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State Funds Enhanced Ultra Short Duration Mutual Fund (STATX)

edited December 2018 in Fund Discussions
Curious to see if anyone owns this fund or their thoughts about this fund? Thanks for any information provided.

Fund website is http://www.tbil.co/

Already contacted the 800 telephone number on the above webpage. Telephone number appears to be to its main offices in Las Vegas, not the transfer agent Mutual Shareholder Services, LLC (http://www.mutualss.com/welcome.aspx ). Other telephone party directed me to contact Mutual Shareholder Services, LLC for an application if I was interested.

Fund investment strategy is:

https://www.sec.gov/Archives/edgar/data/1679960/000116204418000562/state497201809.htm

Principal Investment Strategies

Under normal market conditions, the Fund primarily invests its net assets (exclusive of proceeds (collateral) received with respect to securities lending, repurchase agreements and reverse repurchase agreement transactions) in U.S. Treasury securities, which include bills, notes, and bonds issued by the U.S. Treasury, that have remaining maturities of three months. The balance of the Fund’s portfolio will consist of a mixture of cash and U.S. Treasury securities, which include bills, notes, and bonds issued by the U.S. Treasury, with remaining maturities of less than three months and remaining maturities of longer than three months. In addition, under normal market conditions, the Fund will hold at least one U.S. Treasury security with a maturity of at least 14 months, as measured at the time of purchase, and the Fund will maintain a portfolio with a dollar weighted average maturity of at least 90 days. The Portfolio manager may adjust the dollar weighted average maturity of the Fund’s portfolio within the stated limit based on current and anticipated changes in interest rates. The foregoing specific maturity lengths are described as measured at the time of purchase. U.S. Treasury securities are backed by the “full faith and credit” of the U.S. Government, which means that the U.S. Government guarantees that the interest and principal will be paid when due. All of the Fund’s assets will be invested in U.S. dollar-denominated securities.

In order to enhance income, the Fund intends to enter into securities lending, repurchase agreement and/or reverse repurchase agreement transactions that provide the Fund with income at either fixed or floating (variable) interest rates and fees. The Fund may lend its portfolio of securities to broker/dealers, institutional investors, institutional investment managers, banks, mutual funds, and insurance and/or reinsurance companies located in one of the member countries of The Organization for Economic Co-operation and Development (“OECD”). Securities lending allows the Fund to retain ownership of the securities loaned and, at the same time, earn additional income from fees paid by borrowers. Loans will be made only to parties who have been reviewed and deemed satisfactory by New York Alaska ETF Management LLC, the Fund’s investment adviser (the “Adviser”), pursuant to guidelines adopted by the Board of Trustees (the “Board” or the “Board of Trustees”) of State Funds (the “Trust”), and which provide collateral, which is either (i) 102% cash or (ii) 102%-115% U.S. government securities. The collateral is marked to market daily and, if the value of the existing collateral decreases or the value of the securities lent increases, the borrower will be required to post additional collateral.

The Fund may enter into repurchase agreements and/or reverse repurchase agreements with broker/dealers, institutional investors, institutional investment managers, banks, mutual funds, and insurance and/or reinsurance companies located in one of the member countries of the OECD. Repurchase transactions involve the purchase of securities with an agreement to resell the securities at an agreed-upon price, date and interest payment. Reverse repurchase transactions involve the sale of securities with an agreement to repurchase the securities at an agreed-upon price, date and interest payment and have the characteristics of borrowing. the Fund will invest over 5% of its assets in reverse repurchase agreements in which proceeds (collateral) received with respect to reverse repurchase agreements will include cash, U.S. Treasury securities or debt instruments secured by U.S. Treasury securities. The Fund will earmark or establish a segregated account equal in value to its obligations to hold the aforementioned proceeds (collateral).

A bond’s “maturity” refers to the length of time until the bond’s principal must be paid back. “Dollar weighted average maturity” (“WAM”) is the weighted average amount of time it take for the Fund’s bond portfolio to mature. This means that the higher the Fund’s portfolio’s WAM, the longer it takes for all of the bonds in the portfolio to mature. WAM is calculated by computing the percentage value of each bond instrument in the portfolio. The number of days or months until the bond’s maturity is multiplied by each percentage, and the sum of the subtotals equals the WAM of the bonds in the portfolio.

