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Excellent Interview With Rob Arnott (Pimco All Asset & All Authority)
Scott, thanks for providing the link to this great interview. Arnott is definitely one of the smartest investment managers out there. I think that most of us focus too much attention on having the best equity and FI funds in our portfolios (two pillars), and not enough on the diversifying, "alternative" assets which comprise the third pillar. Currently, we have an 18% allocation to "alternative" assets which are poorly correlated with equities and FI, and a 10% allocation to EM equities.
Word of warning: Don't be scared off by what sounds like a low-budget car commercial narration at the opening. I thought I had been scammed but there actually is a real interview after the first minute or so.
Yes thanks for pointing that interview - interesting Q&A with good thoughts/insights from Arnott.
Yeah you're right, the interviewer sounds like he could be an announcer at a low-budget strip club.
But PAUIX is offering a nice yield and has a nice little comeback kickstart so far in 2012 --- YTD: +6.58%
From PAUIX Dec Report: ===============
"EM and Global Bond Strategies: the Fund continued to increase its exposure to emerging market currencies and debt. This enables the Fund to further benefit from less correlated risk exposure and emerging market countries' strengthening economies and fiscal reforms, as well as to protect against inflation in the U.S. Since a weakening dollar is a likely channel for future U.S. inflation, EM local currency based assets are attractive inflation hedges given their yields relative to U.S. TIPS. The Fund also increased its exposure to foreign bonds in order to diversify currency risk."
Reply to @MaxBialystock: PAUDX has a lower minimum. PAUDX has a 1.5 ER... bit high for a fund of funds. Wonder if BRUFX might be a better consideration
Reply to @MaxBialystock: Depending what brokerage you are using for the institutional shares: Vanguard requires $25K with $20 transaction fee, $2 additional purchases (2 required) Fidelity requires less than $1M with $75 transaction fee, $5 additional purchases through automatic investment.
Pimco's lower minimum share class, D share, has higher expense ratio; something like 1.40% vs 0.90% institutional share.
Pimco All Asset/All Authority can short, and use leverage. Both funds are excellent fund-of-funds run by Rob Arnott, whose fundamental indexing is also behind some of the other Pimco offerings. Neither fund is anything one should expect a home run from - they are fairly/moderately conservative. Both funds were a little so-so compared to expectations last year, but both have rebounded nicely (compared to expectations) this year. I own PAUDX.
Each time I watch or listen Arnott, he is very convincing, like a professor talking to silly children. Each time I listen Gundlach, he is equally convincing. However, I believe that sometimes they make opposite statements: Arnott says that one must buy inflation protection now, because later it will be very expensive. Gundlach says that there will be a large time gap when inflation will become manifest but the protection will be cheap, so it does not make much sense to buy inflation protection now. Perhaps I am oversimplifying the situation, but I am trying to understand whether I should invest with Arnott or with Gundlach. So far Gundlach's funds grow much faster and they look much safer too. Do you think that this lucky period will end soon, together with the general bull market for bonds?
I'm using PGDIX (mix of poorly correlated assets, great upside/downside capture ratio), two institutional class risk parity funds (AQR, Invesco), PAUIX, and BIP. I always check out correlations of investments at http://www.assetcorrelation.com/.
Reply to @kevindow: Happy to help. I'm also certainly very much a believer in alternative investments, as well, and they remain a fairly large portion of my holdings.
Reply to @andrei: A year ago I read that Bill Gross was extremely bearish on Treasuries. I completely agreed with his ideas and wanted to move my bond allocation from VBMFX to PTTRX. However for external reasons, it was not practical to do so and my bonds stayed at VBMFX.
Of course you probably already know that Bill Gross turned out to be completely wrong. PTTRX returned 4% while VBMFX returned 7.5%.
Gundlach made the opposite bet, that investors would actually flock to Treasuries because the rest of the world was that much worse. His funds ended up doing great.
Dan Fuss at Loomis Sayles... well I don't really know what he has been doing. At least I don't think I've lost money there, although in 2008 he really seemed to be trying to.
I also have money with Tad Rivelle and his team at Metropolitan West.
