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.
Hedge funds can buy/sell pretty much anything in whatever ratios/amounts/allocations they want, using various eclectic technical, macro, momentum, value, algorithmic, and Magic Eight Ball-style strategies and normally target so-called 'sophisticated' investors with high net worths over $1MM or more..which is why many of them a) blow up all the time and b) have gates on when folks can withdraw money, among other things. Mutual funds (publicly traded ones, like this) have to abide by SEC oversight stuff that hedge funds generally don't, and unless it's an 'interval fund' anyone can buy into or sell out of them anytime they want.
While the new TRP hedge-fund mutual fund looks interesting (I forget the ticker, it just launched) and I may drop some $$ into it to see what it does I would prefer knowing more about what the Blackstone black-box is since it comprises (at last check) 10% of RPGAX's holdings.
I've tracked this TRP fund for a while and for the most part like it. Frankly I'm torn between using this or the new Vanguard Global Wellington as the core of a revised Roth IRA account.
Speaking of having faith, I also purchased a TMSRX for my in-laws. Now before someone calls me reckless, here's the allocation, but i will be increasing it to 33% invested. It's really just my MIL now, FIL passed away, and she is 80+
% Fund ----------------------------------------------------- 77.98 T. Rowe Price Government Money Market 5.22 T. Rowe Price Global Allocation 4.34 T. Rowe Price Capital Appreciation 4.21 T. Rowe Price Ltd Duration Inflation-Protected Bond 2.10 T. Rowe Price Health Sciences 2.08 T. Rowe Price Multi-Strategy Total Return 2.05 T. Rowe Price Floating Rate 2.02 T. Rowe Price Emerging Mkts Value
And FWIW I moved half of my VWELX to its Global sibling in our taxable accounts a few days back.
Hedge funds can buy/sell pretty much anything in whatever ratios/amounts/allocations they want, using various eclectic technical, macro, momentum, value, algorithmic, and Magic Eight Ball-style strategies and normally target so-called 'sophisticated' investors with high net worths over $1MM or more..which is why many of them a) blow up all the time and b) have gates on when folks can withdraw money, among other things. Mutual funds (publicly traded ones, like this) have to abide by SEC oversight stuff that hedge funds generally don't, and unless it's an 'interval fund' anyone can buy into or sell out of them anytime they want.
While the new TRP hedge-fund mutual fund looks interesting (I forget the ticker, it just launched) and I may drop some $$ into it to see what it does I would prefer knowing more about what the Blackstone black-box is since it comprises (at last check) 10% of RPGAX's holdings.
I've tracked this TRP fund for a while and for the most part like it. Frankly I'm torn between using this or the new Vanguard Global Wellington as the core of a revised Roth IRA account.
"Mutual funds (publicly traded ones, like this) have to abide by SEC oversight stuff that hedge funds generally don't, and unless it's an 'interval fund' anyone can buy into or sell out of them anytime they want."
SEC: "Mutual funds are open-end funds. ETFs are generally structured as open-end funds, but can also be structured as UITs."
So interval funds are not mutual funds. Nor is SPY, which is a UIT.
In addition to what was said about hedge funds, another difference between hedge funds and mutual funds (or any registered investment company) is that hedge funds can have a 2+20 fee structure. Mutual funds are allowed to have performance fees also, but they must be symmetric - if they underperform they charge less. These are fulcrum fees.
IMHO Maurice has the right facts, but in the reverse order. What is important is that hedge funds are less regulated by federal and state authorities. In exchange for less oversight (including fewer disclosure requirements), hedge funds are generally allowed only to be sold to accredited investors (or a few sophisticated investors under Rule 506). That includes money managers like T. Rowe Price, so the fact that not everyone walking in off the street can buy a hedge fund shouldn't be a major concern.
The idea is that these knowledgeable investors are capable of doing their own research in a "buyer beware" market, so they need less regulatory protection. The premise that an accredited investor with $1M in assets is automatically knowledgeable is debatable, but not germane here.
What matters is that T. Rowe Price is truly a knowledgeable investor, fully capable of doing the research necessary to feel comfortable with its investments. TRP markets itself as an investment firm that relies heavily on research. Unlike Janus that used to make the same claim, I believe TRP. So personally I would worry too much about it being taken for a ride.
@Crash, frankly not sure why not. I think I'm more anal and fickle than most when choosing where to invest. IMHO, there is a lot more evil in this world than RPGAX. My fiduciary is TRP, not who they invest in/with. The day I lose faith in TRP, my money will go under my mattress.
