Saw this featured on M* today under - The Case for Emerging-Markets Dividend Funds.
5 Star rating, Low Risk, High Return. Exp. at .63%, Yield of 3.45%. It does appear to be a passively managed fund, however given it's returns and low risk and the fact that so many Emerging Markets Funds have very high expenses, maybe this is a good thing.
Regarding it's performance I did a quick compare of this on M* to other Diversified Emerging Markets Funds under the Fund Category Performance: Total Returns Section. DEM is not included in there since it's an ETF, but when charting it against some of the other high performing funds, DEM appears to have them all beat since it's inception except WAEMX which it's about even with. DEM however has much lower risk attached, and it's obvious during the 2008 crash. I also added OAKIX to compare against and it blows that one away as well since DEM's inception.
I've been looking for a Foreign/Emerging Markets Fund with low risk/high return and this looks extremely compelling at first glance. It seems like so many Emerging Markets Funds come with real high risk, but this one really appears different, at least one that has been around a few years vs. all the new balanced funds coming out. Granted I haven't researched this area very much at all, so love to hear any feedback if there are other worthy funds that fit this mold as well.
And as an overall question, what are opinions about how to play Emerging Markets right now? Are there certain regions one should avoid? I do see this heavily weighted in China & Latin America. Also I was trying to determine what a weight in a portfolio would be? M* does say DEM can be considered a small core holding in a portfolio which I thought was interesting. I am only 34, so willing to take on some risk, if I think the long-term returns will payout.
Thanks in advance for any feedback.
Comments
Interesting that EDIV & DEM seem to be fairly close in the way they construct their custom indexes, and yet the sector weighting is very different between the two.
IMHO, this class of fund is the single best vehicle for diversified EM stock exposure with at least a bit of a check on the usual risk. You may have seen the interview with Jesper Madson (sp?) (of Matthews Asia) on M* about Asian dividend stocks - he stresses that dividends in themselves are a risk reducer in places where you might be cautious about fraud, securities laws, etc. - I think his line was that you can fake everything else, but it takes real money to pay dividends.
Mapix & Macsx (closed now) fall in this category for Asia, and they're both major winners. Of course they're actively managed ....
To summarize, I want to build a portfolio that gets great returns, with some downside protection. I'm also willing to jump into much more risky funds if the market totally tanked and I was trying to take advantage of it. A fund like CAMAX would be a good example. Right now though, I don't want to take on risk like that.
Also, I'm not a trader nor do I want to be keeping up with the markets all the time. I just want to build a solid portfolio that I feel pretty strongly about getting me long-term returns. Note, I'm someone who only got about a 1% return over the past decade. My 401K is through Vanguard and only up until a couple months ago, we were locked into only very few funds we could invest in. They just opened up VBO (Brokerage option) to us. When I look back and say compare YACKX to one of the funds I had available that tracked the S&P 500, I'm somewhat disgusted. Not to say I would have invested in YACKX back then, but what I only just realized, is that I can do a lot better and I'm just trying to figure that all out.
Regarding MAPIX, I'll put that on my list, but ideally I think I'd prefer to have one do it all Emerging Markets Fund.
Scott,
Re: Pimco EM Multi-Asset, that does sound interesting. Still looks new. I don't see much info about specific holdings, yield, etc. What was it about that fund that made you buy it? What are your expectations for it?
Jardine Matheson looks interesting. What is the outlook for them? Is it safe to assume because they are already so established, and there are still I assume many more opportunities in Asia, that one can expect they should have a fairly strong growth outlook? Any strong competitors?
Jardine has a pretty fascinating history and (I thought) appealing mixture of businesses - there is both Jardine and Jardine Strategic, and Jardine Strategic owns a 20% stake in Rothschilds Continuation Holdings, which is the financial holding company of the Rothschilds.
"Until 2008, the only non-family interest was Jardine Matheson, a hong which holds the other 20% of Rothschild Continuation Holdings. The stake was acquired in 2005 from Royal & Sun Alliance through the Jardine Strategic subsidiary, which specializes in leveraging stakes to protect family owners.[7] Jardines acted as Rothschilds' China agent from 1838 onwards" (http://en.wikipedia.org/wiki/N_M_Rothschild_&_Sons)
longer Bloomberg article on the relationship between the two companies -
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=apHai5xmbq9s
Jardine Strategic owns the majority of Jardine Matheson and Jardine Strategic is part of Jardine Matheson. As noted, "It (Strategic) in effect owns its own corporate parent, enabling the Keswick family to control the group without providing a majority of the capital. This expertise in protecting family owners was shared in 2005 when it took a 20% stake in Rothschild Continuation Holdings, a major merchant bank." (http://en.wikipedia.org/wiki/Jardine_Strategic_Holdings)
Jardine chair Sir Henry Keswick is also listed as a director of Rothschilds Continuation Holdings. Jardines is really a dynasty - I think - in the old-fashioned sense, which I found appealing.
