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.
Not sure how many are holding on. I'm going to wait till it becomes MainStay fund, THEN see if it is available load waived at Schwab - like some other MainStay funds.
Sometimes the funds after similar changes keep the original share class at the same fees and no load as they were before, but they may introduce new share classes which (load or not) can be more expensive. Do you hope that the fees for the new no-load version of this fund at MainStay will be lower than the fees at present?
There is not anything quite like Marketfield and I've been mostly very pleased with the fund. While there is some concern about the fund moving to Mainstay, I'm not overly concerned and there's really no strong similar alternative.
If you are interested in MFLDX, you really ought to buy it now. Once the change occurs, the no-load shares will be availabe only to those who already own them. Yes, you may have access to load shares at NAV, but they will be more expensive. We do not anticipate any change to the fund itself. Same management team, same strategy. MainStay will simply take over all marketing aspects, which leaves Aronstein and company to just run the fund, which they have done remarkably well. I seldom suggest buying a fund before it changes ownership, but this is one cas where I believe you will be ahead, even if you decide to sell later on.
Reply to @BobC: This depends on your brokerage, but at Vanguard, MFLDX is available NTF but the MainStay funds are not. I don't know what will happen after MFLDX makes the transition, but there's at least a good chance that it will not be NTF anymore. If I put a foothold in MFLDX now, I risk having to pay a transaction fee for future contributions, or to get out of my initial position. Again, might not be applicable to most folks at other brokerages, but just something I wanted to point out.
My own experience: I've held shares in both Acorn & Mutual Discovery for ????(many) years. They are Z-shares, created & consecrated when the ownership changed and I can testify that despite being a "nobody" I have been able to purchase/transact Z shares with no problem. What he is saying is correct & makes it worthwhile (IMHO) to get in & gain that status.
I have been busy researching. Came across a firm called Broadmark Asset Management. They are subadvising funds from Forward and Keeley. I'm looking at these as potential replacemenets for MFLDX as well.
I just didn't want to hold on to MFLDX giving its not certain what's going to happen when it gets hosed. Err, i mean bloated. Err, I mean loaded.
Reply to @rmt: Thanks for the added comment. Mea culpa, I've actually never held mutual funds in a brokerage acct, only stocks. Funds I always have dealt direct. I assume Z-shares are Z-shares wherever held, but I honestly have never personally held them in a brokerage acct. (Yes, pretty old-school -- forgotten the terminology for them, but once even had shares with a couple of companies -- P&G I recall in particular -- you could buy direct. Then there was no internet etc, & if you were a "midget" investor, what you bought you expected to keep for a really long time. Started with MF's years ago (Max Heine (before Price), Ab Nicholas, etc etc) buying direct & never really got around to changing. MF's were a much smaller universe then.)
As a point of curiosity, I wonder how much longer MF's will be commonly sold direct, at least to individuals with less than 1 m or so. I still have a small residual in some so-called Janus "D" shares that I will probably get rid of in the next house-cleaning, but would not be surprised to see the Janus example be followed & small retail accounts become a thing of the past with many fund Co.s.
Reply to @VintageFreak: Forward Enhanced (FETEX) has done okay, but the first fund, Forward Tactical Growth (FTWGX) has barely done anything. Both funds are subadvised by Broadmark. I believe Bob C has mentioned these funds before and can likely discuss them in much greater detail, but the funds seem to be another effort to side-step declines (the Forward funds actually say that on the website) and adjust market exposure up/down actively/very actively based on their specific metrics/methodology. Whether it be these funds, the Toews funds (although those seem to be doing better this year) or the GTAA etf or some other variation/similarity, I have yet to find a fund like this that really seems to work that well and is nimble enough to achieve mid-to-large scale timing results consistently.
I don't think the Broadmark Forward funds or Broadmark Keely funds are an apples-to-apples comparison to Marketfield (that Marketfield is global, and other aspects), but can be evaluated and considered on their own terms. I'd say the Robeco Boston L/S Research (BPIRX or whatever share class) would be closer (still different in many ways, but closer) in intent to Marketfield.
Or there's the Whitebox fund I've mentioned recently, although that fund does not have much of a record.
I've decide against Forward. Keeley Alternative Value seems interesting. Only load waived for Advisors at Scottrade, but Schwab is waiving load for all.
