I put WBLSX and WBMIX on my watch list with quite a bit of skepticism. But looking very short term, they are holding up pretty well as alternative diversification. There have been a couple other recent posts about diversifiers and where to go in place of bonds. These funds were never mentioned.
Yesterday was an interesting signal. I have 4 L/S funds on my list. WBLSX, HSGFX, ARLSX adn FMLSX. In yesterday's late dive, WBLSX along with HSGFX were in the green. Over a pretty bumpy stock market week, WBLSX pulled out a +1.6% return. The controversial HSGFX was also in the green at +0.8%. FMLSX was slightly positive, +.2% and ARLSX was -0.2%. In comparison, the VFINX was -1.1%.
The positive comparison of HSGFX and WBLSX pretty much ends when looking back the last 3 months when the market did very well. Looks to me like HSGFX will only be decent in a prolonged bear market. Whitebox looks like it may do well longer term in market cycles. Again in comparison to equities, (VFINX gained over 8% n the last 3 months) WBLSX was a positive 5.3%. HSGFX was slightly in the red. WBMIX actually gained most of the markets returns gaining +6.6% over the last 3 mo.
A lot of rambling, but just wanted to highlight a couple funds that may well end up being decent diversifiers. Still not sure I would buy it if I could, ironically, neither fund is available to me through my TRP account.
Comments
ARLSX down 0.7%
HSGFX up 0.58%
WBLSX up 0.10%
WBMIX down 0.64%
FMLSX down 0.89%
VFINX down 1.43%
As of May 31st.
A long short fund should be one that goes long stocks it thinks can outperform, that is simply buys them, and goes short stocks it thinks will fall. Goes short here means buy puts which has a cost or sell calls collect money and reinvest it. So we have two flavors of such funds.
HSGFX is not a long short fund. It hedges exposure buying puts on indices and at the end of the day expects its long holdings to outperform the market. Even FVALX is classified long short; utter nonsense.
So I guess my point was first to highlight that both Whitebox funds are doing a pretty good job in recent terms and in comparison to Hussman, the Whitebox L/S fund is a better diversifier in these markets then HSGFX.
The sales-pitch seems to be - "Make alot. Lose a little." (the opposite of what has occurred). Sounds market neutral to me. If the SEC has any definitive classifications for diversified equity funds I'm unaware of it. However, it seems labels are not nearly as important as how the manager operates. So I'd shy away from such classifications here. Hussman appears quite legally savy. So it's likely the Prospectus allows him to do pretty much anything he chooses with the fund (short of violating SEC regs or robbing banks:-)
While "market neutral" seems to fit as well as anything, I'm inclined to call HSGFX "market reverse". (If memory is correct, OJ has already coined that term.) Past performance: 1 Year -11.67%, 5 Years -4.85%. For 10 years he's positive +1.39% - probably what you'd have made sitting in a money market fund - without the additional thrills and chills.
Link to HSGFX Prospectus http://www.hussmanfunds.com/pdf/hsgprosp.pdf
Link to Investopedia definition for "Market Neutral"http://onswipe.investopedia.com/investopedia/#!/entry/market-neutral,51033a8ed7fc7b567005560a Note: "There is no single accepted method of employing a market-neutral strategy."
Sorry to disagree.
If a fund can increase its exposure to the market in times where the manager views conditions as favorable, it is by definition not market neutral. Neutral means neutral. The fund actually allows leverage in certain conditions, which Hussman says he will use. Hussman has been asked repeatedly if HSGFX is a market neutral fund and his answer has always been "No".
Thanks to the Investopedia link. Forty year investor, advisor and lurker here from early days.
A lot of funds, simply select S&P 500 as the index to benchmark against (or something easier to beat) but they invest in a bunch of other stuff. Investing in other stuff is OK but mis-measuring is the problem.
There is certainly some truth to that! Hussman has not been exposed to market fluctuations to a significant degree since early 2004 and for a very brief period in late 2008/ early 2009. His hedging strategy has not " worked" (hence the returns), although he remains a very, very good stock picker. He has actually modified his strategy in response to his results during this rally, a fact that makes me somewhat uneasy.
I am an on/ off investor and recommender into and of the fund. I have not held it personally since 2010. A week ago I began scaling into a small position in it. So evaluate what I say knowing my biases.
I have read all his market commentaries, including those of his non- mutual fund version prior to 2000. He is quite transparent in what he does and a very readable economist and pundit.
Use of his fund in a portfolio takes a bit of deftness. It is much easier, say, to use FPACX or FESGX as a core holding than to correctly use HSGFX. For that I blame Hussman himself as he intends it otherwise.
I also dumped HSGFX in 2010. I wouldn't invest in it again even though I think the market will correct in the coming months - just like I don't want to invest in a fund that only plays well in an upside market. And you are right. It is much easier to invest in a fund like FPACX. That is a manager I believe can play al markets and come out ahead over a market cycle. I don't believe Hussman can do that.
Like some others, I would not own Hussman's funds. Yes, the man is obviously intelligent. And he will occasionally be right, but at what detriment to long-term shareholders?
Unlike some commentators, we DO believe that owning a chunk of truly alternative strategy funds can lower volatility. We do this NOT to enhance returns, but to reduce volatility and risk. While they might not do much for long-term numbers, most investors are comfortable owning some holdings that reduce downside participation, even a small amount.
But now I don't know why one needs Market Neutral funds. Long/Short I get. Market neutral I don't.
I really don't thing we have a good "diversifier" other than buy a bear fund. Which again would make us Market Neutral !!!
Your post is now making me think. I considered TFSHX and HSGFX to be my "diversifiers".