Beruflich Dokumente
Kultur Dokumente
&
Thirtyeightyearsago,theDelawareBayfrozeoverandstayedfrozenfor45
days,arecordthatstandstoday1.Withboyhoodenthusiasm,Itoldmy
parentsIwasgoingtowalkoverthebayfromNewJerseytoDelaware.AsI
sprintedout,Iheardsubtlecrackingsoundsastheiceshiftedfrommyweight
andbrieflystoppedtoreconsidermyactions.Itwasjustenoughtimeformy
fathertocatchupandwarnmethat,whiletheicemaybemileswide,itwas
probablynotthickenoughtosupportmeonmyquest.Thiswasanearly
lessoninweighingriskversusreward.
The2008financialcrisishighlightedsystematicriskswhichpromptedtheU.S.Governmentto
pursueregulationandpoliciestoprotectcitizensfromfuturehazardsandjumpstartarecovery
fromtheGreatRecession.2ThereformsaimedatTooBigtoFail3institutionsand
implementationofQuantitativeEasing4,havedefinitelyrestoredasenseofstability,butnot
withoutunintendedconsequences.InMarch2015,theBankofInternationalSettlementsand
MoodysInvestorServiceshighlightedtheadverseimpactonbondmarketliquidityandthe
consequencesoflowinterestrateswhichencouragecompaniestoleverup.
Theplethoraofnewfinancialregulationshasincreasedcorporatebondmarkettransparency5
andbreadthattheexpenseofmarketdepth.ThefinancialcrisisforcedWallStreetto
deleverageandunwindproprietarytradingpositions.TheVolkerRule6sealedthefateofthe
businessmodel,permanentlycurtailingmarketmakingactivitiesinfavorofagency
transactions.Inotherwords,WallStreetwouldnolongerserveasaproviderofliquidity,but
wouldbemorethanhappytocontinuetotakeanorderandmatchbuyersandsellersonabest
efforts,riskless,basis.
Addressingtheconcernheadon,theBankofInternationalSettlementsdiscussedintheirrecent
quarterlyreviewtheShiftingtidesmarketliquidityandmarketmakinginfixedincome
instruments7:
inmostcorporatebondmarkets,tradingappearstobehighly
concentratedinjustafewliquidissues,andconcentrationappearsto
beincreasinginsomemarketsegmentsInmanyjurisdictions,market
makinghasthusshiftedfromaprincipaltradingmodeltowardsaclient
drivenbrokeragemodel.Asaresult,manymarketmakershavebecome
reluctanttoabsorblargepositionsandconsequentlyneedmoretimeto
executelargetrades.
Despitethebestofintentions,everynewregulationandinterventionhasunintended
consequences.TheFirstLawofThermodynamicsstates:Energycanneitherbecreatednor
destroyed;itmayonlybecontrolled,storedortransferred.Similarly,theVolkerRuledidnot
eliminatesystemicrisk.Instead,theriskwastransferredfromWallStreettoitsinstitutional
clients,theBuySide.Priortothe2008financialcrisis,WallStreettradingdesksactively
engagedinmarketmakingactivitiesandtheirinventoryrepresentedasignificantportionofthe
corporatebondmarket.ArecentGreenwichAssociatessurveyhighlightstheliquidityvoid;38%
ofbuysidefixedincomeparticipantssurveyedfeltthattrading$15MMormore(parvalue)
bondswasextremelydifficult8.
2
BuySideSurvey:AbilitytoTradeCorporateBonds
ParValueofBonds
Over$15mm
$5mm$15mm
Lessthan$5mm
0%
5%
10%
15%
20%
25%
30%
35%
40%
%ofStudyParticipantsWhoResponsed"ExtremelyDifficult"
Thisbegsthequestion:Areinvestorsbeingadequatelycompensatedforthisrisk?Withinterest
ratesathistoriclows,findingyieldwithouttakingonsignificantriskcanbedifficult.Ithaslong
beenourbeliefthatsmallerissuesofmoneygood9,highyieldbondsofferinvestorsahigh
riskadjustedrateofreturn.
