Any OAKBX owners freaked out?

Shostakovich

In light of the bond discussion below, I checked OAKBX's bond portfolio on M*.

As best I can determine using the basic M* portfolio view, OAKBX's bond sleeve is higher duration than the benchmark and category average.

Perhaps this doesn't account for TIPS holdings, but...yeesh !

Can anyone lend any insight here? I've held the fund for a while and have done well enough and generally respect Oakmark as an organization.

Thanks.

catch22

It appears the total bond holdings are about 13% of the fund; and the majority of "fixed income" is between the 5 and 10 year duration. My take at this time is that this range is a decent place to be parked for these type of holdings. Not as much going on at the lower end, without help from a steroid bond fund, and some think more risk on the longer end.
An earlier prospectus indicates mostly U.S. treasury issues, with some TIPs type holdings and also Canadian short term T-bills.
If I held this fund, I would not think the holdings or duration were out of line, as the fund is nominally a balanced/moderate style fund.
My 2 cents worth........

Shostakovich

Reply to @catch22: thanks for the sanity check, catch.

Cheers.

hank

Third Quarter Report 2012
http://www.oakmark.com/reports/2012_q3/12-15943-1_enh_C6-1.pdf

As of June 30, 2012, Oakmark Equity and Income Fund Holdings:
Common Stock 70.1%. Fixed Income 22.4%. Short Term Investments 6.4%. Approximate cash on hand 1.1%

Re Above: Fixed Income (22.4%) With the exception of less than 1% invested in Norwegian government notes, this consists of U.S. government debt obligations. Of these TIPS comprise just under 15% of the total. The TIPS also have the longest dated maturities, some extending out to 2020. The remainder are mostly Treasury issues with substantially shorter maturities - most 3 years or less.

Re Above: Short Term investments (6.4%) These appear to be about evenly split between a repurchase agreement involving Federal Home Loan Bank short duration securities and Canadian government short term bonds. Less than 1% consists of commercial paper.

Re Above: We can infer the fund does not hold any junk bonds.

In his commentary, Clyde McGreggor, Portfolio Manager notes the fund's "... low fixed income duration of 1.7 years." If this sounds at variance with the stated maturities above, it's because maturity and duration are two different animals.

Link: The difference between bond duration and maturity
http://moneycation.blogspot.com/2011/02/difference-between-duration-and.html

Shostakovich

Reply to @hank: much obliged. appreciate the link; I'll have to dissect that later when I have a clearer head. I'm disposed to trust Clyde McGregor & Co., but will do some more due diligence if I can ever find the time over the next month. Thanks for pitching in .

Cheers.

hank

Reply to @Shostakovich: Yep - Clear head helps with this stuff.
Glad to assist. (It's good to check on what they're doing with my $$ occasionally:-)

BobC

Hank has a very good point. I do not spend much time looking at average maturities. But I DO spend time looking at durations. A duration of 1.7 is very much on the low side, especially when compared to some typical bond indexes and ETFs. For example, OAKBX's duration is very similar to iShares Barclasy 1-3 Yr Treasury Bond SHY. It is lower than Vanguard Limited-Term Tax-Exempt VMLTX's 2.31years. All of the domestic bond managers we are currently using have reduced their durations in the last 1-2 years. McGregor is right in line with our experience in this regard.

Shostakovich

Reply to @BobC: Thanks, Bob. Always good to get your input and insights.

Old_Joe

Reply to @BobC: Hi Bob- I've tried looking at various sources for the duration or maturity info, but can't seem to find it. Could you give us a little more info in this area?

Thanks- OJ

Mark

Reply to @Old_Joe: Try going to the M* profile of the fund. Click on the Portfolio link. Under Style Details click on the Bond Style box or heading. Scroll down to see the Bond Maturity breakdown.

Old_Joe

Reply to @Mark: Thanks much, Mark. Will do.

BobC

Reply to @Old_Joe: Sometimes M* does not have the information or does not report what the fund gives them. Most of the time, however, the fund company website will have the duration/maturity/etc information available, either in the most recent fact sheet (usually in pdf version) or in the detailed fund descriptions.

hank

Reply to @Old_Joe: Along with Bob C, I'll say it's hard to beat semi & annual reports for relevant information. If you can't get a pretty good idea of what they're doing from these, it's probably time to look elsewhere. Some may not specifically mention duration, but will leave clear indications about their commitment (of lack thereof) to fixed income. Going one step further - if I called their customer service reps and they were unable or unwilling to provide important data like bond duration, ... than #*#!* Time to move on! It might take them some time, but they ought to be able to provide that information.

Interesting that so many find M* of great value. I don't - except that their star rating is one element considered in evaluating a fund. For a quick overview, much prefer the Lipper scorecard system. (However, the big variable is the peer group in which they place a fund.) I'd give John Hussman failing grades as a fund manager, but have found his discussions of bond maturity & duration to be both instructive and insightful over the years. These sometimes appear in the HSTRX portion of his weekly commentaries. FWIW. Regards

Old_Joe

Thanks to all for the info. You guys are great.

Regards- OJ