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Have you looked at the credit quality of the FI sleeve, the expense ratio, the minuscule amount of assets under management and how long the management has been running a fund?
Telling the members that the fund is new but no other facts about the fund is not useful, unless you would like members to tell you that it is OK to invest in a 2 yr old fund. Some of us do invest in newer funds. irrespective of whether the manager is new.
In addition to sharing what you have already learned about the fund, please share the weblink to the fund site if you want members' opinion on things other than the age of the fund.
@Carefree It would be interesting to hear how you happened on this one and what you like about it. Suspect there’s a story there or maybe a personal situation that lends itself to this fund.
MCTOX
1.92% ER
About 40/40 equity / fixed income
10-20% “other” and a little cash
Pretty much a “go anywhere” mandate
They can short securities, but don’t currently seem to be shorting to a significant degree.
Heavy investment in real estate and energy (MLPs?)
Low asset base - only around $50 mil AUM
Turnover 1,229% These guys are “wheeling and dealing.”
I don’t worship at the alter of M*, but do look at what they say. In this case M* gives the fund a Negative rating. They don’t hand a lot of those out. They could be proven wrong as the fund is so new it’s hard to tell. That said, I don’t think I’d buy a fund with their negative rating. They’re generally correct on that score.
There’s not much they like, but in particular M* faults the “excessive” fees and lack of investment experience by the managers, Following is a brief excerpt from Morningstar::
”Peter Montalbano brings three years of listed portfolio management experience. The team is small and inadequately equipped, with only one other listed manager supporting it. Together, the two average three years of listed portfolio management experience “
Our own Lewis Braham just highlighted them in An article in Barron’s. Some excerpts:
“ Despite the confusion, some of these funds are worthy diversifiers for a traditional fixed-allocation portfolio. The hard part is figuring out which ones, as their strategies can vary significantly. “The issue to me is ‘tactical’ means the portfolio changes,” says Michael Lowenberg, manager of Modern Capital Tactical Income  (ticker: MCTDX), which Morningstar categorizes as Moderate Allocation. That category generally includes funds with 50% to 70% in stocks and the remainder in bonds, but Lowenberg says, “Our portfolio is dramatically different” from a year ago when “fixed income wasn’t investible” as interest rates were rising and bonds falling.”
“In early 2023, Lowenberg avoided most bonds, but today, now that he thinks the rate increases are over, his fund’s portfolio, as of March 31, was 53% in bonds and cash. Lowenberg’s aggressive shifts have paid off. In 2022, his fund was up 13.9%, with significant weightings in energy stocks and cash in an inflationary environment. Last year, the fund was up almost 18% as he gradually shifted more toward high-yield bonds and floating-rate debt.”
“How do you analyze a fund like this when you don’t know what’s in its shifting portfolio? Morningstar categorizes only 80 mutual funds and 23 exchange-traded funds as Tactical Allocation, but if you include the word “tactical” in a fund screen, those numbers go up to 126 mutual funds and 50 ETFs. Some but not all of those correctly belong in non-tactical-allocation categories as they are shifting more between individual stock or bond sectors than entire asset classes.”
“Compounding the confusion, some of the best tactical funds invest in closed-end funds, both to allocate their assets and to exploit deep price discounts to the closed-ends’ underlying portfolio values. When closed-end fund price discounts narrow, their share prices get bid up. That augments the tactical funds’ returns but also adds an extra layer of closed-end fund fees. Modern Tactical’s seemingly high 1.92% expense ratio actually masks that it charges a much more reasonable 0.60% management fee. There are additional fees charged by funds it holds, like Templeton Emerging Markets (EMF), which has a 1.47% expense ratio, but also trades at an attractive 15% discount.”
“Modern Capital has an 0.86 three-year Sharpe ratio, higher than any fund in Morningstar’s Tactical Allocation category, followed by Saba Closed-End’s 0.44 and Matisse’s 0.39. Most funds in the category have negative Sharpes, indicating they aren’t rewarding investors enough for their risks.”
Thanks @MikeW - I missed Lewis’s article but will locate and read it. M* did note in brief that CEFs is one of MCTOX’s several investment options. And it is true that CEFS can oftentimes carry high fees which get passed on to the investor one way or another. There has been discussion on the board recently of 3 different diversified approaches to CEFs. True to form, the 3 funds that have been mentioned all carry high ERs (4-6% roughly) when the pass through is taken into account.
Lewis apparently interviewed Michael Lowenberg who heads MCDTX. Lewis’s is a worthy endeavor. He’s looking at funds that zig when most of the markets zag - in short … diversifiers.
While I summarized MCTOX, MCDTX looks very similar. It carries the same 1.92% ER and also receives a Negative rating at M.* M* (like Lewis Braham) notes that MCTDX has had an impressive short-term run, but M* casts doubt on whether that can be replicated going forward.
I cringe at mentioning MCDTX and LCORX in the same breath. The differences are too numerous to cite. But think of LCORX as a well seasoned and conservative grown-up riding a well maintained high quality bicycle at a safe speed. And think of MCDTX as the new kid on the block careening past on a skateboard.
