TMSRX Semi-Annual Report

BenWP

https://prospectus-express.broadridge.com/summary.asp?doctype=semi&clientid=trowepll&fundid=77958R100

The wonks here will have plenty to digest in the linked report. If you were wondering what the managers of TMSRX have been up to in recent months, your curiosity should be satisfied. As for understanding all the verbiage, that may well be beyond the grasp of the mere mortal MF investor. I speak for myself, not the rest of the board. I don’t know squat about shorting market futures, but it does seem that the TRP team has done that. For my part, I was a bit put off by their use of the 3-month T bill index as a bogey for measuring performance. That’s a low bar INMHO. I have reduced my exposure recently.

Derf

I noted .1 % of this & that holdings, which makes me ask why ?
Stay Kool, Derf

LewisBraham

Most absolute-return hedged or hedge funds that seek to outperform in a down market and "never lose money" over an extended period of time often use T-bills as their benchmark. More interesting, I think when examining a fund like this one is how well it held up during past periods of market stress and how well it recovered after them. One way would be to see how it did in the February March April period of 2020 versus stocks and conventional bonds.

carew388

Per Yahoo Finance, TMSRX lost 3.21% in 1Q 2020. Haven't compared that loss with other alternative funds. 2021 YTD seems sluggish. Not currently adding to this fund;it's on probation for me right now.

KHaw24

The 3 month TBill is typically the standard index used by these vehicles. It's due to the cash positon and short side of the investments. Seems odd but that's the BM the products I worked with used.

Baseball_Fan

So....risk with no return? Spaghetti bowl of holdings where you have little idea of what you really own... derivative of a derivative..

Got burnt with iqdax. Stung with poor timing with bivix

No thanks

Good luck to all

Baseball Fan

FD1000

IMO, a fund must be good at all times, based on YTD at 1.7% TMSRX failed. My bond funds made a lot more.

hank

FD1000 said:

IMO, a fund must be good at all times, based on YTD at 1.7% TMSRX failed. My bond funds made a lot more.

Where can I locate a list of your “no lose” holdings? Would like to buy all.

Thanks

hank

LewisBraham said:

More interesting, I think when examining a fund like this one is how well it held up during past periods of market stress and how well it recovered after them.

Or - See how it holds up against your own other investments during times of stress. I track a lot of funds for informational purposes. But IMHO nothing compares to owning a small bit of a fund for a few months or years to see how it fits in with your other investments. Suspect that for some TMSRX serves a purpose (primarily moderating volatility / downside risk). For others not. Not everyone invests the same way.

Yes - I’ve also gotten the sense TRP is trying to market this as a substitute for a bond fund. At least in the very early going that was the “sell”. And I’d agree with most here that’s not how they really intend the fund to act or what investors should expect.

This isn’t something TRP has a lot of experience with. I’m curious why they even went with it knowing the challenges? Suspect market forces are “a funny thing” if you’re a big player like TRP. (I’ve owned the fund almost since inception.)

carew388

Yes-I would think a new multi-asset or utilities fund run by Giroux would be a bigger sell and generate greater management fees.

hank

carew388 said:

Yes-I would think a new multi-asset or utilities fund run by Giroux would be a bigger sell and generate greater management fees.

Wow. That raises so many interesting questions and possibilities.

- How willing would Giroux be to sell his name? I get the sense he’s bigger than that. Loves what he’s doing (PRWCX). Extremely bright. And nobody’s better at communicating their investment goals, expectations, etc. to the herd than he is. More likely, he’ll leave and start his own company some day.

- What’s next in the way of fund offerings there? Despite the dizzying array of funds, I don’t think they’ve gotten around ever to having a utilities fund. (They tried an infrastructure fund a decade or two ago but folded it.) And they’ve never offered a precious metals or gold fund. But I suspect they will in the not too distant future.

- They seem to have grown very fast. Was that the right course? I can tell you from experience the front office is messed up (account servicing / client relations) at this point. But they offer some stellar funds. Fees, ISTM, have been falling. Good for investors. Likely causing some cost cutting at the firm.

carew388

I figured since Giroux has touted the utilities sector as purchases for PRWCX , TRP could give him a separate utilities fund. Give him two assistant portfolio managers, put some of his utility picks from PRWCX in the new fund, and he could spend about 15 minutes a day running the fund! There probably wouldn't be many asset constraints. TRP had talked about Giroux running a 40/60 type balanced fund a few years ago, but it's never been launched.

Crash

Yes, TRP customer "service" leaves a lot to be desired these days. And if you want the brokerage but dialed the "ordinary" number, you get to wait on hold, twice. FUN.

