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WealthTrack: Q&A With Kathleen Gaffney, Manager, Eaton Vance Bond Fund: Video Presentation
I noticed my brokerage offers a no load version of her fund, EVBIX, but the minimum is $250K. Can I purchase this fund no load and maybe even NTF somewhere...hopefully with lower minimums?
@bee: You should be able to purchase EVBCX, "C" shares with no front load, but a 1% deferred load and an increased ER of 1.70%. with an inital investment of $1,000. Regards, Ted Regards, Ted
Hi Bee, always check the A shares ... some brokerages have deals with the fund companies to waive the loads on those. Fidelity for example has EVBAX load-waived & NTF, minimum investment of $2.5k.
I noticed my brokerage offers a no load version of her fund, EVBIX, but the minimum is $250K. Can I purchase this fund no load and maybe even NTF somewhere...hopefully with lower minimums?
@bee: Available at both Schwab and Fidelity, no load, no transaction fee
I don't like the expense ratio: 1.27% , currently lowered to 0.95% These expense waivers bother me. If they wanted the expense ratio to be 0.95%, they wouldn't have made it 1.27% When the expense waiver expires.....well, eventually it is planned to be 1.27%
In today's low interest rate world, 1.27% is way too high for a bond fund, IMHO
Look at what Eaton Vance might of had to pay Ms. Gaffney to get her away from Loomis Sayles. Talent like her's is very costly and is, no doubt, passed on to its investors. And, since I wanted to own a fund managed by Ms. Gaffney ... Well, I steped up and was willing to pay the associated cost. It certaintly beats 2&20.
I am sure there are others, like yourself rjb112, that might feel different.
Look at what Eaton Vance might of had to pay Ms. Gaffney to get her away from Loomis Sayles. Talent like her's is very costly and is, no doubt, passed on its fund investors. And, since I wanted to own a fund managed by Ms. Gaffney ... Well, I steped up and was willing to pay the associated cost. It certaintly beats 2&20.
I am sure there are others, like yourself rjb112, that might feel different.
Old_Skeet
@Old_Skeet , I understand your viewpoint, respect it, and I'm not necessarily opposed to investing in that fund. I could very well find myself one day investing in it, even some day soon, even though I don't like the expense ratio. You're right, it beats 2/20, and I'm sure she's better than 99% of hedge funds that are charging 2/20.
My bigger issue with investing in it is finding it's role in my portfolio. It has 18.6% stocks, unusual for a bond fund. 31% below investment grade bonds. An additional 2.46% not rated. 50% BBB bonds. So we are not talking about a portfolio of high quality bonds. Which may be just fine, if I can come up with a role for this fund in my portfolio. A good portion of the fund will be somewhat correlated to the stock market. Below investment grade bonds tend to be correlated to the stock market.
A person could almost buy a balanced fund and perhaps get a similar risk profile, depending on how conservative the balanced fund is.
One thing is certain: I do like Dan Fuss, Kathleen Gaffney, and other talented money managers!
Bee, according to a test trade I just made in my Fidelity retirement account, EVBIX is available for a $500 minimum with a $49.95 initial transaction fee.
Hi Bee, always check the A shares ... some brokerages have deals with the fund companies to waive the loads on those. Fidelity for example has EVBAX load-waived & NTF, minimum investment of $2.5k.
I bought EVBAX load waived through Fidelity early this year and it's done great. I think it's a great option as an aggressive multi sector fund.
@rjb112 I will be interested to see how she does when the stock and/or bond markets turn down.
@Bitzer: me too. The concern would be during a period like October 2007-March 2009, which I hope we never see again. Have you read any articles by Larry Swedroe? Bonds are supposed to play a specific role in a portfolio. John Bogle calls it "ballast", and "an anchor to windward." When stocks do very badly, very high quality bonds like Treasuries either do quite well, or at least not too badly.
So what role does a bond fund like this have in a portfolio?
If someone has a 100% bond fund portfolio, this fund would provide great diversification. If someone has a stock heavy portfolio, not sure how much diversification this fund would provide.
Nevertheless, I am somewhat attracted to Gaffney's fund, and funds managed by Dan Fuss, and Jeffrey Gundlach, Bill Gross, and other excellent money managers.
