Barron’s Funds Quarterly (2022/Q3–October 10, 2022)

yogibearbull

Barron’s Funds Quarterly (2022/Q3–October 10, 2022)
https://www.barrons.com/topics/mutual-funds-quarterly

(Performance data quoted in this Supplement are for 2022/Q3 and YTD to 9/30/22)

Pg L3: Good ACTIVE mutual funds that are OPEN, BROAD-based, in the TOP 20% of peers in various timeframes, have average ERs and have manager succession plans: LC-growth OLGAX, FDSVX; dividends PRDGX, IHGIX; SC-value BRSVX, AASMX; international MIEIX, DPWRX; fixed-income DODIX, SCCIX.

Pg L10: Large-cap GROWTH funds have disappointed in 2022 (-4.1% in Q3; -32.1% YTD to 9/30/22) and there were outflows (but some related ETFs had inflows (VUG, SPYG, etc)); as expected, there were funds that did much better (BPTRX, etc) or worse (MSEQX, etc) than the averages. Large-cap VALUE also disappointed in Q3 (-5.9%) but was relatively better YTD (-16.6%). Several funds with large losses and outflows may have large YEAREND CG distributions (bad in taxable accounts; not relevant in tax-deferred/free accounts). MANAGED-FUTURES did well (after several disappointing years) and attracted inflows (QMHNX, PQTAX, etc). COMMODITY funds also saw inflows (DBC, FTGC, etc). Interestingly, despite the market selloff in both stocks and bonds, several INDEX funds had inflows, stocks (VOO, IVV, VTI, etc) and bonds (TLT; IEF, BND, LQD; SHY, VCSH, etc) (bulls will point to this as strength, bears as lack of capitulation yet). (by @LewisBraham)

EXTRA from Part 2: Pg 22: Katrina DUDLEY, EUROPE TEMIX. Things couldn’t be worse for Europe but that is how opportunities develop. Costs have risen sharply due to supply-chain disruptions, energy crisis, Russia-Ukraine war. However, Europe wasn’t overvalued before all this, jobs are holding up so far, and any recession may be short and shallow. Be selective as countries are following different paths. Lower currencies (vs DOLLAR) are hurting the returns of the US investors. She LIKES telecom, energy, industrials, insurance, aircraft leasing, etc; she is AVOIDING travel, entertainment, etc. CHINA will remain a global growth engine despite pause or slowdown, so European companies with China exposure would be fine. RISKS include the ECB polies, energy crisis.

Pg L37: In 2022/Q3 (SP500 -4.88%): Among general equity funds, the best were SC-growth -1.61%, MC-growth -1.65% (yes, it was BAD Q3, following terrible Q2) and the worst were equity-income -5.75%, multi-cap-value -5.64%, LC-value -5.60%, MC-value -5.45%; ALL general equity categories were negative. Among other equity funds, the best were short funds +6.54%, Lat Am +5.28%, and the worst was China -21.55%. Among fixed-income funds, domestic long-term FI -2.72%, world income -4.16% (not very refined in Lipper mutual fund categories listed in Barron’s).
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Crash

Thanks for the "skinny," @yogibearbull.

Sven

@yogibb, thanks for the summary. Noted that a number of AQR alternative funds such as QMHNX, have done well this year. Even with their investor shares, the investment minimum is $1M for aggregate investors, not so much for individual investors. Pimco is much more assessable.

hank

Not something I pay much attention to. Thought it interesting that DODIX “made the cut” (ranked high) in their top income funds category. Down -13.25% YTD and -13.62% over 1 year. Makes you wonder what kind of returns its competition is posting.

Observant1

I follow a bunch of intermediate core and intermediate core-plus bond funds via Portfolio Manager.
These funds include DODIX, BCOIX, BAGIX, FBND, VBTLX, VCPAX, WACPX, etc.
YTD returns range from -13.25 (DODIX) to -21.51 (WACPX).
Twelve month returns range from -13.37 (DODIX) to -21.39 (WACPX).
Some bond investors use the Bloomberg "Agg" as a benchmark.
VBTLX tracks the "Agg" and has returned: -14.81 YTD, -14.61 for 12 months.