The two biggest parts of Jardine are majority-owned subsidiary Dairy Farm (a massive group of retail operations, ranging from 7-11's to hypermarkets to restaurants to a few IKEA stores and Hong Kong Land (50% owned by Jardine). There's also Mandarin Oriental hotels, among other subsidiaries. If one digs in the reports, Strategic also holds some small investments in other companies, such as Tata Power (to use an example from last I looked, things may have changed.) Jardine Pacific is another interesting part, containing all non-listed businesses, such as various operations at Hong Kong airport.
Additionally, the whole thing rests on whether one believes in the continued rise of Asia over the next decade or two (and as I've said, I believe that, although I do believe there will be problems along the way.) If not, then something like Jardine would be of no interest.
Again, this is a stock, so it is certainly a risk and one *MUST DO THEIR OWN RESEARCH*. I wanted to own an EM stock or two for the long-term (5-10 years+) and Jardine was the most appealing that I found.
In terms of Asian-centric funds that would be comfortable holdings for the long-term, the search - I think - starts and ends w/Matthews Asian Growth/Income (MACSX) and Matthews Asia Dividend (MAPIX.) I'd recommend the great majority of people - especially more conservative investors or those nearing retirement - interested in EM stick with funds instead of specific stocks, and particularly the Matthews funds listed above.
The Pimco EM Multi-Asset fund has not released holdings yet, but my guess is that it looks like an EM-focused version of fund-of-funds (and some other stuff) Pimco Global Multi-Asset.
Have you found a way of investing in Jardine Matheson or RIT Capital Partners without investing in pink sheets, which have historically low trading volumes ? Apparently Etrade and Scottrade are two brokerages that have direct access to overseas stock exchanges including the LSE. Thanks.
Kevin
A recent update from an article in the Telegraph:
http://www.telegraph.co.uk/finance/personalfinance/investing/8698751/Shield-your-portfolio-from-stock-market-falls.html
"Lord Rothschild, the chairman of RIT Capital Partners, the investment trust, said he had anticipated this kind of market turmoil and had already positioned the fund to withstand it.
"In June last year I said we had more to worry about than at any other time in my 50 years of working in the City," he said. In his recent annual chairman's statement he wrote: "The risks ahead are glaring and global." This week he reiterated that these risks remained. "Few people listened at the time – now they are," he said.
To reduce the trust's exposure to risk, he put about 10pc in gold, avoided being fully invested in equities but increased exposure to big, US-listed global stocks. "We'll stick with that," he said. "We are concerned about inflation over the longer term. We don't own any bonds."
Jardine is only available to the retail investor in the US pinks, as I don't believe there's a retail broker that offers access to the Singapore market. Both Jardine Matheson and Jardine Strategic are publicly traded and there is both a foreign ordinary share (ending in "F") and ADR (ending in "Y" for each. Some brokerages may not offer trading in both shares of each.
I know I'm probably asking too much right now
I think I'm just feeling very frustrated when I look at my 401K and that it's only earned about 1% annually for the past decade. It's made me really want to take control of my investments and at the very least do the best I can with it, whatever returns I may get. When I started working and obtaining a 401K, and really all I had learned was, put as much as you can in your 401K, IRAs, etc. Then like I said, I literally only earned about 1% over the past 10 years. I never did much with my 401K, never really understood the investments, just knew that money came out of my paycheck every 2 weeks and that it should grow over time. But what I more recently realized is I think I'm one of probably millions of other American workers with 401Ks that don't know anything about investing. I'm part of the post labor-union era I'll call it, who also out of high-school and college, never was given real financial advice regarding retirement or investing. My parents for example both have pensions and health-care taking care of them in their retirement. I asked my father recently if he had a Roth IRA, and he said no, don't know much about those. It's also funny, I just recently picked up a Dave Ramsey book that someone had given me 5-8 years ago, and I caught this section where he talked about don't invest in bonds and investments that only earn 4-8%, and instead investing in a mutual fund (nothing specific, just said mutual fund) that you can expect to earn 12% annually over the next 30 years, like that was normal. And I just chuckled. And out of my curiosity I looked up historical returns for the S & P 500 and I was blown away by what I saw. Other than recently, only in 1974 and pre-1940 did the 10Yr. Avg Return Rate fall below 2%.
http://www.istockanalyst.com/article/viewarticle/articleid/2803347
And really the period between 1979 until 2007 long-term returns were really good, especially 1983 - 2001. So, I think for me, all of this has been a real a wake up call. That I can't just rely on the markets to earn the money I hope to have come retirement without thinking about it.
