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@reids: Let's take a snapshot of SWHEX last week with huge volatility. On Friday, October 17th SWHEX was up 1.06%, however, S&P 500 Index was up 1.29%. For the entire week, 10/13-10/17 SWHEX was down -(1.69)% while the S&P 500 Index was down just-1.00)%, enough said. Regards, Ted
Just wanted a suggestion or two, not comments on the investment category. But if you must know, I would like lower volatility, which should help to encourage me investing even when conditions seem not conducive to doing so, and in theory I can see why they could beat the market over the long haul if the expense ration was reasonable.
Guess we'll be a minority of two Ted. The return of these types of funds (long-short, alternative, tactical, etc.) tend to be below underwhelming and unless one is holding them as a significantly large portion of their portfolio I fail to see their usefulness.
Your questions and comments are always welcome on MFO.
I will make it a minority of three, and here is what I wrote on 8/4/2014 about MFLDX, previously a loved darling on MFO:
"Avoid MFLDX:
1. Poor Fund Stewardship: As AUM have ballooned to $18.9B, there has not been a significant decrease in the exorbitant 1.39% management fee or the extremely high actual expense ratio of 2.66% (forget the M* data which is unreliable). Aronstein and the fund directors need to address this issue, but I doubt that they ever will as this fund is a very productive cash cow.
2. High Expenses Are a Headwind for Future Returns: There continues to be an inverse correlation between fund expenses and returns.
3. Troubled Space: There continues to be very few long-term winners in the L/S space, so your default position should be to avoid this space.
4. You Don't Need a L/S Fund: I have yet to read any objective evidence that investors need a dedicated L/S fund as part of a diversified portfolio. Fixed income may provide all the needed volatility dampening you need at a much lower cost."
Now if you have an equity-biased portfolio like mine, you may want to consider adding a relatively low cost conservative allocation fund like VWIAX or PGDIX to decrease the volatility of your overall portfolio. And solid bond funds such as PIMIX would serve the same purpose.
Another fund you may want to consider is PQTIX, which takes long and short positions in various asset classes through futures and derivatives with the goal of producing low-to-negative correlation to traditional asset classes. I've been watching this fund, but have not bought it yet.
@reids, this seems to be a subject that fuels the fire of opinions here. I recommended SWHEX as a direct answer to your question but I don't own the fund. I have it on my watch list. So far these types of funds have not shown any benefit of owning in a down market although they do have a short history for the most part. My thought is that the investor themselves can switch to a defensive mode faster than these funds can. By having a plan with a group of funds already pre-selected, you can enact the plan very quickly into more conservative equity or equity allocation funds, bond funds including unconstrained funds, etc.
The little research that I have done tells me that the L/S funds do very poorly in the first year of a bear market. Then they even out some but that depends on the fund itself. Perhaps these funds cannot switch to the defensive mode that quickly?
Another point would be to question your asset allocation. Lots of pundits will tell you how to allocate based on your age but they do not know your risk tolerance. Only you know that.
Thanks for stopping by to ask the question. It is a pertinent question with the volatility we've had lately.
I dropped ARLSX a while ago, just because I did not care for how it behaved, and put the moneys into RGHVX and GLRBX. You might check them out; I would recommend the latter over the allocation funds already mentioned. RGHVX I am waiting to see about (not fine prose, sorry).
As others have suggested knowing, how old, tolerance of risk, what kind of moneys are we talking here (macro and gross, not details, do not want to seem intrusive)? I would not argue against canning ARLSX for sure. But tell us more, please.
Another fund you may want to consider is PQTIX, which takes long and short positions in various asset classes through futures and derivatives with the goal of producing low-to-negative correlation to traditional asset classes. I've been watching this fund, but have not bought it yet.
Kevin
I'm waiting for the period over the next year where this fund - which, admittedly has had stunning performance for a fund in the managed futures category - under-performs for a period (given the nature of the fund, it will happen) and everyone who got in because of its initial performance gets upset and dumps it.
Maybe long short is notwhatyou need. Maybe multialternative or market neutral might suit your needs more. I have seldom seen long short funds goals stating lower volatility as a goal. They claim they can protect capital better but i dont think we can equate that statement with lower volatility.
And my comment wasnot meant to drive anyone away from any board. I think wea are all busy yet take time to respond. Is it too much to ask original post to be a little tad more explanatory?
You could try FMLSX or BPRRX. I've been with FMLSX for a while (they are more often on the long side). It's a good outfit. BPRRX hasn't been around as long but can learn from BPLEX
@JohnChisum (Oct 19th post) Yes, an individual investor certainly may move more nimbly than a manager of a long/short or managed futures fund. But, as an individual investor, I seem to have a good deal of trouble calling market tops and bottoms to go into defensive or offensive mode. Even if I sell at the correct time, I still have to get back in and make that correct timing call as well.
