But David, your last paragraph is again saying your happy with RPHYX, insinuating that RSIVX having the same manager must mean RSIVX will be good too. It hasn't been. Your also saying that the sound strategy is being negatively influenced by the un-sound market. Heck, Hussman has been saying that for years (not to insinuate this manager is as bad as Hussman in allocating money). I just think good managers can come up with good investment theories, but it doesn't mean they'll work in real life. This fund may turn out to have great 5 year risk adjusted returns. But why not wait until proven? So far not so good.
P.S. if I could get into RPHYX I would. Proof is in the pudding.

Hey, 3yards.
Sorry, not trying to snub anybody.
Here's my fundamental problem: I'm concerned that the market is currently forked up. Really. Zero and negative interest rate policies fundamentally distort investors' allocations. Why are interest rates at or below zero? Because, despite falling unemployment, global growth is at or below zero. We're about to register a fourth consecutive quarter of falling year-over-year earnings (Factset, March 2016). And still the stock market is rising at above average rates over the past three years; VTSMX is up 11% annually in that period. At the base of the market trough in February 2016, valuations were higher (at least in small caps, maybe broadly) than they were at the peak preceding the 2007 crash. The liquidity available to fixed income market makers is down by 90% since the end of the crisis. In theory, those guys provide the circuit breaker in a falling market: if you want to sell a share of Google, they'll buy it immediately then sell it as quickly as they can find an ultimate buyer for it which pocketing a few bps for their trouble. In the absence of that sort of liquidity, selloffs accelerate.
That's relevant here because I'm reluctant to make too strong an argument against what appears to be a sensible strategy that's performing poorly in a senseless market, especially when the manager has reasonable arguments about the malformations in the market. Similarly, I'm about to buy a small cap fund that's 50-80% cash and that most of you folks think of as appropriate for the Thanksgiving table.
In short, I own RSIVX personally and in an account for MFO. The positions aren't huge, but then none of mine are. I'm not happy that the strategy has been losing money over the past several quarters but I'm also not selling based on that experience nor am I willing to say that the strategy is a bad one. I am pretty happy with RPHYX (up 1% YTD) which continues to be a low-vol alternative to cash for me.
As ever,
David

I did the same as MikeM, but had to swallow the transaction fee at Schwab for PTIAX. I still have a chunk of RPHYX.

I sold it last year and moved to PTIAX. A multisector bond fund that has been around at least 5 years with high returns and below average risk. Happy with this one.
And that's what I was hoping for with RSIVX. RSIVX is a pretty good example of a group-think fund, I believe. Why gamble with a fund with little to no tract record? Because the manager did well with another new fund, RPHYX? And that manager gets rave reviews here. But as it turns out, that doesn't mean very much.
By the time I'm dead, I plan to make every investment mistake possible, but hopefully fewer in-between as I learn along the way. This was mistake number 128 if we're keeping tract :)

Hi, Bud.
Here's the problem with distinctive funds: they're impossible to benchmark. RPHYX is sometimes a one-star fund, sometimes a four-star fund based not on its virtue but on the fate of its largely-irrelevant peer group. It's benchmarked against high-yield funds despite the facts that (a) high yield bonds are a sliver of the portfolio and (b) it has a short to ultra-short average maturity while the group tends to intermediate term.
So yes, the world o' high yield investing sucked last year and RPHYX is being rewarded for its low volatility, modest expectations portfolio. I mention that mostly because once market conditions normalize, it will go back to being both really good and a one-star fund.
David

M* now gives RPHYX 4 stars, up from 1 star. Total return about the same as years past so I'm guessing hi yield was prolly not a good overall sector last year.

