FPA Queens Road Small Cap Value Fund Institutional Class · NASDAQ:QRSIX
FPA Queens Road Small Cap Value Fund Institutional Class — FPA New Income Fund and FPA Flexible Fixed Income Fund — Debt Investor Presentation (June 2024)
47 slides from FPA Queens Road Small Cap Value Fund Institutional Class's debt investor presentation, June 2024
Slide 1: FPA New Income Fund & FPA Flexible Fixed Income Q2 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 Second 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 6/30/2024 QTD YTD 1 Year 3 Years 5 Years 10 Years 15 Years 20 Years 30 Years 7/11/84) rs FPA New Income Fund (“FPNIX”) 0.97 1.84 7.09 2.04 2.12 2.09 2.10 2.54 4.15 6.20 Bloomberg U.S. Agg Bond Index 0.07 -0.71 2.63 -3.02 -0.23 1.
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 6/30/2024 QTD YTD 1 Year 3 Years 5 Years 12/31/18) rs FPA Flexible Fixed Income Fund (“FPFIX”) 1.20 2.39 7.87 2.92 3.17 3.37 Bloomberg U.S. Universal Index 0.19 -0.28 3.47 -2.68 0.11 1.26 CPI + 200 0.76 2.41 5.05 is o7.08 6.25 6.
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 6/30/2024 L P , Yield-to-Worst (%) Effective Duration (yrs.) YTW/Duration* rs FPA New Income Fund 5.52 3.2 1.73 o Bloomberg U.S. Aggregate Bond Index 5.00 6.1 0.82 is Bloomberg U.S. Aggregate 1-3 Year Index 4.98 1.9 2.62 d v c A Yield-to-Worst (%) Effective Duration (
Slide 8: Q2 2024 Summary
Q2 2024 Summary L P ■ FPA New Income celebrated its 40th anniversary under FPA’s management! ■ Risk-free rates increased during the quarter while, overall, investment grade and high yield spreads rs, did not change meaningfully. is o ■ We believe High Quality, longer duration bonds remain attractive
Slide 9: Years of class-leading risk adjusted returns
40 years of class-leading risk adjusted returns 40 year Risk-Adjusted Returns and Annualized Return L P FPA New Income – Institutional Sharpe Ratio 0.92 Sortino Ratio 1.60 rs, Annualized Return (%) 6.20 Vanguard Short-Term Investment-Grade Fund Fidelity Advisor Limited Term Bond Fund 0.74 0.64 is o
Slide 10: Fund growth of $10,000 vs comparable funds
40 years of class-leading risk adjusted returns FPA New Income Fund Growth of $10,000 vs Comparable Funds and the Bloomberg U.S. Aggregate Bond Index L P $140,000 From July 1984 to July 2024 rs, $120,000 $100,000 is o $80,000 d v $60,000 c A $40,000 i f i c $20,000 $0 Jul-84 Jul-88 P a Jul-92 Jul-96
Slide 11: Maximum time to high-water mark
40 years of class-leading risk adjusted returns Maximum Time to High-Water Mark (in Years) since 1984 L P rs, is o d v c A i f i a c t P F i rs Note: A high-water mark is the highest peak in value that the Fund, category, or index has reached. The plus sign represents a high-water mark that has not
Slide 12: Percentage of rolling 12-month periods with positive performance
40 years of class-leading risk adjusted returns Percentage of Historical 12-Month Rolling Periods with Positive Performance L P rs, is o d v c A i f i a c t P F i rs Source: Morningstar Direct. The chart illustrates the percent of 12-month rolling periods that resulted in positive average performanc
Slide 13: Worst return during a 5-year period
40 years of class-leading risk adjusted returns Worst Return (Annualized) During a 5-Year Period L P rs, is o d v c A i f i a c t P F i rs Source: Morningstar Direct. The chart illustrates the worst five-year rolling average returns for the FPA New Income Fund – Institutional from August 1, 1984 thr
Slide 14: 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 Jun-14 J
Slide 15: Attractive long-term performance with a smoother ride (FPFIX)
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 16: 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 16
Slide 17: "Modest" progress on inflation
