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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"FPA New Income Fund returned 1.65% in Q2 2025, maintaining a highly conservative posture with 96% high-quality exposure as credit spreads hovered near historical lows."
The FPA New Income Fund returned 1.65% in the second quarter of 2025 and 4.31% year-to-date, outperforming its benchmarks on a risk-adjusted basis. During the quarter, the fixed income market experienced heightened volatility triggered by the federal government's April 2nd announcement of historically high tariffs, which initially caused interest rate volatility to surge and credit spreads to widen. However, following a pause on tariffs on April 9th, volatility subsided, and spreads decreased below pre-tariff levels. In response to this expensive credit environment, where spreads reached the 2nd percentile for the Bloomberg U.S. Aggregate Bond Index and the 6th percentile for BB-rated high-yield corporate bonds, the Fund's managers, led by Abhijeet Patwardhan, maintained a highly conservative posture. High-quality exposure was held at 96%, while credit exposure remained at a minimal 4%. The portfolio managers focused their investment activities on buying longer-duration, high-quality, fixed-rate bonds (such as non-agency RMBS, agency-guaranteed residential mortgage pools, and single-family rental property bonds) with a weighted average duration of 5.4 years. To fund these purchases, the Fund sold treasuries, agency-guaranteed CMBS, and various asset-backed securities (ABS). The managers utilized a strict 100 bps duration test to identify bonds that could achieve at least a breakeven return over 12 months if yields increased by 100 bps, emphasizing capital preservation over chasing yields in an uncompensated market.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
High-conviction positioning: FPA New Income Fund returned 1.65% in Q2 2025, maintaining a highly conservative posture with 96% high-quality exposure as credit spreads hovered near historical lows....
Growth Outlook
Market outlook remains high conviction: FPA New Income Fund returned 1.65% in Q2 2025, maintaining a highly conservative posture with 96% high-quality exposure as credit spreads hovered near historical lows....
Risk Appetite
Risk appetite posture is high conviction: FPA New Income Fund returned 1.65% in Q2 2025, maintaining a highly conservative posture with 96% high-quality exposure as credit spreads hovered near historical lows....
Capital Deployment
Manager actively deployed capital into high-conviction opportunities. FPA New Income Fund returned 1.65% in Q2 2025, maintaining a highly conservative posture with 96% high-quality exposure as credit spreads hovered near historical lows....
Forward Guidance
Forward guidance signal: FPA New Income Fund returned 1.65% in Q2 2025, maintaining a highly conservative posture with 96% high-quality exposure as credit spreads hovered near historical lows....
Language Signal
Tone analysis indicates high conviction language: FPA New Income Fund returned 1.65% in Q2 2025, maintaining a highly conservative posture with 96% high-quality exposure as credit spreads hovered near historical lows....
Perceived Risk
Perceived risk level is evaluated as moderate conviction. FPA New Income Fund returned 1.65% in Q2 2025, maintaining a highly conservative posture with 96% high-quality exposure as credit spreads hovered near historical lows....
Opportunity Density
Opportunity density index indicates high conviction actionable entry points. FPA New Income Fund returned 1.65% in Q2 2025, maintaining a highly conservative posture with 96% high-quality exposure as credit spreads hovered near historical lows....
Time Horizon
Investment time horizon reflects a high conviction orientation. FPA New Income Fund returned 1.65% in Q2 2025, maintaining a highly conservative posture with 96% high-quality exposure as credit spreads hovered near historical lows....
