"If you've invested or are considering investing in a stock or bond fund that has a waiver in place, that current reduction may be only temporary. In most cases there won't be any dramatic jump in expenses, but it can happen."
A few funds come to mind, where the fees doubled once the waiver was removed:
Marsico Global Fund (MGLBX) - fund started June 2007 @0.75%, and raised its cap to 1.60% January 2009 (actually began recouping some expenses under the cap, otherwise its expenses would have been 1.52%)
Marsico Flexible Capital Fund (MFCFX) - implemented a waiver June 2007 @0.75%, and raised its cap to 1.60%, above its then operating expenses of 1.49% January 2011 (but elected not to use that 0.11% window to recoup some previously waived expenses)
Fidelity Spartan Int'l Index (FSIIX) - implemented a waiver Oct 2005 @ 0.10% that it removed Feb 1, 2012 allowing expenses to rise to 0.20%.
My takeaway is:
- if a waiver seems too good to be true (i.e. it is reducing ER well below what a fully functional fund with adequate assets would be charging), it likely is; and
- consider such funds only for tax-sheltered accounts where you won't be hit by a tax bill if you want to bail once the waiver is reduced or vanishes
That's not to say that there aren't many small funds with waivers that will keep roughly the same ERs once they grow and their waivers are removed. Just that some of these low ERs aren't going to last.

Reply to @cman: Thanks for the feedback. I've held LSBRX and FGBRX for a few years now and consider them buy and hold. The WDHYX and PRFRX are new to me and an attempt to weight bond segments that may actually make money as opposed to lose when inflation starts to increase.
I didn't consider muni's because this account is tax deferred. But is that the correct thought here? What would be wrong with holding munis in a 401k if they are the bond sector that is making money? My whole intent here is to make positive gains, hopefully in the 5-6% range, in the bond portion of my portfolio.
Thanks again for the input.

In this context, I think it would be wise to rethink the bond allocation percent recommendations. Like many religious or cultural traditions, they may exist long after the original premise is no longer the norm.
The bond allocation thumb rules came about at a time when treasuries and investment grade bonds were the primary allocations. Decent interest rates, low volatility was the assumption. The idea was that in a bear market, the bonds would provide a stable part that paid you with dividends while you waited for the bear market to end. The age based allocation was also designed for that environment where getting 4-6% dividends with relative safety was not an unreasonable assumption. This is what led to the use of bonds as a safety net and the lack of correlation with equities as people used them primarily for that purpose.
And then the markets evolved and many of the assumptions blew up. New bond sectors became available easily via funds not all of which satisfied that assumption. Long and significant interest rate movements resulted in investors buying bonds for "total return". They started to move back and forth between bonds and equities depending on economic conditions increasing volatility. Some of these sectors were highly correlated with equities because they were sensitive to economic conditions more than to interest rates.
In this climate 40% bonds in a portfolio says very little. You can construct a 70/30 equities/bond portfolio that is more conservative than a 40/60 portfolio depending on what is in the bond section. @junkster here is living proof that you can just have a 100% bond portfolio and capture gains from all economic cycles just as you can with equities and probably has a much riskier portfolio than a conservative equity portfolio. You can have the bond part of the portfolio be highly correlated with equities without providing that safety net in bear markets.
The low interest rates have distorted the picture as well sending people to sectors in search of yield that don't satisfy the original premise anymore.
And yet we still think in terms of a 60/40 portfolio. 40% containing what? Are convertibles in the equity section or bond section?
The bottom line is that we need better tools for individual investors to create portfolios with bond funds that go beyond the simple duration, volatility X-rays. Portfolios need to be created keeping historical correlations with equities in mind and to diversify across bond sectors based on risk adjusted returns and stress testing tools (not to be confused with Monte Carlo simulations) to test for consequences under multiple conditions.
Until then, I think retail investors are better off outsourcing all of this to allocation funds (I believe this is the site founder's preference), portfolios created by competent RIAs or for the so inclined and adept, tactical allocations that are actively managed with trend/momentum strategies.

