Mutual Funds That Beat The Market - Part 3 (Asset Allocation)

Charles

Next up, a review of asset allocation or so-called balanced funds, of which there are more than 1200 (oldest share class only). This type of fund can hold a mixed portfolio of equities, bonds, cash and/or property.

I followed consistent methodology used for the equity funds tabulated in Part 2.

Again, I realize that balanced funds do not use either SP500 or T-Bill as a benchmark, but nonetheless I find the comparison helpful. More than one in four such funds actually have beaten the SP500 over their life times. It's a bit re-assuring to me, since these funds typically have lower volatility. And, nearly nine in ten have done better than cash.

In the tabulation below, purple means the fund was a top performer relative to SP500 over its life time, blue represents highest Sharpe (if not already a top APR), and yellow represents worst performing APR. I included other notables based on David's commentaries, past puts by catch22, scott, and other folks on MFO, and some funds of my own interest.

Here's the break-out, by inception date:



























Some observations:

- If you invested $10K in Mairs & Power Balanced MAPOX in Jan 1962, you would have more than $1M today and nearly four times more than if you had invested in American Funds American Balanced ABALX. But ABALX has $56B AUM, while the five star MAPOX has attracted less than $300M.

- Value Line Income & Growth VALIX does not even warrant coverage by M*.

- 2008 was a really bad year.

- Some attractive ETFs have started to emerge in this generally moderate fund type, including iShares Morningstar Multi-Asset Income IYLD.

- Putnam Capital Spectrum A PVSAX, managed by David Glancy, has outperformed just about everybody in this category since its inception mid 2009.

- RiverNorth Core Opportunity RNCOX, first reviewed on MFO in June 2011, has had a great run since its inception in 2007. Unfortunately, its availability is now limited.

For those interested, I've posted results of this thread in an Excel file Funds That Beat The Market - Nov 12.

Next up, fixed income funds.

BobC

Great presentation, Charles! We would separate out the balanced funds from the asset allocation and dynamic strategy (go anywhere) funds. For example, we look at VWELX differently than we do PAUIX, TIBIX, IVAEX, since the latter managers have more discretion in what they can own. PAUIX and IVAEX really can go anywhere or nowhere and can invest in just about anything. TIBIX has restrictions in terms of growing dividends. VWELX is very limited in how it can allocate. And glad to see you included Whitebox at the end. We are doing some due diligence on WBLFX. Its cousin, WBMIX, is also very different from the more traditional balanced funds. The only other thing I would suggest to Observer board members is to consider the importance of WHO runs the funds. In many ways, a manager change can negate previous historical risk/reward numbers. But thanks for your work here.

Charles

Thank you sir, my pleasure. Yes, I agree, there is a very broad mix in the batch analyzed.

Honestly, I'm just scratching a itch started by MJG...hopefully, will not fuss it too much and trust further due diligence will come from the very capable readers on this site.

I actually prefer the broader, more actively allocated funds, like WBMIX. Attracted I'm sure to the risk management enabled by the wider discretion you mention in both manager and method...at least in principle. Similarly for risk parity funds like AQRIX.

I think just about all of us here on MFO are into the WHO part, individual manager and firm. It is appealing to me to see funds like T. Rowe Price Capital Appreciation PRWCX endure a good manager departure, like Richard Howard, but the fund seems to be doing quite well now under David Giroux. On the other hand, Fidelity Magellan FMAGX has never really regained its stride after the legendary Peter Lynch departed. In fact, I do not think it has performed well in the last 15 years, yet it retains $14B AUM.

scott

Reply to @BobC: Please keep us updated with what you find regarding Whitebox. I'm pleased with WBMIX so far, but would be curious on what you discover about the company.

As for the thread, a very excellent presentation by Charles, and quite useful.

Ted

WBMIX: 30% portfolio in SPY and another 23% in cash, give me a break ! SPY has outperformed WBMIX YTD, not to mention the 1.46% expense ratio you are paying the fund managers to invest 30 cents on the dollar in a passive index SPY (S&P 500) that costs .09%. Not my kind of fund.
Regards,
Ted

Charles

Hi Ted. I know what you mean. Eric Cinnamond has 49% in cash and his fund ARIVX charges 1.42% ER. My only defense is that we pay folks like Cinnamond and Redleaf to assess markets and effectively time our investments, as active fund managers.

If WBMIX gets it right, that equities (and cash vs bonds) are place to be right now, then I have no problem with its fee and high allocation to SPY.

Here's quote from Whitebox Fund's most recent commentary:

Today, lots of people worry that stock prices are being artificially boosted by the excess liquidity created by the Fed. We don’t think that is true. The vectors of capital flows don’t support the idea that excess Fed dollars are going into stocks. So we don’t see stocks collapsing when the Fed takes away the money. Rather we see stocks eventually benefitting from a coming realignment of supply and demand.

But if they get it wrong, your critique will be spot-on.