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I have owned this fund for about 5 years. In the 2008 - 2009 market drop, it did relatively well. But since then, much less so. In 2010, 2012 and now 2013 it has been in the 90th percentile (according to Morningstar) of large value funds. I am thinking of replacing it and am curious what other readers think.
Perhaps thinking not so much about how it's doing as much as why it's doing it would help?
In his fall letter, Jeff says:
The Fund ended the quarter with 86% in stocks, 2.6% in bonds and 11.4% in cash. Our stockholdings gained 4.81% for the quarter and 19.5% year to date, trailing Standard & Poor’s 500-stock index’s 5.24% for the quarter and 19.79% year to date.
So, in part, it looks like his stock-picking is pretty solid. Part of the lag is asset allocation: 82% equities with about a 2:1 overweight in international. In rough terms, 70% in the top performing asset class (US equities) versus 90% for peer funds. And even within US equities, he maintained a distinctively conservative bias: major overweights in two defensive sectors (consumer and health care) and major underweights in four economically sensitive sectors (financials, tech, energy and industrials).
Which the manager describes as a "conservative stance befitting the fact that the fund’s manager has his entire retirement portfolio riding on Auxier Focus."
So, where is he staking his retirement. He highlights two value-oriented themes: European telecoms (he's betting that a six-year downturn isn't likely to be an eight-year one) and restructurings. Of the latter he says:
We also are finding opportunities in companies that break up and “shrink to grow.” Spinoffs tend to re-energize and focus resources. We see mounting pressure for many of the larger companies in our portfolio to generate material shareholder value by spinning off divisions (e.g. Procter and Gamble, Johnson and Johnson). As the market prices go higher, we tend to gravitate more to investments that are tied less to the supply and demand of the market and more on events where managerial actions and acumen can build value even in a declining market.
In the long term, that "protect the downside" strategy has worked ("Since inception in 1999, the Fund’s cumulative performance is 167%, almost triple the S&P 500’s corresponding 56%, despite the index’s much riskier 100% stock allocation vs. an average of 77% for Auxier Focus"). His absolute returns in the three years with the worst relative performance (2011, 12, and 13) have averaged 14.2%.
So the question becomes, is Jeff doing what you hired him to do? And is he doing it well enough at meet the goals you set in your investment plan? If both are "yes," I guess I'd be comfortable here. If both are "no," I guess I'd be uncomfortable. If I had one "yes" and one "no," I suppose I'd renew my due diligence efforts: contact the fund, reread the commentaries, think about the portfolio's evolution, and try to make a thoughtful decision.
I think it would be a huge mistake selling AUXFX...
It seems that investors forget why they hired their fund managers every time the market heads towards the moon. I'd stay put if you're looking for good risk adjusted returns. The markets have two directions and people forget how painful losing 50% can be..
AUXFX looks like a fine fund. However, if you are looking at a fund which can go to cash and internationals to reduce downside risk, FPACX may be better. I know it is not exactly the same animal, but it depends on the reasons why you bought AUXFX in the first place. FPACX and OAKBX are core funds for my buy-and-hold portfolio.
Reply to @Kaspa: Good funds, all. I've owned FPACX for a while and worry only about asset growth there. Owned OAKBX from the time I adopted my son until when Ed Studzinski retired (I like his style). Great fund during Ed & Clyde's tenure, respectable (huge) one since. Over the past five, AUXFX has pretty much matched FPA and has been steadily ahead of Oakmark.
It's ranked as low risk long-term, so I'd consider giving it a pass for not keeping up with the bull run since '09. The overall return:risk of Average: Low is probably the best way to think of it. Although I don't own it, I like that kind of stock fund.
Agreed on the manager risk for OAKBX. I have owned this fund for more than 12 years now. Both OAKBX and FPACX protected downside a little better than AUXFX in the 2008-2009 drop. See the link below and set it to maximum time period http://quote.morningstar.com/fund/chart.aspx?t=OAKBX®ion=usa&culture=en-US
It's a conservative, low risk fund and such funds will almost inevitably underperform in a raging bull market. I used to own it, and I only sold it because I decided to go in a more global direction, not because of anything that AUXFX did. So far as I can tell, Jeff Auxier doesn't have any organization behind him. Some consider that a strength, and I can understand the argument, but I personally feel more comfortable with a relatively small company like Tweedy, Browne than I am with a one-man show. I would definitely not be worried about a 20% gain in a year when the market went up 30%, however.
Comments
OAKBX and FPACX come to mind.
In his fall letter, Jeff says: So, in part, it looks like his stock-picking is pretty solid. Part of the lag is asset allocation: 82% equities with about a 2:1 overweight in international. In rough terms, 70% in the top performing asset class (US equities) versus 90% for peer funds. And even within US equities, he maintained a distinctively conservative bias: major overweights in two defensive sectors (consumer and health care) and major underweights in four economically sensitive sectors (financials, tech, energy and industrials).
Which the manager describes as a "conservative stance befitting the fact that the fund’s manager has his entire retirement portfolio riding on Auxier Focus."
So, where is he staking his retirement. He highlights two value-oriented themes: European telecoms (he's betting that a six-year downturn isn't likely to be an eight-year one) and restructurings. Of the latter he says: In the long term, that "protect the downside" strategy has worked ("Since inception in 1999, the Fund’s cumulative performance is 167%, almost triple the S&P 500’s corresponding 56%, despite the index’s much riskier 100% stock allocation vs. an average of 77% for Auxier Focus"). His absolute returns in the three years with the worst relative performance (2011, 12, and 13) have averaged 14.2%.
So the question becomes, is Jeff doing what you hired him to do? And is he doing it well enough at meet the goals you set in your investment plan? If both are "yes," I guess I'd be comfortable here. If both are "no," I guess I'd be uncomfortable. If I had one "yes" and one "no," I suppose I'd renew my due diligence efforts: contact the fund, reread the commentaries, think about the portfolio's evolution, and try to make a thoughtful decision.
For what that's worth,
David
It seems that investors forget why they hired their fund managers every time the market heads towards the moon. I'd stay put if you're looking for good risk adjusted returns. The markets have two directions and people forget how painful losing 50% can be..
As ever,
David
http://quote.morningstar.com/fund/chart.aspx?t=OAKBX®ion=usa&culture=en-US