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I have been researching some funds in this arena and this one seems to be doing fairly well. I would appreciate any feedback if this would be a good choice for a 5-10% portion of a portfolio?
I am not inclined to use this fund for several reasons. What works with a small hedge fund often does not work with a mutual fund that requires transparency and liquidity. And understand this fund will eventually be enormous. How might that affect performance? Finally, I have never known a successful hedge fund manager switch to a mutual fund. While some have decided to ADD a mutual fund that is managed similarly to their hedge fund, I am not aware of anyone who has left the lucrative waters of hedge fund management to do just a mutual fund. For my money, I would look at more tested mutual funds like Wasatch or Mainstay Marketfield. And although we have been with MFLDX since it began, we are watching the fund's size and its expenses carefully.
I own it, I like it, it has had a great year, but I would keep one's expectations reasonable in regards to this fund. I do not expect it to continue to have years like this. This is a concentrated fund and has to get bets both ways right. It has definitely done so this year while also holding a lot of cash. It largely avoided 2008 not because of shorting, but apparently because it largely went to cash and cash equivalents. It is a very interesting fund and I am not selling it but I do not expect it to possibly be hot/cold over time given the concentrated nature of the fund. I would not put 10% of one's portfolio in this fund.
I've been thinking of opening a small position in PMHDX, not sure yet of the timing, but if I do, I'll consider it part of my stock allocation, and not so much as an alt fund for portfolio purposes. Seems to me it runs more like a lower-volatility stock fund, and less like a risk averse long-short.
For something lower on the risk scale that's readily available to an individual investor, ARLSX is pretty good.
Reply to @AndyJ: "Seems to me it runs more like a lower-volatility stock fund"
I think you had a lot of long-short funds 3-5 years ago that took the definition very seriously. You have a series of funds now (Marketfield, Pimco L/S) that are far more flexible in terms of dialing up and down risk exposure and act, as you say, like a lower volatility stock fund. Pimco L/S's concentrated nature is a little concerning, but I think it's another interesting entry in what continues to feel like a new generation of funds in the category.
Thanks for all of the replies. I did notice the large cash position this fund has at this moment. I was thinking that this fund could be a foul weather fund and even if one was in retirement, it could be suitable for a portion of a portfolio. The 2008 example was something I was looking at and hearing that this fund went to cash mostly makes me wonder how their short model will do in a negative environment. That part hasn't been put to the test yet it seems.
I'm going to keep this on the watch list. AndyJ, I agree with you as far as keeping it part of the stock portion of the portfolio and I too am trying to figure out a timing model if and when to put money in.
Reply to @scott: I remember the literature for the fund noting that it will be long-biased. To that extent, it may behave more like a low volatility stock fund than a market neutral fund. I have held it since inception and plan to continue to do so unless AUM goes haywire...I like the fund's long stock picks -- they have turned out to be ones that I had considered buying as well.
Reply to @JohnChisum: FWIW, I would take the 'cash position' with a grain of salt. Most PIMCO funds tend to have a sizeable 'cash' position, but often there is little real cash. Much of what M* calls cash is really the derivatives PIMCO uses to enhance returns. Sometimes this works in their favor. Other times, it comes back to bite them. In the case of this L/S fund, less than 1% is in cash, with another 20% in floating rate short-term securities, with the remaining being options, foreign currency contracts, and other derivatives.
Reply to @Mark: Mark, the manager G. Johnson ran it as a small hedge fund starting in 2003, and he killed the category through both the runup and the crash.
But he had only $17 million in the hedge fund at the peak, and since converting to a Pimco OEF, he's now got several hundred million to manage. The uncertainty with the fund is that his smaller cap, concentrated style may or may not work as well longer term at those asset levels, and we know Pimco doesn't (typically? ever?) close funds. He certainly can't go mostly cash like he did with the hedge fund in 2008. And he did have a weak 2012 opener with the OEF.
Yes. My thought is that the odds favor buying into this fund now ending badly. Unless you believe when market turns south, this fund will suddenly change tracks. I'm seeing it is a little short now, but first time I looked at it, it was hardly short. That was at the beginning of the year and it was doing so-so. So while I'm kicking myself for not buying especially because I was hunting high and low for an L/S fund, does not mean I make mistake in buying it right now.
Hurry up slowly on this one. For once, I agree with m* comment. Best to wait and see.
Comments
For something lower on the risk scale that's readily available to an individual investor, ARLSX is pretty good.
I think you had a lot of long-short funds 3-5 years ago that took the definition very seriously. You have a series of funds now (Marketfield, Pimco L/S) that are far more flexible in terms of dialing up and down risk exposure and act, as you say, like a lower volatility stock fund. Pimco L/S's concentrated nature is a little concerning, but I think it's another interesting entry in what continues to feel like a new generation of funds in the category.
I'm going to keep this on the watch list. AndyJ, I agree with you as far as keeping it part of the stock portion of the portfolio and I too am trying to figure out a timing model if and when to put money in.
NOTE: This is NOT an ad hominem attack so unbunch your undies. I'm just curious and want to know the answer.
But he had only $17 million in the hedge fund at the peak, and since converting to a Pimco OEF, he's now got several hundred million to manage. The uncertainty with the fund is that his smaller cap, concentrated style may or may not work as well longer term at those asset levels, and we know Pimco doesn't (typically? ever?) close funds. He certainly can't go mostly cash like he did with the hedge fund in 2008. And he did have a weak 2012 opener with the OEF.
Source: the M* fund report.
Cheers, AJ
Hurry up slowly on this one. For once, I agree with m* comment. Best to wait and see.