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AlphaCentric Income Opportunities - A Cautionary Tale
"No matter AlphaCentric Income Opportunities’ fate, it offers a cautionary tale about the role of bonds in a portfolio. This Fund Spy will tell that tale. Along the way, we will see why the risks the fund courted and the corners it cut laid the seeds for its rise and fall. In the end, the lesson here is simple. Investors who chase performance in an increasingly complicated and obscure fixed-income market should beware lest years of returns evaporate in a matter of months—or less." Link
Another piece of the puzzle, at least in 2021, last time I held any shares in it, was that a chunk of the distribution was ROC. At one point in the last quarter, the ROC for the year was 50% of the total distribution. The actual income was pitiful.
That was one of several threads I had comments on, but little time now. Quick post ...
Whatever happens, AlphaCentric Income Opportunities’ rise and fall is yet another example of a bond fund that flew too close to the sun and got burned.
That's a fair description of many funds, equity as well as fixed income. Funds can take on risk that don't show up in statistics like volatility or risk adjusted returns because the risks don't play out frequently. But the risks are there; not exactly in plain sight, but often clear if one looks and expands one's definition of risk beyond the usual metrics.
It's somewhat like living on a fault line. You may not experience anything for decades. Still the risk is there and sooner or later something bad is going to happen. The fault line is below ground, so you have to look for it. But it's not exactly hidden in the sense of being unknown and/or undiscoverable.
"Latent" (M*'s word)? Maybe. Discoverable? Often, and if not, that alone can serve as a yellow flag.
Comments
https://www.mutualfundobserver.com/discuss/discussion/60008/m-on-iofix#latest
I missed the prior IOFIX post.
Whatever happens, AlphaCentric Income Opportunities’ rise and fall is yet another example of a bond fund that flew too close to the sun and got burned.
That's a fair description of many funds, equity as well as fixed income. Funds can take on risk that don't show up in statistics like volatility or risk adjusted returns because the risks don't play out frequently. But the risks are there; not exactly in plain sight, but often clear if one looks and expands one's definition of risk beyond the usual metrics.
It's somewhat like living on a fault line. You may not experience anything for decades. Still the risk is there and sooner or later something bad is going to happen. The fault line is below ground, so you have to look for it. But it's not exactly hidden in the sense of being unknown and/or undiscoverable.
"Latent" (M*'s word)? Maybe. Discoverable? Often, and if not, that alone can serve as a yellow flag.