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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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FPA New Income Fund 2024 Q2 Investor Letter | Buyside Digest

Back to Fund Profile (FPA New Income Fund)

Primary Source Intelligence • Q2 2024 Letter Analysis

FPA New Income Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, FPA New Income Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD+97%

YTD+1.84%

Annualized+7.09%

Positioning StanceConstructive

GeographyUS

Digest Analysis

Quick Take

"The fund continues extending duration to capture higher yields in High Quality bonds while reducing Credit exposure. Duration increased to 3.21 years from 1.39 years in 2021, positioning for attractive long-term returns through disciplined risk management."

Executive Summary

FPA New Income Fund returned 0.97% in Q2 2024 and 1.84% year-to-date. The Federal Reserve left rates unchanged, citing need for greater confidence that inflation is moving sustainably toward 2%. Treasury yields increased 9-22 bps across the curve. The fund continues to see attractive opportunities in longer-duration, High Quality bonds rated single-A or higher, which should enhance long-term returns and improve short-term return profiles. Credit exposure decreased to 9.0% as BBB-rated and lower securities are not viewed as attractively priced. The fund has increased duration from 1.39 years in December 2021 to 3.21 years currently, taking advantage of higher yields through a disciplined 100 bps duration test. Portfolio activity included purchases of agency-guaranteed mortgage pools, non-agency RMBS, CMBS, and asset-backed securities. The manager maintains a flexible, opportunistic approach focused on attractive risk-adjusted returns while celebrating 40 years of competitive performance under FPA management.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

72%

CautiousHigh

High Conviction (72%)

High conviction evident through significant duration extension from 1.39 to 3.21 years over 2.5 years, representing a major strategic shift. Manager provides specific methodology (100 bps duration test) and clear rationale for positioning. Names specific sectors being purchased and sold with conviction about High Quality bonds over Credit.

Growth Outlook

25%

BearishBullish

Bearish (25%)

Manager expresses cautious optimism about bond market opportunities, noting attractive yields in High Quality bonds are among highest in 15+ years. However, acknowledges uncertainty from elections and macro factors, and explicitly states they won't try to predict macroeconomy or politics.

Risk Appetite

40%

DefensiveAggressive

Defensive (40%)

Fund is selectively adding risk by extending duration to 3.21 years from 1.39 years in 2021, taking advantage of higher yields. However, simultaneously reducing Credit exposure from 10.0% to 9.0% and maintaining disciplined approach through 100 bps duration test shows measured risk appetite.

Capital Deployment

25%

De-riskingDeploying

De-risking (25%)

Moderate deployment activity with cash stable at 4.8% vs 4.6% prior quarter. Fund actively bought longer-duration bonds and extended Treasury holdings while selling shorter-duration securities. Credit exposure decreased slightly, indicating selective rather than aggressive deployment.

Forward Guidance

30%

CautiousExpansionary

Cautious (30%)

Manager indicates continued selective deployment into longer-duration High Quality bonds while remaining patient and opportunistic. Plans to continue searching for Credit opportunities but only when prices adequately compensate for risk. Guidance is constructive but measured.

Language Signal

35%

BearishBullish

Bearish (35%)

Language includes positive terms like 'attractive opportunity,' 'enhance long-term returns,' and 'well-positioned' but balanced with risk awareness and uncertainty acknowledgments. More opportunity-focused than risk-focused but not overwhelmingly bullish.

Perceived Risk

45%

Low RiskElevated

Moderate Risk (45%)

Manager acknowledges election uncertainty, interest rate risk, and credit market concerns but doesn't dwell extensively on risks. Uses risk management tools like duration testing and maintains disciplined approach. Risk discussion is present but not dominant theme of the letter.

Opportunity Density

70%

ScarceAbundant

Abundant (70%)

Manager sees attractive opportunities in High Quality bonds with yields among highest in 15+ years. Actively deploying into multiple sectors including agency MBS, non-agency RMBS, CMBS, and ABS. Less optimistic about Credit markets but still searching for opportunities.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

Strong emphasis on long-term oriented approach with 40-year track record. Manager wants to 'lock in today's yields for as long as possible' and focuses on enhancing 'long-term returns.' Uses patient, opportunistic strategy suggesting multi-year investment horizon.