Do you believe GLRBX, FPACX, OAKBX and BERIX will still be the best performing funds 20 years from now? If the answer is no, then can you give me the names of the 4 funds that will outperform so I can buy them today? VBINX outperforms 90% of everything else so do you want to risk your capital attempting to pick the best youngest managers you have never heard of today from 1000 balanced funds? How many start up balanced funds have come into existence since 1997? Double that? So you would have had to pick the best 4 out of 2000 in 1997 in order to get the returns you speak of.

@willmatt72 I agree that tax considerations are important for funds held in taxable accounts. But I also feel that the "magic number" tax cost (or after-tax return), while offering some insight, is not a particularly refined figure. The best it can do is tell you whether a fund is a stinker from a tax perspective.
Start with the basic fact that different people are in different tax brackets - I would never use a 20% cap gains tax rate, yet that is what is typically used. Quoting from M*'s tax cost ratio methodology: "Per the SEC’s guidance, after-tax returns are calculated with the highest tax rates prevailing at the time of the distribution, as if the investor were in the highest tax bracket."
(This is probably incorrect even for those in the top bracket, as I think it excludes the Medicare surtax of 3.8% on investments, and of course ignores state taxes.)
Then there is the problem that these calculations almost never (except in prospectuses) show the tax effect if one liquidates. That's important because if one is paying taxes on cap gains distributions now, one will pay less in taxes when one liquidates. So while cap gains distributions do have an effect on total returns long term, the effect is not as pronounced as one is led to believe from usual tax cost calculations.
Some of these factors increase the actual tax cost (such as state taxes, surtaxes including Medicare and phaseout of exemptions, etc.), while others decrease the actual tax cost (reduced cap gains on liquidation, not being in the top tax bracket, etc.). It's all very personal - each individual's situation is different.
That's why whatever after tax figures you get are at best crude approximations, and why I either do a much more detailed analysis or use the figures provided only as a filter (don't get a very tax inefficient fund), and not to compare funds.

I think some people use the *M tax adjusted returns feature as a guide, not as the last word on the subject. But it does serve an important purpose and does give investors a general overview of a fund's tax efficiency. The *M guide serves as an important feature to determine returns given tax considerations. Death, taxes and all that. Personally, I do compare tax adjusted returns because they can have a rather large effect on ultimate returns, especially with a high value portfolio such as mine. Having a "stinker" in terms of tax perspective can make a big difference in one's portfolio. Comparing 10-year returns without tax considerations is not an entirely accurate comparison, IMHO. It can become a rather large factor when comparing balanced funds.

@willmatt72 I agree that tax considerations are important for funds held in taxable accounts. But I also feel that the "magic number" tax cost (or after-tax return), while offering some insight, is not a particularly refined figure. The best it can do is tell you whether a fund is a stinker from a tax perspective.
Start with the basic fact that different people are in different tax brackets - I would never use a 20% cap gains tax rate, yet that is what is typically used. Quoting from M*'s tax cost ratio methodology: "Per the SEC’s guidance, after-tax returns are calculated with the highest tax rates prevailing at the time of the distribution, as if the investor were in the highest tax bracket."
(This is probably incorrect even for those in the top bracket, as I think it excludes the Medicare surtax of 3.8% on investments, and of course ignores state taxes.)
Then there is the problem that these calculations almost never (except in prospectuses) show the tax effect if one liquidates. That's important because if one is paying taxes on cap gains distributions now, one will pay less in taxes when one liquidates. So while cap gains distributions do have an effect on total returns long term, the effect is not as pronounced as one is led to believe from usual tax cost calculations.
Some of these factors increase the actual tax cost (such as state taxes, surtaxes including Medicare and phaseout of exemptions, etc.), while others decrease the actual tax cost (reduced cap gains on liquidation, not being in the top tax bracket, etc.). It's all very personal - each individual's situation is different.
That's why whatever after tax figures you get are at best crude approximations, and why I either do a much more detailed analysis or use the figures provided only as a filter (don't get a very tax inefficient fund), and not to compare funds.

