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... when the holdings in DSENX reach the initial investment minimum of $100,000 for DSEEX, [then] a quick call to Fidelity is all that is needed to convert the shares. Since the initial investment minimum is $100,000 for DSEEX, we would not be able to convert the shares at a lower amount. If purchasing or converting in an IRA, though, the initial investment amount drops to $5,000. It is also correct that DSEEX does not participate in our No Transaction Fee (NTF) program, meaning it would have a transaction fee to buy into, whereas DSENX participates in the NTF program and therefore does not have the fee to buy into. You are able to review this information yourself via the fund prospectus, and under the Fees and Distributions tab on Fidelity.com.
That's as clear as mud. It says that there's a fee to "buy into" DSEEX, but doesn't say whether converting shares counts as "buying into" the fund.
Especially since it recognizes that purchases and conversions are different types of transactions: "If purchasing or converting in an IRA ..."
Though they might still both be regarded as buying shares. (I've described conversions as exchanges, which can be viewed as purchases paid for with shares rather than cash.)
I posted the following on M* several weeks ago but it's still current...First, managers invest in global bonds then, they look at 11 US stock sectors and select 5 undervalued sectors, then take 4 sectors out of 5 with the best momentum. They don't invest directly in the index but in a derivative that is similar to the index.
Basically, you get 200% investments for the price of 100%. You get real bonds + derivative of stock indexes.
To make even simpler, let's assume they invest in just one sector SPY and assume the bond portion makes 3-4% annually. It means, the performance will be SPY + 3-4% - (paying for derivatives). So, let's use DSEEX vs SPY + DBLTX(I know, it's not a global fund but you don't pay for derivatives. The results show that since inception DSEEX made more than 3% annually than the SPY which is SPY + 3.4%.
The fund is not specifically defensive in nature, [Jeffrey] Sherman explained, because it is not designed to outperform during a market pullback. Instead, it seeks to outperform the S&P 500 over the long term through the sector rotation of the Shiller Barclays CAPE US Sector Index, augmented by the returns on the fixed-income portfolio. ... ... the fund’s management style mitigates the danger of chasing performance, because the index it invests in can change its sector focus each month. It’s also interesting to note that during 2015, when large-value strategies fared poorly against the S&P 500, the fund outperformed both. And when the large-value category beat the S&P 500 in 2016, the fund again outperformed both.
@msf, >> That's as clear as mud. It says that there's a fee to "buy into" DSEEX, but doesn't say whether converting shares counts as "buying into" the fund.
I find it clear, but that may be because I have executed it so often; also, I've known for years that our reading comprehension differs.
Seeing as DSENX invests in those sectors that are the cheapest, I would it expect it to be less volatile than the market and that it would resist downdrafts better. Why don't the numbers play out this way? The downside capture ratios are all slightly greater than 100%.
As for buckets its not a simple answer and it can change every month. According to M*'s definition of the "buckets" the equity exposure is currently 39% large cap growth, 22% large cap blend and 30% large cap value plus 8% mid cap spread across the buckets.
The fund's definition of "value" is very different than M*'s. The fund buys 4 of the 5 "cheapest" sectors based on Shiller's CAPE ratio RELATIVE TO THAT SECTOR's 20 year history. That means Technology can have the highest current sector P/E ratio AND the highest CAPE ratio out there but if its CAPE ratio is relatively lower than other sectors compared to what its been over the last 20 years then its in the fund. This is why you can't "expect" the fund to be less volatile. It is not just a "value" fund according to M*'s definitions.
As @Carefree alluded to, the effective exposure of the fund is 50% equity and 50% bonds so suggesting its an Allocation fund with 50-70% equity makes some sense too.
When I want to "X-ray" the buckets my portfolio falls into I use the SPDR Select Sector etfs to represent the value of my holding because M* isn't able to do that. I forget about the bonds because my reason for holding DSEEX isn't for the bonds, its just an added bonus.
The derivatives, the swaps they use to get exposure to the sectors they want, have two main benefits as far as I can figure out.
