FPA Queens Road Small Cap Value Fund Institutional Class · NASDAQ:QRSIX
FPA Queens Road Small Cap Value Fund Institutional Class — First Pacific Advisors (FPA New Income Fund and FPA Flexible Fixed Income Fund) — Investor Presentation (September 2024)
41 slides from FPA Queens Road Small Cap Value Fund Institutional Class's investor presentation, September 2024
Slide 1: FPA New Income Fund & FPA Flexible Fixed Income Third Quarter 2024 Webcast
L P rs, is o d v c A FPA New Income i f i Fund (FPNIX) & a c FPA Flexible Fixed Income (FPFIX) P Third Quarter 2024 Webcast Presentation t i r s F Follow us on:
Slide 2: FPNIX performance – net of fees
FPNIX performance – net of fees L P ITD (Since , Performance (%) as of 9/30/2024 QTD YTD 1 Yr 3 Yr 5 Yr 10 Yr 15 Yr 20 Yr 30 Yr 40 Yr 7/11/84) rs FPA New Income Fund (“FPNIX”) 3.82 5.73 9.74 3.21 2.72 2.46 2.28 2.71 4.23 6.03 6.26 Bloomberg U.S. Agg Bond Index 5.20 4.45 11.57 -1.39 0.33 1.84 2.60 3.
Slide 3: FPNIX performance – net of fees (annual)
FPNIX performance – net of fees Annual Performance (%) 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 FPA New Income Fund (“FPNIX”) 7.51 -3.10 0.82 2.51 3.81 2.30 2.67 2.53 0.15 1.32 0.67 2.18 2.23 3.18 2.89 4.31 L P 6.02 4.79 1.57 2.60 Bloomberg
Slide 4: FPFIX performance – net of fees
FPFIX performance – net of fees ITD (Since L P , Performance (%) as of 9/30/2024 QTD YTD 1 Yr 3 Yr 5 Yr 12/31/18) rs FPA Flexible Fixed Income Fund (“FPFIX”) 3.86 6.34 10.71 4.12 3.81 3.90 Bloomberg U.S. Universal Index 5.20 4.91 12.08 -1.05 0.70 2.10 CPI + 200 1.03 3.46 4.47 is o6.84 6.26 5.96 d v
Slide 5: FPFIX performance – net of fees (annual)
FPFIX performance – net of fees L P , Annual Performance (%) 2023 2022 2021 2020 2019 rs FPA Flexible Fixed Income Fund (“FPFIX”) 9.02 -2.82 1.77 4.70 3.78 Bloomberg U.S. Universal Index 6.17 -12.99 -1.10 7.58 9.29 CPI + 200 5.38 8.58 is o 9.35 3.36 4.38 d v A Past performance is no guarantee of fut
Slide 6: Fund overview
Fund overview FPA New Income Fund Institutional Share Class (FPNIX) Investor Share Class (FPNRX) FPA Flexible Fixed Income Fund L P Institutional Share Class (FPFIX) Advisor Share Class (FFIAX) Investment Objective Seeks to provide long-term total return, which includes income and capital appreciati
Slide 7: Portfolio characteristics
Portfolio characteristics As of 9/30/2024 L P , Yield-to-Worst (%) Effective Duration (yrs.) YTW/Duration* rs FPA New Income Fund 4.52 3.2 1.4 o Bloomberg U.S. Aggregate Bond Index 4.23 6.2 0.7 is Bloomberg U.S. Aggregate 1-3 Year Index 3.95 1.9 2.1 ▪ Credit sensitive exposure: 7% d v c A Yield-to-W
Slide 8: Q3 2024 Summary
Q3 2024 Summary L P ■ Risk-free rates decreased during the quarter while, overall, investment grade and high yield spreads did not change meaningfully. rs, ■ We believe High Quality, longer duration bonds remain attractive. is o d v ■ Lower-rated debt is generally still not attractive but both Funds
Slide 9: Observations: Market Commentary
L P rs, is o d v Observations A Market Commentary i f i c a c t P i r s F 9
Slide 10: Yield curve
Yield curve U.S. Treasury Yield Curve L P rs, is o v Yield As of 6/28/24 A d As of 9/30/24 As of 12/29/23 Y Y Y Y Y i Y f i c Y Y a c Maturity Maturity t P Change in yield (bps) during Q3 2024 1Y -111 2Y -111 3Y -100 5Y -82 7Y -73 10Y -62 20Y -49 30Y -44 i r s Change in yield (bps) year-to-date -76
