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Checking the Temperature of Columbia Thermostat Fund = COTZX

beebee
edited April 2015 in Fund Discussions
@Old_Skeet introduce me to this fund years ago and I liked the name so I occasionally "check" this fund's "temperature" every now and then. The fund uses a fund of fund approach holding other Columbia funds in various percentages. M* reports its holding as of 2/28/15 as:
image

I'd like to understand it's present strategy a little better so I thought maybe others could shed some light on its portfolio management strategy. It presently is holding roughly 85% bonds and 4% cash.

Fund Mojo describe the fund this way:

"Columbia Thermostat Z Fund normally allocates at least 95% of net assets among a selected group of stock and bond mutual funds according to the current level of the S&P 500 Stock Index in relation to predetermined ranges set by the investment adviser."

Columbia Fund's Website explain the fund this way:
image

The fund doesn't seem very interested in the "heat" (of the S&P 500 Stock Index) right now.

Comments

  • [Deleted User]
    edited April 2015
    The user and all related content has been deleted.
  • TedTed
    @MFO Members: A fund -of-funds, no thanks !
    Regards,
    Ted
  • beebee
    edited April 2015
    Just for fun(d)...I'll try to shed a little more light on Fund of funds:

    Fund_of_funds
  • [Deleted User]
    edited April 2015
    The user and all related content has been deleted.
  • Old_Skeet
    edited April 2015
    Hi bee,

    I have linked the fund’s fact sheet below. If you look under asset allocation you will find a scale for the S&P 500 Index and under this scale is the reading ranges that it adjust it’s asset allocation. It does not consider interest rate risk in this model but does with respect to what type of bond funds it holds.

    https://www.columbiathreadneedleus.com/content/columbia/pdf/LIT_DOC_3C97987F.PDF

    Old_Skeet
  • msf
    edited April 2015
    Maurice said:

    I do concur that a fund of funds investment, if you have one, is best started in a retirement account. I was not aware that a fund of funds cannot pass along losses to the investor. That pretty much nails using the IRA, Roth IRA or 401k.

    At best, the Wiki statement that "A fund of fund ... cannot use [capital] losses" is extremely misleading, at worst, flat out wrong.

    Any registered investment company (whether fund of funds or fund of individual securities) cannot distribute capital losses. But it is allowed to carry losses forward to later years, where it may use those losses to offset gains. If memory serves, funds are only allowed to carry forward losses ten years, as opposed to individual taxpayers who can carry forward cap losses indefinitely.

    Nothing special about fund of funds here.

    In fact, the boggleheads Wiki says just this: Vanguard's Target Retirement Funds' ''rebalancing can result in the realization of capital losses and the creation of tax loss carryforwards in the funds. The existence of loss carryforwards has historically resulted in minimal long-term capital gains distributions."

    Vanguard Target Retirement Funds (2005-2025) tax distributions (boggleheads)

    So whom do you care to believe: the boggleheads' Wiki, or the boggleheads' Wiki?
  • [Deleted User]
    The user and all related content has been deleted.
  • JohnChisum
    To me it would seem that this fund would underperform given the way it measures the market. Is this fund more for conservative investors?
  • [Deleted User]
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  • msf
    Maurice said:

    I believe everything that I read on the internet.

    Can't Lie on the Internet

  • JohnChisum
    @Maurice, thanks for that explanation. It is a bit of a odd fund in its style.
  • [Deleted User]
    edited April 2015
    The user and all related content has been deleted.
  • Old_Skeet
    If I were to purchase this fund today I'd be putting it in my income sleeve in the income area of my portfolio based upon its current allocation to fixed income. I could have some months ago when it was carrying a heavier allocation to equities placed it within the domestic hybrid sleeve within the growth & income area of my portfolio ... and, when it was seventy percent, or better, equity I may have placed it within the growth area of my portfolio, specialty sleeve.

    Indeed, it is a fund with a sliding equity allocation that adjust to the valuation of the S&P 500 Index.

    Although, I have watched and studied this fund in the past it is not a fund that I am currently likely to buy.

    Old_Skeet
  • jerry
    The managers see4m to have assumed the market would always be in a moderately large trading range. The allocation formula is many years old and since the $+P has gone up considerably in the last 5 years the allocation is mostly bonds.I would call it a market timing fund not a conservative allocation fund. If you don't agree with their formula you can wait for a different time to invest in it .
  • [Deleted User]
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