Probably should have called this
“The extent to which fund managers are willing to ‘slice & dice’ in search of yield when there is scarce little to be found in conventional credit instruments.“Early in the reporting period, we initiated an allocation into a growth-oriented Global Stock strategy, which seeks to capture the excess return of the T. Rowe Price Global Stock Fund over its benchmark ... To implement this strategy, the Multi-Strategy Total Return Fund may invest in the Global Stock Fund and short a basket of equity futures and/or use a variety of total return swaps, consisting of both long and short positions, on specific stocks that align with the Global Stock Fund’s portfolio relative to its benchmark.”Semi-Annual Report for TMSRX 4/30/20
Comments
- Invest in the Global Stock Fund
- Short a basket of equity futures
- Use a variety of total return swaps, consisting of both long and short positions, on specific stocks that align with the Global Stock Fund’s portfolio relative to its benchmark.
@BenWP - Surely you jest!
I’ve not come across another fund that seems to “play off” or “key on” one of the sponsor’s own funds. Generally, funds try to beat or approximate some index. Here, T Rowe’s managers are actively engaged in trying to capture only the above benchmark return of one of their own funds (not its total return). It’s as if they’ve got two different benchmarks in play.
The ER (1.22%) seems reasonable considering the machinations of the fund. However, over time, that’s quite a bite out of long term compounded return. I’d suggest using the fund sparingly. It’s typically 12-14% of my holdings - firmly in the alternative category.
I’ll note (as does @JD_co above) that more of these type funds fail than succeed over time - so hats-off to T. Rowe for their success thus far in running this Rube Goldberg contraption.
(PHD = “pile it higher and deeper”)
Kidding aside - It’s a fascinating fund. I’ve held it from the start. But I still haven’t figured out how the 5 different managers keep from shooting one another. TRP tried a 2-manager approach with PRWCX 10-15 years back and it didn’t last long.
Stay Safe, Derf
Here’s the various styles used under TMSRX’s 5 management teams as I understand it.
Macro and Absolute Return
Fixed Income Absolute Return
Equity Research Long/Short
Quantitative Equity Long/Short
Volatility Relative Value
Style Premia
Dynamic Global FX
Dynamic Credit
Global Stock
What I’m wondering is whether the manager of the Macro and Absolute Return portion might be long a certain stock based on macro readings while the manager of the Volatility Relative Value component might be shorting the same stock? Might different managers work at cross purposes?
Than there’s the “little issue” of TRP paying management fees to Blackstone for inclusion of one of its hedge funds in RPGAX (10% of the fund’s holdings). One might assume (1) that the experience has proven highly instructive to TRP as to how to effectively manage a hedged fund and (2) eventually TMSRX will replace the Blackstone fund within RPGAX.
https://partnerselectfunds.com/pdfs/fact-sheets/MASFX_fact_sheet.pdf
Absolute Return | Target Allocation: 19%
Arbitrage and Event Driven | Target Allocation: 19%
Contrarian Opportunity | Target Allocation: 18%
Long-Short Credit | Target Allocation: 19%
Opportunistic Income - Target Allocation 25%
TMSRX has been outperforming it.
@BenWP : What are you referring to : STEAM guy ? just wondering.
Stay safe, Derf
@BenWP can answer that. But I’m wondering if “STEAM” here is a variation of “STEM”? According to BusinessBalls, STEM is an accronym for “Science, Technology, Engineering, Mathematics” - which would seem to fit the sentence.
Regards
Not sure what this has to do with the OP. But this is the internet after all.
Unrelated to TMSRX, but distributions stories: top-rated MCG BMGAX, with AUM north of $13B, did not distribute a cent this year. OTOH, a previously successful LCG fund, RiverPark Wedgewood (RWGIX) will cost shareholders a lot because of an approximately $4.25 per share distribution at an NAV of $9.05. Ouch!