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FPA New Income, Inc. limited availability to new investors as of August 1, 2020

edited July 13 in Fund Discussions
https://www.sec.gov/Archives/edgar/data/99203/000110465920082874/tm2024548-1_497seq.htm

...Effective August 1, 2020, the following is added to the front page of the Prospectus:
Fund shares are presently offered for sale only to existing shareholders and to directors, officers and employees
of the Fund, the Fund’s Adviser, First Pacific Advisors, LP, and affiliated companies, and their immediate
relatives, and certain categories of shareholders.

Effective August 1, 2020, the section titled “Purchase and Sale of Fund Shares” on page 8 is replaced in its entirety with the following:

Purchase and Sale of Fund Shares

The Fund has discontinued indefinitely the sale of its shares to new investors, except existing shareholders, directors, officers and employees of the Fund, the Adviser and affiliated companies, and their immediate relatives. See the section entitled “Limited Availability to New Investors” for a description of shareholders eligible to purchase shares of the Fund. Investors may purchase or redeem Fund shares on any business day by written request, check, wire, ACH (Automated Clearing House), telephone, or through dealers as further described in this prospectus. You may conduct transactions by mail (FPA Funds, c/o UMB Fund Services, Inc., P.O. Box 2175, Milwaukee, Wisconsin 53201-2175, or 235 West Galena Street, Milwaukee, Wisconsin 53212), by wire, or by telephone at (800) 638-3060. Purchases and redemptions by telephone are only permitted if you previously established this option in your account. Eligible investors can use the Account Application for initial purchases.

Eligible investors can purchase shares by contacting any investment dealer authorized to sell the Fund’s shares. The minimum initial investment is $1,500, and each subsequent investment, which can be made directly to UMB Fund Services, Inc., must be at least $100. However, as described herein, no minimum investment amount is imposed for subsequent investments in retirement plans. All purchases made by check should be in U.S. dollars and made payable to the FPA Funds. Third party, starter or counter checks will not be accepted. A charge may be imposed if a check does not clear. The Fund reserves the right to waive or lower purchase and investment minimums in certain circumstances. For example, the minimums listed above may be waived or lowered for investors who are customers of certain financial intermediaries that hold the Fund’s shares in certain omnibus accounts, at the discretion of the officers of the Fund. In addition, financial intermediaries may impose their own minimum investment and subsequent purchase amounts.

Subsequent investments and redemptions can be made directly to UMB Fund Services, Inc.

Effective August 1, 2020, the following is added at the beginning of the section titled “Investing with the Fund” on page 23:

LIMITED AVAILABILITY TO NEW INVESTORS

The availability of shares of the Fund to new investors is limited. The Fund has discontinued indefinitely the sale of its shares to new investors, except existing shareholders, directors, officers and employees of the Fund, the Adviser and affiliated companies, and their immediate relatives. Affiliated companies include: current and former directors, officers and employees of the Adviser (and its predecessor firm and such predecessor firm’s parent firms) and its affiliates; current and former directors of, and partners and employees of legal counsel to, the investment companies advised by the Adviser; investment advisory clients of the Adviser and consultants to such clients and their directors, officers and employees; employees (including registered representatives) of a dealer that has a selling group agreement with UMB Distribution Services, LLC and consents to the purchases; any employee benefit plan maintained for the benefit of such qualified investors; directors, officers and employees of a company whose employee benefit plan holds shares of one or more of the FPA Funds; and directors, officers and employees of the Fund’s custodian and transfer agent.

In addition, the Fund will allow new investors to purchase shares if they fall into one of the following categories:

1. Clients of an institutional consultant, a financial advisor, a financial planner, or an affiliate of a financial advisor or financial planner, who has client assets invested with the Fund or the Adviser at the time of the investor’s application;

2. Investors purchasing Fund shares through a sponsored fee-based program where shares of the Fund are made available to that program pursuant to an agreement with FPA Funds or UMB Distribution Services, LLC, and FPA Funds or UMB Distribution Services, LLC has notified the sponsor of that program, in writing, that shares may be offered through such program and has not withdrawn that notification;

3. Investors transferring or “rolling over” into a Fund IRA from an employee benefit plan through which the investor held shares of the Fund (if an investor’s plan doesn’t qualify for rollovers an investor may still open a new account with all or part of the proceeds of a distribution from the plan);

4. Investors that are an employee benefit plan or other type of corporate or charitable account sponsored by or affiliated with an organization that also sponsors or is affiliated with (or is related to an organization that sponsors or is affiliated with) another employee benefit plan or corporate or charitable account that is a shareholder of the Fund; or

5. Investors participating in an employee benefit plan that is already a Fund shareholder.

The Fund may ask you to verify that you meet one of the categories above prior to permitting you to open a new account in the Fund. The Fund may permit you to open a new account if the Fund reasonably believes that you are eligible. The Fund also may decline to permit you to open a new account if the Fund believes that doing so would be in the best interests of the Fund and its shareholders, even if you would be eligible to open a new account under these guidelines.