VBINX (a simple 60/40 fund) is ranked #16 out of all 1194 Allocation (Balanced) funds based on Fidelity's Mutual Fund research site over the last 10 years. Therefore 98.6% of all the CFA's, MBA's, ChFA and PhD's portfolio managers cannot outperform a simple low cost index. Why do we even spend time discussing the best funds?
Over any 1, 3, 5 or 10 year timeframe compared to only Moderate Allocation OR all Allocation funds, VBINX is better than 89.5% of any actively managed fund. Amazing. The really great managers are rare.

It is not clear how you arrived at these precise numbers. Here's Fidelity's fund screener for

all the allocation funds (i.e. all share classes) it carries. I get 1,870 funds. But if I sort on 10 year returns (so that all the share classes that haven't been around drop to the bottom), I get "just" 865. And that includes multiple share classes per fund.
My best guess is that you may have used Fidelity's screener to pick all subcategories of Allocation funds with "Allocation" in their name: Conservative, Aggressive, Moderate, Tactical, and World. If one does this and excludes funds that are closed at Fidelity (the screener's default - good for shopping but less so for research), that results in 1195 share classes. Close enough since these figures can shift on a daily basis.
In this cohort, VBINX isn't even Vanguard's best fund, based on 10 year performance. That goes to Wellesley VWINX. (Actually the top two Vanguard share classes would both be Wellesley, except that Fidelity doesn't sell VWIAX).
Note that I haven't disagreed with your thesis, but with your numbers. From a scientific method perspective they are suspect because they're not easily reproducible. Also, extreme figures invite inspection, and a small deviation can cast doubt up the greater thesis, rightly or wrongly.
Had you suggested that 80% or so of actively managed allocation funds did not do as well over ten years, I likely wouldn't have even looked at the data. Fidelity's own page on VBINX says that over 10 years, it beat 88% of 500 other (501 total) moderate allocation funds. Which means that over 10 years, there were about 60 moderate allocation funds (let alone other types of allocation funds) that beat VBINX. Four times as many as the fifteen implied by a #16 ranking for VBINX.
Just so we don't confuse funds and share classes, out of those 1195 funds I could coax out of Fidelity's screener, the funds (not share classes) ranking above VBINX include:
(1) Columbia Balanced (CBLAX and CBCLX), (2) John Hancock Balanced (SVBIX),
(3) Wellesley (VWINX), (4) Janus Balanced (JABAX),
(5) AMG Chicago Equity Partners Balanced (MBESX and MBEAX)),
(6) Loomis Sayles Global E&I (LSWWX and LGMAX), (7) Berwyn Income (BERIX),
(8) Boston Trust Asset Mgmt (BTBFX), (9) First Eagle Global (SGIIX and SGENX),
(10) Intrepid Capital (ICMVX and ICMBX), (11) LKCM Balanced (LKBAX), (12) Ivy Balanced (IBNAX),
(13) Wells Fargo Index Asset Allocation (WFAIX and SFAAX), (14) Mairs & Power Balanced (MPAOX),
(15) Transamerica Multi-Managed Balanced (TBLIX and IBALX),
(16) American Funds American Balanced (ABALX), (17) Tributary Balanced (FBOPX & FOBAX),
(18) Hennesy E&I (HEIFX), (19) Westwood Inc. Opp (WHGIX and WWIAX),
(20) Thornburg Investment Inc. (TIBIX), (21) Puritan (FPURX), (22) FPA Crescent (FPACX),
(23) Eaton Vance Balanced (EIIFX), (24) Oakmark E&I (OAKBX), and (25) Ivy Asset Strategy (WASAX).
T. Rowe Price Cap Ap (PRWCX and PACLX) would be at the top of the list, except that it is a closed fund, and I had to exclude closed funds to come close to your 1194 fund count. Likewise, Vanguard's other "vanilla" actively managed allocation fund - Wellington - would have come out ahead of VBINX also, except that Fidelity thinks it is a closed fund. (It's not, but you can't open a new position at Fidelity.)
If we throw out the four world allocation funds (Loomis Sayles Global, First Eagle Global, Thornburg Investment Income, and Ivy Asset Strategy), we're still left with 21 distinct funds, let alone share classes outperforming VBINX over ten years. Well more than 15 funds, and all the remaining funds are conservative, moderate, or aggressive allocation funds - no offbeat stuff like convertibles.
If I had a better idea of how you're getting your figures (or to put it another way, what factors you're looking at), it would be easier to discuss. You started with a Vanguard (marketed) fund, so one could easily ask: at Vanguard, why even look at Vanguard-managed funds (VBINX, VGSTX), when the Wellington-managed funds (Wellesley, Wellington) have done better?

