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You might look at Pinnacle Value (PVFIX). We've got a profile of it. Mr. Deysher has the same skepticism about buying when you ought not be buying, so he often has a cash-heavy small value portfolio. In the long term, it tends to be a lot steadier than its competitors.
This tends to be a top 1% or bottom 1% sort of fund. When the small cap market races, it's in the bottom decile (2009 and 2010) though it makes decent money (12.5% for those two years). When the market cracks, it tends to be in the top decile (2007, 2008, 2012). Its relative performance used to be less volatile, but as the market becomes more bipolar, folks in the steady middle tend to look more often like geniuses or fools.
My own small cap exposure is mostly through Artisan Small Cap Value (ARTVX), for what interest that holds.
Thanks David for the suggestion of PVFIX, Seems like in the league of ARIVX and very likely what I am looking for. Like so far what I read about the fund from your profile on the fund.
One thing that stands out is 58.01% investment in "Financial Services" area as per morningstar snapshot. Will research bit more before start investing in the fund.
Worth repeating, Thanks a lot for this wonderful site and your valuable monthly commentary!!!
Reply to @CaryRaleigh: Not an apples-to-apples comparison, but Whitebox Tactical Opportunities is an aggressive allocation fund is that is heavily in cash and also has the flexibility to short and invest in various fixed income securities (although it was 7% fixed income at last check.)
David will be profiling the Whitebox fund next month, and I'm eagerly awaiting his overview of the fund.
Eric Cinnamond's former fund ICMAX is still doing fairly well. If you think you have too much allocation to ARIVX you might give a consideration again. QRSVX is a pretty conservative fund as well.
Does it have to be a small cap fund? ARIVX is my sleep easy small cap also, and I pair it with my sleep easy large cap, YAFFX, the Yacktman Focus fund.
ARIVX, YAFFX and MACSX are the equity funds I feel I can hold through thick and thin.
I could not "sleep easy" with YAFFX. Last three years it has indeed been less volatile than benchmark. But longer term, it's been just as volatile...accumulating some significant, if short-term, losses.
Between peak in 2007 and low in 2009, it lost nearly 40%. Granted, better than benchmark.
But it lost same amount between 1997 and 1999...and this time, it performed some 20% below benchmark. In other words, it lost 60% compared to investing in SP500.
So, unless you can sleep deep for couple years at least, I trust you will allocate accordingly.
Hi Charles. You are right if you are only looking at standard deviation. But that can be misleading. Here is the welcoming statement when you go to the Yacktman website.
At Yacktman Asset Management we are proud of our successful, consistent, long-term track record. Our experienced investment team focuses on delivering risk-controlled results by being objective, diligent, and patient.
Risk controlled is the key.
Now any fund group can state that their priority is risk control in their literature. But from my experience, closely watching the fund while owning it for the last 4 years, the man does exactly what he says. He becomes cautious when valuations are high and/or when economic conditions look bleak. He has no problem moving large percentages of money to cash if conditions dictate caution. His management style to me is very close the Eric Cinnamond's style when Cinnamond ran ICMAX and now ARIVX. And this is the management style I can hold on to rough times.
The proof Yacktman is one of the best managers available to the average "Joe Mike" (i think) is looking at the M* upside/downside capture data.
Over the last 3 years, YAFFX has captured 78% of the upside market returns. and on down months only had 61% of the loss. If you look at it's category peers, over the last 3 years, all other large cap blend managers were getting 98% of the upside (great!) BUT during losing periods getting 109% of the loss.
If you look over the last 10 years at upside/downside capture data Yacktman's ability to limit losses is even more striking. He has captured 99% of the gains in up markets and had only 74% of potential losses. His peers on the other hand captured 98% of the gains (very similar to Yacktman) but had 103% of losses in down markets. That is a huge difference. The man knows how to limit losses during rough markets - just like his welcoming page says.
Why can I sleep well with this fund? I trust that Yacktman, like Cinnamond, can limit losses during the inevitable down markets.
I am a bit concerned about YAFFX. One can easily find a fund that is very lucky during the last 5 or 10 years, but let us look a bit further in the past.