Here's an update that I just mailed to the 60 or so registrants for the call: the good folks at Aston Asset Management, adviser to the fund, discovered yesterday that a January 14th call would run afoul FINRA regulations. There's an embargo on the release of certain sorts of portfolio information for the 15 days following the end of a calendar quarter. A call on the 14th could occur only if Matt and Dan said nothing about portfolio positioning after 9/30 but a call after the close of the markets on the 15th was in the clear. At the risk of losing some of the folks already committed to a Tuesday call, we shifted it to Wednesday.
All of the original registration information remains valid: the link (below) still works, the registration and assigned PINs remain the same. It's just 24 hours later.
For what interest that holds,
David
--------------------
Just a reminder of next week's conference call with the managers of ASTON River Road Long Short. The copy below is a lightly-edited version of what I mailed out to the folks on our masterlist this afternoon.
I’d like to invite you to join a conversation with Matt Moran, manager of ASTON River Road Long Short Fund (ARLSX). Last winter we spent time talking with the managers of really promising hedged funds, including a couple who joined us on conference calls. ARLSX best matched my own predilections and I subsequently invested a bit in the fund. That does not say that we believe this is “the best” long/short fund (an entirely pointless designation), just that it’s the fund that best matched my own concerns and interests. The fund returned 18% in 2013, placing it in the top third of all long/short funds.
I was struck primarily by the extensiveness and thoughtfulness of Matt’s risk management system, though the promise that the fund might outperform the stock market by 200 bps/year over a full, 3-5 year market cycle was attractive as well.
Matt and co-manager Dan Johnson have agreed to join us for a second conversation. Matt has been kicking around ideas for what he’d like to talk about. His short-list includes:

• How we think about our performance in 2013 and, in particular, why we’re satisfied with it given our three mandates (equity-like returns, reduced volatility, capital preservation)
  
• Where we are finding value on the long side. (It’s a struggle.)
  
• How we’re surviving on the short side. (It’s a huge challenge.) Really, how many marginal businesses can keep hanging on because of the Fed’s historic generosity? Stocks must ultimately earn what underlying business earns and a slug of these firms are earning …
  
• But, too, we have a strong desire not to be carried out in body bags on short side.
  

Our conference call with Matt and Dan will beWednesday, January 15, from 7:00 - 8:00 p.m. EST. Just click REGISTER and you'll take been to the Chorus Call website where you'll register and receive a toll-free number and a PIN. As before, we'll try to divide the call in thirds: in the first third, they will talk us through the fund's genesis, universe and strategy. In the middle third, I'll ask a handful of questions - some suggested by folks on the Observer's discussion board. For the final third, we'll open the lines to your questions. As always it's a simple dial-in; there's no web component to it.
If you can't make it but have questions for the guys, please share them and I'll raise as many as I can in the time available (when possible I cheat on the side of giving more time to listeners' questions than my own, but I do usually work in three or four).
As ever,
David

Very Interesting commentary from these two funds.
They both blame Easy Fed policies. While Marketfield manager believe inflation will make situation worse for less affluent, Appleseed managers are very dire in predictions:
"
1. We expect to see higher tax rates on high income earners and higher tax rates on capital gains, gifts, estates, and
property.
2. Trade protectionism should rise, so that demand from U.S. consumers can be more easily served by domestic
manufacturers.
3. With stronger trade protections in place, the labor movement could experience a resurgence in the U.S.
4. The financial sector likely will decline as a percentage of GDP, driven by higher interest rates and structural
industry reforms.
5. The dollar likely will be devalued further in order to reduce the burden of debtors.
6. Legislation likely will be passed and executive orders likely will be issued which would make it easier for
consumers to restructure their household debts.
7. As the Federal government spends more money to protect the poor and service debt, spending in other areas will
likely be cut. "
Portfolio Positions
Appleseed - "We are similarly underweight companies that market consumer
discretionary products to high income consumers."
Marketfield -Those that have catered to luxury class, have done super well. They don't say if they believe it will continue.
FWIW, don't count out the luxury class. It is inconceivable that they would allow their taxes to go up because of "lazy" people.
https://www.nylinvestments.com/public_files/MainStay/PDF/Marketfield/Marketfield_Commentary_September_13.pdf
Appleseed Shareholder Letter, 10/25/2013
http://www.appleseedfund.com/files/documents/2013 end of year letter final.pdf

