@hank - Aside from a minor nit, I agree with you. Though a fund that's 94% long and 6% short is net 88% long. TSMRX (equity) is 3
1.74% long, 37.54% short, for a small net negative position of -5.80%.
What you wrote about the quality of bonds being what matters tends to weaken the idea the BAMBX made money on Friday basically because it was in bonds. Especially with these funky funds, you can't tell much from their allocations alone.
Here's an interesting comparison. Two funds with very similar allocations, both across asset classes and by bond ratings:
Asset allocations (fund
1 vs fund 2):
US equity:
11.28% vs.
10.32%
Foreign equity:-0.70% vs. 0.90%
Fixed income: 77.38% vs. 82.64%
Other: 0.00% vs 0.04%
Cash: 9.90% vs 4.72%
Not classified: 2.
14% vs.
1.38%
Viewed from the perspective of equity and debt (fixed income + cash), the two sets of allocations are close together. In addition, while both funds' equity lean toward value, fund
1 has a lower average market cap. Lower market cap stocks tended to do worse on Friday. (Source: morningstar home page, with a style box currently showing Friday's returns for each style.)
Bond allocations (fund
1 vs. fund 2)
AAA: 3
1.6% vs. 33.5%
AA:
1.4% vs. 4.2
1%
A:
12.9% vs
12.3%
BBB:
13.9% vs.
16.4%
BB:
19.7% vs.
16.
10%
B:
15.0% vs.
13.0%
Below B: 0.9% vs 3.55%
Not Rated: 4.5% vs
1.0%
Fund
1 has less in IG bonds (BBB and above) in nearly every category, and it has more BB and B junk bonds. Given Friday's flight to quality, as with the equity side this suggests that fund
1 would likely have done worse than fund 2.
Overall the differences are minor. The first fund, not surprisingly given the 77% allocation to bonds, is BAMBX. Lewis wrote in Barron's that the core of the fund (about half) is high quality bonds. M*'s take is a little different, it characterizes this part of the portfolio as multisector. 35% junk does lend support to that. So I compared this fund to a multisector bond fund.
Some multisector funds went up on Friday, some down. For a good allocation match, I used RPSIX as the second fund. A nearly plain vanilla multisector fund with a dash of equities. It went down 0.2% Friday, while BAMBX went up 0.2%.
Bond funds go up, bond funds go down, even with the same credit quality allocations, even with the same
10% net allocation in equities. Especially on any given day. It doesn't seem to matter so much that BAMBX is 77% in bonds as what those bonds are (type and duration).
With this I'm just echoing what you wrote:
Likely that includes many other types of credit. Quite conceivably, very short dated treasury
Sources (all portfolio figures are as of Sept 30, 202
1):
- for asset allocations, the funds' respective M* portfolio pages.
- for credit quality allocations: M* portfolio page for RPSIX; Blackrock's fund fact sheet for BAMBX.
https://www.blackrock.com/us/individual/literature/fact-sheet/bambx-systematic-multi-strategy-fund-factsheet-us09260c1099-us-en-individual.pdf