Splittingthehighyieldmarketinhalfbyissuesizeillustratesthesignificantyieldpickup10.The
bottom50%ofissueshasanoptionadjustedspread(OAS)overUSTreasuriesof582basis
points(bp)whichis140bpmoreyieldperyearthanthetop50%ofissues.Coincidently,
excludingtheenergysectorbecauseofrecentturmoilandpotentialfuturecreditlosses,the
bottomhalfofissuesstillmaintainanadvantageof140bpOAS:
HighYieldIndexOptionAdjustedSpread(exEnergy)
Top50%
Bottom50%
OAS
(JLRG)
(JLIT)
Difference
31Mar14
349bp
433bp
84bp
31Dec14
419bp
545bp
126bp
31Mar15
398bp
538bp
140bp
Overthepast15years,investinginanindexofthebottomhalfofissuerswouldhave
outperformedthetophalfofissuersbyacumulative50.1%inreturn.
Weknowthereisnofreelunchgeneralconsensusisthatsmallerissuesarelessliquidthan
biggerissues.Thisisnotalwaysthecase.Forinstance,inperiodsofgreatmarketstress,we
haveobservedthatthelargerissuesquicklybecomeasilliquidasthesmallerissues.Belowisa
3
chartillustratingthedifferenceinOASbetweenthetop50%andbottom50%ofhighyield
issuesovertime:
OASDIFFERENCE
200bp
HistoricalOASDifference
100bp
0bp
(100)bp
Financial Crisis
(200)bp
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
JLITJLRG
median
Duringthesellofffromtheinternet/telecombubbleandtherecentfinancialcrisis,theOASof
thetop50%ofissuesexceededthatofthebottom50%ofissues.Inotherwords,theprice
declinewassignificantlygreaterinthetop50%issues.Amultitudeofexplanationsmaybe
provided,butthekeyfactoristhatwhenelephantsstampede,youwanttogetoutoftheway.
WithWallStreetdiminishedandpassiveETFs,aswellasotherbuysideparties,increasingtheir
demandforlargebondissues,thetrademaybealittlecrowded.Unfortunately,largeselloffs
haveawayofconvertingtemporarymarktomarketlossesintopermanentlossesas
redemptionsneedtobemet.
LiketheicedoverBay,therewouldappeartobesafetyintheontherun,largebondissues,but
thatmarginofsafetyisprecariouslythinandcannotbearthefullweightofthemarket.
Weoftenfindvalueinoverlookedandignoredmoneygoodhighyieldbonds.Duringthefirst
quarterof2015,RiverParkStrategicIncomepurchasedtwooffthebeatenpath11bondsthat
metthatcriterion:ConsolidatedTomoka124.5%SeniorUnsecuredConvertibleBondsdue2020
andNathansFamous1310%SeniorSecuredNotesdue2020.
ConsolidatedTomokaLandCompany(CTO),foundedover100yearsago,isaFloridabased
publiclytradedrealestatecompanywithaportfolioofincomeearninginvestmentsandland
assets.WehaveknowntheCEOforyearsandevenpredatinghisarrival,wewerefamiliarwith
thissleepy,longstanding,valueinvestment.Historically,thecompanyhasbeenconsidered
assetrichandcashflowpoor.ThecurrentCEOarrivedin2011andhasbeensuccessfulin
unlockingsomeofCTOsvalue,asreflectedbythestockmorethandoublingtoamarketcapof
over$330million.InMarch,CTOissueda$75millionconvertiblebondwithproceedstobe
usedtorepayitscreditfacilityandforgeneralcorporatepurposes.Purchasingthisbond,we
weregettingthebestofbothworlds:yieldwithequityupside.Sincethedebtisnotcallable,
weassureourselvesareasonableyieldforfiveyearswithstrongassetcoverageandthe
opportunitytoparticipateinequityupsidetiedtocontinuedvaluerealization.Following
issuanceofthebond,ithastradedtoasignificantpremium,asexpected,yetweseepotential
forfurthergainsandcontinuetoholdtheposition.
NathansFamous(NATH)isawellknownbrandnameforhotdogssoldatcompanyowned
andfranchisedrestaurants,throughfoodserviceprogramsandvialicensingactivities.InMarch,
thecompany,newtothebondmarket,issued$135millionseniorsecurednotestopaya
specialdividendtoitsshareholders.Ourresearchshowedarecentlicensingagreementmore
thancoveredthedebtandtheremainingbusinesseswereextracushion.InMarch2014,NATH
signedan18yearlicensingagreementwithasubsidiaryofSmithfieldFoodsrequiringminimum
licensingfeesthatwouldgenerateenoughcashflowtocoverthebondsbeforeanyadditional
revenuesharing.Assumingmanagementdoesntrunamok,NATHbondshaveanimplied
SmithfieldFoodscreditriskfurtherenhancedbycashflowsfromNATHsrestaurantbusinesses.