Reply to @scott: Hi Scott. We have a lot of client dollars in MFLDX. It is pretty much a core hold in our alternative strategies allocation. When it becomes part of MainStay, the no-load, NTF shares will only be available to existing retail shareholders. That is the official word from Marketfield management. RIAs with accounts in MFLDX will be able to add new accounts, but this does not apply to retail investors.
We have some dollars in Forward Tactical Growth FTGWX. Because it uses specific indicators in making its long-short decisions, it can be (and has been) whipsawed in choppy markets. It does better in longer periods of market decline. They did a great job in 2010's second quarter and 2011's third quarter. But in both cases, their model did not turn quickly enough to prevent losses in the subsequent quarters, when the stock markets had nice gains.
We have looked briefly at KeeleyKALIX, but are skeptical of a two-person family team capably running five different funds, especially when there does not appear to be a history of running long-short investments. It could be this will be a fine option, but Keeley funds seem to do great out of the gate, then less so as they grow assets.
Another option is Wasatch FMLSX, which has been around since 2003. It is less aggressive in both its long and short calls than MFLDX. But it runs a decent second to MFLDX. Forester FVALX has sort of morphed from a large cap value fund to a long-short fund in M*. It hardly moves at all from day to day, as Tom Forester is extremely conservative. It is the only equity fund to have gained anything in 2008, but it is more of a capital preservation strategy than long-short. Then there is Hussman HSGFX, which has been a disaster because of the manager's fear of everything. He will undoubtedly be right at some point, but I cannot imagine hanging around this fund long enough to realize that.
As the MFO commentaries have noted, there are more and more long/short funds available to the retail investor. ARLSX profiled this August looks like it has done pretty well, and both Aston and River Road seem to be quality managers in general. For those who pass up on MFLDX now, I don't think it will be irreplaceable.
Perpetual Bull posted the link earlier in reference to another fund, but I thought this bit from Pimco EQS Long/Short (PHMDX) was well put in terms of describing the fund's long/short philosophy.
"We short stocks when we identify opportunities to generate alpha as opposed to simply hedging market risk. Companies we short tend to fall into two categories: Fundamental shorts, or companies in secular decline, and cyclical shorts, or businesses that will likely be most impacted by a weakening economy.
When our outlook is bearish and our objective is to reduce equity market exposure, moving to cash is usually our first line of defense. In bear markets, the Fund can go 100% into cash and cash equivalents in an effort to avoid downside risk. To help preserve investors’ capital, in September 2008, for instance, we were invested mostly in cash and cash equivalents. In addition, our approach is consistent with the needs of many investors who are moving away from benchmark-oriented strategies in favor of highly active, unconstrained approaches that seek to limit downside risk."
I continue to believe that most investors do not need a dedicated L/S fund. There are very, very few long-term winners in this space (only BPLSX and MFLDX), and the space has inherently very high actual expense ratios which serve as stiff headwinds to future performance. Here are the M* front page ERs vs. the actual ERs paid by investors for select funds: BPLSX (2.47% vs. 3.71%), MFLDX (1.56% vs. 2.47%), ARLSX (1.70% vs. 2.75%), PMHIX/PMHDX (1.40%/1.75% vs. 1.80%/2.15%), and MARNX (1.50% vs. 2.63%).
And when one buys MFLDX, you are not receiving this fund's past performance, but you are paying very high fees which will definitely affect uncertain future performance. And now that the fund has $2.3B in AUM, will it perform as well as it did when it was a much smaller fund ?
For portfolio diversification, investors may use other asset classes that are far less costly to own and have better track records than L/S funds.
I do own PAUIX (1.18% vs. 1.65%) which may short and use leverage, but it has limits on such exposures and is not obligated to use such tactics. But this fund is very expensive for a $21B AUM fund, and the more accessible PAUDX is even more expensive (1.58% vs. 2.05%). This fund is as close as I will come to owning a significant position in a L/S fund.
Reply to @kevindow: Well said, I personally believe most of these Long-Short funds will not deliver. In general the costs are high giving a big headwind. There will be a few that we will know that has worked well (by luck or by skill) after the fact with no guarantees of future continued performance. I would rather choose less moving parts and buy a more conventional long fund and allocate enough to bonds/cash to cut the risk. O, a moderate or conservative allocation fund can achieve the same thing fairly well.
