Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Thanks for the notice, big guy! A combination of Easter activities and Little League activities threw my schedule way off and I ended up writing until 3 a.m. then I had to be back at the college by 8 a.m. That made me a little dubious about trying to construct a coherent announcement and highlights.
Some cool funds in the pipeline, at the very least. I'm teaching News Literacy to young journalists this term, so some of the antics in that field were more grating than usual and it felt good to point out what appear to be the ever-lower standards applied in the field now.
Off to figure out how to prep for tomorrow's classes.
There was a lot in April commentary... I did scan a bit and later re-read in detail and did a bit of research for this post. I have a few remarks regarding April commentary:
Opening comments:
1) Real estate investment of Colleges: You see them as investment for the future of the university and may be entirely justified for Augustana College. But Real estate investments, especially in non-core real estate in outside of teaching and research purposes has been a contributor growing budgets for universities and one reason why tuition costs has been advancing much faster than inflation. In fact, I read somewhere twice as fast as health care and that is already too much. I think the development towards more fancy/luxurious facilities did not add much value for education quality but deeper holes to parents pockets. While the costs go up, the support provided by universities to students (even very good ones) is going down. This is not how we are going to build a strong future in this country.
Again, I am not saying Ausgutana's investments are bad. I do not know. Having kids that will be college bound in a few years makes me an interested party and I do not like the current situation. The rich afford higher costs in any case. The very poor are given grants, scholarships and the middle class is the victim as their kids do not qualify for scholarships but they do not have resources like the rich.
2) Stupid Pill:
I am one of those that decided to bail out of ARIVX. I realized that his style is not my style. I am looking for more consistent performers rather than how and cold episodes. I actually think you also highlighted those that are consistently not bad. Well, I really cannot put ARIVX as one of those yet. Performance so far is not very inspiring. I am sure during some periods his performance will improve and hopefully he will make up for the lag. Can he turn into another Hussman? Maybe or maybe not.
3) Regarding the list of funds you have included.
3a) I question the inclusion of allocation/balanced funds. Recently a lot of these funds have moved to short term securities which are considered cash equivalent by M*. So, for these funds to show high cash is really not a revelation. I am comfortable with Balanced funds selling long bonds and holding more cash. I think it is more interesting to look at the behavior of those that were supposed to be pure equity funds by investment objective.
3b) First Pacific Low Volatility. The ticker symbol should be LOVIX instead of LOVLX. Intrepid All Cap - > Intrepid Disciplined Value (well, you referred to this change at the end of the commentary)
3c) The Cash position information for a number of funds do not match with M* Portfolio tab. Some are close. Some are more than 10% different.
3d) I think a number of funds do not merit inclusion in the list to make a case for such type of manager. These are consistently bad.
CDFFX CLRTX GAVAX -- To short history. Any previous fund to quote? HCMAX HSDVX NQCFX PYGEX PVFIX - Well, with recent underperformance consistently bad 3/5/10 year record. Future for ARIVX ? TEBRX
One you eliminate allocation funds, and funds that are not worthy of setting an example, the list for consideration is now much smaller. 4) About Ms. Hobson.
Interesting fact: Maybe she learned new Jedi Mind Tricks from George Lucas to make her being interested party to be forgotten.
Ms. Hobson and Mr. Lucas recently got engaged around the time George Lucas sold Star Wars empire to Disney.
5) VCAPX.
This is not something I would ever invest. Is it even 40 act compliant, mutual fund? It is worse than a closed end fund.
The performance data given is also not so eye catching. PONDX invested in MBS last year and have done much better. There are others in open end funds that did much better than this fund.
6) About Charles' table.
He is doing a great job. The only issue I have is the use of records from inception. Funds are being compared from different periods. The ones that avoided the bad period recently ending up with much better fund stats. A little bit apples to oranges comparison.
Great commentary, as always David. Thanks very much for the humor and insight you and your team bring to this site. Its one of my favorites.
