Morn'in Coffee,
Huh, I found a note that was misplaced regarding further investigation into a query I posted here, in July 2011 regarding PETDX. Ya, one would think that I would remember; but that is why I write notes and place them in proper places, as one becomes too busy with all other aspects of living. I keep a paper reminder file to offset situations when the mental reminders file becomes too large.....
:):)
PETDX is a different creature of fund types, and whether the fund has much to do with real estate is not part of what I have determined; as the fund is about 89% U.S. TIPS holdings, with other bond pieces here and there. The critical part of this fund management, in my opinion, is Mr. Worah's/and team abilities to manage all of the "tools" used within this fund to obtain results. These are tools (options, CDS, future, etc.) that are not available to our house and surely not within our skillset to trade. This situation is part of when one finds value in a managed fund versus an index or static etf.
This fund crossed below its 50 day moving average only once recently (retreating 18%); during the market decline one year ago after the downgrade of U.S. debt. I have charted the moves (past 2 years) of this fund against many other sector types/styles and find that their is little relationship to interest rates, equity moves in various sectors, etc. Perhaps someone else is able to find a matching sector of equity or relationship to interest rates that I have not considered; but this funds positive returns have pretty much ignored many other areas.
I will conclude that the management team is able, at this time and with the given market conditions to properly position the holdings and the special tools used to take full advantage of circumstances.
This house must now consider with the current market conditions, an election cycle, debt restructing, continued central banks lowering of rates, year end pending U.S. tax policy changes and the unknowns of a lame duck congress coming our way in 2013; as to whether to start to trickle monies into this fund that continues to obtain new 52 week highs.
The consideration of this fund, by this house; may seem a strange choice based upon our otherwise "slow growth" economy portfolio mix of various bonds. Perhaps the high heat weather of MI is getting to my brian cells and disrupting proper processes.
Conservative or otherwise with anyones investments remains the fact that if one does put the pot on the stove burner with the switch "on", one surely can't expect to cook anything (grow monies).
PETDX Summary Data SheetThanks for letting me think outloud to you all.
Regards,
Catch
Comments
Of course since it is based on derivatives and not actual stocks, there is also counterparty risk, and of course the risk that you (like me) have no idea what they are really doing.
I put a small position in the I class of this fund (PRRSX) a few months ago, just to test it out as an alternative to VGSIX. So far, so good -- but then everything related to REITs has turned into gold this year. (Much better than gold this year, for that matter.)
Edit: portable alpha
Thank you for your note about this. I am not deceived or mislead by the prospectus or methods used by this type of fund.
I have placed this link for all, relative to your note and fundalarm's comment regarding portable alpha.
portable alpha per Investopedia
Regards,
Catch
I have been invested in PETDX for nearly three years now. It represents about 5% of my total portfolio and helps fills my REIT slot in my asset allocation strategy along with the stocks RSO and NCT. It exposes me to the Dow Jones U.S. Select Real Estate Investment Trust (REIT) Total Return Index which it tracks. I use RWR are a daily tracking ETF for how PETDX is going to do and it mirrors pretty well. I can also check RWR's holdings easily to see how the individual REIT stocks are doing.
I understand PETDX as much as one can without being in the offices with management day to day, in that I grasp the tools they are using and how the fund works. I answer a ton of questions about it on other investment sites because most people simply look at the top 10 holdings and think it's a bond fund.
Others have explained it well. I would add a couple of things that I don't think have been mentioned about PETDX although I may have missed them in my reading here.
First, sometimes there is concern expressed that the large dividend payouts erode the NAV. I am a strong advocate for giving great weight to total return. PETDX doesn't pay a distribution based on ROC, but an earned dividend and an end of the year capital appreciation and end of the year supplemental dividend when appropriate. That high dividend payout does have some tax consequences which is why I keep my PETDX in IRA and Roth accounts. But I don't worry about NAV erosion. If it was paying ROC, I would be concerned. In my view PETDX simply gives me its earnings.
At the same time dividends are not consistent. So retirees or others who are looking for predictable income might be disappointed. In 2008 and 2009 and most of 2010 it didn't pay a dividend as the NAV fell. But in the past three years I've seen my initial investment more than triple.
I view PETDX as an excellent vehicle for me to be able to "own" the Dow Jones U.S. Select Real Estate Investment Trust (REIT) Total Return Index with higher risk and the opportunity for higher reward (and higher loss).