For example, three years after inception, YAFFX lost 20%, whereas during the same time S&P 500 gained 90%. Can you imagine yourself staying in YAFFX and looking at your money melting away, whereas the market nearly doubles?
Of course, later YAFFX started doing better than S&P 500, but its period of significant outperformance is only about 5 years old. So it may feel really great now, but in the beginning it was really scary. Same manager. So can you really sleep well with this fund?
Reply to @andrei: Then you should not buy this fund if you have concerns.
...but its period of significant outperformance is only about 5 years old.
What data are you looking at? 5, 10, even 15 year returns blow away it's competition. 15 years takes into account not one but possibly 2 market cycles. Lucky??? I disagree. And again, the fund is about preserving capital and being conservative when the manager sees fit. The fund wins because it stays away from big losses in comparison to it's peers. The fund has underperformed the S&P500 over the last year. And there have been other years it has underperformed. But by understanding the managers long term goals, short term under performance means little to me.
So my comparison, again, and why I suggested YAFFX is because of the investing philosophies between Cinnamond and Yacktman. I believe they are similar. And the capture ratio tract record is terrific for the Yacktman funds. Heck, the capture ratios for YAFFX are even better then Cinnamond's old fund, ICMAX.
Reply to @andrei: YAFFX and YACKX are very similar. YAFFX is slightly more focused but YACKX is considered focused fund as well. Here are the longer calendar year returns for YACKX
The period you are referring is the hey days of dot com boom. At that time S&P 500 was full of high growth companies. It was much more lobsided to expensive growth companies. Value managers like Yacktman did not participate in this rally when the valuations got too rich unfortunately the irrational exuberance kept going for an extended time. Warren Buffett himself was criticized as well having lost all of his investment acumen during those times. It was really hard to be a value investor.
However, when the bubble burst eventually, the value funds returned positive returns. See 2000, 2001, 2002 returns.
That does not mean that you should have only this fund as your large cap fund.
The period of significant outperformance began 5 years ago, on 2008. This outperformance was so significant that it affected the 5, 10 and 15 years data in a fantastic way.
For the first 3 years of its existence, the fund behaved horribly, especially compared to S&P 500, so it would be very hard for any reasonable person to stay invested in YAFFX at that time, but is was relatively safe and steady since 2000.
I see the comment by Investor that this period of underperformance was because of the value tilt. This can explain some part of it, but not all. The manager of Oakmark fund OAKMX was fired for his underperformance at that time, even though his underperformance was less severe than the one of YAFFX. Meanwhile OAKBX (balanced value tilted fund) was very steady during the full period of existence of YAFFX, and outperformed YAFFX since its inception.
Only if you are sure that the original period of significant underperformance will not repeat, you may hope that this fund is as safe as ICMAX.
I would take a look at TASVX, which continues to produce, beating the SCV index over the past 3-, 5-, and 10-years with lower standard deviations and higher sharpe ratios than the category over these time periods. This fund appears to be available at Wellstrade for a $50 minimum in both types of accounts according to test trades I made earlier today.
If it were my portfolio, I would be looking for a fund that complements ARIVX. And my choice would be WSCVX, which is managed by John Walthausen. He previously managed PVFAX from 12/31/2002 to 8/14/2007, during which he crushed the SCV index. Since the inception of WSCVX, he has outperformed both PVFAX and the SCV index as shown HERE. Note that WSCVX is very volatile and may not be appropriate for your risk tolerance.
Another complementary fund to consider would be MSCFX. Although this fund is very young, Mairs and Power is a rock solid investment advisor, and run two other outstanding funds, MAPOX and MPGFX.
Reply to @David_Snowball: Perhaps it's a philosophical question, but, if one has a manager one trusts who has beaten his category fairly consistently (ARIVX), why recommend a fund with a M* low risk, low return rating (PVFIX)? I tried without success to chart ARTVX, PVFIX, & ARIVX against one another. It seems like the more funds one injects, the closer one approximates the index. I have a modest amount of various Artisan Funds (for years), but I wonder if I shouldn't obey Andrew Carnegie: "Put all your eggs in one basket, and watch the basket."