Reply to @BobC: Thank you for the excellent and detailed response, Bob - greatly appreciated. I find strategies like the Forward fund (and GTAA etf and Toews funds) interesting, but as you note, they appear to be whipsawed unless there is a fairly clear, fairly consistent trend. This is similar to managed futures mutual funds, which also appear to continue to be whipsawed - as I've noted before, I like these sorts of strategies in theory, but have sometimes questioned whether they can be nimble enough in a mutual fund structure.
See the struggles RYMFX (Rydex Managed Futures) has had since 2008 for an example of a fund - I think - not nimble enough given the structure, and which has continually been whipsawed for the last three years. More complex Managed Futures mutual funds ("2nd Generation" funds such as AQR's AQMNX after RYMFX's "1st Generation") still are having difficulty with these markets, although not quite as much as RYMFX and its basic structure (updating positions once a month.)
However, RYMFX has not as badly as Wisdomtree's Managed Futures etf (WDTI).
The Wasatch fund is definitely a very interesting recommendation, as I think Ralph Shive is an excellent manager.
Thanks again for your comments - greatly appreciated.
Amen ! Common investors like us need to focus most of our attention on having diversified global exposures to equities and FI. Then, when the core of the portfolio is shipshape, one should add exposures to the traditional diversifiers, commodities and RE.
All the while, investors should focus on reducing their expenses, and keeping their overall portfolio ER to far less than 1%. It continues to irk me that investors on this site and at M* continue to buy the more expensive "D" class of PIMCO funds when the less costly "I" class of these same funds are available for no or very low minimums at TDA, Scottrade, and Firstrade.
Our current diversifiers consist of PAUIX, PGDIX, ABRIX, AQRIX, and BIP.
Reply to @kevindow: Don't agree with some of the stuff mentioned, but not going to really get into it. I will agree that much of the alternative retail product is hampered (see RYMFX, which I continue to use as an example*) just by the mutual fund structure (or just not good), that doesn't mean many haven't been incredibly successful with long-short investing or various other alternative strategies. A number of new long/short funds that have greater flexibility as to dialing up/down risk rather than being stricter about the long-short mandate seem promising.
As noted in MFO's review of Marketfield (which I've decided to add to), "A great deal of the decision to invest in Marketfield comes down to an almost religious faith in the manager’s ability to see what others miss or to exploit opportunities that they don’t have the nerve or mandate to pursue. " (Um, couldn't one say that about many long-only managers, like a certain financial-heavy one that seems to have a near-religious following? Just sayin'.)
*As for RYMFX, you have a managed futures fund whose positions long/short commodities and currencies are updated once a month, which is a recipe for the fund to get whipsawed again and again. It worked in 2008 to the tune of 8% when the trend was straight down, but hasn't worked since. Managed futures is a strategy that many hedge funds have been quite successful with - but I just think a once a month adjustment just doesn't work in today's markets, and the fund appears broken for the meantime as it can't really manage to follow short term trends in the markets it follows. I noticed today that the fund is now described as following "medium term" trends, and I don't think that description was there before (and it's not really doing that, either.)
Additionally, a favorite (not in a good way, but sort of an "Alternative Investing Goes Wrong" example) bizarre alternative fund is Federated Absolute Return (FMAAX), which was renamed and had a manager change and has had one positive year (a gain of under 2% last year) in the last 5.
It's not that managed futures as a strategy doesn't work, but I continue to question whether it works well in a mutual fund format. Some alternative funds just haven't been very good, or - I think - are too strict with the long/short mandate.
There's instances where complexity works, and there's instances where complexity does not, and Hussman - who would have been better off not being 65% long (and completely hedged against it or nearly so) and instead just having a portfolio of staples and the like and cash and light hedging. I can understand a manager liking this (long) and not that (short), but I just don't understand Hussman's positioning versus his views - and I would be curious what the AUM is now vs 5 years ago.
Some alternative funds are just gone (NARFX, I think Janus' long/short fund is no longer?, there are a number of others), but a number have done pretty well this year, including the new Riverpark fund.