The Fund’s ability to impose the guidelines above with respect to accounts held by financial intermediaries may vary depending on the systems capabilities of those intermediaries, applicable contractual and legal restrictions and cooperation of those intermediaries.

The Fund continues to reinvest dividends and capital gain distributions with respect to the accounts of existing shareholders who elect such options.

The Fund may recommence at any time the offering of shares to all investors if the Board of Directors believes it would be in the best interests of the Fund and its shareholders.

Federal regulations may require the Fund to obtain your name, your date of birth (for a natural person), your residential street address or principal place of business and your Social Security Number, Employer Identification Number or other government issued identification when you open an account. Additional information may be required in certain circumstances or to open accounts for corporations or other entities, and certain information regarding beneficial ownership will be verified, including information about beneficial owners of such entities. The Fund may use this information to attempt to verify your identity and, for legal entities, the identity of beneficial owners. The Fund may not be able to establish an account if the necessary information is not received. The Fund may also place limits on account transactions while it is in the process of attempting to verify your identity and, for legal entities, the identity of beneficial owners. Additionally, if the Fund is unable to verify the identity of you or your beneficial owners after your account is established, the Fund, the Fund's distributor and the Fund's transfer agent each reserve the right to reject further purchase orders from you or to take such other action as they deem reasonable or required by law, including closing your account. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated on the date your account is closed, and you bear the risk of loss.

Effective August 1, 2020, the section titled “How to Buy Fund Shares” on page 25 of the Prospectus is hereby deleted in its entirety.

PLEASE RETAIN FOR FUTURE REFERENCE.

FPA New Income, Inc. (FPNIX)

Supplement dated July 13, 2020 to the

Statement of Additional Information dated January 31, 2020

This Supplement amends information in the Statement of Additional Information (the “SAI”) for the FPA New Income, Inc. (the “Fund”), dated January 31, 2020. You should retain this Supplement and the Prospectus for future reference. Additional copies of the SAI may be obtained free of charge by visiting our web site at www.fpa.com or calling us at (800) 638-3060.

Effective August 1, 2020, on page 50 of the SAI, the following language is added to the section titled “Purchase, Redemption and Pricing of Shares”:

Limited Availability to New Investors. The availability of shares of the Fund to new investors is limited. See the section titled, “Limited Availability to New Investors” in the Prospectus for a complete description of categories of shareholders eligible to purchase shares of the Fund.

The Fund continues to accept additional investments from existing shareholders, and continues to reinvest dividends and capital gain distributions with respect to the accounts of existing shareholders who elect such options.

The Fund may recommence at any time the offering of shares to all investors if the Board of Directors believes it would be in the best interests of the Fund and its shareholders.

PLEASE RETAIN FOR FUTURE REFERENCE.

Comments

  • edited July 13
    Here is an additional news story concerning the closing and expense waiver:

    https://www.businesswire.com/news/home/20200713005370/en/FPA-New-Income-Close-New-Investors#:~:text=(FPNIX%2C%20the%20%E2%80%9CFund%E2%80%9D,business%20on%20July%2031%2C%202020.


    From FPA:

    https://fpa.com/docs/default-source/FPA-News-Documents/fpa-new-income-to-close-to-new-investors_final.pdf?sfvrsn=4
  • I'm not sure what the attraction of this fund is. Returns are positive, yes, but over the time period it's been around (sans the last few years) a CD would have performed as well or better. I do like the "never had a down year theme" but in that space I much prefer AVEFX (a fund that seems to fly under the radar).
  • One reason maybe that AVEFX ''flies under the radar'' is it is not available at Fidelity or Schwab no load/NTF.
  • Another filing from FPA concerning New Income Fund and expense waiver:

    https://www.sec.gov/Archives/edgar/data/99203/000110465920083389/tm2024548d5_497seq1.htm
  • Art said:

    One reason maybe that AVEFX ''flies under the radar'' is it is not available at Fidelity or Schwab no load/NTF.

    Firstrade is great for buying this NTF. It also offers many other "fee funds" with NTF.
  • Do any brokers offer FPNIX NTF?
  • edited July 26
    Art said:

    One reason maybe that AVEFX ''flies under the radar'' is it is not available at Fidelity or Schwab no load/NTF.

