.)

        As a
        class, these funds should show low to
        middling
        correlation with either stocks or bonds, standard deviation
        and return characteristics somewhere between stocks
        and bonds, and superior to inverse performance
        in
        bear markets.

 
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10.80+0.02(+0.19%)3:01 PMEDT