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Since CTFAX Is Heavily Invested In Bonds At This Time. Would It Be A Poor Choice To Purchase Going Into 2022. Im Also Considering Adding To BAMBX Or JHQAX. Im Looking For A Fund That Can Hold Up Well If We Get Hit With a Serious Market Drop. Which I Expect Is Coming.
I don't think it would be a poor choice if a serious stock market drop is the case you're looking to avoid. It's been only mildly under pressure recently, so I'd think it might do all right, and of course they'd add back some stock exposure on a deep equity dive.
It's about to throw off a significant year-end distribution so don't go buying in a taxable account today. Tomorrow, Tuesday, is record date, Wednesday is ex-date.
I agree with AndyJ. I think it's positioned for a equity drop right now. I took a little from TMSRX and distributed to CTFAX and JHQAX last week. Working on getting each about the same weight in the portfolio.
The 80+% bond allocation is well positioned for further stock decline. Majority of the bond is high quality, AAA and some in BBB. Duration is 5.5 years so it is reasonable for the rising rate in 2022.
I own the institutional class (COTZX). Frankly, its the only fund I am thinking about adding to prior to year-end.
It all comes down to one's view of the market though. If one is eager to embrace risk of one's capital in pursuit of another 20% up year in 2022, CTFAX would NOT be the place to be.
OTOH, if one is risk-averse, and is seeking a disciplined approach to adding risk (i.e. it buys more as the market crashes), then CTFAX would be ideal. --- Just don't buy before it goes ex-div!
I hope the owners of this fund post in this thread the next allocation update when it becomes available. There has not been an update since the last one on May 31, 2021.
I love the concept of CTFAX and trying to time the markets. Equities are generally overvalued, at least by historical metrics.
Can CTFAX really get "ahead" of things? It shifted its allocation a while ago. The markets (thanks to the Fed) are resilient. CTFAX is a defensive play in an era when defense is RARELY rewarded.
Along with some other low-return grinders (CVSIX, HRSAX, HMEZX, ARBIX, etc), I expect annual returns close to 4% . Which means that now inflation is destroying my portfolio. What is the actual U.S. inflation rate at - 12%?
Tough to manage your portfolio when inflation rages and your fund returns are essentially capped. I think this is a major issue for a fund like CTFAX this year. If there is no Stock market crash in 2022, or at least a very strong correction, is it a failure?
Wondering if the legal issues connected to HMEZX have been cleared up-specifically the Jim Dondero bankruptcy, etc ?
I'm guessing somebody like Dondero maximizes his litigation efforts and makes sure it all gets buried, a la 45. A decent (and highly paid) legal team can do that.
As a disclaimer, I currently have a very moderate position in COTZX and appreciate the clear mechanics of adjusting to market conditions based on S&P levels. Still, I am challenged to add to it for the following reasons and considering selling it, so maybe someone could talk me off the roof.
First, it doesn’t anticipate market moves but responds after the fact - I do that on my own. Second, six of the funds 13 funds are invested in 1.56% or less. So the impact from these funds is either offset by each, negligible, or cumulatively indexing (I have no issue with indexing. I like index funds for core investing). Third, don’t know if the er’s are cumulative or only the reported 0.65% Fourth, the treasury index is a 31.29% holding with a 6.83 duration. Maybe I’m off here but if we’re going into 2022 expecting rate hikes then how will COTZX adjust its bond holdings. Fifth, if all of my perceived obstacles from the above were removed, I think I’d need to be invested much more deeply than I am at present - but as you could tell, just not ready
Again I really like the idea behind COTZX but as I’ve looked closer, it may not be for me.
Hi Level5, I have held the A share class of the Thermostat Fund for more than ten years and I hold it within my fixed income sleeve since it is currently 90% fixed and 10% equity. I look at it as a risk-off (risk-on) type fund that adjust it's equity holdings based up price/earning metrics for the S&P 500 Index. So, when equities falter and fall in price it automatically loads equities and sells down bonds. Thus, it is designed to play stock market swoons without me having to do much of anything. When it's time to sit (which is hard for many retail investors to do) it plays the bond market. And, when it is time to engage and ramp up equities it plays the stock market. For me, it's a keeper and currently held within the fixed income sleeve of my portfolio.
In review of its performance I am finding that its average total return over the past five years has been better than ten percent. Not bad for a fund that often just sits in risk-off mode.
Hello CecilJK - I recall briefly discussing this fund with you some time back. Again, I like the idea behind it’s strategy and why I have a very modest exploratory investment with it.
You, as well as another poster/author I highly regard (Charles Lynn Bolin), write highly of COTZX. Still my portfolio is mostly risk-off now with a 33-36% allocation to stocks (VDADX, VDIGX, VTSAX), 23% in a stable-value fund (TIAA-Trad earning, so far a guaranteed 3%) and the rest in bond funds/cash. I still have COTZX, but it’s far less than a 5% position, which in my opinion needs to be the minimum threshold for a fund to have a meaningful impact on a portfolio. What is the percentage of COTZX that you hold?
Within my fixed income sleeve CTFAX makes up about 12% of it's investment sleeve which consist of twelve funds. Currently, my fixed income sleeve makes up about 18% of my portfolio.
Hello CecilJK - thanks for responding. I realize my bias is showing. Your answer reminds me that given a large portfolio, a less than 5% allocation would be significant.
First, it doesn’t anticipate market moves but responds after the fact - I do that on my own.
@Level5, I would say the fund acts contrary to this statement. Market valuations go up, it sheds equity. Valuations go down it buys. Buy low, sell high. Anticipating the next trend up or down, not reacting to it.
Fourth, the treasury index is a 31.29% holding with a 6.83 duration. Maybe I’m off here but if we’re going into 2022 expecting rate hikes then how will COTZX adjust its bond holdings.
I would also like to hear more about this concern from more knowledgeable bond posters. I would say a 6.8 year duration for treasuries is on the low side and possibly more in the safe range if inflation takes off, but I'm not sure.
Fifth... I think I’d need to be invested much more deeply than I am at present...
I totally agree with that statement if you trust the 'buy low sell high' concept it follows. The previous poster acknowledged he has a 2% stake in the fund (2% of total portfolio), .12 x .18= .02. Owning the fund at that percentage IMHO will result in very little affect on total return, a fraction of a percent maybe. If your reason to own this fund is to dampen the affect of a market drop and take advantage of the subsequent market recovery you need to own a meaningful piece - or why bother.
But as you said, it may not be for you. Good luck with your decision.
Hi @MikeM - thanks for your message. What I meant to say, and did so incompletely was that COTZX has these S&P *trigger* points where they will then buy or sell based on how the market shows up. I have my own *trigger* points to buy (from bonds or cash), based on market dips/drops (not as defined as COTZX) and harvest gains (to bonds or cash) when my stock percentage moves beyond a threshold. In my opinion, that’s what COTZX does. The difference is, as @CecilJK noted, it’s automated for you.
If you have a portfolio of $5-10 million (which I do not), a 2% investment still comes out to be a hefty chunk of change ($100 - 200K), though not a big impact overall.
So one question I ask myself is, am I willing to pay the extra *er* fees for a service that I currently enjoy and still think (relatively) competent doing?
Thank you for the kind words,@Level5. I have almost 9% of my overall portfolio in COTZX/CTFAX. I like it’s Benjamin Graham style approach to value investing. Automating removes the emotion of investing.
As far as investing in bonds when rates are likely to rise? I own bonds (45%) for diversification anyway. I expect volatility to accompany inflation and rising rates. Shorter duration is better when rates rise. Longer duration is typically better when the stock market falls. I am happy with the long term performance of COTZX/CTFAX, but recognize that it will underperform during bull markets,
For downside protection, I own TMSRX which has currently low returns but decent downside protection. BAMBX, SWAN, ARBIX, and PHDG rate highly. My base case is continued, but slowing growth in 2022, with moderating inflation, end of bond purchases by Fed (QE), and modest rate hikes. I am waiting for the December MFO data before making any decisions.
@90% fixed income, I would treat COTZX as a bond fund. As long as it is positioned to perform better than the worse bond fund in your portfolio, it is a keeper. If one has low expectations of any bond fund in the current environment and as such comparing COTZX to the bond funds in your portfolio is not a reasonable thing to do, then move the worse bond fund in your portfolio to cash and if that happens to be COTZX, then so be it. Good luck.
COTZX has done well over the life of the fund -- 19 years, Sortino=1.14, APR=8.3, Avg 3 Year Rolling APR=7.2 but I personally would not treat this as a bond sub given the max DD of 42.4% in 200902 and an Ulcer of 7.3.
Imo PRWCX has better risk adjusted returns than COTZX (big risk being manager skill of course) PRWCX stats are -- 35 years, Sortino=1.40, APR=11.7, Avg 3 Year Rolling APR=11.3, Max DD=36.6, Ulcer=5.3
SFHYX stats are 17 years, Sortino=2.08, APR=7.2, Avg 3 Year Rolling APR=6.7, Max DD=16.9, Ulcer=3.5
Hi @StayCalm Fund managers change and so do philosophies. COTZX did not do well in 2009, because it’s strategy was to be 100% stocks or bonds. Since then they have changed their philosophy to make the changes gradually.
