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Dodge & Cox Emerging Markets Stock Fund in registration
1. Another D&C fund -- so soon? Are they under new management, or is this really in the best interest of shareholders?
2. If D&C were to add another fund, I kind of think they should add a Global Balanced Fund (Global Stocks, Global Bonds) before doing an EM fund. But, hey...
They were highly reco'd in the early 00s and I was really respecting them. I was in DODFX for a while and got burned by their 'disciplined' strategy of refusing to sell bank stocks despite the tides shifting right in front of them -- just like how Arnott kept a 20% SPX short position in PAUIX to maintain their 'discipline' despite the markets going nowhere but up for over a decade. I got out and never looked back.
One would think a team approach at D&C would help to balance out their strategy. Especially with large AUM it is critical to move the right moves as required in actively managed funds. The other choice is to close the fund, but this would limited their management fee.
Them starting an EM fund makes sense to me. Most pundits believe there is more upside for EM stocks going forward. I assume it will have a value tilt like all their funds since that is their forte. That likely means heavier financial stocks I would think.
@rfono -- there was a writeup in one of the financial / investing journals about D&C following the 2008 calamity. D&C allegedly improved their process by bringing fixed income committee members / insights in on stock committee selection process.
I am reminded of something I believe David wrote about D&C (paraphrased): "...if these guys can't get it write, then we should all just go home and index...".
I think as an active shop, in terms of integrity and process they're likely top 10% (compared with a Fairholme Fund, or Royce & Friends/Partners/Associates). Been a huge fan of D&C and Oakmark, among others. Oakmark has certainly taken it's lumps. I think with active, since the strategy can underperform in the short an medium terms you have to go with process.
Not a huge fan of the AUM grab which is evident at D&C and others, but to some extent that goes with the reasonable fees.
Vanguard offers two global balanced funds - Global Wellington, VGWLX, and Global Wellesley, VGWIX. Both funds started in 2017 and they are managed by the well respected sub-advisor, Wellington.
Expense ratio: Global Wellesley, 0.42% (Investor class), 0.32% (Admiral class). Global Wellington, 0.46% (Investor class), 0.36% (Admiral class).
Emerging market exposure: Global Wellington, 2.2% and Global Wellesley, 5.9%. True to Wellington conservative nature, they invested in Taiwan Semiconductor and Samsung in EM space.
@Sven. High hopes for VGWLX and VGWIX. I do believe that every D&C fund 'cept DODWX has beaten its peers since launch (or at least back to 1960). Give it time. But yay, I picked wrong in 2002 going all in on "one fund for life" DODBX instead of VWELX. So much pain! Sucker for value, even now! @gmarceau. I think that is a good move. (If you can stand the pain.) c
@Charles, Used to invest with D&C but gradually move on elsewhere. They have grew too big for me and slow to react to the market condition. After 2008, many of their stock funds trail their benchmarks. On value investing, I prefer Wellington as a subadvisor to Vanguard's Wellington and Wellesley funds. While VGWLX and VGWIX are relatively new and Wellington is more known for their domestic expertise, they seem to hold up relatively well during March's drawdown.
While Wellington has been associated with Vanguard for as long as Vanguard's been around, it does also submanage many funds elsewhere. A couple of the other families that come to mind are:
Harbor Funds: HMCNX (not cheap, a new midcap fund)
Hartford Funds: "Our mutual funds (with the exception of certain fund of funds) are primarily sub-advised by Wellington Management Company LLP or Schroder Investment Management North America Inc." Examples: HAOYX, HGIYX (5* fund compares favorably with 4* VDIGX)
I'd still look first to Vanguard for lower expenses, but there are other families to consider as well. Especially as one moves away from domestic large cap value, which is where Vanguard/Wellington is focused. Wellington's been managing foreign funds for at least a quarter century; see, e.g. HAOYX.
Thank you. I did not know Wellington subadvises other firms. HAOYX is quite a different fund than VGWLX. First two holding are EM stocks - Tencent and Alibaba.
