An indolent portfolio is an investor’s best friend. It is a portfolio designed to be ignored for a year at a time. Why is that a good idea? Two reasons, really. First, almost everything you do with your portfolio will be a mistake. Morningstar’s long-running series of “Mind the Gap” studies looks at the difference between investor’s actual returns and the returns of the funds in which they are invested.
Those annuals routinely show that investors’ returns Continue reading →
The bouncing baby Warren Edward Buffett entered the world on 30 August 1930, the only son of Laila and Howard Buffett. In celebration of this 94th birthday, I looked seriously at my portfolio … and did absolutely nothing.
That was hard, but baby Warren would have wanted it that way.
In this article, I look back at the market lows in October 2022. Continue reading →
Our colleague Devesh Shah encouraged the incorporation of ETF Benchmarks into MFO Premium. Traditional benchmarks cannot be purchased. Similarly, category averages, which are the basis for much of the ratings on MFO Premium, also cannot be purchased. Establishing an ETF “benchmark,” Devesh argues, makes for a more relevant and practical comparison.
Furthermore, the Continue reading →
On September 10, 2024, Research Affiliates will launch its first ETF. Research Affiliates was founded in 2002 by Rob Arnott to provide professional and institutional investors with innovative research and product development. Mr. Arnott is iconic, having published 150 or so research articles that received both attention and rewards. His most extensive work is The Fundamental Index: A Better Way to Invest (2008). Most traditional indexes are capitalization-weighted, so they lock in a large/growth/momentum bias. Arnott notes that the bias may Continue reading →
Tortoise Capital Advisors is merging three closed-end funds, with combined assets of over $300 million, into a single actively managed ETF. The current funds are Tortoise Power and Energy Infrastructure Fund (TPZ), Tortoise Pipeline & Energy Fund (TTP), and Tortoise Energy Independence Fund (NDP). They will be supplanted by the Tortoise Power and Energy Infrastructure ETF which will adopt TPZ’s strategy for its own. As a warning Continue reading →
“It’s a sure sign of summer if the chair gets up when you do.” Walter Winchell
Walter who? O tempora! O mores!
At the height of his popularity, in the late 1930s, 50 million people—two-thirds of American adults—read Winchell’s syndicated column and listened to his 15-minute Sunday-night radio broadcast. He positioned himself as a champion of “Mr. and Mrs. America,” and was the most powerful – or, at least, most Continue reading →
In July 2024, Morningstar.com published a promising but ultimately disappointing article entitled “The Best Small-Cap Funds” (7/18/2024). “Content development editor” Tori Brovet has been publishing a series of “The Best” articles (Energy Stocks, Value Funds, Bond ETFs). The article promises there are
You can do Continue reading →
On May 17, 2024, Otter Creek Advisors launched the Otter Creek Focus Strategy ETF (OCFS). In doing so, they are providing an existing separately managed account strategy which launched on May 29, 2020, as an ETF. Otter Creek was founded in 1991 to manage a long/short hedge fund and, in 2013, launched a long/short mutual fund. That four-star fund Continue reading →
I celebrated my 69th birthday last month and will just be reaching my prime next year. I volunteer at Habitat For Humanity two days per week building homes for those that might not otherwise be able to afford them. I have been greatly influenced by the wisdom of the now elders in finance. My friend Dave Hogle and I used to take a three-hour drive to the nearest Costco and discuss Continue reading →
I love a good mystery. WPG Partners Select Hedged is one. It is live, tracked by Morningstar, and available through Schwab, but appears on neither the Boston Partners nor WPG websites. Here’s what to know.
On May 31, 2024, Boston Partners launched WPG Partners Select Hedged, a long/short small-cap fund from its WPG Partners subsidiary. Boston Partners manages Continue reading →
“Bits and Pieces” is a collection of things that I have learned over the past few months. David Snowball suggested that I write articles about transitioning into retirement. This “Bits and Pieces” article contains a few Continue reading →
“Rest is not idleness, and to lie sometimes on the grass under trees on a summer’s day, listening to the murmur of the water, or watching the clouds float across the sky, is by no means a waste of time.” John Lubbock, The Use Of Life (1896)
I’ve let my brain disconnect from the urgent events of the day (month, season, year …) a bit, and gave it rein to go where Continue reading →
As of July 19, 2024, the Amplify High Income ETF went from passively tracking an index of the top 45 US closed-end funds to tracking the top 60.
The US Securities and Exchange Commission reserves the right to study any proposed fund offering for 70 days before the adviser is permitted to offer the fund for sale to the public. During that time, (a) the SEC might require substantive or editorial changes to the fund’s prospectus and (b) the adviser is permitted to Continue reading →
On July 10, 2024 – T. Rowe Price launched T. Rowe Price Intermediate Municipal Income ETF (TAXE), an actively managed ETF. Price has 16 other ETFs, including semi-transparent and transparent equity and income funds but this is the first that does not directly mirror an existing fund.
The fund is co-managed by James Lynch and Charlie Hill, who collectively have 53 years of investment experience, and have served Continue reading →
Dear friends,
Welcome to Really, Really Summer … and to the July issue of Mutual Fund Observer.
Summertime is an especially blessed and cursed interval for those of us who teach. On the one hand, we’re mostly freed from the day-to-day obligation to be in the classroom. Some of us write, some travel, and some undertake “such other duties as may from time to time be assigned” by our colleges. On the other hand, we hear the clock ticking. All year long, as we try to face down a stack of 32 variably literate essays at 11 p.m. Sunday night, we think “If I can just make it to summer, I’ll Continue reading →
Morningstar held its annual investment conference [Morningstar Investment Conference US (MICUS) 2024] last week in Chicago, on 26 and 27 June. It employed a new venue and conference schedule: The Navy Pier and a chock-full, two-day agenda. The 292-foot-wide Pier, which opened originally in 1916, and was “built by the city for the people, is the largest in the world, projecting east 3,040 feet into Lake Michigan. It remains the longest public pier in the world today.”
