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RiverPark Short Term High Yield (RPHYX / RPHIX) reopened to all investors today

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.
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Comments

  • Thank you David, but not available yet at Schwab. I'll keep trying.
    1.This fund is closed to new investors. Only accounts which currently have a position in this fund may place a buy order at this time.
  • Here is the link:

    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.

  • I know of some investors who have held RPHIX/RPHYX as a cash alternative fund, during its closure period. Now that it is open again, I expect it will garner quite a bit of interest from new investors. Riverpark has a good history of managing HY bond funds, with a low risk approach.
  • edited January 14
    What would be the argument to choose this fund over Zeoix (better performance) or BBBMX (better and even safer)?
  • "wxman123">What would be the argument to choose this fund over Zeoix (better performance) or BBBMX (better and even safer)?

    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.

  • edited January 15
    The issue I have with ZEOIX is it isn't on NTF transaction free platforms at brokers. My understanding is this is by design as the managers don't want hot money or to pay to be on those "free" platforms. The problem is this is a low returning cash-like/short-term bond investment. So if you're a retail investor who maybe puts in a few thousand, say $5,000, and end up paying a $50 transaction fee, well that's 1 percentage point of your return over the next year and ZEOIX might deliver 3% on a year, so you've lost one-third of your return. Then because it is cash-like, let's say the stock market dips or falls flat on its face, well you might want to move some of your money out of cash or ZEOIX to buy some stocks. Well, then you've lost another 1/3 of your return doing that with the transaction fee. It's lack of liquidity for a short-term bond fund at brokers is problematic. And even if you buy it directly from Zeo and don't pay a fee, well again, let's say you see an opportunity to buy stocks, do you have to call Zeo to liquidate, transfer that money to your broker to buy the stocks? To me the hassle seems not worth it for many investors. I think if the managers want to prevent hot money, they could employ a short-term redemption fee that makes investors hold for a few months but lets them trade freely once that period ends.
  • RPHYX also reduces risk by holding a much higher percentage in cash (about 46%),

    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.
    Cash encompasses both actual cash and cash equivalents (fixed-income securities with a maturity of one year or less) held by the portfolio plus receivables minus payables.
    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.

  • I agree with what Lewis said. ZEOIX doesn't fit for me because the TF makes it restrictive for liquidity, unlike what I want from a MM fund or a cash alternative. The restrictions defeat the purpose in my opinion. I will get my foot in the door with RPHYX as soon as it is available at Schwab.
  • Thanks for letting us know this, David, and for bringing this valuable fund to light in the first place. I've got a small stake in my taxable account, but I've been waiting for a chance to get it in my solo 401K, where right now I've got a lot of cash parked.
  • msf: "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."

    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.
  • Schwab reported the same 46% cash & equivalent. If six % is actual cash where is the other 40 % positioned. With all the hot money leaving, a big reason to hold more cash ($) !
    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
  • It is interesting that this fund reopened now, after a significant slow down: During the last 1/2 year it reached a plateau with almost zero slope (no return). The only time it happened in the past it was in 2015, see M*
  • Both M* and Schwab uses the following information in describing assets, based on information provided by the fund company.

    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.

  • finder said:

    It is interesting that this fund reopened now, after a significant slow down: During the last 1/2 year it reached a plateau with almost zero slope (no return). The only time it happened in the past it was in 2015, see M*

    @finder - Right on. I noticed the same, that the Vanguard Money Market VMMXX has a higher one year return than RPHYX. RPHYX lost its magic?
  • edited January 15
    @RisklessInSeattle There is a reason majority of my cash is in VMMXX...the only thing safer would be a bank money market fund. I do have a smattering of RPHYX and RSIVX.
  • msf
    edited January 15
    dtconroe said:

    Both M* and Schwab uses the following information in describing assets, based on information provided by the fund company.

    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.

    When giving quotes, it helps to provide a citation to the source as well as name it. That makes it clear exactly which definition you are using from the source. The same source may offer multiple definitions.

