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Markets Without Havens - VMVFX

edited October 2020 in Fund Discussions
Bloomberg Article:

The Bloomberg article got me thinking about doing a portfolio review.

Much of the article was focused on volatility and earlier this year I watched VMVFX deal with the pandemic's impact on this fund's focus, minimizing volatility.

I initially liked the concept of a fund (VMVFX)...a global equity fund... that attempted to minimize volatility. The Pandemic tested its strategy and proved its volatility wasn't at all minimal on the downward side of things. I sold out of that position and decided to except "normal" market volatility by purchasing PRGSX instead. The two have diverged since March with PRGSX offering the rewards of upward volatility.

I also noticed that my Moderate Asset allocation fund (PRWCX) YTD lost less and regain more than VMVFX proving that allocation funds are still a great way to manage market risk and reward.

VWINX performed as expected losing less and continues to be my portfolio benchmark (a fund that I compare all my other funds performance against). When other funds in my portfolio out perform VWINX I consider capturing that out performance by selling that fund's alpha back into VWINX. This helps me grow my portfolio's conservative base in good times and is a place where I will pull assets from during retirement minimizing the volatility of my withdrawals. I struggle going one step further by holding sizeable amounts of my portfolio in pure bond funds. I own VFSTX, PRWBX, PTIAX, THOPX, and (a Schwab bond eft) SCHZ.

Q: Is there anything magical out there in mutual/eft fund-land similar to PONDX of yesterday?

I believe even with bonds at historically low returns they still maybe the best way to minimize volatility, especially when thoughtfully combined with well managed allocation funds.

Other fund holdings that have not performed to my expectation:

FRIFX - Very correlated on the downside (to VGSIX) with little upside capture.

THOPX - A Short Term Corporate fund that has performed absolutely awful in the short (YTD) term. Showing no signs of its former performance.


  • Nice article Bee, thank you for sharing.

    I've been phasing into ARTTX (Artisan Partners Focus Fund) the past week or so, do like that it attempts to be "risk - aware", looking at crowding, volatility, correlation, factor analysis, macro drivers, liquidity, stress tests and can use options to mitigate risk etc

    Also hold TGUNX TCW Premier New America, full of cash flow rich, compounders, lower asset base

    I attempt to barbell these holdings with ROSOX (Rondure Overseas) in case of falling dollar, FPFIX FPA Flex Income, IOFIX Q Infinity and large holdings in DERI Dominion notes, like money market, no FDIC, easy access to funds and 5 year CDs.

    Who knows what will think this Virus etc has pulled forward many trends, one of them being software companies etc who are losing money now but are growing their market share tremendously and will have huge revenue streams with the life time value of customer annuity effect when customers get into their eco system and don't want to change out...many mutual fund managers are older (maybe not in age but maybe in thinking/training) and might be fighting the last war...

    Good Luck to all,

  • I've been recently using BIV and VCIT rather than investing in oef's. THIFX SNGVX and PTIAX have been working for me the last 6 months.
  • edited October 2020
    Several funds I would hold longer term.

    PRWCX has been my top moderate allocation for years and YTD did well. Great manager with insight.
    VWINX/VWIAX-has been my top conservative allocation for years and YTD did well. Great long term team investing in stocks and Corp bonds which is the "secret" of theis fund.
    Beyond that simple indexes such as SPY. For more growth simple QQQ
    Remember, 40% of the SP500 and 50% of QQQ revenues are from abroad.

    BIV a great ballast index and better than BND at about 50% treasuries (better ballast) + 50% investment grade Corp(better for rate rise+higher distributions). BIV has better performance from 3 months to 10 years. BIV er=0.05 is cheap and you can buy it with no commission. BIV is so good you can use it instead of managed core + core plus funds.
    PTIAX in the Multi sector category


    VMVFX used to be pretty good but is doing bad.
    PIMIX-used to be an easy choice but lost its mojo in early 2018. There is a new fund JASVX in MBS/securitized. It did well in the crash and YTD. Can't guarantee you anything.
    THOPX-I never liked it. Looks Sometimes OK but crashes.


