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VELIX Portfolio Parameters: Benchmark Russell 100; Typical Number of Positions Long: 40-60, Short 20-30; Typical Net Exposure 100%; Typical Total Long Exposure 80-100% of net assets; Total Short Exposure 0-30% of net assets; Maximum Industry Exposure 20%; Maximum Position Size 6%; Minimum Market Cap $3B (at cost); Maximum Cash Position 20%.
@Baseball_Fan In response to your July 21 question about VELIX being a 130/30, the co-manager, Lisa Wesolek, with whom I have been pretty tight since my profile ran, writes as follows. "Yes, we did initially intend it to be a 130/30. We knew they had fallen out of favor but thought it would be a good idea/timing to Introduce a new strategy with the experience we had as you noted above.
We had some strategic conversations with a couple of outside analysts that knew us and the reputation for Ric's experience with Diamond Hill's long- short (Dennis here: Rick Dillon ran a long-short fund at Diamond Hill asset management when he worked there.) as you also aptly noted. (After we launched, they became aware Ric was back in business and contacted us).
With respected input and much discussion, Ric and Kyle made the decision to change the focus and name to allow the team to not be "constrained" by the "having" to maintain a short position if the market conditions and therefore the managers felt the value was not there on finding good shorts. Also making the decision of adding the use options, puts, and calls.
I don't think there is anything to read into the decisions via the DHIL L/S necessarily. In some of our discussions regarding previously managing long short it was noted one of the challenges received most from investors, concerned the shorts. The performance would most often be in the long book, finding short ideas was often challenging. (Disclaimer, no idea what or how DHIL manages L/S post 6/30/2018).
Ric and Kyle (Dennis here. Ric and Kyle are the co-managers of VELIX) felt going Large Cap Plus eliminating the constraint of having to maintain a percentage of shorts but using shorting more strategically and adding the additional mechanisms for helping to hedge would be more compelling.
I hope that helps. Happy to chat more or set you up with a call with Ric or Kyle."
Are there any :L/S funds with a strict mandate to have X% of shorts? I have not delved into this space enough but what would be the reason to have a minimum short requirement, unless it is a fund?
@Dennis Baran, thanks again for not only your reply but also soliciting a reply from a principal at the fund company. Very helpful.
@BaluBalu... getting back to you with my reply... I've made it clear in prior threads that I'm extremely risk averse... I do have substantial financial assets ( 8 figures) and am not looking to get greedy. Furthermore, I'm of the opinion that the markets have been juiced by insane fiscal and monetary inputs as well as the somewhat ponzi structure of it due to index fund flows and stock options issuance as well as buy backs. Not sure.
So I'm on the look out for what some have recently described as boomer candy. Exposure to markets but with a shock absorber approach that might mitigate a severe downturn in the markets.
PHEFX t Rowe hedged equity is one fund mentioned prior but I also believe that VELIX likely is a very good candidate. I also really like that you have a veteran running the fund along with a still experienced and well educated co manager who is younger also at the helm.
VELA will see some of my investment monies in the near future... I'll be phasing in slowly over the next several months.
Not all boomer candy provide downside protection. VELIX May provide downside protection through its shorts and options but as an active fund that does not have mandatory hedging like JHEQX, VELIX hedging results can only be viewed in hindsight but can not be anticipated. Let us know how the manager fared during Covid vs JHEQX.
For the results you are looking for, there can be plenty of opportunities in fixed income, and perhaps with much less volatility. Good luck.
Fixed income, even in junk land, is holding up pretty well today. Even though spreads are suffocatingly tight, look forward to VELIX performance against fixed income during the current equity reset.
@BaluBalu...I already have a high majority of my investment portfolio in Tbills, US Treasury mmkt's, Tnotes 2 years or less and some CDs from major banks...am looking at VELIX for exposure to the stock market...not sure having shorts on all the time makes sense...I'd then just lower exposure to stocks and add to cash holdings.
A better comparison set would be VELIX vs VFINX (Vanguard equiv to SP500), no?...and looking out over the next 5 years...I'd would and AM taking the VELIX side of that wager...we'll see...
I am reading your objective with VELIX is to beat SPY over a 5 yr period, starting now, which is a narrow, targeted focus than the broader theme you explained 2 days ago which prompted my suggestion to look at the broader fixed income space.
What %age of your portfolio are you targeting VELIX and equities in general?
BTW, I personally know people of 8 and 9 figure portfolios with 95% equity exposure. I also know people with 8 and 9 figure portfolios that are 100% in fixed income. Each group is motivated by maximizing their long-term wealth for the unit of Risk they take. The definition of Risk likely varies but they all play primarily in equity or below A rated credit.