SmithfieldFoods,whichisratedBB,has5.875%unsecurednotedue2021thatthemarketwas
pricingata4.5%YTM.Hence,thenewNATHbondcomparesveryfavorablywithits10%
couponandsecuredinterests.Moreover,bondholdersareprotectedbyeffectivefinancial
covenants,preventingmanagementfromtakingadditionalshareholderfriendlyactionsthat
mightdegradethecreditinthefuture,incontrasttotypicalcovenantsininvestmentgrade
bonds.
InaMarch2015,MoodysInvestorsServicepublishedareport14entitledMacroeconomicsand
CorporatePolicesErodingCreditQualityin2015,addressingthenegativeimpactoflowinterest
ratesoncorporatebehavior:
InvestmentgradeUScompaniesareincreasinglyreturningcashto
shareholders,andhavelessfreecashflow(FCF)torepaydebttodaythan
theydidbeforetherecessionMeanwhile,prolongedverylowinterestrates
aremakingdividendsmoreimportanttoinvestors,leavingcompanies
increasinglyfixatedondividendgrowthariskforcreditquality,especially
withleveragerising.
Asshownbelow,investmentgradecorporatebondyieldsaresignificantlybelowtheearnings
yields(inverseoftheP/Eratio)ofS&P500stocks.Thishascreatedanenvironmentinwhich
corporationshaveincentivetoissuedebttoeffectuateshareholderfriendlystockbuybacks
anddividends.
5
WhiletheMoodysreporthascreatedsomecommotion,wetooknoteofthisphenomenonin
thefallof2012.Infact,intheNovember29,2013editionofGrantsInterestRateObserver15,
wewerequotedtothiseffect:
Whatinvestmentgradecompaniesaredoingis,theyreleveringupeitherto
trytogrowthroughexpansion,mergersorevenbuildproductline(s).Or
theyrefinancialengineering.But,truthfully,withrevenuesnotbeingso
robust,theyrenotreallygrowingthebusinessasquicklyastheyregrowing
thedebt.
InthearticlewediscussedourobservationofthisbehaviorwithrespecttoCocaColawhich,
sincethattime,hasincreaseditsdebtbyapproximately19%andincreaseditsdividendrateby
nearly8%.
Whilemanycompaniesarecompelledtopursueimmediategratificationviafinancial
engineering,afewcompaniesareusingcheapmoneytopursuelongtermshareholdervalue,
sometimesviastrategicacquisitions.Althoughdebtfinancedacquisitionsmayaddleverage,
whenprudentlyemployedwithanalignmentofinterestsamongbondholdersandstockholders,
growthcanbereignitedthatultimatelybenefitsallfinancialconstituents.Threeinvestments
purchasedbytheFund(s)in1Q15thatillustratethisapproachareCoach16,Southwestern
Energy17andInternationalGameTechnologies18.
6
In2014,Coach,thedesignerandretailerofluxuryleathergoodssawadramaticdeclinein
revenuesanditsstockwasoneoftheworstperformersintheS&P500;downover30%forthe
year.Atthetime,Coachhadnodebt.Ratherthanappeaseshareholderswithanaggressive
stockbuybackordividendpolicy,theyfocusedlongterm.Seekinganewsourceofgrowth
whilesimultaneouslyrefreshingitscorebrands,Coachagreedtopurchaseluxuryfootwearand
accessoriesproducerStuartWeitzmanfor$530million.Tofinancethetransaction,inFebruary
2015,Coachissued$600millionin4.25%seniorunsecuredbondsdue2025.Weviewedthe
financingasanattractiveinvestmentgradeadditiontoRiverParkStrategicIncomeFund.We
thoughtthatthe225bpissuancespreadundulypenalizedCoachforrecentfinancial
performance.WithDebt/EBITDA<1.0x,weencourageCoachtopursuesimilartransactions
andwewouldbehappytoparticipateinfinancingthem.
