I love the idea of performance adjusted fees.
I started thinking perhaps such an approach was the answer to otherwise seemingly investor-friendly, but high-fee funds, like ARIVX in particular. (See recent threads: MFO April 2013 Commentary is posted, ASTON/River Road Independent Value Fund Update, and I thought the April 2013 MFO was the best Commentary yet - anywhere.)
Other than hedge funds, I did not know a fee structure based on performance was employed or even legal for mutual funds. So, really appreciate you digging into this topic.
Bravo to John Montgomery and Bridgeway Capital Management, Inc. I haven't researched the performance of such funds, but just based on stewardship and investor-first practice, can't help but applaud.
So, more thoughts on ARIVX. Eric Cinnamond believes equities are over-bought. Wanting to protect capital, he opts to move more than half his portfolio to cash, which is yielding 0.1-0.2%. I own ARIVX and pay him to actively manage my capital. But ASTON charges a heavy 1.42 ER for ARIVX, even with large AUM of $718.5M. The fund currently has 58% in cash, which means investors incur a guaranteed loss of $5.3M each year for this portion of their capital. As long as Mr. Cinnamond maintains his bearish position, this allocation is an on-going source of negative alpha, whether he is right or wrong on the equity side.
In fact, I started wondering if it might be better for him use that $5.3M to short small-cap equities, which is effectively what he is doing by holding the capital in cash. Perhaps purchase put options.
But, I suspect the prospectus prevents such moves, not to mention ASTON's ownership. Similarly, the prospectus likely restricts ARIVX from investing in longer-term bonds. So, the fund is boxed-in to a small cap value world, which the manager believes is over-bought. Result: investors end-up paying 1.3% net ER for ARIVX to hold cash. The fund is also closed, exacerbating this investor relations issue. (BTW. Ever wonder what 12b-1 translates to for closed funds?)
A better solution? Performance based fees. ASTON should reduce its ER to basically zero for the cash portion of the portfolio. Reinforce its support of the sub-advisor's decision to hold cash during such times. Seems to me that would be huge show of stewardship. Still not as bold I understand as Bridgeway, but a big step in right direction.
Thanks BannedfromBogleheads for calling attention to performance based fees and Bridgeway. Perhaps there's hope =).

I only bought into this fund a couple weeks ago (sold some of my PRNEX to buy it), but RYOIX was my best performer in this down week. It's been sailing along in good weeks and bad. And I'm always pleasantly amazed how well MACSX navigates a steady return.
In a rocky week, these are the funds having positive returns in my portfolio this week:
RYOIX +2.6%
MACSX +.6%
GASFX +.3%
MAINX +.2%
PONDX +.2%
PGDPX +.1%
MWTRX +.1%
Not in my portfolio, but I have it on my watch list because of all the press it was getting on this board, WBMIX. I thought this fund was suppose to protect capital in rough times. That fund was down -4.4% for the week. I guess I would never buy into a fund where I don't understand where it fits.

FWIW, I split my TBGVX 50-50 with TBCUX, which is unhedged against the dollar with the same managers, when it became available; and it seems to have done better, according to my TDA percentage gains. Guess it's a dollar plus EM bet.