Interesting analysis. Since VBINX is considered a moderate allocation fund, did you compare it with other moderate allocation for tax-adjusted returns over 10 years? As we all know. taxes can play a large part in determining the ultimate returns. I plugged in a few of the funds compared to VBINX for a 10-year tax adjusted returns and they don't hold up. For example, BERIX, TIBIX and MAPOX were behind VBINX. I didn't even look at your entire list, just popped in a few for analysis. Some investors hold balanced funds in taxable accounts so tax-adjusted returns should be taken into consideration for those who do.

VBINX (a simple 60/40 fund) is ranked #16 out of all 1194 Allocation (Balanced) funds based on Fidelity's Mutual Fund research site over the last 10 years. Therefore 98.6% of all the CFA's, MBA's, ChFA and PhD's portfolio managers cannot outperform a simple low cost index. Why do we even spend time discussing the best funds?
Over any 1, 3, 5 or 10 year timeframe compared to only Moderate Allocation OR all Allocation funds, VBINX is better than 89.5% of any actively managed fund. Amazing. The really great managers are rare.

It is not clear how you arrived at these precise numbers. Here's Fidelity's fund screener for all the allocation funds (i.e. all share classes) it carries. I get 1,870 funds. But if I sort on 10 year returns (so that all the share classes that haven't been around drop to the bottom), I get "just" 865. And that includes multiple share classes per fund.
My best guess is that you may have used Fidelity's screener to pick all subcategories of Allocation funds with "Allocation" in their name: Conservative, Aggressive, Moderate, Tactical, and World. If one does this and excludes funds that are closed at Fidelity (the screener's default - good for shopping but less so for research), that results in 1195 share classes. Close enough since these figures can shift on a daily basis.
In this cohort, VBINX isn't even Vanguard's best fund, based on 10 year performance. That goes to Wellesley VWINX. (Actually the top two Vanguard share classes would both be Wellesley, except that Fidelity doesn't sell VWIAX).
Note that I haven't disagreed with your thesis, but with your numbers. From a scientific method perspective they are suspect because they're not easily reproducible. Also, extreme figures invite inspection, and a small deviation can cast doubt up the greater thesis, rightly or wrongly.
Had you suggested that 80% or so of actively managed allocation funds did not do as well over ten years, I likely wouldn't have even looked at the data. Fidelity's own page on VBINX says that over 10 years, it beat 88% of 500 other (501 total) moderate allocation funds. Which means that over 10 years, there were about 60 moderate allocation funds (let alone other types of allocation funds) that beat VBINX. Four times as many as the fifteen implied by a #16 ranking for VBINX.
Just so we don't confuse funds and share classes, out of those 1195 funds I could coax out of Fidelity's screener, the funds (not share classes) ranking above VBINX include:
(1) Columbia Balanced (CBLAX and CBCLX), (2) John Hancock Balanced (SVBIX),
(3) Wellesley (VWINX), (4) Janus Balanced (JABAX),
(5) AMG Chicago Equity Partners Balanced (MBESX and MBEAX)),
(6) Loomis Sayles Global E&I (LSWWX and LGMAX), (7) Berwyn Income (BERIX),
(8) Boston Trust Asset Mgmt (BTBFX), (9) First Eagle Global (SGIIX and SGENX),
(10) Intrepid Capital (ICMVX and ICMBX), (11) LKCM Balanced (LKBAX), (12) Ivy Balanced (IBNAX),
(13) Wells Fargo Index Asset Allocation (WFAIX and SFAAX), (14) Mairs & Power Balanced (MPAOX),
(15) Transamerica Multi-Managed Balanced (TBLIX and IBALX),
(16) American Funds American Balanced (ABALX), (17) Tributary Balanced (FBOPX & FOBAX),
(18) Hennesy E&I (HEIFX), (19) Westwood Inc. Opp (WHGIX and WWIAX),
(20) Thornburg Investment Inc. (TIBIX), (21) Puritan (FPURX), (22) FPA Crescent (FPACX),
(23) Eaton Vance Balanced (EIIFX), (24) Oakmark E&I (OAKBX), and (25) Ivy Asset Strategy (WASAX).
T. Rowe Price Cap Ap (PRWCX and PACLX) would be at the top of the list, except that it is a closed fund, and I had to exclude closed funds to come close to your 1194 fund count. Likewise, Vanguard's other "vanilla" actively managed allocation fund - Wellington - would have come out ahead of VBINX also, except that Fidelity thinks it is a closed fund. (It's not, but you can't open a new position at Fidelity.)
If we throw out the four world allocation funds (Loomis Sayles Global, First Eagle Global, Thornburg Investment Income, and Ivy Asset Strategy), we're still left with 21 distinct funds, let alone share classes outperforming VBINX over ten years. Well more than 15 funds, and all the remaining funds are conservative, moderate, or aggressive allocation funds - no offbeat stuff like convertibles.
If I had a better idea of how you're getting your figures (or to put it another way, what factors you're looking at), it would be easier to discuss. You started with a Vanguard (marketed) fund, so one could easily ask: at Vanguard, why even look at Vanguard-managed funds (VBINX, VGSTX), when the Wellington-managed funds (Wellesley, Wellington) have done better?