The fund currently has $6.7 billion in AUM. That means if one of the sectors in the portfolio changes they would need to sell roughly $1.7 billion of one sector and invest it in the new sector at month-end. The SPDR Select Technology etf trades a little over $1 billion daily. They wouldn't be able to do that without impacting the market or spreading out their trades over a week or more, I don't think. AND, most of the calculations behind the choices are public information, so their moves could and likely would be arbitraged.
The swaps allow them to get all the exposure they want at the month-end price in a private transaction, quite frequently with Barclay's the last I checked. You'd have to assume Barclay's doesn't want to be short those sectors but they have the flexibility to hedge their "bet" with futures, options or actual share purchases over a more flexible time frame and that makes arbitraging the transactions more complicated.
The second benefit is that there's no cash outflow to "bet" using a swap. Six months from now, or whenever the swap expires, one party or the other will have to "pay" the other. In the meantime, though, they can use all that cash to buy bonds, which in my view helps to pay the "cost" of the swaps, reduces the expense ratio and can also increase the return of the fund if things go well.
I posted the following on M* several weeks ago but it's still current...First, managers invest in global bonds then, they look at 11 US stock sectors and select 5 undervalued sectors, then take 4 sectors out of 5 with the best momentum.
What percentage of the portfolio is stocks and what percentage bonds?
@Mona - not sure if this will help you or not but the security type breakdown as a % of net assets according to the annual report of March 31, 2019 says:
Non-Agency Commercial Mortgage Backed Obligations - 12.9% Collateralized Loan Obligations - 12.3 Non-Agency Residential Collateralized Mortgage Obligations - 12.0 Short Term Investments - 11.2 US Government and Agency Obligations - 9.1 Foreign Corporate Bonds - 9.0 Bank Loans - 7.9 US Government and Agency Mortgage Backed Obligations - 7.0 Asset Backed Obligations - 6.5 US Corporate Bonds - 4.8 Affiliated Mutual Funds - 3.4 Foreign Government Bonds, Foreign Agencies and Foreign Government Sponsored Corporations - 0.5 Exchange Traded Funds and Common Stocks - 0.0 Other Assets and Liabilities - 3.4
... managers ... look at 11 US stock sectors and select 5 undervalued sectors, then take 4 sectors out of 5 with the best momentum.
A couple of clarifications: The five candidate sectors are the most undervalued not relative to the market, but to themselves. This allows for the inclusion of traditionally overvalued sectors that may still be overvalued relative to the market, albeit somewhat less so than historically. People seem to think that the methodology is designed to select sectors that are undervalued relative to the market. That is not the case.
Edit: @LLJB - I composed this before seeing your better post on relative valuations. One sometimes sees 20 year lookback periods (as you described for the CAPE values used) and sometimes 10 year periods. Each of the CAPE values itself is computed with a 10 year lookback, so the raw data that feeds into this index could extend as far back as 30 years!
Here's a paper that shows for the 11 sectors, in which months during 2018 they were included in the Shiller Barclays CAPE® US Sector RC 10% USD TR Index. That index picks the same four sectors as the Shiller Barclays CAPE® US Core Sector Index. The only difference is that the former adjusts its market exposure up or down to temper volatility. https://indices.barclays/IM/33/en/efsdocument.app?documentId=374&filename=Shiller10PerformancAnalysis.pdf
Two sectors were included in all twelve months: technology and healthcare. IMHO, a fund that maintains a steady 50% exposure to technology and healthcare (combined) is no value fund. The sectors may have had low valuations relative to their historical norms, but they were not low relative to the market. See, e.g. US News, The Most Overvalued and Undervalued Stock Market Sectors of 2019, Jan 11, 2019.
Based on forward looking P/Es (I believe Shiller uses retrospective figures), technology and healthcare were smack in the middle of the pack. Compared to their historical P/Es, they're undervalued (as are several sectors according to the article).
Regarding momentum, that's based on a one year look back, as opposed to the ten year look back for Relative CAPE® Indicator (historical valuation).
>> That's as clear as mud. It says that there's a fee to "buy into" DSEEX, but doesn't say whether converting shares counts as "buying into" the fund.
I find it clear, but that may be because I have executed it so often; also, I've known for years that our reading comprehension differs.