When it comes to tax efficiency I think it's important to remember that any fund you couldn't live with holding forever (and never selling) will not necessarily be tax efficient. And I think this should always be your goal because I'm of the old school of thought that trying to realize capital gains is speculation (just look it up in the dictionary) and that, in the long term, the only legitimate purpose of capital gains is to elevate the dollar amount of the dividend in a sound and prudent fashion (as opposed to chasing yield). So an index fund, even if not the ideal choice for a tax efficient fund today, is probably best in the long run because it's never going to be at the bottom of the pile (and thus tempt you to sell before this happens) after accruing significant capital gains; and also, since it is more difficult to be confident about the future dividends of actively managed funds, this confidence that capital gains/losses are only of secondary importance (except when it comes to taxes) will also allow you to actually achieve the goal of living off the dividend by eliminating from your portfolio inferior asset classes like "high quality" bonds (which underperform because they are simply poor investments, not because they are "less risky" as claimed by some fools...how could there be a lower risk of underperforming when everyone knows that the underperformance is consistent and predictable?).
That being said, there doesn't appear to be much diversification in holding international vs domestic indexes because everything is highly correlated. Some, like Jack Bogle, conclude from this that one should AVOID heavy allocations to international index funds (<50%), but I say it's all the justification needed to EMBRACE heavy allocations to international index funds (>=50%). Think of it this way: if you thought that they were both going to perform the same then there'd be no reason to select one or the other and so you'd need to split it 50/50, but the most notable difference between the two is that, for a tiny increase in the already insignificant ER of domestic index funds, international index funds give you a much higher dividend (without chasing yield) AND you're investing in an asset class that an awful lot of investors (passive and active alike) have an irrational and/or involuntary aversion to because of their home bias and/or the relative inaccessibility of international investment tools (not to mention all the negative sentiment due to the political problems in the eurozone if you're inclined to invest on that basis in addition to the known behaviors already listed).
And for me personally?...since March 2011, share classes of VGTSX (which is the Vanguard Total International Index Fund) is the only investment I have purchased in taxable accounts and I have been "dollar cost averaging" all my new savings into it every month (and also advancing my purchases with margin every time the eurozone crises flares up). With this "core", I then use my tax advantaged account to "explore" various active funds regardless of their tax efficiency, but my tax advantaged account is only about 5% of my overall portfolio due to the success of my taxable investments and arbitrages (which I don't consider investments because they are 1-temporary opportunities, 2-have guaranteed outcomes, and 3-I only do them with borrowed money so my assets are not actually "vested" even though I reap the profits).

I am back to a question that I still have not been able to answer comfortably.
I am a Flagship member with Vanguard and also invest with Schwab. In a retirement account with Schwab I currently hold SGOVX. In a different retirement account at Schwab I hold MAPIX and MACSX. In my taxable account with Schwab I hold ARTKX. I currently do not hold an international fund at Vanguard.
My plan within the six months to a year is to increase my international exposure. I am not looking to make any changes with MAPIX or MACSX.
I hold SGOVX in a retirement account because it is fairly tax inefficient. The problem is, I am out of room in that account and also want more mid cap value exposure, which I can satisfy by selling SGOVX and adding to my ARTQX position in that same account. Of course, when I do this, not only am I not increasing my international exposure, I am decreasing it.
One potential solution is to add to ARTKX, which historically seems to have been fairly tax efficient. The two issues with doing this is besides MAPIX and MACSX, I would be putting over 60% of my international exposure in one fund. Also, per M* ARTKX has about a 25% potential capital gains exposure.
A second way I could go is to purchase UMBWX at either Schwab or Vanguard. It's long term performance has been good, its expense ratio seems reasonable (18 basis points below ARTKX), it's been fairly tax efficient, and it seems like it would be a complement to ARTKX because it has an average market cap about three times the size of ARTKX. However, UMBWX has a potential capital gains exposure of about 19%.
A third way to go is to purchase VGSTX at Vanguard and call it quits ;-). It's tax efficient, it has a low expense ratio at 16 basis points, a low capital gains exposure at about 5%, and a an average market cap about twice ARTKX. However, while about 50% of my domestic exposure is in index funds, I have not been a big fan of indexing international.
With the above in mind, I certainly would appreciate some thoughts.
Mona

Reply to @Soupkitchen: Hi Soupkitchen. We continue to hold PRPFX in many of our conservative client accounts. It provides some ownership in assets that these folks otherwise would not have, such as gold, silver, foreign currency, real estate. We have captured most of the gains clients have netted over the last decade and are happy to hold the remaining shares. We never bought this fund to shoot out the lights. And I would be very surprised if it truly disappointed. The allocation is unlikely to allow that. I do not compare it to VWINX, since they are not at all similar. The treasuries in PRPFX have shorter durations than they have in the past. And no one expects the fed to increase the fed funds rate in the next 12-18 months. The fund has been a fairly boring, but very steady holding. That is not likely to change very much.