    Voaltility: I have learned over the years that only several funds can play volatility well longer term but it's difficult to predict and why I'm the one who does it manually.
    Momentum: similar to the above, funds can do pretty well for several years and suddenly be behind for years because the environment changed(example: growth vs value). This is why diversification is not a good choice if you can observe this.
    Do I really need to hold 10+ funds...3 moderate allocation + 3 conservative allocation + 3 LC stock funds + 3 SC,MC + 3 international?
    You can do it all with 5-7 funds.
  • Like you Bee, I rely heavily on VWINX and PRWCX for my core holdings and also use VWINX as a measurement stick for my overall investments (I'm 77). For other equity holdings I have been using etf's to supplement these funds taking advantage of momentum. QQQ and IHI are among these and are long term holdings of which I can easily increase or decrease depending on the market. Another long term holding I have is COST for which I love the business model and along with my core holdings, do not plan to sell. I currently have a small position in ARKK and plan to look at adding to it with any future down markets.
    On the bond side, I, like you wish there was a viable PONDX alternative. I don't believe there is and I didn't like what happened to many of these funds during March. My bond holdings currently include MWTRX, PTIAX, BSV and VCSH.
    I'm wondering going forward if I need to hold a smaller position in bonds, especially so with the bond component in VWINX and PRWCX. I'm not sure what the options would be, however, I have around 3% of my total portfolio(s) in GLD. Other possibilities could be utilities, reits, international bonds and possibly tips. Safety would be the utmost importance to me in this area as I use the equity etf's to provide a little kick to performance.
    Would be interested in hearing others thoughts on this topic.
    Thanks for your post as I enjoyed reading and commenting as I have similar concerns!
  • Thanks for the excellent article @bee. Like several posters here I also use PRWCX and VWINX as my main balanced funds, and they performed well through March drawdown and bounced back in 6 months.

    With respect to VMVFX, this global fund has underwent several sizable changes while trailing its benchmark badly this year. YTD -8.1% versus Vanguard total world index, 4.3%. I too invested in this fund since inception but left two years ago to refocus my oversea exposure elsewhere toward growth oriented funds.

    1. the top 10 holding of VMVFX has changed considerably. Now it holds Alibaba (#1) and Taiwan Semiconductor (#3) and they are certainly NOT low volatility stocks.
    2. a change of fund manager in 2018 (Antonio Picca)
    3. an increased of emerging market exposure to 10.1%
    4. Currency hedging hurts its performance as USD has been declining this year.
    5. Large % of REITs early in the year does not help as REIT is still not doing well. Recent data indicated that REIT holding has reduced to 4%.

    My Vanguard total bond market index fund, institutional share, in a target date fund has done a solid job this year and that is good enough for us.

    @Ironranger61, bond funds you picked are quite good. One suggestion I have is Vanguard International Total bond index, Admiral share, VTABX - a conservative bond fund.
  • Like Iron Ranger, have a position in IHI as I think Medical Equipment is less exposed to political whims than pharmaceuticals. Similarly, I just initiated in ARKK--other than consistent performance impressed with their quarterly webinar updates and interesting to review the daily trade activity by free subscription. Also have done well with MSEGX and CLIX which I believe is still well-positioned for the retail environment. Most of my bond portfolio in 401(k) managed by Blackrock. Defensively, small positions in FLYT, DFND, and FCTR but would entertain musings of others on the board in this area.
  • VMVFX is on my list to sell. Too much movement chasing whatever seems to be low volatility at the moment. I was leery of the thesis to begin with. Bought it as sort of an experiment.

    Per the article cited, I don't feel like I've lost out on much by having plenty of cash on hand.

    After spending some time around some hospitals I became a big fan of "medical devices." Hospitals burn through stuff at an astonishing rate.
  • '' Hospitals burn through stuff at an astonishing rate'' I thought they used sterilizers ?!
    Stay safe, Derf
  • Derf said:

    '' Hospitals burn through stuff at an astonishing rate'' I thought they used sterilizers ?!
    Stay safe, Derf


  • A year ago in August, with additional cash on hand, I took to experimenting. Interested in low volatility, I invested in VMVFX and USMV. As their March performance obliterated my trust in the concept, I kicked them to the curb. With those funds I went with VDADX and VBILX (30/70).
  • MY IRAs are at Fidelity where I own a large amount of PRWCX. I'd like to pair it with VWINX but it's a transaction fee at Fidelity - not even their usual $49 but $75. I like how it's more value focus. Can anyone suggest a low fee Mutual Fund or ETF with the same profile that might be a good sub for VWINX?
  • Golub1- I'm at Fidelity as well & you can purchase VWINX at for $5 per transaction vs $75 by setting up automatic investments (dollar cost average). You can set up when you want to start and end the auto purchases. You can also stop them at any time.
    Accounts & Trade
    Account Features
    Payments & Transfers
    Set up auto tran or inv
    Set up auto inv
    You can check with your Fidelity rep as well & they can assist. Some reps may not be aware of this and will need to check with a more senior person.
    Hope this helps as there are no good subs for VWINX in my opinion!
  • If this is for a buy-and-hold or a buy-and-gradually-sell long term position, it may be cost effective to simply pay the one time fee and amortize it over years. That is, think of it as, say, a $15 fee/year for five years. Compare the fee with the how much you'll be paying in higher expense ratios of other funds and this can still come out to be your best bet.

    If you're looking at investing more than $50K, you could save 7 basis points ($35/year) by buying VWIAX at Vanguard and (if you want to keep everything at Fidelity) transferring the account to Fidelity. Generally you can hold Admiral shares at Fidelity but not buy any more.

    If you still want to buy a similar fund at Fidelity, you could look at HBLYX/HBLAX submanaged by Wellington. It is managed by St. John/Reckmeyer/Hand/Illfelder. St. John is the lead manager for VWESX, and Reckmeyer is the lead at VWINX. HBLYX takes a bit more credit risk than VWINX and is a bit more volatile, still generally not dissimilar to VWINX. The equity profiles are quite similar, and both funds lean toward longer durations.

    The Y shares are available at Fidelity at a low min, but with the $49.95 initial fee. As discussed above, this could still save you money in the long run. (You should be able to add shares for a $5 fee via automatic investments, but that should be verified with Fidelity. I'm less certain about the ability to use automatic investments with Vanguard Investor shares, though you should check with Fidelity for VWINX also.
  • edited October 2020

    Golub1- I'm at Fidelity as well & you can purchase VWINX at for $5 per transaction vs $75 by setting up automatic investments (dollar cost average). You can set up when you want to start and end the auto purchases. You can also stop them at any time.
    Accounts & Trade
    Account Features
    Payments & Transfers
    Set up auto tran or inv
    Set up auto inv
    You can check with your Fidelity rep as well & they can assist. Some reps may not be aware of this and will need to check with a more senior person.
    Hope this helps as there are no good subs for VWINX in my opinion!

    Looking at the Fido website, when you set up an automatic investment it has to be into a mutual fund you already own. Unless I’m missing something, there doesn’t appear to be any way around the $75 TF for the first purchase, only for subsequent purchases.

  • Someone please enlighten me what PONDX is.
  • edited October 2020
    PONDX was the D share class of the Pimco Income Fund which had no load at that time. I believe PIMCO phased out the D share class.

    See the attached SEC filing which states D share class was converted to A share class:

    It appears that D share class investors were grandfathered from the "A" share class load on future purchases after the conversion.
  • MrRuffles - Thanks for checking on and clarifying the Fidelity automatic investment option to avoid the $75 fee. I wasn't aware of this as I have used it to add to VWINX which I owned. However, if someone really wanted to own VWINX, for example, but didn't want to pour alot of $ into in a single purchase, they could purchase an initial position for $75 and then DCA over a period of time using the auto trans at the $5 fee.
  • FWIW, I just checked with Fidelity (phone) and VWINX is eligible for Fidelity's Automatic Investment Program. As with other funds, a $250 min for each addition.
  • edited October 2020
    @basball_fan interesting reading. Thanks, everyone. I quickly compared TGUNX with my BIAWX, which I hold for the kids. Doesn't the Brown fund look better? Are they not in the same category? ...But I see the TCW fund holds quite a bit of foreign stuff these days. 29 percent. They're both very concentrated.
  • beebee
    edited October 2020
    In New 60/40 Portfolio, Riskier Hedges Are Displacing U.S. Debt
    Many investors have no choice but to stick with Treasuries because of fund mandates, or they do so since they’re unconvinced it’s worth taking a chance on something else. Yet others are exploring riskier assets -- from options to currencies -- to supplement or fill the role of portfolio protection that U.S. government debt played for decades, a trend that highlights the dangers that the Fed’s rates policy can create.