In any case, whatever the reason, your choice is your choice. Period.
OK. Thanks for the words, obviously informed statements. I just never heard of a mutual fund doing such a thing: investing in a hedge fund. And perhaps right now is not the time? It's a global fund, and there's a ton of political feces going around about now. I would be diversifying away from holding so very much in PRWCX. It's 35% of my stuff. And when I look at performance numbers between the two, I could do nothing at all and come out better off. I can build some cash. Which I've neglected to do for all these years, and eventually put THAT into RPGAX. I would do RPGAX as a regular investment account. In a couple of years, I'm going to stop re-investing everything, and take profits, whether dividends or cap. gains, for current income. Wife will continue to work, at age 45. And it will happen somewhere other than here. AMEN. Thanks, guys.
As allocation positions, I own RPGAX and CCAPX, as well as BRUFX. I am reducing the latter in favor of the the other two as the Bruce boys seem to have lost their mojo. Because I don't try to maintain a diversified bond portfolio, I rely on the experienced allocators to do it. I don't short or trade options, etc., but I'm happy to let the Chiron managers do it for me. Same goes for the RPGAX's hedge fund position and holdings in other TRP bond funds; even if I looked under the hood of those vehicles, I wouldn't necessarily understand what those managers do. I don't really know how my Honda hybrid works, but I have confidence that I have a well-engineered car.
I Also Own RPGAX & CCAPX I Did My Research Before Purchasing Them And So Far I Am Happy To Own Them. I Also Own GBLEX. GAOAX, BBALX, TRXIX, MFWTX.VGWLX. For Uncertain Times I Like Global Allocation Funds
@Crash, I believe there is a distinction about RPGAX investing in Blackstone Hedge Fund Solutions that I haven't heard on this thread yet. The TRP fund is not, I don't believe, investing in a "hedge fund". It is investing in a company that manages hedge funds. Blackstone is a financial company just like investing in Merrill Lynch or JP Morgan, isn't it? At least this is how I interpret that TRP fund holding.
How does this hedge fund company make money, just like any other financial institution, they charge their clients for money management.
I don't know I'm right, but that is how I interpret it. TRP has been a very good, fairly conservative fiduciary. I have a hard time believing they would invest peoples money directly in a hedge fund. I think this fund is an interesting choice.
MikeM - if the fund was investing in Blackstone the company it would declare BX as a holding. This particular position is an investment in one of Blackstone's proprietary black-box offerings, such as what a so-called 'sophisticated' or 'accredited' investor might throw money into. In other words, a totally different beast than just being a shareholder invested in Blackstone....which anyone could buy into on the open market.
@Crash, I believe there is a distinction about RPGAX investing in Blackstone Hedge Fund Solutions that I haven't heard on this thread yet. The TRP fund is not, I don't believe, investing in a "hedge fund". It is investing in a company that manages hedge funds. Blackstone is a financial company just like investing in Merrill Lynch or JP Morgan, isn't it? At least this is how I interpret that TRP fund holding.
How does this hedge fund company make money, just like any other financial institution, they charge their clients for money management.
A-ha! Not that I don't trust TRP. And I see, looking further, that the fund pays (with its bond holdings in mind) only in December. And the December pay-out last year was just .2150 cents/share. I think I'll continue to grow my SFGIX, then. Trying to REDUCE the number of funds I own, anyhow. Can't reduce TOO much, though. Seems like that would not be prudent. I could do the budgeting, but it's easier when a fund pays me MONTHLY and does the work FOR me.
...But now, here's another question: with the idea of harvesting more monthly income (needed beginning in about a year and a half,) how much of my PRWCX should I move into any of these 3? PRSNX (owned currently) PREMX (owned currently) or start a new holding in RPIHX or TUHYX? (I only just this past week opened a tiny position for $3,500 in PTIAX. I will be growing that. But I'm not happy to learn that PTAM doesn't have the capacity on their website to let a customer log-in to see their account. Gotta call and either use their automated system, or talk to a rep.) Yes, I could go elsewhere, but to simplify, I'd prefer to go with TRP, where most of my $$$ sits, already. And by the way, PRWCX is 35.46% of my total right now. I don't think I will EVER totally close it out. Solid fund.