If it was even possible that your experience influenced your read, regardless of whether it actually did, then the text was not without objective ambiguity. Either that, or you sometimes read things differently than the plain text on the page. As might I.
Sometimes the custodian will issue a trade confirmation on the swap, which makes it look like we sold one share class and bought into another. Though technically that is true, it is essentially a non-taxable swap into a different share class of the same mutual fund, albeit one with a lower expense ratio.
@Mona - not sure if this will help you or not but the security type breakdown as a % of net assets according to the annual report of March 31, 2019 says:
Non-Agency Commercial Mortgage Backed Obligations - 12.9% Collateralized Loan Obligations - 12.3 Non-Agency Residential Collateralized Mortgage Obligations - 12.0 Short Term Investments - 11.2 US Government and Agency Obligations - 9.1 Foreign Corporate Bonds - 9.0 Bank Loans - 7.9 US Government and Agency Mortgage Backed Obligations - 7.0 Asset Backed Obligations - 6.5 US Corporate Bonds - 4.8 Affiliated Mutual Funds - 3.4 Foreign Government Bonds, Foreign Agencies and Foreign Government Sponsored Corporations - 0.5 Exchange Traded Funds and Common Stocks - 0.0 Other Assets and Liabilities - 3.4
The affiliated mutual fund is a DoubleLine bond fund. On this balance sheet, there are no equities. I believe the other assets and liabilities include the net value of the swap contracts.
Just as PIMCO StocksPlus PSTKX has no equities but does its "magic" with derivatives, so does this fund. DSEEX works similarly to the way M* describes the PIMCO fund. Key differences of the PIMCO fund are: different index tracked, done with futures rather than swaps, and differently manged bond portfolio (DSEEX seems more aggressive, but that should be checked):
It seeks to track the S&P 500 using futures and generate excess returns of 75-125 basis points over a market cycle from an actively managed short-term bond strategy. As the derivatives require only a small cash outlay, the fund can provide 100% notional exposure to the performance of both the S&P 500 and the bond portfolio.
When you graph PSTKX ($1M minimum; PSPAX is the investor class) vs IVV over periods shorter than the last 8-9y, the added value from the bond sauce sure looks tiny, sometime nonexistent, and also sometimes worsening rather than buffering dips and volatility. I wonder what its appeal is, really, when one would probably do better holding IVV and PONAX.
Rather than getting deep in the weeds of the magic mechanisms and contents of these funds, I find it easier just to be empirical and look at performance: consistent tracking of SP500, plus sauce. Same as seeing Fido means a share swap is not a buy. Fascinating explanation from Parsec, @msf, thanks --- technically true, but essentially something else. Love it. Editing financial and other lawyers, and their legalese and lay translations of same, has always been among the funner parts of my career work.
The Barclay's article linked by @msf helped me a lot in grasping how the CAPE sector rotation works. It's illuminating to see what sectors never made it in at all and that energy was in for only one month. If CAPE had a "value" tilt, sectors such as utilities, real estate, financials, and materials might be selected, but they were not. Sherman's comment as cited above by @davidmoran, makes it clear why investors should not expect the fund to act like a bulwark against market downturns.
I am happy with my holdings in DSENX because the strategy and implementation are way beyond what I could replicate on my own. Over my investing years I've read explanations by several smart-seeming managers (anyone remember Ryan Caldwell?) whose funds never produced anything worthwhile. The CAPE and DoubleLine people strike me as being really smart and they are producing returns for me and others on this board.
I have also owned the CAPE ETN at times because I like to trade certain CEFs or ETFs when I see a possible market inefficiency. As I have said before, CAPE is a tough fund to trade because the spreads are so wide. Only occasionally is there an advantage to exploit.
@BenWP, What brokerage do you use for CAPE? Bid-ask of 16 cents on $134 (if I am reading the Fidelity listing right) does not sound so wide, and it tracks its NAV pretty closely. Am I missing something?
Schwab. At 134.57, at 3:40PM, 134.48 bid and 134.75 ask, so a 27 cent spread. What I have found, if I'm buying, is to put in a pretty low offer, maybe a cent or two above the low of the day and hope to get that price at the end of the day. Volume is really low, so it can be frustrating.