"disaster"
Hmmm ... it had an 8% drawdown from mid-2015 to mid-February, 2016. That's better than the average high yield fund (-11%), worse than the average multi-sector bond fund (-6.5%). Neither's a particularly great benchmark. Not good and modestly surprising. I'd probably reserve "disaster" for folks who've demonstrated bad faith or really sustained incompetence. Neither's the case here, though I don't disagree that the performance has been surprisingly poor.
To the manager as well, for what interest that holds.
I've spoken to Mr. Sherman a fair number of times. I like him and respect him, but can't always quite keep up with him. As soon as we hit "but when the shape of the derivative curve tightens, the yield-to-worst / yield-to-call ratios become irrational. Right?" my brain blinks. My best understanding is that two factors have been driving results. (1) He screwed up on two or three securities. At base, a couple CEOs used freakishly bad judgment which damaged - terminally in one case, temporarily in another - the value of the fund's investment in them. (2) Fixed-income investors have been acting like the apocalypse is imminent, which has led some portions of the market to be pounded down. There are some short-term bonds yielding over 10% now, a year ago those same bonds paid 6.5%. He's got some very conservative exposure - overlap with RPHYX - to offset some riskier stuff (the aforementioned pounded sectors) that he believes to be "money good," but the dark fantasies involving the collapse of the energy market or of the Chinese economy or of the European Union have kept prices from normalizing. When the panic passes, he might ease back on the amount of ballast and benefit from a substantial rebound in oversold securities.
He might be wrong, either in the thesis or in timing, but, at least in my best judgment, he's neither delusional nor incompetent.
For what that's worth,
David

FWIW, M* shows only 3% of RPHYX's bonds as unrated.
M* gets the ratings for each bond in a fund's portfolio from the fund company. When asking for this data, it says that "So-called internal or manager-derived, alphanumeric credit ratings are not to be included in those categories; rather, bonds not rated by an NRSRO are included in the Not Rated category."
https://corporate.morningstar.com/us/documents/MethodologyDocuments/MethodologyPapers/FixedIncomeStyleBoxMeth.pdf
So it is likely that (at least for the February portfolio), a scant 3% of the bonds (by value) are internally rated. Generally though, high yield funds have a significantly higher percentage of assets in unrated bonds.

Asset Allocation RPHYX
Type %
Net %
Short %
Long Bench-
mark Cat
Avg
As of 02/29/2016
Cash 46.66 — 46.66 — 4.42
US Stock 0.00 — 0.00 — 1.33
Non US Stock 0.00 — 0.00 — 0.01
Bond 51.02 — 51.02 — 92.87
Other 2.32 — 2.32 — 1.36

RPHYX:
Per MFO: think 30 - 90 day maturity
Per M*: any fixed instrument with less than one year to maturity [is] cash for the purposes of calculating a fund’s asset-allocation breakdown
One can't look at M*'s figures and conclude that there's even a dime's worth of cash in either of these funds for the purpose of liquidity. (But you will get cash-like behaviour in terms of interest rate sensitivity.)

Per Morningstar -- rphyx 43.57 % -- rsivx 18.22 %
ps- rsivx 12 MO. LOSS =4.91%

There are both similarities and differences of faults with hedge funds and open end funds. In one sense, you're right about people tending to pile into some funds based on manager past performance.
People piled into Gundlach's funds, even though they use "exotic financial derivatives like total return swaps". (See below.) IMHO use of exotic derivatives has become more commonplace - they're not limited to hedge funds and a few offbeat mutual funds as the article suggested. Though they're still insignificant if not absent from vanilla funds.
People piled into DoubleLine, into Yacktman, and others based on the managers' long term past performance at substantially identical funds. Not on a short term (3 year) record at a fund that was substantially different. RSIVX by design holds longer term, often illiquid bonds, than RPHYX, as opposed short term bonds ("think 30-90 day maturity").
So ISTM there is a qualitative difference between piling into funds like RSIVX (unproven management for that type of fund) or TFCIX or WBMAX (both with untested strategies for open end funds), and piling into proven management and strategies in the hedge fund arena. Another example of a mismatch between strategies and open end funds - stable value funds. There were (as I recall) over a dozen open end stable value funds attempted. They couldn't handle the open end fund daily redemption requirement.
YACKX also floundered for its first couple of years. It was only in 1994, in a relatively flat market, that it began to shine. Yet people stuck with him. Quoting Yacktman: "My only real fear in 1993 was that people who put their money in during 1992 would take it out at a loss. I didn't want this to happen, because I knew my performance would come back. ... As it turned out, more money came in than went out."
With hedge funds, accredited investors have the responsibility (and supposedly the opportunity) of investigating the offering. These "sophisticated" investors don't get the same disclosures as are required of open end funds. If managers have buried past failures, it's up to the investors to discover that.
The mandated disclosures of open end funds are supposed to make it easier for the other 99%. It is their choice to accept or reject a disclosure that discloses little other than: "just trust us".
DoubleLine funds and total return swaps:
Reuters, Nov 16, 2015: RiverNorth/DoubleLine Strategic Income Fund possesses economic exposure to an aggregate of 1,103,373 shares of Common Stock [of FSC] due to certain cash-settled total return swap agreements."