A separate issue is do the money managers earn their keep? Can they beat very low cost index funds over extended periods, consistently?
It seems the active stock fund managers are failing in this regard. Maybe the active bond managers do quite a bit better, which I suspect they do.
@rjb112 I agree with you 100%. It is much easier for me to find managers that add value in the bond arena, rather than equities. Gaffney, PIMCO, Loomis Sayles and DoubleLine are all favorites.
Like many here, I'm not a market timer but do believe, on a short-intermediate term basis, there may not be a lot of room for the markets to run. So, contrary to some advice given here, I'm moving slowly and cautiously into alternatives, primarily long/short and managed futures.
When the equity markets turn south, will favorites here such as YAFFX and FPACX provide shelter as they did in the October 2007-March 2009 timeframe? At the risk of sounding trite, an active manager has to get out and then back in at the right times. Yacktman, for one, looks like he got out several years too early.
rjb: "If someone has a 100% bond fund portfolio, this fund would provide great diversification. If someone has a stock heavy portfolio, not sure how much diversification this fund would provide."
My thoughts exactly. Also, I'm thinking that KG's view on the economy is too one-sided, that there are actually risks in both directions.
Like many here, I'm not a market timer but do believe, on a short-intermediate term basis, there may not be a lot of room for the markets to run. So, contrary to some advice given here, I'm moving slowly and cautiously into alternatives, primarily long/short and managed futures.
I don't see the Yacktman funds as being shelters for when the market turns south. FPACX might, as it is only 52% equities right now.
I own the Litman Gregory Master Alternative Strategies fund, for the reason you mentioned.
I've never been able to understand much about managed futures funds. I used to track (on a watch list) a fund run by an MIT economics guy, Andrew Lo, but the fund never did anything.
rjb: "If someone has a 100% bond fund portfolio, this fund would provide great diversification. If someone has a stock heavy portfolio, not sure how much diversification this fund would provide."
My thoughts exactly. Also, I'm thinking that KG's view on the economy is too one-sided, that there are actually risks in both directions.
Yeah, AndyJ, there has to be significant risks in her fund. After all, what does the term "below investment grade" bond mean?
Many readers (especially Bogleheads) will be horrified at the following statement: I don't know a whole lot about managed futures funds. I believe they help when asset classes start moving in different directions and volatility increases and also believe those circumstances may be coming.
I don't time markets, but I added a small percentage of managed futures funds as what I like to call a "$2 bet". If I win, it's fun, if not, very short term disappointment.
Interestingly, the main recommendation Kathleen Gaffney gave to the listeners is to rise cash.
She did say cash is a great 'investment' at this time. I think this was in answer to Consuelo Mack asking her: 'What is the one recommendation you have for all now'?
What do MFOers think about raising some cash now? Gaffney said she is holding 20% cash now, as opposed to her normal level of 5%.
She says we will be able to buy things at a lower price after a price correction, so raise some cash
@Junkster Your notes of caution are appreciated. That having been said, I'm getting bored with index funds and need to have some fun in life (at least with a small portion of my portfolio).
Performance chasing active fund managers, waiting one to three years as their performance tanks and then wondering what to do is no longer fun. That having been said, I still use some active managers, especially in the bond arena.
Bitzer, even though I disagree with about 99.99% of what I read on this fine board as to what it takes to accumulate wealth, I completely understand where you are coming from and have learned (finally) not to criticize other viewpoints. Best of luck.
Bitzer brings up an interesting point regarding active management with bond funds. The trend does seem to point in that direction what with all these strategic income funds as of late.
After listening to the interview, I considered reducing my FAGIX and SPHIX holdings since they represented the majority of my high yield bond funds (my 403b is in Fido); but I checked the graph at M*, where they regained their return slope in about a year after 2008, so I am really conflicted. Therefore, I agree with AndyJ as to from what?
I think I believe in gross market timing (CAPE says the next 10 years will be low return if one buys the broad market at current levels), so it looks like I should let my monthly additions molder in cash.
RSIVX, RPHYX seemed to have flattened out or declined, but FSAHX may have shown a gasp of life. My hopes that I could park my "cash" in short term bond funds are now muted (especially since I have 40 X as much in the first 2 and the latter was positive on Fri, but it's only one day.)
