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Good Luck to all, but I wouldn't touch these funds with anyone's 10 foot pole.
Done learnt my lesson in IQDAX playing around with volatility derivatives etc.
See my latest post...looks like holders of IQDAX will lose ~35% of their monies (if we are lucky?)
Also, their was another vol fund run in Chi-town...LJM partners...more geniouses...I think they were down 56% in a day and then down more before they went kaput....it was all good until it wasn't.
Well at least they were men about it and were honest unlike what appears to have happened at Infinity Q...freaking shyster
I also have sold out of TMSRX...I know some on this board still like this fund but no more "Level 3" holdings in funds for me.
Take everything on this MaxFunds site with a large grain of salt. Often they overstate the negative. However, for a worst case scenario , it’s an interesting place to look.
ABRTX Overall MaxFunds Score: 50% - Poor
Forecast: 1% Best Case: 38% Worst Case: -75%
Lipper gives ABRTX its highest rating (5) for “capital preservation”. However, that’s a backward looking grade - not a projection. While the chart looks steady, the fund’s been open less than 10 years. Why anyone would pay a 2.25% ER for any fund is beyond me.
I do use some funds that use derivatives heavily to hedge market risk or operate in the futures markets (ie ABRZX). With such funds, the integrity and demonstrated expertise of the manager become paramount. Without knowing much about this one, at a glance I’d agree with @Baseball_Fan that it looks dicey. Suggest you continue to investigate.
Hank understates the cost. Without waivers (agreement through Nov 30, 2021), the ER would be 2.76%. And that's for tracking an index, albeit a proprietary one: ABR Dynamic Blend Equity & Volatility Index Powered by Wilshire℠.
Given the expense, given the fact that M* and the fund can't seem to agree on what it's doing (M* calls it long/short, the fund tracks an index it describes as "unleveraged, long-only allocation"), I'm disinclined to look into it further. @little5bee, what about this fund piqued your interest? https://abrdynamicfunds.com/mutual-funds-3/
Apologies should have been more clear. Not only concerned about level 3 assets but look at holdings
Tmsrx full of swaps, derivatives etc, holdings in annual report look like a spaghetti bowl. No way you can tell what this fund will do on any given day or week or months vs stonk, bond market
Don't get the same with fpfix, meaning swaps, derivatives
Thanks for the clarification. As hank observed, derivatives can be used for protection or to increase returns. Either way they change the risk profile of the fund. I believe that investors should look at what's in a fund and if they don't understand it or it makes them uncomfortable, they shouldn't invest in it.
That four page paper does a pretty good job of explaining how CMO tranches are derived from the underlying mortgages and various ways the risk profiles may be tweaked.
The point is simply that derivatives are everywhere (including in FPFIX). One does the best one can to understand what one owns (or might choose to invest in), and goes from there.
As the cost of owning ABRTX surfaced in the course of discussion, I’ve linked a good summary of the types of expenses and fees mutual funds charge or pass-on and how they impact your bottom line. LINK
It’s generally recognized that (what I call) “boutique” funds will cost more to own. Specialized approaches like long/short and multi-strategy are more expensive to operate. Some of the added expense comes from having to pay interest on cash used to back short selling - if I understand correctly. However, I haven’t seen any of these funds that could justify an ER much north of 1.5%. TMSRX is getting 1.29% after waivers. ABRZX (which I also own) gets 1.33%.
If a fund appears to be “compensating” investors for higher fees with an impressive total return, I’d suspect them of taking an inordinate amount of risk to do so - likely more risk than their investors realize.
Not aware of anyone here flogging TMSRX or other of these boutique funds. They have very limited appeal and only to certain types of investors. Generally they’re owned in an attempt to “balance out” or “offset” other riskier investments. Without viewing the portfolio in total, it’s hard to pass judgment on the wisdom of someone else owning such a fund. Additionally, some are using these as substitutes for the bond positions they held in prior years. A better question might be: Will these alternative funds outperform conventional bond funds going forward?
Comments
Good Luck to all, but I wouldn't touch these funds with anyone's 10 foot pole.