    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.
    This data point identifies the percentage of the fund's net assets held in cash.

    Cash encompasses both actual cash and cash equivalents (fixed-income securities with a maturity of one year or less) held by the portfolio plus receivables minus payables.

    Negative percentages of cash indicate that the portfolio is leveraged, meaning it has borrowed against its own assets to buy more securities or that it has used other techniques to gain more than 100% exposure to the market.
    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.
    What are the changes to the Global Fixed Income Sector Classifications?
    Within Morningstar's fixed-income classification processes, we use instrument attributes to determine which positions should be treated as cash and cash equivalents. Morningstar previously based the assignment on an instrument being an eligible type of fixed-income instrument with a maturity of no more than 364 days. Morningstar will reduce it to 92 days to align with regulations and the broader investment industry. Additionally, we’re making minor refinements to the determination of which securities, accounts, loans, and derivatives will be subject to this reclassification to cash.
    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
  • There is a reason majority of my cash is in VMMXX...the only thing safer would be a bank money market fund. I do have a smattering of RPHYX and RSIVX.

    While I agree that a bank money market account, so long as it were within FDIC insurance limits, would be safer than VMMXX, I consider VUSXX to be safer still.

    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).
  • edited January 15
    @msf I thought VMMXX provided a higher yield than VUSXX. I will take a look. If difference not substantial, I should switch.

    EDIT: VMMXX --> 1.7%, VUSXX --> 1.54%
  • On RPHYX's return: David Sherman's line is close to "we take what the market is willing to give us." The translation is, "there is a level of risk that we're willing to subject our investors to, we target assets that meet our risk criteria and returns flow from that decision." He's been very clear, repeatedly, that he's never going to stretch for yield - he's not going to squint at the risk profile in hopes of adding a bit of the returns - because that's contrary to the nature of the short-term high-yield fund's mission.

    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.
  • @MikeM (and others),

    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:)
  • @VintageFreak - Treasuries and Treasury MMFs generally pay less than corporate bonds and prime MMFs. VUSXX is no exception.

    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.
  • @msf yes, I'm hardly disagreeing with what you said. Basically I was saying IF you are going to invest in a Premier Market Fund then someone like Vanguard who has a lot to lose in terms of reputation would be the safest. I guess any big firm as well. Fido, TRP, etc. Vanguard just seems to yield the highest amongst the MM lot.
  • If you are willing to take on a slight interest rate risk, you can consider Vanguard Short-term treasury index, VSBSX.
    Duration is 1.9 years, SEC yield 1.56% and ER 0.07%.

    Certainly there is less credit risk as compares to corporate debts.
  • Why would one ever mess around with VUSXX, assuming they hold an account in vanguard? The vanguard sweep account, Vanguard Federal Money Market Fund (VMFXX), yields a tick more, is just as "safe" and has no restrictions.
  • wxman123 said:

    Why would one ever mess around with VUSXX, assuming they hold an account in vanguard? The vanguard sweep account, Vanguard Federal Money Market Fund (VMFXX), yields a tick more, is just as "safe" and has no restrictions.

    Neither fund is subject to gating/redemption fees.

    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
  • Thanks, awesome explanation. I was not thinking along those lines.
  • Hi @Graust. I'm curious if your Fidelity order for RPHYX went through. The fund still can't be purchased at Schwab. I inquired by email and got the following response today. So far, not available.
    Thank you for reaching out to Charles Schwab eServices with your inquiry on RPHYX last week. While the website for RPHYX may report that this fund has been re-opened to new investors, it is not guaranteed to be made available for purchase at Schwab. That being said, the Mutual Fund Support Specialist still advised that you reach out in about a week to see if any updates have been made to the availability status of RPHYX at Schwab. You can chat in, or call our General Customer Service Line at 800-435-4000 and we will be able to research that for you.
  • Sorry @MikeM, yes the trade went through at Fidelity.
  • I put more emphasis on the last 3 years. When I compare RPHIX,ZEOIX,SEMMX,DHEIX(link)
    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.
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