FYI: DoubleLine Capital, overseen by widely followed investor Jeffrey Gundlach, said on Wednesday it posted a net inflow of $1.95 billion in January, marking the firm's 24th consecutive month of inflows.
Regards,
Ted
http://www.reuters.com/article/doubleline-gundlach-inflows-idUSL2N15I232

What I want to know is who wrote the oil hedges that have paid out billions to fracking companies keeping them alive?
The way capital market equities have been tanking (see KCE), there is something going on in the big asset management and investment banking area that is causing a panic.
The stress test for a bank is debt financing frackers with oil as collateral and then underwriting the hedges for the price of oil. When oil prices zoom upwards, they make billions but with oil going in the opposite direction, the collateral value goes down, the companies whose debt they hold begin to default on top which they have to pay out the hedges. Triple whammy.
The latter seems like just the kind of situation our investment bankers would jump into with both feet when the going is good.

FYI: Gene Neavin, co-manager of the top-rated $753 million Federated High Yield Trust, divides junk bonds into two categories: the 10 percent of the market issued by metals, mining and energy companies, and the 90 percent from everyone else.
While the first group faces serious problems, the second is in surprisingly good shape, according to Neavin, whose fund has the best five-year performance among its peers. His view contrasts with bleaker forecasts from the likes of DoubleLine Capital’s Jeffrey Gundlach.
Regards,
Ted
http://www.bloomberg.com/news/articles/2016-02-02/why-the-best-junk-fund-manager-since-11-is-betting-on-a-rebound

Interesting note from M* commenter, bchalmers:

Quoting Kevin Carter of Big Tree Capital - what to do with broad emerging market ETFS?
Carter: Avoid them. I have come to the conclusion that the largest emerging market ETFs (EEM & VWO) have significant structural flaws and are not optimal ways to get exposure to emerging markets.
That conclusion is only being strengthened by the collapse of oil and natural resource prices. The biggest problem with these ETFs is the large allocation to state-owned enterprises, which account for about 30% of EEM and VWO.
These are massive, legacy, government-owned Chinese banks, Brazilian oil companies, etc., that are inefficient, conflicted and frequently corrupt. Just look at Petrobras in Brazil. If you read the newspaper, you know that the country is reeling, as dozens of Brazil’s government officials and business leaders stand accused of looting billions of dollars from Petrobras through a string of kickbacks and bribes.
The other big problem is that VWO does not own companies like Alibaba and Baidu, because these companies list in the U.S. and are thus not included in the FTSE Emerging Markets index.
It seems crazy that these companies choose to list on the most transparent markets with the highest listing standards, but get “punished” from an index perspective for that decision.
Of the 48 companies in EMQQ, only two are included in VWO. Just think about that. Petrobras is in VWO in multiple places (local listing, ADR, preferred), while Alibaba and Baidu aren’t.

At least the junk munis continue to just roll along with PYMDX the leader of the pack.

I keep looking over my shoulder on the junk munis, but right, nothing negative's happening yet - but we're getting close to that time of year for munis. I'd hate to give back very much of the gains - thinking about de-risking, like selling some NHMAX.