April 14, 2013 … Hello,
Indeed, good to read a Morningstar article written about a fund that I own that keys on how an individual investor, with limited capital, can invest in listed private equity firms which in return themselves make the private equity placements.
I purchased LPEFX a while back in the fourth quarter of 2011 … and, my average cost in the shares that I currently own are about $4.25 with its current share price approaching about $6.00. In addition, since purchase, I have received better than fifty cents in distributions per share which makes my total return, thus far, north of fifty percent … and, combined with a year-to-date gain of better than sixteen percent … Score me, a happy camper.
The Listed Private Equity Fund (LPEFX) is a major position with a weighting of better than twenty five percent in my Specialty Sleeve Section of the Growth Area of my portfolio. The Specialty Sleeve Section contains six funds and makes up about twenty percent of the Growth Area of my portfolio.
Again thanks, Investor, for posting the article as I indeed enjoyed the read especially with the good results that I have experienced.
I have linked the Morningstar report for those that would like to look under the hood, so-to-speak.
http://quotes.morningstar.com/fund/f?t=lpefx&region=USA
In addition, I have linked below Morningstar's Expense Analysis Report along with its Holdings Report.
http://financials.morningstar.com/fund/expense.html?t=LPEFX&region=USA&culture=en-us
http://portfolios.morningstar.com/fund/holdings?t=LPEFX&region=USA&culture=en-us
Skeeter

Hi everyone,
I continue to watch and manage my equities with their upward march and sold some more off as the S&P 500 Indexed reached a close of 1575. My next sell stop will be 1600. In following my systematic sell process I have kept my equity allocation in line and have not let it balloon on me. I started my selling process at the beginning of the year at S&P 500 Index at 1426 as a base line step and have sold a sum equal to about 1% of my equities at each 25 point upward step from there. The percentage of gain ranges between each step from about 1.7% to 1.6%. So in selling one percent at each step I have been putting about two thirds of the gains in my pocket as equities have advanced. And, when the pull back comes I am already pretty much right sized as I have kept my equity allocation towards the low range, for me, within my portfolio at about 45%. My normal allocation range for equities within my portfolio is 40% to 60% based upon my age and my risk tolerance assessment along with varying market conditions. At high valuations and overbought conditions I keep equities towards the low range (40%) within my asset allocation and during low valuation and oversold conditions I set more towards the upper range (60%).
When a substantial pull back comes I’ll increase my allocation to equities as I believe more value can be had at lower price levels. In short words … Don’t buy at, or towards, the top.
Yesterday, I was in Charleston, SC for a memorial service of a dear departed friend who was a fraternity brother and college room mate. I saw people who I have not seen in years and most likely will never see again in my lifetime. Indeed, a sad; but, also joyous time in the celebration of his life.
Now back in Charlotte … I will soon be off to church this morning and plan this afternoon in watching the final round of the Masters with some golfing friends (hot dogs & burgers) and perhaps we will have a second tv tuned to cover the NASCAR Truck Race at Rockingham.
Enjoy your day ...
Skeeter

Reply to @Charles: Would appear to be a hedge fund. I don't own any, but there are a couple of major London-listed hedge funds, including Brevan Howard Macro (which is giant) and Third Point. I really don't recommend (illiquid and other issues), but both have pink sheet versions in the US (BHMDF.PK, TPNTF.PK) There's also the Rothschild Investment Trust (RIT Capital Partners),which is a mix of funds and stocks (RITPF.PK in the US, again - definitely illiquid and not really recommended.) Jacob Rothschild's letters in the fund's occasional reports do make for interesting reading on the fund's website, though.

Reply to @MikeM: You have my kind of funds, especially RYBOX and GASFX. (but why the load RYBOX instead of RYOIX) Best of luck. I see so few here with momentum funds, especially in this market of double digit gains. Surprised you are still hanging with ARIVX but understand your explanation so no need to add my 2 cents which would just alienate the ARVIXers.