Okay, so, Artio Local Emerging Markets Debt (or, whatever its called) is liquidating? Holy smokes, wasn't that one of the funds that was retained after their culling their other offerings?
Wow. Just wow. Once a neat fund company with interesting funds that went "a bridge to far".
So glad I exited that sinking ship a while back. Thanks to you and BobC for the heads up.
Reply to @Investor: Thanks man. I will often present performance numbers over lifetime of funds, but in this case, I believe I met your demand to compare performance of the funds over same 43 months, since COBYX inception. So, the performance for COBYX, SEQUX, MAPOX, YAFFX, DWGIX, ICMBX, FPACX, BRK.B were all computed using monthly total returns from Aug 2009 through Feb 2013. (ARKEX is a slight exception since it is a couple months younger.) Otherwise, apples to apples.
I tried to make sure that was clear with the note in the lower left hand corner of the table:
Based on monthly returns from COBYX inception Aug 2009 thru Feb 2013, except AKREX from Oct 2009.
COBYX has outperformed these other 5-star funds over the very same time period. But I think I am getting to know you well enough to anticipate your next critique: "You can't spend risk adjusted returns...".
I agree that the NPR piece on disability was very good:
"The most striking example of great long-form work is “Unfit for Work: The startling rise of disability in America,” the NPR piece on the rising tide of Americans who apply for and receive permanent disability status. 14 million Americans – adults and children – are now “disabled,” out of the workforce (hence out of the jobless statistics) and unlikely ever to hold a job again. "
Thanks for using the same time frame. I should have been paying more attention.
COBYX has been a very good fund with nominal returns but their success is really year 2011. Can they do the same?They say they do. i wish them luck. I am just not comfortable with that small portfolio. A mistake and you will get a big hit suddenly. Call me chicken.
Update: I would be more interested on GOODX vs COBYX. I wished David profiled GOODX and had a conf. Call with their managers (former FAIRX managers prior to 2008)
Reply to @Investor: I also noticed the wide discrepancy in the cash figure for FMIJX; FMI's December 31 portfolio report, the most recent, confirms it. Thanks for digging out the others.
Reply to @Derf: Hi Derf -- I'd guess the "long" and "short" are the currency contracts, no? They don't short, but do hedge foreign currency (which sounds like a good deal at this point, given they've got euro exposure).
Hmmm. I wonder if the source David used for the cash figures in the monthly commentary counts all the plus and minus values of the odd bits like currency contracts as cash ... 20.6 + 37.37 comes in pretty close to the 60% in that table.
Reply to @Investor: Quick thoughts in the midst of mid-term grading.
Augie's buildings: at a state-supported school, construction funds do get added to the state budget. Here, the new construction is paid for by gifts (or gift commitments) and not from tuition. As it turns out, raising money for a building is a lot easier than for a scholarship. In our case, the new buildings will lower our operating expenses by a lot; we will, for example, combine all dining services into a single facility and cut energy costs a lot.
As a kid whose folks never finished high school, whose siblings barely did and whose family lived paycheck to paycheck, I'm incredibly sympathetic to concerns about the cost of college. I'm also modestly irked that exceedingly affluent families - folks with AGIs over $500k - still demand "need-based" aid and less affluent families demand townhouse-style residence halls, or they'll go someplace that will offer it. There was a depressing study that came out in February; its bottom line is that, except for academically-elite students, schools that make investments in the academic program are seen as less attractive than those that make investments in amenities.
Aston River Road Independent Value: it could be that his success from 1996 through Q3 2011 was a fluke. He's up 17.7% since then while his average peer is up 48%, which is an annualized return of 30%. So perhaps that period represents a fluke, too?
The List: I wasn't trying to generate a list of great, good or even decent cash-heavy funds. I was mostly trying to get folks to reflect on the range of funds that have moved in that direction. The challenge is that portfolios are now so complex (currency forward contracts, anyone?) that even finding folks who hold cash qua cash was tough.
