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Recommend any long short funds with good track record?
I am looking for a long short fund with a good track record. The AQR long short equity fund QLEIX looks pretty good but it is closed and just has a 3 year history.
The only L/S fund that's been around for the full market cycle and has qualified as a Great Owl, is Hundredfold Select Alternatives (SFHYX). That's not an endorsement, just a statistical report. It has outperformed its peers by 2.7% annually for the full cycle.
The star is Boston Partners Long/Short Equity (BPLSX), which is closed. Ali Motamed, who comanaged the fund from 2013-15 and worked at the adviser from 2003-15, now manages Balter Invenomics (BIVIX). It launched last year and has outperformed BPLSX, though with noticeably more volatility.
Though not technically a long/short fund, Litman Gregory Masters Alternative Strategies (MASNX) has a solid cast and great long term record. Swan Defined Risk (SDRIX) is an interesting options-based fund that we've written about. At base, the manager argues that you can't protect against all risks so you have to define the one you're hedging. In his case, the fund is constructed to buffer a major market drop but doesn't try to dodge smaller options. River Road Long-Short (ARLSX) has modestly outperformed the L/S group since launch with substantially less volatility. If you use the search function on the "Commentary" page, you'll get some text about each of them.
Finally, I'd strongly consider investing in a fund that holds a lot of cash. They function exactly like a L/S fund: reduced volatility and reduced returns when the broad market is rising, reduced losses and increased returns when the market falls. In our February issue, I'll name the 15/15 funds: funds with at least 15% cash that had total returns of at least 15% last year.
HMXIX - newer fund, but darn consistent/lacking in volatility. Available at Fido (TF). Looking forward to see how it performs in a downturn, assuming its still around whenever that finally happens.
The AQR long short equity fund QLEIX looks pretty good but it is closed and just has a 3 year history.
Not that it matters, since it's not available to new investors, but it's been around 4 1/2 years and will hit 5 in July. (Even some L/S funds without a long history have been around for a few short weak periods for equities, e.g., a few months in 2014 and 2015, 2015 overall, and Jan. 2016, for peeks into down-market performance. None of those were deep and sustained like 2007-2008, of course, but the GR was back far enough that many funds of all kinds with that extensive a record have changed managers/strategies or have had big increases in AUM that have likely affected strategy and performance since.)
That Calamos fund (CPLSX) looks interesting. So many different strategies within long-short ...
Now, I just hold extra cash so when the market pulls back I'v got some cash to do some buying. Plus the extra cash (including CD's) acts as a dampner and reduces portfolio volatility as David notes in his above post.
That’s a tough universe to tread in. I can understand the appeal however. I’ve been burned more than once with these types of funds. Generally they run hot and cold. After a few hot years money piles in. Than, next thing you know they turn cold. They are usually beset with high fees - often having ERs in the 2% range. They have to pay interest on their short positions and that gets reflected in the ER. I’d agree with David. Or, if you feel up to it, develop your own scheme for raising and lowering cash or short-term bonds.
@MFO Members: Objectives be dammed, your a retail investor ,not a trader or institutional investor. Here's just one example: The almost 13% difference between CPLSX and the Haystack is a lot of money. Regards, Ted CPLSX: 2017 8.89% S&P 500 TR: 2017 21.83%
Hey Ted, since you opened the door to cherry-picking data points, how about this one from 2015:
SPX +1.38 QLENX +16.79
The 15%+ difference was a lot of money!
This isn't a bad point for a retail or any other investor to be looking for hedged equity exposure, depending on circumstances. (For example, not everybody is a fed retiree, and capital conservation can be a very reasonable objective for those with crummy or non-existent pensions.)
@Ted The questions to me are do we expect the S&P 500 to deliver 16.08% annualized over the next five years and do long-short funds do what they're supposed to do in a downturn? I don't think it's fair to compare their returns to the S&P in a raging bull market. It would be better to look at risk adjusted returns, alpha, Sharpe, beta and downside capture. By that take, I would still agree with you that most long-short funds aren't worth the price of admission. Their fees tend to be too high and they don't always protect on the downside as much as they should. But there are a handful that are worthwhile.
