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Mutual Funds Rally By Not Sticking To A Style: FPACX
The short version: a former Morningstar analyst ranked "balanced" funds with more than a billion in assets by their 15-year Sortino ratio. Sortino is an offshoot of the well-known Sharpe ratio, but it's more sensitive to a fund's downside deviation. By that measure, the best balanced fund is F P A Crescent.
Two quick notes:
1. a lot has changed for Crescent over the past 15 years, not least growing to 100 times their previous size. That is, from $170 million in 2002 to more than $18 billion now.
2. different parameters give different results. Lipper categorizes Crescent as a "flexible portfolio" fund, which seems more appropriate than benchmarking it against staid 60/40 funds as Morningstar does. If you look at 60/40 funds over the course of the current market cycle, which began in the fall of 2007, Crescent finishes sixth:
Forward Income Builder
Chicago Equity Partners Balanced
Bruce
Marsico Flexible Capital
Intrepid Capital
FPA Crescent
Provident Trust
JP Morgan Income Builder
Prudential Income Builder
Loomis Sayles Multi-Asset Income
If you sort by Martin ratio, Charles's preferred metric and the basis of our fund ratings, you get most of the same funds but Crescent pops to fourth:
I just compared the above top rated Forward Income Builder fund (AIAIX) to the fund I've been using in this space for the last 13+ years TIBIX. No thanks, I'll continue to remain oblivious.
Edited to add: I'm sure I'm missing something but it doesn't appear to be performance. I'd be thankful for any insight. FWIW, I'm not totally thrilled by the Thornburg offering as they have faltered in their objective of "income building" but I haven't been able to find or settle on a suitable alternative.
I'm not arguing for or against of the funds listed. Other than Crescent, I know next to nothing about them. I just try to remind folks that our conclusions are no better than our premises. GIGO might be Gold In - Gold Out as much as Garbage In - Garbage Out.
I knew that David, and my comparison is dubious at best - they're both Income Builder funds or have Income Builder in their names, both according to M* fit into the world allocation slot and again according to M* both are bench marked against the moderate target risk whatever. Mostly it was just idle curiosity that propelled me to take a peek. My GIGO meter is probably pegged way over on the Garbage side which is why I was seeking clarity from those who might know better.
Yuh, I was struck by the plethora of "Income Builders" on the list. It turns out that there are a dozen funds bearing that designation. One is designated "global," one is designated "U.S." and the rest promise, generically, to build income
It feels like an marketing hook, akin to "strategic income" and "tactical income" from a few years back.
I just compared the above top rated Forward Income Builder fund (AIAIX) to the fund I've been using in this space for the last 13+ years TIBIX. No thanks, I'll continue to remain oblivious.
Edited to add: I'm sure I'm missing something but it doesn't appear to be performance. I'd be thankful for any insight. FWIW, I'm not totally thrilled by the Thornburg offering as they have faltered in their objective of "income building" but I haven't been able to find or settle on a suitable alternative.
An obvious observation - TIBIX couldn't show up in the cited article, since it hasn't been around for 15 years.
What you're missing seems to be the fund's relatively poor performance through 2008 (falling further than both M*'s moderate allocation benchmark and the average world allocation fund). See this M* chart
For the chart, I used 9/30/2007 as the start date (David suggested fall 2007 as a start point, this date seemed as good as any). Over this period of time, TIBIX performed in line with AIAIX and the moderate allocation benchmark, though it significantly outpeformed world allocation funds.
It's that oversized dip that's killing it. It doesn't get brownie points for upside volatility with Sortino.
Over its lifetime, TIBIX has indeed excelled. Here's that same M* graph, stretched to lifetime.
While I'm not a fan of asking "what have you done for me lately" (e.g. YTD), I think it is fair to point out that all of that outperformance is due to the fund's first five years. Since then it has been doing well, but it's not beating a few other good funds. However, by the same token, if you throw out its 2008 performance, it again looks great.
If one is willing to live with the idea that the fund could get creamed (relatively speaking) in a bear market, it's a fine, high performing fund.
@msf - I noted the 15-yr baseline but not David's suggested start date. In my look I started with the TIBIX start (inception) date of 12/24/2002 when running my comparison since I basically jumped on board then. Stop, we're both right? I don't know. It just seemed like a good place for me to begin, creaming included. I'm not sure there's a true apples-to-apples way to go after this.
Comments
Two quick notes:
1. a lot has changed for Crescent over the past 15 years, not least growing to 100 times their previous size. That is, from $170 million in 2002 to more than $18 billion now.
2. different parameters give different results. Lipper categorizes Crescent as a "flexible portfolio" fund, which seems more appropriate than benchmarking it against staid 60/40 funds as Morningstar does. If you look at 60/40 funds over the course of the current market cycle, which began in the fall of 2007, Crescent finishes sixth:
- Forward Income Builder
- Chicago Equity Partners Balanced
- Bruce
- Marsico Flexible Capital
- Intrepid Capital
- FPA Crescent
- Provident Trust
- JP Morgan Income Builder
- Prudential Income Builder
- Loomis Sayles Multi-Asset Income
If you sort by Martin ratio, Charles's preferred metric and the basis of our fund ratings, you get most of the same funds but Crescent pops to fourth:- Forward Income Builder
- Intrepid Capital
- Chicago Equity Partners Balanced
- FPA Crescent
- Provident Trust
- Bruce
For what interest that holds,David
Edited to add: I'm sure I'm missing something but it doesn't appear to be performance. I'd be thankful for any insight. FWIW, I'm not totally thrilled by the Thornburg offering as they have faltered in their objective of "income building" but I haven't been able to find or settle on a suitable alternative.
Regards,
Ted
http://www.marketwatch.com/tools/mutual-fund/compare?Tickers=AIAIX+TIBIX&Compare=Returns
U.S. News & World Report Ranking of World Allocation Funds;
http://money.usnews.com/funds/mutual-funds/rankings/world-allocation
I'm not arguing for or against of the funds listed. Other than Crescent, I know next to nothing about them. I just try to remind folks that our conclusions are no better than our premises. GIGO might be Gold In - Gold Out as much as Garbage In - Garbage Out.
David
It feels like an marketing hook, akin to "strategic income" and "tactical income" from a few years back.
David
What you're missing seems to be the fund's relatively poor performance through 2008 (falling further than both M*'s moderate allocation benchmark and the average world allocation fund). See this M* chart
For the chart, I used 9/30/2007 as the start date (David suggested fall 2007 as a start point, this date seemed as good as any). Over this period of time, TIBIX performed in line with AIAIX and the moderate allocation benchmark, though it significantly outpeformed world allocation funds.
It's that oversized dip that's killing it. It doesn't get brownie points for upside volatility with Sortino.
Over its lifetime, TIBIX has indeed excelled. Here's that same M* graph, stretched to lifetime.
While I'm not a fan of asking "what have you done for me lately" (e.g. YTD), I think it is fair to point out that all of that outperformance is due to the fund's first five years. Since then it has been doing well, but it's not beating a few other good funds. However, by the same token, if you throw out its 2008 performance, it again looks great.
If one is willing to live with the idea that the fund could get creamed (relatively speaking) in a bear market, it's a fine, high performing fund.