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Thank you. They are very good funds going into 2023.
As for the bonds, 2023 may present better chance to gain 5%+ gain now that most of the rate hike are likely behind us now. Few smaller hikes are likely this year. And the yields are considerable more attractive comparing to the recent years.
Since there is a possibility of a recession, value funds are preferred unless those that have better risk profile their benchmarks in last year’s drawdown.
Thanks @Obsevant1. Couldn’t help noting that 5 funds from TRP comprise close to a quarter of the list.
I hope it’s OK to supplement this thread with a reference to @LewisBraham’s excellent article in the current issue of Barrons (”Investors Rediscover Stock Funds”). A nice broad-brush look at how different equity sectors fared last year. Can’t do it justice here. A few clips might entice folks to pull up the whole article / purchase / read Barron’s.
Excerpts from Barron’s - “Investors Rediscover Stock Funds” - January 9, 2023
- ”In this difficult environment, active management worked. Mutual funds in Morningstar's Large Blend category, which are mostly actively managed, were up 8.4% for the quarter and down 17% in 2022 …”
- “A favorite sector for value investors—energy—continued to dominate, with the average energy mutual fund up 21% in the fourth quarter and 45% in 2022.”
- “Perhaps the biggest surprise this past quarter was the tremendous rebound in foreign stock funds, in particular Morningstar's Europe Stock and Foreign Large Value mutual fund categories, both of which averaged 18% returns. Two value funds—Causeway International Value (CIVVX) and Oakmark International (OAKIX)—had strong runs of 23% each.”
- “The Europe Stock mutual fund category has only 18 funds. Two of the largest—Vanguard European Stock Index (VEURX) and T. Rowe Price European Stock (PRESX)—were two of the best, up 21% each in the quarter. Still, the Vanguard FTSE Europe ETF (VGK), also up 21%, is an easier way to get exposure …..”
- Article details / discusses the impact of foreign exchange rates in driving returns on non-U.S. stocks. (If you haven’t noticed, the dollar has weakened in recent months, helping non-dollar domiciled assets.)
- Lewis also notes, ”One trend that persisted all year was shareholder redemptions from Large-Growth mutual funds. T. Rowe Price Blue Chip Growth (TRBCX) lost the most from outflows in the quarter's first two months, $2.7 billion, and $12 billion for the year through Nov. 30.”
@hank, @LewisBraham - Do you think those redemptions from TRBCX are attributable to poor fund performance the last 2 years or possibly a rotation into the value area of the market? Merely curious.
@Mark Both poor performance and growth stocks lagging are most likely factors, but another important factor is the massive shift that is occurring from actively managed mutual funds to cheaper indexed ETFs. Especially in areas that are bread and butter styles of investments such as large-cap stocks, investors are tired of paying extra for active management. Many would argue it's harder to gain an edge for an active manager in such areas while niche areas like emerging markets, alternatives, small-caps and esoteric bonds offer more promise for active. If mutual funds managers haven't been put on notice that they're charging too much for such familiar highly competitive blue chip stock active strategies, they should be now.
How time has changed. There are now actively managed ETFs are becoming available and at a lower expense ratio. T. Rowe Price, Harbor and Franklin Templeton offer them. Additionally, many loaded funds are waiving their loads at large brokerages. Investors are certainly saving on the management fees and trading ETFs is largely free of commission. As LewisBranham pointed out, ETFs are more challenging to construct for smaller caps domestic and overseas markets. These new products are continuing to evolve.
Other firms have similar cousins of OEFs too. So, some of the outflows from OEFs are just into their ETF or CIT cousins. This isn't fully captured by fund industry asset tracking.
“… but another important factor is the massive shift that is occurring from actively managed mutual funds to cheaper indexed ETFs. Especially in areas that are bread and butter styles of investments such as large-cap stocks, investors are tired of paying extra for active management. Many would argue it's harder to gain an edge for an active manager in such areas while niche areas like emerging markets, alternatives, small-caps and esoteric bonds offer more promise for active ...
Lewis addresses that (shift to ETFs) in the article. I meant to mention it.
