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I am considering the purchase of the BAMPX fund. I would appreciate any opinions about this fund. It is for a taxable account. I want a conservative allocation fund.
VWINX is my "go-to" fund to benchmark this category. That's not to say there aren't comparable funds. But because it is such a solid long term performer, for me to prefer another fund to this one I would want to see something about the other fund that was significantly better.
BAMPX also looks like a solid fund. Slightly weaker than VWINX over ten years, a dead heat over five, better over the past three years, and much better over the past year. Its better numbers are due primarily to its current (2020) year's performance. For periods ending in 2019, the long term figures still look great, but not superior: 1 year (2019): 16.68% (BAMPX) vs. 16.87% (VWINX) 3 years (2017-2019): 24.04% vs. 24.96% 5 years (2015-2019): 28.97% vs. 36.41% 10 years (2010-2019): 104.79% vs. 111.41%
While I don't disregard this year's performance, I do ask whether the gap between these funds was a one off or something repeatable. In addition, you might want to discard all BAMPX history before 2016, because its current lead manager Michael Gates took over in mid 2015 and the fund shifted from being a moderate allocation fund to being a conservative allocation fund. That's a serious point to consider.
VWINX is what I might call an old school conservative allocation fund - large cap value, bond allocation hugging 60% (57% - 61% over the past five years). BAMPX is more "modern", with a growth leaning blend portfolio and a lower bond allocation, around 50% (39% to 56% over the past five years). This has resulted in performance that has been slightly more volatile. Standard deviation comparisons over the past 3/5/10 years are: 8.52 (BAMPX) vs. 7.72 (VWINX) / 6.96 vs 6.35 / 7.44 vs. 5.51
As noted above, perhaps we should disregard the 10 year figure. The volatility of BAMPX over the 3 and 5 year periods are below category average, so this comparison is not to suggest that it is an excessively volatile fund.
On the plus side, the fund is pretty small at $½B. I happen to like the fact that it invests some equity overseas (currently about ¼ of its equity); others may consider this a negative. Its cost, 0.68% ER (0.73% without waivers) is reasonable, though obviously much higher than that of VWINX.
Where it looks a bit odd is in its portfolio. This is a fund of funds, so one would expect it to have a modest turnover, tweaking allocations. But its turnover rate of 98% is somewhat high even for funds that invest directly in individual securities. According to its latest (Sept. 30th) annual report, it holds 11 equity funds, 3 fixed income funds, and 2 MMFs.
Blackrock equity funds: EM class K (5% of portfolio), Technology Opportunities class K, Master Advantage Large Cap Core Portfolio (5%)
iShares equity ETFs: Core MSCI EAFE (4%), Core S&P Small Cap (4%), Core S&P Total US Stock Market (15%), ESG Aware MSCI USA (11%), MSCI EAFE Growth (7%), MSCI Min Vol USA, MSCI USA Value Factor, US Medical Devices
Blackrock fixed income funds: Strategic Income Opportunities Portfolio class K (8%), Master Total Return Portfolio (22%)
iShares fixed income ETF: iBoxx $ Investment Grade Corporate Bond (6%)
(The Master funds are "master" funds in master/feeder configurations. MDLRX is a retail fund feeding into Master Advantage Large Cap Core, MAHQX is a retail fund feeding into Master Total Return.)
Overall, BAMPX looks like a solid fund from an excellent fund family. While its portfolio seems slightly aggressive (both in terms of a higher equity allocation and its dabbling in sectors), it manages to keep volatility in check. Based on its turnover rate and plethora of underlying funds, I couldn't guess at its strategy (spaghetti against a wall?), but it seems to work. It looks like a worthwhile fund; for me I don't see a compelling reason to prefer it to VWINX.
Do you mean any other funds of funds, or funds in general?
You may remember the Strong Advisor funds of the 1990s and early 2000s, with their turnover ratios of 60.3% (Small Cap Value, 2000), 87.8% (Opportunity Fund, 2001), 88.1% (International Core Fund, 2003), 95.4% (Common Stock Fund, 2000), 116.1% (US Value Fund, 2001), 116.6% (US Small/Mid Cap Growth Fund, 2004), 174.2% (Utilities and Energy Fund, 2003), 184.5% (Technology Fund, 2003), 186.8% (Emerging Growth Fund, 2000), 199.4% (Growth and Income Fund, 2003), 221.6% (Large Company Core Fund, 2001), 234.1% (Balanced Fund, 2001), 268.5% (Blue Chip Fund, 2003), 269.3% (Large Cap Core Fund, 2002), 285.3% (Large Company Growth Fund, 2001), 399.8% (Growth Fund, 2001), 416.8% (Endeavor Fund, 2002), 420.4% (Endeavor Large Cap Fund, 2002), 437.3% (Select Fund, 2002), 468.7% (Large Cap Growth Fund, 2001), 501.7% (Discovery Fund, 2001), 605.7% (Focus Fund, 2001), 629.8% (Enterprise Fund, 2001), 658.7% (Growth 20 Fund, 2001), 683.7% (Mid Cap Growth Fund, 2000) https://www.sec.gov/Archives/edgar/data/723257/000119312505044665/dncsr.htm
Aside from such "believe it or not" figures, the ICI reports that turnover ratios have been trending downward. The ICI's 2020 Fact Book has a graph (Figure 3.7) showing this trend in the asset-weighted average turnover ratio of equity funds. There's a peak in 1987 a bit over 80% turnover, and another peak around 2000 at just under 80%. The current figure is 28%.