I gave up on PM mutual funds TGLDX and USAGX last summer and I am so - so glad I did. I like to put some money into sector bets , but never again for precious metal, minor funds. Right now my sector bets are on GASFX, PRENX, CSRIX, PRHSX and RYBOX - Energy/NR, health care and REITs.
On the other hand, I own ARIVX and have no intention to give up on it. I believe the manager will be a winner over an economic cycle (a perfect buy and hold fund). He has proven that as much compared to any other fund manager. And since I bought the fund for the purpose of buy and hold with a manger that has capital preservation at the forefront of his investing style, nothing has changed for me. If Cinnamond believes a part of his portfolio should be in minors, I trust he sees value going forward. But I know I'm not smart enough to play the minors.
Me-thinks your ARIVX comment is trying to justify your dumping the fund.

Reply to @Anna:
The thing is, that unlike houses, shares of a given security are identical, except for their labels (i.e. a tagging of each share by purchase date). And the neat thing is that these labels are interchangeable. A broker just sells identical shares - no labels, and then slaps a label on, after the fact, for those who care about the labels.
It isn't even a unique label. Suppose you bought 100 shares six months ago at $10, and bought 100 more shares six days ago at $11, and now you're selling 100 shares ...
Many brokers charge early redemption fees - for example, Fidelity charges a TF if you sell a share of an NTF fund within 60 days of buying it. Fidelity will slap on the 6 month label (FIFO) to the 100 shares you sold for the purpose of calculating early redemption fees. This works to your advantage (you avoid the TF), and even if you wanted to pay the fee, the broker wouldn't listen to you.
But for tax purposes, you would likely want to sell those 6 day shares. So if you ask nicely (make the phone call, send email, whatever the broker wants you to do), the broker will slap on the 6 day label for the purpose of calculating capital gains.
Which shares did you really sell?

"The way each one handles things is different, and you have to check with the institution to see which hoops they are going to have you jump through."
See, you're missing the point. This is one of the great benefits of the government keeping hands off free enterprise. No stifling of innovation and entrepreneurship here, by gum!! If you don't like the setup at one place you're perfectly free to move someplace "better". Just close all your accounts, pay all your taxes, pay all your ill-gotten capital gains, file all your forms, hire all your attorneys and accountants, and stand by for a government audit. Nothing to it! (Recommend you check with Max to find the "better" places...)

Schwab does not let you specify lots for mutual fund sales, but you can choose your cost basis strategy. The default is average cost, but other options are FIFO, LIFO, Highest cost, Lowest cost and Tax Lot Optimizer (take short term losses first, then long term losses, then long term gains and finally short term gains).

BobC hits it on the nail there. If you buy these bond previously, and if you sell them now, you may get a good INCREASED capital gain tax. I don't think you can find any good that would give 4+% yearly return almost guaranteed for 4-5 yrs. Most CDs are yielding craps, cannt find any good bonds that would yield >5% without any risks, and you can't find a better deal out there. Bedsides, what would you buy if you sell these, ? I think the only ones maybe making sense are more stocks but there maybe a large correction coming in the near future. I had the same questions previously but the bonds I bought are decend and I use these as my 'money market account/Cash holdings' since you can probably sell these at any time

