Category Archives: Mutual Fund Commentary

Analysis Paralysis and Talking Heads

By Charles Lynn Bolin

“But I don’t want to go among mad people,” Alice remarked.

“Oh, you can’t help that,” said the Cat: “we’re all mad here. I’m mad. You’re mad.”

“How do you know I’m mad?” said Alice.

“You must be,” said the Cat, “or you wouldn’t have come here.”

– Alice in Wonderland, Lewis Carroll

At the time of this writing, the S&P 500 has fallen 7.8% year to date. Some respectful sources point to retail (small) investors panicking. Alice, the Mad Hatter, and I are not so sure. There are those who believe they can time the markets and are trying to jump ahead of the falling market before the rest of the crowd. Then some investors have the financial acumen to make quick, intelligent decisions. Should you sit back and ignore the volatility, buy the dip or sell the news? Continue reading →

What is Your Edge?

By Devesh Shah

Many people are heartsick after watching the stock market’s gyrations. Some of the people who are queasiest are the young investors who thought, “this is so easy!” as they booked a year’s worth of profit in a single morning, trading meme stocks or NFTs or cryptos or any of a dozen other securities they could barely explain, much less analyze. More will find their moment of reckoning as they confront Continue reading →

On Risk

By Mark Freeland

On Risk

Justice Potter Stewart’s most famous line is the one that he most regretted:

I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description [“hard-core pornography”], and perhaps I could never succeed in intelligibly doing so. But I know it when I see it, and the motion picture involved in this case is not that. Concurring Opinion, Jacobellis v. Ohio, 378 U.S. 184 @ 197 (1964)

In 1981 he lamented “having said what I said about obscenity—that’s going to be on my tombstone.”

Many investors have the same difficulty with risk that Justice Stewart had with “hard-core pornography,” they are not quite able to define it though they’re pretty sure they know it when they see it. Given that we seem to have entered a period when risk is going to be on a lot of minds, it’s important to understand what it actually is Continue reading →

Biggest Bang for your Buck

By David Snowball

Fresh from the MFO Archives! An update on a classic essay.

20 equity funds with the best capture ratios over the entire market cycle

Capture ratio is a sort of “bang for your buck” summary. It’s calculated by dividing a fund’s upside capture (a fund that typically rises 1.1% when the market rises 1% has an upside capture of 1.10) by its downside capture (a fund that typically falls 1.1% when the market falls 1% has a downside capture of 1.10). Capture ratios greater than 1.0 reflect funds that Continue reading →

Briefly Noted

By TheShadow

Hi! The Shadow here! I scan SEC filings and other sources for interesting industry developments to share with you. If you see something that you think we should share with readers in the month ahead, drop me a heads-up. If we use it, we’ll happily send an intensely stylish MFO mug to you!

Updates

Smead International Value Fund commenced operations on January 11, 2022. It’s the international version of the five-star Smead Value Fund (SMVLX), and it’s managed by Continue reading →

January 1, 2022

By David Snowball

Dear friends,

Merry Christmas and Happy New Year!

Let’s hope it’s a great one.

If you think I’m a bit late on the former, it’s because you think of Christmas as a day rather than as a season. Not so! In 567, the Council of Tours established that the twelve days between Christmas and Epiphany – also sometimes known as “Chip’s son’s birthday” – were to be treated as a single holiday. (Her sister was born on Christmas Day so it makes sense she waited to give David a reason to celebrate the other end of the holiday.) In England, in Continue reading →

Building a Multi-Strategy Portfolio – Managed Fidelity Roth IRA

By Charles Lynn Bolin

The Mutual Fund Observer writes for the benefit of intellectually curious, serious investors— managers, advisers, and individuals—who need to go beyond marketing fluff, beyond computer-generated recommendations, and beyond Morningstar’s coverage universe.

The quote above had a big impact on me in July 2019 when I was first introduced to Mutual Fund Observer, and I became its most enthusiastic fan. I began contributing to the monthly newsletter shortly thereafter. I appreciate the efforts that have gone into creating and maintaining MFO by Professor Continue reading →

Investing in 2022: The Indolent Portfolio

By David Snowball

Each year, usually in our February issue, I walk through my portfolio. It gives some folks the shivers, and others, a nice sense of superiority. On the whole, it seemed like a good idea to accelerate the schedule this year. I’ll walk through it using the same five-part process that we’ve urged on others.

Step One: Assess my goals and resources

My overarching goal is to have a portfolio that I don’t have Continue reading →

Terrific twos: Intriguing funds not yet on your radar

By David Snowball

Most funds don’t show up on investors’ radar until they have at least a three-year record, which is also the point at which they receive their inaugural Morningstar rating. That’s a generally sensible, sometimes silly constraint since many funds that have been operating for fewer than three years are actually long-tested strategies managed by highly experienced professionals, which are just coming to market in a new form. Relatively recent examples of such funds include Andrew Foster’s Seafarer Overseas Growth & Income (SFGIX), Rajiv Jain’s GQG Partners Emerging Markets Equity (GQGPX), Abhay Deshpande’s Centerstone Investors (CETAX), and Amit Wadhwaney’s Moerus Worldwide (MOWNX). Collectively, those four managers had overseen more than Continue reading →

Morningstar isn’t very good at mutual funds … and that’s a good thing

By David Snowball

Running them, not assessing them.