Talk’s cheap during a runaway (likely overextended) bull market.
Even the great Rukeyser got lulled into complacancy during the late 90s tech mania. If memory serves me correct, the one bear on his panel, Gail Dudeck, was eventually dismissed for her persistent bearishness. Never easy going against the trend.
Obviously the need for these funds is subjective. My subjectivity agrees with @Ted's. Over time I just don't see these funds, as a category, doing better than a moderate or even conservative balanced fund. There may be one that shines over some time range or any given year, but good luck picking it without the help of the rear-view mirror.
But as I started with, subjectivity - to each their own.
Agreed that it's to each his own, @MikeM. What I object to is the authoritarian in chief telling others what to do in no uncertain terms, when it's clear he doesn't understand anything about them.
One other minor point: category returns aren't especially illuminating.
Agreed that it's to each his own, @MikeM. What I object to is the authoritarian in chief telling others what to do in no uncertain terms, when it's clear he doesn't understand anything about them.
One other minor point: category returns aren't especially illuminating.
It’s very rare nowdays for folks eliciting assistance to state their age, years to retirement, other sources of income, etc. One size does not fit all. Never did.
L/S funds are interesting and I have considered many with interest. However, upon analysis, I always come to the conclusion that 'my' objectives are better met with good balanced/allocation funds. I own OAKBX, FPACX, SGENX for a long time know and have handled the dips very well since I held them. Started accumulating from around 2001 and continue to add to them all these years. My suggestion is to at least consider them vs. L/S funds and see if they satisfy 'your' objectives.
I looked at alternatives ( L/S, Merger, futures, even market neutral) a year or so ago, because I thought stocks and bonds were overpriced even then and cash paid so little. I came to the same conclusion about L/S funds as David but BPLSX was closed (somehow SFHYX escaped my radar) so I started a position in it's global cousin BGLSX/BGRSX. It has done pretty well and seems to be positioned to avoid huge draw downs.
All of the other alternatives are reasonable, ie more cash, options etc, although the performance of FPACX has not inspired confidence in the last three years ( it lost more than the SP500) in Jan 2016, making me wonder what was involved.
One of the problems with mutual funds is you are investing in someone else's ideas about returns, safety and risk. Usually they are consistent, and reliable but not always. Of course the farther away from "bread and butter" diversification ( major asset classes, cash as ballast etc ) the more of a black box.
Certainly a portfolio with 30 to 50% cash will be significantly less volatile, but your returns will lower. There is a greater argument to made for cash with a 25 return now than a year ago
The key is 1) know what return you need and be sure you won't stick your neck out and get burned and 2) know exactly what you will do when a crunch comes and the market is down 20 % . If you can't stand the heat...
FPACX, SGENX, and OAKBX are my top fund holdings and among my longest ones. Great choices. They have done great over the long haul and stick to their investment processes. Even after the gifted Jean Marie Evillard left SGENX, they continue to do well. If only these funds had less assets and could buy smaller caps in amounts which could move the performance needle more.
Kaspa 1:49PM Flag L/S funds are interesting and I have considered many with interest. However, upon analysis, I always come to the conclusion that 'my' objectives are better met with good balanced/allocation funds. I own OAKBX, FPACX, SGENX for a long time know and have handled the dips very well since I held them. Started accumulating from around 2001 and continue to add to them all these years. My suggestion is to at least consider them vs. L/S funds and see if they satisfy 'your' objectives.
Looks to be long and short the identical holdings? How can this be productive? Thanks, Penny
Not David, but here's a go at an answer, which you'll want to confirm or not against manager commentary or annual/semi reports. Both Lord Abbett and Semper account for income in bond funds through daily accrual (rather than flowing it through the NAV), so it may be that being long and short funds from those families enables them to pocket the income distributions without the price/NAV risk.
Comments
The star is Boston Partners Long/Short Equity (BPLSX), which is closed. Ali Motamed, who comanaged the fund from 2013-15 and worked at the adviser from 2003-15, now manages Balter Invenomics (BIVIX). It launched last year and has outperformed BPLSX, though with noticeably more volatility.