WAM is not the same thing as “duration.” Duration is an approximate measure of a bond’s price sensitivity to changes in interest rates. If a bond has a duration of six years, for example, its price will rise about 6% if interest rates drop by a percentage point, and its price will fall by about 6% if interest rates rise by a percentage point. For investment purposes, the Fund uses the Macaulay method of calculating duration, named after its creator, Frederick Macaulay. Macaulay duration is the weighted average term to maturity of the cash flows from a bond. The weight of each cash flow is determined by dividing the present value of the cash flow by the price.

The Adviser may, but is not required to, use a securities lending agent to facilitate its securities lending transactions or may itself act as agent, for which the Adviser will receive no separate compensation. The Fund may split fees earned from securities lending with any unaffiliated lending agent, but in no event will the Fund pay more than 15% of the interest or fees earned from securities lending to a securities lending agent who administers the lending program in accordance with guidelines approved by the Board of Trustees.

The Fund seeks to maximize income from securities lending and reverse repurchase agreement transactions through entering into such transactions with counterparties who may reuse the securities obtained through securities lending and/or reverse repurchase agreements with the Fund to collateralize other transactions with different counterparties. Such counterparties may be willing to enter into securities lending and/or reverse repurchase agreement transactions with the Fund on more favorable terms than would otherwise be available.

Under normal market conditions, the Fund will invest not less than 80% of its net assets (exclusive of collateral with respect to securities lending, repurchase and reverse repurchase agreement transactions), plus any borrowings for investment purposes, in U.S. Treasury securities, which include bills, notes, and bonds issued by the U.S. Treasury, that have remaining maturities of three months.

The Fund is not a money market fund and thus does not seek to maintain a stable NAV of $1.00 per share. Additionally, the Fund’s investment strategy will cause the Fund’s portfolio to exceed the dollar weighted average maturity requirements imposed on money market mutual funds. Furthermore, the Fund’s use of reverse repurchase transactions will have a leveraging effect on the Fund’s NAV, which is generally inconsistent with the stable net asset value associated with money market mutual funds. In addition, although the Fund may invest in securities that may be held by money market funds, it is not subject to the regulations applicable to money market funds.


Comments

  • edited December 2018
    I wanted to purchase this fund awhile back but it wasn’t available anywhere much less at TD Ameritrade where I trade. Still not available at TD but now I see it is available at Vanguard with a transaction fee. From what I hear these newer funds go to Schwab first so not sure if is available there now too. My kind of fund in that its equity curve is straight up with no volatility. One of the rare bond funds that is meaningfully up over the past 1 month, 3 months and YTD. A more volatile fund but with the same performance would be NVHIX/AX. At least for me, with money market funds closing in on 2.50%, I would prefer to see a fund where there is a potential return several percentage points above cash. The mini debacle in junk corporates has my attention but would like to see more blood there. Anxious to see what early January has in store for bonds.
  • edited December 2018
    @Junkster,

    Thank you for your thoughts! I am contemplating buying this fund through the transfer agent.

    Have a Happy New Year!
  • Difficult to find the application forms (or even current prospectuses) online, but I came up with some things that may do. Though it's probably better to contact the fund directly for the forms.

    Curious too that the prospectus says explicitly that the fund is offered to nonresidents (bold in original):
    How to Purchase Shares

    The Fund may be purchased by U.S. or non-U.S. shareholders, and the procedure for purchasing shares are the same for both U.S. and non-U.S. shareholders .
    From the SEC site, the standalone IRA application (also found as an exhibit in the 2018 prospectus, see below):
    https://www.sec.gov/Archives/edgar/data/1679960/000116204418000223/state485bposexh5201803.htm

    A search on the SEC mutual fund filings page for STATX comes up empty, but SeekingAlpha (of all places) seems to have all of them (set Filing Type to All):
    https://seekingalpha.com/symbol/STATX/sec-filings

    The March 29, 2018 485BPOS (also from SeekingAlpha) contains the IRA application form as (exhibit) Ex. 99.28.h.v, and the individual taxable account application form as Ex. 99.28.h.vi
    https://seekingalpha.com/filing/3957574
  • @msf,

    Thank you for your effort. I spoke with a particular individual at Mutual Shareholder Services, LLC, Steven Milcinovic, who emailed me both the regular and non-taxable applications.

    I did note that STATX did not come in Edgar symbol search engine as well; however. Enhanced Ultra Short in the actually come up in the name search engine.

