Article - Originally from BloombergThe author’s premise seems to be that the strategy has worked this year using intermediate term bonds, but that abnormal behavior at the 30-year end clouds the strategy’s efficacy going forward.
“A SLUMP in US long-dated bonds is clouding the comeback of a classic investment strategy. The so-called 60/40 portfolio – long recommended for investors who want to balance exposure to risk with a cushion of safer, steady income – calls for allocating 60 per cent of holdings to stocks and 40 per cent to bonds. While a bedrock for retirement savers over decades, the approach lost some of its lustre in recent years as its underlying mechanism fell out of whack, with US stocks and bonds moving more in lockstep rather than offsetting each other.”
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"The so-called 60/40 portfolio – long recommended for investors who want to balance exposure to risk with a cushion of safer, steady income – calls for allocating 60 per cent of holdings to stocks and 40 per cent to bonds. While a bedrock for retirement savers over decades, the approach lost some of its lustre in recent years as its underlying mechanism fell out of whack, with US stocks and bonds moving more in lockstep rather than offsetting each other."
VBIAX is your typical 60/40.
I would not call 2.2% a great income.
BND, the US Tot Index made 1.46% annually in the last 10 years, a pretty low performance. Even 15 years at 2.2% is pretty low. BND lost more than 13% in 2022, where was the cusion?
I never believed in B&H for decades, the markets keep changing, and sometimes it's for years. I preferred to hold funds like PRWCX.
Somewhat agree. Every 3-5 years I’ve found it prudent to alter the overall mix - even though it is intended as long-term B&H. An example was after real assets funds outperformed heavily around 2020-21. I dumped them. But during the past 6-12 months I reallocated to one, as these products have cooled off in recent years.
My “Strategery” doesn’t always work. Last year I sold a big position in PRPFX after it had surged 28% at one point during the year. Darned if it hasn’t continued on its winning ways this year, thanks to gold’s unparalleled rise plus its holdings in the Swiss Franc which is up around 10% YTD.
However, at this stage of life, ”A bird in the bag is worth two in the bush”.
Didn't realize how many call options this fund holds.
“PRWCX is having one of its poorest performances relative to peers, all the way "down" to the 22nd percentile. Typically growth leaning, it has moved solidly into blend (37% of portfolio is LCBl) suggesting that Giroux also sees the markets moving toward value. (It is also open to investors who have at least $250K total invested at TRP.)”
As one who owned PRWCX almost from inception (1986) until I sold 2 or 3 years ago I’ve witnessed several different managers at the helm, a staggering growth of AUM and changes in how the fund positions itself (away from mid-cap and niche holdings). It’s a heavyweight now. Giroux speaks in terms of a 3-year time horizon and isn’t afraid to hold cash when he thinks equities are pricy. If past is prologue, the fund will again head to the front of the pack sometime during the 2 or 3 years. As always, I’m skeptical.
If you go back to the January Barron’s “Roundtable” 2 or 3 years ago (either 2022 or 2023) you will find Giroux was quite far off on his interest rate outlook - insisting rather stridently at the time that the 10-year Treasury would not finish the year above 3%. It finished quite a bit higher that year. Today it’s at 4.518%
3-5-10-15 years Percentile Rank at 8-4-1-1
My portfolio is different = my system
As of last market close (May 23), M* reports it at the 23rd percentile YTD. (It dropped 1 percentile in the day or two since I posted 22nd percentile.) I don't know where 27th percentile comes from. M* reports 23rd percentile as of May 23 and as of April 30, and 41st percentile as of March 31st.
https://www.morningstar.com/funds/xnas/prwcx/performance
Lipper reports it at the 49th percentile of Mixed Asset Multi-Target Growth funds. The page linked to below doesn't give an "as of" date (at least I don't see it). But given that its YTD figure is reported to be 1.91%, the same as M* reports for May 23 ("today"), I figure that is through last market close.
https://www.marketwatch.com/investing/fund/prwcx
A lot depends upon how your peers are chosen (mixed asset growth or moderate allocation). One category uses a narrow band on style (growth) but a wide band on stock/bond allocation. The other category uses a narrow band on allocation (moderate) but a wide band on style (growth/value).
As popular funds grow, they do tend to shift - upward in market cap and maybe to a different type. FLPSX started out as a small cap fund. It added capacity by moving into mid cap and adding more foreign holdings (it's now classified as a global fund). VPMCX started as a mid cap growth, moved to large cap growth and is now in large cap blend. Such funds are not necessarily worse than they used to be, but they are somewhat changed. Perhaps that's why you (@hank) sold?
This can be problematic for investors who used these funds to fill specific roles within their portfolios.
I never held a huge slug. It was always in the Traditional IRA. After it closed, the thought of converting a single share into a Roth occurred to me, but I never followed through. I owned DODBX directly in the Roth in those days and considered it an equally well run fund.
I get nervous whenever something is doing “too well.” Also, my (always evolving) investing approach today is to focus on more ”asset-specific” funds and attempt balancing them out as they ebb and fall (umm … utilities / real assets / miners / health care, etc.) PRWCX is great at what it does. But the manager has a lot of discretion. By necessity he needs to play in the broader large-cap arena. Equities in general make me nervous in today’s market. CPLSX is the nearest I come to letting the manager decide where to focus / invest throughout the wide equity universe.
* Note that @msf put “down” in quotes in the passage I quoted. So, I assumed the comment was a bit tongue-in-cheek.
mark,
in 2024 i shifted prwcx->prcfx in all family tax deferred accts.
Giroux, who is no slouch in multi-asset, has high praise for shuggi's risk adjusted fixed income skills.
seems like a good combo even if you find a better bond manager, because these 2 are also adjusting asset weights at no extra cost\effort for holders.
one disagreement to discussion above; prcfx could easily go downcap given it is tiny...Giroux is not forced to go largecap here. i would triple my stake were it smidcap.
but the reason it does not is to utilize existing effort used for prwcx equities...barring a few unique names that may transit.