Still, some funds like Magellan (FMAGX) have turnover rates north of 100% today.
With respect to funds of funds, the M* premium screener reports 123 distinct funds of funds (about 12%) with turnover rates above 100%, including what seems to be a favorite here, Columbia Thermostat (CTFAX). That fund has a turnover ratio of 158%.
Much of the turnover in BAMPX appears to be coming from Strategic Income Opps fund (1805%) and to a lesser extent Master Total Return (556%). Total guess....perhaps short term paper purchases?
Much of the turnover in BAMPX appears to be coming from Strategic Income Opps fund (1805%) and to a lesser extent Master Total Return (556%). Total guess....perhaps short term paper purchases?
A fund of fund's turnover, like a "regular" fund, is calculated based on what it holds directly. I can't find an authoritative definition at the moment that confirms that, but I can provide solid evidence.
Look at FGDFX, the subject of another thread. This is another fund of funds. Its turnover is stated to be 0%. If turnover were computed using the securities in the underlying holdings, then its turnover would have to be greater than zero. The underlying funds, and their turnover ratios are: FBTNX - 6% FONNX - 0% FNTNX - 0% FRXNX - 0% FTKNX - 0% It's small (because all these funds are new), but there is non-zero turnover in the individual securities.
CTFAX Statement of Additional Information p.102 says under normal conditions the portfolio turnover rate is expected to be below 150%. The past 4 year CTFAX avg has been in the 100% range like BAMPX 98%. CTFAX makes portfolio changes relative to changes in the S&P500. I do not know if small daily adjustments to portfolio allocations within a F of F's would amount to 98% annualized TO rate... but maybe so. I do not know the answer to BAMPX. All of the Blackrock Target Funds 80/20, 60/40, 40/60 and 20/80 have similar TO ratio numbers around 100% in 2020. Separately... I also remember reading somewhere that in some conditions money market instruments purchases may include a profit to the dealer resulting in a TO ratio skew.
CTFAX makes sizeable changes in general, not only relative to the S&P 500. Between its annual report p. 68 (period ending Dec 31, 2019) and its semiannual report p. 43 (period ending June 30, 2020), it decreased its allocation of fixed income funds from 71.1% to 44.2%. It sold off all of its inflation protected securities fund (7.9% of the portfolio), all of its Total Return Bond Fund (about 5% of the portfolio), and decreased its other bond funds by around 5-10% (eyeballing). At the same time it inceased its equity fund holdings from 19.7% to 44.7%, and increased its equity ETF holdings from 5.0% to 7.9%.
That wasn't just around the S&P 500. It increased its Dividend Income Fund allocation from 2.0% to 4.9%, its Acorn Int'l Fund from 2% to 4.9%, its Acorn Fund from 2% to 5%. You detect a pattern here - outside of large cap funds, it raised its equity fund allocations by 2.5x. But it raised its large cap funds, those closest to the S&P 500, by "only" 2.1x, from 11.8% to 24.9%. And it changed Mid cap fund altogether, swapping out its 2.0% of Acorn Fund for 5.0% of Select Midcap Value.
That was just in six months. It's not hard to see how this fund could have a 100% turnover just counting the churn of underlying funds.
The funds mentioned, CTFAX, Blackrock X%/Y% funds invest strictly in house funds (Columbia and Blackrock/iShares respectively), so it's hard to see how the fund companies profit from trading. Certainly one could see them profiting by keeping a higher allocation to cash, just as Schwab makes its money in its managed portfolios by keeping a high cash allocation. But at least for CTFAX, its MMF allocation is under 1%.
Your work above on CTFAX showed its possible for a F of F's to have 100% TO ratio.