I could see over the next several years stepping into VELIX to be 10%-15% of the portfolio...I'm likely a couple years away from stepping away from the corporate work environment...who knows, still enjoying most days what I do...and am therefore in that danger zone, within 5 years of retirement (whatever that means, right?) and post 5 years retirement...I'm very very high in cash equiv's, like over 90%...works for me, wouldn't recommend it for most but I should be transparent and state my wife and I were in the highest tax bracket for quite a few years...so what we left on the table with the uptick in markets we overcame slippage of inflation with salary/bonus/stock options etc...fully acknowledge that I've been actually taking on risk by being too conservative but on days like this, I'm going for a bike ride this evening and not overly concerned about what the markets are doing...back in my younger days, in the 20's and 30's, was uber aggressive in the stock market...not anymore...
Did MRFOX say if they are going to provide month end portfolio stats (or at least cash level) or do we have to wait for quarter end stats? Monthly commentary could be a lot to ask for.
MRFOX down today 1.41% which is unusual. Do you by any chance know the fund's 2023 annual distribution date? In prior years, based on M* info, it distributed in mid December. Why can not I locate prior year distributions at the fund site?
I also noticed that the fund website has a lot of tabs but the info is sparse / stale. Most funds' websites readily show expense ratio and I just realized that one has to go the prospectus document to know this fund's expense ratio. Am I not looking in the right place?
@BaluBalu MRFOX ER is 1.01%. Its 2023 distro was 0.13; 2022 distro 0.03. (This info is from Barron's.) I will be selling 60% of my IRA holding in the fund later this month but keeping 22% of my regular account. The reason is that I want to diversify more, and so I've identified a few options which I hope will have decent and hopefully better overall returns with reasonable risk. The TR of the fund as you point out since April 1 is noteworthy.
Thanks. The fund is swimming is cash, manager claiming that there is nothing good to buy and then loses 1.41% on the day. What an attitude! I hope you do not own it.
My comment about ER and distro is to note why the fund website is so sparse in info. If I did not look for ER before, I am not going to look for it now.
Thanks for the heads-up about your sales. Your heavy weighting surprised me. I hope you held it long enough to have benefitted from its historic performance.
I've held the fund since 2019, and so I've benefitted from its returns since then. My spouse holds even more of it but hasn't owned it as long in both an IRA and regular account. She isn't interested in selling any of it.
Unfortunately, more of the same. The managers continue to say the market is very expensive. The fund did not participate in the early Aug and early Sept market pull backs. Cash is at 25.4%. There are so many stocks below the Mag 7 that are participating in this bull market. Since the September market pull back, RSP has outperformed this fund by 4%. If there is an ETF for 493, I should check the relative performance with this fund. The fund’s stated strategy is All Cap Value. I do not have a single value fund in my watch list that returned only 1% over the past six months.
50% of the portfolio is in consumer cyclicals and 30% is in financials. I hope the holiday season is good for these sectors and the good luck spills over onto this fund.
Lurkers, Note that this fund is highly concentrated, with only 16 holdings (per M*) and the top 5 taking up 50% of the fund.
Edit: it is impressive that fund inflows are unabated. September marked three months of increasing fund inflows. June had the lowest inflows for the year - every month had inflows. Who are these people plowing their wealth into this fund when MM funds out performed over the past 6 months. If this fund has a cult following, I must avoid it. Note that the management also manages separate accounts which if I recall correctly has $4B in AUM in the same strategy, far in excess of the fund AUM. SMAs are more sticky than a mutual fund AUM. So, may be this is cultish!
I have to admit that I am puzzled by your disappointment at this fund on the basis of a single data point -- 6 month returns.
Here are the metrics I see(per PV) and why I continue to hold. The 25% cash position does not bother me and I'm comfortable with managers being contrarian, not following the herd and willing to sacrifice short term returns in the interest of the long term.
From 1/1/21 to 9/30/24 as compared to VWELX - CAGR 15.24% v 7.83% - MaxDD -10.16% v -20.22% - Sortino 1.78 v 0.68
- 3 month return 5.13% v 5.17% - YTD return: 16.86% v 13.82%
What is the redline if crossed is a no go for you? My redline - if the fund does not turn around by December and I am still holding it in January, call me out.