Though not technically a long/short fund, Litman Gregory Masters Alternative Strategies (MASNX) has a solid cast and great long term record. Swan Defined Risk (SDRIX) is an interesting options-based fund that we've written about. At base, the manager argues that you can't protect against all risks so you have to define the one you're hedging. In his case, the fund is constructed to buffer a major market drop but doesn't try to dodge smaller options. River Road Long-Short (ARLSX) has modestly outperformed the L/S group since launch with substantially less volatility. If you use the search function on the "Commentary" page, you'll get some text about each of them.
Finally, I'd strongly consider investing in a fund that holds a lot of cash. They function exactly like a L/S fund: reduced volatility and reduced returns when the broad market is rising, reduced losses and increased returns when the market falls. In our February issue, I'll name the 15/15 funds: funds with at least 15% cash that had total returns of at least 15% last year.
For what that's worth,
David
That Calamos fund (CPLSX) looks interesting. So many different strategies within long-short ...
Regards,
Ted
Now, I just hold extra cash so when the market pulls back I'v got some cash to do some buying. Plus the extra cash (including CD's) acts as a dampner and reduces portfolio volatility as David notes in his above post.
Regards,
Ted
CPLSX: 2017 8.89%
S&P 500 TR: 2017 21.83%
SPX +1.38
QLENX +16.79
The 15%+ difference was a lot of money!
This isn't a bad point for a retail or any other investor to be looking for hedged equity exposure, depending on circumstances. (For example, not everybody is a fed retiree, and capital conservation can be a very reasonable objective for those with crummy or non-existent pensions.)
Regards,
Ted
The Average L/S Equity Fund Returns:
YTD: 4.06%
1yr. 14.98%
3yr. 5.41%
5yr. 6.45%
----------
S&P 500 TR:
YTD: 6.05%
1yr. 27.23%
3yr. 13.50%
5yr. 16.08%
Even the great Rukeyser got lulled into complacancy during the late 90s tech mania. If memory serves me correct, the one bear on his panel, Gail Dudeck, was eventually dismissed for her persistent bearishness. Never easy going against the trend.
But as I started with, subjectivity - to each their own.
One other minor point: category returns aren't especially illuminating.
Top Holdings SFHYX
Holding, Weight %
Payb Lord Abbett Fl. - 34.10
Recv Lord Abbett Fl. 34.08
Recv Semper Mbs Total 31.13
Payb Semper Mbs Total - 31.04
Looks to be long and short the identical holdings? How can this be productive?
Thanks,
Penny
All of the other alternatives are reasonable, ie more cash, options etc, although the performance of FPACX has not inspired confidence in the last three years ( it lost more than the SP500) in Jan 2016, making me wonder what was involved.
One of the problems with mutual funds is you are investing in someone else's ideas about returns, safety and risk. Usually they are consistent, and reliable but not always. Of course the farther away from "bread and butter" diversification ( major asset classes, cash as ballast etc ) the more of a black box.
Certainly a portfolio with 30 to 50% cash will be significantly less volatile, but your returns will lower. There is a greater argument to made for cash with a 25 return now than a year ago
The key is 1) know what return you need and be sure you won't stick your neck out and get burned and 2) know exactly what you will do when a crunch comes and the market is down 20 % . If you can't stand the heat...
FPACX, SGENX, and OAKBX are my top fund holdings and among my longest ones. Great choices. They have done great over the long haul and stick to their investment processes. Even after the gifted Jean Marie Evillard left SGENX, they continue to do well. If only these funds had less assets and could buy smaller caps in amounts which could move the performance needle more.
Kaspa
1:49PM Flag
L/S funds are interesting and I have considered many with interest. However, upon analysis, I always come to the conclusion that 'my' objectives are better met with good balanced/allocation funds. I own OAKBX, FPACX, SGENX for a long time know and have handled the dips very well since I held them. Started accumulating from around 2001 and continue to add to them all these years. My suggestion is to at least consider them vs. L/S funds and see if they satisfy 'your' objectives.