Thanks for making this post.
This metric is quite interesting and makes intuitive sense to me. The 10 year time horizon is long enough for accepted market norms to change -- for “market memory” to be reset at a fairly deep level. [Its the cutoff point William Bernstein picked as the starting point in his transition from shallow investment risk to deep investment risk – where deep investment risk is viewed as a “permanent” loss of capital (Deep Risk: How History Informs Portfolio Design).]
The scatter plot suggests the metric has done a good job of “predicting” 10 year average returns over the past half century. It also suggests we may currently be somewhere in the middle area for potential returns for the next decade....not at one extreme or the other.
David's January commentary discussed relative value and absolute value stock investors. I tend towards the absolute value camp and have about 50% of my investment portfolio invested with stock managers who adhere to this philosophy (with FPACX included). The metric presented with this post suggests it may be a few years before adherents to an absolute value style of investing have their next full day in the sun...relatively speaking!

Annuities started at a time when the markets weren't as volatile and they could arbitrage between lower bond yields and statistically higher equity returns over time. Providers had the capital pool to ride out bear years from the excess returns they made in bull years since the upside to the annuity holder was seriously limited. The margins they realized in bull years was lucrative enough to maintain a guaranteed payment over all years even in instruments where capital is returned at the end. But increasing volatility and black swan events are making that risky leaving too many scams to play.
Some of the annuities work the same way as insurance when the capital isn't returned on death. You can create actuarial tables based on life expectancy and average market returns and over a pool of people, you can calculate how much of the capital you get as people die and how much you have to guarantee for the still living. Basically, people who die earlier than expected pay for the guarantees of those who live beyond expectations and the provider's profit margins. It is an insurance game.

http://www.safemoneyradiopa.com/
http://www.blogtalkradio.com/brettandethan
Insurance/Annuities-10% immediate return and guarantees of of no loss and 7%+ gains.
They have to invest in the same markets as everyone else.

Reply to @bnath001:
If I was going to purchase it ... It would be in a ira type account. Still with over sixty percent of unrealized gains is a lot for any fund to hold by my thinking.
Old_Skeet

Reply to @Ted:
Thank you for the read. My point was that new share holders would be saddled with tax liability for capital gains the fund has accrued through the years should they make disbursement of same. I would have no problem in paying the taxes if I had been there through the years as they were accumulated. This is a sizeable amount that is better than sixty percent of its net asset value as I write. With a share price of better than $150.00 that comes to better than $90.00 of unrealized capital gains per share and its associated tax liability for both old and new shares holders.
For this reason … this fund is not for me.
Thanks again for the read.
Old_Skeet

FYI: We are getting a colon irrigation today, a kind of cleansing of an over stuffed portfolio hang over from 2013's big profitable year. But not to fear, we have four more days to go.
When the S&P500 has a net positive gain in the first five trading days of the year, there is about an 86% chance that the stock market will rise for the year, it has worked in 31 out of the last 36 years (as of 2006). The five exceptions to this rule were in 1966, 1973, 1990, 1994, and 2002. Four out of these five years were war related, while 1994 was a flat market. As history suggests, the markets average nearly 14% gains when the January Effect is triggered.
On the flip side of the coin, when the first five days of January are lower, there is no statistical bias of the market, up or down. It is anyone’s game at that point. Not a very reliable indication.
Regards,
Ted

Reply to @Old_Skeet: The only sure things in life are death and taxes. Granted, if your looking for a tax-efficient fund Richie is not your man. Here's a little something for your to read about mutual funds and capital gain tax.
Regards,
Ted
http://www.ricedelman.com/cs/education/article?articleId=248&titleParam=Why Paying Capital Gains Taxes on Your Mutual Funds Isn't So Bad#.UsVM3WyA2M8

