February 2022 IssueLong scroll reading

Intrepid Income Fund (ICMUX), February 2022

By David Snowball

Objective and strategy

The fund’s goal is to generate current income. In particular, they want to offer an attractively higher yield than comparable maturity US Treasury securities without taking significant default or interest rate risk.

The managers invest primarily in shorter duration corporate bonds, both investment grade, and high yield. They might also own other income-producing securities such as securitized loans and convertible securities. Generally, the majority of securities in the portfolio are part of smaller issues of less than $500 million.


For investors, there is only one risk: that when the time comes, the sum of their resources will be less than the sum of their needs. Everything else is noise.

For fixed-income investors, there are two sources of risk: the money you’ve lent is not earning enough interest to offset the corrosive effects of inflation, or the people you’ve lent to are not able to repay you. The former is called interest rate risk; the latter is credit risk. In a low-interest rate environment, credit risk may be the lesser of two evils. And in the transition to a rising interest rate one, which combines low current rates with the risk of disruptive rate increases (the ultra-cheap Vanguard Total Bond Market Index Fund lost 1.7% in 2021 then an additional 2% on rate hike fears in just the first three weeks of 2022), it’s all the more worthwhile considering a fund that generates substantial income without courting interest rate risk.

Intrepid Income is one such fund and one of the best in its class.

Intrepid Income’s strategy was launched in the 1990s and became available to mutual fund investors in 2007. Traditionally, it was managed by investors with a strong background in absolute value equity investing. As with funds such as F.P.A. Crescent, they were willing to scour a corporation’s entire capital structure – from common and preferred stock to bonds and loans – to find the most attractive sources of high income and capital appreciation. That led them into “a fairly liberal definition of what it meant to be an income strategy,” according to manager Hunter Hayes, with a fair amount of deep value equity stocks and a willingness to hold substantial cash. While generally successful, that dual focus tended to reduce yield and bump up volatility.

The focus began to change in 2018, with changes in the management team, including the return of Intrepid Capital founder Mark Travis to the manager’s role in November 2018 and the appointment of Hunter Hayes as co-manager in January 2019. Mr. Hayes came from Eaton Vance, where he was an associate on the High Yield team, assisting with the multi-billion dollar Eaton Vance Income Fund of Boston (EVIBX). Before that he’d been a consultant at Deloitte Advisory. Messrs. Travis and Hayes agreed on a bunch of stuff, most notably that:

  1. targeting small issues gave them a useful strategic advantage. Intrepid targets bond issues of $500 million or less, deals which are far too small for major investors like Eaton Vance to even consider. The relative inattention to these smaller offerings meant that mispricing was, if not rampant, common.
  2. the opportunity set was large enough without pursuing much equity exposure. There are, Mr. Hayes argues, lots of sub $200 million issues where they have been able to find yields of 150-200% of those available in larger offerings without any commensurate increase in risk exposure. He points, as an example, to a G.E. bond, part of a tiny $15 million issue, that has three times the yield of other G.E. bonds for the same underlying risk. Something similar occurred with the “deeply busted” convertible securities for a Norwegian shipping company.

At the end of 2021, the portfolio was dominated by three sets of assets.

60% Short-term corporate bonds, both high yield and investment grade. The ratio is high-yield to investment grade was about 4:1

21% convertible securities, which they opportunistically purchase when they’re selling at a discount and are held until they’re in the money. In the worst case, these offer above-market interest because they were bought below par; in the best case, they might offer a bit of capital appreciation.

15% levered loans, quite frequently to cannabis companies. This is a paradigm case of “good businesses that major lenders won’t touch.” They have to pay up.

4% “other,” which includes a smattering of preferred stocks, common equity, and discounted SPACs.

On the whole, that’s been a solid portfolio with a yield-to-maturity of 7.68%. By comparison, the huge Vanguard Corporate Short-Term Bond ETF (VCHS), which targets larger issues and investment-grade debt, sits at 1.5%.

Morning and Lipper have both moved Intrepid between peer groups over time, depending on whether it seems a predominately short-term high yield portfolio or a more opportunistic multi-sector income one. Regardless of which you choose, Intrepid has top tier risk-adjusted returns over time.

Ranking by Sharpe ratio

  3 year 5 year 10 year
Short-term high yield #2 of 17 #2 of 15 #2 of 5
Multi-sector income #6 of 117 #5 of 104 #7 of 61

The only short-term high yield fund with better risk-adjusted returns is RiverPark Short-term High Yield (RPHYX), a great fund but one designed to generate a lower risk-return profile than Intrepid. During the Covid bear market in March 2020, Intrepid Income fell 7.0%, while RiverPark dropped 1.1%. In both cases, that’s their worst-ever drawdown, and it’s hugely superior to the average decline of 9.1% for their peer group. In return for that greater downside risk, Intrepid investors have booked two- to three-times greater gains over time.

