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Through October, all six Dodge & Cox funds below 3- and 10-month simple moving averages (SMAs), including its Income fund DODIX. Its closed International Stock fund DODFX is trending 8.5% below is 10-month SMA.
Interesting. Correct me if I'm wrong but my questionable memory seems to recall that they exhibited similar behavior during the last market kerfluffle.
08-09. Now granted who didn't crash but it seems that investors held them accountable for not protecting the portfolio(s) better as they expected given the nature of the firms investing precepts (or something like that).
@Mark is correct. D&C was a train-wreck during the late ‘07 to early ‘09 market collapse. One of the worst performers across all their equity funds. Some of their funds lost more than 50% during that 2-3 year period. Their balanced fund, DODBX, held up better, but also was hammered relative to peers. Reading their commentaries back than, D&C management blamed unanticipated and unusual government intervention during the crisis, in part, for their poor performance.
I’m sorry I can’t remember exactly what transpired, but believe it had to do with the government and courts’ failures to hold accountable issuers of (defunct) obligations D&C held. D&C got stung good on some of that paper. I believe they contested it in court to no avail.
I stuck with them, shifting more and more into their most beaten-up funds as markets crumbled. At the end of the mess I had 100% in DODWX, which bounced nicely in ‘09.
Personally, I don’t understand or pay much attention to moving averages. But I do believe in spreading risk around. That means D&C is but one of several houses I entrust my life savings to. I’ve always considered them a bit more aggressive than the average fund manager in their equity and balanced funds. So you need to be prepared to take a little bigger hit in down markets.
You can read about the 2008 misery in the linked Dodge & Cox Annual Report, dated December 31, 2008: https://www.sec.gov/Archives/edgar/data/29440/000119312509037454/dncsr.htm In the report, reference is made to their failure to foresee “the likelihood of government interventions” in the crisis as one cause of their poor performance.
I believe Derf is correct. As value investors, D&C was heavy in financials back in '07-'08 which got hit harder than other categories. A quick look now shows the stock fund as over-weight technology and health care. Tech may be the sector most vulnerable during the next pull-back.
But lets face it, over-time this has been a great fund company. Maybe the best for buy-and-holders ever.
Current Morningstar rating of the 6 Dodge&Cox funds show 4 funds with a 5 Star rating and 2 funds with a 4 Star rating. Not too many fund companies with multiple funds can beat that.
I think their “gross” underperformance in ‘08 was likely a one-time occurrence. But, can’t say for certain. However, D&C’s funds will normally give you a rougher ride for sure. Not for the “queasy”.
Long term (10+ year out) if one has a lot of patience they’re a hard act to beat IMHO. A lot of that is due to their very competitive ERs. Not many investors today possess that degree of patience. Actually, now in my 70s, I don’t possess that degree of patience either. I continue to hold slices of DODBX, DODIX and DODLX, but now avoid their equity funds.
All "value" funds where in financials during the mortgage bust. Remember Schneider Value?
The point is we need to stop thinking money managers are geniuses. And more importantly let's stop them from projecting on YOU that YOU are supposed to beat the market. No. THEY are supposed to beat the market. YOU are supposed to know how much exposure you should have to the market.
If we stop managing for return and start managing for risk - which is not volatility - all will be fine.
Let me try fine tuning VF's statement slightly. Instead of "YOU are supposed to know how much exposure you should have to the market", try: YOU are supposed to know how much exposure you should have to various markets.
If you invested 100% in a (relatively) well performing gold fund, its your problem for having picked the gold market instead of having invested in, say, a mediocre bank loan fund this year.
DODFX has roughly treaded water. If one buys into DODFX (this year or any time), one is choosing to invest around 1/5 in EM stock and the rest in developed market stock. No bonds, no gold, no pork bellies. YOU make that decision. Given what DODFX invests in, it continues to do okay relative to its market.
Foreign Large Blend YTD: -11.93% Emerging Markets YTD: -15.80%
80/20 mix YTD: 80% x -11.93% + 20% x -15.80% = -12.70%
Interesting. DODFX (down 13%+ YTD) has cranked out better than 10% average annual returns over the past 10 years. And over that longer period ranks in the top 5% (5th percentile) of its peers according to Lipper. Gets back to what I said earlier about needing a long time horizon and a lot of patience to invest with these guys. I’d be loath to give up on it.
@msf. Fair enough. I can decide how much exposure I should have to non-US markets and let D&C decide for me where exactly that exposure should be distributed. However, then let's not discuss "if only DODFX had more exposure to Asia, etc.".
I could just buy one global allocation fund and be done with it. I need to still decide how much I want in the global allocation fund and how much I should have in cash as far as my portfolio is concerned. The return is only going to be known in hindsight. Saying D&C trending down doesn't do anything for me one way or the other.