I have to say though, doing all this research the past few months I feel like has become a new hobby for me. Even though I haven't put all my money to work yet to where I want it, I've found it to be very fascinating. And just watching the markets going nuts lately is actually another lesson I'm learning to try to stay calm
So yea, whether I can actually achieve the high return with low risk is something I'll just shoot for, but at the very least I'd like to keep learning about funds with really good mangers who will make much better decisions than myself could ever make. And that is really all I'm trying to do. Buying into funds with managers who if they are taking risks, know when to move money out of equities when needed and to put back into when the markets are ready to rebound. It really boils down to trust. Finding those funds that help me sleep better at night. And based on what many of you have said, it sounds like MAPIX fits that mold I'm looking for from an Emerging Markets point of view.
I just want to say to this site and to everyone that posts here, I really appreciate the input and the knowledge sharing. It's helped me immensely in trying to get a grip on my investments and I am grateful for it.
By the way, I'm curious. What kind of investors are the majority of people who post/read here and are there any others like me, who don't deal or work in finance and are currently working and just trying to make better choices for their retirement portfolio?
In terms of finding funds that will allow one to sleep better at night, that answer is going to be different to everyone, and risk tolerance - and really understanding your risk tolerance is definitely something that can be learned on a day like today - is a big part.
I'm not diversified, I know what I believe to be longer-term (5-10 year) areas of interest and that's really a core part of my investments; the remainder are alternative investments and some funds that offer broader exposure.
"Buying into funds with managers who if they are taking risks, know when to move money out of equities when needed and to put back into when the markets are ready to rebound. "
Not many of those - the majority of managers take risks and are invested and that's it - if the market tanks, it's not their fault they didn't lessen exposure to risk. Only a few managers can really move back and forth between heavily cash and into risk well, such as Romick (FPACX) and Yacktman (YACKX).
GTAA (Cambria Global Tactical) is a multi-asset ETF (it can hold stock, bond, commodity and currency ETFs, even as specific as certain commodities or sectors) that is based upon technical levels and can go literally from all cash (if the situation were to call for it) to entirely invested (and everything in-between) - those managers are not making market calls though, it's entirely technically driven.
For me, since I don't really understand the details of the investing world, I'm doing my research based on some simple things. Finding funds with good long-term returns (mainly using M* to find best long-term returns and as well as YTD returns (ones that haven't gotten clobbered) or ones mentioned here that may be newer but have managers with a good history (i.e. ARIVX) and then charting them against peers in their category. The good thing about the 2008 crash, is it's helping to make finding those funds that standout on a chart much easier. And that brought me to YACKX, FPACX, and APPLX. Then hearing especially FPACX & YACKX (as well as ARIVX, Doubleline funds) so widely discussed here at this site helped to reinforce my findings.
Looking at MAPIX in the same way with long-term returns and charting it against other peers, I can see why people like that so much as well. So thank you for that, especially because I don't know that I would have specifically looked at Pacific/Asia area to find a fund. Hence why I started with Diversified Emerging Markets category instead.
The other part I'm struggling with is then how to weight all the funds I like. I'm not sure I'm really ready for that yet until I feel like I completed my list of funds I want buy into, take a status check of where the value of the markets are at when I'm ready for that, and then making my decisions. I do feel pretty confident long-term YACKX will have a strong place in my portfolio. ARIVX may be next, and then beyond that, too early to say.
Managers that fared well in a previous downturn do not *always* fare well in the next one - see Kinetics Paradigm in 2000/2001 vs 2008 - but Yacktman remains an excellent choice in terms of a fund that has displayed the ability to pull back risk when appropriate.
I'm just totally throwing this together so you could mix/match/reallocate, but you could (if you want bonds and stocks) do something like:
15% Templeton Global Bond
10% Pimco Total Return
5% RNDLX
30%
_
15% Yacktman
10% FPA Crescent
5% ARVIX
30%
-
15% First Eagle Overseas
10% Matthews Asia Dividend (or Asian Growth/Income)
5% Ivy Asset Strategy
30%
____
5% Pimco Commodity RR
5%
__
2.5% Merger (MERFX) or Arbitrage Event-Driven (AEDNX)
2.5% Pimco Unconstrained (PUBDX) or Loomis Sayles Absolute
You could put a number of different options here, but this would be for alternatives.
