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I'm just curious if you use these types of funds in your portfolios and the reasoning behind it. Do you think they further diversify a portfolio or just a "fad" type fund in the same vein as "unconstrained" funds?
Yes, I use hybrid (multi-asset) income funds within my portfolio plus I have a couple of other sleeves that contain hybrid type funds as well.
In my income area I have two sleeves, one a fixed income sleeve and the other is a hybrid income sleeve which consists of the following six funds: CAPAX, CTFAX, FKINX, ISFAX, JNBAX & PGBAX.
In the growth and income area I have four sleeves, two of the sleeves contain only hybrid type funds. One is a global hybrid sleeve and the other is a domestic hybrid sleeve. My global hybrid sleeve consists of three funds: BAICX, CAIBX & TIBAX. My domestic hybrid sleeve consists of six funds: AMECX, DDIAX, FBLAX, FRINX, HWIAX, LABFX + ABALX which is held in my health savings account.
All combined, currently, my three hybrid sleeves make up about 40% of my overall portfolio. I am thinking of bringing this up to 50% through a rebalance process. There are multiple reasons that I use hybrid funds. One is that most of these hybird fund managers use somewhat of an adaptive allocation strategy to postion their funds within their allowable asset allocation ranges. This leaves the other seven sleeves (one in the income area, two in the growth & income area and four in the growth area) which make up about another 40% of the portfolio that I position as to how I am reading the markets. I am thinking of reducing this down to 30%, as hybrids are increased, by reducing the number of fund positions held within the sleeves that I use to position. The other two sleeves are found in the cash area and make up about 20% of my portfolio.
Anyway, this is how I use (multi-asset) hybrid type funds within my portfolio. I have found them, for the ones that I own, to be good income generators while at the same time positioning and adapating to varrying market conditions.
In response to your above statement.
Income is generally taxable by the Federal, most States and some local governments?
If you are retired as I am; I am looking for ways to generate a diversified income stream from many sources and with this I expect to pay the taxes associated with this income generation weather it be earned or unearned. Perhaps, hybrid (multi-asset) income funds might not be right for you if you have a concern about taxation.
If you are wanting to avoid as much taxation as possible then perhaps you should look more towards muni income.
Until the 1990s, funds tended to be classified and analyzed according to their objective, e.g. aggressive growth, growth, G&I, equity income. Along came style boxes followed by an emphasis on style purity. Different questions (what vs. how).
A fund managed for objective (very fuzzy, which is why M* rates on style) will likely cut across many styles. But that doesn't make your portfolio more diversified than one where you hit the same holdings by creating your own mix of funds with different styles.
IMHO there's been a gradual shift back toward funds focused on objectives (like income) rather than style - with target date funds for example. Income-oriented funds seem like another natural. Just as the old growth, G&I, etc. categories represented a dialing up or down of risk (and income vs. appreciation) in the equity arena, income investing seems ripe for a similar sort of grouping by objective.
In part, that's because there are more vehicles than ever for generating income - well beyond the investment grade/junk/muni triumvirate of a generation ago. In part, that's because interest rates have been so low for so long that there's demand for other ways of generating income without going off the risk charts. In part because boomers are retiring and interested in generating income. That's what they need regardless of which of their funds hold what types of bonds.
So, no these funds don't add diversification; though they may facilitate portfolio construction. And no, they're not a fad, if for no other reason than there are lots of more esoteric vehicles that are better employed as parts of other funds than as standalone products.
Actually, I utilize a little of both in my portfolio - some tax efficient funds such as muni bond funds, and others less so, such as PIMIX. I'm always looking for ways to avoid paying more to the government, so tax efficiency is a factor when I choose income generating vehicles. It's not the main determining factor, but it is something that I do consider. If it's an excellent fund - as is the case with PIMIX - then I will go ahead anyway.
I think the TERM 'multi-asset fund' (with or without income) is a creation of fund-industry marketing types.
Any old-fashioned balanced fund which emphasizes income is a 'multi-asset income fund'. (MAIF) I own one, its called Vanguad Wellesley.
Some newer MAIFs add in riskier sleeves-- junk, MLPs, whole-loan products, etc. etc. They are simply stepping out on the risk-spectrum. --- the higher the yield (i.e. the bigger the spread), the bigger the risk.
While I still own some VWINX, my thinking on hybrids (MAIFs or otherwise) has evolved over the past 3-5 years. I generally eschew them, in favor of single-asset products. I suspect that 'bundling' assets has the effect of obscuring how good the manager of each asset-sleeve within the 'bundle' is. [Take OAKBX, for example. The stocking picking was always very good, but Oakmark never had much of a bond desk. They usually loaded their bond-sleeve with Treasurys (US & Canadian) and that was it. The stock picking "carried" the fund overall for many years. Til it didn't.] How does an individual investor get comfortable that each of the asset-sleeves within a hybrid (or "MAIF) is at least average -- and hopefully above so?)
Then too, every asset class will encounter an investing environment with a lousy "setup". At those times, its best to UNDERweight such assets. Most hybrid products have allocation guidelines which require weightings stay within a certain range. Having witnessed 3 massive boom-bust cycles this century (tech, mortgage, energy), I am uncomfortable with "forced" allocations. The lower rates go, the more convinced I am, we are in the 'pleasant' phase of a 4th boom-bust cycle.