“The fund’s investments in alternative investments may include unregistered hedge funds or other private or registered investment companies. ... ”
“... A hedge fund is considered an illiquid asset by the fund, is not subject to the same regulatory requirements as mutual funds and other investment companies, and could underperform comparable hedge funds with similar alternative strategies. Hedge funds are not required to provide periodic pricing or valuation information to investors, and often engage in leveraging, short-selling, commodities investing and other speculative investment practices that are not fully disclosed and may increase the risk of investment loss. Their underlying holdings are not as transparent to investors or typically as diversified as those of traditional mutual funds, and an investor’s (i.e., the fund’s) redemption rights are typically limited. All of these factors make the fund’s investments in alternative investments and hedge funds more difficult to value and monitor when compared to more traditional investments, and may increase the fund’s liquidity risks.”. http://quote.morningstar.com/fund-filing/Prospectus/2018/3/1/t.aspx?t=RPGAX&ft=485BPOS&d=e356b3ef2f165906373d32ffc4cf44ef
From Yahoo: T. Rowe Price Global Allocation (RPGAX)
Top 10 Holdings (34.03% of Total Assets)
Blackstone Hedge Fund Solutions 9.62% Reserve Invt Fds 6.47% T. Rowe Price Instl Emerging Mkts Bond TREBX 3.88% T. Rowe Price Emerg Mkts Lcl Ccy Bd PRELX 3.10% TRP DYNAMIC GLOBAL BOND FD-I 2.78% T. Rowe Price Instl Intl Bond RPIIX 2.57% T. Rowe Price Instl Floating Rate RPIFX 2.02% T. Rowe Price Instl High Yield TRHYX 1.63% Microsoft Corp MSFT 1.09% Amazon.com Inc AMZN 0.87% https://finance.yahoo.com/quote/RPGAX/holdings/
“Blackstone Hedge Fund Solutions” appears to be a client tailored hedge fund of hedge funds operated by Blackstone. From Blackstone’s Website:
“Our Hedge Fund Solutions group, Blackstone Alternative Asset Management (BAAM®), is the world’s largest discretionary investor in hedge funds. With approximately $75 billion in assets under management as of December 31, 2017, BAAM aims to provide its clients with investment solutions via various different means, including customized and commingled portfolios, special situations, seeding, GP ownership, and registered products. Our investors include many of the world’s leading institutional investors, including corporate, public and union pension funds, sovereign wealth funds and central banks. ... BAAM’s overall investment philosophy is to protect and grow investors’ assets through both commingled and custom-tailored investment strategies designed to deliver compelling risk-adjusted returns and mitigate risk. Approximately half of the assets we manage are invested in customized vehicles created to meet client-specific objectives.”
I couldn’t find the Blackstone hedge fund listed in RPGAX’s last Annual Report (October, 2017). https://individual.troweprice.com/gcFiles/pdf/argaf.pdf I suspect that perhaps the SEC requires the report to separate out the individual securities (stocks and bonds) from the hedge fund and list each as if it were held individually by the fund. The report does, however, list a near 10% weighting in “alternative investments” - which likely reflects the Blackstone holding. (Short positions are hard to sort-out anyway - usually reflected in cash, bonds or liabilities - a bit over my head).
My Take Aways:
- With over 150 funds now under the T. Rowe Price umbrella, it’s become increasingly difficult to make fine distinctions among them. If you like the house you’ll probably do well over the longer term (10+ years ) with just about any of their equity or allocation funds.
- RPGAX is a “twist” on the conventional 60/40 “Balanced” Fund. By keeping equities pegged at 60% and dropping its bond allocation to 30%, the fund has a 10% “window” open to invest in alternatives. Since it costs a lot more to invest in alternative strategies (ie hedge funds) than bonds, doing so is a bet that over the next market cycle bonds aren’t going to perform as well as they have in the past. That thinking (whether you agree with it or not) ties in with a conundrum Ed Studzinski highlighted in a MFO commentary at least two years ago. Roughly paraphrased (and grossly oversimplified): Bonds as part of a “balanced” strategy no longer offer the degree of downside protection they once did.
- One ingredient of hedge funds usually lacking in conventional mutual funds is the ability to sell short. TMSRX, for example, can short both equities and bonds. (In going both long and short they are, in effect, “hedging” their bets.) It’s proven a difficult tactic for mutual funds over the years. One demon is the higher cost of so doing. Further, the strategy’s very dependent on the manager’s ability to make correct calls - much more so than with long-only funds. A third problem is that these strategies typically fail to keep pace with “the market” - since they’re structured to “zig” when the broader markets “zag”. As a consequence, they tend to suffer large outflows from investors at precisely the wrong times.
