seeking a little alpha around SP500 --- XRLV

davidrmoran

I have found the DSE_X funds to do a very good job, as anyone who reads my posts knows, and have often touted the great etn CAPE in addition or instead. But some don't like to deal in etfs / etns whose processes are not easy to understand, and for others it is unavailable, for example at ML.

So using MFOP and other sites, I am always looking for other seemingly consistent small improvements over VOO to sub for CAPE. (Straight low-vol indexes often do not show any outperformance.) This has led me to examine QUAL and LGLV (SP500 subclasses / subscreens, so to speak) and similar.

My latest discovery, while not CAPE (which is GO and HR), is XRLV, which tracks the SP500 Low-Volatility Rate Response Index, whose purported and so-far-so-good advantages are explained here:

http://www.indexologyblog.com/2018/06/06/maintaining-risk-reduction-while-reducing-interest-rate-risk/

https://investorplace.com/2018/06/4-funds-that-will-help-protect-against-rising-interest-rates/

Ted

@MFO Members: Davidmoran is" seeking a little alpha around SP500", so far that hasn't happened with XRLV. Let's look at the three year return for XRLV and SPY. Low volatility rate around the S&P 500, please. These niche mutual funds only prove that if you build it someone will come along and buy it. Just say no to niche funds.
Regards,
Ted
YTD:
XRLV =6.45%
SPY= 7.96%
1yr.
XRLV=17.96%
SPY= 19.80%
3yr.
XRLV=14.19%
SPY= 14.15%

Expense Ratio's:
XRLV=.25%
SPY= .09%

LewisBraham

@Ted Correct me if I'm wrong but is not a 14.19% 3-year annualized return higher than a 14.15% one? And with less volatility: performance.morningstar.com/funds/etf/ratings-risk.action?t=XRLV&region=usa&culture=en_US
Better returns with less risk equals alpha.

Ted

@Lewis: Yes. for three years, XRLV returned 0.4% more than PPY. However, the cummulative returns are XLRV 12.86% and SPY 13.97%. If you consider an .04% as being alpha, I have a bridge to sell you. How about the expense ratio's ?
Regards,
Ted

LewisBraham

Alpha, the actual term, is not just a measure of outperformance, but a calculation of risk adjusted outperformance. Also, you are mistating cumulative returns. This fund produced slightly better returns with less volatility, and earned an alpha stat of 1.94 for three years as a result--more than a little alpha exactly as davidrmoran stated: performance.morningstar.com/funds/etf/ratings-risk.action?t=XRLV&region=usa&culture=en_US

davidrmoran

@Ted,

You can do way better than SPY (cash drag, as uit). Let us compare with the very best, VOO.

Since the day after it launched, 4/7/15, 3-1/3y ago, $10k in XRLV has risen to $15,020 and change.

VOO, which handily beats SPY, has increased to $14,709 less change.

>$300, XRLV beats VOO, and forget SPY.

But for 3y, its outperformance is slight. And 2y shows underperformance, 1y the same but less so, and for increments thereof, ditto, ... except for the last month.

So: if not longterm, you won't go wrong with VOO (Ted, you might change your reference point).
But anyone can probably do slightly better than VOO, adding slightly more value, with no more volatility and likely less volatility. As LB notes.

Nothing approaches CAPE, though, alas.

So at ML it looks as though I will need to do something like 50-50 XRLV and QUAL.

Other suggestions (with backup) welcome.

Ted

@davidmoran: You are correct, I used the wrong index fund (SPY). So let's look at the index fund I use IVV against XRLV. As far as risk/rating, I not a big believer in the MPT. If your happy owning XRLV is the keys to the kingdom rather than just the old boring haystack, be my guest. In my opinion your are just kidding yourself.
Regards,
Ted
YTD:
XRLV =6.57%
IVV= 8.21%
1yr.
XRLV=17.96%
IV 26.12%
3yr.
XRLV=15.34%
IVV= 15.52%

Expense Ratio's:
XRLV=.25%
SPY= .04%

LewisBraham

@Ted Where are you getting these 3-year performance numbers? They are incorrect:
performance.morningstar.com/funds/etf/total-returns.action?t=XRLV&region=USA&culture=en_US

Ted

@Lewis: Thanks Lewis, the returns have been corrected.
Regards,
Ted

davidrmoran

VOO is better yet, and yes, it was the four months preceding Aug 15 that initially gave XRLV the nontrivial leg up.

Same with the last month.

So you get performance very close to VOO (or IVV) with possible added value of outperformance under rising rates. Win-win. All I was saying. No kidding anyone.

Hard to beat VOO. If there were significant downsides to QUAL, XRLV, and CAPE (none shown thus far), they would not be of interest. Yet they seem close to equal to VOO and, often enough, better than. That's why my discussion title was what it was.

But you do you, and stay argumentative.