“Modest” progress on inflation CPI Urban Consumers less Food and Energy year/year change L P 7.0% rs, o 6.0% 5.0% v is 4.0% A d 3.0% i f i c 2.0% a c 1.0% t P F i 0.0% rs Source: US Department of Labor. As of June 30, 2024. The Consumer Price Index, or CPI, reflects the average change over time in p
Slide 18: Yield curve
Yield curve U.S. Treasury Yield Curve L P rs, is o d v As of 6/28/24 As of 3/28/24 c A As of 12/29/23 i f i a c t P Maturity rs 1Y 2Y 3Y 5Y 7Y 10Y 20Y 30Y F i Change in yield (bps) during Q2 2024 Change in yield (bps) year-to-date 9 35 13 50 14 54 17 53 17 49 20 52 21 47 22 53 Source: Bloomberg. As
Slide 19: Treasury yields remain near decade-plus highs
Treasury yields remain near decade-plus highs 18.00% Treasury Yield L P 16.00% rs, 14.00% is o 12.00% d v A 10.00% 8.00% i f i c 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 1/5/1962-6/28/2024. Past performance is
Slide 20: 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% 350 16.00% o rs 300 is 14.00% 250 12.00% d v Yield-to-worst (YTW) Spread (bps) 200 A 10.00% 8.00% i f i c 150 c 6.00% 100 4.00% P a 50 2.00% rs t 2nd percentile i 0.00% 0 F YTW Spread Source: Bloombe
Slide 21: Active duration management: upside versus downside
Active duration management: illustration of upside versus downside Hypothetical 12-month U.S. Treasury Returns L P rs, is o d v c A i f i a c t P F i rs Source: Bloomberg. ^ Yield-to-maturity is the annualized total return anticipated on a bond if the bond is held until it matures and assumes all pa
Slide 22: Return simulation as of June 30, 2024
FPA New Income return simulation as of June 30, 2024 8.0 L P 7.0 rs, Hypothetical Total return - gross of fees (%) o 6.0 5.0 v is 4.0 3.0 A d 2.0 i f i c 1.0 a c 0.0 -100 -75 t P -50 -25 0 +25 +50 +75 Reference yield change (bps) +100 +125 +150 +175 +200 i rs The Chart shows the hypothetical impact
Slide 23: FPFIX return simulation as of June 30, 2024
FPFIX return simulation as of June 30, 2024 8.0 L P 7.0 rs, Hypothetical total return - gross of fees (%) o 6.0 5.0 v is 4.0 3.0 A d 2.0 i f i c 1.0 a c 0.0 -100 t -75 P -50 -25 0 +25 +50 +75 Reference yield change (bps) +100 +125 +150 +175 +200 F i rs As of June 30, 2024. The Chart shows the hypoth
Slide 24: 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 6/30/2024 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 25: 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% 1,600 16.00% o rs 1,400 is 14.00% 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% 2.00% t P 200 rs 6th percentile i 0.00% 0 F Y
Slide 26: 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, 700 is o 600 d v Basis Points (bps) A 500 400 i f i c c 300 200 P a 4th percentile 100 rs t F i 0 Source: Bloomberg. As of June
Slide 27: 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 27
Slide 28: FPNIX contribution to return
FPNIX contribution to return Average Q2 2024 Total L P Contribution , Weight (%) Return (%) to return (%) ABS 40.72 1.30 0.51 rs Auto 8.49 0.95 0.08 Equipment 14.11 0.95 0.13 Agency RMBS CLO Other 4.41 13.71 15.45 is o 2.26 1.54 0.64 0.10 0.20 0.13 Agency CMO Mortgage Pass-through MBS Stripped d v 0
Slide 29: 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 81.5% 15.8% 5.60% 5.08% 4.2 5.9 3.3 4.9 rs, 3.5 4.9 112 74 o Non-Agency RMBS 6.1% 5.88% 5.1 4.2 4.0 141
Slide 30: Exposures by investment idea
FPA New Income exposures by investment idea L P As of March 31, 2024 As of June 30, 2024 rs, Mortgage Pass- through Agency Performing is o Agency Performing CMBS v CMBS ABS Auto Mortgage ABS Equipment ABS 14% 14% 14% Prime Pass-through 14% d Equipment 7% 16% Treasuries 14% 7% A Corporates Corporates
Slide 31: Quality distribution
