Hi, Bitzer!
If by "defensive" you mean "weakly correlated to the stock market," you might benefit by thinking about how equity-oriented funds minimize their correlation.
Some choose to short individual stocks, which allows them to maintain an effective (called "net") exposure that might be in the 40-60% range. Representative of such funds is ASTON/River Road Long-Short (ARLSX), LS Opportunity (LSOFX), RiverPark Long-Short Opportunities (RLSFX) and Wasatch Long-Short (FMLSX).
Some choose to sell options which generate income and rise in value, generally, when volatility is climbing. Representative of such funds is RiverNorth Dynamic Buy-Write (RNBWX), RiverPark Gargolye Hedged Value (RGHVX) and Bridgeway Managed Volatility (BRBPX).
Some choose to maintain high cash balances when the market does not represent a screaming buy. Representative funds include Bretton Fund (BRTNX), Cook and Bynum (COBYX), Pinnacle Value (PVFIX), all of the F P A funds (including Crescent and International Value), and Tilson Dividend (TILDX).
Some, of course, have hybrid stock/bond portfolios. I'd be cautious there about anything holding a bond portfolio with a maturity of more than five years. You could do worse than a fund like Greenspring (GRSPX) or Osterweis Strategic Investment (OSTVX).
Each approach has its special drawbacks and none are pure magic, but any of the strategies might work to help you find a long-term holding that you might choose to enlarge when your anxiety climbs.
For what it's worth,
David

Reply to @Investor: Hi, big guy!
Sorry about the delayed response. Just returned yesterday and faced a surprisingly large pile of stuff of the "why didn't you do this before vacation?" variety. Since Chip and Charles have weighed-in on copy edits and the database, respectively, I just wanted to pick up on four points:
Royce Value (RVT) and its peer group. RVT is categorized as a "small blend" fund. The CEF universe is tiny and filled with niche products, which presumably explains why there are only two small core funds in the bunch. I'm guessing Morningstar felt compelled to have a category for each stylebox but I agree with your concern, that it's really misleading not to disclose the number of funds when they're small enough to seriously distort the rankings. I've passed your query along to the Morningstar folks.
Long/short funds and my portfolio. I'll do a snapshot of my (incredibly dull) portfolio for September. I don't have any long/short funds, at least in part because most of the portfolio was set before I found attractive options. There are two funds that particularly interest me (ASTON/River Road Long-Short ARLSX and RiverPark Strategic Income, which is not yet launched) and which might worm their way in as substitutions (ARLSX for BBALX, RiverPark for Price Spectrum Income).
Interesting "Elevator talks". I'm trying to use the ET feature as a way of broadening my own horizons. Left to mine own devices, I'd ignore an awful lot of stuff. My hope was to offer folks whose strategies didn't immediately grab me the opportunity to slap some sense into me. And so I'm not predisposed to buy an interval fund but I do find the logic fascinating (well-chosen liquid investments have a poorer risk/return profile than well-chosen illiquid ones) and I was glad for the opportunity to learn about them. The feature's a surprising lot of work because firms are so worried about running afoul of FINRA/SEC regs, but we'll keep at it.
On being criticized. I'm deeply grateful for it and, especially, for the careful reading that folks like you, Charles and Chip offer. By the moment it comes for us to publish a piece, I tend to view it with such a combination of dread, loathing and embarrassment that I've ceased to be a great reader of my own work. They, and you, are and it makes a huge difference in the quality of the Observer. So, thanks!
As ever,
David

Here are links to updated fact-sheets for Whitebox Tactical Fund WBMIX and Long-Short WBLFX.
Here's link 2Q Commentary.
Quick notes: The Great Rotation Begins. Premature accumulation of gold miners, but holding on because under-valued. Short Apartment REITs. Long Financials and Specialty Financials. Short Fixed Income. Long Quality Blue Chip. Short Consumer Staples. Long-Cap Over Small-Cap. Long Airlines and Automotive. Use of straddles as hedge against volatility.
Intriguing, as always. And, I appreciate their articulation of good/bad past performance and of strategy and positioning going forward.
And, from fact-sheet: Interesting that WBMIX now using long-short peer group, if not formal benchmark.
Here's look at YTD performance using M* chart:

Not bad.
BTW. Not a peep yet on 2Q performance from AQR.
How does WBMIX compare with AQRIX, or another favorite, ARLSX YTD?