No one gets to tell me I haven't invested enough or I'm selling at bottom or buying at top. Life happens to ME. Active fund managers are supposed to beat their benchmark for the duration I'm invested in them. If because of my situation (which others don't have clue about) I decided to add or remove funds allocated to a fund, that's none of their business. They can lose money with everyone else but they are supposed to lose less. When markets are doing better they are supposed to do better. If they are internally losing less and gaining less that's fine.
I think we're in agreement here. If one buys a "go anywhere" international fund that really does go anywhere, then one is delegating regional allocations. Then one should simply benchmark against a global ex-US index and not complain about the world regions it wanders into.
However, that's not the way many funds function. IMHO, the difference between a traditional balanced (60/40) fund and a moderate "allocation" fund is that the latter has a little more wiggle room to make tactical shifts. But it's still going to be meandering near that 60/40 "set point", and so should be benchmarked that way.
Likewise, if one picks an international fund that holds around 1/5 in EM, then one should keep that in mind when fleshing out one's portfolio. So long as the fund doesn't lose big relative to its set point allocation, then as you wrote, "that's fine".
Comments
Derf
I’m sorry I can’t remember exactly what transpired, but believe it had to do with the government and courts’ failures to hold accountable issuers of (defunct) obligations D&C held. D&C got stung good on some of that paper. I believe they contested it in court to no avail.
I stuck with them, shifting more and more into their most beaten-up funds as markets crumbled. At the end of the mess I had 100% in DODWX, which bounced nicely in ‘09.
Personally, I don’t understand or pay much attention to moving averages. But I do believe in spreading risk around. That means D&C is but one of several houses I entrust my life savings to. I’ve always considered them a bit more aggressive than the average fund manager in their equity and balanced funds. So you need to be prepared to take a little bigger hit in down markets.
You can read about the 2008 misery in the linked Dodge & Cox Annual Report, dated December 31, 2008: https://www.sec.gov/Archives/edgar/data/29440/000119312509037454/dncsr.htm
In the report, reference is made to their failure to foresee “the likelihood of government interventions” in the crisis as one cause of their poor performance.
Derf
But lets face it, over-time this has been a great fund company. Maybe the best for buy-and-holders ever.
Not to many fund companies with multiple funds can beat that.
Long term (10+ year out) if one has a lot of patience they’re a hard act to beat IMHO. A lot of that is due to their very competitive ERs. Not many investors today possess that degree of patience. Actually, now in my 70s, I don’t possess that degree of patience either. I continue to hold slices of DODBX, DODIX and DODLX, but now avoid their equity funds.
The point is we need to stop thinking money managers are geniuses. And more importantly let's stop them from projecting on YOU that YOU are supposed to beat the market. No. THEY are supposed to beat the market. YOU are supposed to know how much exposure you should have to the market.
If we stop managing for return and start managing for risk - which is not volatility - all will be fine.
If you invested 100% in a (relatively) well performing gold fund, its your problem for having picked the gold market instead of having invested in, say, a mediocre bank loan fund this year.
DODFX has roughly treaded water. If one buys into DODFX (this year or any time), one is choosing to invest around 1/5 in EM stock and the rest in developed market stock. No bonds, no gold, no pork bellies. YOU make that decision. Given what DODFX invests in, it continues to do okay relative to its market.
Foreign Large Blend YTD: -11.93%
Emerging Markets YTD: -15.80%
80/20 mix YTD: 80% x -11.93% + 20% x -15.80% = -12.70%
DODFX YTD: -13.64%
I could just buy one global allocation fund and be done with it. I need to still decide how much I want in the global allocation fund and how much I should have in cash as far as my portfolio is concerned. The return is only going to be known in hindsight. Saying D&C trending down doesn't do anything for me one way or the other.
No one gets to tell me I haven't invested enough or I'm selling at bottom or buying at top. Life happens to ME. Active fund managers are supposed to beat their benchmark for the duration I'm invested in them. If because of my situation (which others don't have clue about) I decided to add or remove funds allocated to a fund, that's none of their business. They can lose money with everyone else but they are supposed to lose less. When markets are doing better they are supposed to do better. If they are internally losing less and gaining less that's fine.
To each his own.
However, that's not the way many funds function. IMHO, the difference between a traditional balanced (60/40) fund and a moderate "allocation" fund is that the latter has a little more wiggle room to make tactical shifts. But it's still going to be meandering near that 60/40 "set point", and so should be benchmarked that way.
Likewise, if one picks an international fund that holds around 1/5 in EM, then one should keep that in mind when fleshing out one's portfolio. So long as the fund doesn't lose big relative to its set point allocation, then as you wrote, "that's fine".