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Opinion on PIMCO EMG Intl Low Volatility RAFI®-PLUS AR Fund (PLVDX)
It has not been around long enough for any kind of review. There has been some discussion here regarding Pimco and their recent troubles. If you understand how derivatives work which is what this fund is for the most part, then you are smarter than me.
What percentage of your portfolio would this be and how long of a time frame are we looking at?
Personally I like emerging markets as a small percentage of a portfolio. There are a ton of funds out there and some have lower ERs than PLVDX. I'm sure others will throw out some names.
For emerging markets biased to Asia I like MAPTX. The biggest bang is still in Asia but also the Middle East and Africa cannot be overlooked.
First, I give the people who developed and named this fund a D- on their choice of names. Can't they do a better job naming a fund? Certainly they can come up with something that has more clarity than that.
I agree. I never associated emerging markets with low volatility. I did not know what RAFI meant. Another new catchphrase. AR I assume means Absolute Return.
Maybe they thought it looks cool to name it like that?
Sorry to the OP for the derailment. I'm sure plenty will chime in on your question.
I agree. I never associated emerging markets with low volatility. I did not know what RAFI meant. Another new catchphrase. AR I assume means Absolute Return.
Maybe they thought it looks cool to name it like that?
Sorry to the OP for the derailment. I'm sure plenty will chime in on your question.
RAFI is the Research Associates Fundamental Index. Instead of a standard index, which is cap weighted (share price x number of shares), Rob Arnott and his Research Associates people don't like to weight each stock by market cap, so they have some "smart beta" fundamental factors to determine each stock's weighting. Stuff like dividends, cash flow, maybe sales or revenues or earnings, fundamental factors like that.
The AR, absolute return part, I'm not a fan of that term either. I guess absolute return is supposed to be the opposite of relative return.
The names marketing people come up with are so user-unfriendly. Does anyone really understand what the name of this fund means? Of course not, at least not until you read enough to figure it out. But if it sounds complicated, it must be good, right? We continue to stick with our core EM holdings, Oppenheimer ODVYX, Wasatch WAEMX, (Thornburg THDIX or Parametric EIEMX where ODVYX is not available). We also use Matthews MAPIX as a core hold for most accounts, and Wasatch WAFMX for more aggressive accounts. EM makes up about 50% of our total international allocation. As for PIMCO, unless the fund is sub-advised (like PAUIX), we do not use them at this time. Just not much confidence with the person at the top.
The names marketing people come up with are so user-unfriendly. Does anyone really understand what the name of this fund means? Of course not, at least not until you read enough to figure it out. But if it sounds complicated, it must be good, right? EM makes up about 50% of our total international allocation. As for PIMCO, unless the fund is sub-advised (like PAUIX), we do not use them at this time. Just not much confidence with the person at the top.
50% is quite a hefty EM allocation as a fraction of international weighting. The Vanguard Total International Stock Index fund has 14.4% in emerging markets. That's more than a 3x overweighting. But Jeremy Grantham/GMO thinks that emerging markets have the best 7-year prospects of any asset class. The valuations are low.
"not much confidence with the person at the top" : Poor Bill Gross. Having a very bad year. I don't recall him ever being 'disrespected' like he is this year. He's always been on a sort of pedestal, the Bond King.
Up until recently, my EM portfolio was 100% Vanguard index ETF. I got tired of performance chasing, only to be uncertain as what to do when the managers' performance tanked for a year or three.
After researching the RAFI approach, I put a portion of my funds into PLVDX. Gotta have some fun in life... We can all say what we want about Bill Gross, but PIMCO is more than one person and I won't summarily dismiss PIMCO.
Doing some research on RAFI since I wasn't familiar with this. Actually not a bad way to go. PLVDX also has some Africa/Middle East countries in the mix. They refer to them as EMEA.
Gross is the bond guy at Pimco. I wouldn't know how much influence he has on this or other equity funds. I suspect not all that much. This might be a leftover from El Erian.
The more I look at the fund the more I like it. Plus, I learned something out of it.
For the OP, I'd say that if I were going to own an index fund in EMs, it would probably be this one because of the fundamental factor approach vs. market cap ... but I prefer active managers in EM.
Charting it against other EM funds is interesting; it doesn't look all that 'low volatility' to moi from that perspective, but then there's not a lot of history in this specific fund to go on. What they refer to as the 'AR' piece is the bond overlay, which from a quick glance has some foreign/EM to it, so that might perk up the volatility a little in addition to the stocks' contribution.
