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.
Hate the 5.75% load, might consider the C class. Typically high ER on these long/shorts. But the performance has been steady. Its certainly worth a look.
NLSAX S&P 500 TR USD Cat (LO) 2013 July — 5.09 — June (0.93) (1.34) (0.70) May 0.76 2.34 0.98 April 0.94 1.93 0.45 March 1.83 3.75 1.92 February 0.61 1.36 0.26 January 2.34 5.18 2.79 2012 December 1.32 0.91 0.54 November 0.09 0.58 0.04 October 0.55 (1.85) (0.87) September 0.55 2.58 0.87 August 0.92 2.25 1.19 July 0.93 1.39 0.24 June 1.70 4.12 1.18 May (0.56) (6.01) (3.47) April 0.47 (0.63) (0.71) March 0.67 3.29 0.77 February 2.64 4.32 1.82 January 2.20 4.48 2.02
In addition to NLSAX you might wish to also look at MFADX, A Shares of the Marketfield fund. They have both been performing well in the long/short category.
NLSAX is load-waived and NTF at Fido. Never heard of it before, but I used to have some $ at Neuberger-Berman and thought they were a good shop. Then they went all load on us, but with Fido waiving some funds' A-shares' loads, N-B becomes an option again.
Apparently Marketfield's A shares are not load-waived at Fidelity.
I'll read up on the N-B L-S fund. Thanks for the mention, VF.
I like MFLDX (although the original I shares are closed.) Pimco's L/S fund has done exceedingly well this year (PMHDX)
The Neuberger Berman Multi-Manager Absolute Return fund has been more low-key, but is an interesting fund, with 9 managers. https://www.nb.com/lp/armm/
Reply to @scott: The A-share class of the Neuberger absolute return fund is NABAX, and it's load-waived & NTF at Fido too.
Took a quick look at the up/down capture ratios of L/S funds ARLSX, NLSAX, and PMHIX on M*: the only directly comparable period is one year, and Pimco wins by a landslide on that basis, at 58/-31 versus NLSAX at 46/12 and ARLSX at 65/79 (they're all calculated vs. the S&P 500).
I agree with 10% s to L/S fund. To let the "cat out of the bag", as I am eliminating excess mutual funds from my taxable accounts, plan is to construct independent portfolios at each of the brokerages I use and one with funds I hold independently, so if anything happens to me, my better half can start liquidating one portfolio at a time without thinking too much.
I'm looking to complete my Artisan heavy portfolio with an L/S fund.
Reply to @JohnChisum: I'm skeptical about any fund that proposes a constant long/short philosophy. I much prefer a fund like FPACX that gives a proven manager the latitude to invest where he sees the best opportunities in a given economic environment.
That said, I recently started moving out of PAUIX and putting that money into RGHVX. M* calls this fund L/S, but if you look at it's portfolio profile, at this time there is no short. The fund has been profiled by David. The fund is a combination of a stock portfolio and an options portfolio. I'll admit, I don't totally understand the fund, but I was impressed that the managers and their families are heavily invested in the fund. It's had a great record out of the blocks. Before it was a mutual fund, the managers were successful hedge fund managers.
FWIW; another S/L fund that has done very well this year is the whitebox fund WBLSX.
Reply to @MikeM: You're seeing a number of L/S funds that have become looser with the definition - able to dial risk up and down more freely as they see fit - and they have been doing mostly well, including Pimco's fund and Marketfield.
"I'll admit, I don't totally understand the fund, "
Thanks for the info everyone. I have been eyeing a few of these type of funds including the Pimco product. Usually the ER's on these are on the high side due to the management but Pimco has some lower expenses than most. Schwab also has one, SWHEX, but I need to research that one a bit more. I have also noticed that many of these funds are not doing very well at all. American Century has ALHIX but the performance is weak and a 3.38% ER is not something I want.