ThinkAdvisor, Nov 22, 2013“It’s [DSEEX] put together using a total-return swap,” Gundlach said of the fixed-income side of the fund.
Probably other funds; this was a quick search.

I unloaded RSIVX during tax-loss harvesting and bought a lesser amount of PTIAX. Still have RPHYX, but not as much as I once did.

I will keep an eye on PTIAX and NEARX. I currently own OSTIX in my Roth IRA as well as RSIVX. I would love to buy RPHYX, but it looks like it will be closed for the next 100 years...

@3yards nope, got out of it early in 2015. I have a toehold in RPHYX. PTIAX (mentioned here by someone) seems to be much steadier...that's where I've put my cash after selling all of RSIVX.

Amen to that! Unless you want to eat, drink, sleep, and breathe the markets 24 hours a day. And I mean that literally. Over the years have seen all these investors congregate in the same funds such as the aforementioned Whitebox as well as other *crowd* favorites ala RSIVX, ARIVX, MFLDX, WAFMX, RPHYX, AQRNX, and the granddaddy of them all PRPFX. Not exactly a prescription for a wealthy retirement. I just hope it won't be the same sad story with the latest fave GPMCX.

Actually in that collection I don't think MFLDX and certainly AQRNX don't belong. One did a shareholder unfriendly thing, and one is shareholder unfriendly period.
RSIVX, I think people are bashing out of proportion. No one said it did not have any risks. People expecting RPHYX out of RSIVX without reading prospectus going to be dissapointed.
Still a believer in ARIVX. Never owned WAFMX and GPMCX
Now two funds I own and who belong are FVALX and INTLX. Luckily for me have held them forever and will continue to hold "forever". With FVALX manager didn't time the S&P 500 puts correctly or it would be breaking even. Hard to be Value Fund and time the short incorrectly. I'm in for the long haul in these two.
The one dissapointment for me has been ICMBX. Expected it to have held up much better.
Finally, got lucky with WBLSX to OTCRX switch at Vanguard. I feel for WBMAX investors.

@VF - I know you saw it coming, sorry to offend. I asked Charles because I thought he was one of the believers.
I have to wonder though if Mr. Buffett has been right all along. Just stick your money in an S&P 500 index and go live your life. If the smart people in the room with all the toys and tools can't get this stuff right who do I think I'm fooling. Some pondering I must do.

Amen to that! Unless you want to eat, drink, sleep, and breathe the markets 24 hours a day. And I mean that literally. Over the years have seen all these investors congregate in the same funds such as the aforementioned Whitebox as well as other *crowd* favorites ala RSIVX, ARIVX, MFLDX, WAFMX, RPHYX, AQRNX, and the granddaddy of them all PRPFX. Not exactly a prescription for a wealthy retirement. I just hope it won't be the same sad story with the latest fave GPMCX.

Thanks David. Sad news about FundFox. It revealed a unique and interesting side of the mutual fund industry that more investors should care about.
Speaking of managers owning up to mistakes, you had mentioned that you were planning to meet with the manager of RPHYX / RSVIX in November. Any update there?

While this game is usually played with funds having large distributions, it can also prove useful for a fund with slow, virtually inexorable declines in NAV, viz. RPHYX. Not to mention other cash-substitute funds. For example, ZEOIX has spent nearly its whole life except its first year above $10. It's now at $9.90.
It turns out that because this year has been somewhat flat, many funds (even with more reasonable size distributions) have shares whose NAVs will drop below purchase price after distribution. This is where specific share identification becomes so handy. You can sell just those shares that you purchased (or got via reinvestment) in the last couple of years, and recognize their losses without also recognizing gains on the other shares.

Hi VF- Yes, I also have a very small position in RSIVX. I'm thinking of converting that to ARTFX and then perhaps taking a part of the RPHYX and gradually switching that over. I agree with you on the risk profiles- I wouldn't switch the entire RPHYX- just part of it. Thanks again for your suggestions on this.