http://www.bloomberg.com/news/2013-04-10/jenner-said-to-raise-100-million-for-health-care-fund.html
Jenner Said to Raise $100 Million for Health-Care Fund
By Christopher Condon - Apr 10, 2013 12:25 PM ET
Kris Jenner, the former top stock picker at T. Rowe Price Group Inc., has raised more than $100 million for a hedge fund to invest in health-care and biotechnology stocks, according to a person with knowledge of his plans.
Jenner will start the fund, named Rock Springs Capital and based in Baltimore, later this year and is continuing to seek commitments from investors, said the person, who asked not to be named because the information isn’t public. Jenner will run the fund with Mark Bussard and Graham McPhail, former T. Rowe Price analysts who left with Jenner in February, the person said. Jenner declined to comment on the fund.
Jenner, 51, had run T. Rowe Price’s $5.8 billion Health Sciences Fund (PRHSX) since 2000 and beat 83 percent of peers in the five years before he left, according to data compiled by Bloomberg. The fund was T. Rowe Price’s best performer during that period, returning an annual average 13 percent.
“What’s distinctive about Kris Jenner is not just his medical and scientific background, but also his ability to connect the dots and see how different information is related,” Leonard Bell, chief executive officer of Cheshire, Connecticut- based Alexion Pharmaceuticals Inc. (ALXN), said in an interview.
Jenner held Alexion shares for more than a decade. T. Rowe Price was Alexion’s second-biggest shareholder with a 9.5 percent stake as of Dec. 31, according to regulatory filings.
Medical Degree
Jenner earned a medical degree from Johns Hopkins University School of Medicine in Baltimore, then a Ph.D. in molecular biology from Oxford University in England. He graduated summa cum laude from the University of Illinois at Urbana-Champaign, where he was a backup quarterback on the school’s football team.
He joined T. Rowe in 1997 and took over the Health Sciences Fund in 2000. He has a reputation for finding lesser-known pharmaceutical and biotechnology firms developing innovative therapies, Christopher Davis, an analyst at Chicago-based fund research firm Morningstar Inc. (MORN), said in an interview after Jenner’s departure from Baltimore-based T. Rowe Price.
Jenner’s is raising money following a period of strong returns for the health-care industry, according to Andrew Berens, a senior biotechnology analyst at Bloomberg Industries in Skillman, New Jersey. U.S. health-care stocks, as measured by the Standard & Poor’s 500 Health Care Index, have gained 36 percent since the end of 2011, compared with a 26 percent increase in the Standard & Poor’s 500 Index.
“Health care is the hottest new launch sector we see,” Omeed Malik, head of the emerging-managers program that advises fund start-ups at Bank of America Corp.’s Merrill Lynch in New York, said in an interview.
Short Sales
Rock Springs Capital will have significantly the same investing strategy as his former fund at T. Rowe Price, the person said. Moving to a hedge-fund strategy will give Jenner the ability not only to invest in companies he believes will rise in value, but also to bet against companies he believes will fall, a practice known as short selling. Most mutual funds aren’t allowed to short stocks.
Hedge funds typically charge clients about 2 percent of assets annually and 20 percent of profits. Jenner’s former mutual fund charges shareholders 0.84 percent annually, according to data compiled by Bloomberg.
T. Rowe appointed Taymour Tamaddon, formerly an analyst at the firm, to replace Jenner as manager of the Health Sciences Fund.
To contact the reporter on this story: Christopher Condon in Boston at [email protected]
To contact the editor responsible for this story: Christian Baumgaertel at [email protected]
++++Wonder if Ted is going to invest with Kris Jenner now?++++

I used to look in on Fund Alarm and only recently stumbled upon MFO. I find it very informative and am fascinated at the knowledge of the poster's. I see some of the same names here I saw years ago. I was given some good advice here years ago and saw some nice gains.
The problem I have is my knowledge is very limited, I'm 60 and I don't want to be guessing at this point of life. I hear advice of having some funds in foreign countries, some in bonds, some in stocks etc. etc. - it's too much info. This leads me to believe I should hire a professional.
I have investments at TRP and hear they will give advice if you have enough funds with them. Do you feel this is OK or does hiring a local investor have any advantages?
Thank you in advance for any advice you can share with me.

Reply to @Charles: My investments in Japan aren't much - I have a very hard time making investments in things that I don't think there's a good fundamental case for. Long-term (and quite possibly even mid-term), I have no confidence that what Japan is doing will solve its various problems and the country's fundamentals are not getting better. I completely agree with the Kyle Bass view of Japan. Short-term, Japanese equities will probably continue to do well, at least until other countries get more noticeably pissed with the whole beggar-thy-neighbor policy.
I'm also curious what Japan's plan is when the cost of energy (and they have to import a ton of what they use) and other imported materials goes much higher.
Additionally: 11:03 AM It's a true "regime change" at the BOJ, says Citigroup, commenting on the central bank's new easing measures overnight. Gone is any hint of concern about monetizing government paper, and up next may be additional stimulus in the form of equity purchases and loans to small and medium-sized enterprises (my comment: companies have had no problems with financing vendors in the past, why should countries with random companies?). The yen (FXY -3.6%) continues a whopper of a move lower, the dollar now at a session-high ¥96.38. The currency-hedged Japan stock ETF (DXJ) gains 7.5% vs. the unhedged EWJ +3.8%. [Global & FX, On the Move] Comment!