It does seem the fund companies have been pushing these lately along with other alternative types of funds. It is either the new way to invest or the latest gimmick. I like the 10% allocation. I'll have to keep on looking including the ones mentioned here. Thanks.
I like WBMIX more and more. Not really Long/Short as Scott as pointed out previously, though M* recently categorized it that way. It uses a lot of leeway. And, I like ARLSX.
Shorting is scary stuff, especially naked shorts. I for example think Staples is an awful company. Big retail stores with lots of empty space that nobody ever visits except in August, poor inventory. So, I shorted it at $13.322 and it proceeded to drop to $12.792. But then OfficeMax merged with Office Depot and Staples jumped to over $14. Fortunately, keeping panic a bay, it came back down and I was able to unwind at $13.248.
That was in February. What's SPLS at today? $17.19. Up 51% YTD!
I obviously have no business trading stocks, especially shorting stocks.
You just need to be very very smart, like the folks at Whitebox. And even then, you need to be lucky.
I read David's article and it is well written and informative. It is really the managers we are buying in these types of funds. It doesn't help either that some of these funds are playing with derivatives. One thing I have noticed is that most of these funds tend to keep a static long/short percentage and I don't see how that would perform well. Many are well below the S&P performance line.
This MFO thread is especially chock full of actionable information and guidance. Thank you all for such an informative exchange.
Most participants seem very knowledgeable in the long-short arena. For those of us long-short novice who are lurking in background silence, some of the merits and nuances of your commentary is likely to escape us. An introductory primer is needed.
I’ll volunteer the following excellent primer from Morningstar analyst Mallory Horejs:
The Handbook is a nice 13 page summary of various long-short options including mutual funds, ETFs, Hedge funds, and Separate Accounts databases. The paper allows for quick and meaningful comparisons of the pertinent characteristics of these alternate investment opportunities. For example, average annual returns for the four options are depicted in Table 4 for the first decade of this century.
I particularly liked the closing section (see figure 7) that explored the impact of various percentages of long-short equity positions on a standard 60/40 stock/bond mixed portfolio. Linear advantages were demonstrated for several performance metrics.
From a modeling perspective, the near-linearity is significant since it suggests that the analysis is likely to be something more than a random success.
For those MFO members who are potentially long-snort equity investors, the referenced article provides a solid understanding basis. Please exploit it.
FYI: According Lipper here are the performance numbers for the 226 Long/Short Funds they track. YTD 9.13%---2 Years:4.90%---3 Years: 6.90%---5 Years:3.98%. Just say no to L/S Funds. Regards, Ted
Reply to @Junkster: Yes, yes, ALL l/s funds are bad.
I'm really not liking PHMDX's 21% YTD gain. MFLDX's 10% gain with minimal volatility is really awful.
There are really some blanket statements regarding sectors/strategies on this board and a mentality - especially surprising on a board full of those in/near retirement age - that seems be: absolutely everything should be an aggressive investment and anything remotely more conservative has no place in a portfolio whatsoever.
Reply to @scott: Can't argue with you at all on that particular one. But overall, in a year of double digit gains of 20% and more there seems to be a lot of discussions on losers and underacheivers ala SFGIX, AQRNX, and ARIVX, to name just a few. There also seems to be an inordinate amount of discussions on alternative funds and capital preservation. Fine if you are in your 60s and beyond, but I can't believe there aren't younger investors here. Heavens forbid had I ventured into the realm of alternative funds when I was younger and in an accumulation mode.
Edit: Everything seems to run in cycles on these boards so alternative funds too shall pass. It wasn't that long ago we had the gold and silver bugs forever extolling the virtues of that form of investment.
Something I have been meaning to post for a long time. If ever there was an indictment for safe, conservative, no risk investing, it's the table in the link below showing the average balances of those who have *both* a 401(k) and an IRA. Yes, I realize we all have different risk profiles, but how does one *comfortably* retire on the balances shown especially for those in the 60 to 75 age group?