Hi CaryR. I am extremely risk-conscious... probably too much but since I would be happy with portfolio returns of 5+% annually, I don't need to chase high returns by adding higher volatility/risk.
Given that, I added ARIVX (another great MFO recommendation) and have kept ICMAX as my two small-cap funds. I have felt secure with both.
Reply to @andrei: Hi Andrei. I don't disagree with what you are saying, but what you are saying is exactly why I like the fund.
Yacktman generally under-performs in hot markets. Agree. But I am a true believer that if the manager can limit losses when the market crashes, long term results will exceed the benchmark. To me, limiting losses (exactly Eric Cinnamond's philosophy) makes for a perfect buy and hold fund.
The Yacktman fund didn't participate in the go-go years of the 90's, but in 2000 when the S&P500 was -22%, he was up +11%. Would I have held onto YACKX in the 90's when it looked like a dog? No, because I was not a very good investor. For one, I was a hot-fund jumper at the time. And 2, it was an unknown fund with an unknown manger with a funny name no less. YACKX held it's own when the market started moving up again in 2003-2006, but as you said, it had it's best triumph by
again
limiting losses in 2008 by going to cash and then buying back some pretty good value stocks, achieving superb results in 2009. And going back to why I compared YAFFX to ARIVX, this is exactly what Cinnamond's ICMAX fund did.
I understand your concerns Andrei, about under-performance in strong markets and how 2008-2009 over weights the long term results. But ironically, your concerns are why YAFFX, along with ARIVX, are my largest domestic equity holdings. Limiting losses in bad times out weighs underperformance in good - for me.
In this quest of looking for small cap fund like ARIVX, I stumbled across MSCFX and is one of the fund in short list. Will look more into TASVX as well, WSCVX is high flying fund and tempting but I will go for bit tamer one.
Something else that I had wondered, I hold GPGOX and it is doing very well, It fits well with global funds that I like in general, But, I do not feel comfortable adding more due to worry of losing more money during corrections, I couldn't convince myself that adding more to GPGOX is the best course.
As you know, GPGOX has a high ER of 1.75% which is a headwind for future performance. If you are OK with the ER, this fund has had an attractive 15.3 standard deviation and 0.99 sharpe ratio since inception using EzBacktest.
These investments are in Taxable account, I had in the past deal with issues of Manager change, under performance and new fund investment opportunity. I have invested in ICMAX, WAGOX and MACSX. I had very large investment in IVWIX as that was the only World Allocation Fund that I could invest at one point of time. Later I could get into funds like SGIIX, So whole equation changed.
Having multiple player helps to deal with issues like the ones that I faced in my taxable account.
On the topic of more funds approximate the index, This is true, If Fund-A will perform above index and Fund-B is going to perform below index return. As an Active Fund investor, You do your best to pick the funds and expectations are both Fund-A and Fund-B are going to perform above index return, So they are expected to perform better than index.
Pinnacle Value is up 16% for year with 30% cash, while ARIVX is up 7% with 50% cash. Both great for risk averse. Should I add ARIVX to a couple of Roth accounts which are sitting in cash just in time for fiscal cliff?
Thanks for pointing out WSCVX...As I screened this fund on Bloomberg's fund screener I came across SSSFX, Southernsun Small Cap...considered a small blend fund with similair performance. It has 25 equity holdings which I would consider a concentrated fund. Average PE for the fund is around 12 (verse 15.8 for the category avg). More than half of these holdings are categorized as Industrials. It is available NTF through many brokerages, but does carry a 12b-1 fee which I consider an on-going load. ER is 1.25
Comments
This tends to be a top 1% or bottom 1% sort of fund. When the small cap market races, it's in the bottom decile (2009 and 2010) though it makes decent money (12.5% for those two years). When the market cracks, it tends to be in the top decile (2007, 2008, 2012). Its relative performance used to be less volatile, but as the market becomes more bipolar, folks in the steady middle tend to look more often like geniuses or fools.
My own small cap exposure is mostly through Artisan Small Cap Value (ARTVX), for what interest that holds.
David
One thing that stands out is 58.01% investment in "Financial Services" area as per morningstar snapshot. Will research bit more before start investing in the fund.