Ms. Hobson: I did make a snarky remark about her engagement to Mr. Lucas when I discussed this in News Literacy, but it was too much of a cheapshot (and an unsubstantiated one at that) to raise on the web.
VCAPX: no problem. I'm trying to use The Elevator Talk feature as a way of getting a little outside my comfort zone. Left to my own devices, I'd be all French & Fama, low cost, and diversified. I worry that those biases impose pretty serious blinders on me, so I'm trying to be consciously welcoming to products that are outside the range of stuff I'd normally consider.
On Charles: he really does remarkable work, using an approach and tools that are entirely beyond my competence. I'm deeply grateful for his willingness to contribute perspectives and vibrancy to the site, just as I'm deeply grateful of yours.
Reply to @David_Snowball: The "cash" category treatment has been questioned several times by M* forum posters for Pimco funds (& maybe others too, don't recall); looks like the screener is unfortunately off-target on this data point.
Reply to @Investor: That's a great idea to do a call with the GOODX guys if there's a time when that could happen. I've come really close to sending them some $ a couple of times.
Thanks for your insight on buildings. I am glad that the situation is not pointing to higher tuition due to construction for Augustana. It is a break from the general trend.
ARIVX may be hot again and produce good long term performance. I just do not like this inconsistent funds. So, after a test drive I have decided that it is not for me.
The list. One again M* screener is either using another database and disagree with fund profile page.
I think the selection of list matters since it is making a case that the managers that are on this list did not take the stupid pill. Time will show who took the pill and who did not. I suspect the majority might have actually did.
I was wrong regarding Charles' analysis. He corrected me and I conceded.
Again, that you very much. I guess you know that I do read and research your commentary. Your effort is appreciated. This was one of your best!
I'm among those thinking of bailing on ARIVX, even though in general I've done well sticking with and adding to funds (FAIRX, JAOSX, BRUSX) that have good long-term records but short-term underperformance.
The quotes from David's interview with him this month made me more likely to bail. It sounds like the manager is in the gloom-and-doom crowd: he thinks the economy is in a bubble and he only likes cash, precious metals, and probably bullets and bottled water. He may be right, but I believe that we're in a gradual but sustainable recovery, and the whole rest of my portfolio is positioned with that in mind. I'd feel better sticking with ARIVX if he had said he was simply looking for undervalued stocks and couldn't find many; but it sounds like he is also making a very big macro bet, and I don't know if he has the chops for it.
Although I am clearly in the minority here, ARIVX does not interest me.
First, if one wants the diversification and long-term performance potential of owning SCV equities, owning ARIVX makes no sense to me. With ARIVX one will get the blended diversification and performance of about a 50/50 exposure to cash and SCV equities at a pricey net expense ratio of 1.44%. And what catastrophic event would it take for Mr. Cinnamond to become more fully invested ? Obviously the 20% loss in SCV equities in Q3 2011 was not enough.
Second and more importantly, I do not trust the stewardship of this fund. Originally it closed to new investors in November 2011 when total AUM -- including a very high cash position -- were between $500-600M. Presumably this was done for the benefit of current investors. Fine, all is good. Then in September 2012, the same fund with about the same AUM -- still with a huge cash position due to the lack of equity opportunities -- reopens to new investors in order "to give the Fund access to capacity that was originally reserved for potential institutional separate accounts." So existing investors had their relatively low SCV equity exposure diluted further by institutional cash. Is this acting in the best interest of current investors ? Obviously not. Is it responsible for a manager and his fund directors to reopen a fund to new investors when they are having difficulty deploying a cash hoard into equity investments ? Clearly, this is not responsible fund stewardship regardless of the spin provided by the manager. Clearly, this was blatant asset gathering, and nothing else.
Wonderful commenary, David. Thanks for all your efforts to help us out. I am one of those in minority, who would stick to ARIVX. I brought it recently and I would give him three years of time. I am not into fund-hopping, jumping from one to another and living in the illusion that would fetch rewards.
I am sorry for the rant but both this board as well as M* boards are dominated by folks with 'short-term view' mentality . Their funds change every couple of months and they justify it with momentum investing, blah blah blah. I wish them good luck.