I was interviewed by the folks at Fund Intelligence on the day that the D&C prospectus was filed. Three guesses that I shared with them:
D&C are not under any real asset pressure. Firm AUM is holding up nicely. Even if they were looking for an asset grab, emerging markets value isn't the place to attempt it.
As several of you have noted, the timing may be right for EM value exposure. 361 Capital shared and interesting note that talked about which assets have, in the past, benefited when the US dollar weakened (a predictable consequence of zero interest rates on dollar bank securities and trillions of new issuance). They report that small, value and emerging are in the top four in both of the preceding periods they examined. Commodities made one of the two lists as well.
But, sadly, there's not much evidence that D&C are good at international investing. Their fixed income funds are splendid. Their primarily domestic equity funds are reasonable. Their international and global funds are not very good at all. There may well be good reason for the sustained underperformance but caution is not one of them: the funds tend to underperform pretty substantially in falling markets.
@Shostakovich: yep. Around the time, I suppose, that Sequoia was *the* domestic fund to hold...
Morningstar's enthusiasm for the fund remains undimmed but their case is dependent on two arguments. First, Dodge and Cox is Dodge and Cox. Second, if you look at the record since the fund's inception in 2001, it's been great. That's true, but true only if you're looking at periods longer than 10 years. Their analysis of the rough patch of the past decade is pretty much "they're contrarian."
Only one of the original six managers remains on the team. While management change has not been rapid, it has been pretty consistent. Perhaps they've lost more talent than they knew? Perhaps some of the folks being added to the team have a perspective at odds with the founders' approach? Maybe the world has changed.
"We have heard of one large firm in San Francisco which is a partnership where the partners buy in or are bought out at book value of the business. If assets under management, as a result of redemptions and market declines are down, then book value is down. If you were a partner scheduled to leave this year, you are not happy about the haircut your capital account is taking, so you drag your feet on retiring. The younger group, who think it should be their turn to step up, are not happy about being held back."
@Paul:I had a similar thought. From my own experience in the corporate world, I can tell you -- culture counts for a lot. If you have a good culture, you mess with it at your peril.
Slight hijack -- the dynamic Ed describes at the San Fran firm: something similar has been known to happen in academia.....
It would seem so. Franklin Templeton is headquartered in San Mateo, 20 miles from SF, but I believe it to be publicly owned. D&C of course is privately held.
To play Devil’s advocate here ... One reason to diversify among managers is the expectation that some will outperform others over short and intermediate terms. A long leash out to perhaps a dozen years is long enough to take into consideration likely changes in management at the firm as well as changes in investor sentiment which in turn affect the fund’s return.
Yes - I’m a bit chagrined comparing DODBX to PRWCX over past 12 years (roughly the tenure of David Giroux). But there was no way to predict that type of disparity 12 years ago that I know of. Without digging below the surface, let’s just say that the management styles and focus of those two funds are quite disparate (even though M* may place them in the same category). My inclination at this point would be to tilt slightly in favor of DODBX, out of belief in reversion to the mean and also the recognition that it’s hard to outwit low fees. (But it hurts a bit looking at the 10 year charts.)
Note: I have owned both of the above mentioned funds for more than 15 years.
A Tribute to Obsolescence
“Tellson’s Bank by Temple Bar was an old-fashioned place, even in the year one thousand seven hundred and eighty. It was very small, very dark, very ugly, very incommodious. It was an old-fashioned place, moreover, in the moral attribute that the partners in the House were proud of its smallness, proud of its darkness, proud of its ugliness, proud of its incommodiousness. They were even boastful of its eminence in those particulars, and were fired by an express conviction that, if it were less objectionable, it would be less respectable. This was no passive belief, but an active weapon which they flashed at more convenient places of business. Tellson’s (they said) wanted no elbow-room, Tellson’s wanted no light, Tellson’s wanted no embellishment. Noakes and Co.’s might, or Snooks Brothers’ might; but Tellson’s, thank Heaven!”
re DODFX . . . Three of the managers that left were older members of the firm: Gunn, Cameron, and Serrurier. Yamada struck out on his own. And so did Gofman. So, that latter is odd for D&C. But that firm has always had average tenure around 20 years. And the eager youth that want to move up must know that.