I have another theory in addition to what Louis added above. I also think ETFs are easier / more convenient to buy and sell at the brokerages. There’s no fee for selling early (in under 60 / 90 days). So, for whatever reason - whether from timidity, uncertainty, or simply wanting to “game” / “time” the markets, some investors are moving more to ETFs. I noted in the “Plans for 2023” thread that TRBCX & TCHP are on my radar. If you want to take a swing at some of the big beaten-down names - especially in tech - there’s your pitch. Unfortunately, am too risk averse at this stage of life to partake at current levels, though did make a little bit holding TCHP briefly as a spec play last year.
Re: CIF aka CIT: "CIFs are generally available to the individual only via employer-sponsored retirement plans, pension plans, and insurance companies. Other names for them include common trust funds, common funds, collective trusts, and commingled trusts." ------Investopedia.
An additional possible contributing factor to TRBCX redemptions is that long-time manager Larry Puglia retired a little over a year ago. Fund is now managed by Paul Greene.
Comments
As for the bonds, 2023 may present better chance to gain 5%+ gain now that most of the rate hike are likely behind us now. Few smaller hikes are likely this year. And the yields are considerable more attractive comparing to the recent years.
Since there is a possibility of a recession, value funds are preferred unless those that have better risk profile their benchmarks in last year’s drawdown.
I hope it’s OK to supplement this thread with a reference to @LewisBraham’s excellent article in the current issue of Barrons (”Investors Rediscover Stock Funds”). A nice broad-brush look at how different equity sectors fared last year. Can’t do it justice here. A few clips might entice folks to pull up the whole article / purchase / read Barron’s.
Excerpts from Barron’s - “Investors Rediscover Stock Funds” - January 9, 2023
- ”In this difficult environment, active management worked. Mutual funds in Morningstar's Large Blend category, which are mostly actively managed, were up 8.4% for the quarter and down 17% in 2022 …”
- “A favorite sector for value investors—energy—continued to dominate, with the average energy mutual fund up 21% in the fourth quarter and 45% in 2022.”
- “Perhaps the biggest surprise this past quarter was the tremendous rebound in foreign stock funds, in particular Morningstar's Europe Stock and Foreign Large Value mutual fund categories, both of which averaged 18% returns. Two value funds—Causeway International Value (CIVVX) and Oakmark International (OAKIX)—had strong runs of 23% each.”
- “The Europe Stock mutual fund category has only 18 funds. Two of the largest—Vanguard European Stock Index (VEURX) and T. Rowe Price European Stock (PRESX)—were two of the best, up 21% each in the quarter. Still, the Vanguard FTSE Europe ETF (VGK), also up 21%, is an easier way to get exposure …..”
- Article details / discusses the impact of foreign exchange rates in driving returns on non-U.S. stocks. (If you haven’t noticed, the dollar has weakened in recent months, helping non-dollar domiciled assets.)
- Lewis also notes, ”One trend that persisted all year was shareholder redemptions from Large-Growth mutual funds. T. Rowe Price Blue Chip Growth (TRBCX) lost the most from outflows in the quarter's first two months, $2.7 billion, and $12 billion for the year through Nov. 30.”
Price ETFs https://www.troweprice.com/personal-investing/tools/fund-research/etf
Price CITs (lower-ER; unlisted; regulated by OCC, not SEC) https://www.troweprice.com/financial-intermediary/us/en/investments/collective-investment-trusts.html
Other firms have similar cousins of OEFs too. So, some of the outflows from OEFs are just into their ETF or CIT cousins. This isn't fully captured by fund industry asset tracking.
I have another theory in addition to what Louis added above. I also think ETFs are easier / more convenient to buy and sell at the brokerages. There’s no fee for selling early (in under 60 / 90 days). So, for whatever reason - whether from timidity, uncertainty, or simply wanting to “game” / “time” the markets, some investors are moving more to ETFs. I noted in the “Plans for 2023” thread that TRBCX & TCHP are on my radar. If you want to take a swing at some of the big beaten-down names - especially in tech - there’s your pitch. Unfortunately, am too risk averse at this stage of life to partake at current levels, though did make a little bit holding TCHP briefly as a spec play last year.
"CIFs are generally available to the individual only via employer-sponsored retirement plans, pension plans, and insurance companies. Other names for them include common trust funds, common funds, collective trusts, and commingled trusts."
------Investopedia.