Sufferingfromsharplydepressednaturalgaspricessince2008thatledtotreacherouslyhigh
leverage,ChesapeakeEnergywasastressedsellerofassets.Takingadvantageofthesituation,
inOctober2014,SouthwesternEnergyagreedtopurchaseChesapeakesoilandgasassetsin
WestVirginiaandsouthwestPennsylvaniaforapproximately$5.4billion.Southwesterntooka
balancedapproachtofundingtheacquisition,utilizingacombinationofdebt,convertible
preferredstockandcommonequity.Althoughnetleverageisanticipatedtoincreasefrom
approximately2.0xatyearend2014to3.3xatyearend2015,wearecomfortedbythe
significantequitycushionbeneaththeconvertiblepreferred.RiverParkStrategicIncome
participatedintheoriginalissuanceofthe6.25%convertiblepreferredshares.Althoughwe
thoughtthenewissuewasattractivefromtheperspectiveofafixedincomeinvestor,equity
andconvertibleinvestorsweremoreoptimistic,drivingthesharesnearly20%abovetheirissue
pricewithinweeksaftertheinitialoffering.Withthesharesexhibitingequitylikebehavior,the
Fundadvantageouslyexitedtheposition.Weexpecttorepurchasetheconvertiblepreferred
shouldthepricedecline.
InJuly2014,GTech,aninternationalproviderofcomputerizedonlinelotteryservicesagreedto
purchaseInternationalGameTechnologies(IGT),aleaderingamingequipment.Facilitatedby
thelowinterestrateenvironment,GTechsawtheopportunitytoexpanditspresenceinthe
worldwidegamingmarketaspartofitsgrowthstrategy.Priortothetransaction,IGTwas
investmentgrade,whileGTechwasahighyieldissuer.However,withthepurchasetobe
fundedwithacombinationofcashandequity,proformaleveragewasexpectedtobe
reasonable.TheindenturesofIGTsthreeoutstandingbondscontainedlanguagethatrequired
thatthecompanyoffertorepurchaseitsbondsatapriceof101uponachangeofcontrol.In
February2015,afterseeingregulatoryapprovalforthedealinanumberofjurisdictionsand
receivingindicationsfromIGTmanagementthatitwouldoffertopurchasetwoofthebond
issuesat101(bondholdersofthethirdissueacceptedaconsentpaymenttoforegotheofferto
purchase),bothRiverParkStrategicIncomeandRiverParkShortTermHighYieldbeganto
purchasebondsinanticipationofachievinganannualizedreturnofapproximately4%.The
7
combinationofthecompanieswascompletedinearlyApril,leadingtoanoffertopurchasethe
IGTbondsthatisexpectedtobecompletedbymidMay.
ItisusefultonotethatbothSouthwesternEnergyandCoachhavebeenholdingsofRiverPark
equityfunds19andcollaborationwiththeirinvestmentteamshasbeenrewarding.
Wehavebeenactivelyengagedinthecorporatebondmarketforover25yearsandare
sensitivetothechanginglandscape.Consequently,weactivelymanagetheportfoliostrategy
accordingly.
4060%oftheholdingsofRiverParkShortTermHighYieldFund(RPHYXandRPHIX)
enjoytheorganicliquidityofshorttermmaturitiesthatrollintocashapproximately
every60days.RiverParkStrategicIncomeFund(RSIIXandRSIVX)similarlyenjoysthis
unaidedliquiditymechanismthrougha1535%overlapwithShortTermFundholdings.
Theportfoliomayexperiencemarktomarketriskasresultofthisnewliquidity
paradigm;however,werelyonourabilitytoselectmoneygoodbondstoenableusto
holdbondstomaturitytoachievetargetedreturns.
Ourcommitmenttolimitcapacityandcloseourfunds,mitigatestheriskofrelianceon
thirdpartyliquidityandavoidstheneedtoinvestinlargerblocksofbondsthathave
becomeincreasinglydifficulttotradeandforwhichinvestorsarenotbeingadequately
compensated.
Cashisanassetclassthatprovidesinvestorswithliquidityandaffords ustheabilityto
add topositionswhenothersmaybebuffetedbymarketilliquidity.
Wefocusonfindingfixedincomeopportunitiesoutsideofthemainstreamthatprovide
ourinvestorswithabovemarketreturnswithouttakingonadditionalcreditrisk.
Intodayslowinterestrateenvironment,centralbanksareencouraginginvestorstofilluptheir
SUVswithcheapgasanddriveonoutontothefrozenbay,ignoringpotentialrisks.Having
heardtheicecrackinginmyyouth,Iwillkeepusclosertoshore.
