I’ve been kicking some funds to the curb this year because they have proved to be more volatile—on the downside—than I bargained for. The most recent fund to get the boot is Vulcan Value Partners.
This fund looked great on the way up. It was outperforming the S&P by a comfortable margin. But it dropped five percent this week, and has declined 20% from its high (as of November 11). That’s a bear market decline from a fund that’s supposed to mitigate risk by investing in value situations.
I know funds will have bad spells, and you have to allow for it. But I first want my funds to mitigate against risk, before they play offense.
The Wintergreen fund is another one I bought when it first opened, that had a great start, and then, starting in 2014, began a steady decline. So much for what was supposed to be a whiz manager, schooled under Michael Price, who managed the Mutual Series funds. [I know this fund hasn't been favored on this site. I'm still holding this one--waiting for a better time to sell out.]
What funds are you giving up on? What funds are looking like long-term winners, with low risk and solid returns? [I’ve owned T Rowe Price’s Cap Appreciation fund and the Mutual Series funds for decades, and that has been a blessing. But trying to find new funds that are solid performers, not so easy. Maybe Vanguard's index approach makes more sense.
Comments
Wintergreen had a number of bets on various themes (including the emerging market consumer), which basically all got obliterated. As bad as that was, I think what really made Wintergreen something I'd never invest in was his futile and foolish attempt at going activist on Coke (KO).
Derf
I own a small position in CTFAX and I am thinking of plowing most all of my capital gains distributions received this year into this fund thus making it my special investment (spiff) fund. This fund will automatically do what I have been doing manualy except I move, back and forth, between cash and equities and it will move, back & forth, from bonds to equities. Currently, my cash position pays little interest while this fund pays about a two percent yield plus capital gains disbursed twice annually from profits (spiffs) made through it's trading activity.
I like this fund because it seems to be good at playing defense as well as running a conserative based offense.
Since, I am traveling, I am making this post through my tablet and not my desk top thus I am unable to link the funds fact sheet as easily as I would through my desk top. But, you might wish to Google "CTFAX Fact Sheet" to get the scoop on this fund. I believe, it has averaged about a six percent annual return over the past ten year period. Since now being retired, I plan to take about a three to four percent distribution from my portfolio each year; and, this fund seems to be a good fit for me in doing this along with growing it's principal over time.
Have a good time on your trip.
Derf
Regarding Vulcan, someone especially recommended to me answering to a question. I took a look. Decided to hold on.
Come on guys, I keep saying this twice a week. Funds like THESE, you HAVE to Time your Buys. We should know that by now. Can't simply go buy. Patience. Keep a shopping list. Go to Cash.
AND Remember to SELL. Pay Taxes. That's fine. One reason I do not reinvest distributions. And let's not cry again about large distributions.
Before that, it was decent fund that I think was less than Winters made it out to be (Winters has talked in interviews about how the fund has all these tools - tools that he's rarely ever used.) I guess I don't really see how you can time actively managed funds with much/consistent success. I mean, anyone who tried to time a return to form for Heebner/CGM Focus is still waiting. The Kinetics funds (including flagship WWNPX) are another example.
With the above in mind, I am keeping both my bonds (due to anticipated rising rates) and equities (due to high valuations) towards their mid to low range while keeping my cash towards its high end within my portfolio's asset allocation.
As I noted above, a fund that trades on equity market volatility is CTFAX. And, since my cash is currently towards the top of its allocation limit, I thinking of buying more of CTFAX with all of this years mutual fund capital gain distributions.
Also do not reinvest dividends. Take profits.
Also I would prefer my manager had some principles when he invests. It is a matter of opinion whether one is being anal about it or not. Let's not kid ourselves. Other fund managers have sold BRK using mumbo jumbo finance jingo, but we wouldn't notice unless fund was widely held or popular. Just as we wouldn't care if WGRNX performance hadn't stunk. I would very much like to know the person who sold the fund because Winters sold BRK. Also the person who sold SEQUX when they bought Valeang while we are it.
I bought WGRNX and MXXVX when they were in the dumps. Then with decent return I sold and patiently waiting to buy back. Been waiting to buy a long time, but I am sorry to say my complaint is better then what I am hearing from others.
When CGMFX returned 80%, what did people think? He will keep returning 80%? So now they buy and then waiting for CGMFX to recover? THIS is market timing no? Waiting for fund to return 80% THEN buying? But waiting for fund to stink up the place and then buying is definitely timing. Hah!
