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Chuck Jaffe's Money Life Show 12/9/13: Guest: Our Own David Snowball
The available research points to three conclusions:
1. we could close 80% of all mutual funds without any noticeable loss to anyone other than the managers.
2. more and more money is pouring into doomed funds, something like 30% of inflows are into "closet index" funds.
3. there are characteristics which increase the prospects for future outperformance. Those include a focused portfolio, independence from the index, an alignment of the advisor's interests with the shareholders (risk-consciousness generally flows from that alignment) and reasonable expenses. In general, those characteristics are difficult if not quite impossible to achieve in a very large fund.
At Chuck's prompting ("well, David, can you name a fund ...") I singled out Beck, Mack & Oliver Partners (BMPEX) as part of a group of owner-operator funds which also includes Bretton, Cook & Bynum, Frank Value and Oakseed Opportunity. I also allowed that if one were interested in a large fund, you could do worse than Tweedy, Browne Global (TBGVX) or Vanguard STAR (VGSTX).
In his "hold em' or fold 'em" round, which is one minute assessments of funds (made in complete ignorance of the investors' needs) submitted by his listeners, I dissed Royce Low-Priced (RYLPX) and Permanent Portfolio (PRPFX) and endorsed Vanguard Dividend Appreciation Index (VDAIX, with a side-note that this is not a high-dividend fund), Seafarer (SFGIX with a side-note that Wasatch Frontier Emerging Small Countries Fund and the yet-to-be-launched Grandeur Peak Emerging Markets would offer higher octane exposure to the same universe), and Cook & Bynum (COBYX).
Comments
The available research points to three conclusions:
1. we could close 80% of all mutual funds without any noticeable loss to anyone other than the managers.
2. more and more money is pouring into doomed funds, something like 30% of inflows are into "closet index" funds.
3. there are characteristics which increase the prospects for future outperformance. Those include a focused portfolio, independence from the index, an alignment of the advisor's interests with the shareholders (risk-consciousness generally flows from that alignment) and reasonable expenses. In general, those characteristics are difficult if not quite impossible to achieve in a very large fund.
At Chuck's prompting ("well, David, can you name a fund ...") I singled out Beck, Mack & Oliver Partners (BMPEX) as part of a group of owner-operator funds which also includes Bretton, Cook & Bynum, Frank Value and Oakseed Opportunity. I also allowed that if one were interested in a large fund, you could do worse than Tweedy, Browne Global (TBGVX) or Vanguard STAR (VGSTX).
In his "hold em' or fold 'em" round, which is one minute assessments of funds (made in complete ignorance of the investors' needs) submitted by his listeners, I dissed Royce Low-Priced (RYLPX) and Permanent Portfolio (PRPFX) and endorsed Vanguard Dividend Appreciation Index (VDAIX, with a side-note that this is not a high-dividend fund), Seafarer (SFGIX with a side-note that Wasatch Frontier Emerging Small Countries Fund and the yet-to-be-launched Grandeur Peak Emerging Markets would offer higher octane exposure to the same universe), and Cook & Bynum (COBYX).
For what it's worth,
David