A few moments ago I discovered that in my haste to post the Morningstar Long/Short equity fund roadmap research paper, I inadvertently neglected to close with my assessment of these evolving popular products. I firmly believe that readers should always be fully informed of the financial position that the writer has in terms of potential conflicts of interests and incentives.
For awhile I seriously considered adding long/short equity funds to my portfolio; they should contribute to a reduction in overall portfolio volatility, especially during market downturns. Ultimately I rejected the idea, at least for the moment. In the investment world, nothing is forever.
I suppose the main reasons for my rejection all devolve into two generic groupings: the accumulated performance of Hedge funds in this arena, and a generic application of the laws of probability.
Several well documented academic studies have assessed long/short strategies for a plethora of Hedge funds over an extended timeframe. These studies conclude that most Hedge funds fail to deliver superior performance within the long/short grouping, but a few do.
Most strategies fail because of trading costs that demolish the small percentage of excess returns that superior stock picking skills generate. For the few winning Hedge funds who manage to jump that hurdle, the issue of persistency bubbles to the surface. The historical research finds that persistent outperformance lasts for about one year, and then evaporates sometimes in the second year.
The earlier referenced Morningstar Handbook shows that for a decade, the average Hedge fund has produced superior returns over those generated by the average Long/Short equity fund cohort. The academic work demonstrates that Hedge funds have persistency issues, and Morningstar finds that their mutual fund equivalents do more poorly on a comparative basis. This is not good news for potential customers. The odds are a constant challenge.
The mentioning of odds provides me with an entry into my second reservation. A long/short fund is an operation that must make two distinctly disparate decisions that require separate decision criteria: to buy and to sell short. This doubles the skill set requirements which likely increase the odds of bad decisions. It adds complexity to an already complex environment.
In terms of probability, it seems to introduce a multiplicative effect on odds; the fund manager must be correct in the positive domain, and also correct in the negative domain. That would appear to be a daunting challenge. By the way, trading costs are likely to escalate.
Since the equity market returns are typically positive over 70 % of the time, purchasing Long-only equity positions seems like the most promising strategy over the long haul.
I believe that was the top-tier reasoning that prompted me to pass on long/short equity funds at this juncture. A secondary consideration was the lack of long-term performance records for many of the newly minted mutual funds in this category.
Howdy Junkster, Before I crash into a pillow; as my very tired head is fully full of meaningless fluff tonight, I presume the balances shown for those age 60-75 are for an individual. If this is the case, then it is possible that one could double the values for a household; or perhaps add at least 50% to the total values. And we don't know anything else about these numbers for these folks.....pensions, etc.
Another point that could have been added to the numbers is how many folks who choose to save for retirement; must now save via a 401k or similar; as the majority of defined pension programs started to go away about 10 years ago. No 401k or Roth IRA means only social security in the end. One would expect 401k and similar numbers to increase from the demise of defined pension programs. 'Course, Fido and I are only talking about those who can affort the money for a 401k. Too many new jobs don't even get one a small health benefit; let alone access to a 401k. Let alone enough money left for more than daily living, eh? $15 or less per hour really is not a hell of alot of money after taxes; based upon full time hours of 2080/year.
Excuse please.....I wandered a bit off the ranch at the end.
Reply to @MJG: Good thoughts. Those few funds that are performing well now may not do so well in the future too. The investosphere (a new word) is changing each day. Yesterdays glory hound may well be tomorrows dog.
We are in a transition period for the labor society as the new normal for retirement funding begins. Those who are aware will do well in investing their leftover money. Those who want to depend on others to save for them may be surprised and left out. This will be harder as most new jobs do not pay as well as the ones that are disappearing. The trick is to funnel ones self into a career path that has promise for the future. Doctors? Not likely. Tech and biotech? More likely.
Reply to @AndyJ: Followup on NABAX at Fido: the fund prospectus (p. 36) contains a provision for a "contingent deferred sales charge" of 1% for shares held less than 18 months (!!) purchased load-waived (with additional language that makes it somewhat unclear under what circumstances the fee's charged).
