Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Why do Managers start new funds when their other funds are doing bad?
The Hussman thing is likely taking advantage of the dividend popularity, although a little late. Hussman International really not exactly getting off to a great start.
What's the issue with Artisan Int'l? Top seventh YTD, top 1% in the past 366 days, top 3% calendar year 2011. If there was an problem with performance, it was 2010 where it was in the bottom 1/8th. Its 3 year risk adjusted performance is 4*, vs. its longer term (5, 10 year) 3* performance, so if anything, it seems to be doing better, though that may be more because of reducing risk than increasing returns.
Given current predictions for US to outperform Europe, it would seem that launching a global fund now might simply be opportunistic.
Hussman appears to be a completely different story.
One reason concerns laws of probability. If you start enough new funds over time one of them's likely to hit it just right and have a couple pretty impressive years at onset. Recall that the first few years after inception were terrific for HSGFX and $$ poured in. Even though some lean years followed, that hot start still made the 3 & 5 year returns look quite respectable and $$ continued pouring in. If the fund stinks right away, on the other hand, you can always close or merge it. I suspect the way M* and others compute those average returns contributes to this. There's no way they can dollar weight those averages. If they could, the fact that a much larger group of investors enjoyed only poor or mediocre returns in subsequent years would really drag down those averages. You can goose initial returns even more by waiving fees for the first few years and many do. If used, the initial waiver should show up along with stated returns somewhere in the prospectus. Don't mean to rag on Hussman. Just happen to own his fund so a bit familiar.
Woody Allen: "Eighty percent of success is showing up" ... You had it pegged right the first time OJ. Just thought I'd burn up a bit of David's bandwidth with a longer answer. (-:
Linked is Hussman's March 5 Commentary. Scrolling to near the bottom you will note a section "Important News". In it he (1) attempts to explain reasons for the new Strategic Dividend Value Fund and (2) solicits applications for new positions on his investment team. Anyone here interested, there's a link on how to apply. I confess VF I find Hussman's reasoning with regards to his investment strategy muddled at best. However, should the markets tank, be sure the fund will rise. Just as your airbag will inflate if you crash your car. However, neither thought is very appealing.
Besides the apparent business reasons, I actually see Hussman's move to open the Strategic Dividend Value fund as a way to stop investors from hurting themselves.
The new fund has a limit of a 50% hedged position (which it is currently using to it's fullest). Obviously, there may be some investors giving in to the normal emotional traps of the market. By providing this option it may prevent some investors for giving in and buying a 100% long fund at exactly the wrong time. As Hussman says in his commentary.
"Given that fact, why would we possibly be introducing the Fund here, when my views on the market could hardly be more negative? Two reasons. First, there is great value in observing how a strategy performs in a market downturn. We would prefer for investors to become acquainted with the differences between this Fund and the other Hussman Funds before they invest, and launching the Fund here provides that opportunity. The second reason is that there are undoubtedly many investors who disagree with our concerns about risk here. Given the choice of investing in say, an S&P 500 index fund, which takes 100% of the market's risk in relatively low yielding stocks, or the Dividend Value Fund, which invests in higher yielding (lower duration) stocks and is presently about 50% hedged, my preference - facing what I expect to be a likely market downturn - would be for investors to choose the more defensive option."
By my count Hussman's been mostly wrong for about 10 years. HSGFX started around the time of the tech-related downturn in 2000-2002. He called the rebound right and the fund got off to a terrific start. However, he blew a chance to replicate by not drastically increasing equity exposure as markets bottomed in 2009. An investment strategy based largely on expectations of a cataclysmic financial crisis and related market plunge? He must find it a bit depressing. Any thoughts as to whether HSIEX & HSDVX might relate to some longer-range plan to sell the firm - in which case a larger stable might add value? After all, if as confident in all them stats and graphs as he professes, two funds should be plenty: a growth fund and a income fund - which is what he used to have.
I think this is the year we have an exodus in HSGFX assets. It's one thing being fully hedged. It's another dropping near 1% when market goes up near 2%.
I'm holding off adding any more money. Will wait for drop. And now, don't think I'm going to bite into HSDVX.
Comments
Given current predictions for US to outperform Europe, it would seem that launching a global fund now might simply be opportunistic.
Hussman appears to be a completely different story.
If according to Hussman, if this is one of the worst times to invest in stocks, then why start a new fund?
In my mind, this all by itself makes arguments for index funds and I am surprised such an argument has never been made.
http://www.hussman.net/wmc/wmc120305.htm
The new fund has a limit of a 50% hedged position (which it is currently using to it's fullest). Obviously, there may be some investors giving in to the normal emotional traps of the market. By providing this option it may prevent some investors for giving in and buying a 100% long fund at exactly the wrong time. As Hussman says in his commentary.
"Given that fact, why would we possibly be introducing the Fund here, when my views on the market could hardly be more negative? Two reasons. First, there is great value in observing how a strategy performs in a market downturn. We would prefer for investors to become acquainted with the differences between this Fund and the other Hussman Funds before they invest, and launching the Fund here provides that opportunity. The second reason is that there are undoubtedly many investors who disagree with our concerns about risk here. Given the choice of investing in say, an S&P 500 index fund, which takes 100% of the market's risk in relatively low yielding stocks, or the Dividend Value Fund, which invests in higher yielding (lower duration) stocks and is presently about 50% hedged, my preference - facing what I expect to be a likely market downturn - would be for investors to choose the more defensive option."
The Wall Street Ranter
I'm holding off adding any more money. Will wait for drop. And now, don't think I'm going to bite into HSDVX.