I'll probably get out of DODWX if this rally holds up long enough. It now makes more sense to me to have clear separation between domestic and foreign for the strategies I'm interested in. VMVFX might remain the exception that proves the rule.
This is a critical statement, IMHO: "361 Capital shared and interesting note that talked about which assets have, in the past, benefited when the US dollar weakened (a predictable consequence of zero interest rates on dollar bank securities and trillions of new issuance). They report that small, value and emerging are in the top four in both of the preceding periods they examined."
Not to any reference to D & C in particular, but the markets overall; globally.
The market melt of 2008 brought us to the "this time is different", and we investors remain with this circumstance; except now, "this time is REALLY different", IMHO.
The "in the past" in bold above needs to have a reference point(s) for both 2008 and what is now the PRE-Covid, CURRENT-Covid and another point in the future that will be a POST-Covid.
Comments
1. Another D&C fund -- so soon? Are they under new management, or is this really in the best interest of shareholders?
2. If D&C were to add another fund, I kind of think they should add a Global Balanced Fund (Global Stocks, Global Bonds) before doing an EM fund. But, hey...
I wonder how much HP it'll hold when it launches ....
Thanks good!
"Global Balanced Fund"
I like that!
They were highly reco'd in the early 00s and I was really respecting them. I was in DODFX for a while and got burned by their 'disciplined' strategy of refusing to sell bank stocks despite the tides shifting right in front of them -- just like how Arnott kept a 20% SPX short position in PAUIX to maintain their 'discipline' despite the markets going nowhere but up for over a decade. I got out and never looked back.
I like the global balanced fund idea too.
I am reminded of something I believe David wrote about D&C (paraphrased): "...if these guys can't get it write, then we should all just go home and index...".
I think as an active shop, in terms of integrity and process they're likely top 10% (compared with a Fairholme Fund, or Royce & Friends/Partners/Associates). Been a huge fan of D&C and Oakmark, among others. Oakmark has certainly taken it's lumps. I think with active, since the strategy can underperform in the short an medium terms you have to go with process.
Not a huge fan of the AUM grab which is evident at D&C and others, but to some extent that goes with the reasonable fees.
Expense ratio: Global Wellesley, 0.42% (Investor class), 0.32% (Admiral class). Global Wellington, 0.46% (Investor class), 0.36% (Admiral class).
Emerging market exposure: Global Wellington, 2.2% and Global Wellesley, 5.9%. True to Wellington conservative nature, they invested in Taiwan Semiconductor and Samsung in EM space.
Harbor Funds: HMCNX (not cheap, a new midcap fund)
Hartford Funds:
"Our mutual funds (with the exception of certain fund of funds) are primarily sub-advised by Wellington Management Company LLP or Schroder Investment Management North America Inc."
Examples: HAOYX, HGIYX (5* fund compares favorably with 4* VDIGX)
I'd still look first to Vanguard for lower expenses, but there are other families to consider as well. Especially as one moves away from domestic large cap value, which is where Vanguard/Wellington is focused. Wellington's been managing foreign funds for at least a quarter century; see, e.g. HAOYX.
D&C are not under any real asset pressure. Firm AUM is holding up nicely. Even if they were looking for an asset grab, emerging markets value isn't the place to attempt it.
As several of you have noted, the timing may be right for EM value exposure. 361 Capital shared and interesting note that talked about which assets have, in the past, benefited when the US dollar weakened (a predictable consequence of zero interest rates on dollar bank securities and trillions of new issuance). They report that small, value and emerging are in the top four in both of the preceding periods they examined. Commodities made one of the two lists as well.
But, sadly, there's not much evidence that D&C are good at international investing. Their fixed income funds are splendid. Their primarily domestic equity funds are reasonable. Their international and global funds are not very good at all. There may well be good reason for the sustained underperformance but caution is not one of them: the funds tend to underperform pretty substantially in falling markets.