Another thing: all commingled products, MAIFs included, assess a MER equally, across all AUM in the fund. But is it really serving investors best to levy (for example only) a flat 1.25% for managing the equity-sleeve, and the same 1.25% for the bond-sleeve. -- Especially if that bond sleeve is often Treasurys, Agencies, and investment-grade paper. --- And especially now that bond coupons barely will cover that MER....). I mean you can find superlative dedicated-bond managers for ~0.50%. Paying 1.25% for the bond sleeve of a hybrid fund seems like you are paying for that bond manager's Alfa Romeo...
FPACX is a good example. It has a superior performance, granted (though performance seems to have suffered with growing assets). It levies a 1.09% on AUM. 34% if AUM is sitting cash. Institutional MMFs are paying NOTHING! I'm not arguing Romick isn't prudent in holding cash --- rather that he should not be charging investors 1.09% for the cash-sleeve. A hybrid can get away with this. Dedicated-asset funds are less prone to charging investors for NOT investing their money.
I'd much prefer to choose single-asset "best of breed" managers for the major asset classes myself. In some cases (say L/C US equities) the "manager" may be Standard & Poors (i.e the index). In others (foreign equities, S/C, REITs, bonds), active managers who persistently excel may be able to be identified. As an asset-class "smells bubbly", I can trim back, rather than relying on a professional allocator, who is frankly, not at all concerned if Edmund's nest-egg is halved due to a forced allocation in a hybrid product.
Just my opinion.
The span of those 'average returns' is 89 years. "Averaging returns" is a mathematical exercise, but investors don't experience smoothed-over 'averaged' returns. They experience sequential, erratic returns. Certainly, 20- or 30-somethings might look at those average returns and reasonably conclude to go "all-in" to equities. -- But it may not make a lot of difference for a typical young investor --- as they have relatively little saved. Most or all of income often going for raising kids, placing a down-payment on a home, student-debt servicing, kids' college or for some, 'living large'. By the time many households get round to saving serious dough (many never do!) they may be in their 40's or 50's. Are average 89-year returns something they should expect? What about when they begin the distribution-phase and are withdrawing assets (via RMDs, etc). Should they count on historical 'averaged' returns, or make some reasonable (and conservative) estimate of future returns based on asset prices? I believe John Bogle and others do offer those estimates in interviews from time to time, based on today's prices as a "set-up" for likely prospective returns. Buying long-term Treasurys in 1982 would have reasonably generated a certain forward-return over 30 years. Buying long-term Treasurys today, prospective-returns will be much more compressed.
Even if an investor could obtain a GUARANTEE of receiving those average returns (say in the form of an insurance company annuity etc.) at the terminal date (89 years), if they had to wait 89 years to receive that payout, would they be alive to collect it? My point: 89-year average returns, even if 'guaranteed' are not meaningful for individuals, if one is pushing up daisies when the guarantee is due to them. Ask Japanese equity investors who bought/held in 1988 and are still well under-water today, 30 years later. -- Hey in another 59 years they may enjoy the fruits of their patience....
Then too, the Vanguard site lists the historical return on a 100% bonds portfolio as 5.4%. Consider AGG, which is a proxy for the total (non-junk) US bond market. Presently, the SEC yield on AGG is 1.72%, with an average coupon of 3.2% The average-price of the bonds trade $9 over par. Perhaps 89 years from today, average-returns may match that. Nobody reading this will be around then. What are the likely returns over the next 1,3, 5, and 10 years? --- This would seem to be more relevancy. Are forward returns, using today as a starting point, likely to be closer to 89-year historical, averaged returns OR the SEC yield?
Eventide Multi-Asset Income Fund ETNMX
ETNMX Fact Sheet
As this is a new fund with both high estimates on "other" expenses and a short term (until October 2016) fee waiver in place, it isn't clear what the actual expenses will be going forward. For example, its management fee component, at 0.73%, is nearly identical to the management fees of the other fund in your post, WHGIX, at 0.75%.
As a bleeding heart liberal on most matters, I'll concede that RPGAX could be considered an income fund. Price appears to consider it more of a balanced fund: "Under normal conditions, the fund’s portfolio will consist of approximately 60% stocks; 30% bonds, money market securities, and other debt instruments; and 10% alternative investments." (Source: T. Rowe Price)
M* classifies it as Global Allocation and Lipper puts it in their Flexible Portfolio category.
I own a bit and include it alongside DODBX in my balanced area. In good times it will likely lag DODBX. But I suspect it will hold up better in bad times. The 10% in Blackstone's fund of hedge funds should help in tougher markets. We'll see on that one. (No snickers from audience please)
I believe its a great holding to pass on to family who doesn't want to get involved in managing money.
I'd be interested in hearing from others out there with opinions on how how they view this fund for non interested inheritors all aged about 50.heir.
Nice to see you posting again.
@JohnChisum Same sentiment here.I'm always trying to keep the curmudgeon(s) a bit more tolerable for you and the rest of the M F O posters.
Welcome Back Duke:
I Think He Lives Somewhere In Asia: