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John Waggoner: The Long And Short Of Long-Short Funds
FYI: When you board an airplane, the one thing you don't want is a wide range of outcomes. If you're headed to Fort Lauderdale, you'd probably prefer not to land in Vladivostok. A trip that's supposed to end in New York City shouldn't end in Altoona.
Similarly, if you're choosing investments for your clients, you probably have reasonable expectations for those investments. In fact, much of the advantage of diversification is not increasing returns, but decreasing unpleasant surprises. Regards, Ted http://www.investmentnews.com/article/20170105/BLOG03/170109978?template=printart
If you re-arrange LEQIX (LoCorr Long/Short Equity Fund) into QLEIX (AQR Long-Short Equity Fund), I think you get a better outcome. Over its lifetime, QLEIX has beaten SPY, with lower volatility.
On the face of it, QLEIX is a great fund. That minimum investment amount leaves me out in the cold, however. Come to think of it,all I have to do is step out the door today and I'm out in the cold. I suppose an "advisor" could get me into AQR funds, but that ain't gonna happen.
Two share classes: QLEIX = TF + 1.27 ER; QLENX = NTF + 1.53 ER. Like Tony & msf said, they're available for reasonable minimums in IRAs at Fidelity -- that goes for both share classes, plus the similar but more short-biased Market Neutral, QMNIX and QMNNX.
According to the most recent prospectus, the actual total expense ratio after fee waivers and expense reimbursements for QLEIX and QLENX are 1.89% and 2.14%, respectively. As M* has consistently bent over backwards to be friendly with mutual fund companies, neither of these figures can be found on the M* front page summaries or expense sections of the funds.
That being stated, QLEIX/QLENX is the best L/S fund out there at this time.
Thanks, Kevin, I forgot about M*'s weirdness on ERs of some funds. For QLEIX, the M* expense page shows the ER as 1.35% from the 5/1 prospectus; comparing that to the actual figures in the 5/1 prospectus, it looks like M* left out the expense categories of dividends from short sales and acquired fund fees/expenses, both of which AQR counts in their ER figure.
@msf, Thanks for the link. M* has explained this to me in the past, but I still don't buy their treatment of expenses.
M* needs to realize that most investors check the M* front page expenses and call it a day -- and this includes fairly knowledgeable investors at MFO and M*. Far fewer investors actually read the prospectus and learn the actual expenses that they are paying. Multiple times I have asked M* to remedy this by publishing the actual expense ratio investors are paying for ALL funds as listed in the prospectus, and put that figure on the M* front page as "actual expenses," and list this figure also in the expense section for each fund. But of course, this is too simple and transparent, and worst of all, it makes sense.
While these latest posts are very important, I don't want the original point of my post relevant to the two share classes of these AQR funds to be lost: for a potential investor in these funds, the tradeoff between the share classes is a transaction fee (50 bucks at Fidelity) for the I class versus paying approximately an additional 0.25% ER annually for the N (NTF) class.
In other words, it takes doing the math to figure which is the better deal for a given investment/holding period.
Comments
That being stated, QLEIX/QLENX is the best L/S fund out there at this time.
Kevin
http://www.morningstar.com/advisor/t/105535457/tallying-up-the-cost-of-short-interest-expenses.htm?&single=true
M* needs to realize that most investors check the M* front page expenses and call it a day -- and this includes fairly knowledgeable investors at MFO and M*. Far fewer investors actually read the prospectus and learn the actual expenses that they are paying. Multiple times I have asked M* to remedy this by publishing the actual expense ratio investors are paying for ALL funds as listed in the prospectus, and put that figure on the M* front page as "actual expenses," and list this figure also in the expense section for each fund. But of course, this is too simple and transparent, and worst of all, it makes sense.
Kevin
In other words, it takes doing the math to figure which is the better deal for a given investment/holding period.