Reply to @Charles: Charles, did you see this little tidbit in the ARLSX report? They're saying shorting is getting to be a crowded trade and returns from it may be weakening. I don't get exactly how that works, but it sounds a little ominous for L/S approaches, unless I'm misconstruing something in the language.
"Crowded shorts (when a sizeable portion of public shares are sold short) have historically outperformed the market as short sellers faced little competition. With the massive growth of the hedge fund industry now looking at the same short opportunities, we wonder if this historical relationship will weaken. The portfolio’s crowded short positions did not work this quarter, and we speculate that it was a large negative contributor for the broader long-short equity universe. The average return of the underlying stock of the portfolio’s crowded individual shorts was 20% versus just 7% for average non-crowded individual shorts."
AJ

Reply to @3yards: I too thought AQR would have exercised its drawdown controls sooner. If I remember, I think ARLSX uses 2-4-6% thresholds. AQRIX may use 5-10%, but I'm just guessing based on what I have seen. They have never published their levels. Still better (for me) than strategies that will ride down a vehicle if belief remains in valuation.
Again, this recent "out of sample" market behavior will be true test for young AQRIX. I suspect their AUM will suffer for performance behavior inconsistent with shareholder expectations, especially for the newer and more highly leveraged RP II offerings.
Right now I'm still heavy the fund (along with FAAFX) and relieved that when bonds tanked yesterday AQRIX did not for a change. Hoping to get more insight with 2Q commentary...if they ever publish one =).

One of things I just love about this shop is their consistently prompt and frank quarterly commentaries. August 1 today and ARIVX and ARLSX commentaries have been posted for 2Q13...along with all other ASTON/River Road funds.
As for AQR Funds? No update...still showing 1Q commentary.
As for Whitebox Funds? No update...still showing 1Q commentary.
As for Fairholme Funds? Well, actually, Mr. Berkowitz just posted 2Q2013 letter...bravo!
Now, don't get me wrong...I actually like all these shops, but hands-down, ASTON/River Road provides most timely communication to its shareholders.
And when things are not going well, like say recently with ARIVX, even more important to keep communication timely.
Small perhaps but I think an important attribute of "shareholder first" stewardship.

I like WBMIX more and more. Not really Long/Short as Scott as pointed out previously, though M* recently categorized it that way. It uses a lot of leeway. And, I like ARLSX.
Shorting is scary stuff, especially naked shorts. I for example think Staples is an awful company. Big retail stores with lots of empty space that nobody ever visits except in August, poor inventory. So, I shorted it at $13.322 and it proceeded to drop to $12.792. But then OfficeMax merged with Office Depot and Staples jumped to over $14. Fortunately, keeping panic a bay, it came back down and I was able to unwind at $13.248.
That was in February. What's SPLS at today? $17.19. Up 51% YTD!
I obviously have no business trading stocks, especially shorting stocks.
You just need to be very very smart, like the folks at Whitebox. And even then, you need to be lucky.
If you haven't already, you might read David's "What’s in your long/short fund?," I found it both helpful and amusing.

Reply to @scott: The A-share class of the Neuberger absolute return fund is NABAX, and it's load-waived & NTF at Fido too.
Took a quick look at the up/down capture ratios of L/S funds ARLSX, NLSAX, and PMHIX on M*: the only directly comparable period is one year, and Pimco wins by a landslide on that basis, at 58/-31 versus NLSAX at 46/12 and ARLSX at 65/79 (they're all calculated vs. the S&P 500).

Hold in cash for the nonce while you invest. Forget in other words about parking in BOND, MUNI, MINT, etc. If you are feeling more confident than not about the near-future market, you could hold in ARLSX, GLRBX, JABAX, or similar with good ulcer index. You could even deploy an ETF like AOR. But all of these could dip in a way cash will not. (duh, of course.)
For the sake of comity among nations (putting on a therapy hat for a moment), I would not push the FPACX case but would simply stick with Vanguard. (This from someone who owns no Vanguard, being with other brokerages.) With Vang you can duplicate what you need for diversity without having to explain overmuch or be 'trusted' for your (manifestly capable) judgment. Go slowly into 65% div-paying US equity ETFs, large-cap and small, Vang or equivalent Vang funds; and 35% into div-paying international. No bonds for now, some further cash maybe. This way, when Fairholme and Matthew (say) go south, you will not have to defend.
Regarding Romick in particular, see the latest M* interview. With his kind of woeful thinking, you wonder why he bothers. And as for whether his contrariness and individualistic insights pay off (given his overcharging), downside protected against, tension balanced and all that, with everyone else supposedly deluded or much less prudent in these regards, well, just look at the last six and five years of his performance compared with MAPOX, JABAX, ICMBX, and GLRBX. (Those are the best of other options for your trust, but I would attempt to duplicate them too with something of Vanguard balanced, or a balanced Vang mix.)
And yes, send interval reports, which as noted can just be Vang statements with a note from you about your thinking or adherence to plan. Seeming autopilot is key, I suggest.

