Hi, guys.
Hope you like it. Four fund profiles - Aston/River Road Long Short and Wasatch Long Short (an update) plus Huber Small Cap Value (Lipper's top SCV fund for the past three years) and Osterweis Strategic Investment (another update).
There are also several warnings about bad data at Morningstar - or, at least, stuff that's substantially inconsistent from one portion of the site to the next, a note about FBR's decision to try to sell their fund family (perhaps they regret chasing Chuck Akre and his billion in assets away?) and other bad moves by fund directors.
"Best of" looks, a bit, at retirement income calculators. I'm likely to follow up on the subject myself in July.
And I've tried reorganizing the "briefly noted" section and the style of the updated profiles, to make both a bit more usable. Let me know what you think.
And have a great weekend.
As ever,
David
Comments
Our plans for the months ahead include profiles of Aston/MD Sass Enhanced Equity (AMBEX), RiverPark Long/Short Opportunity (RLSFX), RiverPark/Gargoyle Hedged Value (RGHVX), James Long-Short (JAZZX), and Paladin Long Short (PALFX). If we’ve missed someone that you think of a crazy-great, drop me a line. I’m open to new ideas."
There have been few successes in the long-short field in part because of the inflexibility of the funds - these were largely presented as "hedge funds for the masses", but in many cases are not flexible enough to be really functional in this market. They're just not hedge funds and if the funds are not "fully functional" in a way that can pull of the strategy, they disappoint . See the Rydex Managed Futures fund, which was "ahead of its time" as the first Managed Futures fund, but after it worked in 2008 when everything went in one direction, it has seemed broken ever since because of the fact that the long-short fund only repositions once a month (and I believe is sector specific - if it's short ag, it's short ag across the board rather than specific commodities.) Managed futures as a strategy has not been outstanding in the mutual fund space over the last few years, but a number of large managed futures hedge funds that are vastly more flexible have done fine. However, something that updates its positions once a month in this market is going to be continually off unless you get one long, continuous move either way.
Additionally, many long-short funds often seem to take the long-short mentality too literally - those funds that can dial up and down risk with much greater flexibility (Marketfield, the Robeco fund) are the few that have held up better than the rest. Those who seem to continually have to be short with a good deal of the portfolio have not. Those who have tried to discuss fundamentals in a time of the easiest monetary policy in history (Hussman) have not. Nakoma, well...
As for the James fund, didn't they have a Market Neutral fund that imploded not that long ago? That fund was down 28% between 11/08 and when it folded in June of last year.
Look at what Leuthold Hedged equity turned into (or not.), as well. As for Leuthold....
"I’ve been wondering, lately, whether there are better choices than Leuthold Global (GLBLX) for part of my non-retirement portfolio."
Yes, yes there is. The Leuthold funds continue to be disappointing and I think it became clear that the hundreds of indicators that Leuthold was using were no longer all that functional in a market like this as maybe they used to be.
I mean, from an article on hedge funds and being in a market where one "has to change algorithms":
http://www.reuters.com/article/2012/05/21/us-trading-blackbox-idUSBRE84K07320120521
"NEW ALGORITHMS
In the middle of a trading floor overlooking the Thames, a huge screen flashes with the deals - everything from interest rate futures to oil contracts - made by AHL's black-box computer.
The firm has recently had a rough ride: its portfolio fell almost 17 percent in 2009 and lost 6.8 percent last year when the fund's assets shrank 11 percent to $21 billion, dragging the share price of its parent, Man Group.
"We've learned our lessons," says boss Tim Wong. The fund is now keenly aware of the need to pay attention to what its rivals may be doing, he says.
But AHL isn't out to match Winton's ancient data - its chief scientist Anthony Ledford argues that modern markets behave very differently than they did 50 or 100 years ago. ************* Winton sends researchers to libraries and archives across the world to find numbers held in books and on microfilms. It has found barley and sesame prices from ancient Babylon, and English wheat prices going back to 1209. It now employs more than 90 researchers, including extragalactic astrophysicists, computer scientists and climatologists. The company hired a meteorologist who had researched the "El Nino" phenomenon.************** The physics graduate - Winton wants to keep his name secret for fear a rival might poach him - works in London correlating weather data to crops such as corn, wheat and soybeans. That data can be used to forecast how prices might fluctuate with the weather.
Instead, it is sharpening up its processes. AHL has cut back its short-term algorithms, and is developing codes to profit from different market patterns away from trend-following - for example, betting on the fact that markets tend to iron out short-term anomalies over time, or revert to the mean.
With volatility so high now, it is also developing new algorithms that try to predict, and trade on, the changing volatility of different assets.
Its approach gets support from some investors.