For what interest that might hold, David
Morningstar's enthusiasm for the fund remains undimmed but their case is dependent on two arguments. First, Dodge and Cox is Dodge and Cox. Second, if you look at the record since the fund's inception in 2001, it's been great. That's true, but true only if you're looking at periods longer than 10 years. Their analysis of the rough patch of the past decade is pretty much "they're contrarian."
Only one of the original six managers remains on the team. While management change has not been rapid, it has been pretty consistent. Perhaps they've lost more talent than they knew? Perhaps some of the folks being added to the team have a perspective at odds with the founders' approach? Maybe the world has changed.
David
The only think I'll say in support of M*'s POV is that many esteemed value funds are having a real rough patch right now.
The point on team turnover was unknown to me. That's pretty shocking.
And, yeah, for sure I think the world has changed.
"We have heard of one large firm in San Francisco which is a partnership where the partners buy in or are bought out at book value of the business. If assets under management, as a result of redemptions and market declines are down, then book value is down. If you were a partner scheduled to leave this year, you are not happy about the haircut your capital account is taking, so you drag your feet on retiring. The younger group, who think it should be their turn to step up, are not happy about being held back."
Is this in reference to Dodge & Cox?
Slight hijack -- the dynamic Ed describes at the San Fran firm: something similar has been known to happen in academia.....
It would seem so. Franklin Templeton is headquartered in San Mateo, 20 miles from SF, but I believe it to be publicly owned. D&C of course is privately held.
To play Devil’s advocate here ... One reason to diversify among managers is the expectation that some will outperform others over short and intermediate terms. A long leash out to perhaps a dozen years is long enough to take into consideration likely changes in management at the firm as well as changes in investor sentiment which in turn affect the fund’s return.
Yes - I’m a bit chagrined comparing DODBX to PRWCX over past 12 years (roughly the tenure of David Giroux). But there was no way to predict that type of disparity 12 years ago that I know of. Without digging below the surface, let’s just say that the management styles and focus of those two funds are quite disparate (even though M* may place them in the same category). My inclination at this point would be to tilt slightly in favor of DODBX, out of belief in reversion to the mean and also the recognition that it’s hard to outwit low fees. (But it hurts a bit looking at the 10 year charts.)
Note: I have owned both of the above mentioned funds for more than 15 years.
A Tribute to Obsolescence
“Tellson’s Bank by Temple Bar was an old-fashioned place, even in the year one thousand seven hundred and eighty. It was very small, very dark, very ugly, very incommodious. It was an old-fashioned place, moreover, in the moral attribute that the partners in the House were proud of its smallness, proud of its darkness, proud of its ugliness, proud of its incommodiousness. They were even boastful of its eminence in those particulars, and were fired by an express conviction that, if it were less objectionable, it would be less respectable. This was no passive belief, but an active weapon which they flashed at more convenient places of business. Tellson’s (they said) wanted no elbow-room, Tellson’s wanted no light, Tellson’s wanted no embellishment. Noakes and Co.’s might, or Snooks Brothers’ might; but Tellson’s, thank Heaven!”
Charles Dickens, A Tale of Two Cities
I'll probably get out of DODWX if this rally holds up long enough. It now makes more sense to me to have clear separation between domestic and foreign for the strategies I'm interested in. VMVFX might remain the exception that proves the rule.
This is a critical statement, IMHO: "361 Capital shared and interesting note that talked about which assets have, in the past, benefited when the US dollar weakened (a predictable consequence of zero interest rates on dollar bank securities and trillions of new issuance). They report that small, value and emerging are in the top four in both of the preceding periods they examined."
Not to any reference to D & C in particular, but the markets overall; globally.
The market melt of 2008 brought us to the "this time is different", and we investors remain with this circumstance; except now, "this time is REALLY different", IMHO.
The "in the past" in bold above needs to have a reference point(s) for both 2008 and what is now the PRE-Covid, CURRENT-Covid and another point in the future that will be a POST-Covid.
My view.
Regards,
Catch