I myself don't see how FPACX is such a bleedin' winner compared with GLRBX, JABAX, ICMBX, and ARLSX, but maybe that's just me and the stick I have about Romick holding so much cash and overcharging for it and not clearly outperforming.
Anyway, re
>> Does historical performance in past bull and bear markets have any practical forecasting merit?
I have been trying to follow the outcome of the recently announced SP500 persistence backtest methodology but have not found the bottom line (maybe I have to pay) --- so what managers do consistently superior work??
Since I buy managers, so to speak, I did do my own crude quickcheck of my ancient faves, both held and ditched, and thus offer to the group this fwiw:
When I compared GABEX, YACKX, FLPSX, PRBLX with SP500 over 19, 13/14/15/16, 10, 8, 7, 6, 5, 4, 3, 2, 1 and ytd, I found that all of them regularly beat SP500 with the following exceptions and notes: PRBLX, GABEX lagged slightly @ 4y, they plus YACKX did the same at 3y, *only* PRBLX and GABEX outperformed at 2y, but then all outperformed or tied at 1y and ytd, same as long ago but less dramatic.
So what do I conclude? Well, only that I am glad to currently hold those four funds (I traded in GABEX for PRBLX) and am glad that all do well ulcerwise.
I also checked hoary good funds (don't know about manager constancy) that I have ditched. Again fwiw:
TWEIX, JENSX, DODGX, FCNTX (various managers but almost always pretty solid), WVALX, TORYX, and SSHFX: all were much iffier compared with SP500 over the last 19 years. The last three have been stronger more recently, but not enough for me to care. I want to see near, long and longer strength.
So there you have an informal and unrigorous look trying to dupe the SP persistence data.
I also believe in paying for downside protection, and the four I now hold as I enter retirement all offer that, to an extent, compared with indexes even div indexes. Nobody talks much about that. I will pay for that bigtime. Gabelli is always hammered for being expensive, e.g., but check his downside stats.
Thoughts appreciated.

Okay I have my answer to original question. M* has a bug in their database. Or are ANALysing and coming up with those numbers. It's Holding page for ARCNX is blank. This fund is 100% invested. I don't care to look at PCRIX because I know the real issue now.
As far as ARCNX performance is concerned they have lost over 15%. They are targetting maximum drawdown of 15%. So they have already broken their promise (again forget M* YTD number, just go on AQR site). If this fund drops 20% YTD, then I'm going to sell and invest in commodity index fund instead. The DD was important for me when I invested. Same reason I bought ARLSX. You need to keep the manager honest.
Anyone have any mutual fund suggestion for commodity indexing, please let me know. I don't do ETFs. Just in case, want to be ready.

Heather, I would suggest looking hard at some that have not been mentioned, which I hold, which generally have the lower risk and higher capture you seek. Not to expand your choices :) . I agree getting holdings under 10 would be a goal.
But I also would stick with a manager for a long time if he or she has the savvy, no matter what the press or others say. (Being 66 and forcibly semiretired, I recently sold some funds run by Heebner and Gabelli, guys intermittently unpopular and dumped on, funds which for me went from 5k ~>20 years ago to 175k, emphasizing to me the virtue of unwavering holding despite press and scuttlebut; I have invested with Tillinghast as long or longer, same thing, and nobody much mentions Flpsx on MFO.)
Anyway, some others to investigate: Glrbx, Jabax, Mapox, Icmbx (courtesy MFO), and the handy Aor and its siblings. Others have mentioned Prblx but not so much Yaffx. And yes, I have recently been exchanging into Arlsx. Not to clutter your mind, just some alternative thoughts. And another yes, <<30% in bond things for your earning years.

I have a M* watch list of alternative type funds. I'm intrigued by the idea of a fund being able to navigate different economic cycles to give steady positive results. The last 3 months, both the bond and stock markets have been pretty volatile. So short term results for these funds, though not a true testament of the fund, are pretty interesting. Charles could do a much better analysis the last 3 months, but here is some simple comparisons.
I'll add VFINX as a market comparison and FPACX, one of my favorite funds where the manager has great flexibility. Ranked by best 1 month and worst 1 month.
comps: 1m 3m
VFINX -3.1 2.9
FPACX -1.8 3.0
best: 1m 3m
HSGFX 2.4 0.4
MFLDX -0.6 2.2
WBLSX -0.8 2.1
HSTRX -0.9 -6.5
RGHVX -1.6 2.5
worst: 1m 3m
AQRIX -8.9 -9.6
ABRIX -5.8 -5.4
PAUDX -5.1 -5.9
PRPFX -4.9 -8.1
PASDX -4.8 -4.2
others on my watch list that fell in the middle of best and worst: PGDPX, ARLSX
My take-away from this is that the much talked about alternatives just didn't hold up (AQRIX, ABRIX, PAUDX, PRPFX). My favorite manager and fund, FPACX, did just fine, which makes me think why not just stick with the tried and true performer. I would never touch HSGFX again, just because it only does well in bear markets - but in this comparison it did well. MFLDX is a very nice alternative fund as many here have said in the past. And lastly, I bought into RGHVX after David's commentary on the fund. It has been relatively volatile, but looking back 1 and 3 months, has weathered the storm fairly well.

