MFLDX and AUM

Chinfist

According to the fund report on this site from 2012, the AUM for MFLDX was under 100 million at the end of 2009, and increased 20 times to 2 billion in mid-2012. According to Morningstar, it is now 21.3 billion, which would be an increase of more than 10 times in less than 2 years. The performance of MFLDX has been underwhelming of late. At least compared to the long-short category, according to Morningstar, it is in the 95th percentile for the last 1 month trailing period, 80th percentile for last 3 months, and 60th percentile for last 12 months. The S&P 500 is up 1.45, ytd, whereas MFLDX is down 1.89. It still might not be a long enough time period to judge, but do any of you who follow this fund think the increase in AUM is weighing on its performance, or is it simply going through a rough patch? I have owned this fund for about 3 years, and am wondering if it is now doomed to mediocrity, or worse.

mnzdedwards

I bought into MFLDX a few months before it closed when its assets were growing and yet manageable (around 3-4B). After it's sale, I grew concerned as I saw its assets balloon and wondered how effectively they could put all that incoming cash to work.

MFLDX's short-term performance (1-yr) doesn't bode well for its future. Why? Because the past 12 months has reflected how effectively they have put those assets to work.

Old_Skeet

I have owned MFLDX since Main Stay Investments purchased the fund. It is true AUM has grown and I am sure the fund is not as nimble as it once was. However, I am still staying with it. It reminds me when I use to own WASAX and held it for a good number of years. I sold it when I felt its assets under management grew to where it lost it nimbleness and became difficult for its managers to position it without being disruptive to the markets. Remember the Flash Crash? Allegedly, some traders at Waddell & Reed sold off a bunch of Index derivatives in a short period of time and with that our computer driven high frequency markets … well, crashed. I felt Waddel & Reed should have been better stewards and not let the fund grow to such a size that seeking out and taking defensive positions to protect the funds assets would become disruptive to the markets. And, with this I sold it. I’ll let MFLDX go too, should I feel it has become too large for its managers to effective manage it. I am not there yet … but, I have it under review as you seem to also.

ducrow

I Also Own MFLDX And I Am Very Concerned About The 21 Billion It Now Manages, It Is On My Sell List!!!!! David Predicted The Asset Bloat That Would Happen After Main Stay Bought The Fund.

slick

I have the same concern with FSCRX with AUM over 6B. For a small cap fund, that is way more than I would like to see. It closed, but not before it doubled its asset size from the time it announced it was closing til it actually did. It may be more difficult to maneuver when needed. Curious if others feel this way.

Bitzer

Similar concerns and uncertainty about PAUDX led me to sell it and invest the proceeds in index funds.

Crash

A darling among us here in MFO is PRWCX. Over $20B AUM. But is it not a so-called "balanced" fund? Dunno much about anything, just following this thread, and thought I'd mention it...

Chinfist

Thanks for all your feedback. I wasn't sure if I was jumping the gun in my thoughts about if the AUM was affecting it's performance, but it looks like I'm not alone with this concern. If it is the AUM, it is a shame how the managers of a once fine fund, along with the arrangement with Mainstay, allowed it to become ruined. I might sell it this week.

MikeM

You could always move the money into a smaller, nimbler MFO L/S favorite like ARLSX. That fund only has a little over $200m in assets... Except that fund is down over 4% for the year. (yes, I'm being facetious).

Not to minimize your concerns because the asset growth of MFLDX is staggering, and on the surface doesn't appear to be customer friendly. But the risk adjusted return for this fund is terrific. There are other consistently well managed funds with high AUM's that do just fine. A good example is my favorite, FPACX. These funds are never the high fliers at any short term interval but are measured for good returns over time.

You have to be comfortable with what you own, but yeah, I do think you are jumping the gun. Of course, this is coming from someone that doesn't own it.

scott

Not selling this fund due to AUM. It's highly flexible, can go long-short a number of different asset classes globally. I think the fund's underperformance recently isn't considerable and is - I think - being a little too short-term. I remain confident in management and in terms of the MFLDX share class, be aware if you sell that (unless something changes) you cannot get back into that share class if you change your mind down the road.

I agree with MikeM.

scott

Bitzer said:

Similar concerns and uncertainty about PAUDX led me to sell it and invest the proceeds in index funds.