@BaluBalu - while COTZX is but 10% equity, I like the idea of thinking of it as an enhanced bond fund for now, even though as @lynnbolin2021 and M* point out, it is a tactical fund. This is about as *exotic* (LOL) I get in my investing.
I researched Columbia Threadneedle because I liked Columbia Thermostat. They have several other funds that have done well including Balanced (CBALX) and Columbia Adaptive Risk Allocation Fund (CRAZX,CRAAX) which I also own.
FWIW: As I stated above CTFAX carries a weighting of 12% within my portfolio's income sleeve. I have some other multi-sector income funds held in this sleeve that also holds some equity. The 12% weighting for CTFAX was chosen so that it could weight up to 80% in equity and not throw the sleeve beyond its 15% equity cap. So, for me, it stays within this sleeve even if it sould go equity heavy in a stock market downdraft and load equities thus reducing its allocation to bonds.
Another fund that I like and that I own is CFIAX (Columbia Flexible Capital Income) which is held in my hybrid income sleeve. It sports about a 4% yield.
As a disclaimer, I currently have a very moderate position in COTZX and appreciate the clear mechanics of adjusting to market conditions based on S&P levels. Still, I am challenged to add to it for the following reasons and considering selling it, so maybe someone could talk me off the roof. [...]
Second, six of the funds 13 funds are invested in 1.56% or less. So the impact from these funds is either offset by each, negligible, or cumulatively indexing. [...]
Fourth, the treasury index is a 31.29% holding with a 6.83 duration. Maybe I’m off here but if we’re going into 2022 expecting rate hikes then how will COTZX adjust its bond holdings. [...]
Again I really like the idea behind COTZX but as I’ve looked closer, it may not be for me.
Well said, Level5.
I also like the idea behind COTZX, but for the second and the fourth reason you mentioned, I had decided a while ago against investing in the fund. I also don't particularly like to invest in a fund of other in-house funds, especially, as you pointed out, when "six of the funds 13 funds are invested in 1.56% or less". I prefer that manager(s) go out and select the individual stocks and bonds that are most suitable for the successful implementation of their goals, good examples are the managers of funds like FMSDX and VWINX.
My current choice of an alternative fund is JHQAX. Still quite happy with its risk/reward profile. These three funds, by the way, make up a significant portion of my conservative portfolio.
@90% fixed income, I would treat COTZX as a bond fund. As long as it is positioned to perform better than the worse bond fund in your portfolio, it is a keeper. If one has low expectations of any bond fund in the current environment and as such comparing COTZX to the bond funds in your portfolio is not a reasonable thing to do, then move the worse bond fund in your portfolio to cash and if that happens to be COTZX, then so be it. Good luck.
May be I should elaborate. My suggestion to treat this as a bond fund is based on its current allocation and for the purpose mentioned above. When the fund is allocated 90% or more in equity, I would treat as an equity fund to evaluate its potential. It is a dynamic allocation fund and my evaluation of it would be dynamic as well. I personally would not use it as a buy and forget fund (no fund receives such deference from me) but I can see the appeal to do so. You got the idea.
Comments
It's about to throw off a significant year-end distribution so don't go buying in a taxable account today. Tomorrow, Tuesday, is record date, Wednesday is ex-date.
It all comes down to one's view of the market though. If one is eager to embrace risk of one's capital in pursuit of another 20% up year in 2022, CTFAX would NOT be the place to be.
OTOH, if one is risk-averse, and is seeking a disciplined approach to adding risk (i.e. it buys more as the market crashes), then CTFAX would be ideal. --- Just don't buy before it goes ex-div!
Can CTFAX really get "ahead" of things? It shifted its allocation a while ago. The markets (thanks to the Fed) are resilient. CTFAX is a defensive play in an era when defense is RARELY rewarded.
Along with some other low-return grinders (CVSIX, HRSAX, HMEZX, ARBIX, etc), I expect annual returns close to 4% . Which means that now inflation is destroying my portfolio. What is the actual U.S. inflation rate at - 12%?
Tough to manage your portfolio when inflation rages and your fund returns are essentially capped. I think this is a major issue for a fund like CTFAX this year. If there is no Stock market crash in 2022, or at least a very strong correction, is it a failure?
First, it doesn’t anticipate market moves but responds after the fact - I do that on my own.