Reply to @kevindow: You are not the only one not interest in ARIVX. I was not interested in this fund either.
At this point of economy the valuation of smaller caps are fully priced while larger caps especially those with global exposure are traded at lower valuation.
Reply to @mrc70: Mrc, I am in complete agreement with you about fund hopping (and about David's wonderful commentary and work on this site), and I hope a continued investment in ARIVX works out well for both of you. It isn't Cinnamond's poor short-term performance that bothers me; it was his comments (not in his interview with David, I made a mistake about that, but on his most recent manager's commentary on his website) when he expresses his opinion that the current U.S. recovery is a mirage bound to collapse. I don't agree and I hadn't invested with him realizing that he made big macro bets like that. It is a different kind of fund than I had realized.
I sold last week, put 40% of proceeds into HUSIX and kept the other 60% in cash, which I will add to HUSIX if a correction brings it down at least 20%. If not, I'll spend it. As others on this board have said, I'd rather hold cash myself than pay a manager 1.4% to hold it for me. That 40/60 ratio is more or less what ARIVX has a right, so I figure I'm keeping my risk level more or less stable.
Comments
Some cool funds in the pipeline, at the very least. I'm teaching News Literacy to young journalists this term, so some of the antics in that field were more grating than usual and it felt good to point out what appear to be the ever-lower standards applied in the field now.
Off to figure out how to prep for tomorrow's classes.
David
Hi David,
There was a lot in April commentary... I did scan a bit and later re-read in detail and did a bit of research for this post. I have a few remarks regarding April commentary:
Opening comments:
1) Real estate investment of Colleges: You see them as investment for the future of the university and may be entirely justified for Augustana College. But Real estate investments, especially in non-core real estate in outside of teaching and research purposes has been a contributor growing budgets for universities and one reason why tuition costs has been advancing much faster than inflation. In fact, I read somewhere twice as fast as health care and that is already too much. I think the development towards more fancy/luxurious facilities did not add much value for education quality but deeper holes to parents pockets. While the costs go up, the support provided by universities to students (even very good ones) is going down. This is not how we are going to build a strong future in this country.
Again, I am not saying Ausgutana's investments are bad. I do not know. Having kids that will be college bound in a few years makes me an interested party and I do not like the current situation. The rich afford higher costs in any case. The very poor are given grants, scholarships and the middle class is the victim as their kids do not qualify for scholarships but they do not have resources like the rich.
2) Stupid Pill:
I am one of those that decided to bail out of ARIVX. I realized that his style is not my style. I am looking for more consistent performers rather than how and cold episodes. I actually think you also highlighted those that are consistently not bad. Well, I really cannot put ARIVX as one of those yet. Performance so far is not very inspiring. I am sure during some periods his performance will improve and hopefully he will make up for the lag. Can he turn into another Hussman? Maybe or maybe not.
3) Regarding the list of funds you have included.
3a) I question the inclusion of allocation/balanced funds. Recently a lot of these funds have moved to short term securities which are considered cash equivalent by M*. So, for these funds to show high cash is really not a revelation. I am comfortable with Balanced funds selling long bonds and holding more cash. I think it is more interesting to look at the behavior of those that were supposed to be pure equity funds by investment objective.
3b) First Pacific Low Volatility. The ticker symbol should be LOVIX instead of LOVLX.
Intrepid All Cap - > Intrepid Disciplined Value (well, you referred to this change at the end of the commentary)
3c) The Cash position information for a number of funds do not match with M* Portfolio tab. Some are close. Some are more than 10% different.
CDFFX - > 33.5 - > 18.26
CLRTX - > 67.8 - > 57.05
FMIJX - > 60.0 - > 11.77 *****
FPIVX - > 34.4 - > 67.17
HDOGX - > 51.1 - > 68.44
PYGEX - > 44.6 - > -4.58 *****
3d) I think a number of funds do not merit inclusion in the list to make a case for such type of manager. These are consistently bad.