Anyway, I do continue to like BIP (although over the long-term that is certainly not without patches of volatility - but since everyone is now desperate for yield, it has been more low-key on average and has at times gone up when the market has gone down and been nicely uncorrelated), the AQR fund (although I'm actually starting to be a little curious as to how the high volatility/low volatility versions will perform when they come out) and Arnott's fund is certainly consistent. I like the Principal fund, but no longer own it.
Scott, thanks for your thoughts as always. BIP has been pulling back recently, and will likely continue to do so in the near future as valuations have gotten stretched. If we get a 8-10% retreat from the high, I may add to my position. And it continues to be poorly correlated with every asset that I can throw at it using assetcorrelation.com.
In the diversifier space, I have been closely tracking ARCIX, which essentially applies RP investing to the commodities space:
This fund has reasonable expenses (net 1.15%), and I like that it has a targeted volatility range (10-24%) in an extremely volatile sector. This fund has no minimum at TDA and a $15 TF for TOS/TDA customers or $49.99 TF for TDA.
Reply to @kevindow: I switched PCRRX (almost entirely, will eventually move the last remainder) to ARCNX. Thanks for the note on assetcorrelation.com - very cool site, I'll have to look at that over the weekend.
Tried to purchase ARCIX in my non-taxable account today with TDA for small amount plus T/F. Received call from TDA rep. indicating ARCIX is not available for "retail investors" and order was rejected.
There are many who believe that hunting for great managers is an ultimately flawed exercise, that luck has as much to do with the success of managers as their innate abilities, and that no managers can outperform their target index consistently. My experience is just the opposite. MFLDX is a good example of this. In virtually every aspect of its performance since day one, Aronstein and company have proven their worth. After expenses (which for some is the critical issue), MFLDX has a beta of 0.56, alpha of 7.60, standard deviation of 12.6, and a five-year return (after expenses) of 9.5% (vs the S&P 1.58%). Hmm, let me think about this... double the return, half the volatility, and a whole lot more bang for the buck than a low-cost index fund.
Will MFLDX always do this well? Probably not. But the point of owning something like it is to help lower the volatility of a portfolio. It has worked wonderfully well. Would I like to have lower costs to own it? Of course. Will it underperform in an extended bull market? Probably, although it outperformed in 2009 and got 95% of the index's return in 2010. Do I share all of Mr. Aronstein's views? Nope, but that is a darned good reason for me to own this fund. Nothing wrong with a little contrarian outlook.
These kind of funds are not for everyone, I agree. But something like MFLDX is a lot easier to grasp than many of the AQR products. When used in tandem with some other alternative strategies like LASYX, PAUIX, and with other things like CEF, PRPFX, and go-anywhere funds like IVAEX and FPACX, it's possible to make real inroads on volatility, real returns, and overall risk. Again, not for everyone. But if the next five years are anything like the last five, these could help provide a lot smoother ride than buying an index fund and hanging on for dear life.
Comments
Derf
There is not anything quite like Marketfield and I've been mostly very pleased with the fund. While there is some concern about the fund moving to Mainstay, I'm not overly concerned and there's really no strong similar alternative.
My own experience: I've held shares in both Acorn & Mutual Discovery for ????(many) years. They are Z-shares, created & consecrated when the ownership changed and I can testify that despite being a "nobody" I have been able to purchase/transact Z shares with no problem. What he is saying is correct & makes it worthwhile (IMHO) to get in & gain that status.
I just didn't want to hold on to MFLDX giving its not certain what's going to happen when it gets hosed. Err, i mean bloated. Err, I mean loaded.
Thanks for the added comment. Mea culpa, I've actually never held mutual funds in a brokerage acct, only stocks. Funds I always have dealt direct. I assume Z-shares are Z-shares wherever held, but I honestly have never personally held them in a brokerage acct. (Yes, pretty old-school -- forgotten the terminology for them, but once even had shares with a couple of companies -- P&G I recall in particular -- you could buy direct. Then there was no internet etc, & if you were a "midget" investor, what you bought you expected to keep for a really long time. Started with MF's years ago (Max Heine (before Price), Ab Nicholas, etc etc) buying direct & never really got around to changing. MF's were a much smaller universe then.)
As a point of curiosity, I wonder how much longer MF's will be commonly sold direct, at least to individuals with less than 1 m or so. I still have a small residual in some so-called Janus "D" shares that I will probably get rid of in the next house-cleaning, but would not be surprised to see the Janus example be followed & small retail accounts become a thing of the past with many fund Co.s.