In my IRA at TDA, EVBAX was relatively costly, as mentioned above, but there were no additional charges. This was a minimum investment to keep me attentive.
I think (hope) there is too much money waiting for an entry point for stocks to drop 30 -60%, and Gaffney's comment about the portion of Treasury debt that the Fed is buying suggests there is a high floor for the short term. I think I'll start adding money at the 10% drop and take the additional hit, if it occurs, and reassess if there is a 10 - 15% gain above the 10% drop. I don't think 2008 was a once in a lifetime event, but I don't think it was a once in a decade event.
@STB65, that was one thing that stood out when I researched these kind of funds. The assumption is when we do get the correction or worse all funds will drop but the recovery of these short term bond funds tends to be much faster than equities for the most part. Since these are relatively new I could only use the 2000 bear market as a example. Another view is that these do not go down as much as stock funds. If the SP drops 20% and the bond funds go down 10% then that is something. Of course cash would worker better but I'm not a timer or a predictor of actual tops and bottoms.
I think I believe in gross market timing (CAPE says the next 10 years will be low return if one buys the broad market at current levels), so it looks like I should let my monthly additions molder in cash.
In my IRA at TDA, EVBAX was relatively costly, as mentioned above, but there were no additional charges. This was a minimum investment to keep me attentive.
I think (hope) there is too much money waiting for an entry point for stocks to drop 30 -60%, and Gaffney's comment about the portion of Treasury debt that the Fed is buying suggests there is a high floor for the short term. I think I'll start adding money at the 10% drop and take the additional hit, if it occurs, and reassess if there is a 10 - 15% gain above the 10% drop. I don't think 2008 was a once in a lifetime event, but I don't think it was a once in a decade event.
Hi STB65: I've listened to several interviews of Robert Shiller, 'co-inventor' of the CAPE, this year. He says it doesn't work for market timing. Also, he says it has been above 20 for the past 20 years. Shiller's website has the CAPE for every month from current to the distant past. I'm looking at the bear market from 2000-2002. At no time did the CAPE get below 20, never came close to its long term historical average. Even in the Oct 2007-March 2009 mega bear, the CAPE was above 20 until October 2008, and was back above 20 by the end of 2009. Waiting for the CAPE to tell you when to buy could be a very tough wait.
What did you mean by: "In my IRA at TDA, EVBAX was relatively costly"? I'm seeing it as a No Transaction Fee fund.
There is an old saw, Rule of Thumb, about the P/E Ratio Rule of Twenty that says if inflation plus the price earnings ratio of stocks in general when combined are below 20 then stocks are undervalued. Using this rule an applying it today for the S&P 500 Index ... by my math ... If stocks are at a TTM P/E Ratio of 19.2 plus 2% for inflation (Both Trailing Numbers) then this puts the combined number at 21.2. With this, stocks would be about six percent above their fair value and puts the fair value number for the S&P 500 Index somewhere around 1880.
Currently, M* is reporting stocks, in general, are about three percent overvalued.
So, it seems this Rule of Thumb will be close to perhaps the real number if you were to accept M*'s number as the gospel.
Comments
Regards,
Ted
Regards,
Ted
I don't like the expense ratio: 1.27% , currently lowered to 0.95%
These expense waivers bother me.
If they wanted the expense ratio to be 0.95%, they wouldn't have made it 1.27%
When the expense waiver expires.....well, eventually it is planned to be 1.27%
In today's low interest rate world, 1.27% is way too high for a bond fund, IMHO
I am sure there are others, like yourself rjb112, that might feel different.
Old_Skeet
My bigger issue with investing in it is finding it's role in my portfolio.
It has 18.6% stocks, unusual for a bond fund. 31% below investment grade bonds. An additional 2.46% not rated. 50% BBB bonds. So we are not talking about a portfolio of high quality bonds. Which may be just fine, if I can come up with a role for this fund in my portfolio. A good portion of the fund will be somewhat correlated to the stock market. Below investment grade bonds tend to be correlated to the stock market.
A person could almost buy a balanced fund and perhaps get a similar risk profile, depending on how conservative the balanced fund is.
One thing is certain: I do like Dan Fuss, Kathleen Gaffney, and other talented money managers!
