David Snowball's Portfolio

golub1

In your September revelation of your taxable portfolio you said referring to ARLSX: it would likely be as a substitute for Northern Global Tactical since the two serve the same risk-dampening function. Since the funds are very different, I also hold BBALX, I wondered what was the basis for presuming that ARLSX would serve the same " risk dampening objective.

I also wondered if your nontaxable holdings were covering the missing categories in your taxable.

ron

ARLSX is 38.54% cash, I would prefer to be in cash than invested in this fund.

David_Snowball

Howdy.

I interviewed a bunch of long/short managers last year, some quite talented. The conclusion that I reached was that ARLSX had the most thoughtful, clearly-articulated risk management discipline of them all. I talk about that in the fund profile, which is on its Featured Funds page. Here's the highlight:

The strategy’s risk-management measures are striking. Through the end of Q1 2012, River Road’s Sharpe ratio (a measure of risk-adjusted returns) was 1.89 while its peers were at 0.49. Its maximum drawdown (the drop from a previous high) was substantially smaller than its peers, it captured less of the market’s downside and more of its upside, in consequence of which its annualized return was nearly four times as great.

It also substantially eased the pain on the market’s worst days. The Russell 3000, a total stock market index, lost an average of 3.6% on its fifteen worst days between the strategy’s launch and the end of March, 2012. On those same 15 days, River Road lost 0.9% on average – which is to say, its investors dodged 75% of the pain on the market’s worst days.

Its 3Q2013 maximum drawdown was one-third of the market's while it's long exposure was above 50% of it. Mr. Moran writes in his end-of-September commentary:

The portfolio did well given that it maintained an average net long exposure of half that of the benchmark during a period of generally rising returns for the market. Both the long and short portfolios performed well. The maximum drawdown from the Fund’s “high-water mark” during the quarter was -1.53%, just 35% of the market’s -4.36% drawdown.

Since inception, it's captured about 90% of the S&P 500's return. The guys consider themselves value investors. They're unwilling to short a stock just because it's overpriced and they're unwilling to buy a stock just because it's the least-overpriced option, so they're reluctantly (and resolutely, so far as I can tell) holding cash. In general, I'm more than comfortable with that decision.

Finally, my retirement and non-retirement accounts are in entirely separate mental buckets since resources are not fungible between them. That said, it's also limited to TIAA-CREF, Fido and T. Rowe which means that you have to be a little cautious in your attempts to invest in the offbeat.

Hope that helps,

David

Sven

Reply to @David_Snowball: Thank you for you input on ARLSX. How would you compare this fund to Marketfield, MFLDX in drawdown and absolute return?

The institutional share of Marketfield is closed to new investor. However, a new "P" share. MFPDX, is open with a transaction fee ($49.95) at Fidelity. No minimum $$ for tax deferred accounts,
https://fundresearch.fidelity.com/mutual-funds/summary/56064B662

David_Snowball

Hi, Sven.

The record for ARLSX is too short to provide a meaningful comparison. If you overlap the charts of the two at Morningstar, it appears that MFLDX is modestly more volatile and has produced a modestly greater upside since the ARLSX launch. Charles might have a more fine-grained reading of the data than that, of course.

Off to teach!

David

Sven

Reply to @David_Snowball: Thank you.