RE:RE:RE:RE:RE:NAV October 24The preferred shares are most definitely not without risk, Kyle. You correctly noted the downside protection being 20% at a unit NAV of $12.50. This means if the NAV drops by more than 20%, preferreds no longer get the $10 par value upon redemption.
If the NAV were to drop by 50%, the units would be worth just $6.25, and all of that would be attributed to the preferreds while the capital shares would get zero upon termination. Of course, it's a near certainty that the fund will be extended for another five years to allow for a recovery while management continues to earn their fees.
The optionality of the capital shares would ensure they always trade above zero no matter how low the NAV gets.
Kylemcc10 wrote: That cant be entirely true. Preferreds arent 100% risk free. Their capital can be at risk, the downside protection they mention is simply the Class A taking the hit first. I can't help but notice another quadravest product, FTU. The site still claims they aim to pay $10 on wind up. However, class A is worth almost nothing and preferreds are 5 bucks. Total NAV is only $5.46. wondering how much the market can fall before PR holders begin to worry is a very valid question