I had a very pleasant, though short, conversation with David Sherman today. They've filed a reopening notice (technically, a 497 / Material Change notice) with the SEC today. Fund assets peaked north of $900 million, they closed and now assets are down to $700 million or so. That's manageable, so they reopened. David speculates that the outflows are FOMO-driven; every time the stock market hits a new high, investors yank more cash from the fund.
RPHYX had the distinction of having the highest Sharpe ratio of any fund in existence for years. It's a low volatility / low risk fund that's best used as a strategic cash fund. (I've owned it for a long time and use it in lieu of a savings account.) It has averaged 3.1% annually with a maximum drawdown, lifetime, of 0.6%. David's current reading of the market, bond as much as equity, is that it's time to maximum caution and his funds are positioned commensurately.
Morningstar calls it a high-yield fund, which is silly (it's correlation to the group is about .6) but unavoidable given the categories available to them. Lipper classifies it as short-term high-yield, which is fair. It's a Great Owl.
Comments
https://www.sec.gov/Archives/edgar/data/1494928/000139834420000731/fp0049672_497.htm
497 1 fp0049672_497.htm
RiverPark Funds Trust
RiverPark Short Term High Yield Fund
Institutional Class (RPHIX)
Retail Class (RPHYX)
Supplement dated January 14, 2020 to the Summary Prospectus, Prospectus and Statement of Additional Information (the “Disclosure Documents”) dated January 28, 2019.
This supplement provides new and additional information beyond that contained in the Disclosure Documents and should be read in conjunction with the Disclosure Documents.
IMPORTANT NOTICE ON PURCHASE OF FUND SHARES
Effective as of the close of business on January 15, 2020 (the “Re-Opening Date”), the RiverPark Short Term High Yield Fund (the “Fund”) will be publicly available for sale without limitation.
The Fund may from time to time, in its sole discretion, limit the types of investors permitted to open new accounts, limit new purchases or otherwise modify the above policy at any time on a case-by-case basis.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.
When I compare the 2 funds, RPHYX is less risky compared to ZEOIX. RPHYX has a portfolio credit rating of using BB rated corporate assets, compared to B rated for ZEOIX. RPHYX also reduces risk by holding a much higher percentage in cash (about 46%), compared to about 5% cash for ZEOIX. Also RPHYX does not require redemption fees compared to ZEOIX. When you look at performance charts, you see the lower volatility/standard deviation in RPHYX, and in the toughest downmarket for the 2 funds (2015/2016), RPHYX showed almost no dip, compared to a slight dip for ZEOIX. As a result of the 2 similar funds, you get a safer fund in RPHYX that performs more like a Money Market fund than RPHYX, but with ZEOIX you get more yield, with a bit more long term return, and a fund that stays largely invested in corporates. For an investor, who wants a fund more like cash, RPHYX is a bit more similar without redemption fees.
I try to go the horse's mouth. The latest annual report, Sept. 30, 2019, Statement of Assets and Liabilities (according to GAAP, see note 2 for the statement) gives the cash and cash equivalent holdings as $4.56K out of $809K, or less than 6% in cash.
When giving secondary source figures, it helps to cite the source. I'll guess that you're looking at M* (47% cash as of Dec 31). M* has its own definition for cash that distorts figures for funds like RPHYX. https://www.morningstar.com/InvGlossary/percentage_cash.aspx
Certainly much of what RPHYX buys has short maturities. That's by design. But they still have non-cash-like attributes.
Yes, the 47% figure came from M*, and yes before you make a decision to purchase, it is important to go to the website. I doubt you will ever see ZEOIX at 47% cash, as they seem pretty committed to stay fully invested, but with RPHYX, you do see higher cash figures periodically in a calendar year. I am not sure that what M* does should be labeled as "distorting" figures, but they do include things that are both cash and "cash like" in their figures.
Fwiw I think keeping it closed is the way to go for the investors not so much so for the fund company.
AA returns for 5years. 2.2 % Investor class
Yes I do hold a position in this fund.
Derf
M* definition of "cash equivalent":
Cash Equivalent
Assets that can be quickly converted to cash. These include receivables, Treasury bills, short-term commercial paper and short-term municipal and corporate bonds and notes.
For example, the M* definition you gave can be found (among other places) in its investing glossary
https://www.morningstar.com/InvGlossary/Default.aspx?letter=C
Just follow the Cash Equivalent link,
All well and good. Now since we've decided to use M*'s glossary as the source of the definitions, and what we're concerned about is not cash equivalents per se, but what M* means by the percentage of cash it presents for a fund, we should look the at the glossary entry for Percentage Cash. That is just what I cited before.