By Howard Marks 14 Dec, 2015 at 12:02
Investors and strategists have to worry about two main risks. The first is the risk of losing money. The second is the risk of missing opportunities.
You cannot avoid both risks at the same time, so the real question is how you balance the two: 100:0, 0:100, 50:50 or something else? Today, I would be 65% towards the defensive....
....The ultimate solution to illiquidity is to buy things you can hold for the long run.
I think the secret to success in investing is to be a long-term holder. Reduced liquidity can make life more difficult, but it should not change what you ultimately do. If you buy good assets at good prices with good prospects, you could close your trading desk and just hold them. I do not believe we make money from what we buy or sell, but from what we hold.
People ask me if we are in a high yield bond bubble. My answer is: ‘No, we are in a bond bubble.’ The pricing or yield spread of high yield bonds relative to other bonds is attractive.
We face record low interest rates. Thus we all have an interest rate problem - whether you are a bondholder or not. Prices of most assets are elevated because the Federal Reserve and other central banks set rates at zero, creating a bull market that has rewarded asset owners and borrowers, and penalised non-asset owners, savers and lenders.
This is the main reason the central banks should get out of the interest rate pegging business – because the free market is the best allocator of resources. And we do not have a free market in money. We have an administered market in money with distortions. This makes it easier for bad deals to get done and for uncreditworthy borrowers to borrow.
http://citywireglobal.com/news/howard-marks-ive-never-seen-the-world-so-uncertain/a865855?ref=citywire-global-latest-news-list
Also
Not only are investors losing confidence in lower-quality paper, they're also unloading the companies that most actively deal in the paper.
Waddell & Reed (NYSE:WDR) - whose $6.2B Ivy High Income Fund (MUTF:WHIAX) has suffered the largest outflows this year of any junk-bond fund - fell 7.5% today, and nearly 15% over the past week.
The manager of the $5.8B AB High Income Advisor Fund, AllianceBernstein (NYSE:AB) tumbled 7.1% on the session, and major Third Avenue Management investor Affiliated Managers Group (NYSE:AMG) brought its two-day decline to more than 13% with a 5.8% fall today. http://seekingalpha.com/news/2983296-asset-managers-punished-in-high-yield-selloff
WDR
https://www.google.com/finance?q=NYSE:WDR&ei=IJRvVoHfCoay2AbG3riYBg
AB
https://www.google.com/finance?q=NYSE:AB&ei=LJRvVpHQKYvnjAHgxYLoCA
AMG
https://www.google.com/finance?q=NYSE:AMG&ei=dpRvVpGeEJeS2AbGxYOIBA
Artisan APAM
https://www.google.com/finance?q=NYSE:APAM&ei=uJRvVqm5LsS02AbzpYuQCQ
referred to as Franklin Templeton Investments,BEN
https://www.google.com/finance?q=NYSE:BEN&ei=65RvVsjSMNS5jAGt64mACQ
iShares Dow Jones US Brok-Dea. Ind.E T F
Exposure Breakdowns
Investment Banking & Brokerage
70.65%
Specialized Finance
27.31%
Asset Management & Custody Banks
1.74%
https://www.google.com/finance?q=NYSEARCA:IAI&ei=95ZvVrmQLMOkjAGCiZP4CA
The Coke campaign by Winters was a futile waste of shareholder time that wound up not only not working, but getting him terrible press when one of the world's most renowned investors basically said on CNBC that people would be better off in an index fund. Also, I think the Winters reasoning for selling Berkshire was poor at best - he was basically having a hissy fit after his campaign against Coke went less well than he somehow expected.
That's all. That's why I wouldn't invest in a fund I've considered in the past.
(these are pretty close to verbatim quotes)
1. "Except for Wintergreen and 'a few others', everybody's capitulated." (to the siren song of indexing.)
2. "Sometimes underperforming is a good thing." (Now that's chutzpah!)
3." We're one of the only ones in the world who's doing any fundamental research anymore." (Sounds absolutely delusional to me.)
4. We're one of the only ones left who --
-- reads annual reports
-- visits companies
-- studies assets. (What is he talking about???)
When Winters was pressed by Consuelo about the 1.89% management fee, he gave no explanation that made any sense to me.
Why would one even consider investing in WGRNX ?