Slide 11: Treasury yields remain near decade-plus highs
Treasury yields remain near decade-plus highs U.S. Treasury Yields L P 18.00% 16.00% rs, 14.00% is o 12.00% d v 10.00% c A 8.00% i f i c 6.00% 4.00% P a 2.00% rs t i 0.00% F 2 yr. Treasury yield 3 yr. Treasury yield 5 yr. Treasury yield Source: Bloomberg. Data from 1/5/1962-9/30/2024. Past performan
Slide 12: High yield: reward generally not worth the risk
High yield: reward generally not worth the risk Bloomberg U.S. Corporate High Yield BB excl. Energy L P 18.00% 16.00% rs, 1,600 1,400 14.00% is o 1,200 12.00% d v Yield-to-worst (YTW) 1,000 Spread (bps) A 10.00% 800 8.00% i f i c 600 c 6.00% a 400 4.00% 9th percentile 2.00% t P 200 rs 0.00% 0 F i YT
Slide 13: High yield: reward generally not worth the risk (spread differential)
High yield: reward generally not worth the risk Bloomberg U.S. Corporate High Yield BB excl. Energy Spread less Bloomberg U.S. Investment Grade Corporate Spread L P 800 rs, o 700 600 v is 500 d Basis Points (bps) 400 c A 300 i f i 200 a c 9th percentile 100 t P F i 0 rs Source: Bloomberg. As of Sept
Slide 14: Investment grade bond yields near decade-plus highs
Investment grade bond yields near decade-plus highs Bloomberg U.S. Aggregate Bond Index L P 18.00% 16.00% rs, 350 o 300 is 14.00% v 250 12.00% d Yield-to-worst (YTW) Spread (bps) A 200 10.00% 8.00% i f i c 150 c 6.00% 100 4.00% P a 50 2.00% rs t 1st percentile i 0.00% 0 F YTW Spread Source: Bloomber
Slide 15: Active duration management: illustration of upside versus downside
Active duration management: illustration of upside versus downside Hypothetical 12-month U.S. Treasury Returns L P , 10.00% 9.16 8.00% o rs 7.34 is 6.44 6.00% v 5.49 Yield / Total Return 4.62 4.00% 4.00 4.00 4.00 3.64 2.67 3.55 A d 3.57 3.56 3.65 2.00% i f i c1.66 0.80 0.00% a c -0.06 -2.00% t 1 yea
Slide 16: Active management
Active management ■ FPA New Income and FPA Flexible Fixed Income are actively adding duration L P rs, Effective duration 12/31/2021 is o 9/30/2024 Change (yrs.) v FPA New Income Fund 1.39 3.21 +1.82 Morningstar U.S. Short-Term Bond Category Bloomberg U.S. 1-3 Yr Aggregate Bond Index A 2.75 1.92 d 2.
Slide 17: FPNIX return simulation as of Sept. 30, 2024
FPNIX return simulation as of Sept. 30, 2024 L P , 8.0 rs 7.0 Hypothetical Total return - gross of fees (%) 6.0 5.0 is o 4.0 d v 3.0 c A i 2.0 1.0 ci f a 0.0 -1.0 -100 t -75 P -50 -25 0 +25 +50 +75 Reference yield change (bps) +100 +125 +150 +175 +200 i rs The Chart shows the hypothetical impact of
Slide 18: FPFIX return simulation as of Sept. 30, 2024
FPFIX return simulation as of Sept. 30, 2024 L P , 8.0 rs 7.0 Hypothetical Total return - gross of fees (%) 6.0 5.0 is o 4.0 d v 3.0 c A i 2.0 1.0 ci f a 0.0 -1.0 -100 t -75 P -50 -25 0 +25 +50 +75 Reference yield change (bps) +100 +125 +150 +175 +200 F i rs As of September 30, 2024. The Chart shows
Slide 19: Upside versus downside example
Upside versus downside example ■ Over the last year, the upside optionality we added to FPA New Income and FPA Flexible Fixed L P Income materialized while still mitigating downside 1-year rs, 1-year FPA New Income Return 9.74% is o Max Drawdown -0.94% FPA Flexible Fixed Income d v 10.71% -0.90% Blo
Slide 20: The ultimate goal is attractive long-term performance with a smoother ride