I'm waiting for the period over the next year where this fund - which, admittedly has had stunning performance for a fund in the managed futures category - under-performs for a period (given the nature of the fund, it will happen) and everyone who got in because of its initial performance gets upset and dumps it.
So true. Like L/S funds, managed futures funds are in a troubled space that has not done well over the past 3-years, and many of the funds I follow in this space are somewhat pricey (I follow PQTIX, ASFYX, EQCHX, HFXIX, LCSIX). For these reasons, I am following but not buying PQTIX. Maybe PIMCO has the secret sauce for the space, but maybe they don't. Time will tell.
I'm waiting for the period over the next year where this fund - which, admittedly has had stunning performance for a fund in the managed futures category - under-performs for a period (given the nature of the fund, it will happen) and everyone who got in because of its initial performance gets upset and dumps it.
So true. Like L/S funds, managed futures funds are in a troubled space that has not done well over the past 3-years, and many of the funds I follow in this space are somewhat pricey (I follow PQTIX, ASFYX, EQCHX, HFXIX, LCSIX). For these reasons, I am following but not buying PQTIX. Maybe PIMCO has the secret sauce for the space, but maybe they don't. Time will tell.
TFSHX has had underwhelming performance since inception, and I have no confidence in the management team, as they have also done poorly with their other "alternative" fund, TFSMX. Bottom line: If I owned TFSHX, I would sell it now.
Like I stated, I am not sold on managed futures at this time, but if I had to own a managed futures fund, along with PQTIX, I would also consider HFXIX, which is the only fund with a decent long-term record as detailed HERE.
@Kevin. Now you are really making me feel good. I own TFSMX as well I'm doing well with TFSMX since I purchased it a while back. TFSHX I agree not doing too well, but then this category as a whole has found it challenging.
At this time, I dunno if I want to buy another PIMCO fund. Regarding Catalyst, they seem to be launching alternative funds like they are going out of style, just like AQR, and that worries me. Is there anything in particular about TFS management you don't have confidence about? I actually have TFSSX on my list to buy in future.
The same team manages TFSMX and TFSHX. Both of these funds have had underwhelming performances YTD, and over the past 1-year and 2-year periods, as well as since inception. Sure they are in troubled investment categories, but as absolute places to invest your hard-earned money, they are poor vehicles IMO. I would definitely prefer relatively low cost funds like VWIAX and PGDIX to lower the overall volatility of my portfolio.
And I cannot stomach paying an actual expense ratio of 8.13% to own TFSMX. M* reports a meaningless expense ratio of 2.41% on the front page for this fund, which absolutely no investor in this fund pays. If most investors realized how much they were paying in expenses to own this fund, they would likely dump the fund.
TFSSX is a solid fund, but I would actually prefer the much lower cost VSTCX in the SCB space.
Hmmm...not sure how you are getting 8.13% ER for TFSMX. Also your suggestion for owning conservative allocation funds with bonds make sense, but wouldn't that be for a different part of the portfolio?
TFSSX I will not buy unless the market really tanks. I'm not in love with it. I am actually cured of falling in love with any and all inanimate objects including mutual funds.
FWIW I own VWELX @ Vanguard along with VTAPX. Someday it would make sense to move to VWIAX assuming more bonds is less risky proposition. With TFSMX and TFSHX I'm not looking to shoot the lights out. I'm treating them like cash substitutes. Now, on that front if we say they are not good funds, I get it. However if we are comparing them with L/S funds that are directional in nature, then I am not getting it. IMHO TFSMX and TFSHX are fulfilling their mandates.
Wait a second. Their YTD performance number is flat. If 8.13% is being charged means they made that return. Something is not right. Please see below note in the prospectus The Adviser has contractually agreed to reduce Management Fees and to absorb the Fund’s other operating expenses (for the life of the Fund) to the extent necessary to limit annual ordinary operating expenses to an amount not exceeding 1.90% of the Fund’s average daily net assets. Management Fee reductions and expenses absorbed by the Adviser are subject to repayment by the Fund for a period of three years after such fees and expenses were incurred, provided that the repayments do not cause the ordinary operating expenses of the Fund to exceed the 1.90% limit. Ordinary operating expenses includes all Fund expenses except brokerage, taxes, borrowing costs such as interest and dividend expenses on securities sold short, Acquired Fund Fees and Expenses and extraordinary expenses. The Adviser’s right to receive repayment of any Management Fee reductions and/or expense reimbursements terminates if the Adviser ceases to serve as investment adviser to the Fund. This agreement may be terminated by either the Fund or the Adviser upon not less than 60 days prior written notice to the other party, provided, however, that (1) the Adviser may not terminate the agreement without the approval of the Board of Trustees, and (2) the agreement will terminate automatically as to the Fund if, and when, the Adviser ceases to serve as investment adviser of the Fund.
