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BobC - New Osterweis Funds

edited January 2017 in Fund Discussions
Bob,

I know you like this fund family, as do I, but I was wondering if you had any thoughts on the two new funds.

Thanks.

Comments

  • Actually I just met with someone from Osterweis yesterday. I have really not looked at the two new funds. As all of their others, these were created because of client requests and team talent. OSTGX manager Jim Callinan was at Robertson Stephens (RS) - now owned by Victory Funds - for about 10 years, managing small cap, science & technology. The new fund will be very concentrated. The new Total Return fund will more of a core bond fund, a contrast to the great OSTIX, which is totally flexible. It just opened on 12/30/16.
    At this point, we are not looking to add either one to portfolios, but never say never.
  • I bought a small amount of OSTGX about a week a ago. So far, so good.
  • edited January 2017
    I remember Callinan well, wondered what he was up to. Had RSEGX when it was smoking and sold when it was not. Good eye on small caps

  • No plan to add either new funds. Bear in mind that the expense ratio of OSTGX at 1.50%.
  • I haven't purchased OSTIX as there appears to be too much junk bond exposure for me and I'm always concerned that bond fund managers with much flexibility may bet in the wrong sectors.

    I like the Osterweis family so am looking at OSTRX. A few fund families seem to be recently entering this space (T Rowe Price is one). Is there anything special to distinguish this "total return" fund from similar offerings?
  • I wanted to check out OSTRX until I heard about Jim Callinan. Sorry, but I think he epitomizes everything that was wrong with the Janus Era. RS may not have overseen market timing, but talent? Not sure...

    Everyone was making hay when RS was doing the same. What happened later? My opinion of Osterweis just went down a notch.
  • Speaking of Osterweis, OSTFX and OSTVX seem to be rather lackluster of late. OSTFX especially so.

  • OSTIX is one of the best moves we made 14 years ago. Consistent, conservative, cautious management. M* still does not understand this fund, and that is fine by me.
  • Because of M*, and now Calinan joining Osterweis, I am going to use OSTVX as buy when down fund rather than a long term fund. Yeah, I shouldn't have been swayed my M*, but it was too late before I figured them out. Given OSTVX is only NTF @ Merrill, with a $5K minimum, I'm going to wait till it sucks. They all do at some point.
  • Count me among those who don't see the appeal with OSTVX. Compared with Wellington, OSTVX:
    - tracks moderately closely (correlation coefficient r of 0.92, coefficient of determination R^2 of 85%)
    - is a bit more volatile
    - generally underperforms (except for a period of about a year - mid 2012 to mid 2013)
    - much more expensive

    See this Portfolio Visualizer analysis page for correlation, std deviation and lifetime performance comparisons, and this M* performance chart for relative performances

    It's not as though I don't find funds like this interesting. I used to follow Greenspring GRSPX. (Another fund with a fixed income sleeve that is low quality, shorter duration.) At the end of the day, ISTM what matters is performance.

    That's not to say that portfolio allocation doesn't matter, but there are solid multi-sector funds that one can use instead to increase one's exposure to that portion of the fixed income market. (Even, dare I say, OSTIX.)
  • @msf, I agree. Mult sector or multi Asset funds are a great way to get exposure.

    @BobC, OSTIX is a good choice as it provides a monthly distribution and a decent yield to boot.
  • beebee
    edited January 2017
    PONDX continues to amaze (though not a HY Bond fund).

    Maybe @Junkster could chime here, but I also see WHIYX as a reasonable HY choice as well. M8 knock this fund for recent management changes. Another choice that performs similarly to WHIYX, but may not be open to new investors is PRHYX.

    Own OSTIX...diverisfy into WHIYX on dips:
    image
  • Why not just own PONDX?
  • Why not just own PONDX?

    Good point. This manager navigates this bond ship very well.

  • @msf, I agree. Mult sector or multi Asset funds are a great way to get exposure.

    @BobC, OSTIX is a good choice as it provides a monthly distribution and a decent yield to boot.

    I believe OSTIX provides distributions on a quarterly basis.
  • edited February 2017
    PONDX is a darned good compliment to OSTIX, since it owns/has owned very small amounts of credit. Its allocation to government and securitized bonds gives it a very different posture.
  • @BobC,
    My apologies for using M* charts and its limitations.

    Using a different tool (Portfolio Visualizer) it looks like OSTIX under performed AGG for the two years you reference, but it has crushed AGG in many other years.

    image
  • What makes PONDX so special it will not suffer like any other intermediate bond fund when interest rates rise?
  • msf
    edited February 2017
    There's a big difference between multi-sector funds and vanilla investment grade bond funds. The former in general, and PIMIX/PONDX in particular contain mortgage bonds, junk bonds, foreign bonds.

    Here's a good 11 page primer by Nuveen on various factors to consider with bonds. It talks about how the starting environment matters on pp. 2-3. Factors such as yield curve steepness and the speed and number of Fed raises.

    With those factors in mind, it discusses (and shows graphically) how different types of bonds are expected to react to changes and how they have reacted in fact during different periods of rising rates. pp. 4-5. "Exhibit 4 shows how asset classes with more yield and varied performance drivers generally performed better ..."

    It then discusses why this time is different on pp. 6-8. Some of what it mentions: a lower starting interest rate; a domestic monetary policy that is different from that of other countries (this difference may tend to moderate the increase in long term rates); rates rising toward "normal" vs. tightening for the purpose of cooling the economy.

    It puts all this together to suggest that "Focusing portfolios on sectors with more yield potential and less sensitivity to changes in interest rates can help offset price declines caused by rising rates. ... We also like broadly flexible, multi-sector bond portfolios in this environment." pp. 8-9.

    That's different from what you get in "any other intermediate bond fund."
  • @msf. I'm going to read that reference you provided. Much obliged.
  • "Focusing portfolios on sectors with more yield potential and less sensitivity to changes in interest rates can help offset price declines caused by rising rates. ... We also like broadly flexible, multi-sector bond portfolios in this environment."

    There is also the possible advantage of letting the manager/s decide what and where to go to find the better yields as well. Unconstrained funds offer this to investors. Just another option versus a set portfolio.
  • In periods of rising interest rates, there is some validity to owning actively-managed fixed-income funds because of what JohnChisum says above. There are plenty of these that do not add value, but those who do are worth investigating. But a simple premise of not owning mid-long duration and maturity index funds is also a wise path, too. Yes, there will always be periodic flights to "quality", but one only has to look at what has happened to long-term Treasuries in the last few months to learn this lesson.
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