BAMPX had numerous portfolio changes 3/31/2020 to 9/30/2020 (per annual and semi annual) as did CTFAX. Although the bond/equity allocation of BAMPX remained constant (+/- 5%), many of the the funds within the allocation totally changed. Comparing the two periods....43% of the allocations in the fund were sold and no longer have overlap. iShares Core S&P Total Mkt 16 to 10%, US Total Bond Index Master 13 to 0%, Blackrock Strategic Inc Opp 12 to 18% and 4 other funds went from 3-5% allocations to 0% each. Five new funds were purchased. The changes made were done so within just 6 months. TO ratios are annualized so we may have more changes within the remaining 6 months to get to the 98%. Therefore, I guess its possible for F of F's to reach 100% TO as these two examples indicate.
Just to clarify... my comment on Money markets was, as I indicated, intended to be separate not related to this matter. I do not want to infer anyone is profiting by trading. In fact, their strategy may be a good thing not a bad thing in my book. Their fund performance will tell the tale over time BAMPX looks like a good candidate for my watch list. Thank the author for the heads up.
Comments
BAMPX also looks like a solid fund. Slightly weaker than VWINX over ten years, a dead heat over five, better over the past three years, and much better over the past year. Its better numbers are due primarily to its current (2020) year's performance. For periods ending in 2019, the long term figures still look great, but not superior:
1 year (2019): 16.68% (BAMPX) vs. 16.87% (VWINX)
3 years (2017-2019): 24.04% vs. 24.96%
5 years (2015-2019): 28.97% vs. 36.41%
10 years (2010-2019): 104.79% vs. 111.41%
While I don't disregard this year's performance, I do ask whether the gap between these funds was a one off or something repeatable. In addition, you might want to discard all BAMPX history before 2016, because its current lead manager Michael Gates took over in mid 2015 and the fund shifted from being a moderate allocation fund to being a conservative allocation fund. That's a serious point to consider.
VWINX is what I might call an old school conservative allocation fund - large cap value, bond allocation hugging 60% (57% - 61% over the past five years). BAMPX is more "modern", with a growth leaning blend portfolio and a lower bond allocation, around 50% (39% to 56% over the past five years). This has resulted in performance that has been slightly more volatile. Standard deviation comparisons over the past 3/5/10 years are:
8.52 (BAMPX) vs. 7.72 (VWINX) / 6.96 vs 6.35 / 7.44 vs. 5.51
As noted above, perhaps we should disregard the 10 year figure. The volatility of BAMPX over the 3 and 5 year periods are below category average, so this comparison is not to suggest that it is an excessively volatile fund.
On the plus side, the fund is pretty small at $½B. I happen to like the fact that it invests some equity overseas (currently about ¼ of its equity); others may consider this a negative. Its cost, 0.68% ER (0.73% without waivers) is reasonable, though obviously much higher than that of VWINX.
Where it looks a bit odd is in its portfolio. This is a fund of funds, so one would expect it to have a modest turnover, tweaking allocations. But its turnover rate of 98% is somewhat high even for funds that invest directly in individual securities. According to its latest (Sept. 30th) annual report, it holds 11 equity funds, 3 fixed income funds, and 2 MMFs.
Blackrock equity funds: EM class K (5% of portfolio), Technology Opportunities class K, Master Advantage Large Cap Core Portfolio (5%)
iShares equity ETFs: Core MSCI EAFE (4%), Core S&P Small Cap (4%), Core S&P Total US Stock Market (15%), ESG Aware MSCI USA (11%), MSCI EAFE Growth (7%), MSCI Min Vol USA, MSCI USA Value Factor, US Medical Devices
Blackrock fixed income funds: Strategic Income Opportunities Portfolio class K (8%), Master Total Return Portfolio (22%)
iShares fixed income ETF: iBoxx $ Investment Grade Corporate Bond (6%)
(The Master funds are "master" funds in master/feeder configurations. MDLRX is a retail fund feeding into Master Advantage Large Cap Core, MAHQX is a retail fund feeding into Master Total Return.)
Overall, BAMPX looks like a solid fund from an excellent fund family. While its portfolio seems slightly aggressive (both in terms of a higher equity allocation and its dabbling in sectors), it manages to keep volatility in check. Based on its turnover rate and plethora of underlying funds, I couldn't guess at its strategy (spaghetti against a wall?), but it seems to work. It looks like a worthwhile fund; for me I don't see a compelling reason to prefer it to VWINX.