Seeing as DSENX invests in those sectors that are the cheapest, I would it expect it to be less volatile than the market and that it would resist downdrafts better. Why don't the numbers play out this way? The downside capture ratios are all slightly greater than 100%.
Apparently Gundlach also thinks so:
“We think [DSENX/DSEEX is] a better mousetrap,” he said, pointing to the fact that using CAPE as an investment strategy has shown lower volatility and a higher rate of return over time. Hopefully, the fixed-income expert says, it will result in “a tastes great, less filling type of investment experience.”
I don't know what he was looking at. According to Porfolio Visualizer, over the lifetime of CAPE, VVIAX and VFINX have been similarly volatile (std. dev about 11) based on monthly returns, while CAPE's std dev was nearly 12.
There's greater separation in maximum drawdowns: about 11% for the value index, 13½% for the 500 index, and 15¼% for CAPE.
\\\ ... pointing to the fact that using CAPE as an investment strategy has shown lower volatility and a higher rate of return over time
>> I don't know what he was looking at.
Well, he's speaking after CAPE has been in operation only 54 weeks, right?
Sure, but he wasn't talking about literally buying the CAPE ETN as an investment strategy. (CAPE doesn't appear in the DoubleLine fund, to state the obvious). The index on which both DSENX and CAPE are based was launched by Barclays in 2012. However, Barclays calculated the index values at least as far back as 2012. (See CAPE prospectus, p. PS-33, pdf p. 36).
Take your pick: Gundlach was not aware of the available data as he promoted his fund, representing volatility figures of those 54 weeks as being "over time"; he was aware of the available data going back a decade but chose to disregard it in representing the investment strategy as having low volatility; or he did consider that data, it confirmed his claim of lower relative volatility, and that volatility has changed significantly between the 2002-2013 period and the 2012-2019 (present) period.
Any better alternatives that might make one more comfortable?
To my eye it does not show 'that volatility has changed significantly between the 2002-2013 period'. Yours?
MFOP's 5y UI for DSEEX is slightly higher than for CAPE (which is slightly higher than for VFINX, yes), indicating the Gundlach bond sauce does not modulate anything, by my grokking anyway.
- boilerplate from DoubleLine which somehow I missed before: 'The Fund may use leverage which may cause the effect of an increase or decrease in the value of the portfolio securities to be magnified and the Fund to be more volatile than if leverage was not used.'
- smartguy FD1001 on M* forums has done extensive crunching on managing volatility.
Q&A not by him (which a look at CAPE could've partly answered): Q - One thing that's confusing: is it DSEEX's bond sleeve that's been responsible for its 3% annual outperformance over SPY? Or is it the Shiller sector selection methodology that favors the cheapest sectors? Does anyone know? Have the fund managers commented on this point? A - Last webcast covered this. Over last 5-1/2 years of fund existence, the fixed income portfolio annualized return was 296 bps. Over the same timeframe, DSEEX outperformed the S&P500 Index by 340 bps per year, NET of expenses (trading costs and expense ratios). Note: The fixed income portfolio is designed to be low volatility with the objective of outperforming cash. It is used as collateral to fund the total return swap on the Schiller Barclay CAPE Index.
Interesting link, @davidmoran, to 2013 MFO commentary. The link to Sam Lee's M* article on CAPE is worthwhile, particularly where he says he'd prefer more history than just back to 2002. He was also very prescient in saying he'd feel more comfortable if CAPE were shown to work in overseas markets. As members have said here, DEULX has not really shown much until this year.
My re-reading also reminded me that the Oakseed Boys were announced with some fanfare in that issue of MFO and RPHYX appeared to be a world-beater. History was not kind to SEEDX (liquidated in 2017) and RPHYX tested shareholders' patience when Mr. Sherman seemed to stumble in trying to explain a period of severe under performance. I previously in this thread noted (obliquely) that Ryan Caldwell's Chiron Capital Allocation (CCAPX) fund benefited from a nice write up in MFO and then promptly showed it couldn't keep up with its M* bogey. The success of CAPE really stands out against a backdrop of a several failed efforts to invent a new mousetrap.