5%
==
EDIV is weighted by yield whereas DEM is weighted by the size of the annual cash dividends paid. So with DEM - the size of the company (marketcap) does carry some weight in determining how much total dividends a company is paying.
Both have some trading minimum and liquidity requirements but EDIV also has other requirements....
Here's the index description from which EDIV tracks....
"The S&P Emerging Markets Dividend Opportunities Index generally includes 100 tradable, exchange-listed common stocks from emerging market countries that offer high dividend yields. To be included in the Index, stocks must have a total market capitalization greater than $1 billion, with a float-adjusted market cap greater than $300 million and a three-month average daily value traded greater than $1 million as of the rebalance reference date. Additionally, stocks must have positive 3-year earnings growth and profitability. Stocks are weighted by annual dividend yield. To ensure diverse exposure, no single country or sector has more than a 25% weight and no single stock has more than a 3% weight."
Thanks for all the recommendations. First a couple unfortunate things.
The Vanguard Brokerage Option I have unfortunately does not allow me into some of these funds. First Eagle Overseas (although taking a quick look at it, looks right up my ally), Ivy Asset Strategy, PIMCO Total Return are not available to me.
And also is there anything about the DoubleLine funds that you don't like compared to PIMCO? I already have 5% in DLTNX. Was considering adding either more to it or adding DLFNX or RNDLX or both. Just curious your thoughts there.
Regarding the bottom section of funds you put together, what is it about these that you recommend them? Understand I'm not trying to question it, I just haven't looked into any of these areas as of yet, so trying to understand more overall the position and reasoning of these in a portfolio.
____
5% Pimco Commodity RR
5%
__
2.5% Merger (MERFX) or Arbitrage Event-Driven (AEDNX)
2.5% Pimco Unconstrained (PUBDX) or Loomis Sayles Absolute
You could put a number of different options here, but this would be for alternatives.
5%
If Pimco TR isn't available to you, you could look at one of Gundlach's offerings; I do own RNSIX, but not much of it. I do not like bonds right now, but have some either as part of balanced funds or a bit of Pimco Emerging Local.
I continue to focus a good deal on what I call "strategic assets and real needs" - MLPs, commodities, infrastructure, etc. I do have some broader, diversified funds, but continue to focus on commodities and real, hard assets, as while there will be bumps in the road, I think - and really moreso with each day - that real assets will fare best on the other side of the mess we're currently in. I do think that one has to own commodities or some manner of inflation protection; Pimco Commodity RR would be more aggressive (and has a fairly consistent history of throwing off large distributions/dividends), but more conservative investors use Permanent Portfolio (PRPFX.)
As for alternatives, I think it's good to have a portion of the portfolio in non-correlated strategies that may fare better than the market during periods like this.
I think one has to remain invested, but I really think that one has to focus on stuff that lasts: whether it be lasting brands (see the majority of Yacktman's portfolio for examples of this, or Wintergreen's blend of hard assets and playing the emerging consumer theme) or hard assets (see another thread where this was discussed recently). I would not have too much exposure to luxuries and fads (although it's fine to have some, especially with a more flexible fund) and would instead look for more real needs and strategic/long-lasting assets.
By the way, do you have any thoughts on APPLX? Note, I was thinking I would trade off some of FPACX for APPLX. Maybe 5% each. Not sure yet.
Also their strategy - Manager Josh Strauss chocked these positions up to the fund’s current outlook. “Right now, our two goals with the fund is that first we’re playing defense. And second, we are very concerned about the long-term effects of inflation."
So it also appears to go along with what you were saying about commodities and hard assets as well. They also are currently over 30% invested in non-US stocks.
I agree with everything you are saying about FPACX and Romick and clearly he has a long-track record to prove himself by. So removing FPACX for a moment out of the question, I guess what I really want to know, is what is your real take on APPLX as a long-term investment?
I agree that Steve Romick is one of the best managers of actively managed funds out there. He is flat out brilliant.
However, I totally disagree with you that he is "shareholder-friendly" as he and the fund directors have decided to NOT decrease the net ER of FPACX appreciably as the AUM have ballooned to the current $6.7B as I detailed here:
http://socialize.morningstar.com/NewSocialize/forums/p/266373/2916097.aspx#PageIndex=1
2006: AUM of FPACX $1.374B, Net ER 1.39%
2007: AUM $1.407B, Net ER 1.35%
2008: AUM $1.246B, Net ER 1.34%
2009: AUM $1.263B, Net ER 1.50%
2010: AUM $3.7B, Net ER 1.34%
Now: AUM $6.7B, Net ER 1.28%
Kevin