http://www.sec.gov/Archives/edgar/data/932471/000093247113006039/ps111a042013nc.htm
Vanguard Capital Opportunity Fund
Supplement to the Prospectus and the Summary Prospectus
Important Changes to Vanguard Capital Opportunity Fund
Vanguard Capital Opportunity Fund is now open to new accounts for personal investors, and shareholders are no longer subject to a $25,000 annual investment limit. Participants in certain qualified retirement plans may continue to invest in accordance with the terms of their plans. Certain qualifying asset allocation programs may continue to operate in accordance with the program terms.
The Fund will remain closed to all prospective financial advisory, institutional, and intermediary clients (other than clients who invest through a Vanguard brokerage account) until further notice, and there is no specific time frame for when the Fund will reopen for new account registrations by these clients.
During the Fund’s closed period, current institutional shareholders may continue to purchase, exchange, or redeem shares of the Fund online, by telephone, or by mail. Current financial advisory and intermediary clients may not contribute to existing Fund accounts.
The Fund may modify these transaction policies at any time and without prior notice to shareholders. You may call Vanguard for more detailed information about the Fund’s transaction policies. Participants in employer-sponsored plans may call Vanguard Participant Services at 800-523-1188. Investors in nonretirement accounts and IRAs may call Vanguard’s Investor Information Department at 800-662-7447.
© 2013 The Vanguard Group, Inc. All rights reserved.
Vanguard Marketing Corporation, Distributor. PS 111A 042013

Hi folks,
I wanted to recap this thread the best I can. First of all, thanks to all for the contributions. For some odd reason, I thought the number of holdings extending beyond 10 years would be slight....what in God's name was I thinking?
Listed below are those held more than 10 years per responses:
ACRNX Columbia Acorn
ARTJX Artisan International Small Cap
ARTKX Artisan International Value
ARTMX Artisan Mid Cap
ARTVX Artisan Small Cap Value
BSCFX Baron Small Cap
DODBX Dodge & Cox Balanced
EUROX U.S. Global Investors Eastern European
FCNTX Fidelity Contra Fund
HABDX Harbor Bond
IVAEX Ivy Asset Strategy
LSBDX Loomis Sayles Bond
MACSX Matthews Asian Growth and Income
MAPTX Matthews Pacific Tiger
MEURX Mutual European Fd (Series of Franklin Mutual Ser Fd Inc.)
MSILX Litman Gregory Masters International
OAKBX Oakmark Equity and Income
OARIX Oakmark International
ODVYX Oppenheimer Developing Markets
OSTFX Osterweis Fund
OSTIX Osterweis Strategic Income
PCVAX AllianzGI NFJ Small-Cap Value
PRBLX Parnassus Income Trust- Equity Income
PRPFX Permanent Pt
PRWCX T. Rowe Price Capital Appreciation
RPIBX T. Rowe Price International Bond
RPMGX T. Rowe Price Mid-Cap Growth
SINAX ClearBridge Large Cap Value
SEQUX Sequoia
SGOVX First Eagle Overseas
TBGVX Tweedy Browne Global Value
TGBAX Templeton Global Bond
TIBIX Thornburg Investment Income Builder
TWVLX American Century Value Investor
VGHCX Vanguard Specialized Portfolios Health Care
VHCOX Vanguard Capital Opportunity
VISVX Vanguard Index Trust Small-Cap Value
VPMCX Vanguard Primecap
VWELX Vanguard Wellington
What great fund pickers we are!!!
Frankly, I think this says a great deal about the folks who visit this site, and particularly the individual (David) who operates the site which draws us in like moths to a flame...ok, bad analogy.
Many of the funds listed were not popular, trendy or acclaimed 10 years ago...but they are now. The key is finding these types of funds early...and that is what I hope to get from this site, and fellow posters.
On a personal note, it was interesting to see that while I only have owned 2 funds for over 10 years, I own 11 of the funds on this list currently.
thanks,
Press