Morningstar runs a booming, global asset management business. They have $255 billion under management and advisement (as of 9/30/21).

Of that, $50.5 billion are assets under management, primarily through their Managed Portfolios and Institutional Asset Management services.

They also have 116,627 Morningstar.com Premium members and 17,182 Morningstar Direct licensees.

The managed portfolios traditionally used outside, actively managed funds. In 2018, Morningstar decided Continue reading →

Launch Alert: Grandeur Peak Global Explorer

By David Snowball

On December 16, 2021, Grandeur Peak Global Advisors launched its 10th fund, Grandeur Peak Global Explorer (GPGEX). The fund will pursue long-term capital appreciation through investments in a global portfolio of micro- to mid-cap stocks. Because of its focus on tiny names, the adviser has set a strategy capacity of $35 million for the fund and will close it rather than compromise the ability to execute the strategy.

As a practical matter, Global Explorer pursues Global Reach’s strategy with a management twist. The fund has Continue reading →

Briefly Noted

By David Snowball

Updates

As part of Heartland Advisors’ succession plan, founder William (“Bill”) J. Nasgovitz intends to transfer a controlling interest in Heartland Advisors to Will Nasgovitz, the Chief Executive Officer of Heartland Advisors, in 2022. The elder Mr. Nasgovitz launched the firm, and the Heartland Value Fund, in 1984. The younger Mr. Nasgovitz joined the firm in 2006 and co-manages the Heartland Value and Mid Cap Value funds.

On the continuing theme of “rules are for the little people,” the Wall Street Journal reports

Sens. Pat Toomey (R., Pa.) and Cynthia Lummis (R., Wyo.) sit on the powerful Senate Banking Committee and have been advocates for Continue reading →

The Younger Defenders

By David Snowball

A handful of young funds, by luck or design, have managed the rare feat of peer beating returns since inception with risk-rated, risk-adjusted returns (MFO rating, Ulcer rating) and risk metrics (downside deviation, bear market deviation, down market deviation).

The US stock market is approaching the most extreme valuation levels of the past 150 years, at least as measured by Continue reading →

Life in the Jungle: Terrific at Two, Dead at Four

By David Snowball

Our last review of “the Terrific Twos” ran in January 2019. We highlighted 10 funds. Here’s what became of them.

Four of the ten were liquidated: Ladder Select Bond (LSBIX), which earned fours stars but never drew over $20 million; BlackRock Emerging Markets Equity Strategies (BEFAX) died in April 2020; WisdomTree Dynamic Long/Short US Equity (DYLS) was Continue reading →

Building a Multi-Strategy Portfolio – Fidelity Traditional IRA

By Charles Lynn Bolin

I love reading the monthly discussions from Mr. Bolin. He is providing very useful information month after month. They’re always so insightful and analytical, yet it can be difficult to construct a portfolio because each month brings some new funds and different analyses. It would be very useful if he would have some specific portfolios and update recommended changes when he thinks it’s necessary. This month’s catastrophe portfolio is compelling, and one I may invest in for the long term. As a retiree of many years, it’s just what I want.

– MFO Discussion Board by golub1

I share a personal traditional IRA at Fidelity that I have constructed following Fidelity’s business cycle approach heavily influenced by the risk management philosophy from Mutual Fund Observer. Each investor’s needs are different, and this portfolio is Continue reading →

Launch Alert: Brown Advisory Sustainable Small-Cap Core (BIAYX)

By David Snowball

On September 30, 2021, Brown Advisory launched their Sustainable Small-Cap Core Fund which is based on their Sustainable Small-Cap Core Strategy, which targets high-net-worth individuals and institutions, launched in July 2017. The goal is long-term capital appreciation. The strategy is to create a concentrated, ESG-screened “best ideas” portfolio populated by small-cap growth and value stocks.

Brown Advisory describes the strategy this way: Continue reading →

Emerging Markets Without China

By David Snowball

China has long been the driver of returns in the emerging markets, both because it is the largest emerging market and because the fortunes of other emerging economies are inextricably linked to China through trade, investment, and direct competition.

After a substantial correction which, at its worst, wiped $1.5 trillion in market cap off the books, China’s cheerleaders are speaking up. In August, BlackRock argued that China wasn’t really emerging and that investors should triple their exposure to Chinese equities. They then launched a mutual fund for Chinese investors, which Continue reading →

The Briefly Noted Omnibus

By David Snowball

Artisan Partners has filed to launch two new funds: Artisan Emerging Markets Debt Opportunities Fund and Artisan Global Unconstrained Fund. Artisan routinely interviews 10-20 management teams a year, folks interested in becoming partners. Their rule has always been, “only hire category-killers.” In this case, the assassins (or defectors, according to a colleague) in question, formerly managed Eaton Vance Global Macro Absolute Return Fund. That fund, curiously, didn’t appear to be killing anything but Continue reading →