Second, six of the funds 13 funds are invested in 1.56% or less. So the impact from these funds is either offset by each, negligible, or cumulatively indexing (I have no issue with indexing. I like index funds for core investing).
Third, don’t know if the er’s are cumulative or only the reported 0.65%
Fourth, the treasury index is a 31.29% holding with a 6.83 duration. Maybe I’m off here but if we’re going into 2022 expecting rate hikes then how will COTZX adjust its bond holdings.
Fifth, if all of my perceived obstacles from the above were removed, I think I’d need to be invested much more deeply than I am at present - but as you could tell, just not ready
Again I really like the idea behind COTZX but as I’ve looked closer, it may not be for me.
In review of its performance I am finding that its average total return over the past five years has been better than ten percent. Not bad for a fund that often just sits in risk-off mode.
You, as well as another poster/author I highly regard (Charles Lynn Bolin), write highly of COTZX. Still my portfolio is mostly risk-off now with a 33-36% allocation to stocks (VDADX, VDIGX, VTSAX), 23% in a stable-value fund (TIAA-Trad earning, so far a guaranteed 3%) and the rest in bond funds/cash. I still have COTZX, but it’s far less than a 5% position, which in my opinion needs to be the minimum threshold for a fund to have a meaningful impact on a portfolio. What is the percentage of COTZX that you hold?
Within my fixed income sleeve CTFAX makes up about 12% of it's investment sleeve which consist of twelve funds. Currently, my fixed income sleeve makes up about 18% of my portfolio.
But as you said, it may not be for you. Good luck with your decision.
If you have a portfolio of $5-10 million (which I do not), a 2% investment still comes out to be a hefty chunk of change ($100 - 200K), though not a big impact overall.
So one question I ask myself is, am I willing to pay the extra *er* fees for a service that I currently enjoy and still think (relatively) competent doing?
As far as investing in bonds when rates are likely to rise? I own bonds (45%) for diversification anyway. I expect volatility to accompany inflation and rising rates. Shorter duration is better when rates rise. Longer duration is typically better when the stock market falls. I am happy with the long term performance of COTZX/CTFAX, but recognize that it will underperform during bull markets,
For downside protection, I own TMSRX which has currently low returns but decent downside protection. BAMBX, SWAN, ARBIX, and PHDG rate highly. My base case is continued, but slowing growth in 2022, with moderating inflation, end of bond purchases by Fed (QE), and modest rate hikes. I am waiting for the December MFO data before making any decisions.
Wishing you Happy Holidays and a prosperous 2022!
Lynn
Imo PRWCX has better risk adjusted returns than COTZX (big risk being manager skill of course)
PRWCX stats are -- 35 years, Sortino=1.40, APR=11.7, Avg 3 Year Rolling APR=11.3, Max DD=36.6, Ulcer=5.3
SFHYX stats are
17 years, Sortino=2.08, APR=7.2, Avg 3 Year Rolling APR=6.7, Max DD=16.9, Ulcer=3.5
Fund managers change and so do philosophies. COTZX did not do well in 2009, because it’s strategy was to be 100% stocks or bonds. Since then they have changed their philosophy to make the changes gradually.
It is a solid long term fund.
I like COTZX (and am considering opening a position) but I don't see it as a bond substitute.
I see COTZX as a tactical fund that is bonds when valuations are high, but stocks when valuations are low.
FWIW: As I stated above CTFAX carries a weighting of 12% within my portfolio's income sleeve. I have some other multi-sector income funds held in this sleeve that also holds some equity. The 12% weighting for CTFAX was chosen so that it could weight up to 80% in equity and not throw the sleeve beyond its 15% equity cap. So, for me, it stays within this sleeve even if it sould go equity heavy in a stock market downdraft and load equities thus reducing its allocation to bonds.
Another fund that I like and that I own is CFIAX (Columbia Flexible Capital Income) which is held in my hybrid income sleeve. It sports about a 4% yield.
Well said, Level5.
I also like the idea behind COTZX, but for the second and the fourth reason you mentioned, I had decided a while ago against investing in the fund. I also don't particularly like to invest in a fund of other in-house funds, especially, as you pointed out, when "six of the funds 13 funds are invested in 1.56% or less". I prefer that manager(s) go out and select the individual stocks and bonds that are most suitable for the successful implementation of their goals, good examples are the managers of funds like FMSDX and VWINX.
My current choice of an alternative fund is JHQAX. Still quite happy with its risk/reward profile. These three funds, by the way, make up a significant portion of my conservative portfolio.
Good luck,
Fred