Small value funds require a lot more patience and the willingness to double down when value is out of favor. Most of the gains made in the last 10 years for small value happened in 2003 and 2013. Maybe it's better to be in a massive small cap index fund which is a lot less likely to liquidate. I'm still plugging money in WSCVX, though.

One of the worst investment decisions I have ever made was to invest in Dan Fuss' former co-manager Kathleen Gaffney's bond fund EVBIX. Last year Ms. Gaffney appeared on Wealthtrack and went on and on about all manor of non-bond investments which she obviously knew nothing about, having spent a career as a bond fund manager with Dan Fuss. I put in a sell order right after the show. In my opinion bonds are a part of my portfolio to provide safe income and act as a hedge against equity losses. I will take my risk in equities where there is a decent chance of significant gains, and not in bonds.

FYI: How helpful are mutual-fund rankings from research firms such as Morningstar Inc. and S&P Capital IQ? New evidence suggests that for many investors, the answer may be “not very.”
Regards,
Ted
http://www.wsj.com/articles/why-fund-ratings-could-be-misleading-1454900921

For those wondering why the dvd distribution of LSBRX has become so paltry of late--- despite the fund holding 35% of assets in HY bonds--- I suspect this is what's at play, and is having a significant impact:

HOW DO FOREIGN CURRENCY LOSSES IMPACT FUND DISTRIBUTIONS?
During periods in which the US dollar strengthens significantly against foreign currencies, some funds that hold non-US dollar denominated bonds may realize currency losses that impact their ordinary income distributions. When a non-US dollar denominated bond is sold at a gain or loss, the sale is made up of two components: a capital gain/loss and a currency gain/loss. A recognized currency loss, in accordance with federal tax rules, decreases the amount of ordinary income the fund has available to distribute (regardless of how long the bond was held). To compensate for realized currency losses, the fund’s ordinary income must be adjusted to ensure that the fund does not distribute too much income early in its fiscal year. If currency losses are not factored into ongoing distributions, the fund risks distributing more income to
shareholders than it earned during the year. This would result in a return of capital to shareholders, effectively reducing the amount of principal that shareholders have in their accounts. Global or international funds, given their larger allocation to foreign bonds, may be especially impacted by a strengthening US dollar and therefore could experience greater fluctuations in ordinary income distributions. Currency gain/loss amounts are monitored on a regular basis for each fund.