After a convoluted e-mail exchange with Fido reps, I'm advised that this fee is void under Fido's contract with Neuberger Berman. So yes, NABAX is straight-up load-waived and NTF at Fido. And I'm keeping a copy of the e-mail string in case the deferred fee comes up later.
I'm considering a starter position in this fund, with its combination of strategies (a little less than half of which is a long-short equity strategy).
Reply to @JoeNoEskimo: The speculation from folks in the field, though not Robeco per se, was that the fund will likely close by year's end. They'll likely have the new fund, with vaguely extortionate fees, live by then.
I've grown not to like them. First, the fees are usually high - often 3X what a good actively managed equity fund runs. Part of this stems from rules requiring them (you) to pay the dividends on the stocks that have been sold short. Second, much of the "benefit" derives from successful timing of equities (albeit different ones in different sectors). I'm not convinced anyone can do this successfully year in and year out. However, I believe most of us can likely do it at as well as these managers - perhaps owing to having smaller sums to manage. Personally, I'd rather take my chances going to cash in heady markets and re-investing it in chunks when markets appear more attractive, saving on those hefty fees.
That said, I have a small amount in CVSIX which seems to have "morphed" more into a long-short play on equities from its earlier emphasis on convertibles since I purchased it 5-10 years ago. Perhaps Gary Black's influence? Still, the ER is only around 1.18% - so am hanging on for now. None of this is to dispute that these funds can get very hot for a few years. The now defunct JAMNX is a prime example. It's the consistency over many years I'm questioning (and the fees).
Reply to @Charles: Naked shorting is illegal and always has been, but it also was fairly widely implemented in the past. Less possible now. A really corrupt manipulation of the market, and was so used in 2006-08 etc.
I used to own MFLDX but sold when they sold it to other company. Didn't want the uncertainty. With $14 billion in assets - large enough to manager for normal equity funds - I think one has to watch this one carefully.
Comments
NLSAX S&P 500 TR USD Cat (LO)
2013
July — 5.09 —
June (0.93) (1.34) (0.70)
May 0.76 2.34 0.98
April 0.94 1.93 0.45
March 1.83 3.75 1.92
February 0.61 1.36 0.26
January 2.34 5.18 2.79
2012
December 1.32 0.91 0.54
November 0.09 0.58 0.04
October 0.55 (1.85) (0.87)
September 0.55 2.58 0.87
August 0.92 2.25 1.19
July 0.93 1.39 0.24
June 1.70 4.12 1.18
May (0.56) (6.01) (3.47)
April 0.47 (0.63) (0.71)
March 0.67 3.29 0.77
February 2.64 4.32 1.82
January 2.20 4.48 2.02
In addition to NLSAX you might wish to also look at MFADX, A Shares of the Marketfield fund. They have both been performing well in the long/short category.
Skeeter
Apparently Marketfield's A shares are not load-waived at Fidelity.
I'll read up on the N-B L-S fund. Thanks for the mention, VF.
The Neuberger Berman Multi-Manager Absolute Return fund has been more low-key, but is an interesting fund, with 9 managers. https://www.nb.com/lp/armm/
Took a quick look at the up/down capture ratios of L/S funds ARLSX, NLSAX, and PMHIX on M*: the only directly comparable period is one year, and Pimco wins by a landslide on that basis, at 58/-31 versus NLSAX at 46/12 and ARLSX at 65/79 (they're all calculated vs. the S&P 500).
I mean, I could throw together something like this for someone desiring moderate risk with a mid-to-longer term time horizon.
10% SGOVX
10% FPACX
15% YACKX
15% OAKIX
15% FLPSX
10% MACSX
10% Marketfield or Pimco L/S
15% Bonds
I'm looking to complete my Artisan heavy portfolio with an L/S fund.