I point us back to @Racqueteer suggestion that for each investment, each of us must have a set expectation at the outset and that one needs to execute whatever that plan is so there is no slippery slope mission creep. Given I do not have unlimited capital, each investment has to perform in line with or exceed alternative opportunity set. My alternate opportunity set is PRWCX (quite low expectation given MRFOX is not an allocation fund).
My benchmark for measuring opportunity cost is VWELX. I look at various relative metrics in the 3 month to 3 year range + Sortino to determine whether I stay or exit. At this time, I'm still invested in MRFOX.
@ stayCalm: MRFOX LT Returns as of 9/30: APR 17.0%; MAXDD -15.7% (202003; Recovery Mos. 7; ST Dev 13.2%; DSEV 7.3%; Ulcer Index 3.2%; Sharp Ratio 1.14%; Sortino Ratio 2.07%; Martin Ratio 4.76; MFO Rating 5 (Best); Peer Count 108; APR vs. Peer 3.6%; APR Rating Best; APR vs. SP500 2.3; Fund is 8.8 years old. Good reasons why you own it.
I bought in in Feb and am up about 10% It seems to be doing about as well as many other Value funds ,although VTV is ahead. Among the other actively managed value funds I follow or use are pretty much 100% invested, so MRFOX 25% cash makes their results more impressive
Comments
Investment Objective: Long-term capital appreciation.
As of 6/30,
Number of Holdings Long/(Short)/Options 66/(24)/60
Gross / Net Exposure 109%/93%
$67M AUM (inception date 9/30/2020)
At the bottom of the page are risk statistics.
@baseball_fan, Do you mind cluing us in what your goal with this fund is (i.e., what role you would like this fund to fill)?
We had some strategic conversations with a couple of outside analysts that knew us and the reputation for Ric's experience with Diamond Hill's long- short (Dennis here: Rick Dillon ran a long-short fund at Diamond Hill asset management when he worked there.) as you also aptly noted. (After we launched, they became aware Ric was back in business and contacted us).
With respected input and much discussion, Ric and Kyle made the decision to change the focus and name to allow the team to not be "constrained" by the "having" to maintain a short position if the market conditions and therefore the managers felt the value was not there on finding good shorts. Also making the decision of adding the use options, puts, and calls.
I don't think there is anything to read into the decisions via the DHIL L/S necessarily. In some of our discussions regarding previously managing long short it was noted one of the challenges received most from investors, concerned the shorts. The performance would most often be in the long book, finding short ideas was often challenging. (Disclaimer, no idea what or how DHIL manages L/S post 6/30/2018).
Ric and Kyle (Dennis here. Ric and Kyle are the co-managers of VELIX) felt going Large Cap Plus eliminating the constraint of having to maintain a percentage of shorts but using shorting more strategically and adding the additional mechanisms for helping to hedge would be more compelling.
I hope that helps. Happy to chat more or set you up with a call with Ric or Kyle."
Lisa
@BaluBalu... getting back to you with my reply... I've made it clear in prior threads that I'm extremely risk averse... I do have substantial financial assets ( 8 figures) and am not looking to get greedy. Furthermore, I'm of the opinion that the markets have been juiced by insane fiscal and monetary inputs as well as the somewhat ponzi structure of it due to index fund flows and stock options issuance as well as buy backs. Not sure.
So I'm on the look out for what some have recently described as boomer candy. Exposure to markets but with a shock absorber approach that might mitigate a severe downturn in the markets.
PHEFX t Rowe hedged equity is one fund mentioned prior but I also believe that VELIX likely is a very good candidate. I also really like that you have a veteran running the fund along with a still experienced and well educated co manager who is younger also at the helm.
VELA will see some of my investment monies in the near future... I'll be phasing in slowly over the next several months.
Thanks again,
Baseball fan
For the results you are looking for, there can be plenty of opportunities in fixed income, and perhaps with much less volatility. Good luck.
A better comparison set would be VELIX vs VFINX (Vanguard equiv to SP500), no?...and looking out over the next 5 years...I'd would and AM taking the VELIX side of that wager...we'll see...
I am reading your objective with VELIX is to beat SPY over a 5 yr period, starting now, which is a narrow, targeted focus than the broader theme you explained 2 days ago which prompted my suggestion to look at the broader fixed income space.
What %age of your portfolio are you targeting VELIX and equities in general?
BTW, I personally know people of 8 and 9 figure portfolios with 95% equity exposure. I also know people with 8 and 9 figure portfolios that are 100% in fixed income. Each group is motivated by maximizing their long-term wealth for the unit of Risk they take. The definition of Risk likely varies but they all play primarily in equity or below A rated credit.