Hi Ted and others,
I know this a fund (SAGCX) that you like to tout ... however, one of the things that held me back from buying it was that it holds a large amount of unrealized capital gains which are currently better than sixty percent as I write according to Morningstar. I just do not wish to buy a fund with such a large potential distribution.
I have linked this information for those that would like a look see themselves.
http://performance.morningstar.com/fund/tax-analysis.action?t=SAGCX&region=usa&culture=en-US
Good Investing,
Old_Skeet

also allstarinvestor read
http://www.allstarinvestor.com/ - could not find the linkage
Editor's Corner
2013 Is History, 2014 Awaits
Ron Rowland
Just a few hours remain in 2013, and financial trading has come to a close. You may remember that early in the year many analysts were calling a top nearly every time the market declined. Stocks had the last laugh though, marching upward throughout the year and rendering those gloomy predictions useless to most investors and damaging to those who heeded the advice to sell.
It was a good year for most equity markets and a not-so-good year for other asset classes. Domestic small cap stocks were the big winners, gaining more than 38% by most measures. Slicing the small cap designation a little thinner, stocks in the Russell Micro-Cap Index boasted returns in excess of 45%. International stocks were mixed, with developed foreign markets gaining about 21% while emerging market stocks lost ground. The benchmark iShares MSCI Emerging Markets ETF (EEM) declined about 4% for the year.
Bonds had a tough year, and nearly every segment posted losses. The U.S. aggregate bond market shed about 2% for the year. Losses were steeper among Treasury securities, as the iShares 7-10 Year Treasury Bond ETF (IEF) dropped more than 5%, even after adding in its monthly dividend. Longer maturities meant larger losses as the Vanguard Extended Duration Treasury ETF (EDV) plunged 20%. Hopefully, bond investors have gotten the message that Treasury bonds are not automatically safe. There was no hiding in international bonds either, with developed country government issues declining 3% and emerging market bonds dropping about 10%. One segment that managed to post gains for the year was corporate high yield (“junk”) bonds, with most funds targeting this segment advancing 5% or more.
Commodities also failed to produce profits in 2013. The largest multi-commodity ETF, PowerShares DB Commodity Index (DBC), dropped more than 7%. Gold was a big story in 2013, partly because the yellow metal plunged more than 28%. Energy was the only major commodity group posting profits for the year with United States Natural Gas Fund (UNG) gaining about 10% and the United States Oil Fund (USO) advancing around 6%.
It will be another year before anyone knows the 2014 results, but that hasn’t stopped many people from making predictions. The first trades of the year will begin in less than 48 hours. We wish you a happy and prosperous New Year.
Investor Heat Map - 12/31/13
Sectors
Industrials maintained its first-place ranking, and Technology stayed close behind in second. Materials continued its recent climb, improving from fourth to third this week. Having Industrials and Materials together near the top is reminiscent of a strong global economy, and there is probably at least one economist willing to claim that is exactly what we have. Consumer Discretionary improved its absolute strength while simultaneously slipping a notch in relative strength. Health Care and Financials held their ground in the middle of the pack. Telecom and Energy swapped places with Telecom coming out on top today. The bottom of the rankings stayed much the same with the defensive groups of Consumer Staples and Utilities barely clinging to positive trends while Real Estate trails behind.
Styles
A couple subtle changes in the Style rankings produced a more definitive pattern. Small Cap Growth and Small Cap Blend swapped places, although they were in a virtual tie a week ago. Small Cap Value and Large Cape Growth also swapped places, and they too had identical momentum readings last week. However, these seemingly insignificant changes now put the four smallest capitalization segments at the top in order from Growth to Value. Micro Cap claims the overall leadership position while the three Small Cap categories take second through fourth. The lower half remains a somewhat disorganized mixture of Mid Caps, Large Caps, and Mega Cap. Mid Cap Value resides at the bottom, although with a momentum reading indicating an upward trend of 23% per year it really can’t be called weak.
Global
Europe was challenging the U.S. for the top spot a week ago, and today it has a firm grasp on the position. The U.S. dropped to second and is again facing competition, this time from the U.K. Recent strength in the British Pound has been a positive influence and could be the deciding factor over the next few weeks. World Equity and EAFE round out the top five, after which there is a large drop-off in momentum readings. Japan and Canada are next in line, just as they were a week ago. China and Emerging Markets managed to shake off their negative readings, but their new positive scores are far from being solid. Pacific ex-Japan and Latin America gained strength yet remain in negative trends.