I am bailed out of DLEUX altogether, after it broke even. DSEEX has been impressively consistent indeed. I wonder if I will stay 2/3 or more in it as I continue to age out .
Don’t own DSENX. Glad so many folks have made a mint with it. At the risk of being a wet rag - when you see a topic like this with 1.7 K views and 2 weeks running, it might be time to consider moving on. I remember when PRPFX was the rage here back in 2011 - followed by a few losing years after everybody had piled in. No intent to disparage either fund.
(Disclosure: I bought PRPFX about the time others had finished fleeing and still own a decent slice.)
Geez @hank, I hope you're not pulling a Ted as in "time to close this discussion" are you? I think it's been a good exercise and I don't recall anyone advocating the fund as a must own. Folks need to decide that for themselves and then be responsible for their decision.
Edit to add: I'd rather look at discussions with the characteristics you described such as lots of views and running time (i.e.interesting) than a page full of links with no comments.
Hey, @Mark. Thanks for noting that my wording here could be taken a couple different ways. I thought about editing it at the time for better clarity but didn’t. No - Not trying to be another Ted. Good discussion with some of the brightest folks on the board opining. Keep it going. Sure beats talking politics and other stuff that creeps in.
What I meant to say: If I owned a fund that had rewarded me as handsomely as this one for a number of years and it had become a really “hot” topic on discussion boards, I’d consider selling some of it. Intense interest is sometimes a contrary indicator. Just me. I tend to be overly cautious and generally sell something too soon.
You make a good point @hank. There have been plenty of funds like PRPFX. Looked great against a specific economic backdrop. Not as good as just the average balanced fund over a market cycle though. I owned it for a time also. I guess you never know. DSENX has surely played well in the bull market. No one can predict what will happen when the economy shifts to bear.
@MikeM- I just looked again at the shift stick in my pickup- don't see any gear marked "bear". Is "bear" similar to "reverse"? Would a 4-wheel drive (or the Trumpian economy) have "compound bear"?
Comments
fyi, just got this from Fido c/s:
... when the holdings in DSENX reach the initial investment minimum of $100,000 for DSEEX, [then] a quick call to Fidelity is all that is needed to convert the shares. Since the initial investment minimum is $100,000 for DSEEX, we would not be able to convert the shares at a lower amount.
If purchasing or converting in an IRA, though, the initial investment amount drops to $5,000.
It is also correct that DSEEX does not participate in our No Transaction Fee (NTF) program, meaning it would have a transaction fee to buy into, whereas DSENX participates in the NTF program and therefore does not have the fee to buy into.
You are able to review this information yourself via the fund prospectus, and under the Fees and Distributions tab on Fidelity.com.
Especially since it recognizes that purchases and conversions are different types of transactions: "If purchasing or converting in an IRA ..."
Though they might still both be regarded as buying shares. (I've described conversions as exchanges, which can be viewed as purchases paid for with shares rather than cash.)
Basically, you get 200% investments for the price of 100%. You get real bonds + derivative of stock indexes.
To make even simpler, let's assume they invest in just one sector SPY and assume the bond portion makes 3-4% annually. It means, the performance will be SPY + 3-4% - (paying for derivatives). So, let's use DSEEX vs SPY + DBLTX(I know, it's not a global fund but you don't pay for derivatives. The results show that since inception DSEEX made more than 3% annually than the SPY which is SPY + 3.4%.
From a year and a half ago:
https://www.marketwatch.com/story/doubleline-fund-doubles-the-returns-of-rivals-by-uncovering-a-curious-strategy-2017-11-30
The fund is not specifically defensive in nature, [Jeffrey] Sherman explained, because it is not designed to outperform during a market pullback. Instead, it seeks to outperform the S&P 500 over the long term through the sector rotation of the Shiller Barclays CAPE US Sector Index, augmented by the returns on the fixed-income portfolio. ...
... the fund’s management style mitigates the danger of chasing performance, because the index it invests in can change its sector focus each month.