I don't really know, but what else could it be?

Howdy PopTart,
I too have been watching the space very closely and actually added to my VERY small positions with junior silver miners just yesterday.
First of all I am still of the mind that everyone should have a wee bit of precious metals in their portfolio. By wee, I'm talking 3-10%. I consider this to be a security blanket type of investment (something for that EOTWAWKI moment). My grandkids have their bed buddies and my pm holding is my bed buddy.
More pm than this core holding is speculation. Speculation is fine and fun so long as you realize the risks. Is now a good time to speculate? What do I know? When I play with investments, speculate, if you will, I lean towards momentum investing. In this I look for trends and when they appear, gradually scale in to my target amount - as long as the trend (momentum) is with me. Let's say you think this nascent trend in the pm's is going to last, and you figure you have $10K to play. Invest $2500 and see if you make money. If you do, add another $2500 and again, see if you make money. If you do, go with the remaining $5K. If at any time it doesn't make money - do not add any more. If it loses, or starts to, have a mental stop loss of say 5-10% at which point, you start scaling out of the play. If it drops some more - exit. This momentum style investing and my penchant for this particular arena, is why I added to my junior silver miners yesterday.
Now as for investing in pms. Funds and ETFs are of two types - bullion and mining stocks. Bullion ETFs will tax your gains at the Collectible rate of 28%. My favorite fund is still TGLDX which does have a little bullion but is taxed at normal cap gain rates. Or, you can go with CEF, a closed end bullion fund that is about 55/45 gold to silver. Or you can go with mining stock funds, ETFs or individual stocks. Lastly, and this is important to many people. For you core holding in pm's, the 'hard corps' recommend holding the physical metal. Although some peeps like safe deposit boxes and such, cripes, a roll of American Gold Eagles comes in a tube 2" tall and the size of a quarter. You can hide it in the oatmeal box and it's worth ~$25,000.
All this said, at this point in time, based upon the metrics of the gold/XAU and gold/silver ratios, miners are undervalued vs. bullion and silver is undervalued vs. gold. Note that this is on the margin. The great leverage is with the junior miners but this is also nose bleed territory. My only homerun in about 40 years of investing was with Silver Wheaton that I bought around 2002-3 for under 3 that I sold in the 40's. Cha-ching!
Right now there are several geopolitical factors at play. China's economy has slowed and they have been fairly steady gold buyers both by the CB and by individuals. The threat of terrorist attacks has really spooked the traveling public and this fear translates in to bullion demand. We also have the zika virus shutting down travel to central and south American and I am far from convinced that Rio is going to be able to even have the Olympics. Oh, and did I forget the Saud family's gas war to end all gas wars? And with Iran coming online, I don't see oil much higher than today for quite a while.
Now all this stuff is what Fear and Loathing are made of (where's Hunter?).
BUT when all is said and done, the POG is dependent upon the price of the U.S. Dollar. Because gold is priced in terms of the dollar and the dollar is the world's reserve currency, they normally are indirectly proportional and this has greatly contributed in the pull back in bullion prices from it's high of ~$1900 in 2011. Recall that the great bull market ran from 2002-3 until this time and commodity bull markets normally last in the 12-15 range. This is due to the complexity of bringing additional supply online in response to higher demand and prices (e.g. you have to find it).
As for the dollar, I've said it was trash since they started QE-nth but compared to any alternative currency, it is still the cleanest pair of dirty socks in the hamper. Lately, it's been showing some weakness but due to ???? Although, I'm starting to sense a negative impact on the dollar caused by the anger of the general public directed at Washington is the support for Trump and Sanders.
Sorry to ramble on,
and so it goes,
peace,
rono

I try to stay away from funds that I don't understand the strategy, that include Rob Arnott's funds. Glad I stay with plain vanilla TRP Capital Appreciation and Vanguard Wellington.

