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PARWX/PFPWX new Look and PM

I've been looking for a LCV fund to offset my growth tilt. I've been hesitant to consider Parnassus Endeavor because of its relatively high SD, mood swings and lean toward LCB.

Since Billy Hwan took over sole PM this year, i decided to look at it again. And i was pleasantly surprised to see such a transformation, even though the relative value "approach" is still in tact. I've been reading articles and listened to the quarterly report and was impressed with the "new" direction.

Mr. Hwan stated he is toning down the volatility and risk, has marginally increasing the number of holdings and thus reducing the top 10% of holdings from 60% to 32%. He has significantly reduced or eliminated several holdings of Mr. Dodson's. He also wants to lower the BETA closer to the index, etc.

From what i can tell, Mr. Hwan is on target.

Any thoughts going forward with Mr. Hwan and the transformation of Parnassus Endeavor?

Thanks, Matt


  • Hi Matt
    It’s interesting that you raise PARWX because I have also been following the fund over the past several months. It is a pretty unusual fund in that it combines a concentrated weighting in financials as well as more value oriented tech — particularly semis. Hwan has also been increasing his weighting’s towards healthcare to dampen volatility. I like where he is taking the fund but haven’t yet invested in it. The fund has underperformed other LCV funds Over the last 3 months. You might want to take a look at Smead Value if you are looking for something that has low correlation to growth funds. Smead has almost no tech and still has performed quite admirably long term. I also recently purchased IAI which is a financials sector fund focused on the brokers and dealers. Very steady performance from both funds.
  • edited September 2021
    mcmarasco said:

    From what i can tell, Mr. Hwan is on target.

    Thanks for the report, Matt. No insight to pass on here. I've been meaning to see what's going on with PARWX since Jerome D. stepped back, and think now I'll bring it up to the varsity watchlist and give it a good look.

  • edited September 2021
    I've posted on MFO about PARWX on the Best Fido NTF Funds thread and hold a large position in it.

    SMVLX Smead Value is a great LC Value fund but closed to New Investors at Fido and unavailable at VG.
  • edited September 2021
    Thanks for the replies!

    Mike, I did come across Smead value but as Stillers stated it’s closed to new investors at Fido which is where I invest.

    Stillers, I will look for the thread, thanks!

    AndyJ, if you come up with some insight or thoughts on PARWX now that you are going to give it a look, please pass it along. I would be very interested to hear what you have to say.

  • edited September 2021
    Bill Smead was a regular guest on the local PBS finance show "About the Money".
    I was impressed by his thoughtful investment strategy and candid demeanor.
    I didn't like Smead Value Fund's expense ratio which was rather high.
    The fund has performed well with top 5% returns in the large value category for the trailing 3 Yr, 5 Yr, and 10 Yr periods.

    Note: Smead Value Fund was classified as a large blend fund by M* from 2011 (or before) through 2017.
  • Interesting that Smead is not available at FIDO. it is available at Schwab. What really sets Smead apart is that hes been able to achieve top performance with very low % in tech.

    I'd value any additional recommendations that you good folks have in large or mid cap value. Ive researched a number. FLPSX, DODGX, YAFFX. Havent quite found one that I'm fully comfortable with
  • @MikeW : When I looked at Chuck's place it mentioned something about trust, so I don't believe it's available to everyone .
  • @derf . Can you please elaborate? Thx
  • SVFAX is available ntf for a $100 minimum at Schwab and not sold at Fidelity.
  • Also available at E-Trade and Vanguard ntf. I guess Fido wants would-be Smead investors to buy their crappy FBCVX fund instead ranked in the 91st percentile for 3 year return !
  • SMVLX is sold to retail investors at Fidelity, just not to investors seeking to open a new position.

    If the convenience of buying (additional) shares through Fidelity is worth a little effort, open a position directly with the fund company and then transfer the shares. I've done that with a different fund. Not a difficult process.
  • edited September 2021
    @MikeW : Availability Trust Company Customers Only
    Automatic Investment PlanHelp No
    52 Week Range $42.85 - $67.91 (for SMVLX)
    SVFAX is open at Schwab

    Does this help, Derf
  • @derf. Thanks. I understand. It’s a different share class for retail investors thats open at schwab
  • Since Dodson left, PARWX looks less volatile and less alpha. Not long enough time to predict what the future could be but one hopes Hwan does not go overboard with tinkering the previously winning formula. Obviously, he will do what he thinks works for him. How much time needs to pass before the consensus here gives a thumps up or down for Hwan?
  • BB, why do you say less alpha? I believe his goal is better alpha with less SD and other improved metrics.