Sincerely,
DavidShermanandTheCohanzickTeam
JamesE.Salmon,PublicInformationOfficerforDelawareRiverandBayAuthority:Thelongestfreeze
upoccurredin1977,45consecutivedaysbeginningJanuary11ofthatyear.
2
AlthoughtheGreatRecessioniswidelyattributedasoccurringinthelate2000sasthelargesteconomic
declinesincetheGreatDepression,theetymologyisunclear,seeCatherineRampelloftheNewYorkTimesblogon
March11,2009:
http://economix.blogs.nytimes.com/2009/03/11/greatrecessionabriefetymology/
3
TooBigtoFailisgenerallyappliedtothewaveoffinancialregulationadoptedtoreduceandpreventeconomic
damagecausedbythefinancialsystem.Foraninterestinginsight,seeJesseEisingerofNewYorkTimesarticle
datedDecember11,2013entitledSoothingWordsonTooBigtoFail,butWithLittleMeaning:
http://dealbook.nytimes.com/2013/12/11/soothingwordsontoobigtofailbutwithlittlemeaning/
4
QuantitativeEasingisassociatedwithunconventionalpoliciespursuedbyCentralBankerstofightdeflation.
BenBernankehighlightedthearrayofsecretweaponstofloodtheeconomywithmoneyatCentralBankers
disposalinhisNovember2002speechDeflation:MakingSureItDoesntHappenHereinwhichhehighlighted
MiltonFriedmanshelicopterdropsolution.Foramoredetailedexplanation,seeCNBCsQuantitativeEasing:
http://www.cnbc.com/id/43268061
5
Specifically,thefullimplementationofTRACEcompletedin2014requirestimelyelectronicpricereportingof
virtuallyallcorporatebonds.Formorespecificinformationortoaccessthisusefulservice,refertoFINRAs
website:http://www.finra.org/industry/trace/corporatebonddata
6
ForadeeperunderstandingoftheVolkerRule,pleaseseetheSECspressreleasedatedDecember10,2013
providingFactSheetFinalRulestoImplementtheVolkerRule:
http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370540476526
Inaddition,TheDoddFrankWallStreetReformActandConsumerProtectionActcanbereviewedatthewebsite:
http://www.gpo.gov/fdsys/pkg/PLAW111publ203/html/PLAW111publ203.htm
7
AuthoredbyIngoFenderandUlfLewrickinBISQuarterlyReviewdatedMarch2015,pages97103.Theentire
reportcanbefoundhttps://www.bis.org/publ/qtrpdf/r_qt1503.pdf
8
GreenwichAssociates2014TradingDeskOptimizationStudy
AmoneygoodassetisconsideredbymarketparticipantstobeasgoodasmoneyThetermmoneygood
impliesalenderwillberepaidprincipal.Inotherwords,onewillgetahundredcentsonthedollarback.
10
BofAMerrillLynchLynchUSCashPayHighYieldIndex(J0A0)isamostcomprehensiveindexofallcashcoupon
payinghighyieldbondsintheUnitedStateswithanissuesizeof$100MMparvalueormore.AsofMarch31,
2015,thetablebelowrepresentsdividingJ0A0inequalhalfbythenumberissuesinwhichthe50%largestissues
inparvaluecomprisedoftheJLRGindexandthe50%smallestissuesinparvaluearecomprisedoftheJLITindex:
J0A0
JLRG
JLIT
Issues
2,280
1,140
1,140
Issuers
1,078
524
765
ParValue
$1,341B
$1,000B
$341B
MarketValue
$1,343B
$1,008B
$335B
YTW
YTWDuration
YTM
YTMDuration
OAS
MaxIssueSize
6.16%
4.08
6.57%
4.95
5.83%
4.15
6.23%
5.05
7.15%
3.87
7.58%
4.68
477bp
442bp
582bp
$4,249MM
$4,249MM
$450MM
MinIssueSize
$100MM
$450MM
$100MM
OverlapofissuersbetweentheJLRGandJLITis211.Forexample,USSteelhastwoissuesinthelargeindexand
fourissuesinthelittleindex.
11
TheRiverParkStrategicIncomeFunddefinesoffthebeatenpathbondsas:Smallissues,notwidelyfollowed,
orlessliquidthatcanofferbetteryieldswithwhatwebelievetobecomparableorlesscreditriskthanonthe
runissues
12
Asof3/31/2015,ourpositioninConsolidatedTomokaLandbonds,represented1.11%oftheStrategicIncome
portfolio.