That said, I recently started moving out of PAUIX and putting that money into RGHVX. M* calls this fund L/S, but if you look at it's portfolio profile, at this time there is no short. The fund has been profiled by David. The fund is a combination of a stock portfolio and an options portfolio. I'll admit, I don't totally understand the fund, but I was impressed that the managers and their families are heavily invested in the fund. It's had a great record out of the blocks. Before it was a mutual fund, the managers were successful hedge fund managers.
FWIW; another S/L fund that has done very well this year is the whitebox fund WBLSX.
"I'll admit, I don't totally understand the fund, "
How so?
It does seem the fund companies have been pushing these lately along with other alternative types of funds. It is either the new way to invest or the latest gimmick. I like the 10% allocation. I'll have to keep on looking including the ones mentioned here. Thanks.
Shorting is scary stuff, especially naked shorts. I for example think Staples is an awful company. Big retail stores with lots of empty space that nobody ever visits except in August, poor inventory. So, I shorted it at $13.322 and it proceeded to drop to $12.792. But then OfficeMax merged with Office Depot and Staples jumped to over $14. Fortunately, keeping panic a bay, it came back down and I was able to unwind at $13.248.
That was in February. What's SPLS at today? $17.19. Up 51% YTD!
I obviously have no business trading stocks, especially shorting stocks.
You just need to be very very smart, like the folks at Whitebox. And even then, you need to be lucky.
If you haven't already, you might read David's "What’s in your long/short fund?," I found it both helpful and amusing.
This MFO thread is especially chock full of actionable information and guidance. Thank you all for such an informative exchange.
Most participants seem very knowledgeable in the long-short arena. For those of us long-short novice who are lurking in background silence, some of the merits and nuances of your commentary is likely to escape us. An introductory primer is needed.
I’ll volunteer the following excellent primer from Morningstar analyst Mallory Horejs:
http://advisor.morningstar.com/uploaded/pdf/Alt_Long-ShortEquity.pdf
The Handbook is a nice 13 page summary of various long-short options including mutual funds, ETFs, Hedge funds, and Separate Accounts databases. The paper allows for quick and meaningful comparisons of the pertinent characteristics of these alternate investment opportunities. For example, average annual returns for the four options are depicted in Table 4 for the first decade of this century.
I particularly liked the closing section (see figure 7) that explored the impact of various percentages of long-short equity positions on a standard 60/40 stock/bond mixed portfolio. Linear advantages were demonstrated for several performance metrics.
From a modeling perspective, the near-linearity is significant since it suggests that the analysis is likely to be something more than a random success.
For those MFO members who are potentially long-snort equity investors, the referenced article provides a solid understanding basis. Please exploit it.
Best Wishes.
YTD 9.13%---2 Years:4.90%---3 Years: 6.90%---5 Years:3.98%. Just say no to L/S Funds.
Regards,
Ted
I'm really not liking PHMDX's 21% YTD gain. MFLDX's 10% gain with minimal volatility is really awful.
There are really some blanket statements regarding sectors/strategies on this board and a mentality - especially surprising on a board full of those in/near retirement age - that seems be: absolutely everything should be an aggressive investment and anything remotely more conservative has no place in a portfolio whatsoever.
Good luck with however you choose to invest.
Edit: Everything seems to run in cycles on these boards so alternative funds too shall pass. It wasn't that long ago we had the gold and silver bugs forever extolling the virtues of that form of investment.
http://www.401khelpcenter.com/press_2013/pr_fidelity_022713.html
Edit: I found it. PMHDX
Sorry.
A few moments ago I discovered that in my haste to post the Morningstar Long/Short equity fund roadmap research paper, I inadvertently neglected to close with my assessment of these evolving popular products. I firmly believe that readers should always be fully informed of the financial position that the writer has in terms of potential conflicts of interests and incentives.
For awhile I seriously considered adding long/short equity funds to my portfolio; they should contribute to a reduction in overall portfolio volatility, especially during market downturns. Ultimately I rejected the idea, at least for the moment. In the investment world, nothing is forever.