The occasion also Continue reading →
Briefly brilliant performance isn’t all the tough. It requires rather more luck the skill and it can be wildly profitable for the adviser, though deadly for the investors. ARK Innovation ETF is, of course, the current poster child for boom-then-bust. The fund posted triple-digit returns in 2020, saw its assets explode then promptly (and predictably) crashed. Anyone who bought five years ago and has devoutly held on has lost 1% annually and has trailed 99.9% of all similar investors. Those who bought at the peak three years ago have clocked annual Continue reading →
No liquidations, no mergers, and 100% of funds posted above-average returns. Of the 68 firms with a 100% 10-year success rate, 41 also have a perfect five-year record.
| Firm Success Ratio 10-Year | Firm Success Ratio 5-Year | # of funds | |
| Appleseed | 100 | 100 | 1 |
| Auer | 100 | 100 | 1 |
| Bretton Fund | 100 | 100 | 1 |
| Caldwell & Orkin | 100 | 100 | 1 |
| Cantor Fitzgerald | 100 | 100 | 2 |
| Changing Parameters | 100 | 100 | 1 |
| Channel Investment Partners | 100 | 100 | 1 |
| Clark Fork | 100 | 100 | 1 |
| Cook & Bynum Capital | 100 | 100 | 1 |
| Disciplined Growth Investors (DGI) | 100 | 100 | 1 |
| Dodge & Cox | 100 | 100 | 6 |
| Equity Investment | 100 | 100 | 1 |
| First Foundation | 100 | 100 | 2 |
| Freedom | 100 | 100 | 1 |
| Hamlin Capital Management | 100 | 100 | 1 |
| Hillman | 100 | 100 | 1 |
| Hood River Capital Management | 100 | 100 | 1 |
| Investment House | 100 | 100 | 1 |
| Ironclad Funds | 100 | 100 | 1 |
| Kopernik | 100 | 100 | 2 |
| Lyrical Partners | 100 | 100 | 1 |
| MainGate Funds | 100 | 100 | 1 |
| Matisse Funds | 100 | 100 | 1 |
| Meehan Focus | 100 | 100 | 1 |
| Moncapfund | 100 | 100 | 1 |
| Needham | 100 | 100 | 3 |
| New Alternatives | 100 | 100 | 1 |
| OCM | 100 | 100 | 1 |
| Otter Creek | 100 | 100 | 1 |
| Payson | 100 | 100 | 1 |
| Performance Trust Asset Management | 100 | 100 | 3 |
| Port Street Investments | 100 | 100 | 1 |
| Private Capital Management | 100 | 100 | 1 |
| Seafarer | 100 | 100 | 1 |
| Smead | 100 | 100 | 2 |
| Sound Shore | 100 | 100 | 1 |
| Sparrow | 100 | 100 | 1 |
| Stringer Asset Management | 100 | 100 | 1 |
| Teberg | 100 | 100 | 1 |
| Terra Firma Asset Management | 100 | 100 | 1 |
| Vericimetry | 100 | 100 | 1 |
Inevitably some of the 10-year winners have tailed off more recently. It’s reassuring that only 17 of 68 funds (25%) have tailed off badly, with fewer than half of their 10-year funds still thriving.
| Firm Success Ratio 10-Year | Firm Success Ratio 5-Year | |
| Fuller & Thaler | 100 | 83 |
| WCM Investment Management | 100 | 75 |
| Bridge Builder | 100 | 75 |
| Grandeur Peak | 100 | 71 |
| Trillium | 100 | 50 |
| Prospector | 100 | 50 |
| Medalist Partner | 100 | 50 |
| Jensen | 100 | 50 |
| Campbell & Company | 100 | 33 |
| Oakhurst | 100 | 25 |
| Swan Wealth Advisors | 100 | 20 |
| YCG FUNDS | 100 | 0 |
| Reaves | 100 | 0 |
| Polen Capital | 100 | 0 |
| Polaris Capital Management | 100 | 0 |
| MP 63 | 100 | 0 |
| MAI | 100 | 0 |
| Long Short | 100 | 0 |
| Lisanti Capital Growth | 100 | 0 |
| JAG Capital Management | 100 | 0 |
| EIP Funds | 100 | 0 |
| Edgewood | 100 | 0 |
| Copley | 100 | 0 |
| Conestoga | 100 | 0 |
| Clifford Capital | 100 | 0 |
| BBW Capital | 100 | 0 |
| Akre | 100 | 0 |
My largest holding by far is an actively managed, total stock market fund of funds with a tilt toward large-cap growth stocks. According to multpl.com, the Price-to-earnings ratio of the S&P 500 is 28.5 which is 50% higher than the average of 19.8 since 1970 and higher than 80% of the years since 1970. Table #1 shows the price-to-earnings ratio of Vanguard sectors and style exchange-traded funds. While most sectors are Continue reading →
Sometimes I wish I lived in Theory. In Theory, investing is such a reasonable, predictable activity. Theoretical Investors know that they’re buying pieces of a company’s future earnings stream. And, being rational, they know that they’re better off buying $1 worth of future earnings for $0.60 rather than for $0.90. In Theory, investors will logically and smoothly migrate from high-cost providers to low-cost providers of an earnings stream.
In Theory, if investors Continue reading →