I don't think the Broadmark Forward funds or Broadmark Keely funds are an apples-to-apples comparison to Marketfield (that Marketfield is global, and other aspects), but can be evaluated and considered on their own terms. I'd say the Robeco Boston L/S Research (BPIRX or whatever share class) would be closer (still different in many ways, but closer) in intent to Marketfield.
Or there's the Whitebox fund I've mentioned recently, although that fund does not have much of a record.
We have some dollars in Forward Tactical Growth FTGWX. Because it uses specific indicators in making its long-short decisions, it can be (and has been) whipsawed in choppy markets. It does better in longer periods of market decline. They did a great job in 2010's second quarter and 2011's third quarter. But in both cases, their model did not turn quickly enough to prevent losses in the subsequent quarters, when the stock markets had nice gains.
We have looked briefly at KeeleyKALIX, but are skeptical of a two-person family team capably running five different funds, especially when there does not appear to be a history of running long-short investments. It could be this will be a fine option, but Keeley funds seem to do great out of the gate, then less so as they grow assets.
Another option is Wasatch FMLSX, which has been around since 2003. It is less aggressive in both its long and short calls than MFLDX. But it runs a decent second to MFLDX. Forester FVALX has sort of morphed from a large cap value fund to a long-short fund in M*. It hardly moves at all from day to day, as Tom Forester is extremely conservative. It is the only equity fund to have gained anything in 2008, but it is more of a capital preservation strategy than long-short. Then there is Hussman HSGFX, which has been a disaster because of the manager's fear of everything. He will undoubtedly be right at some point, but I cannot imagine hanging around this fund long enough to realize that.
"We short stocks when we identify opportunities to generate alpha as
opposed to simply hedging market risk. Companies we short tend to
fall into two categories: Fundamental shorts, or companies in secular
decline, and cyclical shorts, or businesses that will likely be most
impacted by a weakening economy.
When our outlook is bearish and our objective is to reduce equity
market exposure, moving to cash is usually our first line of defense. In
bear markets, the Fund can go 100% into cash and cash equivalents
in an effort to avoid downside risk. To help preserve investors’ capital,
in September 2008, for instance, we were invested mostly in cash and
cash equivalents.
In addition, our approach is consistent with the needs of many
investors who are moving away from benchmark-oriented strategies in
favor of highly active, unconstrained approaches that seek to limit
downside risk."
https://materials.proxyvote.com/Approved/MC0059/20120813/AR_139608.PDF
And when one buys MFLDX, you are not receiving this fund's past performance, but you are paying very high fees which will definitely affect uncertain future performance. And now that the fund has $2.3B in AUM, will it perform as well as it did when it was a much smaller fund ?
For portfolio diversification, investors may use other asset classes that are far less costly to own and have better track records than L/S funds.
I do own PAUIX (1.18% vs. 1.65%) which may short and use leverage, but it has limits on such exposures and is not obligated to use such tactics. But this fund is very expensive for a $21B AUM fund, and the more accessible PAUDX is even more expensive (1.58% vs. 2.05%). This fund is as close as I will come to owning a significant position in a L/S fund.
Kevin
See the struggles RYMFX (Rydex Managed Futures) has had since 2008 for an example of a fund - I think - not nimble enough given the structure, and which has continually been whipsawed for the last three years. More complex Managed Futures mutual funds ("2nd Generation" funds such as AQR's AQMNX after RYMFX's "1st Generation") still are having difficulty with these markets, although not quite as much as RYMFX and its basic structure (updating positions once a month.)
However, RYMFX has not as badly as Wisdomtree's Managed Futures etf (WDTI).
The Wasatch fund is definitely a very interesting recommendation, as I think Ralph Shive is an excellent manager.
Thanks again for your comments - greatly appreciated.
Amen ! Common investors like us need to focus most of our attention on having diversified global exposures to equities and FI. Then, when the core of the portfolio is shipshape, one should add exposures to the traditional diversifiers, commodities and RE.
All the while, investors should focus on reducing their expenses, and keeping their overall portfolio ER to far less than 1%. It continues to irk me that investors on this site and at M* continue to buy the more expensive "D" class of PIMCO funds when the less costly "I" class of these same funds are available for no or very low minimums at TDA, Scottrade, and Firstrade.