I suppose the main reasons for my rejection all devolve into two generic groupings: the accumulated performance of Hedge funds in this arena, and a generic application of the laws of probability.
Several well documented academic studies have assessed long/short strategies for a plethora of Hedge funds over an extended timeframe. These studies conclude that most Hedge funds fail to deliver superior performance within the long/short grouping, but a few do.
Most strategies fail because of trading costs that demolish the small percentage of excess returns that superior stock picking skills generate. For the few winning Hedge funds who manage to jump that hurdle, the issue of persistency bubbles to the surface. The historical research finds that persistent outperformance lasts for about one year, and then evaporates sometimes in the second year.
The earlier referenced Morningstar Handbook shows that for a decade, the average Hedge fund has produced superior returns over those generated by the average Long/Short equity fund cohort. The academic work demonstrates that Hedge funds have persistency issues, and Morningstar finds that their mutual fund equivalents do more poorly on a comparative basis. This is not good news for potential customers. The odds are a constant challenge.
The mentioning of odds provides me with an entry into my second reservation. A long/short fund is an operation that must make two distinctly disparate decisions that require separate decision criteria: to buy and to sell short. This doubles the skill set requirements which likely increase the odds of bad decisions. It adds complexity to an already complex environment.
In terms of probability, it seems to introduce a multiplicative effect on odds; the fund manager must be correct in the positive domain, and also correct in the negative domain. That would appear to be a daunting challenge. By the way, trading costs are likely to escalate.
Since the equity market returns are typically positive over 70 % of the time, purchasing Long-only equity positions seems like the most promising strategy over the long haul.
I believe that was the top-tier reasoning that prompted me to pass on long/short equity funds at this juncture. A secondary consideration was the lack of long-term performance records for many of the newly minted mutual funds in this category.
Best Wishes.
Before I crash into a pillow; as my very tired head is fully full of meaningless fluff tonight, I presume the balances shown for those age 60-75 are for an individual.
If this is the case, then it is possible that one could double the values for a household; or perhaps add at least 50% to the total values.
And we don't know anything else about these numbers for these folks.....pensions, etc.
Another point that could have been added to the numbers is how many folks who choose to save for retirement; must now save via a 401k or similar; as the majority of defined pension programs started to go away about 10 years ago. No 401k or Roth IRA means only social security in the end. One would expect 401k and similar numbers to increase from the demise of defined pension programs. 'Course, Fido and I are only talking about those who can affort the money for a 401k. Too many new jobs don't even get one a small health benefit; let alone access to a 401k. Let alone enough money left for more than daily living, eh? $15 or less per hour really is not a hell of alot of money after taxes; based upon full time hours of 2080/year.
Excuse please.....I wandered a bit off the ranch at the end.
Regards,
Catch
We are in a transition period for the labor society as the new normal for retirement funding begins. Those who are aware will do well in investing their leftover money. Those who want to depend on others to save for them may be surprised and left out. This will be harder as most new jobs do not pay as well as the ones that are disappearing. The trick is to funnel ones self into a career path that has promise for the future. Doctors? Not likely. Tech and biotech? More likely.
After a convoluted e-mail exchange with Fido reps, I'm advised that this fee is void under Fido's contract with Neuberger Berman. So yes, NABAX is straight-up load-waived and NTF at Fido. And I'm keeping a copy of the e-mail string in case the deferred fee comes up later.
I'm considering a starter position in this fund, with its combination of strategies (a little less than half of which is a long-short equity strategy).
David
That said, I have a small amount in CVSIX which seems to have "morphed" more into a long-short play on equities from its earlier emphasis on convertibles since I purchased it 5-10 years ago. Perhaps Gary Black's influence? Still, the ER is only around 1.18% - so am hanging on for now. None of this is to dispute that these funds can get very hot for a few years. The now defunct JAMNX is a prime example. It's the consistency over many years I'm questioning (and the fees).