Worth repeating, Thanks a lot for this wonderful site and your valuable monthly commentary!!!
David will be profiling the Whitebox fund next month, and I'm eagerly awaiting his overview of the fund.
ARIVX: blue
QRSVX: green
ICMAX: orange
PVFIX: yellow
ARIVX, YAFFX and MACSX are the equity funds I feel I can hold through thick and thin.
I could not "sleep easy" with YAFFX. Last three years it has indeed been less volatile than benchmark. But longer term, it's been just as volatile...accumulating some significant, if short-term, losses.
Between peak in 2007 and low in 2009, it lost nearly 40%. Granted, better than benchmark.
But it lost same amount between 1997 and 1999...and this time, it performed some 20% below benchmark. In other words, it lost 60% compared to investing in SP500.
So, unless you can sleep deep for couple years at least, I trust you will allocate accordingly.
Yes, I am looking specifically for small cap recommendations.
I also have high allocations in ARIVX, YAFFX and MACSX, For the same reasons that you stated.
Now any fund group can state that their priority is risk control in their literature. But from my experience, closely watching the fund while owning it for the last 4 years, the man does exactly what he says. He becomes cautious when valuations are high and/or when economic conditions look bleak. He has no problem moving large percentages of money to cash if conditions dictate caution. His management style to me is very close the Eric Cinnamond's style when Cinnamond ran ICMAX and now ARIVX. And this is the management style I can hold on to rough times.
The proof Yacktman is one of the best managers available to the average "
JoeMike" (i think) is looking at the M* upside/downside capture data.Over the last 3 years, YAFFX has captured 78% of the upside market returns. and on down months only had 61% of the loss. If you look at it's category peers, over the last 3 years, all other large cap blend managers were getting 98% of the upside (great!) BUT during losing periods getting 109% of the loss.
If you look over the last 10 years at upside/downside capture data Yacktman's ability to limit losses is even more striking. He has captured 99% of the gains in up markets and had only 74% of potential losses. His peers on the other hand captured 98% of the gains (very similar to Yacktman) but had 103% of losses in down markets. That is a huge difference. The man knows how to limit losses during rough markets - just like his welcoming page says.
Why can I sleep well with this fund? I trust that Yacktman, like Cinnamond, can limit losses during the inevitable down markets.
I am a bit concerned about YAFFX. One can easily find a fund that is very lucky during the last 5 or 10 years, but let us look a bit further in the past.
For example, three years after inception, YAFFX lost 20%, whereas during the same time S&P 500 gained 90%. Can you imagine yourself staying in YAFFX and looking at your money melting away, whereas the market nearly doubles?
Of course, later YAFFX started doing better than S&P 500, but its period of significant outperformance is only about 5 years old. So it may feel really great now, but in the beginning it was really scary. Same manager. So can you really sleep well with this fund?
So my comparison, again, and why I suggested YAFFX is because of the investing philosophies between Cinnamond and Yacktman. I believe they are similar. And the capture ratio tract record is terrific for the Yacktman funds. Heck, the capture ratios for YAFFX are even better then Cinnamond's old fund, ICMAX.
http://investor.managersinvest.com/investment/yacktman_fund_performance
The period you are referring is the hey days of dot com boom. At that time S&P 500 was full of high growth companies. It was much more lobsided to expensive growth companies. Value managers like Yacktman did not participate in this rally when the valuations got too rich unfortunately the irrational exuberance kept going for an extended time. Warren Buffett himself was criticized as well having lost all of his investment acumen during those times. It was really hard to be a value investor.
However, when the bubble burst eventually, the value funds returned positive returns. See 2000, 2001, 2002 returns.
That does not mean that you should have only this fund as your large cap fund.
Dear Mike,
The period of significant outperformance began 5 years ago, on 2008. This outperformance was so significant that it affected the 5, 10 and 15 years data in a fantastic way.
For the first 3 years of its existence, the fund behaved horribly, especially compared to S&P 500, so it would be very hard for any reasonable person to stay invested in YAFFX at that time, but is was relatively safe and steady since 2000.