It might be helpful if I reproduced the complete entry for that term, since M* makes clear that this defines how it computes the 47% figure you quoted. It doesn't matter how M* defines "cash equivalent" generally; what matters is how it defines it for the purpose of computing percentage cash.
For some purposes, and I'm not sure which, in 2016 M* redefined cash equivalents down from 364 day maturity to 92 day maturity. Since the definition you quoted doesn't include a time frame (neither a year nor a quarter), to be consistent I expect you would disregard this definition also. http://advisor.morningstar.com/Enterprise/VTC/FAQ_Methodology_Enhancements_31_October_2016.pdf
My takeaway from this FAQ is not that M* has altered how it calculates "percentage cash". Rather, the text states that industry standard for "cash equivalents" excludes securities with maturities over three months, even if they fit the definition you gave.
P.S. Regarding Schwab's figures and definitions: "Except as noted below, all data provided by Morningstar, Inc." Schwab is not using data provided by the fund company, except indirectly, via M*. It's a tertiary source.
https://www.schwab.com/public/schwab/investing/investment_help/investment_research/mutual_fund_research/mutual_funds.html?path=/Prospect/Research/mutualfunds/summary.asp?symbol=RPHYX
VMMXX holds corporate debt and can break a buck. While it is the "sense of Congress" that the FDIC is backed by the Treasury, there is no statute providing that level of backing. In contrast, the treasuries held by VUSXX are backed by the full faith and credit of the US government.
Dancing on the head of a pin, perhaps.
As of 1/14/20, M* reports identical 1 year returns for VMMXX and RPHYX of 2.20%, which means that RPHIX has returned about a quarter percent more than the MMF (no 12b-1 fee).
EDIT: VMMXX --> 1.7%, VUSXX --> 1.54%
He's also, for what interest it holds, deeply concerned about the health of the market and the economy. In particular, he seems to perceive that liquidity is problematic and that downgrades of bonds that are "just above junk" are much likely than are upgrades. As a result, both of his portfolios are positioned conservatively.
RPHYX shows as open at TD Ameritrade, but at Fidelity it still shows as closed. However, I put an order in today at Fidelity, and the order went through....well, I should say, the system accepted the order. I will let you know if it goes through tomorrow
I was addressing the comment that Vanguard Prime MMF was safer than anything other than a bank account (which also implies that bank accounts are the safest possible places for money).
Prime MMFs, whether Vanguard's or anyone else's can break a buck. To lessen this possibility, they are required to freeze withdrawals and/or impose a redemption fee in times of stress. That's not a requirement imposed on VUSXX or any MMF that holds exclusively federal obligations (even if not backed by the full faith and credit of the government). Those funds are safer.
In term of safety, prime money market funds are less safe than bank accounts (backed by FDIC, not full faith and credit) and MMFs holding government debt, which in turn are less safe than Treasury debt and Treasury MMFs.
Conversely, Treasury debt would be expected to pay less than government debt which would be expected to pay less than corporate debt. Same for MMFs: prime MMF pays more than gov MMF pays more than Treasury MMF.
The greater the risk, the greater the reward.
Though in a taxable account in a state with a 10% income tax, that 1.7% yield, after taking out state income tax, leave one with just 1.53%, just about what one gets with the Treasury MMF. Extra safety at no extra cost, depending on one's situation. Occasionally, rarely, there is a free lunch.
Certainly there is less credit risk as compares to corporate debts.
As I wrote before, this is dancing on the head of a pin. But since you asked, many securities held by VMFXX are not backed by the full faith and credit of the US government. Substantially all securities held by VUSXX are Treasuries that do have that extra layer of security.
https://personal.vanguard.com/us/content/Funds/FixIncAgencyBondsContent.jsp
Goldman Sachs writes: "Contrary to their reputation, government money market funds are not all the same. These funds, which invest primarily in cash, government securities and/or repurchase agreements, can offer a range of risks and returns."
Government Money Market Funds are Not All the Same
The difference in portfolios can make not only a minuscule difference in safety, but a quantifiable difference in after tax returns. Last year, only 78% of the income from VMFXX was state tax-exempt. 100% of the income from VMFXX was derived from Treasuries, thus exempt in all states.
https://personal.vanguard.com/pdf/USGO_012019.pdf
Any MMF that is allowed to hold government agency paper and/or federal repurchase agreements subjects residents of California, Connecticut and New York to the risk that all of the income will be taxed by the state See, e.g. FRBXX or FLGXX.
https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/taxes/2018-gse.pdf
RPHIX has inferior numbers to the other 3.
DHEIX is the only one with 80+% in investment-grade rating. I can't buy DHEIX at Schwab but I can buy DHEAX with no fees.