The ultimate goal is attractive long-term performance with a smoother ride $13,000 FPA New Income FPA New Income growth of $10,000 over ten years L P $12,000 Bloomberg U.S. Agg 1-3 Year Bond Index Morningstar U.S. Fund Short-Term Bond Bloomberg U.S. Agg Bond Index rs, is o v $11,000 $10,000 Sep-14 S
Slide 21: The ultimate goal is attractive long-term performance with a smoother ride
The ultimate goal is attractive long-term performance with a smoother ride $13,000 FPA Flexible Fixed Income growth of $10,000 since inception L P $12,000 rs, $11,000 is o $10,000 FPA Flexible Fixed Income d v Bloomberg U.S. Universal Index $9,000 Morningstar U.S. Fund Nontraditional Bond A Bloomber
Slide 22: FPA New Income Portfolio Update
L P rs, is o d v FPA New Income c A i f i c Portfolio Update a t P F i rs 22
Slide 23: FPNIX contribution to return
FPNIX contribution to return Average Q3 2024 Total L P Contribution , Weight (%) Return (%) to return (%) ABS 37.40 3.60 1.35 rs Auto 7.77 3.74 0.29 Equipment 13.83 4.04 0.55 Agency RMBS CLO Other 4.02 11.78 15.72 is o 2.03 3.55 5.10 0.08 0.42 0.79 Agency CMO Mortgage Pass-through d v 0.02 15.70 3.8
Slide 24: FPA New Income portfolio overview
FPA New Income portfolio overview Sector Exposure (% of MV) Yield-to-Worst (%) Maturity (years) Effective Duration (years) Spread Duration (years) L P Nominal Spread (bps) Securitized Agency RMBS 78.8% 15.9% 4.74% 4.30% 4.0 5.7 3.3 4.9 rs, 3.5 4.9 114 69 o Non-Agency RMBS 5.9% 5.15% 5.2 4.3 4.2 151
Slide 25: FPA New Income exposures by investment idea
FPA New Income exposures by investment idea L P As of June 30, 2024 As of September 30, 2024 rs, Agency Performing CMBS ABS Equipment is o Agency Performing CMBS v Mortgage Mortgage ABS Equipment 14% 14% 15% Pass-through Pass-through 14% d 16% Treasuries 16% 7% Treasuries A Corporates 10% Other 7% O
Slide 26: FPA New Income quality distribution
FPA New Income quality distribution 100% L P , As of 9/30/2024: rs 90% High Quality AAA 73% 80% 70% is o AA A Total 15% 93% 5% v % of portfolio 60% d Credit Sensitive BBB 3% 50% 40% c A BB B 0% 1% i CCC 0% 30% 20% ci f CC C D 0% 0% 0% a NR 4% 9% 9% 9% 9% 10% 10% 10% 10% 10% 10% 10% 9% 7% Total 7% 10
Slide 27: FPA Flexible Fixed Income Portfolio Update
L P rs, is o d v c A FPA Flexible Fixed Income i f i c Portfolio Update a t P F i rs 27
Slide 28: FPFIX contribution to return
FPFIX contribution to return Average Q3 2024 Total L P Contribution , Weight (%) Return (%) to return (%) ABS 33.92 3.74 1.28 rs Auto 5.11 3.87 0.20 Equipment 10.56 4.02 0.42 Agency RMBS CLO Other 6.77 11.47 13.69 is o 2.86 3.98 5.09 0.19 0.46 0.69 Agency CMO Mortgage Pass-through d v 0.01 13.68 3.5
Slide 29: FPA Flexible Fixed Income portfolio overview
FPA Flexible Fixed Income portfolio overview Sector Exposure (% of MV) Yield-to-Worst (%) Maturity (years) Effective Duration (years) Spread Duration (years) L P Nominal Spread (bps) Securitized Agency RMBS 67.8% 13.6% 5.21% 4.31% 4.3 5.7 3.3 4.9 rs, 3.6 4.9 167 70 o Non-Agency RMBS 5.0% 4.99% 5.3 4
Slide 30: FPA Flexible Fixed Income exposures by investment idea
FPA Flexible Fixed Income exposures by investment idea L P As of June 30, 2024 As of September 30, 2024 rs, ABS Equipment Mortgage Pass-through Agency is o Mortgage Pass-through Agency Performing CMBS v 11% 14% Performing Treasuries 13% 12% Treasuries 17% CMBS d 11% 14% ABS A Equipment Other Other 1
Slide 31: FPA Flexible Fixed Income quality distribution