CDFFX
CLRTX
GAVAX -- To short history. Any previous fund to quote?
HCMAX
HSDVX
NQCFX
PYGEX
PVFIX - Well, with recent underperformance consistently bad 3/5/10 year record. Future for ARIVX ?
TEBRX
One you eliminate allocation funds, and funds that are not worthy of setting an example, the list for consideration is now much smaller.
4) About Ms. Hobson.
Interesting fact: Maybe she learned new Jedi Mind Tricks from George Lucas to make her being interested party to be forgotten.
Ms. Hobson and Mr. Lucas recently got engaged around the time George Lucas sold Star Wars empire to Disney.
5) VCAPX.
This is not something I would ever invest. Is it even 40 act compliant, mutual fund? It is worse than a closed end fund.
The performance data given is also not so eye catching. PONDX invested in MBS last year and have done much better. There are others in open end funds that did much better than this fund.
6) About Charles' table.
He is doing a great job. The only issue I have is the use of records from inception. Funds are being compared from different periods. The ones that avoided the bad period recently ending up with much better fund stats. A little bit apples to oranges comparison.
Okay, so, Artio Local Emerging Markets Debt (or, whatever its called) is liquidating? Holy smokes, wasn't that one of the funds that was retained after their culling their other offerings?
Wow. Just wow. Once a neat fund company with interesting funds that went "a bridge to far".
So glad I exited that sinking ship a while back. Thanks to you and BobC for the heads up.
Where have I been? Where have I been?
I tried to make sure that was clear with the note in the lower left hand corner of the table: COBYX has outperformed these other 5-star funds over the very same time period. But I think I am getting to know you well enough to anticipate your next critique: "You can't spend risk adjusted returns..."
Ummm, you can't spend risk adjusted returns.
Thanks for using the same time frame. I should have been paying more attention.
COBYX has been a very good fund with nominal returns but their success is really year 2011. Can they do the same?They say they do. i wish them luck. I am just not comfortable with that small portfolio. A mistake and you will get a big hit suddenly. Call me chicken.
Update: I would be more interested on GOODX vs COBYX. I wished David profiled GOODX and had a conf. Call with their managers (former FAIRX managers prior to 2008)
137.37 % long - 120.6% short = Net cash 11.77 %.
Have a nice day, Derf
Hmmm. I wonder if the source David used for the cash figures in the monthly commentary counts all the plus and minus values of the odd bits like currency contracts as cash ... 20.6 + 37.37 comes in pretty close to the 60% in that table.
David
Augie's buildings: at a state-supported school, construction funds do get added to the state budget. Here, the new construction is paid for by gifts (or gift commitments) and not from tuition. As it turns out, raising money for a building is a lot easier than for a scholarship. In our case, the new buildings will lower our operating expenses by a lot; we will, for example, combine all dining services into a single facility and cut energy costs a lot.
As a kid whose folks never finished high school, whose siblings barely did and whose family lived paycheck to paycheck, I'm incredibly sympathetic to concerns about the cost of college. I'm also modestly irked that exceedingly affluent families - folks with AGIs over $500k - still demand "need-based" aid and less affluent families demand townhouse-style residence halls, or they'll go someplace that will offer it. There was a depressing study that came out in February; its bottom line is that, except for academically-elite students, schools that make investments in the academic program are seen as less attractive than those that make investments in amenities.
Aston River Road Independent Value: it could be that his success from 1996 through Q3 2011 was a fluke. He's up 17.7% since then while his average peer is up 48%, which is an annualized return of 30%. So perhaps that period represents a fluke, too?
The List: I wasn't trying to generate a list of great, good or even decent cash-heavy funds. I was mostly trying to get folks to reflect on the range of funds that have moved in that direction. The challenge is that portfolios are now so complex (currency forward contracts, anyone?) that even finding folks who hold cash qua cash was tough.