Hi Mike. I like WBMIX and I like the intellect and frankness of the shop, which Scott introduced us to. I think ARLSX makes for better diversification and suspect WBMIX correlates more with equities. That said, Mr. Redleaf has a lot of authority and if he assesses right, could be ok. Recently I chose ARLSX over WBMIX, but still attracted to WBMIX and may look for opportunity to get back in. Available at Schwab for no load at somewhat tolerable ER of 1.36, but better than the 1.75 ER for ARLSX. One gripe I have with Whitebox is that while I love their quarterly commentaries, they take forever to update them. For example, it's June and they are still showing only 4Q12. ASTON does a better job in this department. A gripe I have ASTON is their high minimums for institutional shares, $1M in case of ALSIX.

I think your numbers are wrong or stale.
ARLSX down 0.7%
HSGFX up 0.58%
WBLSX up 0.10%
WBMIX down 0.64%
FMLSX down 0.89%
VFINX down 1.43%
As of May 31st.

I put WBLSX and WBMIX on my watch list with quite a bit of skepticism. But looking very short term, they are holding up pretty well as alternative diversification. There have been a couple other recent posts about diversifiers and where to go in place of bonds. These funds were never mentioned.
Yesterday was an interesting signal. I have 4 L/S funds on my list. WBLSX, HSGFX, ARLSX adn FMLSX. In yesterday's late dive, WBLSX along with HSGFX were in the green. Over a pretty bumpy stock market week, WBLSX pulled out a +1.6% return. The controversial HSGFX was also in the green at +0.8%. FMLSX was slightly positive, +.2% and ARLSX was -0.2%. In comparison, the VFINX was -1.1%.
The positive comparison of HSGFX and WBLSX pretty much ends when looking back the last 3 months when the market did very well. Looks to me like HSGFX will only be decent in a prolonged bear market. Whitebox looks like it may do well longer term in market cycles. Again in comparison to equities, (VFINX gained over 8% n the last 3 months) WBLSX was a positive 5.3%. HSGFX was slightly in the red. WBMIX actually gained most of the markets returns gaining +6.6% over the last 3 mo.
A lot of rambling, but just wanted to highlight a couple funds that may well end up being decent diversifiers. Still not sure I would buy it if I could, ironically, neither fund is available to me through my TRP account.

I'm planning to build up from a small position in ARLSX (long-short); overall its returns since I've owned it have fallen between stocks and bonds, and on the days when both take it in the shorts, it's been the only green anywhere in my holdings ... at the moment, at least, it looks like a real diversifier.

I finally found a use for a long-short fund, ARLSX in this case, on days like these last few when most stocks and most bonds are down. It's up reasonably in the last week, while all my other funds are down. I still have a core bond fund that would normally be less correlated with stocks, but of course that's not happening right now.

Isn't cash a guaranteed source of negative alpha? So, only minimum amount of cash in my portfolio. I'm 40% fixed income (multi-sector bonds...BOND, RNSIX, MAINX, FOCIX, DODIX), 30% risk parity/mod allocation (AQRIX, DODBX, ARLSX), 30% long equities (FAAFX, SIGIX, DODGX, BAC, ARIVX, FAIRX, BRK.B, GE, COP).

Lots of good funds listed in this post, seems to me, but some can be very volatile.
Below is tabulation with emphasis on lifetime downside and drawdown performance. I broke into older and younger bunches, so not direct comparison over same period, just trying to get feel for up versus down.
First the older bunch, all living through 2008, sorted by Martin Ratio:

Next, younger bunch, from 2009, sorted by Sortino ratio (since we've basically not had much in way of drawdowns):

PONDX amazing of course. BPLEX, MAPIX, PRHSX, MACSX all have strong returns and good downside protection. Investor is right about extreme ER for Robeco's LS fund...high even for this already high category. I added WBLFX, which David profiled this month...a tale of two funds.
See that PETDX was basically left for dead in 2009 with Max Drawdown MaxDD of -73%. I for one could probably not tolerate such a decline, even if it was "only" on paper. Ditto for MAPTX and PRNHX.
Please beware of RYOIX. It has the highest Ulcer Index of any fund on list. Handle with care.
As for the younger funds, MAINX continues to post impressive numbers. So does PGDIX. I added AQRIX, ARLSX, and COBYX to list.
I let out a sigh thinking about WBMIX. Unless things pick-up next week, April numbers will not look so good. If I remember, Mr. Redleaf has been shorting high yield bonds and he remains bullish financials. More on Whitebox later.