I Also Own RPGAX & CCAPX I Did My Research Before Purchasing Them And So Far I Am Happy To Own Them. I Also Own GBLEX. GAOAX, BBALX, TRXIX, MFWTX.VGWLX. For Uncertain Times I Like Global Allocation Funds
I like the way you think (except BBALX I feel is overrated). Anyways, can you tell me if/how you were able to purchase CCAPX and TRXIX NTF?
Comments
While the new TRP hedge-fund mutual fund looks interesting (I forget the ticker, it just launched) and I may drop some $$ into it to see what it does I would prefer knowing more about what the Blackstone black-box is since it comprises (at last check) 10% of RPGAX's holdings.
I've tracked this TRP fund for a while and for the most part like it. Frankly I'm torn between using this or the new Vanguard Global Wellington as the core of a revised Roth IRA account.
% Fund
-----------------------------------------------------
77.98 T. Rowe Price Government Money Market
5.22 T. Rowe Price Global Allocation
4.34 T. Rowe Price Capital Appreciation
4.21 T. Rowe Price Ltd Duration Inflation-Protected Bond
2.10 T. Rowe Price Health Sciences
2.08 T. Rowe Price Multi-Strategy Total Return
2.05 T. Rowe Price Floating Rate
2.02 T. Rowe Price Emerging Mkts Value
And FWIW I moved half of my VWELX to its Global sibling in our taxable accounts a few days back.
SEC: "Legally, interval funds are classified as closed-end funds". That's because they're not continuously redeemable.
SEC: "Mutual funds are open-end funds. ETFs are generally structured as open-end funds, but can also be structured as UITs."
So interval funds are not mutual funds. Nor is SPY, which is a UIT.
In addition to what was said about hedge funds, another difference between hedge funds and mutual funds (or any registered investment company) is that hedge funds can have a 2+20 fee structure. Mutual funds are allowed to have performance fees also, but they must be symmetric - if they underperform they charge less. These are fulcrum fees.
https://www.accreditedinvestorleads.com/accredited-vs-sophisticated/
The idea is that these knowledgeable investors are capable of doing their own research in a "buyer beware" market, so they need less regulatory protection. The premise that an accredited investor with $1M in assets is automatically knowledgeable is debatable, but not germane here.
What matters is that T. Rowe Price is truly a knowledgeable investor, fully capable of doing the research necessary to feel comfortable with its investments. TRP markets itself as an investment firm that relies heavily on research. Unlike Janus that used to make the same claim, I believe TRP. So personally I would worry too much about it being taken for a ride.
https://www.cbsnews.com/news/poor-janus-investors/
In any case, whatever the reason, your choice is your choice. Period.
How does this hedge fund company make money, just like any other financial institution, they charge their clients for money management.
...But now, here's another question: with the idea of harvesting more monthly income (needed beginning in about a year and a half,) how much of my PRWCX should I move into any of these 3?
PRSNX (owned currently)
PREMX (owned currently)
or start a new holding in RPIHX or TUHYX?
(I only just this past week opened a tiny position for $3,500 in PTIAX. I will be growing that. But I'm not happy to learn that PTAM doesn't have the capacity on their website to let a customer log-in to see their account. Gotta call and either use their automated system, or talk to a rep.)
Yes, I could go elsewhere, but to simplify, I'd prefer to go with TRP, where most of my $$$ sits, already. And by the way, PRWCX is 35.46% of my total right now. I don't think I will EVER totally close it out. Solid fund.