@MikeM: I too have two buckets for stocks, and virtually all of my stocks are in iras, so preserving of capital is not necessarily priority one, although still important. I learned early on that setting a stop loss almost guarantees it will hit it :) My long term stock stop losses were fairly liberal (generally 15-20% down from purchase price) and once hit they went right back above and stayed above there for the most part. Some I bought back, some I let go. My other bucket , some people call spifs, are always 5% or less of portfolio and primarily are composed of 4 or 5 small or midcap stocks. There are not intended to be long term holds, but one or two I have kept for more than one year, but watch very closely. I no longer use stop losses on these either. I just watch them closely, retired.

These funds were sold as providing the flexibility to go anywhere where gains could be made. Which is fine if the manager had the ability and the skills to manuever as such. Turns out Rob Arnott is just Hussman in a corporate suit with a rigid philosophy waiting for the market to come to him.
In my baseball analogy earlier, a hitter that waits for a specific ball to send it out of the park as opposed to one who takes every ball as it comes and manufactures a hit. The team can lose while the former is waiting.

@MikeM, have tried similar experiments (with ETFs not individual stocks) none of them really worked for me. Fixed stops in amount or percentage don't work because it depends on the inherent volatility of the asset. A lower volatile asset keeps you in for too long, high volatility takes you out too quickly before it bounces back up. With individual stocks it is worse as they are more often subject to spikes based on news that can trigger these stops. So any mental stop has to be subjected to a judgment when it happens rather than be automatic and that takes time.
I believe this is why @junkster prefers low volatility assets so that you have more time without taking deep losses to make a judgment call rather than an automated decision but the idea of having an exit plan is still valid. He can correct me if I am wrong.
I do follow the Bollinger Bands (which are simply means to keep track of movements in standard deviations, nothing exotic in terms of TA) after having faced the same problem as you in holding on to a gain and seeing it subsequently disappear. If I see the price shoot past the 2 SD band on the upside, I sell. It works more often than not in preserving gains. Selling to limit a loss is much more difficult psychologically.

Buying individual, stocks to be honest, is just a recent "hobby" for me. I set aside a small bucket to play with. The first thing I learned (after mistakes) was to establish with yourself your mind set for the purchase. My mind-set had to be 1 of 2 categories, buy it and hold it, or speculating to hopefully make a profit over a short or long time. Speculating definitely requires establishing the sell point.
If you want to preserve capital as Junkster said, you must set a trailing-stop on the stock. You have to do that right after your purchase. I decided my method would be the 1% rule. Never loose more than 1% of your stock bucket on any single purchase. For example, if you decide you have $10,000 to invest (or play with in my case) in stocks and spend $2000 on a specific stock, set the trailing stop at 5% (($10,000 x 1%)/$2000) = 5%. Allow the stock to trend up (hopefully) and if it drops 5% from it's recent high - auto sell.
Are there other sell rules people use? Like I said, I'm new at this and really have had mixed results. My worst buys were before implementing the trailing stop - for sure. Still hanging on to my first buy, SLB. Darn stock increased ~20% at one point for me, then lost all that and more. But that helped me learn.

Woulda, coulda, shoulda. It's fun grinding someone's face in the dirt isn't it.
So really, folks waited a half hour after the news to start selling a stock that just dumped on them. Really!?
I agree. Entry and exit plans should be laid out ahead of time for any investment. There was, and still is, plenty of handwriting on the wall with respect toward deterioration in the energy sector. However news events work in both directions. Not everyone can be glued to their electronic devices throughout the day in order to react to every wire snippet. We also have no idea other than digital fog clouds about an investor or their portfolio or their positions in same or any of the reasons why they invest in what they do. For all any of us know those recently bought shares could be add-ons to legacy shares handed down from great, great grandma who lived out her golden years on the capital gains and dividends they produced. Who knows!?
Yeah, I love I told you so's.
Edited to correct some typo's, increase clarity and also to add the following. Conoco' executives made a point of coming out nationally and making repeated statements about how safe the dividend would be. Either they were lying or incredibly incompetent plus too stupid to have a grip on reality. For cripes sake the company RAISED the dividend last year. Since they didn't foresee this being a problem one might postulate that managing a company of this nature and in this environment is not their strong suit.