Hi @DavidV.
Thanks for posting the Seeking Alpha article. Below are some of my own recent observations and thinking.
I, myself, have been wondering what triggered the January sell off in the markets ... and, came to the conclusion that it had a lot to do with electronic program trading. It seems, there were some big money accounts that sold assets, as I have read, perhaps even some sovereign wealth funds to raise money to support domestic programs. No doubt, selling pressure in the capital markets was generated; and, I believe, program trading keyed on this selling pressure resulting in a good sizeable downdraft. Perhaps some might even say a selling stampede resulted.
From my own research, year-over-year earnings in the S&P 500 Index have been in decline for most of 2015 and had been trending downward until about September in which I noticed that they began to improve. From the reference source I use to follow earnings, earnings are currently projected to rise and to continue upward through much or 2016. With this, it seems to me, technical market trading patterns took over fundamental based market research and trading.
Within my own portfolio I have a good number of hybrid mutual funds (sixteen of forty seven funds) that invest in a combination of cash, bonds, stocks and other assets. In my recent month end study (January Ending Instant Xray Report), I detected that there was some good movement from stocks to bonds in these hybrid funds, as a whole, enough to the point that it raised my portfolio's overall allocation to bonds by 2%. Due to the delay in reporting mutual fund trading activity some of my hybrid mutual fund managers must of have had a feeling there was going to be a possible stock market sell off coming and began to move to bonds sometime back in late 2015 or because they felt stocks were overbought.
It will be interesting, to continue to follow this asset movement in my hybrid funds and see if this movement to bonds continues or if the hybrid fund managers change course and begin to now load equities perhaps following a fundamental path since earnings seem to be now improving and stock market prices have recently declined perhaps now to the point of becoming oversold.
I am wondering if anyone else, that closely follows their portfolio’s asset makeup, might have also noticed this?
I wish all ... "Good Investing."
Old_Skeet

FWIW, I sold FAIRX last year before the big cap gains distribution, but added to FAAFX. But I guess that doesn't answer the general question of whether or not to stay with BB. I'm giving him a couple more years, mostly because I think the bull market has a few more years to run, then if FAAFX hasn't knocked it out of the park to make up for its years of underperformance, I"m moving the money to an index fund or a low-priced diversified ETF like VIG or SCHD.
Because if Berkowitz can't outperform, with so much going for him, then I will no longer believe in my ability to choose great active managers.
A possible exception would be low-cost team-managed funds like Primecap or D&C.

I googled several different combinations to try to find any word at all on the topic, and found nothing.
However, I did run across one interesting site, called glassdoor, where employees post reviews of corporations they work for. AQR has 43 reviews, and they're pretty interesting.

After today will be up to around 6% in the junk corps with 84% in the junk munis and the rest in cash. Would like to sell some of the munis to get heavier in the corps if the market cooperates by working higher. Then again, the worst may be yet to come in the corps if the *experts* are correct. And as we know, the *experts* are never wrong.
Edit: Make that 8% junk corps.

Today is looking like the 5th consecutive day of gains in the junk corporates (and no, HYG and JNK don't tell the story) Quite a divergence from equities. Some of the better open end are down less than 1% for the year. Not exactly the crash we have been lead to believe that is occurring in that sector. Will be interesting to see if the cash market gains continue after the Fed meeting. Will be lightening up on the munis. My meager 8% exposure to the corps may have to be increased quite a bit.

Like most years, M* blew a number of these. Brown Capital has been closed for a couple of years, but they neglected to mention this. ANWPX is not an international fund. Even M* calls it a Global Stock fund, with holdings almost evenly divided between U.S. and foreign stocks. They clearly overlooked true international fund such as WAIOX (9.4% gain), DRIOX (12.6% gain), TGVIX (6.7% gain), and SGOVX (2.3% gain), all of which were remarkable in a year when EAFE was negative. And then there is MAPIX (4% gain when China killed EMs and much of Asia. Then PTSHX as the best bond fund? At least with NEARX you would have gotten a better return and not been taxed, if M* was looking for a good short-term bond. Heck, I could have been in CDs the last 2 years and been ahead of PTSHX. What were they thinking? And no AQR for alternative. I think VMNFX is an ok option, but it is not a true market neutral fund. I will stop throwing stones. In the end, these so-called awards a really nothing more than publicity events for M* and for the funds named.

Nothing in the capital markets is structurally safe and that is the reality. Just a matter of degrees.
With junk bonds, one has to worry whether the crisis is just a temporary mark to market induced crisis or a default induced crisis or if both how much of each. If just the former, then just holding tight would restore much of the values riding out current value fluctuations unless there is a huge rush to the exits forcing sells in the underlying funds realizing a loss. If the latter then the credit quality of the underlying bonds have deteriorated and some of them may become worthless.
To me, it seems like it is the fear of the latter that is causing a mark to market crisis in this area for now rather than actual defaults happening. The defaults could happen as much as feared or it may be overblown in which case, they all bounce back up creating buying opportunities.
These days markets are based on trying to front-run possibilities than wait for something to become real.