Agree with Bitzer on Pimco: there's a lot more to the shop than the lead guy, and by dismissing the whole group, you'd be kicking at least one outstanding bond manager out of contention ... and his name isn't Gross.
During my research, I ran across such articles as "Smart Beta is just Dumb". I think many such articles are written by people who have vested interests in maintaining the status quo (market cap indices).
I would agree that the PIMCO marketing department does go overboard with catchy phrases to describe products. But, marketing labels aside, the RAFI approach may make sense. I'm not in 100%, but as I said, you have to have some fun in life. Plus chasing performance and then wondering what to do a year or three later after the funds' performance tanks just isn't fun for me.
Thank you all for the responses. I got 10% in WAFMX and extremely happy with the returns vs volatility. Thanks to MFO. I was thinking if I should put another 10% into WAFMX or find an EM fund with similar returns/volatility. With WAFMX I can easily apply the 2 to 4% rule (Junkster Rule) without getting kicked out often. PLVDX looks a little less volatile than BEXFX and VWO especially in the past month and higher returns.
What they refer to as the 'AR' piece is the bond overlay,
Best, AJ
That's what I thought - I really don't think that should allow "absolute return" in the title. If a fund has "absolute return" in the title, that should cover the fund as a whole, not just one aspect.
Scott: "That's what I thought - I really don't think that should allow "absolute return" in the title. If a fund has "absolute return" in the title, that should cover the fund as a whole, not just one aspect."
Agreed - plus it doesn't seem accurate to call a straight bond fund with the regular interest rate & credit risks, which I think the bond portion more or less mirrors, "absolute return" either.
Comments
What percentage of your portfolio would this be and how long of a time frame are we looking at?
Personally I like emerging markets as a small percentage of a portfolio. There are a ton of funds out there and some have lower ERs than PLVDX. I'm sure others will throw out some names.
For emerging markets biased to Asia I like MAPTX. The biggest bang is still in Asia but also the Middle East and Africa cannot be overlooked.
First, I give the people who developed and named this fund a D- on their choice of names. Can't they do a better job naming a fund? Certainly they can come up with something that has more clarity than that.
Yep, it needed a buzzword or two.
These fund companies can be pretty ridiculous. Why not come up with a name that plainly and clearly states what the fund is?
Maybe they thought it looks cool to name it like that?
Sorry to the OP for the derailment. I'm sure plenty will chime in on your question.
The AR, absolute return part, I'm not a fan of that term either. I guess absolute return is supposed to be the opposite of relative return.
"not much confidence with the person at the top" : Poor Bill Gross. Having a very bad year. I don't recall him ever being 'disrespected' like he is this year. He's always been on a sort of pedestal, the Bond King.
After researching the RAFI approach, I put a portion of my funds into PLVDX. Gotta have some fun in life... We can all say what we want about Bill Gross, but PIMCO is more than one person and I won't summarily dismiss PIMCO.
Doing some research on RAFI since I wasn't familiar with this. Actually not a bad way to go. PLVDX also has some Africa/Middle East countries in the mix. They refer to them as EMEA.
Gross is the bond guy at Pimco. I wouldn't know how much influence he has on this or other equity funds. I suspect not all that much. This might be a leftover from El Erian.
The more I look at the fund the more I like it. Plus, I learned something out of it.
Charting it against other EM funds is interesting; it doesn't look all that 'low volatility' to moi from that perspective, but then there's not a lot of history in this specific fund to go on. What they refer to as the 'AR' piece is the bond overlay, which from a quick glance has some foreign/EM to it, so that might perk up the volatility a little in addition to the stocks' contribution.
Agree with Bitzer on Pimco: there's a lot more to the shop than the lead guy, and by dismissing the whole group, you'd be kicking at least one outstanding bond manager out of contention ... and his name isn't Gross.
Best, AJ
I would agree that the PIMCO marketing department does go overboard with catchy phrases to describe products. But, marketing labels aside, the RAFI approach may make sense. I'm not in 100%, but as I said, you have to have some fun in life. Plus chasing performance and then wondering what to do a year or three later after the funds' performance tanks just isn't fun for me.
https://fundresearch.fidelity.com/mutual-funds/composition/72201U414
Agreed - plus it doesn't seem accurate to call a straight bond fund with the regular interest rate & credit risks, which I think the bond portion more or less mirrors, "absolute return" either.