    As you point out the key question is how much time has to go by to get a feel for Mr. Hwan’s changes?

    It’s been 8+ months and he has made good on his approach. Obviously, That’s not a lot of time, so what do you feel is an appropriate honeymoon?

    I’m also considering PARWX for a taxable account but that wouldn’t happen until next year because of the tax consequences from the many changes to the portfolio.

    Thx. Matt
  • While younger funds, I would also look at BIAVX ( investor class of BLVAX which has $100,000 minimum ) CILGX
    Both BLVAX and CILGX are GOs
    All have higher Martin ratios and lower UI either over their shorter life ( BLVAX CILGX) or a comparable period to SVFAX
  • @mcmarasco, "What do you feel is an appropriate honeymoon?" That was my question too. It seems investors already give him an overwhelmingly good grade because half of the $5B AUM came in as net inflows just in 2021. May be the fund's 2021 performance would have been even better without those inflows. With that type of inflows and high turnover ratio, I think he can implement his strategy without triggering too much per share year end cap gain distributions. But it may be sensible to not buy into potential YE cap gain distributions, as you point out.
  • I Decided to resurrect this thread with the hope of a few more thoughts and opinions now that Mr. Hwan has had a full year as sole manager and made some significant holding changes.

    The SD appears to have dropped by 2+, although still a bit high, with positive Alpha that’s well above the -7.55 (per m*).

    I’m considering PARWX/PFPWX for a taxable account, but not sure that’s wise. Mr. Hwan is aiming for 30% to 40% turnover which I believe should help keep the tax implications reasonable given the expected return.

    Thank you for any and all replies or suggestions!
  • @mcmarasco thanks for the comment. There is a thread called Parnassus Endeavor Fund where I posted as well. Both threads are applicable. But as I’m viewing Value as important for my 2022 strategy.. I’m interested in feedback on this fund. Here’s my post there. I’ve been very happy with the 2021 performance. I just want to know why MFO is rating the fund so low for 1 year. I hold this in tax deferred so taxes don’t come into play for me.

    January 5 edited January 5
    Purchased some PARWX LY and have been happy with it. It was up 31 percent in 2021. Up 4.7 to peers, low Ulcer, good Martin and Sharpe…

    Wondering why it’s a MFO 3 Rating for 1 yr. I think I may need a re-education on ratings. Can anyone shed some light? Referring to 1 yr rating on this fund as all other periods are 5 rating. TIA.

    Edit/Add: Is it an overriding category issue?
  • Thx JonG, I will look for your thread
  • Schwab says High return - High risk $8.00 + CG OUCH !!
  • Derf, the large CG in 2021 was due to the significant changes Mr. Hwan made to the portfolio. 2021 was an aberration and should be a 1-time event.

    Going forward I’m wondering if the fund will be more tax friendly than in the past. He states he is reducing turnover, SD and other metrics.

    Obviously, his intent is to reduce volatility but at what cost (i.e. return)?

    There’s a lot to like about PARWX but questions still need answers.

    Any thoughts?
  • edited January 2022
    I think an active equity OEF should be judged only by its total return. Asking the manager to focus too much on tax efficiency is tying one of their hands behind their back. I would rather the manager reduces losses (e.g., better downside capture) than worry about cap gain distributions. If tax efficiency is more important than total return to us, there are so many ETFs available these days.

    I do not own this fund.
  • Agreed that putting too much emphasis on tax efficiency can negatively impact the PM ability to generated above avg./high returns. That was not my intent to convey.

    Mr. Hwan stated his goal is to reduce turnover between 30% to 40%, among other volatility reducing measures.

    In fact, I did state that I was concerned what impact these process changes will have on returns.

    I too am a firm believer in TR, but very high tax consequences can have a significant impact on after-tax returns and make an otherwise excellent fund, mediocre or inefficient in a taxable account.

    Unfortunately (i guess) for me, 75% of my retail investments (ex. IRA's, 401K) are in a taxable account, so I believe I have to, at least, consider tax consequences, not necessarily make decisions solely based on it, but it is one factor.

    As far as ETFs, they don't serve my purpose in this area. I do not want a index tracker, I much prefer an investment that deviates from its bogie. From what I read PARWX/PFPWX has an active ratio of about 90%, not bad.

    Any further thoughts, ideas, suggestions or opinion are very welcome!!!

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