High annual turnover rates in excess of 200% or more tend to have larger distribution on short term capital gain.
Also international funds that use currency hedging also have larger distribution on dividend.

Large outflows turn out to be a double whammy. Funds may be forced to liquidate securities with formerly unrealized gains, and those gains get divided among fewer remaining shares.

Large outflows can also trigger realization of capital gains.
However, predicting which funds will make distributions is also complicated by the fact that some funds are aware that their large embedded capital gains are being watched and deterring investors from investing in those funds. So, what these funds then do is periodically realize their capital gains so that future investors are not deterred by the size of their embedded cap gains.

Either I'm reading the DOL proposal wrong or the news article is an insurance industry PR piece.
If you want a "short" summary, here's the DOL fact sheet:
http://www.dol.gov/ebsa/newsroom/fsconflictsofinterest.html
My two line summary: Fiduciary responsibility will now generally apply to advice on IRAs (so if brokers intend to avoid that responsibility, they'll have to stop selling IRAs altogether, which won't happen), and virtually nothing gets special treatment or singled out. If annuities lose market share, it's because they are often not the best investments (especially inside of IRAs), not because they're being picked on.
I'm still wading through the proposal - which is long and takes several readings to appreciate. With that qualification (i.e. I may not know what I'm talking about), here are some responses to the article:
- "annuity retirement accounts [would be added] to the list of investments for which brokers [have to act as fiduciaries]"
Sure, and so would mutual funds, and anything else in an IRA. What's being changed is that if you get individualized advice on an IRA (or 401(k)), the adviser would now be considered a fiduciary, regardless of the investment. The proposal says:

Today, ... many ...advisers have no obligation to adhere to [fiduciary standards], despite the critical role they play in guiding ... IRA investments. Under [the Internal Revenue] Code, if these advisers are not fiduciaries, they may operate with conflicts of interest that they need not disclose and have limited liability under federal pension law for any harms resulting from the advice they provide. Non-fiduciaries may give imprudent and disloyal advice ...
With this regulatory action, the Department proposes ... a definition of fiduciary investment advice that better ... protects plans, participants, beneficiaries, and IRA owners from conflicts of interest, imprudence, and disloyalty.

The proposal goes on and on about how high cost funds are costing IRA investors a percent or more a year. I don't see any similar criticism of retirement annuities.

The underperformance associated with conflicts of interest--in the mutual funds segment alone--could cost IRA investors more than $210 billion over the next 10 years and nearly $500 billion over the next 20 years. Some studies suggest that the underperformance of broker-sold mutual funds may be even higher than 100 basis points, possibly due to loads that are taken off the top and/or poor timing of broker sold investments

- "The extra work required by the new rules ... would likely push brokers away from selling annuities and toward mutual funds and other fee-based investments"
The extra work imposed by the new regulations would apply to all IRA investments, so annuities wouldn't be disadvantaged. As a result of industry comments, DOL streamlined the regulations to reduce the overhead. DOL acknowledges compliance costs:

The Department nonetheless believes that these gains alone would far exceed the proposal's compliance cost.... For example, if only 75 percent of the potential gains were realized in the subset of the market that was analyzed (the front-load mutual fund segment of the IRA market), the gains would amount to between $30 billion and $33 billion over 10 years.

- "They feel the government is favoring mutual fund companies like Vanguard over insurers"
The proposed regs allow advisers to keep their front end loads, their wrap fees, etc. so long as they are reasonable under the circumstances.