I can report on a recent experience: I called with questions, being new to the brokerage, and wanted a walk-through. The service rep. surely knew what she was doing, but was too busy filling the air with words for me to keep up. And anyway, I mostly just wanted a walk-through of what feels to me to be a very clunky web-process, when you go to buy or sell. (I've only BOUGHT, so far, and only once.) On my 2nd try, I got a rep. who listened to my input, and simply and RESPONSIVELY kept her own words to a minimum. She answered the questions I was actually ASKING, and took me through the process, up to the point where I would be executing a trade, but I did not do that right then and there. ... So, you CAN get lucky. But the wait-time is really horrible and shitty.
...And along the same line, I cannot recommend Navy FCU any longer. I am keeping our accounts, but Hickam FCU has flipped for us, to become our primary. (Anyone living on Oahu is eligible to join.) Yesterday, I was at the Navy Branch and waited and waited and waited and waited to handle THEIR mistake, to get it corrected. There was just ONE employee who could accomplish what needed to be done: my credit limit on the Amex card was automatically raised, and I never wanted that. (SONSOFBITCHES!) So, I was there to have them take it back to the original limit. The employee spent an inordinate amount of time with two young fellows. They seemed to spend more time on their phones than paying attention to what she needed from them. It was utterly nuts. I said to her, when at last, I got MY turn: "What were they trying to do? START THEIR OWN SPACE PROGRAM?!" (Apologies to uncle Lewis Black.)
.....Why didn't I just call? Nine out of ten times, the experience is very, very bad indeed.

msf

The largest single holding (1/6 of the portfolio) is T. Rowe Price Dynamic Global Bond (RPEIX / RPIEX). That's where the magic may be be coming from.

A simple 18/82 blend of VTSAX and RPIEX produces a portfolio with
- lower standard deviation (3.84% vs 5.06%),
- higher Sharpe ratio (1.18 vs. 0.81),
- double the Sortino ratio (2.51 vs 1.26),
- max drawdown 60% less (1.74% vs. 4.68%),
- virtually identical correlation with the US equity market (0.66 vs. 0.67)

and an annualized return ½% better: 6.09% vs 5.50%

See Portfolio Visualizer comparison.

So far, I haven't been able to come close to this performance when substituting a different bond fund. There are a variety of other factors to consider. Rotation to value could account for some recent underperformance by the growth leaning TMSRX. The somewhat higher volatility (compared with my custom portfolio) could account for its relative underperformance in 2018 (a down year for the fund and my portfolio) and its relative outperformance in 2019 and 2020 (up years).

Just quick observations. I haven't looked into RPIEX yet, or taken more than a cursory look at the Portfolio Visualizer data.

carew388

FSKAX is the Fido version of VTSAX, and should give similar results.

LewisBraham

@MSF I think it's a mistake to assume the largest holding by assets--RPIEX--in a hedged fund like TMSRX is naturally the primary driver of its performance. Hedged funds often make extensive use of derivatives and those can have a small weighting asset wise yet be big drivers of performance, for better or worse. In the hedge world--and actually the non-hedged world now too--a concept of Value at Risk or VaR--is more common to capture the different drivers of performance, although it can be a problematic statistic itself. But think of it this way. Let's say 80% of a fund's assets is in a money market fund cash-like vehicle, while 20% is in volatile high tech stocks and bitcoin. Which would you say is the primary driver of performance? In many respects, the volatility of an investment drives a fund's performance more so than its asset weighting, although importantly in periods of extreme market stress when "safe" or "low risk" asset classes don't perform normally this can prove not to be the case.

msf

Certainly RPEIX is not the primary driver, even if we take its 1/6 naively at face value. (I had considered posting a link to an explanation of notional value somewhere else in this thread.)

RPIEX (retail class of RPEIX) serves as starting point for constructing a portfolio that emulates that of TMSRX. Replacing the remaining 5/6 of TMSRX with 4/6 RPIEX and 1/6 VTSAX produces a portfolio that performs pretty similarly (albeit with better figures) to the original TMSRX. That is, the two-fund portfolio tracks the ups and downs of TMSRX fairly well.

So regardless of how important the individual drivers in that exceedingly complex 5/6 are, in concert they seem to behave little different from a 4:1 mix of RPIEX and VTSAX.

VaR is primarily a measure of, to state the obvious, value at risk. It is concerned with the probability distribution of potential losses (and gains) over a fixed period of time. It is less concerned with how a portfolio gets to those points. Though it is concerned, at least implicitly, with variances (thus "volatility"), as you explained. But it's also concerned with covariances.

If I construct a portfolio that is 1/3 long in bitcoin, 1/3 short in bitcoin, and 1/3 in a short term bond fund, it's the bond fund with its low volatility, that is the primary driver. The other two highly volatile components cancel themselves out. That's why covariances matter as much as variances.

RPEIX has a near zero correlation with VTSAX (-0.14) and with IEF (0.01), per Portfolio Visualizer. One may not call that magical, but it's awfully impressive given its 3% annualized return. (One can get zero correlation with money under a mattress.)

Given that a combination of RPEIX and VTSAX can substantially reproduce TSMRX (at least based on the fund's performance to date), and that VTSAX is anything but magical, it seems fair to say that the "magic" of TSMRX is at least reflected by if not embodied in RPEIX.

Roy

I've noticed recently on the TRP website that TMSRX is no longer listed in the "Asset Allocation Funds" search option under the "Funds" dropdown menu, and now only shows up if you use the "View All Mutual Funds" search option. Oversight, intentional?

Fund can also be accessed by entering the fund symbols in the search box.

I've also noticed lately that TRP does not include recent asset allocation for some funds under a fund's portfolio section. Currently missing that info for PRWCX for month ending in May.