    In 2020 peak to trough AVEFX lost about 10% while FPINX lost only about 2%.
    AVEFX has 20% in stocks FPINX < 1%

    Vanguard VASIX is a better choice than AVEFX. See (chart). VASIX ER=0.11%. It has better performance and SD(volatility) is close.

  • beebee
    edited July 26
    Tom Atteberry is a Portfolio Manager of the flagship FPA New Income fund. Atteberry brings us up to speed on conditions in the bond market, and how they have changed since Covid-19.

    Atteberry will also share his One Investment recommendation with us – it might surprise you!



  • FD1000 said:

    Art said:

    One reason maybe that AVEFX ''flies under the radar'' is it is not available at Fidelity or Schwab no load/NTF.

    In 2020 peak to trough AVEFX lost about 10% while FPINX lost only about 2%.
    AVEFX has 20% in stocks FPINX < 1%

    Vanguard VASIX is a better choice than AVEFX. See (chart). VASIX ER=0.11%. It has better performance and SD(volatility) is close.

    There may well be better choices for this TYPE of fund, but the criteria I was focusing on was never a down year. VASIX has had two, including down 10.53% in 2008. Not so pretty. AVEFX has an unbroken streak during its existence dating back to 2004.
  • edited July 28
    wxman123 said:

    FD1000 said:

    Art said:

    One reason maybe that AVEFX ''flies under the radar'' is it is not available at Fidelity or Schwab no load/NTF.

    In 2020 peak to trough AVEFX lost about 10% while FPINX lost only about 2%.
    AVEFX has 20% in stocks FPINX < 1%

    Vanguard VASIX is a better choice than AVEFX. See (chart). VASIX ER=0.11%. It has better performance and SD(volatility) is close.

    There may well be better choices for this TYPE of fund, but the criteria I was focusing on was never a down year. VASIX has had two, including down 10.53% in 2008. Not so pretty. AVEFX has an unbroken streak during its existence dating back to 2004.
    If you want only funds that never lost money then performance could lag badly. PFNIX 10 years average annually is only 2% and that's a dismal bond performance.
    AVEFX has a much better performance but 3.8-3.9% average annual return for 5-10 years are not good enough for me. At least VASIX performance annually is at 5.2-5.3% and Vanguard uses just indexes.

    My goals at retirement are 6+% average annually with SD < 3 + positive annually + never lose more than 3% from any last top.
  • If you want only funds that never lost money then performance could lag badly. PFNIX 10 years average annually is only 2% and that's a dismal bond performance.

    I'd suggest you might have a typo, but you've assured us that whatever was posted, you meant what you said and you said what you meant, your numbers are true, 100 percent.

    Still, given that PFNIX has only been around since 4/28/18, producing a 10 year average for that share class is a neat trick.

    If one were to extrapolate PFNIX returns based on the performance of other share classes, one might arrive at a 10 year average return of 3.57% as of June 30th. That's far better that your 2%. However the shares, had they existed, would have lost money in 2011, 2014, and 2015.

    Nor could it be that you conflated Pimco Low Duration Income Fund with Pimco Low Duration Fund, e.g. PTLDX. Because while the latter fund did average a bit over 2%/year over the past ten years, it too lost money. The annual performance graph below is from its prospectus.
    image

    If the game is simply to compare performance of funds that have never had a losing year.... AKRIX. I win! The metric in the quoted sentence was 10 year average annually. That would be 18.3%.

    Silly cherry picking game.
  • In "the never had a losing year contest" it's not meaningful to consider funds that did not exist prior to 2008 IMO.
  • My goals at retirement are 6+% average annually with SD < 3 + positive annually + never lose more than 3% from any last top.

    It seems to me that you jump around quite a bit with large sums of money into a few funds (mostly bond?) that are on a roll in terms of recent performance and low SD. Great that this seems to work for you, but I could not personally implement such a jumping strategy (if I'm correctly understanding your approach). I doubt the approach could work with a few buy and hold funds over the long term. Most would fail on the SD. Taking a quick peek, seems that SIUPX might come close to your criteria? (Avg 5.75 lifetime and SD of 2.9)
  • wxman123 said:

    In "the never had a losing year contest" it's not meaningful to consider funds that did not exist prior to 2008 IMO.

    IMHO the whole concept is an arbitrary numbers game. While I tend to agree with you about having an interest in 2008 performance, I'm more interested in 1994, when bonds lost almost 3% and stocks barely broke even. That's a real test.

    Why should 365 days be special? (Well, except for every fourth year.) Even granting that one year is a useful period of time (not too long to make recoveries easy, not too short to get confused by random noise), what's special about January 1? If one is ascribing meaning to one year periods, ISTM that absent some meaningful rationale, looking at all rolling one year periods makes as much sense as looking only at calendar years.

