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INTERESTING COMMENTARY BY DAVID IN THIS MONTH'S issue. I think LCORX is a great fund which theoretically could be the only fund you need to own because it can invest anywhere and hold any market asset. The problem I have with it is the ER it charges 1.38%. They now have an ETF which appears to have the same strategy and it's ER is .85%. Is the ETF sufficiently similar that it will out perform the mutual fund?


  • $10k minimum to get in. Not a problem for some of us. ADJUSTED ER is 1.16%.

    It has provided superior returns compared with peers, but subpar returns compared with the category benchmark...When adjusting for risk, this fund is competitive. The share class led the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing 10-year period. This strategy also delivered a smooth ride for investors, with a relatively low standard deviation of 8.2%, compared with the benchmark’s 12.0%. Finally, the share class proved itself effective by generating positive alpha, over the same 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

    Still, 0.85% sounds high for an ETF. I dunno about the composition of the portfolio compared to the OEF.
  • LCORX is long-short, so its ER also includes additional costs related to shorting. Still, its ER is high.

    LCR is ETFs based and is long only. Inception was 1/6/20. ER is high for an ETF.

    Surprisingly, their M* charts are similar since 1/6/20 (StockCharts doesn't recognize LCR).
  • edited May 2023

    LCR is ETFs based and is long only. Inception was 1/6/20. ER is high for an ETF.

    Surprisingly, their M* charts are similar since 1/6/20 (StockCharts doesn't recognize LCR).

    It looks like LCR uses inverse ETFs to address the "short" side. SPND (Direxion Daily S&P 500® Bear 1X ETF) was recently the 4th largest holding.

  • edited May 2023
    From Morningstar LCORX

    Adjusted ER: 1.16% *

    Total ER 1.38%

    According to M*, the adjusted ER ”excludes certain variable investment-related expenses, such as interest from borrowings and dividends on borrowed securities, allowing for more consistent cost comparisons across funds.”

    No comment on the fund. Haven’t yet read write up. But LS tends to be a very expensive type of fund. I own one that has a total ER slightly over 2%. BTW - they’re also one of the least consistent / homogeneous types of funds. Some will excel while others falter over the same time period. One way to reduce costs would be to run on an algorithm, automatically selecting long and short positions according to a set of criteria. But from my (admittedly limited) experience, I’d prefer a good actively managed one. It’s hard to justify the cost of a good L/S fund compared to fees on more traditional types. Really boils down to what you see as the role inside a broader portfolio and your willingness to pay the fees to achieve your purpose.
  • @hank, M* now backs out the shorting- and leverage-related expenses from the ER, and calls it adjusted-ER. Years ago, M* controversially stated only the adjusted ER, and argued vigorously about it, but since it started its own asset management business, it changed its practice to include both adjusted and total ERs. As far as the SEC is concerned, the total ER must be stated, but optionally, an adjusted ER (with explanations) may also be included.

    There are historical reasons why the SEC has required inclusion of these costs in the ER and one of these was that the OEFs campaigned for this in the 1940s because there were concerned about the unfair advantages that CEFs may have due to leverage.

    @JD_co, I missed that 4.74% -1x (inverse) SP500 position in the holdings.
  • Just fyi, we'll run a full profile of LCORX in June. It has a side by side comparison of the metrics for the three variations on the tactical allocation theme: LCORX, Leuthold Global and Leuthold Core ETF.

    As an aside, the minimum initial investment for LCORX at Schwab is $100. My old TD Ameritrade and Scottrade accounts had that same minimum.

  • I've looked at this fund for a while. Be good to know if Steve L's death has any influence on the fund or the strategy -- even though he was in his 80's.
  • Steve retired about 11 or 12 years ago and moved from Minnesota to Maine. At the time of his recent death he was, I think, in California. So he's been out of the loop for more than a decade.

    There's an argument that his departure was good for the fund, at least in the sense that the new team had an opportunity to step back, review their model and refresh it. In particular, they concluded that the historic allocation model - with something like 130 component industries - was too rigid. Implicitly the size of the fund was controlled by things like the "industrial air gases" industry. The original model said you had to have the option to take a meaningful position there but the industry group was so small that the fund had to turn away assets to keep from growing beyond the constraints imposed by its smallest potential components. The team, my understanding is, reviewed and revamped to buy themselves some flex.

    For what that's worth, David
  • edited May 2023
    LCORX is a good fund with a difficult tactical allocation strategy to execute well. It used to be almost the only game in town with this more flexible asset allocation strategy, and has done well with it overall. Although different in their flexibility and emphasis, LCORX may be worth comparing or even pairing with RPGAX and SGENX, and for more conservative investors DRRIX and PCBAX.
  • edited May 2023
    @LewisBraham, @David_Snowball -- appreciate your input.
  • edited May 2023

    @LewisBraham, @David_Snowball -- appreciate your input.


    ISTM the rather extensive “alternative” category of funds (including but not limited to L.S.) constitutes a bit of a twilight zone - so varied are the approaches and expected outcomes. Looking forward to David’s full profile of LCORX in the June Observer.
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