Ms. Hobson: I did make a snarky remark about her engagement to Mr. Lucas when I discussed this in News Literacy, but it was too much of a cheapshot (and an unsubstantiated one at that) to raise on the web.
VCAPX: no problem. I'm trying to use The Elevator Talk feature as a way of getting a little outside my comfort zone. Left to my own devices, I'd be all French & Fama, low cost, and diversified. I worry that those biases impose pretty serious blinders on me, so I'm trying to be consciously welcoming to products that are outside the range of stuff I'd normally consider.
On Charles: he really does remarkable work, using an approach and tools that are entirely beyond my competence. I'm deeply grateful for his willingness to contribute perspectives and vibrancy to the site, just as I'm deeply grateful of yours.
Back to grading!
David
Thanks for your reply.
Thanks for your insight on buildings. I am glad that the situation is not pointing to higher tuition due to construction for Augustana. It is a break from the general trend.
ARIVX may be hot again and produce good long term performance. I just do not like this inconsistent funds. So, after a test drive I have decided that it is not for me.
The list. One again M* screener is either using another database and disagree with fund profile page.
I think the selection of list matters since it is making a case that the managers that are on this list did not take the stupid pill. Time will show who took the pill and who did not. I suspect the majority might have actually did.
I was wrong regarding Charles' analysis. He corrected me and I conceded.
Again, that you very much. I guess you know that I do read and research your commentary. Your effort is appreciated. This was one of your best!
The quotes from David's interview with him this month made me more likely to bail. It sounds like the manager is in the gloom-and-doom crowd: he thinks the economy is in a bubble and he only likes cash, precious metals, and probably bullets and bottled water. He may be right, but I believe that we're in a gradual but sustainable recovery, and the whole rest of my portfolio is positioned with that in mind. I'd feel better sticking with ARIVX if he had said he was simply looking for undervalued stocks and couldn't find many; but it sounds like he is also making a very big macro bet, and I don't know if he has the chops for it.
First, if one wants the diversification and long-term performance potential of owning SCV equities, owning ARIVX makes no sense to me. With ARIVX one will get the blended diversification and performance of about a 50/50 exposure to cash and SCV equities at a pricey net expense ratio of 1.44%. And what catastrophic event would it take for Mr. Cinnamond to become more fully invested ? Obviously the 20% loss in SCV equities in Q3 2011 was not enough.
Second and more importantly, I do not trust the stewardship of this fund. Originally it closed to new investors in November 2011 when total AUM -- including a very high cash position -- were between $500-600M. Presumably this was done for the benefit of current investors. Fine, all is good. Then in September 2012, the same fund with about the same AUM -- still with a huge cash position due to the lack of equity opportunities -- reopens to new investors in order "to give the Fund access to capacity that was originally reserved for potential institutional separate accounts." So existing investors had their relatively low SCV equity exposure diluted further by institutional cash. Is this acting in the best interest of current investors ? Obviously not. Is it responsible for a manager and his fund directors to reopen a fund to new investors when they are having difficulty deploying a cash hoard into equity investments ? Clearly, this is not responsible fund stewardship regardless of the spin provided by the manager. Clearly, this was blatant asset gathering, and nothing else.
Kevin
I am one of those in minority, who would stick to ARIVX. I brought it recently and I would give him three years of time. I am not into fund-hopping, jumping from one to another and living in the illusion that would fetch rewards.
I am sorry for the rant but both this board as well as M* boards are dominated by folks with 'short-term view' mentality . Their funds change every couple of months and they justify it with momentum investing, blah blah blah. I wish them good luck.
At this point of economy the valuation of smaller caps are fully priced while larger caps especially those with global exposure are traded at lower valuation.
I sold last week, put 40% of proceeds into HUSIX and kept the other 60% in cash, which I will add to HUSIX if a correction brings it down at least 20%. If not, I'll spend it. As others on this board have said, I'd rather hold cash myself than pay a manager 1.4% to hold it for me. That 40/60 ratio is more or less what ARIVX has a right, so I figure I'm keeping my risk level more or less stable.