It’s also interesting to note that during 2015, when large-value strategies fared poorly against the S&P 500, the fund outperformed both. And when the large-value category beat the S&P 500 in 2016, the fund again outperformed both.
@msf,
>> That's as clear as mud. It says that there's a fee to "buy into" DSEEX, but doesn't say whether converting shares counts as "buying into" the fund.
I find it clear, but that may be because I have executed it so often; also, I've known for years that our reading comprehension differs.
The fund's definition of "value" is very different than M*'s. The fund buys 4 of the 5 "cheapest" sectors based on Shiller's CAPE ratio RELATIVE TO THAT SECTOR's 20 year history. That means Technology can have the highest current sector P/E ratio AND the highest CAPE ratio out there but if its CAPE ratio is relatively lower than other sectors compared to what its been over the last 20 years then its in the fund. This is why you can't "expect" the fund to be less volatile. It is not just a "value" fund according to M*'s definitions.
As @Carefree alluded to, the effective exposure of the fund is 50% equity and 50% bonds so suggesting its an Allocation fund with 50-70% equity makes some sense too.
When I want to "X-ray" the buckets my portfolio falls into I use the SPDR Select Sector etfs to represent the value of my holding because M* isn't able to do that. I forget about the bonds because my reason for holding DSEEX isn't for the bonds, its just an added bonus.
The derivatives, the swaps they use to get exposure to the sectors they want, have two main benefits as far as I can figure out.
The fund currently has $6.7 billion in AUM. That means if one of the sectors in the portfolio changes they would need to sell roughly $1.7 billion of one sector and invest it in the new sector at month-end. The SPDR Select Technology etf trades a little over $1 billion daily. They wouldn't be able to do that without impacting the market or spreading out their trades over a week or more, I don't think. AND, most of the calculations behind the choices are public information, so their moves could and likely would be arbitraged.
The swaps allow them to get all the exposure they want at the month-end price in a private transaction, quite frequently with Barclay's the last I checked. You'd have to assume Barclay's doesn't want to be short those sectors but they have the flexibility to hedge their "bet" with futures, options or actual share purchases over a more flexible time frame and that makes arbitraging the transactions more complicated.
The second benefit is that there's no cash outflow to "bet" using a swap. Six months from now, or whenever the swap expires, one party or the other will have to "pay" the other. In the meantime, though, they can use all that cash to buy bonds, which in my view helps to pay the "cost" of the swaps, reduces the expense ratio and can also increase the return of the fund if things go well.
What percentage of the portfolio is stocks and what percentage bonds?
Non-Agency Commercial Mortgage Backed Obligations - 12.9%
Collateralized Loan Obligations - 12.3
Non-Agency Residential Collateralized Mortgage Obligations - 12.0
Short Term Investments - 11.2
US Government and Agency Obligations - 9.1
Foreign Corporate Bonds - 9.0
Bank Loans - 7.9
US Government and Agency Mortgage Backed Obligations - 7.0
Asset Backed Obligations - 6.5
US Corporate Bonds - 4.8
Affiliated Mutual Funds - 3.4
Foreign Government Bonds, Foreign Agencies and Foreign Government Sponsored Corporations - 0.5
Exchange Traded Funds and Common Stocks - 0.0
Other Assets and Liabilities - 3.4
The five candidate sectors are the most undervalued not relative to the market, but to themselves. This allows for the inclusion of traditionally overvalued sectors that may still be overvalued relative to the market, albeit somewhat less so than historically. People seem to think that the methodology is designed to select sectors that are undervalued relative to the market. That is not the case.
Edit: @LLJB - I composed this before seeing your better post on relative valuations. One sometimes sees 20 year lookback periods (as you described for the CAPE values used) and sometimes 10 year periods. Each of the CAPE values itself is computed with a 10 year lookback, so the raw data that feeds into this index could extend as far back as 30 years!