Annual percentage returns

  3 year 5 year 10 year
Intrepid Income 7.8% 5.5% 4.3%
RiverPark STHY 2.3% 2.3% 2.8%
Lipper peers 5.5% 4.3% 4.1%

If you are concerned about the prospect of a bear market for conventional (intermediate term, investment grade, domestic) bonds, then it’s reassuring to note that Intrepid operates with unquestioned independence from the market: the firm estimates their “active share” is “essentially 100%,” the fund’s correlation (R-squared) to the bond market is an invisible 0.01, and it has managed a negative downside capture of 30%, which means that the fund has historically risen as the bond market fell.

Bottom Line

The only thing that makes the U.S. stock market marginally attractive is the start of the U.S. bond market. That doesn’t help investors who need income. The “safe” assets and broad aggregate indexes do not seem capable of delivering that income and might not do so for years.

Income investors need to look for funds and ETFs that find income where others aren’t willing or able to look. Funds like Intrepid Income (and, for other investors, RiverPark and Osterweis Strategic Income, another famously independent multi-sector income fund with a 0.85 correlation to Intrepid) are the models to consider. They have clear, risk-conscious disciplines paired with experienced managers who have managed across a variety of economic cycles. They have seen no bankruptcies in portfolio companies in 20+ years and have never “held bad paper.” They consistently produce positive real returns. Their returns are independent of the bond markets, and they’re almost looking forward to the rate hikes which might “give us the opportunity to buy some of the 40 names on our wish list.”

You might add them to yours.

The other details you need to know


Intrepid Capital, headquartered in Jacksonville Beach, Florida. The firm was launched in 1994 with an avowed focus on a long-term focus, absolute returns, and deep fundamental company analysis. They provide investment management services to about a hundred high net worth individuals, to three mutual funds, and to two limited partnerships. In all, the firm has about $616.7 million in assets under management.


Hunter Hayes, CFA and Mark Travis

Mr. Hayes joined Intrepid Capital in 2017. Prior to joining Intrepid, he was a high-yield analyst on a $20 billion Eaton Vance strategy. He is a co-lead portfolio manager here and on the separately managed Intrepid Income portfolio and is also a member of the investment team responsible for the Intrepid Endurance Fund, the Intrepid Capital Fund, and the separately managed Intrepid Small Cap and Intrepid Balanced portfolios. He earned bachelor’s degrees in both finance and piano performance at Auburn and is a C.F.A. charter holder.

Mr. Travis is the firm’s president and founder. He co-manages this fund and the Intrepid Capital Fund, as well as the separately managed Intrepid Balanced portfolio, and the Intrepid Capital, L.P. Mr. Travis began managing this fund at its inception, left the team in 2017, and returned in late 2018. He has 30 years of investment experience.

Strategy capacity and closure

The managers believe the strategy could accommodate $1 billion. Given their special focus on smaller bond issues, they recognize that limiting the strategy size is “super important.”

Management’s stake in the fund

Mr. Travis has invested between $100,000 – 500,000 here, and Mr. Hayes has $10,000 – 50,000.

Opening date

July 2, 2007. The strategy, as distinct from the fund, has been in operation since the 1990s.

Minimum investment


Expense ratio

0.91% on assets of $325.3 million, as of July 2023.

Fund website

https://intrepidcapitalfunds.com/strategies/mutual-funds/income/overview/. It’s a pretty sparse site, with almost no new content – other than routine fund documents – posted in the past year or so. For more information, please contact Tommy Isaacs, Vice President, at [email protected] or by telephone (904) 242-5071

© Mutual Fund Observer, 2022. This article reflects publicly available information current at the time of publication. The views and opinions expressed in this article are those of David Snowball of Mutual Fund Observer and do not necessarily reflect the views of Intrepid Capital or its officers. Intrepid has no editorial control over the content of the article or subject matter and is independent of Mutual Fund Observer. For information concerning article reprints or data sources, contact Mutual Fund Observer.

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About David Snowball

David Snowball, PhD (Massachusetts). Cofounder, lead writer. David is a Professor of Communication Studies at Augustana College, Rock Island, Illinois, a nationally-recognized college of the liberal arts and sciences, founded in 1860. For a quarter century, David competed in academic debate and coached college debate teams to over 1500 individual victories and 50 tournament championships. When he retired from that research-intensive endeavor, his interest turned to researching fund investing and fund communication strategies. He served as the closing moderator of Brill’s Mutual Funds Interactive (a Forbes “Best of the Web” site), was the Senior Fund Analyst at FundAlarm and author of over 120 fund profiles. David lives in Davenport, Iowa, and spends an amazing amount of time ferrying his son, Will, to baseball tryouts, baseball lessons, baseball practices, baseball games … and social gatherings with young ladies who seem unnervingly interested in him.