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David Snowball's article on Prospector Opportunity (POPFX) certainly caught my attention. One thing that puzzles me is that in spite of all the favorable risk ratios this fund still has a MFO risk rating of 4. Are there any POPFX shareholders here? Any good or bad experiences to share? Thanks in advance.


  • Hi, Ben.

    It's the nature of that particular metric that pretty much all stock funds have a risk of four or five. Here's why. Charles starts by defining the S&P 500 as "the market." The question is whether you're substantially more or less volatile than that.

    From the definitions page: Funds with volatility between 75 and 125% of market are assigned MFO Risk of 4 and deemed "Aggressive."

    So, by definition, the S&P 500 is a 4. Funds with as little as 75% of its volatility are also 4 as are funds with as much as 125% of its volatility.

    If you look at the entire Fidelity line-up, nearly 450 funds, only one equity fund has an MFO risk below 4 and even many multi-asset class funds earn 4 or 5 on risk.

    The idea is to allow you to see where your fund lies within the entire universe of possibilities, not just where it lies within a narrow peer set. Happily, the "narrow peer set" data is available in the screener. It's just not the MFO Risk metric.

    Hope that helps,

  • Why not tighten the bands so the risk metric is more relevant?
  • I'll ask Charles to weigh in, since he actually knows the thinking that went into the thresholds. As a general matter, I suspect that answer has two parts: (1) sometimes it's good to have the big picture - which MFO Risk gives by reminding you that even the tamest equity fund is one of your most aggressive options, and (2) sometimes it's good to have fine grained data - which pretty much all of the rest of the metrics provide by allowing you to pick the variant of risk-return balance you favor, then picking the historic period that seems relevant, then looking at a fund against its own peers or - if you choose, as I did with Prospector, to add a second peer group - against its direct peers and plausible competitors.

    For Prospector, I looked at mid-cap core then mid-cap core and multi-cap core. You might similarly decide that the sort of fund that interests you might be categorized as flexible portfolio or world allocation (they're close), so you decide to stack both sets up.

  • I took a quick look at the M* info on POPFX. One question that I have is how large a cash position did the fund have from inception in 2007 and through 2008, the period for which performance appears so good compared to peers? While it may be stating the obvious, only long-term investors have been rewarded for the risk-averse investing of the managers. Finally, I was struck by the high percentage (53%) of holdings in Financial Services (including a position in TRP and in White Mountains, both companies where managers previously worked) and by the low allocation (10%) to Technology. Mid-Cap Blend is the inevitable bogey, but this fund also has both Giant and Micro stocks. The fund itself uses both the Russell 2000 Total Return and the Russell Mid-Cap Total Return indices for comparison. I grew up not far from the fund's headquarters, so I hear these managers' New-England accents and I am very familiar with the Connecticut scenes depicted on their web site. They are quite apologetic in the annual report about missing out on 2017's rally.
  • Thanks, David. Yes that is helpful. I did find some "3-s" in equity funds, just a few, as you indicated, including one in which I am invested, ROSIX.
  • POPFX has a transfer fee at Schwab. Ends any interest I may have had.
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