    Have a Happy New Year!
  • Bought in Feb. of this year. I am happy with the steady slow growth of this fund.
    Currently stacks up very well with Morningstar's 1 year return in the Ultra Short rankings (up 3.65%) and vs. Short Term bond rankings. It is now beating my other Short term bond fund RPHIX. Be interested if MFO would profile it sometime as it is a newer fund.
  • @fundhunter,

    Thanks for your input! Have a Happy New Year!
  • From what I hear these newer funds go to Schwab first so not sure if is available there now too
    Yes it's available at Schwab but has a $76 TF (buy) fee. That's a no for me.
  • Are you sure? When I tried asking it to trade STATX, I got: "The symbol you entered is not a mutual fund symbol. Please verify the symbol."

    The Schwab page for STATX has '-' next to "Availability", and next to minimum initial investment for "Basic" and for "IRA".

    If one flips to its Fund Facts & Fees tab, next to "Transaction Fee" it also shows '-', not "Yes" as one sees on, say, the Schwab fees tab for DODGX.
  • Your probably right msf. I didn't look close enough.
  • edited December 2018
    While I do not have an account with Schwab, I did look at their MF screener. This is what it indicates:

    Status


    Availability--


    Minimum Investment

    Initial Subsequent

    Basic-- --

    IRA-- --

    Custodial-- --


    One may have to contact their brokerage to request that their brokerage complete an agreement to execute to purchase that fund.

    I know WFA does not have agreements in place to purchase certain funds.
  • Is this a daily accrual bond fund?

    For example, if you buy this fund today, will you receive the month-end distribution for the remaining 4 days of December? And, if you sell the fund part-way through the January, will you receive a partial distribution at the end of January for the days you held the fund?

    Mona

  • Mona said:

    Is this a daily accrual bond fund?

    For example, if you buy this fund today, will you receive the month-end distribution for the remaining 4 days of December? And, if you sell the fund part-way through the January, will you receive a partial distribution at the end of January for the days you held the fund?

    Mona

    Mona, no it is not a daily accrual fund.

  • However, it does pay dividends every two weeks, not on a monthly basis.
  • I spoke with the manager today. He said that the fund does have daily accrual.
  • openice said:

    I spoke with the manager today. He said that the fund does have daily accrual.

    All you have to do is look at a chart of this fund or look at its daily price history to see it is not a daily accrual fund. The price declines by the amount of the dividends every two weeks. That is not the case with funds where the dividends accrue daily and then paid out whenever - primarily end of month like say a PIMIX. IOFIX a favorite here is another example of a fund that is not a dail accrual fund. Either I am really missing something here or the fund manager.....................

  • Junkster: Call him yourself. 1-818-941-4618
  • openice said:

    Junkster: Call him yourself. 1-818-941-4618

    Even better let’s ask @msf if he has ever heard of a daily accrual fund where the NAV drops each month (or in this case bi weekly ) by the amount of the dividends payout. Because I sure haven’t.

  • While I appreciate the thought, I'm not infallible (as @Junkster well knows) and I prefer the adage: teach someone to fish ...

    With that in mind, IMHO the best source is the documentation (RTFM), not some person, even the manager who may not be responsible for the bookkeeping. The prospectus reads:
    FUND DISTRIBUTIONS

    The Fund distributes substantially all of its net investment income to shareholders in the form of dividends. The Fund intends to declare and distribute income dividends every two weeks to shareholders of record.
    I don't know how a fund could accrue dividends on the 13 days out of every fortnight that it didn't declare dividends.

    Since Junkster mentioned PIMCO, here's PIMCO's page summarizing its funds' distribution schedule. It seems to give a pretty clear description of how daily accrual works (and who gets the divs):
    Daily Accrual Dividends: Dividends are declared daily to that day's "settled" shareowners of record for the amount of net investment income earned that day.
  • Is there a way to tell a daily accrual fund from one that is not by looking at the fund's price history on Yahoo?

    Also, from Yahoo or M* is there a way to tell the next distribution date for STATX?

    Mona
  • Mona said:

    Is there a way to tell a daily accrual fund from one that is not by looking at the fund's price history on Yahoo?

    Also, from Yahoo or M* is there a way to tell the next distribution date for STATX

    The prospectus reads:
    FUND DISTRIBUTIONS

    The Fund distributes substantially all of its net investment income to shareholders in the form of dividends. The Fund intends to declare and distribute income dividends every two weeks to shareholders of record.
    declares and distributes => does not accrue, daily or otherwise; to accrue you would have to have a dividend declared but not paid

    distribute every two weeks => the next distribution date is two weeks after the last one (though you'll have to guess what happens if that falls on a Friday holiday)
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