13
Asof3/31/2015,ourpositioninNathansFamousInc.,bonds,represented1.29%oftheStrategicIncome
portfolio.
14
AuthoredbyBillWolfe,TomMarshella,PalomaSanValentinandMarkGray,MoodysInvestorsServiceUSNon
FinancialCorporates:MacroeconomicsandCorporatePolicesErodingCreditQualityin2015dated3/27/2015.
15
AuthoredbyJimGrant,GrantsInterestRateObserverdated11/29/2013.Fullreportavailableuponrequest.
16
Asof3/31/2015,ourpositioninCoachbondsrepresented1.91%oftheStrategicIncomeportfolio.
17
Asof3/31/2015,ourpositioninSouthwesternEnergyrepresentedlessthan1%oftheStrategicIncomeportfolio.
18
Asof3/31/2015,ourpositioninInternationalGamingTechnologybonds,represented1.39%oftheShortTerm
portfolioand2.14%oftheStrategicIncomeportfolio.
19
Asof3/31/2015theRiverParkLargeGrowthFundhada3.41%positioninSouthwesternEnergycommonstock,
andtheRiverParkLong/ShortOpportunityFundhada4.30%positioninthesameissue.RiverPark/Wedgewood
Fundhelda5.69%positioninCoachcommonstockasof3/31/2015.
10
RIVERPARKSHORTTERMHIGHYIELDFUND
MARCH31,2015
RiverPark
BofAMerrill
BofAMerrill
BofAMerrill
ShortTermHighYield
Lynch1Year
Lynch13Yr
Lynch03Yr
FundPerformance
U.S.Treasury
U.S.Corp
U.S.HYIndex
RPHIX
RPHYX
Index1
Index1
ExFinancials1
1Q15
0.70%
0.64%
0.11%
0.83%
1.77%
YTD2015
0.70%
0.64%
0.11%
0.83%
1.77%
OneYear
2.83%
2.38%
0.21%
1.49%
1.61%
Since
Inception*
3.74%
3.44%
0.32%
2.28%
5.40%
* TotalReturnspresentedforperiodslessthan1yeararecumulative,returnsforperiodsoneyear
andgreaterareannualized.FundInceptionDate:September30,2010.
The performance quoted herein represents past performance. Past performance does not
guaranteefutureresults.Theinvestmentreturnandprincipalvalueofaninvestmentwillfluctuate
sothataninvestor'sshares,whenredeemed,maybeworthmoreorlessthantheiroriginalcost,
andcurrentperformancemaybehigherorlowerthantheperformance.
As of the most recent prospectus, dated 1/28/2015, gross expense ratio was 0.90%. Gross
ExpenseRatiodoesnotreflecttheabilityoftheadvisertorecoveralloraportionofpriorwaivers,
which would result in higher expenses for the investor. Please reference the prospectus for
additionalinformation.
1
TheBofAMerrillLynch13YearU.S.CorporateIndexisasubsetoftheBofAMerrillLynchU.S.
CorporateMasterIndextrackingtheperformanceofU.S.dollardenominatedinvestmentgrade
ratedcorporatedebtpubliclyissuedintheU.S.domesticmarket.Thissubsetincludesallsecurities
with a remaining term to maturity of less than 3 years. The BofA Merrill Lynch 1Year U.S.
TreasuriesIndexisanunmanagedindexthattrackstheperformanceofthedirectsovereigndebt
oftheU.S.Governmenthavingamaturityofatleastoneyearandlessthanthreeyears.TheBofA
11
MerrillLynch03YearU.S.HighYieldIndexExcludingFinancialsconsidersallsecuritiesfromthe
BofAMerrillLynchUSHighYieldMasterIIIndexandtheBofAMerrillLynchU.S.HighYield01
YearIndex,andthenappliesthefollowingfilters:securitiesgreaterthanorequaltoonemonth
butlessthan3yearstofinalmaturity,andexcludeallsecuritieswithLevel2sectorclassification
=Financial(FNCL).
AsofMarch31,2015theportfoliowascomprisedofsecuritieswithanaveragematurityof4.8
months.TheaveragematurityisbasedontheWeightedAverageExpectedEffectiveMaturity,
whichmaydifferfromthestatedmaturitybecauseofacorporateactionorevent.