I think all of these managers are smart folks. The key is finding managers that you can trust that in the long run, they will be right more often than they will be wrong.
In practical terms, if you find several managers equally persuasive, you can simply split your portfolio among them.
On the inflation issue, I think the key question is whether you personally are concerned with sudden short-term inflation. If you are retired then it may make more sense to buy inflation protection now, because the risk may not be worth it. I am still working and quite far from retirement so I am not too worried about inflation right now -- I think a combination of employment income, stock funds, and commodities funds will tie me through.
I am not really sure about the various scenarios for a "bond bear market." If you think it could happen, then your reaction probably depends again on your overall allocation and also on whether you need to preserve principal or not.
Does anyone subscribe to Research Affiliates' 16 asset classes philosopy? 6.25% to multiple assets. Some are fairly standard but I usually don't see convertible bonds, HyYield, EM Local currency, long coporates. RA may only use it as a model or index for comparison's sake. Any thoughts?
Comments
Kevin
Yeah you're right, the interviewer sounds like he could be an announcer at a low-budget strip club.
But PAUIX is offering a nice yield and has a nice little comeback kickstart so far in 2012 ---
YTD: +6.58%
From PAUIX Dec Report:
===============
"EM and Global Bond Strategies: the Fund continued to increase its exposure to emerging market currencies and debt. This enables the Fund to further benefit from less correlated risk exposure and emerging market countries' strengthening economies and fiscal reforms, as well as to protect against inflation in the U.S. Since a weakening dollar is a likely channel for future U.S. inflation, EM local currency based assets are attractive inflation hedges given their yields relative to U.S. TIPS. The Fund also increased its exposure to foreign bonds in order to diversify currency risk."
PAUIX Allocation Card
http://investments.pimco.com/MarketingPrograms/External Documents/AAAA_Product_Chart_PPC4019.pdf
PAUIX Dec 2011 Monthly Report
http://investments.pimco.com/ShareholderCommunications/External Documents/All_Asset_All_Authority_Monthly_Commentary_791.pdf
PAUIX 4th Qtr 2011 Report
http://investments.pimco.com/ShareholderCommunications/External Documents/All Asset All Authority Fund - 791 QIR.pdf
PAUDX has a lower minimum. PAUDX has a 1.5 ER... bit high for a fund of funds. Wonder if BRUFX might be a better consideration
prinx
Vanguard requires $25K with $20 transaction fee, $2 additional purchases (2 required)
Fidelity requires less than $1M with $75 transaction fee, $5 additional purchases through automatic investment.
Pimco's lower minimum share class, D share, has higher expense ratio; something like 1.40% vs 0.90% institutional share.
I'm using PGDIX (mix of poorly correlated assets, great upside/downside capture ratio), two institutional class risk parity funds (AQR, Invesco), PAUIX, and BIP. I always check out correlations of investments at http://www.assetcorrelation.com/.
Thanks Kevin. PGDIX is a very interesting fund.
is what are your top three BORING funds?
Of course you probably already know that Bill Gross turned out to be completely wrong. PTTRX returned 4% while VBMFX returned 7.5%.
Gundlach made the opposite bet, that investors would actually flock to Treasuries because the rest of the world was that much worse. His funds ended up doing great.
Dan Fuss at Loomis Sayles... well I don't really know what he has been doing. At least I don't think I've lost money there, although in 2008 he really seemed to be trying to.
I also have money with Tad Rivelle and his team at Metropolitan West.
I think all of these managers are smart folks. The key is finding managers that you can trust that in the long run, they will be right more often than they will be wrong.
In practical terms, if you find several managers equally persuasive, you can simply split your portfolio among them.
On the inflation issue, I think the key question is whether you personally are concerned with sudden short-term inflation. If you are retired then it may make more sense to buy inflation protection now, because the risk may not be worth it. I am still working and quite far from retirement so I am not too worried about inflation right now -- I think a combination of employment income, stock funds, and commodities funds will tie me through.
I am not really sure about the various scenarios for a "bond bear market." If you think it could happen, then your reaction probably depends again on your overall allocation and also on whether you need to preserve principal or not.