BullHouse_BearMarket wrote: ↑
Tue Jun 30, 2020 9:50 am
That makes sense. Thank you. Can you or someone explain what perfect storm of things has to happen for this fund to shutdown and all investment be lost?
I agree with the above assessment. Fundamentally, it's primarily a very diversified bond fund. So if debts get canceled around the world, all at once, that is probably the threat. It's not easy to imagine that happening. It does move like a 100% stocks and 100-ish% spread.
You'll probably laugh at me. I am repairing a hot tub, and I have the prospectus here in the floor to catch drips of PVC glue. all the plumbing underneath is PVC. According to the prospectus, here's what it was as of March 31:
44% corporate bonds
2% municipal bonds
22% "government agencies" read fanny mae, Freddie Mac
55.5% U.S. Treasury
2% Non-agency MBS
2% asset-backed securies read student loans and even more mortgages
several other 1% items
, this is mostly the S&P500 total return swap, but there are a lot of other doodads in there including not insigificant credit default swaps.
Some of the bonds were pledged as collateral for these total return swaps, FWIW.
There are approximately enough S&P return swaps to equal about 100% of the fund, so if the S&P500 drops by 50%, I guess they have to sell off about half the bonds. They actually lived through that in 2009, but I wasn't paying attention.