Source:BloombergProfessionalAnalytics
12
At quarterend, 52% of the invested portfolio was comprised of securities with an Expected
Effective Maturity of 30 days or less. Below is a more specific breakdown of the portfolios
holdingsbycreditstrategy:
%OfInvestedPortfolioAsof3/31/15
Expected
Effective
Maturity
030days
3160days
6190days
91180days
181270days
271365days
12years
23years
Redeemed
Debt
Event
Driven
Strategic
Recap
45.6%
0.2%
1.1%
10.2%
3.3%
0.4%
3.9%
3.0%
45.8%
15.2%
6.8%
Cushion
Bonds
ShortTerm
Maturities
1.6%
4.5%
7.4%
2.3%
3.6%
1.6%
19.3%
7.4%
1.8%
51.6%
10.9%
0.0%
8.3%
12.6%
2.3%
11.0%
3.3%
13.0%
08/21/15
2.2%
AsofMarch31,2015theWeightedAverageMarketYieldtoEffectiveMaturitywas5.77%for
EffectiveMaturitiesof31daysormore.Thatcomprised48%oftheinvestedPortfolio.
80%
7.00%
70%
6.00%
60%
5.00%
50%
4.00%
40%
3.00%
30%
2.00%
20%
10%
1.00%
0%
0.00%
%ofInvestedPortfolio
WeightedAverageMarket
YieldtoEffectiveMaturity
%ofInvestedPortfolio
EffectiveMaturites 31DaysorMore
WgtdAvgMktYldtoEffectiveMaturity
13
NewpurchasesmadebytheFundduringthequarterconsistedof52.6%Called/Tendered,
17.7%EventDriven,23.0%StrategicRecap,1.8%CushionBonds,and4.9%ShortTerm
Maturities.CalledandTenderedsecuritiescontinuetobethemostsignificantcomponentof
ourpurchases.Thesupplyofthesebondsremainedampleduringmostoftheperiod.
WhencombiningCalled/TenderedpurchaseswithStrategicRecap(whichrepresentsecurities
thatareintheprocessofbeingrefinancedbuthavenotyetbeenofficiallyredeemed),the
figurereachednearly76%ofourpurchasesduringthequarter.Wewillcontinuetotryfocusing
alargeportionoftheFundinredeemedorsoontoberedeemedsecurities,especiallyintimes
ofmarketweakness,bothtokeeptheFundsdurationshort,andalsotoensurethatadequate
poolsofneartermcashareavailabletotakeadvantageofattractivenewpurchases.
14
RIVERPARKSTRATEGICINCOMEFUND
MARCH31,2015
1Q15
RiverPark
StrategicIncome
FundPerformance
RSIIX
RSIVX
1.44%
1.38%
Barclay's
Aggregate
Bond
Index1
1.61%
Morningstar
Multisector
Bond
Category2
1.43%
YTD2015
1.44%
1.38%
1.61%
1.43%
OneYear
Since
Inception*
3.00%
5.46%
2.66%
5.23%
5.72%
4.95%
2.50%
4.59%
TotalReturnspresentedforperiodslessthan1yeararecumulative,returnsforperiodsoneyear
*andgreaterareannualized.InceptionDate:September30,2013
The performance quoted herein represents past performance. Past performance does not
guaranteefutureresults.Theinvestmentreturnandprincipalvalueofaninvestmentwillfluctuate
sothataninvestor'sshares,whenredeemed,maybeworthmoreorlessthantheiroriginalcost,
andcurrentperformancemaybehigherorlowerthantheperformance.
As of the most recent prospectus, dated 1/28/2015, gross expense ratio was 0.91%. Gross
ExpenseRatiodoesnotreflecttheabilityoftheadvisertorecoveralloraportionofpriorwaivers,
whichwouldresultinhigherexpensesfortheinvestor.Thisoptionisavailablecontractuallyto
theadvisoruntilJanuary31,2016.Pleasereferencetheprospectusforadditionalinformation.
1
TheBarclaysU.S.AggregateBondIndexisabroadbasedunmanagedindexofinvestmentgrade,
U.S. dollardenominated, fixedrate taxable bond market, including Treasuries, government
relatedandcorporatesecurities,MBS(agencyfixedrateandhybridARMpassthroughs),ABS,and
CMBS.