You are actually paying an 8.13% expense ratio. Here is the key sentence, with emphasis on "except:"
"Ordinary operating expenses includes all Fund expenses except brokerage, taxes, borrowing costs such as interest and dividend expenses on securities sold short, Acquired Fund Fees and Expenses and extraordinary expenses."
So you are paying 6.42% in "Other Expenses" and 0.06% for "Aquired Fund Fees and Expenses" -- both of which are excluded from the 1.90% limit -- and you are also paying for the management fee of 1.65%, which is below 1.90%. Total damage is the 8.13%.
M* could report the actual expense ratio paid by investors in a conspicuous place, ideally on the fund's front page, but they choose not to do so, likely for the benefit of the fund company at the expense of common investors. And it would not violate any SEC regulation for M* to report an "Investor Expense Ratio" much like they report "Investor Returns."
Comments
Regards,
Ted
Regards,
Ted
Your questions and comments are always welcome on MFO.
I will make it a minority of three, and here is what I wrote on 8/4/2014 about MFLDX, previously a loved darling on MFO:
"Avoid MFLDX:
1. Poor Fund Stewardship: As AUM have ballooned to $18.9B, there has not been a significant decrease in the exorbitant 1.39% management fee or the extremely high actual expense ratio of 2.66% (forget the M* data which is unreliable). Aronstein and the fund directors need to address this issue, but I doubt that they ever will as this fund is a very productive cash cow.
2. High Expenses Are a Headwind for Future Returns: There continues to be an inverse correlation between fund expenses and returns.
3. Troubled Space: There continues to be very few long-term winners in the L/S space, so your default position should be to avoid this space.
4. You Don't Need a L/S Fund: I have yet to read any objective evidence that investors need a dedicated L/S fund as part of a diversified portfolio. Fixed income may provide all the needed volatility dampening you need at a much lower cost."
Now if you have an equity-biased portfolio like mine, you may want to consider adding a relatively low cost conservative allocation fund like VWIAX or PGDIX to decrease the volatility of your overall portfolio. And solid bond funds such as PIMIX would serve the same purpose.
Another fund you may want to consider is PQTIX, which takes long and short positions in various asset classes through futures and derivatives with the goal of producing low-to-negative correlation to traditional asset classes. I've been watching this fund, but have not bought it yet.
Kevin
The little research that I have done tells me that the L/S funds do very poorly in the first year of a bear market. Then they even out some but that depends on the fund itself. Perhaps these funds cannot switch to the defensive mode that quickly?
Another point would be to question your asset allocation. Lots of pundits will tell you how to allocate based on your age but they do not know your risk tolerance. Only you know that.
Thanks for stopping by to ask the question. It is a pertinent question with the volatility we've had lately.
I dropped ARLSX a while ago, just because I did not care for how it behaved, and put the moneys into RGHVX and GLRBX. You might check them out; I would recommend the latter over the allocation funds already mentioned. RGHVX I am waiting to see about (not fine prose, sorry).
As others have suggested knowing, how old, tolerance of risk, what kind of moneys are we talking here (macro and gross, not details, do not want to seem intrusive)? I would not argue against canning ARLSX for sure. But tell us more, please.
Select long/short category then sort on risk, which will give you list of less volatile funds.
And my comment wasnot meant to drive anyone away from any board. I think wea are all busy yet take time to respond. Is it too much to ask original post to be a little tad more explanatory?
@Scott That might be me
@00by I sold FMLSX to double down on BPLEX. Need to have some fun in life!
I'm waiting for the period over the next year where this fund - which, admittedly has had stunning performance for a fund in the managed futures category - under-performs for a period (given the nature of the fund, it will happen) and everyone who got in because of its initial performance gets upset and dumps it.
So true. Like L/S funds, managed futures funds are in a troubled space that has not done well over the past 3-years, and many of the funds I follow in this space are somewhat pricey (I follow PQTIX, ASFYX, EQCHX, HFXIX, LCSIX). For these reasons, I am following but not buying PQTIX. Maybe PIMCO has the secret sauce for the space, but maybe they don't. Time will tell.
