In the context of investment performance and choice, one day is meaningless except, perhaps, as a tool to pique curiosity and encourage a bit more investigation. So, what might one be curious about after the "oops" on Thursday? I'm curious about the funds that I track on your behalf and, in particular, the funds which should hedge your portfolio (to some degree) from the stock market's antics.
Here are three benchmarks that I looked at:
Vanguard Total Stock Market (VTSMX): unhedged domestic equity performance
Vanguard Balanced Index (VBINX): 60% equity exposure
IQ Alpha Hedge Strategy (IQHOX): a well-regarded attempt to market the performance of a broad index of hedge funds
VTSMX: down 1.39%
VBINX: down 0.78%
IQHOX: down 0.74%
So here's a thought: if your hedged fund lost less than 0.75% on Thursday, it's acting respectably. In that camp we have:
• Robeco Boston Partners L/S Equity 0.69
• Hussman Strategic Growth 0.20
• Hussman Strategic International 0.20
• Forward Credit Analysis Long/Short 0.13
• Hussman Strategic Total Return 0.09
• T. Rowe Price Strategic Income 0.09
• Fidelity Strategic Income 0.00
• Arbitrage R -0.08
• Pacific Financial Tactical -0.10
• Merger -0.18
• Whitebox Long Short Equity -0.38
• ASTON/River Road Long-Short -0.42
• TFS Market Neutral -0.43
• Diamond Hill Long-Short -0.51
• Gateway -0.52
• GRT Absolute Return -0.54
• Quaker Event Arbitrage -0.60
• Bridgeway Managed Volatility -0.61
• New Century Alternative Strategies -0.61
• RiverNorth Dynamic Buy-Write -0.66
• MainStay Marketfield -0.72
If you think it's also reasonable that they should have produced about 60% of the market's 25% gains this year, that list contracts:
• Diamond Hill Long-Short 19.17
• ASTON/River Road Long-Short 15.14
• MainStay Marketfield 13.45
If you have the more-modest goal of matching the YTD performance of the industry's best hedged fund, Boston Robeco Partners L/S (up 8.3% YTD), you'd add:
• Quaker Event Arbitrage 9.08 (the former Pennsylvania Avenue Event Driven)
More modest still? Perhaps just have bragging rights over the folks who are surrendering 2-and-20? Roughly that would mean north of 4.3%, the YTD return of IQ Alpha Hedge Strategy. You start adding covered call funds to the mix:
• Bridgeway Managed Volatility 7.08
• Whitebox Long Short Equity 6.63
• Gateway 6.19
• New Century Alternative Strategies 5.03
• RiverNorth Dynamic Buy-Write 4.88
Finally, is an "absolute value" strategy, marked by concentrated portfolios, concern about valuations and still on cash the answer? Here I looked at funds with 15% or more in cash that either I've profiled or ridiculed (Oceanstone) or that you've gotten all tingly about (Yacktman).
The columns represent Thursday's loss (under 0.75% would be nice) and YTD gains (over 14% is tingle-worthy):
• Oceanstone -0.23 29.7
• FPA International Value -0.42 15.9
• Pinnacle Value -0.45 10.9
• FPA Crescent -0.51 17.8
• Cook & Bynum -0.52 10.1
• Beck, Mack & Oliver -0.66 18.1
• Aston River Road Indep Value -0.70 5.3
• Oakseed Opportunity -0.91 20.2
• Bretton -0.96 21.0
• Yacktman -1.08 24.3
Oceanstone, F P A Crescent, and Beck, Mack & Oliver Partners make the cut. Since Aston and Pinnacle are small cap value funds, you might ask how they did against 60% of the Vanguard Small Cap Value (VISVX) index. That target would be down 1% on the down (both did much better than that) and up 16% on the year (neither's closer, though Pinnacle is a lot closer).
For what discussion it spurs,
David
Comments
ARTMX took it on the chin, VEXMX almost as much.
David
Not exactly a great way to accumulate wealth for a comfortable retirement if that is one's goal each year. I have to say, the mindset of the investors of today differs markedly from those of the 80s and 90s. I suppose because of 2000-02 and especially 2008. As for the hedged funds or "more modest still", we don't even want to go there.
Edit: My reference above are for those under 60 and still in the accumulation phase.
Have a good weekend, Derf
Take care,
David
FYI:
Regards,
Ted
U.S. Markets 1:09 PM CST: http://www.cnbc.com/id/100003242
I compare my portfolio against the Lipper Balanced Index. Yesterday, I was down 0.55% while the Lipper Balanced Index was down 0.77%. Year-to-date I am up 12.1% while it is up 12.7%. I contibute my trailing in the upside to the large cash position that I am holding. However, at these elevated valuations I feel caution is warranted.
Skeeter
Yes, a little better at 14.03%. But it xrays at holding only 3% in cash. I am happy with my results considering the amount of cash I am holding. Anyway, I have generated more than enough off my principal this year to more than meet my needs. Why take more risk than is needed? Its five year annual return is 12.6% while mine is 15.8%. I was taking more risk five years ago and I have been dialing my risk down as equity valuations have elevated and I have now become of retirement age.
Should we get a good size market pull back ... (5% to 10% perhaps more) ... it is in my blood line, most likely, to ramp up my equity allocation and put more risk on. Again, I feel caution is somewhat warranted at these current elevated valuations.
Skeeter
Hi AndyJ,
OSTIX was down 0.25% which seems like a bit of a hit as relates to PIMIX which was down 0.32% and VWEAX which was down 0.17%.
Mona