I could see over the next several years stepping into VELIX to be 10%-15% of the portfolio...I'm likely a couple years away from stepping away from the corporate work environment...who knows, still enjoying most days what I do...and am therefore in that danger zone, within 5 years of retirement (whatever that means, right?) and post 5 years retirement...I'm very very high in cash equiv's, like over 90%...works for me, wouldn't recommend it for most but I should be transparent and state my wife and I were in the highest tax bracket for quite a few years...so what we left on the table with the uptick in markets we overcame slippage of inflation with salary/bonus/stock options etc...fully acknowledge that I've been actually taking on risk by being too conservative but on days like this, I'm going for a bike ride this evening and not overly concerned about what the markets are doing...back in my younger days, in the 20's and 30's, was uber aggressive in the stock market...not anymore...
Kind Regards,
BF
Did MRFOX say if they are going to provide month end portfolio stats (or at least cash level) or do we have to wait for quarter end stats? Monthly commentary could be a lot to ask for.
MRFOX down today 1.41% which is unusual. Do you by any chance know the fund's 2023 annual distribution date? In prior years, based on M* info, it distributed in mid December. Why can not I locate prior year distributions at the fund site?
I also noticed that the fund website has a lot of tabs but the info is sparse / stale. Most funds' websites readily show expense ratio and I just realized that one has to go the prospectus document to know this fund's expense ratio. Am I not looking in the right place?
https://marshfieldfunds.com/fund-facts/
P.S.: the fund total return since the beginning of April is 1%. I can not find an investment or money market in my account with that total return!
BaluBalu said:
MRFOX down today 1.41% which is unusual.
Take a peek at the top 10 holdings. ROST down -3.75%, ACGL -6.16%, DPZ -3.6%, TJX -2.23%.
MRFOX is heavy on retail - consumer cyclicals. Retail had a bad day.
Thanks. The fund is swimming is cash, manager claiming that there is nothing good to buy and then loses 1.41% on the day. What an attitude! I hope you do not own it.
@Dennis Baran,
My comment about ER and distro is to note why the fund website is so sparse in info. If I did not look for ER before, I am not going to look for it now.
Thanks for the heads-up about your sales. Your heavy weighting surprised me. I hope you held it long enough to have benefitted from its historic performance.
Unfortunately, more of the same. The managers continue to say the market is very expensive. The fund did not participate in the early Aug and early Sept market pull backs. Cash is at 25.4%. There are so many stocks below the Mag 7 that are participating in this bull market. Since the September market pull back, RSP has outperformed this fund by 4%. If there is an ETF for 493, I should check the relative performance with this fund. The fund’s stated strategy is All Cap Value. I do not have a single value fund in my watch list that returned only 1% over the past six months.
50% of the portfolio is in consumer cyclicals and 30% is in financials. I hope the holiday season is good for these sectors and the good luck spills over onto this fund.
Lurkers, Note that this fund is highly concentrated, with only 16 holdings (per M*) and the top 5 taking up 50% of the fund.
Edit: it is impressive that fund inflows are unabated. September marked three months of increasing fund inflows. June had the lowest inflows for the year - every month had inflows. Who are these people plowing their wealth into this fund when MM funds out performed over the past 6 months. If this fund has a cult following, I must avoid it. Note that the management also manages separate accounts which if I recall correctly has $4B in AUM in the same strategy, far in excess of the fund AUM. SMAs are more sticky than a mutual fund AUM. So, may be this is cultish!
I have to admit that I am puzzled by your disappointment at this fund on the basis of a single data point -- 6 month returns.
Here are the metrics I see(per PV) and why I continue to hold. The 25% cash position does not bother me and I'm comfortable with managers being contrarian, not following the herd and willing to sacrifice short term returns in the interest of the long term.
From 1/1/21 to 9/30/24 as compared to VWELX
- CAGR 15.24% v 7.83%
- MaxDD -10.16% v -20.22%
- Sortino 1.78 v 0.68
- 3 month return 5.13% v 5.17%
- YTD return: 16.86% v 13.82%
What is the redline if crossed is a no go for you? My redline - if the fund does not turn around by December and I am still holding it in January, call me out.
I point us back to @Racqueteer suggestion that for each investment, each of us must have a set expectation at the outset and that one needs to execute whatever that plan is so there is no slippery slope mission creep. Given I do not have unlimited capital, each investment has to perform in line with or exceed alternative opportunity set. My alternate opportunity set is PRWCX (quite low expectation given MRFOX is not an allocation fund).