Kevin
So true. Like L/S funds, managed futures funds are in a troubled space that has not done well over the past 3-years, and many of the funds I follow in this space are somewhat pricey (I follow PQTIX, ASFYX, EQCHX, HFXIX, LCSIX). For these reasons, I am following but not buying PQTIX. Maybe PIMCO has the secret sauce for the space, but maybe they don't. Time will tell.
Kevin
I have TFSHX. What's your opinion on it?
TFSHX has had underwhelming performance since inception, and I have no confidence in the management team, as they have also done poorly with their other "alternative" fund, TFSMX. Bottom line: If I owned TFSHX, I would sell it now.
Like I stated, I am not sold on managed futures at this time, but if I had to own a managed futures fund, along with PQTIX, I would also consider HFXIX, which is the only fund with a decent long-term record as detailed HERE.
Kevin
I'm doing well with TFSMX since I purchased it a while back. TFSHX I agree not doing too well, but then this category as a whole has found it challenging.
At this time, I dunno if I want to buy another PIMCO fund. Regarding Catalyst, they seem to be launching alternative funds like they are going out of style, just like AQR, and that worries me. Is there anything in particular about TFS management you don't have confidence about? I actually have TFSSX on my list to buy in future.
The same team manages TFSMX and TFSHX. Both of these funds have had underwhelming performances YTD, and over the past 1-year and 2-year periods, as well as since inception. Sure they are in troubled investment categories, but as absolute places to invest your hard-earned money, they are poor vehicles IMO. I would definitely prefer relatively low cost funds like VWIAX and PGDIX to lower the overall volatility of my portfolio.
And I cannot stomach paying an actual expense ratio of 8.13% to own TFSMX. M* reports a meaningless expense ratio of 2.41% on the front page for this fund, which absolutely no investor in this fund pays. If most investors realized how much they were paying in expenses to own this fund, they would likely dump the fund.
TFSSX is a solid fund, but I would actually prefer the much lower cost VSTCX in the SCB space.
Kevin
TFSSX I will not buy unless the market really tanks. I'm not in love with it. I am actually cured of falling in love with any and all inanimate objects including mutual funds.
FWIW I own VWELX @ Vanguard along with VTAPX. Someday it would make sense to move to VWIAX assuming more bonds is less risky proposition. With TFSMX and TFSHX I'm not looking to shoot the lights out. I'm treating them like cash substitutes. Now, on that front if we say they are not good funds, I get it. However if we are comparing them with L/S funds that are directional in nature, then I am not getting it. IMHO TFSMX and TFSHX are fulfilling their mandates.
You are actually paying an 8.13% expense ratio according to the most recent prospectus and confirmed with a telephone call I just made to TFS Capital.
Time to rethink entire association with TFS.
Five star silver fund too.
The Adviser has contractually agreed to reduce Management Fees and to absorb the Fund’s other operating expenses (for the life of the Fund) to the extent necessary to limit annual ordinary operating expenses to an amount not exceeding 1.90% of the Fund’s average daily net assets. Management Fee reductions and expenses absorbed by the Adviser are subject to repayment by the Fund for a period of three years after such fees and expenses were incurred, provided that the repayments do not cause the ordinary operating expenses of the Fund to exceed the 1.90% limit. Ordinary operating expenses includes all Fund expenses except brokerage, taxes, borrowing costs such as interest and dividend expenses on securities sold short, Acquired Fund Fees and Expenses and extraordinary expenses. The Adviser’s right to receive repayment of any Management Fee reductions and/or expense reimbursements terminates if the Adviser ceases to serve as investment adviser to the Fund. This agreement may be terminated by either the Fund or the Adviser upon not less than 60 days prior written notice to the other party, provided, however, that (1) the Adviser may not terminate the agreement without the approval of the Board of Trustees, and (2) the agreement will terminate automatically as to the Fund if, and when, the Adviser ceases to serve as investment adviser of the Fund.
I don't think investors are paying 8.13%
"Ordinary operating expenses includes all Fund expenses except brokerage, taxes, borrowing costs such as interest and dividend expenses on securities sold short, Acquired Fund Fees and Expenses and extraordinary expenses."
So you are paying 6.42% in "Other Expenses" and 0.06% for "Aquired Fund Fees and Expenses" -- both of which are excluded from the 1.90% limit -- and you are also paying for the management fee of 1.65%, which is below 1.90%. Total damage is the 8.13%.
M* could report the actual expense ratio paid by investors in a conspicuous place, ideally on the fund's front page, but they choose not to do so, likely for the benefit of the fund company at the expense of common investors. And it would not violate any SEC regulation for M* to report an "Investor Expense Ratio" much like they report "Investor Returns."
Kevin