I see the comment by Investor that this period of underperformance was because of the value tilt. This can explain some part of it, but not all. The manager of Oakmark fund OAKMX was fired for his underperformance at that time, even though his underperformance was less severe than the one of YAFFX. Meanwhile OAKBX (balanced value tilted fund) was very steady during the full period of existence of YAFFX, and outperformed YAFFX since its inception.
Only if you are sure that the original period of significant underperformance will not repeat, you may hope that this fund is as safe as ICMAX.
If it were my portfolio, I would be looking for a fund that complements ARIVX. And my choice would be WSCVX, which is managed by John Walthausen. He previously managed PVFAX from 12/31/2002 to 8/14/2007, during which he crushed the SCV index. Since the inception of WSCVX, he has outperformed both PVFAX and the SCV index as shown HERE. Note that WSCVX is very volatile and may not be appropriate for your risk tolerance.
Another complementary fund to consider would be MSCFX. Although this fund is very young, Mairs and Power is a rock solid investment advisor, and run two other outstanding funds, MAPOX and MPGFX.
Kevin
Given that, I added ARIVX (another great MFO recommendation) and have kept ICMAX as my two small-cap funds. I have felt secure with both.
Yacktman generally under-performs in hot markets. Agree. But I am a true believer that if the manager can limit losses when the market crashes, long term results will exceed the benchmark. To me, limiting losses (exactly Eric Cinnamond's philosophy) makes for a perfect buy and hold fund.
The Yacktman fund didn't participate in the go-go years of the 90's, but in 2000 when the S&P500 was -22%, he was up +11%. Would I have held onto YACKX in the 90's when it looked like a dog? No, because I was not a very good investor. For one, I was a hot-fund jumper at the time. And 2, it was an unknown fund with an unknown manger with a funny name no less. YACKX held it's own when the market started moving up again in 2003-2006, but as you said, it had it's best triumph by limiting losses in 2008 by going to cash and then buying back some pretty good value stocks, achieving superb results in 2009. And going back to why I compared YAFFX to ARIVX, this is exactly what Cinnamond's ICMAX fund did.
I understand your concerns Andrei, about under-performance in strong markets and how 2008-2009 over weights the long term results. But ironically, your concerns are why YAFFX, along with ARIVX, are my largest domestic equity holdings. Limiting losses in bad times out weighs underperformance in good - for me.
In this quest of looking for small cap fund like ARIVX, I stumbled across MSCFX and is one of the fund in short list. Will look more into TASVX as well, WSCVX is high flying fund and tempting but I will go for bit tamer one.
Something else that I had wondered, I hold GPGOX and it is doing very well, It fits well with global funds that I like in general, But, I do not feel comfortable adding more due to worry of losing more money during corrections, I couldn't convince myself that adding more to GPGOX is the best course.
As you know, GPGOX has a high ER of 1.75% which is a headwind for future performance. If you are OK with the ER, this fund has had an attractive 15.3 standard deviation and 0.99 sharpe ratio since inception using EzBacktest.
These investments are in Taxable account, I had in the past deal with issues of Manager change, under performance and new fund investment opportunity. I have invested in ICMAX, WAGOX and MACSX. I had very large investment in IVWIX as that was the only World Allocation Fund that I could invest at one point of time. Later I could get into funds like SGIIX, So whole equation changed.
Having multiple player helps to deal with issues like the ones that I faced in my taxable account.
On the topic of more funds approximate the index, This is true, If Fund-A will perform above index and Fund-B is going to perform below index return. As an Active Fund investor, You do your best to pick the funds and expectations are both Fund-A and Fund-B are going to perform above index return, So they are expected to perform better than index.
Thanks for pointing out WSCVX...As I screened this fund on Bloomberg's fund screener I came across SSSFX, Southernsun Small Cap...considered a small blend fund with similair performance. It has 25 equity holdings which I would consider a concentrated fund. Average PE for the fund is around 12 (verse 15.8 for the category avg). More than half of these holdings are categorized as Industrials. It is available NTF through many brokerages, but does carry a 12b-1 fee which I consider an on-going load. ER is 1.25
Fund Mojo ranks SC Blend managers here:
fundmojo.com/mutualfund/bestmanager.php?category=Small+Blend
Very Nice...Thanks!