Investment advice fiduciaries to IRAs could still receive commissions for transactions involving non-securities insurance and annuity contracts, but they would be required to comply with all the protective conditions [that apply to mutual funds]

For the full set of DOL docs, see: http://www.dol.gov/ebsa/regs/conflictsofinterest.html

@rlyke12
Indicators of size...hmm, that's a toughy. And I would agree with msf that unrealized CGs (and, for that matter, unrealized losses) aren't very useful either. However, there is a situation where you can tell, if you notice sizeable CGs building up in a fund and are using that as a reason to get out or not invest in it, whether concern about a large CG distrubution is warranted. But you have to be willing to do the homework!
Let's say a fund has a bad year, or has a so-so year, with some or a lot of capital losses but no CGs realized. Rather than let the realized losses go to waste, mutual funds can "carry them forward," for many years (up to 5?), but they have to designate to the IRS how much and in which years they will be used. So, let's say a fund's bad year was 2010, with realized losses of $200M; they designate future usage of $50M for 2013, $70M for 2014, and $80M for 2015. You come along as an interested new investor in the fund in 2015, but see that fund has had a good 4 yr run and appears to be in harvesting mode, i.e. realized CGs are up to $50M, and it's only June. Maybe you should wait until Jan., you think, to avoid the tax hit. After all, why should you pay tax on someone else's CG?
And that is where all that minutia, in the SAI and in the back pages of the annual and semi-annual reports becomes quite relevant to your concern. Losses carried forward to what years are listed in detail there. So, in the above example, you go to the SAI, find this "old history" of which you were unaware, and find out that CGs tax is not one of the variables in play for deciding whether you should invest now or wait--- for 2015, most all of it is gonna be cancelled out at year's end.

IMHO the only somewhat reliable indicator is if there's been a management change to a new manager with a different investing style. For example, I'd expect a larger distribution with a management change at Fidelity than at T. Rowe Price where there's an effort at smooth transitions and continuity.
The larger distributions this year (2015) were not unexpected, because the market went up so much in 2014 and funds didn't seem to distribute much that year. That meant they were sitting on securities that had gone up a lot, and so were candidates to be sold off in 2015.
But ... while funds tended to have larger than average distributions, there were some funds with outsized gains, and I couldn't even guess at any common factor. So I'll beg off regarding indicators of size, beyond what I've already described.
More generally, you can look at figures like M*'s tax cost ratio to get a sense of a fund's typical distributions. That should correlate somewhat with turnover. I don't find a fund's unrealized capital gains particularly predictive - a fund may own the same appreciated securities for many years, even as it trades in and out of others.

What indicators are there, if any, that a mutual fund will likely make capital gain distributions later during the year? Is there any technical indicator one could use to predict the size of those distributions?

I did initiate a small position in CAPE on Thursday instead of adding to my DSENX. As an ETN, it throws off no income or capital gains. Small volume means it can't be unloaded without taking a hit.

My takeaway is to watch whether Berwyn Income Fund, with current AUM in the neighborhood of $1.7B, will become an asset gatherer for the acquiring firm.
Most striking was a phrase in the TriState Capital Holdings (TSC) release that its subsidiary, Chartwell, hoped to "meaningfully accelerate growth in client assets..."
That's never a good sign. (Remember, Berwyn Income Fund closed in 2010-2011, when it could not find new investment opportunities)
As for Berwyn, it says neither the objectives, invest team or process will change. And it says "total fund expenses are to remain unchanged for two years."
***
Also, the offerings of Berwyn and Chartwell appear somewhat redundant.
Chartwell's two mutual funds: small cap value (CWSIX-$1.7B market cap) and short duration (CWFIX- mostly BB-rated corporate bonds).
Berwyn: Berwyn (BERWX-$620m market cap) and Berwyn Income (BERIX- >%50 corporate bonds, BBB to B )
I presume the acquisition settles succession issues for the boutique firm - Berwyn CEO and president Robert Killen, and the principals are well acquainted, only a few miles apart out on the Main Line of Philadelphia.