Heck, I can't even gains access M* ... The message I keep getting on my computer ... "Server Is Too Busy."

FYI:
Regards,
Ted
Bloomberg Slant:
http://www.bloomberg.com/news/articles/2016-02-03/asian-stock-futures-diverge-as-dollar-selloff-sparks-oil-rebound
Reuters Slant:
http://www.reuters.com/article/us-global-markets-idUSKCN0VD024
MarketWatch Slant;
http://www.marketwatch.com/story/us-stock-futures-point-to-further-gains-as-oil-rallies-2016-02-04/print
USA Today Slant:
http://www.usatoday.com/story/money/markets/2016/02/04/stocks-dow-thursday/79807730/
IBD Slant:
http://www.investors.com/market-trend/stock-market-today/dow-outperforms-for-second-day-mattel-soars-on-deal-talk/
WSJ Markets At A Glance:
http://markets.wsj.com/us
Sector Tracker:
http://www.sectorspdr.com/sectorspdr/tools/sector-tracker
Current Futures:
http://finviz.com/futures.ashx

@davfor, that is an interesting and useful observation. It is necessary to understand where something like this may fit in for fund evaluation.
At a very high level, those ratios answer questions like "Is this fund going to go up and down a lot for what I can get from it that may be a problem". RARE analysis answers questions like "If I buy this fund over an index fund (or another similar fund) at any time, am I (as opposed to the fund) likely to do better than the latter".
Regarding the ratios you mentioned, a quantitative study of correlation at this point wouldn't make sense because the sample space is so small and the selected funds are already skewed towards funds that are rated high over several metrics.
But qualitatively, they do measure very different things. Those ratios along with Sharpe ratio are volatility measures that may affect your ability to achieve a certain return or the deviations they make in reaching that return that may give you ulcers. So, they are affected by market volatility. A sector index fund that faithfully follows a highly volatile sector would fare poorly in those measures.
RARE grades on the other hand measure the ability of an investor to realize an alpha or excess return over the market using a particular fund even if you are losing money because markets are headed down. It normalizes with respect to market volatility.
So, it is more related to alpha measures for a fund. It differs from alpha measures in that it is also a measure of the volatility of the alpha generation as a rolling metric. Just as volatility of price in a fund affects the probability of returns you get based on when you bought that fund (near a peak or a trough), volatility of alpha determines the probability that any individual investor will realize the alpha that is measured for the fund in discrete steps.
If the underlying market is very steady and the fund is very volatile with respect to it, it may be correlated with volatility measures. But if the fund is also steady, then it isn't correlated. A fund that generates alpha uniformly will have good RARE grades and a fund that is equally steady but loses with respect to the index say with high ER, will have poor RARE grade while the volatility measures might be the same for both.
The reason this distinction to alpha measure is important is because of timing and the incentive fund managers have to manage returns for a calendar year. If the alpha performance of a fund is streaky or lumpy as may happen with a focused fund, then the alpha you would see will be very dependent on when you bought into that fund and may be much less or negative compared to the alpha reported for that fund in some fixed time period.
Fund managers are in the asset gathering business not fund returns business, so the latter is only important as to help in that asset gathering. Because of the year to year metrics used which determine how a fund fares in rankings and comparisons, it sets up an incentive for a manager to manage the returns for a calendar year rather than manage the returns for the investors coming in and out.
The activity of fund managers trying to juice up returns towards the end of the year by increasing risk or beta exposure especially if they are trailing the index is much talked about. If you sold the fund before they did this (or have been selling regularly in retirement), you may not get anywhere close to the returns for the fund for the year.
What is not talked about much is the opposite, when fund managers get a windfall earlier in the year. Depending on that gain, it may be safer for the managers to reduce risk for rest of year and coast than risk losing that earlier gain. So if you are doing monthly buys or buy later in the year, you may not see anywhere close to the gains for the fund for the year.
RARE grades try to separate funds that have streaky or lumpy gains in narrow periods from those that steadily (not calendar year consistent as some metrics try to do) beat the market over longer periods. While it may protect you from poor timing of when you got into the fund, it also has the benefit of potentially avoiding funds that look good on paper but that may be from one or two lucky streaks and unlikely to be repeated. Funds with steady gains over longer periods may indicate better management and/or strategy.
Should complement other fund evaluation criterion.