With 6/24/21 inception, the new kid on the block MCTOX / MCTDX is just hitting some 3-yr screens; both classes have the same ER. It did avoid hits in 2022. Its prospectus mentions day-trading and long-short strategies in ETFs, CEFs, stocks, so turnover is crazy high. Website features availability on Fido and Schwab, but both classes are TF at Fido, NTF at Schwab.
As rates are stabilizing, I do not see an edge over the past one year. Since storms are always possible, May be this can have an appeal in the future. I personally do not pay a ot of attention to M* medal ratings but pay attention to their * rating. Pl post anyone buys into this. I have a few experimental positions, none of which are working. Need storms for this to work, I am guessing..
The high expense ratio is a barrier for us. Still think whether LCORX fits into our balanced fund sleeve. If so, we will choose the ETF version, LCR instead with a lower ER.
Comments
In addition to sharing what you have already learned about the fund, please share the weblink to the fund site if you want members' opinion on things other than the age of the fund.
MCTOX
1.92% ER
About 40/40 equity / fixed income
10-20% “other” and a little cash
Pretty much a “go anywhere” mandate
They can short securities, but don’t currently seem to be shorting to a significant degree.
Heavy investment in real estate and energy (MLPs?)
Low asset base - only around $50 mil AUM
Turnover 1,229% These guys are “wheeling and dealing.”
I don’t worship at the alter of M*, but do look at what they say. In this case M* gives the fund a Negative rating. They don’t hand a lot of those out. They could be proven wrong as the fund is so new it’s hard to tell. That said, I don’t think I’d buy a fund with their negative rating. They’re generally correct on that score.
There’s not much they like, but in particular M* faults the “excessive” fees and lack of investment experience by the managers, Following is a brief excerpt from Morningstar::
”Peter Montalbano brings three years of listed portfolio management experience. The team is small and inadequately equipped, with only one other listed manager supporting it. Together, the two average three years of listed portfolio management experience “
“ Despite the confusion, some of these funds are worthy diversifiers for a traditional fixed-allocation portfolio. The hard part is figuring out which ones, as their strategies can vary significantly. “The issue to me is ‘tactical’ means the portfolio changes,” says Michael Lowenberg, manager of Modern Capital Tactical Income  (ticker: MCTDX), which Morningstar categorizes as Moderate Allocation. That category generally includes funds with 50% to 70% in stocks and the remainder in bonds, but Lowenberg says, “Our portfolio is dramatically different” from a year ago when “fixed income wasn’t investible” as interest rates were rising and bonds falling.”
“In early 2023, Lowenberg avoided most bonds, but today, now that he thinks the rate increases are over, his fund’s portfolio, as of March 31, was 53% in bonds and cash. Lowenberg’s aggressive shifts have paid off. In 2022, his fund was up 13.9%, with significant weightings in energy stocks and cash in an inflationary environment. Last year, the fund was up almost 18% as he gradually shifted more toward high-yield bonds and floating-rate debt.”
“How do you analyze a fund like this when you don’t know what’s in its shifting portfolio? Morningstar categorizes only 80 mutual funds and 23 exchange-traded funds as Tactical Allocation, but if you include the word “tactical” in a fund screen, those numbers go up to 126 mutual funds and 50 ETFs. Some but not all of those correctly belong in non-tactical-allocation categories as they are shifting more between individual stock or bond sectors than entire asset classes.”
“Compounding the confusion, some of the best tactical funds invest in closed-end funds, both to allocate their assets and to exploit deep price discounts to the closed-ends’ underlying portfolio values. When closed-end fund price discounts narrow, their share prices get bid up. That augments the tactical funds’ returns but also adds an extra layer of closed-end fund fees. Modern Tactical’s seemingly high 1.92% expense ratio actually masks that it charges a much more reasonable 0.60% management fee. There are additional fees charged by funds it holds, like Templeton Emerging Markets (EMF), which has a 1.47% expense ratio, but also trades at an attractive 15% discount.”
“Modern Capital has an 0.86 three-year Sharpe ratio, higher than any fund in Morningstar’s Tactical Allocation category, followed by Saba Closed-End’s 0.44 and Matisse’s 0.39. Most funds in the category have negative Sharpes, indicating they aren’t rewarding investors enough for their risks.”
https://www.barrons.com/articles/tactical-allocation-funds-beat-market-95a77628?refsec=funds&mod=topics_funds
Lewis apparently interviewed Michael Lowenberg who heads MCDTX. Lewis’s is a worthy endeavor. He’s looking at funds that zig when most of the markets zag - in short … diversifiers.
While I summarized MCTOX, MCDTX looks very similar. It carries the same 1.92% ER and also receives a Negative rating at M.* M* (like Lewis Braham) notes that MCTDX has had an impressive short-term run, but M* casts doubt on whether that can be replicated going forward.
I cringe at mentioning MCDTX and LCORX in the same breath. The differences are too numerous to cite. But think of LCORX as a well seasoned and conservative grown-up riding a well maintained high quality bicycle at a safe speed. And think of MCDTX as the new kid on the block careening past on a skateboard.
Edit: LCORX, ER 1.38%; LCR ER 0.86%.