Here's a paper that shows for the 11 sectors, in which months during 2018 they were included in the Shiller Barclays CAPE® US Sector RC 10% USD TR Index. That index picks the same four sectors as the Shiller Barclays CAPE® US Core Sector Index. The only difference is that the former adjusts its market exposure up or down to temper volatility.
https://indices.barclays/IM/33/en/efsdocument.app?documentId=374&filename=Shiller10PerformancAnalysis.pdf
Two sectors were included in all twelve months: technology and healthcare. IMHO, a fund that maintains a steady 50% exposure to technology and healthcare (combined) is no value fund. The sectors may have had low valuations relative to their historical norms, but they were not low relative to the market. See, e.g. US News, The Most Overvalued and Undervalued Stock Market Sectors of 2019, Jan 11, 2019.
Based on forward looking P/Es (I believe Shiller uses retrospective figures), technology and healthcare were smack in the middle of the pack. Compared to their historical P/Es, they're undervalued (as are several sectors according to the article).
Regarding momentum, that's based on a one year look back, as opposed to the ten year look back for Relative CAPE® Indicator (historical valuation).
If it was even possible that your experience influenced your read, regardless of whether it actually did, then the text was not without objective ambiguity. Either that, or you sometimes read things differently than the plain text on the page. As might I. Emphasis added . ParsecFinancial, What is a Mutual Fund Share Class Exchange
Just as PIMCO StocksPlus PSTKX has no equities but does its "magic" with derivatives, so does this fund. DSEEX works similarly to the way M* describes the PIMCO fund. Key differences of the PIMCO fund are: different index tracked, done with futures rather than swaps, and differently manged bond portfolio (DSEEX seems more aggressive, but that should be checked):
I wonder what its appeal is, really, when one would probably do better holding IVV and PONAX.
Rather than getting deep in the weeds of the magic mechanisms and contents of these funds, I find it easier just to be empirical and look at performance: consistent tracking of SP500, plus sauce. Same as seeing Fido means a share swap is not a buy. Fascinating explanation from Parsec, @msf, thanks --- technically true, but essentially something else. Love it. Editing financial and other lawyers, and their legalese and lay translations of same, has always been among the funner parts of my career work.
I am happy with my holdings in DSENX because the strategy and implementation are way beyond what I could replicate on my own. Over my investing years I've read explanations by several smart-seeming managers (anyone remember Ryan Caldwell?) whose funds never produced anything worthwhile. The CAPE and DoubleLine people strike me as being really smart and they are producing returns for me and others on this board.
I have also owned the CAPE ETN at times because I like to trade certain CEFs or ETFs when I see a possible market inefficiency. As I have said before, CAPE is a tough fund to trade because the spreads are so wide. Only occasionally is there an advantage to exploit.
What brokerage do you use for CAPE?
Bid-ask of 16 cents on $134 (if I am reading the Fidelity listing right) does not sound so wide, and it tracks its NAV pretty closely. Am I missing something?
I don't know what he was looking at. According to Porfolio Visualizer, over the lifetime of CAPE, VVIAX and VFINX have been similarly volatile (std. dev about 11) based on monthly returns, while CAPE's std dev was nearly 12.
There's greater separation in maximum drawdowns: about 11% for the value index, 13½% for the 500 index, and 15¼% for CAPE.
>> I don't know what he was looking at.
Well, he's speaking after CAPE has been in operation only 54 weeks, right?
Outperforming VFINX 2.4% in that year-plus, with both up >30%.
It does look like the peaks and dips are very slightly greater than SP500 in that timeframe, hard to tell from the graphs, but I think so.
Take your pick: Gundlach was not aware of the available data as he promoted his fund, representing volatility figures of those 54 weeks as being "over time"; he was aware of the available data going back a decade but chose to disregard it in representing the investment strategy as having low volatility; or he did consider that data, it confirmed his claim of lower relative volatility, and that volatility has changed significantly between the 2002-2013 period and the 2012-2019 (present) period.
Any better alternatives that might make one more comfortable?
https://finance.yahoo.com/news/barclays-shiller-cape-sector-rotation-123731560.html
You mean 2002, correct?
