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A Roll-Your-Own TMSRX Alternative? [TRP's Multi Strategy Total Return Fund]

edited March 2021 in Fund Discussions
I believe that there are some on this board who are quite fond of TMSRX, T Rowe Price's Multi Strategy Total Return Fund.

The fund receives 4 Stars From Morningstar, and - as referenced in link above - uses a highly flexible investment approach in an effort to provide strong risk-adjusted returns. This fund - classified by Morningstar as a "Multialternative" fund - bears a net expense ratio of 1.22%.

One can, however, construct something similar using T Rowe Price Funds, that would seem to also deserve consideration. This roll-your-own ("RYO") alternative alternative, so to speak, is not as expensive as TMSRX, and this apparent cost-saving may be the source of the RYO advantage.

Below is a link to the RYO at PortfolioVisualizer. The link compares TMSRX to a combination of two TRP funds:

1. T. Rowe Price QM U.S. Bond Index Fund, with an ER of 25 bps; and
2. T. Rowe Price Global Allocation Fund, with an ER of 95 bps.

PV1: Portfolio Visualizer Regression

If we combine these two funds using a 70/30 allocation that was suggested by the PV tool, then you get a two-fund combo, with a 46 bps weighted average expense ratio - 76 bps below the ER of TMSRX. More details are at the link below.

PV2: Portfolio Visualizer RYO Backtest

The synthetic RYO alternative possessed better Sharpe and Sortino ratios than TMSRX, better 'Worst Year', better 'Best Year', a lower standard deviation, etc. The compound average growth rate of the RYO exceeds that of TMSRX by 61 bps, just as the regression alpha of the RYO exceeded that of TMSRX by about 75 bps - see PV1.

By construction, the RYO alternative uses funds drawn from the T Rowe stable. If you're looking for the special insight or advantage conferred by T Rowe Price's deep bench, then have at it.

I just wonder if you need to spend 122 bps a year for the privilege.

[1] 03-14-21 Thank you to Crash, et al., for their post on RPGAX, which got me thinking about RPGAX and TMSRX.

[2] 03-16-21 FWIW, TMSRX 'Asset Class' correlations, via PV.

[3] 03-16-21 And here is link to synthetic versions, constructed from a handful of asset classes.


  • RPGAX has a 7.22% allocation to the "Blackrock Multi Mgr Partners Offshore" fund, which I'm guessing is part of the secret sauce.Not sure what the secret sauce is for TMSRX . I'd like to create a RYO version of PRWCX, which I'm assuming would involve various allocations to RPGAX RPBAX and TMSRX, among others.
  • @Vegomatic Thanks for pointing that out. It's surely helpful to literally visualize it all. My current bond funds are PRSNX RPSIX and PTIAX. I'm happy enough to stick with them, and simply add RPGAX--- if I ever pull the trigger. (And some of my bonds are in PRWCX.)
  • edited March 2021
    A side by side comparison of the 3 above mentioned funds would show a similar “average” track over the past 3 years. Looks like by combining RPGAX and PBDIX you’d arrive at a return near that of TMSRX and a roughly similar degree of volatility.

    Umm ... Why are we doing a performance comparison for a fund barely 3 years old? I’d argue anything can happen over such a short period. As far as fees go, TMSRX engages in short sales of securities - a CYA tactic against steep equity losses. Funds that engage in shorting typically have higher costs due to borrowing cash to cover the shorts. At one time they were able to hide those costs inside a fund’s operating costs, but SEC regs a couple decades back required those to be shown in the ER - hence an elevated ER. As a relatively new fund, fees for TMSRX are probably higher now than what TRP will eventually establish as assets grow. (Getting to the front of the line sometimes costs extra.)

    PBDIX* is, of course, a plain vanilla intermediate term investment grade bond index fund with relatively low fees. I owned it during 2020, but unloaded it early this year in favor of shorter duration funds. RPGAX is a global balanced fund with an added 10% hedge fund exposure. Its managers do apply some interesting defensive tactics using derivatives. I wouldn’t be surprised if they’re shorting something (likely a bond or equity index), but would expect that to be in substantially lesser proportion and less frequently applied than what TMSRX does.

    “Fond of TMSRX”? - All things are relative. I’d put it differently. TMSRX is a refuge for those “not fond” of either equity or fixed income valuations today. It’s a defensive fund.

    Disclosure: TMSRX represents 16-17% of portfolio.

    * Fund ticker symbol (PBDIX) was initially incorrect. Have corrected.

    Here’s a tool that lets you run side by side comparisons of up to 5 funds for periods of 1, 3 or 5 years. It allows you to play around with time period covered as well as looking at both a linear graph and a side by side table comparison. Clicking “performance” pulls up a linear graph. One of the better tools I’ve come across and what I used in comparing the funds under discussion.
  • +1 TMSRX is a refuge when VMFXX is yielding one basis point !
  • I agree that 3 years performance is bit short in risking of not seeing the entire picture. The fund is set up as a defensive position.
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