Kevin
So what role does a bond fund like this have in a portfolio?
If someone has a 100% bond fund portfolio, this fund would provide great diversification. If someone has a stock heavy portfolio, not sure how much diversification this fund would provide.
Nevertheless, I am somewhat attracted to Gaffney's fund, and funds managed by Dan Fuss, and Jeffrey Gundlach, Bill Gross, and other excellent money managers.
A separate issue is do the money managers earn their keep? Can they beat very low cost index funds over extended periods, consistently?
It seems the active stock fund managers are failing in this regard. Maybe the active bond managers do quite a bit better, which I suspect they do.
What do you think about all this Bitzer?
Like many here, I'm not a market timer but do believe, on a short-intermediate term basis, there may not be a lot of room for the markets to run. So, contrary to some advice given here, I'm moving slowly and cautiously into alternatives, primarily long/short and managed futures.
When the equity markets turn south, will favorites here such as YAFFX and FPACX provide shelter as they did in the October 2007-March 2009 timeframe? At the risk of sounding trite, an active manager has to get out and then back in at the right times. Yacktman, for one, looks like he got out several years too early.
My thoughts exactly. Also, I'm thinking that KG's view on the economy is too one-sided, that there are actually risks in both directions.
FPACX might, as it is only 52% equities right now.
I own the Litman Gregory Master Alternative Strategies fund, for the reason you mentioned.
I've never been able to understand much about managed futures funds. I used to track (on a watch list) a fund run by an MIT economics guy, Andrew Lo, but the fund never did anything.
Haven't looked at it yet.
After all, what does the term "below investment grade" bond mean?
Great interview! Highly recommend it.
Many readers (especially Bogleheads) will be horrified at the following statement: I don't know a whole lot about managed futures funds. I believe they help when asset classes start moving in different directions and volatility increases and also believe those circumstances may be coming.
I don't time markets, but I added a small percentage of managed futures funds as what I like to call a "$2 bet". If I win, it's fun, if not, very short term disappointment.
You can also view it at the Wealthtrack website:
http://wealthtrack.com/recent-programs/kathleen-gaffney-bond-risks/
http://www.forbes.com/sites/greatspeculations/2012/07/31/nine-reasons-to-just-say-no-to-managed-futures/
Fooling Some of the People All the Time
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1279594
Managed Futures Funds - The Ultimate Sucker's' Bet
http://www.bloomberg.com/news/2013-10-07/how-investors-lose-89-percent-of-gains-from-futures-funds.html
I think this was in answer to Consuelo Mack asking her: 'What is the one recommendation you have for all now'?
What do MFOers think about raising some cash now?
Gaffney said she is holding 20% cash now, as opposed to her normal level of 5%.
She says we will be able to buy things at a lower price after a price correction, so raise some cash
Performance chasing active fund managers, waiting one to three years as their performance tanks and then wondering what to do is no longer fun. That having been said, I still use some active managers, especially in the bond arena.
I think I believe in gross market timing (CAPE says the next 10 years will be low return if one buys the broad market at current levels), so it looks like I should let my monthly additions molder in cash.
RSIVX, RPHYX seemed to have flattened out or declined, but FSAHX may have shown a gasp of life. My hopes that I could park my "cash" in short term bond funds are now muted (especially since I have 40 X as much in the first 2 and the latter was positive on
Fri, but it's only one day.)
In my IRA at TDA, EVBAX was relatively costly, as mentioned above, but there were no additional charges. This was a minimum investment to keep me attentive.
I think (hope) there is too much money waiting for an entry point for stocks to drop 30 -60%, and Gaffney's comment about the portion of Treasury debt that the Fed is buying suggests there is a high floor for the short term. I think I'll start adding money at the 10% drop and take the additional hit, if it occurs, and reassess if there is a 10 - 15% gain above the 10% drop. I don't think 2008 was a once in a lifetime event, but I don't think it was a once in a decade event.
What did you mean by: "In my IRA at TDA, EVBAX was relatively costly"?
I'm seeing it as a No Transaction Fee fund.
Currently, M* is reporting stocks, in general, are about three percent overvalued.
So, it seems this Rule of Thumb will be close to perhaps the real number if you were to accept M*'s number as the gospel.
Old_Skeet