That is odd he would make such a bald volatility claim, as I study this graph, yes.
https://s.yimg.com/ny/api/res/1.2/VZJ_aAz5A0gSKHXbVIpZZg--~A/YXBwaWQ9aGlnaGxhbmRlcjtzbT0xO3c9NDgwO2g9MzY3O2lsPXBsYW5l/http://globalfinance.zenfs.com/en_us/Finance/US_AHTTP_SeekingAlpha_ETF_H_LIVE/saupload_cape-hypo_thumb1.jpg
To my eye it does not show 'that volatility has changed significantly between the 2002-2013 period'. Yours?
MFOP's 5y UI for DSEEX is slightly higher than for CAPE (which is slightly higher than for VFINX, yes), indicating the Gundlach bond sauce does not modulate anything, by my grokking anyway.
- boilerplate from DoubleLine which somehow I missed before:
'The Fund may use leverage which may cause the effect of an increase or decrease in the value of the portfolio securities to be magnified and the Fund to be more volatile than if leverage was not used.'
- smartguy FD1001 on M* forums has done extensive crunching on managing volatility.
https://community.morningstar.com/t5/Exchange-Traded-Funds/Low-Volatility-ETFs/m-p/9630
shoutout to DSEEX
similar more recently here:
https://community.morningstar.com/t5/Allocation-Balanced-Funds/DoubleLine-Shiller-Enhanced-CAPE-I-DSEEX/td-p/7228
Q&A not by him (which a look at CAPE could've partly answered):
Q - One thing that's confusing: is it DSEEX's bond sleeve that's been responsible for its 3% annual outperformance over SPY? Or is it the Shiller sector selection methodology that favors the cheapest sectors? Does anyone know? Have the fund managers commented on this point?
A - Last webcast covered this. Over last 5-1/2 years of fund existence, the fixed income portfolio annualized return was 296 bps. Over the same timeframe, DSEEX outperformed the S&P500 Index by 340 bps per year, NET of expenses (trading costs and expense ratios). Note: The fixed income portfolio is designed to be low volatility with the objective of outperforming cash. It is used as collateral to fund the total return swap on the Schiller Barclay CAPE Index.
FD1001 MFO-type profile:
https://community.morningstar.com/t5/user/viewprofilepage/user-id/3408 ;
more:
http://socialize.morningstar.com/NewSocialize/blogs/fd1000/archive/2014/05/14/investing-and-my-basic-system.aspx
Historical shoutouts:
DSnowball (https://www.mutualfundobserver.com/2013/11/november-1-2013/) alerted us all to Lee's kickoff analysis almost 7y ago:
https://www.morningstar.com/articles/583010/cape-crusader.html
My re-reading also reminded me that the Oakseed Boys were announced with some fanfare in that issue of MFO and RPHYX appeared to be a world-beater. History was not kind to SEEDX (liquidated in 2017) and RPHYX tested shareholders' patience when Mr. Sherman seemed to stumble in trying to explain a period of severe under performance. I previously in this thread noted (obliquely) that Ryan Caldwell's Chiron Capital Allocation (CCAPX) fund benefited from a nice write up in MFO and then promptly showed it couldn't keep up with its M* bogey. The success of CAPE really stands out against a backdrop of a several failed efforts to invent a new mousetrap.
I am bailed out of DLEUX altogether, after it broke even. DSEEX has been impressively consistent indeed. I wonder if I will stay 2/3 or more in it as I continue to age out
1.6% above CAPE alone;
and even a percent or so above TRBCX and FCNTX.
A hair under FLVCX, of all things, which is otherwise not good at all, and even a hair over QQQ.
So again wow, so far.
(Disclosure: I bought PRPFX about the time others had finished fleeing and still own a decent slice.)
Edit to add:
I'd rather look at discussions with the characteristics you described such as lots of views and running time (i.e.interesting) than a page full of links with no comments.
What I meant to say: If I owned a fund that had rewarded me as handsomely as this one for a number of years and it had become a really “hot” topic on discussion boards, I’d consider selling some of it. Intense interest is sometimes a contrary indicator. Just me. I tend to be overly cautious and generally sell something too soon.
And sorry I wasn't more clear in the beginning.
@MikeM- I just looked again at the shift stick in my pickup- don't see any gear marked "bear". Is "bear" similar to "reverse"? Would a 4-wheel drive (or the Trumpian economy) have "compound bear"?