Done learnt my lesson in IQDAX playing around with volatility derivatives etc.
See my latest post...looks like holders of IQDAX will lose ~35% of their monies (if we are lucky?)
Also, their was another vol fund run in Chi-town...LJM partners...more geniouses...I think they were down 56% in a day and then down more before they went kaput....it was all good until it wasn't.
Well at least they were men about it and were honest unlike what appears to have happened at Infinity Q...freaking shyster
I also have sold out of TMSRX...I know some on this board still like this fund but no more "Level 3" holdings in funds for me.
Best,
Baseball Fan
Take everything on this MaxFunds site with a large grain of salt. Often they overstate the negative. However, for a worst case scenario , it’s an interesting place to look.
ABRTX Overall MaxFunds Score: 50% - Poor
Forecast: 1%
Best Case: 38%
Worst Case: -75%
Lipper gives ABRTX its highest rating (5) for “capital preservation”. However, that’s a backward looking grade - not a projection. While the chart looks steady, the fund’s been open less than 10 years. Why anyone would pay a 2.25% ER for any fund is beyond me.
I do use some funds that use derivatives heavily to hedge market risk or operate in the futures markets (ie ABRZX). With such funds, the integrity and demonstrated expertise of the manager become paramount. Without knowing much about this one, at a glance I’d agree with @Baseball_Fan that it looks dicey. Suggest you continue to investigate.
Given the expense, given the fact that M* and the fund can't seem to agree on what it's doing (M* calls it long/short, the fund tracks an index it describes as "unleveraged, long-only allocation"), I'm disinclined to look into it further. @little5bee, what about this fund piqued your interest?
https://abrdynamicfunds.com/mutual-funds-3/
Regarding TMSRX: According to the fund's latest annual report, just $440K out of $130M AUM (0.34%) are level 3 securities.
Elsewhere you wrote: According to that fund's latest annual report, $3.7M out of $335M AUM (over 1%) are level 3 securities.
What is it about TMSRX that gives you pause while you seem sanguine about FPFIX?
Apologies should have been more clear. Not only concerned about level 3 assets but look at holdings
Tmsrx full of swaps, derivatives etc, holdings in annual report look like a spaghetti bowl. No way you can tell what this fund will do on any given day or week or months vs stonk, bond market
Don't get the same with fpfix, meaning swaps, derivatives
Best,
Baseball Fan
Note that many types of securities are derivatives. CMOs for one. Commentary from the Cleveland Fed, 1995: "Collateralized mortgage obligations (CMOs), first introduced in 1983, are a form of financial derivative created to provide more stability and predictability for those investing in mortgage assets. Although some investors have profited handsomely from CMOs, others have lost millions of dollars. ..."
https://www.clevelandfed.org/~/media/content/newsroom and events/publications/economic commentary/1995/ec 19950901 derivative mechanics the cmo pdf.pdf
That four page paper does a pretty good job of explaining how CMO tranches are derived from the underlying mortgages and various ways the risk profiles may be tweaked.
The point is simply that derivatives are everywhere (including in FPFIX). One does the best one can to understand what one owns (or might choose to invest in), and goes from there.
It’s generally recognized that (what I call) “boutique” funds will cost more to own. Specialized approaches like long/short and multi-strategy are more expensive to operate. Some of the added expense comes from having to pay interest on cash used to back short selling - if I understand correctly. However, I haven’t seen any of these funds that could justify an ER much north of 1.5%.
TMSRX is getting 1.29% after waivers. ABRZX (which I also own) gets 1.33%.
If a fund appears to be “compensating” investors for higher fees with an impressive total return, I’d suspect them of taking an inordinate amount of risk to do so - likely more risk than their investors realize.
Not aware of anyone here flogging TMSRX or other of these boutique funds. They have very limited appeal and only to certain types of investors. Generally they’re owned in an attempt to “balance out” or “offset” other riskier investments. Without viewing the portfolio in total, it’s hard to pass judgment on the wisdom of someone else owning such a fund. Additionally, some are using these as substitutes for the bond positions they held in prior years. A better question might be: Will these alternative funds outperform conventional bond funds going forward?