Walkin the walk M*s top performing L/S fund in 2015-16
Update From the Jan 31 OTCRX Fact Sheet
..We continue to be focused on credit domestically and globally as the change in credit conditions is being underappreciated by investors from our perspective.
Credit market stress continues to percolate in various sectors with stress now going beyond commodities..
the decline in equity markets has made valuations slightly
more attractive; however, overall valuations in both the equity and bond markets are not compelling on an absolute basis considering the growth outlook. We
estimate the S&P 500 is trading around 15x-16x consensus 2016 earnings, this is near its historical average. Based on our conversations, it appears that in the
near term there will continue to be selling pressure in the market driven by asset liquidations among Sovereign Wealth ( funds )..
As we enter February, we have approximately 20% of the Fund in cash. We anticipate equity and bond markets will remain volatile as the market goes through a
painful digestion period driven by a less accommodative Federal Reserve, slowing global growth, tighter financial conditions, and the risk of a currency war.
Ultimately, asset prices will have to adjust to reflect a higher risk premium
Copyright © 2015 :::: Otter Creek Adviosors, LLC
http://www.ottercreekfunds.com/media/pdfs/OCL_Factsheet.pdf
OTCRX Y T D +4.09 1 YR +13.89 A U M $225 mil
JANUARY 20,2016 Webcast Combine the two links for the full presentation.About 45 minutes.
http://www.ottercreekfunds.com/media/pdfs/OCL_Call_Presentation_4Q2015.pdf
http://www.ottercreekfunds.com/media/pdfs/Q42015_CC.mp3
Or
http://www.ottercreekfunds.com/index_webcasts012016.html
Also
http://performance.morningstar.com/fund/performance-return.action?t=OTCRX&region=usa&culture=en_US
Synopsis /Outline
THE OTTER CREEK INVESTMENT PROCESS
US MACRO: THE AGE OF GOVERNMENT AUSTERITY IS OVER
Government spending is estimated to add around 40 70bps to GDP growth in 2016 according to various Street economists
US MACRO: OVERALL THE US ECONOMY HAS SLOWED
US MACRO: MIXED SIGNALS
Global trade volume growth has turned negative
One potential upside factor to growth is lower oil prices eventually boosting GDP
CENTRAL BANKS: THE POLICY CONUNDRUM
TAILRISK: EXPECT THE UNEXPECTED IN 2016
Large increases in global debt, zero bound rates, slowing growth
...we are expecting heightened levels of volatility to continue
(and they're busy boys on those days)
MARKET FUNDAMENTALS: EARNINGS GROWTH and PROFIT MARGINS
S&P 500 earnings growth excluding energy has moderated, but it is still growing
Margins gains have slowed
CHEAP DEBT & LOW RATES: REAP WHAT YOU SOW
Zero bound rates have created meaningful distortions in how capital is allocated...it started with energy production
Auto subprime financing at all time highs
THE MACRO and MARKET ENVIRONMENT: CONCLUSIONS
PORTFOLIO POSITIONING IN TODAY’S ENVIRONMENT
Long Portfolio
Short Portfolio
INVESTMENT THEMES
DRAWDOWN ANALYSIS
CONCLUSION
Seek to achieve:
•Absolute risk-adjusted returns
•
Capital preservation
in periods of dislocation
•
Low
correlation
relative to the market indices
•
Below average volatility
relative to the S&P 500 Index