2
Source:MorningstarPrincipia.TheMorningstarMultisectorBondCategoryisusedforfundsthat
seek income by diversifying their assets among several fixedincome sectors, usually U.S.
governmentobligations,foreignbonds,andhighyielddomesticdebtsecurities.
15
Category
RiverParkShortTermHighYieldOverlap
Buy&HoldMoneyGood
PriorityBased(AbovetheFray)
OffTheBeatenPath
InterestRateResets
Other(ABS,Distressed)
InvestedPortfolio
Cash
TotalPortfolio
Weight
33.1%
35.8%
10.4%
6.3%
2.8%
7.6%
96.0%
4.0%
YTW
4.6%
7.5%
9.8%
8.8%
3.9%
6.9%
6.7%
YTW
Duration
0.57
3.73
2.77
3.78
0.18
3.17
2.39
100.0%
6.4%
2.29
YTM
5.7%
7.6%
10.0%
9.0%
8.5%
7.4%
7.3%
YTM
Duration
1.48
4.20
3.27
3.92
3.11
3.63
3.07
7.0%
2.94
Thefivelargestpositionstotaled13.9%oftheFund.
HC2HoldingsInc.
HuntCosInc.
InforUSInc.
KCGHoldingsInc.
LansingTradeGroup
3.1%
3.0%
2.7%
2.6%
2.5%
13.9%
For the quarter, the five best performing positions outperformed the five worst performing
positions (inclusive of interest) on a net basis by 25 basis points. The five best and worst
performingpositionsforthequarterwereasfollows:
PositiveContribution0.81%
SouthernStatesCoopInc.
LansingTradeGroup
MarsicoHoldingsLLC
HC2HoldingsInc.
ConsolidatedTomokaLandCo.
NegativeContribution(0.56%)
GoodmanNetworksInc.
VertellusSpecialties
USShaleSolutionsInc.
VersoPaperHoldingLLC
HamptonRubberCompany
16
In1Q15,SouthernStatesCoopandMarsicobothrecoveredfromtechnicalsellingpressure.As
discussed earlier in the letter, ConsolidatedTomoka Land Co issued paper that we found
attractive.Thebondsmovedupafterissuance.LansingTradeGroupadvancedastheyreported
abetterthanexpectedfourthquarter.PriceappreciationinHC2Holdingsreflectedenthusiasm
forandbetterunderstandingofrecentacquisitions.
GoodmanNetworkssufferedastheirlargestclient,AT&T,announcedasignificantdeclineintheir
capexbudget.Vertellusbondsmovedlowerastheyreportedworsethanexpectedearnings.US
Shaleisaserviceprovidertotheoilandgasmarketandwerealizedthelossasweexitedthe
position.ConcernarosethatpartofHamptonRubberCompanysdistributionbusinessmaysee
greaterthanexpectedweaknessfromservicingtheenergysector,includingrefinersandmid
streamsegments.Thelosswasrealizedaswechosetoswapoutofthe2ndlienpaperintothe1st
liendebt,allowingus,ultimately,torecapturethedeclineinmarketprice.Versodeclinedon
concernsregardingthelikelihoodofachievingmuchneededsynergiesprojectedtobederived
fromitsrecentmergerwithNewPage.
YTW
EffectiveMaturity
YTM
StatedMaturity
SEC30DayYield
1.
RiverPark
Strategic
IncomeFund
(RSIIX,RSIVX)1
6.39%
1/24/2018
7.01%
4/07/2019
6.95%
Barclays
U.S.Aggregate
BondIndex*
MarkitiBoxx
USDLiquid
HighYieldIndex*
1.53%
6/19/2022
1.53%
7/11/2022
1.87%
5.56%
11/23/2019
5.99%
08/23/2021
5.24%
NumbersrepresentaweightedaverageforRSIIXandRSIVX
Thismaterialmustbeprecededoraccompaniedbyacurrentprospectus.Investorsshouldreaditcarefullybefore
investing.
*TheseindexcharacteristicsarecalculatedbyBloombergProfessionalAnalyticsandarebasedontheiSharesETFs
whicharepassiveETFscomprisedoftheunderlyingsecuritiesoftheseindices.
RiverPark Strategic Income has a much higher YieldtoWorst and YieldtoMaturity than the
indices even though its effective maturity is much shorter. We believe the portfolio is well
positionedanddefensiverelativetotheindices.
17
18