    As it turns out, AVEFX lost money over the 365 day period between 6/16/2003 and 6/15/2004. It lost a tad more over the 366 day period ending 6/16/2004 (counting Feb 29, 2004).

    Why is avoiding any loss (but only over calendar year periods) no matter how small so critical? Is it better to make 0.01% in a MMF, or to make some measurable profit even if one loses 0.05% in one out of 23 years. That describes PMDRX. It has performed better than AVEFX with a smoother ride.

    FPNIX started 4/1/1969. From then until the end of the year it lost almost 3%. Between the end of that April and the end of the following April (365 days), it lost nearly 11%.

    From its launch to the end of the following April (i.e. its first 13 months), it lost over 5%. At nearly the end of November 1970, 1 2/3 years after launch, it was still down.

    But none of this "counts". The 1969 loss doesn't count because that wasn't a full calendar year. The nearly two year span doesn't count because it doesn't align on calendar years.

    All this is supposed to be "meaningful"?

    Absolute negative screens have problems. This is not to suggest that one should disregard losses. But it's their magnitudes and frequency that matter, not the mere fact that a fund happened to lose a small amount over a particular 365 (or 366) day period.

    How one weighs different factors is a personal preference. All I'm suggesting is that giving one factor (avoiding losses) infinite weight may not be as helpful as it appears.
  • MSF, I can't disagree with anything you say. Certainly there is no magic in one year, but it is a useful point of reference and I find it interesting that once you move beyond short duration bond funds there are not many that started life before 2008 and have won every year since. I also agree that it's most important to avoid bad stumbles. In my research the best I've found in terms of reliability while providing returns ahead of cash is SNGVX. It's record of 31-1 with it's one down year being -2.08 is pretty impressive (though it's returns overall are not much to write home about). A good cash substitute in my book.
  • Generally speaking, different years are good for some types of investments and bad for others. That's why 1994 is so interesting - little seems to have done particularly well.

    Obviously 2008 was a disaster for equities, and serves to get one focused on bonds. Since junk bonds and to a lesser extent corporates tend to track equities, the further a fund strayed from Treasuries, the more likely it was to lose money that year.

    To illustrate this, here's a chart for 2008 comparing intermediate Treasuries (VFITX up 13.8%), Treasury-laden IG market (AGG, up 6.2%), a good corporate bond fund (PIGIX up 2.2%), a corporate index (down 2.7%), and the average corporate bond fund (down 8.2%).

    Shortening duration tempers swoons, so one is most likely to find funds that didn't lose money in 2008 either by investing shorter term or in government-backed securities. Another way to improve yield is to invest in MBSs that resemble these other bonds in duration and credit quality, but come with a higher coupon.
    Using asset-backed securities in enhanced cash funds has a number of advantages. The interest rate risk or duration is similar to a money market instrument. The volatility of returns from interest rate moves should be fairly low, but a yield premium is available over money market assets.
    https://www.ipe.com/enhanced-cash-and-the-naming-problem/25602.article

    However, nothing comes for free. These higher yields have prepayment risk (negative convexity). That risk is somewhat hidden by the numbers and usually pays off. Until it doesn't. Look for threads along the lines of "XXX fund worked until it didn't".

    One can even find MBS funds in the intermediate government category with won/lost records comparable to SNGVX Though for a variety of reasons I wouldn't personally use these "longer" term funds as cash substitutes.

    SNGVX has an effective duration of 2.9 years and is full of GNMAs, FNMA's, etc.

    PDMIX is called an intermediate term fund. It has an effective duration of 1.8 years and is full of GNMAs. Like SNGVX, it lost money in 2013: 2.37%. Outside of that, it's never had a losing year. But ... it only goes back to mid 1997. It wasn't tested in 1994. It also adds another layer of performance enhancement (and risk) with leverage.

    VFIJX is also called an intermediate term fund. It has an even shorter effective duration of 1.0 years. Like SNGVX and PDMIX, it lost money in 2013: 2.13%. Unlike PDMIX it was around in 1994, and unlike SNGVX it did lose money that year: 0.95%, making its record 37-2 (it started in mid 1980).

    With all these funds, it's a matter of taste. What sort of risks and of what size one is willing to take for what level of return. One gets different risk profiles by investing in different types of bonds. Then it's a matter of finding a good fund of that particular type.

  • @wxman123

    VFIIX has also provided a similar record since 1981 37 up years. The 2 down years were (-2.23%) in 2013 and (-0.95%) in 1994.
  • I believe I'd rather own VFIIX than FPNIX. I resisted the urge to establish a new position in FPNIX this week (before the soft close at today's close) and just add to VFIIX instead.
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