FPA Flexible Fixed Income quality distribution 100% L P , As of 9/30/2024: rs 90% High Quality AAA 72% 80% 70% is o AA A Total 12% 87% 3% v % of portfolio 60% d Credit Sensitive BBB 4% 50% 40% c A BB B 5% 2% i CCC 0% 31% 32% f 29% 30% 29% CC 0% i 30% 28% 27% 24% 23% C 0% 23% 24% 22% c 20% 20% 20% 20
Slide 32: Question & Answer
L P rs, is o d v c Question & Answer A i f i ac t P F i rs 32
Slide 33: CMBS exposure summary
CMBS exposure summary ■ Primarily AAA-rated senior bonds L P % of portfolio Agency CMBS FPA New FPA Flexible Income Fixed Income 14.9% 11.7% Description rs, Agency-guaranteed bonds backed entirely by multifamily properties Non-Agency CMBS CRE CLO 5.1% 3.0% 5.5% 1.8% is o Backed primarily by multifam
Slide 34: FPNIX return simulation vs. 12 month Treasury Bill
FPNIX return simulation vs. 12 month Treasury Bill FPNIX (gross of fees) FPNIX (net of fees) L P , 12 month Treasury Bill FPNIX (net of fees) less 12 month Treasury Bill rs 8.0 6.76 o 6.31 Hypothetical total return (%) is 6.0 v 4.00 4.19 4.00 4.00 3.74 4.0 2.0 2.31 A d 1.73 1.28 0.0 i f i c -0.26 -2
Slide 35: FPNIX return simulation vs. 3-year Treasury
FPNIX return simulation vs. 3-year Treasury FPNIX (gross of fees) FPNIX (net of fees) L P , 3 yr. Treasury FPNIX (net of fees) less 3 yr. Treasury rs 8.0 o 6.76 6.31 Hypothetical total return (%) is 6.0 5.49 4.0 4.19 3.74 3.55 d v 2.0 c A 1.73 1.28 1.66 0.82 i f i 0.19 c 0.0 -0.38 -2.0 -100 P a 0 +1
Slide 36: FPNIX return simulation vs. 7-year Treasury
FPNIX return simulation vs. 7-year Treasury* FPNIX (gross of fees) 7 yr. Treasury FPNIX (net of fees) FPNIX (net of fees) less 7 yr. Treasury L P 10.0 9.16 rs, o Hypothetical total return (%) 8.0 6.76 is 6.31 6.0 4.0 4.19 3.74 3.65 d v 2.82 2.0 c A 0.09 1.73 1.28 0.0 i f i c -2.0 -1.54 -4.0 -100 P a
Slide 37: Important Disclosures
Important Disclosures These slides are intended as supplemental material to the Third Quarter 2024 FPA New Income Fund and FPA Flexible Fixed Income Fund (each a “Fund”, and collectively, the “Funds”) audio presentation and transcript that is posted on FPA's website at fpa.com. L P This presentation
Slide 38: Important Disclosures (continued)
Important Disclosures (continued) P Certain statements made may be forward-looking and/or based on current expectations, projections, and information currently available to First Pacific Advisors, LP (“FPA”). Such statements may or may not be accurate over the long-term. While we believe we have a r
Slide 39: Important Disclosures (continued)
Important Disclosures (continued) P Important Disclosures for Hypothetical Stress-Tested Results and Estimated Principal Cash Flows L The hypothetical and estimated data provided herein is for illustrative and informational purposes only. No representation is being made that FPNIX or FPFIX will or i
Slide 40: Important Disclosures (continued)
Important Disclosures (continued) P Bloomberg U.S. Investment Grade Corporate Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD denominated securities publicly issued by US and non-US industrial, utility, and financial issuers. , L Bloomberg U.S. Univers
Slide 41: Glossary of Terms
Glossary of Terms P CMO (Collateralized Mortgage Obligation) is a mortgage-backed, investment-grade bond that separates mortgage pools into different maturity classes. L Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interes