FPA New Income quality distribution 100% L P , As of 6/30/2024: rs 90% High Quality AAA 69% 80% 70% is o AA A Total 17% 91% 5% v % of portfolio 60% d Credit Sensitive BBB 4% 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% Total 9% 10% 8
Slide 32: 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 32
Slide 33: FPFIX contribution to return
FPFIX contribution to return Average Q2 2024 Total L P Contribution , Weight (%) Return (%) to return (%) ABS 37.91 1.89 0.68 rs Auto 5.35 1.02 0.05 Equipment 10.97 0.96 0.10 Agency RMBS CLO Other 8.08 13.52 13.60 is o 3.84 1.79 0.50 0.31 0.23 0.12 Agency CMO Mortgage Pass-through d v 0.02 13.57 1.0
Slide 34: 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 72.8% 14.1% 6.21% 5.08% 4.3 5.9 3.3 4.9 rs, 3.7 4.9 181 74 o Non-Agency RMBS 5.8% 5.83% 5.0 4
Slide 35: FPA Flexible Fixed Income exposures by investment idea
FPA Flexible Fixed Income exposures by investment idea L P As of March 31, 2024 As of June 30, 2024 rs, ABS Equipment Mortgage Pass-through Agency is o ABS Equipment Mortgage Pass-through Agency v 11% 11% Performing 11% 14% Performing Treasuries Treasuries CMBS CMBS d 12% 11% 10% 14% A Corporates 9%
Slide 36: FPA Flexible Fixed Income quality distribution
FPA Flexible Fixed Income quality distribution 100% L P , As of 6/30/2024: rs 90% High Quality AAA 63% 80% 70% is o AA A Total 16% 83% 4% v % of portfolio 60% d Credit Sensitive BBB 5% 50% 40% c A BB B 5% 3% i CCC 1% 31% 32% 30% 20% 20% ci f20% 23% 24% 22% 24% 29% 30% 29% 28% 27% 23% 20% 17% CC C D
Slide 37: Question & Answer
L P rs, is o d v c Question & Answer A i f i ac t P F i rs 37
Slide 38: 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 7.51 7.06 o Hypothetical total return (%) is 6.0 5.11 4.92 5.11 5.11 4.47 4.0 1.95 d v 2.45 2.00 A 2.0 0.0 i f i c -0.64 -2
Slide 39: 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 7.51 7.06 6.46 o Hypothetical total return (%) is 6.0 4.92 v 4.47 4.55 4.0 A d 2.45 2.00 2.68 c 2.0 0.60 i f i c 0.0 -0.08 a -0.68 P -2.0 -100 0 +
Slide 40: 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 9.76 rs, o 7.51 Hypothetical total return (%) 8.0 7.06 6.0 4.92 4.47 4.37 v is d 4.0 2.45 2.70 A 2.00 2.0 c 0.10 0.0 i f i -0.70 c -2.0 -4.0 -100 P -
Slide 41: Important Disclosures
Important Disclosures P Fund Objectives and Returns L The below provides information about the twelve funds referenced on slides 9-13 for comparative purposes. , FPA New Income – Institutional: The investment seeks to provide long-term total return, which includes income and capital appreciation, wh
Slide 42: Important Disclosures (continued)
Important Disclosures (continued) L P Russell Inv Short Duration Bond S: The investment seeks to provide current income and preservation of capital with a focus on short duration securities. The fund has a non- fundamental policy to invest, under normal circumstances, at least 80% of the value of it
Slide 43: Important Disclosures (continued)
Important Disclosures (continued) These slides are intended as supplemental material to the Second 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
Slide 44: 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 45: 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 46: Important Disclosures (continued)
Important Disclosures (continued) P Bloomberg U.S. Universal Bond Index represents the union of the following Bloomberg indices: U.S. Aggregate Index, the U.S. High-Yield Corporate Index, the 144A Index, the Eurodollar Index, the Emerging Markets Index, and the non-ERISA portion of the CMBS Index. M
Slide 47: Glossary of Terms
Glossary of Terms P Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. L EBITDA, or earnings before interest, taxes, depreciation, and amortization, is an alternate measure of profitability to net income. By incl