    Options Hedge

    Swan is a longtime skeptic of Modern Portfolio Theory, which was made famous by economist Harry Markowitz in the 1950s and is the thinking upon which the 60/40 mix is based. Two decades ago, Swan created a strategy of using long-term put options plus buy-and-hold positions in the S&P 500 to limit huge losses during economic downturns.

    That approach has since been expanded to include positions in exchange-traded funds indexed to small cap stocks, and developed and emerging markets. It relies on constant allocations of 90% to equities and 10% to put options purchased on the underlying ETF portfolio.
    Are riskier-hedges-are-displacing-u-s-debt
  • Hi @Crash...thanks for the call out...bear with me while I go on a rant etc....ha!

    They both are similar in performance and speak to an ESG perspective...but...what turned me off on the BIAWX fund is they really play up the ESG perspective...then hold AMZN as their largest holding...Whiskey Tango Foxtrot! You mean the company that undercuts all our local businesses and puts them out of business so the local leaders now have to increase out property taxes, fines and fees to the sky? The one company who will deliver a tube of tooth paste to your door, ya, that is environmental friendly, not!

    But more so I like TGUNX better...I like the manager's background and the funds perspective, very subjective statement I'm about to make but I used to spend a lot of time doing business out West, Silicon Valley in the 90's, LA area and San Dog...used to have business dealings with many folks who went to Stanford or UCLA, really sharp folks, modern thinkers, open to different viewpoints. TGUNX, Shaposhnik seems cut from that cloth, I've seen interviews on CNBC, like his moxy and poise. Like that fund is nimble, can hold stalwarts like MSFT but can also hold co's such as the The Trade Desk. Foreign holdings are Canadian companies, North America.

    Take care, stay safe everyone, Vote and Good Luck to all,


    (Should be a good World Series between Team Hollywood and Team Walmart)
  • msf said:

    The equity profiles are quite similar, .....

    Important to note significant differences between the two funds in equity holdings: VWINX 36% with HBLYX holding 44%.
  • edited October 2020
    Why not split the difference 50-50 ? Would that equal 11 % more in equity instead of 22% ?
    What was I think ? 8% or 4% =50 - 50. Stay Safe, Derf
  • msf
    edited October 2020

    msf said:

    The equity profiles are quite similar, .....

    Important to note significant differences between the two funds in equity holdings: VWINX 36% with HBLYX holding 44%.
    True the equity/bond asset allocations are a bit different. Still, the equity profiles are similar:
    VWINX vs. HBLYX:

    LCV: 69% vs. 73%
    LCBl: 21% vs. 15%
    LCG: 2% vs. 3%
    MCV: 5% vs. 6%
    MCBl: 0% vs. 1%
    Others: 0%

    VWINX: 9.5% of equity is foreign (1.47% Canada, 1.48% UK, 6.59% Europe developed)
    HBLYX: 9.4% of equity is foreign (1.69% Canada, 1.34% UK, 6.35% Europe developed)

    Even in terms of equity allocation, the historical differences tend not to be quite so large. Closer to 5% than to 8%. Again from M*, VWINX vs. HBLYX:

    2020: 36.46% vs. 41.46%
    2019: 38.11% vs. 42.87%
    2018: 36.90% vs. 40.15%
    2017: 38.56% vs. 43.25%
    2016: 38.30% vs. 41.27%
  • FWIW VWINX 36.46 % VS HBLYX 41.46 % Would it not be possible VWINX returned more in 2020 than HBLYX ? It's what in the pot cooking not so much the size of the pot.
  • For me to make a decision, I would have to look at Sharpe ratios for these 2 funds as well as VBIAX VTMFX and VWELX . Fidelity shows VBIAX with the highest 3 yr SR at 0.71( VTMFX was unavailable) The ER of HBLYX is also 0.68, by far the highest in this group.
  • msf
    edited October 2020
    My original point was that for a long term investor, total cost of ownership is less if one pays the $75 fee up front. No argument that all else being equal, paying a fee to buy a fund with a lower ER comes out cheaper in the long run.

    But some people balk at that. (Hence the alternative suggestion.) Actually, a lot of people balk at that - look at how many people would rather buy higher ER retail shares than pay a fee to get into lower ER institutional shares. Many people would buy HBLAX NTF over HBLYX with a transaction fee. Or they'd buy C class shares before paying a load for A shares (e.g. TEGBX over TPINX before the latter was sold load-waived).
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