"The old CTAs are relying too much on the past," said Monty Agarwal, an author and founding partner of Managed Futures Fund, which invests in both its own and external CTAs. "The new strategies that we see thriving are mean reversion, which is trend anticipation, and pattern recognition - artificial intelligence."
The funds know they need something new to generate 'alpha', or outperform the market. AHL's Ledford isn't sure whether short-term codes will ever work again. "It's either taken an extremely long time for the alpha to come back from those frequencies or it's not coming back," he said. "And I still don't know the answer to that."
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Or, as Lord Rothschild (or "Lord Vader", perhaps) simply said a couple of days ago, "Unless one has a long horizon, investment success in
public markets has become a game of timing rather
than fundamentals."
You have an investment market where people have to research grain prices from ancient Babylon in order to try and get that extra leg up over their computer-driven competition. No comment really necessary.
Overall, another really terrific article this month, and keep up the wonderful work with MFO.
And a Boglehead hat tip to you......
Boglehead Discussion Board
I agree with Scott that the only attractive L/S funds with decent track records continue to be BPLSX (we own) and MFLDX.
Note that both of these funds are very expensive to own, with real-world expenses paid by investors of greater than 2.50% (likely 3.71%) and 2.47%, respectively, according to the latest prospectuses. The literature for both of these funds make it extremely hard to figure out the expenses actually paid by investors. I'm sure most of the members of this forum realize that such high expenses are clearly headwinds for future performance.
I continue to be interested in your reviewing the Risk Parity space (AQRIX, ABRIX, MMAFX, and PDRYX). We continue to own 4% positions in both AQRIX and ABRIX, as I have detailed in M* threads. Salient has introduced the first RP Index:
http://theriskparityindex.com/indices.html
Kevin
BPLSX I wish was open - that's just tremendous stockpicking *in both directions.*
The entirely derivatives-based AQR Risk Parity fund - I think - has worked quite well and isn't terribly correlated to the market.
Another category that could be considered for coverage are the "Event Driven" funds.
In the "oddball" category I'll note James Alpha Global Enhanced Real Return, an "absolute return" fund run by the former long-time manager of Pimco Commodity Real Return. The fund is an "absolute return" fund focused almost entirely on emerging markets and commodities (goal - To achieve attractive long-term risk-adjusted returns relative to traditional
financial market indices, through real asset and hedged strategies, while seeking
to limit the effects of a broadly inflationary or deflationary monetary environment.) (GRRAX)
It has only gently crept higher over the last year and a half, with hardly any volatility and returns that look like an Arbitrage fund, which now seems rather pleasant. Not something I'd invest in, but just pointing out a rather "unique"/unheard of fund.
You mentioned...
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Goldman Sachs Mid Cap Value (GCMAX) will close to new investors at the end of July. Over the past five years the fund has been solidly . .. uh, “okay.” You could do worse. It doesn’t suck often. Not clear why, exactly, that justifies $8 billion in assets.
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I think this fund has so much in assets because of 401k accounts and not that retail investors having been running out to buy this fund as a top choice. In fact my 401k plan at work offers this fund.
MFLDX, Interesting Bloomerberg interview on Emerging Markets. Manager states that super luxury firms opening up in Brazil, etc are bad omens for equity markets. Probably dispartity in income preceding slowdown.
http://www.bloomberg.com/video/93592927-emerging-market-investments-brazil-s-economy.html
http://www.bloomberg.com/news/2012-06-03/s-p-500-valuation-slips-19-below-11-as-shaoul-advises-patience.html
Marketfield has been moving in a very curious fashion, and I think it continues to seem at least mildly correlated to precious metals movements, especially starting around mid-May.
Another look (1mo) at MFLDX vs GLD: http://finance.yahoo.com/echarts?s=MFLDX+Interactive#symbol=mfldx;range=1m;compare=gld;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
I've moved some money from MFLDX to the new Pimco L/S fund and elsewhere, but am keeping the remainder of MFLDX.
Additionally, article notes $178B has been pulled from domestic equity funds in the last 12mo - the longest streak of withdrawals since the data started being tracked in 1984.
Andrew Stephens, one of the co-managers of this fund, is also co-manager of the Artisan Midcap fund since inception in 1997. (14.34% annual returns since inception). And so he has some pretty good long-term success there.
The thing I like about this fund is that I do have more of a global value tilt to my portfolio. But I've learned that when looking at several year periods - value and growth will take turns outperforming each other. Look what happened 5 years ago when so many investors were piling up on the so-called steddie-eddie Dodge & Cox value-oriented funds. Back then most value funds sported the best 5-year returns. Fast forward to today and in fact it turned out that many of the Growth-oriented funds sported better returns.
That's why I like to play both the Growth & Value sides and balance between the two.