PAUDX and index funds are really apples/oranges, but right decision short-term, at least. I do think that PAUDX was disappointing last year, but it's a highly conservative fund (I believe the benchmark is CPI + 6.5%?) and anyone expecting home runs from it in general is absolutely going to be disappointed.

hank

All very interesting. "What's in a name ..." might apply here to some extent. Meaning: When we wash-out fund name, stated objectives, M* category or whatever - what most of us want is to make $$ consistently without undue risk to our principal. MFLDX displays an amazing growth of AUM for a fund less than 7 years old. My question is: Why? Is MFO (where it's received a lot of attention) that influential? Or, have other media sources also been singing the praises? ... My reply to the poster's original question is that such short term results don't mean very much. They offer neither reason to sell nor reason to buy a fund.

Crash mentioned PRWCX - obviously a much different type of fund. Yet, it's interesting that both funds' total listed AUM are very similar - at something over $20,000M for each. There are a couple very sharp contrasts: PRWCX has been around 28 years - compared to less than 7 for MFLDX. And while the listed ER on MFLDX is high at 1.85%., PRWCX by contrast has an ER of only .72%.

All said, my own experiences with "go-anywhere" funds haven't been favorable - but that's a different issue and I have no intent here to go down that path. Additionally, my own experiences with PRWCX have been highly favorable. The latter might well be considered "go anywhere" in the sense that the managers will invest in most anything that appears promising (translated: undervalued). Over the past 3 decades the fund's taken sizable (but temporary) positions in junk bonds, government bonds, growth stocks, utilities and even miners - and currently sells put-options on some of its equities to enhance income. It's not using short sales yet ... but I wouldn't rule it out some day.

I enjoy watching many of the funds members discuss here and so am reminded of a comment last year in which a member alluded to short positions held by MFLDX in gold futures. I haven't been able to verify that --- but. if correct, it would help explain the fund's lack-luster performance this year.

scott

hank said:

I enjoy watching many of the funds members discuss here and so am reminded of a comment last year in which a member alluded to short positions held by MFLDX in gold futures. I haven't been able to verify that --- but. if correct, it would help explain the fund's lack-luster performance this year.

The fund was short metals (and the closed end fund CEF) for a while, but I'm not seeing it as of 12/31:

http://www.sec.gov/Archives/edgar/data/1469192/000119312514091117/d654075dncsr.htm

Bitzer

Yes, Scott, I agree, apples and oranges. Although many investors would disagree on terminology, I thought of PAUDX as one of my alternative, go anywhere or satellite funds. Decided to put the sale proceeds into a more traditional stock/bond mix. Who knows, though. Maybe PAUDX will outperform a traditional mix during the next market downturn.

BobC

If it were anyone else except for Mr. Aronstein running the fund, we would probably have sold it, given the huge asset base. He insists the size will not hurt their performance. Keep in mind that long-short funds are designed to participate some in bull markets, but to shine in bear markets. We have not seen a bear market since 2007-08, and the fund held up well when it was launched at the end of 2007. Investors who expect it to keep pace with the S&P 500 in a long-run bull market have bought it for the wrong reasons. Have they actually READ the prospectus?

We would be comfortable if Aronstein would decide to do a hard close to new assets, and we would also like to see a lower expense ratio, given the large asset base. But until long-term performance becomes an issue (and it has not), we will hold the fund. Nothing comes close to MFLDX record over the last 3 and 5 years. PIMCO is up 22% in the last 12 months compared to MFLDX 8%. But PIMCO has no track record in bear markets, and I am very uncomfortable with the PIMCO hocus-pocus, not to mention the in-house political strife there. Wasatch has a good long-short offering, but they have tended to be long-long-long-short, with not much on the short side. IN the meantime, Aronstein and his team have made some very good calls over the last 2 years or so.

AMatMFO

>>"Nothing comes close to MFLDX record over the last 3 and 5 years."

I just compared BPLEX and MFLDX at M* for the 5 year and 3 year periods ending yesterday (3/24/2014).

For the past 3 years, MFLDX beats BPLEX:
$10K invested on 3/24/2011 would have grown to the following amounts on 3/24/2014:
BPLEX: $12,514.96
MFLDX: $13,483.03
Long/Short Equity: $11,321.27
S&P: $15,210.64

For the past 5 years, BPLEX handily beats MFLDX.
$10K invested on 3/24/2009 would have grown to the following amounts on 3/24/2014:
BPLEX: $29,384.83
MFLDX: $21,123.45
Long/Short Equity: $13,448.10
S&P: $25,755.32

I'm curious to see what happens in the next substantial (10%+) downturn.