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Perils of Chasing Star Managers + Other Fund Stories from Barron's
”my desired target is .60 or better on active management fees for mutual funds and with no 12(b)-1 fees thrown in.”
Very reasonable outlook. Similar goal here for the plain vanilla variety. However, if one wishes to visit Charlie’s Chocolate Factory and add extra ingredients like long-short, market neutral, leveraged CEFs, it will cost more. Not everyone needs or wants those exotic flavors. One might even argue they are extravagant and wasteful.
I listened to the Clark Howard show (https://clark.com/)in ATL in the early 90s. Clark has been a great advocate for consumers and promoted index funds. This is when I read my first investing book Random Walk..I didn't know much about investing but I knew expenses should be very cheap. I started investing in 1995 and opened my first account at Vanguard. Several years later with more experience and knowledge I looked at other options.
How time has changed with American funds. By the time we invested with American, the R6 (retirement accounts) were available - no load and no 12-b-1 fees. AF has served us well especially during drawdowns. Today, we moved to their newly created ETFs (less than 2 years old) with attractive expense ratio of 0.47-0.33%.
@FD1000 In other threads haven't you also advocated for owning IOFIX at times, a bond fund with an extraordinarily high for bonds 1.50% expense ratio? You've also suggested PRWCX, which, while an excellent fund, isn't cheap but average expense ratio wise and more expensive than American Funds' competitors. So it might help if you explain why these previous statements don't quite add up when combined with this one.
@FD1000 In other threads haven't you also advocated for owning IOFIX at times, a bond fund with an extraordinarily high for bonds 1.50% expense ratio? You've also suggested PRWCX, which, while an excellent fund, isn't cheap but average expense ratio wise and more expensive than American Funds' competitors. So it might help if you explain why these previous statements don't quite add up when combined with this one.
Yes, years ago I used to own a lot of IOFIX. I have a system that works for me and is not recommended to anybody. I don't care too much about ER, I'm a trader.
On the other hand, there are funds that can be great for other investors with a decent ER, such as PRWCX, PIMIX at its best and others.
Amy Zhang was supposed to be a star SCG and MCG manager at Brown Capital. She got hired away by Alger. However, her record there leaves a great deal to be desired. Not that her former fund BCSIX has shot the lights out since she left; its total return for the past 5 years is only 7.5%. OTOH, AGOZX has racked up a 5-year loss of 3.07% under Zhang’s tutelage. Her Alger MCs haven’t done any better.
Sometimes it feels like we expect financial situations to be quantifiable and behave like a chemistry operation where all of the various materials, inputs, and processing can be measured within tolerances of .001%. OK, manager "X" is very successful in environment "Y", and the results are great. So let's just replicate that.
The problem of course is the various materials, inputs, and processing which actually constitutes environment "Y". Some of the factors which make up "Y" may be reproducible, but a good many are not, because unlike chemistry, financial operations are subject to constant uncontrollable influences from the overall financial environment, creating complex conditional sets which change over various time frames, and are impossible to standardize.
So, manager "X" may be a constant, but the results of moving him/her from environment "Y" to environment "Z" are always going to be unpredictable.
Comments
Very reasonable outlook. Similar goal here for the plain vanilla variety. However, if one wishes to visit Charlie’s Chocolate Factory and add extra ingredients like long-short, market neutral, leveraged CEFs, it will cost more. Not everyone needs or wants those exotic flavors. One might even argue they are extravagant and wasteful.
On the other hand, there are funds that can be great for other investors with a decent ER, such as PRWCX, PIMIX at its best and others.
Amy Zhang was supposed to be a star SCG and MCG manager at Brown Capital. She got hired away by Alger. However, her record there leaves a great deal to be desired. Not that her former fund BCSIX has shot the lights out since she left; its total return for the past 5 years is only 7.5%. OTOH, AGOZX has racked up a 5-year loss of 3.07% under Zhang’s tutelage. Her Alger MCs haven’t done any better.
The problem of course is the various materials, inputs, and processing which actually constitutes environment "Y". Some of the factors which make up "Y" may be reproducible, but a good many are not, because unlike chemistry, financial operations are subject to constant uncontrollable influences from the overall financial environment, creating complex conditional sets which change over various time frames, and are impossible to standardize.
So, manager "X" may be a constant, but the results of moving him/her from environment "Y" to environment "Z" are always going to be unpredictable.