LewisBraham

To provide some nuance, I will add the folowing excerpt:

If all of this makes you consider throwing in the towel on active management, you’re not alone. Investors continue to shift money into indexed exchange-traded funds and away from mutual funds. In the Large Growth category, some $16.2 billion has flowed into ETFs in 2022, $8.6 billion of that during the first two months of the third quarter. In the Large Growth mutual fund category, $54.8 billion has fled this year, and $14.5 billion in July and August.

The big ETF winners, flow-wise, in Large Growth this past quarter have been Vanguard Growth (VUG), with $2.1 billion of inflows, followed by SPDR Portfolio S&P 500 Growth (SPYG), with $2 billion. The biggest mutual fund Large Growth outflow losers were T. Rowe Price Blue Chip Growth (TRBCX), down $3.1 billion, and Harbor Capital Appreciation (HCAIX), down $2.1 billion.

Some 70 Morningstar mutual fund categories suffered outflows this past quarter, while most ETF categories experienced inflows or only small outflows. While September’s full-month flow numbers aren’t available yet, the mutual fund outflows are part of a longer-term trend that some have dubbed “flowmageddon,” which could have harmful tax effects.

Sven

Very insightful data. Tax loss harvesting could account for the switch for large outflow from TRBCX and HCAIX, to VUG.

Question is where does those outflow $ went to when bonds performed poorly this year? Alternatives and treasuries?

MikeW

Incredibly helpful info @yogibearbull. Thx so much for sharing. Managed futures looks enticing but worried that this year is a blip… Where are others hiding out in this market? I’m at about 50% cash and money markets.

Sven

Hiding out is a good way to put it! I too have high cash and they are distributed among stable value fund, ladders of treasuries and CDs. Energy sector funds, ETFs and commodity futures have worked so far but they are volatile. Increased allocation to alternatives throughout the year as things got worse.

MikeW

@Sven thanks for sharing that. Would you be willing to share which alternatives you are allocating to and stable value funds?

MikeW

I liked Lynn’s article on this topic… concerning thing to me Is that a number of these didn’t do well the prior few years.

yogibearbull

While not mentioned in this Barron's issue or supplement, one can use multi-asset funds that mix stocks-bonds-alternatives. Examples are FMSDX, VPGDX, etc. They have also been hit but the hit has been several % points less than conventional moderate-allocation funds.

Info is also posted elsewhere on 2 common SV funds within the workplace retirement plans, TIAA Traditional (there is an alphabet soup within - RC, RA/GRA, RCP, SRA/GSRA, special TIAA IRAs, etc) and Federal TSP G Fund. Many fund families also offer less interesting SVs within 401k/403b.

Sven

@MikeW, the stable value fund I use is a private fund offers through my 401(k), not assessable for the public. For alternatives, I invest in PRPFX after I replaced TMSRX and IAU last year. Also I invest in GPANX (multi-strategies) and PQTAX (managed futures). So far they are holding up much better than those from PRPFX and TMSRX. My goal to have closer to 10% alternatives since their asset correlation to S&P500 are less than 0.5 for the last 2.5 years.

One has to pay attention to the underlying components invested in the alternatives. For example, PQTAX has a healthy % in commodity, metals, agricultural grains, and currencies in addition to the derivatives that Pimco often deploys. Lynn Bolin calls it the “ black box fund”. Commodity futures have done well while tracking WTI prices and natural gas. USD is rising over other currencies. The others are flat. GPANX is a relative new addition, but it is has stay afloat despite the drawdown lately.

To migrate risk of the unknown, I like to build the position to the target % over say 3 months while watching how it responds to S&P500, for example. Consistency over various market cycles is something we are all seeking. Lynn’s article also pointed out recent severe drawdown day and YTD data that provided insights of how these alternatives behaved under those circumstances. The other is the asset correlation to S&P500 and to different types of alternatives.