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Frontier Fund Buyers Find It Pays To Look Under The Hood
Interesting article, of note is the size of the fund assets. The funds mentioned are all relatively smaller than WAFMX which is $1Billion plus. I am a holder of WAFMX but could get MFMPX load waived at fidelity. Wondering if I should cut Wasatch in half and buy Morgan Stanley with the other half to hedge my bets. Any thoughts.
chrisblade, I did exactly what you are thinking of doing. After performing my DD I decided it was a prudent thing to do. I know many people might think this is MF "collecting", but I view it as adding a little diversification to an area of the EM market that is, among other things, a little bit of the unknown.
I'm not sure how much you have invested in WAFMX (in % of portfolio terms) but currently have 3% in each WAFMX and MFMPX (LW) which is my absolute minimum % to invest in any given fund. I usually shoot for a 5% minimum, but the FM arena is a different animal.
I am comfortable with my 6% in FM and may add a couple of percent in the not-too-distant future; many might considers this aggressive and unwise, that is something only you can decide.
HLMOX, the Harding Loevner FM fund, has a grand total of 10 stocks in the portfolio, position sizes ranging from (in round numbers) 8-13% of the port, and only about half large-caps. Yikes for risk (and liquidity?).
Anyone own any of the funds shown in the graphic in the article besides WAFMX and MFMPX?
Thanks, Chinfist, the HL site makes much more sense. Had a minor brain seizure there, trusting M* data without verifying. I suppose M* took the top 10 and calculated the %s like they're the whole portfolio.
You are welcome Andy. I feel WAFMX and HLMOX complement each other well. WAFMX seems more conservative (stresses high quality, has 44% in consumer staples), whereas HLMOX seems to venture out more sector wise.
mcmarasco you are exactly right, I feel the wasatch fund has more Africa and consumables whiles Morgan Stanely has more middle east and financial. A good way to hedge my bets. Thanks for the input.
chrisblade, glad I could be of some assistance! I'm by no means an expert, especially in FM, but adding a little diversification is usually a good thing.
Also, the avg market cap of MFMPX is about twice the size of WAFMX, another bit of diversification.
And what will owners of the predominantly Middle East and oil frontier funds do when there is a bust in the oil sector? Looking under the hood, as investors should do with any fund, would tell me that WAFMX may have an ultimate hedge over the others precisely because it does not favor countries in any created index. It goes for companies first. And even if you do not agree, how many frontier market funds do you really need in a portfolio? Probably one at most. Pick one and hang on.
BobC I apprecaite your comments. I guess my biggest concern is around asset bloat, recognizing that the liquidity in Frontier Markets is a limitation. I am youngish (35) and have no problem holding onto this for decades and look at it as a long term investing theme. However given the size of WAFMX I wish they would at least institute a soft close. Thanks for your thoughts and I do appreciate the focus on middle east and oil with the associated concerns.
Chrisblade, you make a good point. If you take the time to look under the Wasatch Funds hood, however, you will find very good stewardship when it comes to closing funds. They may reopen them, but they have always given the individual managers leeway to make decisions on keeping their funds open, doing soft closes, or closing them completely. And in talking with Laura Geritz, that has not changed. She is fully aware of the importance of not letting asset size cause problems, but she also says there is still room to grow since there are a lot of opportunities outside the index countries in the frontier markets. As an aside, she is fully aware her fund will underperform when oil and related Middle East plays are going strong, but she is not interested in playing that game.
BobC, thanks for sharing some candid observation on WAFMX. I have it about 8% of my portfolio, once again probably a little high but I am in it for the long run. I think part of my initial concern was seeing from the wsj article that many similar funds are only 1/10th to 1/4 the size of Wasatch's offering. It did give me pause to assess the investment. I am fine riding the bumps in the road though and appreciate the thoughts.
Comments
I'm not sure how much you have invested in WAFMX (in % of portfolio terms) but currently have 3% in each WAFMX and MFMPX (LW) which is my absolute minimum % to invest in any given fund. I usually shoot for a 5% minimum, but the FM arena is a different animal.
I am comfortable with my 6% in FM and may add a couple of percent in the not-too-distant future; many might considers this aggressive and unwise, that is something only you can decide.
Good luck and profitable investing,
Matt
Anyone own any of the funds shown in the graphic in the article besides WAFMX and MFMPX?
I am guessing you are looking at Morningstar's data? According to Harding Loevner's website, HLMOX has 78 holdings.
http://www.hardingloevnerfunds.com/individual-funds/frontier-emerging-markets-portfolio.html
I own HLMOX, as well as WAFMX, and have been happy with both.
Looks like a decent fund.
Also, the avg market cap of MFMPX is about twice the size of WAFMX, another bit of diversification.
Matt