Our current diversifiers consist of PAUIX, PGDIX, ABRIX, AQRIX, and BIP.
Kevin
As noted in MFO's review of Marketfield (which I've decided to add to), "A great deal of the decision to invest in Marketfield comes down to an almost religious faith in the manager’s ability to see what others miss or to exploit opportunities that they don’t have the nerve or mandate to pursue. " (Um, couldn't one say that about many long-only managers, like a certain financial-heavy one that seems to have a near-religious following? Just sayin'.)
*As for RYMFX, you have a managed futures fund whose positions long/short commodities and currencies are updated once a month, which is a recipe for the fund to get whipsawed again and again. It worked in 2008 to the tune of 8% when the trend was straight down, but hasn't worked since. Managed futures is a strategy that many hedge funds have been quite successful with - but I just think a once a month adjustment just doesn't work in today's markets, and the fund appears broken for the meantime as it can't really manage to follow short term trends in the markets it follows. I noticed today that the fund is now described as following "medium term" trends, and I don't think that description was there before (and it's not really doing that, either.)
Additionally, a favorite (not in a good way, but sort of an "Alternative Investing Goes Wrong" example) bizarre alternative fund is Federated Absolute Return (FMAAX), which was renamed and had a manager change and has had one positive year (a gain of under 2% last year) in the last 5.
It's not that managed futures as a strategy doesn't work, but I continue to question whether it works well in a mutual fund format. Some alternative funds just haven't been very good, or - I think - are too strict with the long/short mandate.
There's instances where complexity works, and there's instances where complexity does not, and Hussman - who would have been better off not being 65% long (and completely hedged against it or nearly so) and instead just having a portfolio of staples and the like and cash and light hedging. I can understand a manager liking this (long) and not that (short), but I just don't understand Hussman's positioning versus his views - and I would be curious what the AUM is now vs 5 years ago.
Some alternative funds are just gone (NARFX, I think Janus' long/short fund is no longer?, there are a number of others), but a number have done pretty well this year, including the new Riverpark fund.
Anyway, I do continue to like BIP (although over the long-term that is certainly not without patches of volatility - but since everyone is now desperate for yield, it has been more low-key on average and has at times gone up when the market has gone down and been nicely uncorrelated), the AQR fund (although I'm actually starting to be a little curious as to how the high volatility/low volatility versions will perform when they come out) and Arnott's fund is certainly consistent. I like the Principal fund, but no longer own it.
Scott, thanks for your thoughts as always. BIP has been pulling back recently, and will likely continue to do so in the near future as valuations have gotten stretched. If we get a 8-10% retreat from the high, I may add to my position. And it continues to be poorly correlated with every asset that I can throw at it using assetcorrelation.com.
In the diversifier space, I have been closely tracking ARCIX, which essentially applies RP investing to the commodities space:
https://www.aqrfunds.com/Portals/0/FundDocuments/Basic Information/Fact Sheet/COMMF.I.pdf
This fund has reasonable expenses (net 1.15%), and I like that it has a targeted volatility range (10-24%) in an extremely volatile sector. This fund has no minimum at TDA and a $15 TF for TOS/TDA customers or $49.99 TF for TDA.
Kevin
Thanks again.
Too bad.
Will MFLDX always do this well? Probably not. But the point of owning something like it is to help lower the volatility of a portfolio. It has worked wonderfully well. Would I like to have lower costs to own it? Of course. Will it underperform in an extended bull market? Probably, although it outperformed in 2009 and got 95% of the index's return in 2010. Do I share all of Mr. Aronstein's views? Nope, but that is a darned good reason for me to own this fund. Nothing wrong with a little contrarian outlook.
These kind of funds are not for everyone, I agree. But something like MFLDX is a lot easier to grasp than many of the AQR products. When used in tandem with some other alternative strategies like LASYX, PAUIX, and with other things like CEF, PRPFX, and go-anywhere funds like IVAEX and FPACX, it's possible to make real inroads on volatility, real returns, and overall risk. Again, not for everyone. But if the next five years are anything like the last five, these could help provide a lot smoother ride than buying an index fund and hanging on for dear life.