“The fund’s investments in alternative investments may include unregistered hedge funds or other private or registered investment companies. ... ”
“... A hedge fund is considered an illiquid asset by the fund, is not subject to the same regulatory requirements as mutual funds and other investment companies, and could underperform comparable hedge funds with similar alternative strategies. Hedge funds are not required to provide periodic pricing or valuation information to investors, and often engage in leveraging, short-selling, commodities investing and other speculative investment practices that are not fully disclosed and may increase the risk of investment loss. Their underlying holdings are not as transparent to investors or typically as diversified as those of traditional mutual funds, and an investor’s (i.e., the fund’s) redemption rights are typically limited. All of these factors make the fund’s investments in alternative investments and hedge funds more difficult to value and monitor when compared to more traditional investments, and may increase the fund’s liquidity risks.”. http://quote.morningstar.com/fund-filing/Prospectus/2018/3/1/t.aspx?t=RPGAX&ft=485BPOS&d=e356b3ef2f165906373d32ffc4cf44ef
From Yahoo: T. Rowe Price Global Allocation (RPGAX)
Top 10 Holdings (34.03% of Total Assets)
Blackstone Hedge Fund Solutions 9.62%
Reserve Invt Fds 6.47%
T. Rowe Price Instl Emerging Mkts Bond TREBX 3.88%
T. Rowe Price Emerg Mkts Lcl Ccy Bd PRELX 3.10%
TRP DYNAMIC GLOBAL BOND FD-I 2.78%
T. Rowe Price Instl Intl Bond RPIIX 2.57%
T. Rowe Price Instl Floating Rate RPIFX 2.02%
T. Rowe Price Instl High Yield TRHYX 1.63%
Microsoft Corp MSFT 1.09%
Amazon.com Inc AMZN 0.87%
https://finance.yahoo.com/quote/RPGAX/holdings/
Morningstar also lists the fund as having 9.62% invested in Blackstone Hedge Fund Solutions. http://portfolios.morningstar.com/fund/holdings?t=RPGAX®ion=usa&culture=fr-CA
“Blackstone Hedge Fund Solutions” appears to be a client tailored hedge fund of hedge funds operated by Blackstone. From Blackstone’s Website:
“Our Hedge Fund Solutions group, Blackstone Alternative Asset Management (BAAM®), is the world’s largest discretionary investor in hedge funds. With approximately $75 billion in assets under management as of December 31, 2017, BAAM aims to provide its clients with investment solutions via various different means, including customized and commingled portfolios, special situations, seeding, GP ownership, and registered products. Our investors include many of the world’s leading institutional investors, including corporate, public and union pension funds, sovereign wealth funds and central banks. ... BAAM’s overall investment philosophy is to protect and grow investors’ assets through both commingled and custom-tailored investment strategies designed to deliver compelling risk-adjusted returns and mitigate risk. Approximately half of the assets we manage are invested in customized vehicles created to meet client-specific objectives.”
A “Sorry - Page Not Found” message may appear when you click following link. There is another link on the page (Hedge fund Solutions) that should take you to the material. https://www.blackstone.com/the-firm/asset-management/hedge-fund-solutions-(baam)
I couldn’t find the Blackstone hedge fund listed in RPGAX’s last Annual Report (October, 2017). https://individual.troweprice.com/gcFiles/pdf/argaf.pdf I suspect that perhaps the SEC requires the report to separate out the individual securities (stocks and bonds) from the hedge fund and list each as if it were held individually by the fund. The report does, however, list a near 10% weighting in “alternative investments” - which likely reflects the Blackstone holding. (Short positions are hard to sort-out anyway - usually reflected in cash, bonds or liabilities - a bit over my head).
My Take Aways:
- With over 150 funds now under the T. Rowe Price umbrella, it’s become increasingly difficult to make fine distinctions among them. If you like the house you’ll probably do well over the longer term (10+ years ) with just about any of their equity or allocation funds.
- RPGAX is a “twist” on the conventional 60/40 “Balanced” Fund. By keeping equities pegged at 60% and dropping its bond allocation to 30%, the fund has a 10% “window” open to invest in alternatives. Since it costs a lot more to invest in alternative strategies (ie hedge funds) than bonds, doing so is a bet that over the next market cycle bonds aren’t going to perform as well as they have in the past. That thinking (whether you agree with it or not) ties in with a conundrum Ed Studzinski highlighted in a MFO commentary at least two years ago. Roughly paraphrased (and grossly oversimplified): Bonds as part of a “balanced” strategy no longer offer the degree of downside protection they once did.
- One ingredient of hedge funds usually lacking in conventional mutual funds is the ability to sell short. TMSRX, for example, can short both equities and bonds. (In going both long and short they are, in effect, “hedging” their bets.) It’s proven a difficult tactic for mutual funds over the years. One demon is the higher cost of so doing. Further, the strategy’s very dependent on the manager’s ability to make correct calls - much more so than with long-only funds. A third problem is that these strategies typically fail to keep pace with “the market” - since they’re structured to “zig” when the broader markets “zag”. As a consequence, they tend to suffer large outflows from investors at precisely the wrong times.
Anyways, can you tell me if/how you were able to purchase CCAPX and TRXIX NTF?