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The Long/Short Equity space is very troubled, as there have been very few funds which have had attractive long-term performance, and the expenses of such funds are inherently high, which serves as a drag for future performance. Whenever I look at a space with many entrants but few winners, I instinctively avoid the space, and I think that this is generally the right move. From my perspective, there are exactly two attractive funds in the space -- BPLSX/BPLEX and QLEIX/QLENX -- with only the latter being open to new investors.
The managers of this very young fund have done a pretty good job at their long-only equity fund, NCVLX. I am not sure how they will do in the more treacherous L/S space. Furthermore, M* understates -- as usual -- the actual expense ratio that investors pay for NCLIX, which is actually a net ER of 1.87%, not the 1.55% listed on M*'s front page.
If you must invest in this space, I would consider QLEIX/QLENX. As for NCLIX, I would wait for a track record to develop and would be reluctant to be an early investor, as it opened its doors very recently on 12/31/2015.
The Long/Short Equity space is very troubled, as there have been very few funds which have had attractive long-term performance, and the expenses of such funds are inherently high, which serves as a drag for future performance. Whenever I look at a space with many entrants but few winners, I instinctively avoid the space, and I think that this is generally the right move.
Concur completely. Personally I go further - I tend to avoid "esoteric" categories even if they have a modest number of successful funds, at least until a category has proven itself through stressful periods.
Furthermore, M* understates -- as usual -- the actual expense ratio that investors pay for NCLIX, which is actually a net ER of 1.87%, not the 1.55% listed on M*'s front page.
That's because M* is excluding leveraging costs. The flip side, according to M*, is that depending on how that leveraging is achieved, its cost may still be hidden (even if M* isn't the one doing the hiding). Pick your poison.
Morningstar elects to exclude interest and dividend expense from the net expense ratio in order to provide the end investor with an apples-to-apples comparison of expense ratios. Depending on the leveraging techniques employed by the fund, the fund may or may not be required to report interest and dividend expense. For example, funds that employ shorting strategies or reverse-repo transactions are required to report interest expense in the Annual Report whereas funds that employ futures, swaps, TBAs, and forwards are not required to report the cost associated with those instruments as interest expense.
I totally agree with your assessment of the ER. That is why I have been advocating for years that M* report on the fund's front page the actual expense ratio that investors will be paying, as detailed in the prospectus. In this case, the actual ER of 1.87% should be reported on the fund's front page. And notice that this 1.87% figure doesn't even appear in the expense breakdown for the fund. M* could report this accurate ER but chooses to not do so, likely to favor fund managements over investors. M* could and should do better.
Unfortunately, I'm not with Fidelity, and I always avoid TF. Don't want those costs to eat into my returns. If I invest $2,500, I instantly dig myself a 2% hole. Same reason I'll never touch funds with loads. I've never understood the whole load concept. How do those still even exist?
Just fyi, QLENX is ntf at Fidelity, but it also has a slightly higher E.R. than QLEIX. You can get either of them at Fido with a $2,500 initial investment in an IRA; the minimums Kevin mentioned are for group retirement plans, according to the "fees and distributions" pages.
Comments
The Long/Short Equity space is very troubled, as there have been very few funds which have had attractive long-term performance, and the expenses of such funds are inherently high, which serves as a drag for future performance. Whenever I look at a space with many entrants but few winners, I instinctively avoid the space, and I think that this is generally the right move. From my perspective, there are exactly two attractive funds in the space -- BPLSX/BPLEX and QLEIX/QLENX -- with only the latter being open to new investors.
The managers of this very young fund have done a pretty good job at their long-only equity fund, NCVLX. I am not sure how they will do in the more treacherous L/S space. Furthermore, M* understates -- as usual -- the actual expense ratio that investors pay for NCLIX, which is actually a net ER of 1.87%, not the 1.55% listed on M*'s front page.
If you must invest in this space, I would consider QLEIX/QLENX. As for NCLIX, I would wait for a track record to develop and would be reluctant to be an early investor, as it opened its doors very recently on 12/31/2015.
Kevin
QLEIX and QLENX are available in Fidelity retirement accounts for $100K and $500 minimums, respectively, with a TF.
@msf:
I totally agree with your assessment of the ER. That is why I have been advocating for years that M* report on the fund's front page the actual expense ratio that investors will be paying, as detailed in the prospectus. In this case, the actual ER of 1.87% should be reported on the fund's front page. And notice that this 1.87% figure doesn't even appear in the expense breakdown for the fund. M* could report this accurate ER but chooses to not do so, likely to favor fund managements over investors. M* could and should do better.
Kevin