You may remember the Strong Advisor funds of the 1990s and early 2000s, with their turnover ratios of
60.3% (Small Cap Value, 2000),
87.8% (Opportunity Fund, 2001),
88.1% (International Core Fund, 2003),
95.4% (Common Stock Fund, 2000),
116.1% (US Value Fund, 2001),
116.6% (US Small/Mid Cap Growth Fund, 2004),
174.2% (Utilities and Energy Fund, 2003),
184.5% (Technology Fund, 2003),
186.8% (Emerging Growth Fund, 2000),
199.4% (Growth and Income Fund, 2003),
221.6% (Large Company Core Fund, 2001),
234.1% (Balanced Fund, 2001),
268.5% (Blue Chip Fund, 2003),
269.3% (Large Cap Core Fund, 2002),
285.3% (Large Company Growth Fund, 2001),
399.8% (Growth Fund, 2001),
416.8% (Endeavor Fund, 2002),
420.4% (Endeavor Large Cap Fund, 2002),
437.3% (Select Fund, 2002),
468.7% (Large Cap Growth Fund, 2001),
501.7% (Discovery Fund, 2001),
605.7% (Focus Fund, 2001),
629.8% (Enterprise Fund, 2001),
658.7% (Growth 20 Fund, 2001),
683.7% (Mid Cap Growth Fund, 2000)
https://www.sec.gov/Archives/edgar/data/723257/000119312505044665/dncsr.htm
Aside from such "believe it or not" figures, the ICI reports that turnover ratios have been trending downward. The ICI's 2020 Fact Book has a graph (Figure 3.7) showing this trend in the asset-weighted average turnover ratio of equity funds. There's a peak in 1987 a bit over 80% turnover, and another peak around 2000 at just under 80%. The current figure is 28%.
Still, some funds like Magellan (FMAGX) have turnover rates north of 100% today.
With respect to funds of funds, the M* premium screener reports 123 distinct funds of funds (about 12%) with turnover rates above 100%, including what seems to be a favorite here, Columbia Thermostat (CTFAX). That fund has a turnover ratio of 158%.
http://quotes.morningstar.com/chart/fund/chart?t=bfocx®ion=usa&culture=en_US
Prospectus
Gives a whole new meaning to "investing with conviction."
"Portfolio turnover is greater than most funds due to the investment style of the Fund."
Annual Statement
From 2.5y ago; author Kam's writeup is interesting, sort of:
https://www.forbes.com/sites/kenkam/2018/06/01/the-6-greatest-mutual-fund-managers-of-the-last-decade-to-use-now/?sh=4d83fd94e678
(Turns out Kam died a year-plus ago.)
Look at FGDFX, the subject of another thread. This is another fund of funds. Its turnover is stated to be 0%. If turnover were computed using the securities in the underlying holdings, then its turnover would have to be greater than zero. The underlying funds, and their turnover ratios are:
FBTNX - 6%
FONNX - 0%
FNTNX - 0%
FRXNX - 0%
FTKNX - 0%
It's small (because all these funds are new), but there is non-zero turnover in the individual securities.
That wasn't just around the S&P 500. It increased its Dividend Income Fund allocation from 2.0% to 4.9%, its Acorn Int'l Fund from 2% to 4.9%, its Acorn Fund from 2% to 5%. You detect a pattern here - outside of large cap funds, it raised its equity fund allocations by 2.5x. But it raised its large cap funds, those closest to the S&P 500, by "only" 2.1x, from 11.8% to 24.9%. And it changed Mid cap fund altogether, swapping out its 2.0% of Acorn Fund for 5.0% of Select Midcap Value.
That was just in six months. It's not hard to see how this fund could have a 100% turnover just counting the churn of underlying funds.
The funds mentioned, CTFAX, Blackrock X%/Y% funds invest strictly in house funds (Columbia and Blackrock/iShares respectively), so it's hard to see how the fund companies profit from trading. Certainly one could see them profiting by keeping a higher allocation to cash, just as Schwab makes its money in its managed portfolios by keeping a high cash allocation. But at least for CTFAX, its MMF allocation is under 1%.
BAMPX had numerous portfolio changes 3/31/2020 to 9/30/2020 (per annual and semi annual) as did CTFAX. Although the bond/equity allocation of BAMPX remained constant (+/- 5%), many of the the funds within the allocation totally changed. Comparing the two periods....43% of the allocations in the fund were sold and no longer have overlap. iShares Core S&P Total Mkt 16 to 10%, US Total Bond Index Master 13 to 0%, Blackrock Strategic Inc Opp 12 to 18% and 4 other funds went from 3-5% allocations to 0% each. Five new funds were purchased. The changes made were done so within just 6 months. TO ratios are annualized so we may have more changes within the remaining 6 months to get to the 98%. Therefore, I guess its possible for F of F's to reach 100% TO as these two examples indicate.
Just to clarify... my comment on Money markets was, as I indicated, intended to be separate not related to this matter. I do not want to infer anyone is profiting by trading. In fact, their strategy may be a good thing not a bad thing in my book. Their fund performance will tell the tale over time