http://www.bostonglobe.com/business/2013/12/31/putnam-david-glancy-boston-capital-fund-manager/ZanFc3kBx9f8a0VXUtbsHL/story.html
I assume this guy was Soviero's mentor or at least model (FLVCX). (If paywalled, just searched for putnam glancy boston globe or similar.) Solid strategies well-executed.

http://www.sec.gov/Archives/edgar/data/1145022/000089418913007082/handw_497e.htm
Excerpt:
"...LIMITED AVAILABILITY
Effective November 1, 2013, the availability of the Small Cap Value Fund to new investors is limited. Effective March 1, 2014, the availability of the Mid-Cap Value Fund to new investors is limited. The Funds do not permit investors to pool their investments in order to meet the eligibility requirements, except as otherwise noted below. Unless specified below, each new investor in the Funds must meet one of the eligibility requirements set forth below.
If you are or were a shareholder of the Small Cap Value Fund as of October 31, 2013 or the Mid-Cap Value Fund as of February 28, 2014, and continue to be a shareholder, you may make additional investments in the Funds and reinvest your dividends and capital gain distributions in the Funds, unless the Advisor considers such additional purchases to be not in the best interests of the Funds and their other shareholders. An employee benefit plan that is a shareholder of the Funds may continue to buy shares in the ordinary course of the plan's operations, even for new plan participants..."

The most important aspect of any true long-short equity fund is the experience and expertise of the management. And as we also know, there is often a big disconnect between how a true hedge fund performs and what its "clone" of a mutual fund can do. Daily liquidity, daily valuations, and other mutual fund requirements force managers to take positions they would not otherwise do if it were hedge fund dollars. MFLDX lead manager Michael Arronstein is about as insightful as anyone, and for us anyway, we employ long-short NOT to top the charts in good years, but rather to hedge downside losses in bear markets. MFLDX lost 12% in 2008, which is better than all L-S funds that have acceptable bull-market returns since then. I, too, dislike the higher fees associated with true L-S funds, but am willing to pay that price for real downside protection and acceptable upside gains. Comparison of MFLDX to the S&P 500 is fine by me, since that is what the management uses. I don't yet see any compelling reason to own RGHVX.

Reply to @cman: I think the S&P500 comparison is just a relative function showing how the long/short funds compare. LS funds are suppose to capture equity gains but not loose as much. The caparison between RGHVX to it's category is even more striking, kind of showing most long short funds suck.
RGHVX has captured 88% of equity gains the last 5 years, 57% of the losses
the category avg of LS funds has captured 38% of gains, 43% of losses.
Basically this shows the LS category is a losing proposition on average. Some funds, like RGHVX stand out as winners. I like MFLDX also, actually my first choice, but couldn't buy it in my 401k. The Pimco fund I could do without.
The other thing I like about RGHVX is that it is still very small. Also like the fact (i read somewhere) that most of the managers money and their families money is invested in this fund. Management commitment!

When in a strongly uptrending market, long only is the place to be, no doubt. Everyone feels good about their longs and the message boards fill with the traders riding the trend and who let others know about it. I get it. The "systems" seem magic and gains just accumulate. Makes for great conversations at Holiday parties. This is nothing I haven't experienced multiple times before in my investing life.
I hope to experience it one last time before I retire.
Happy New Year to David and all who put in the fine work here at MFO.

I have a smidgen of RGHVX and I can't imagine why ANYONE would want to be like Bill Belicheat, although the "end justifies the means" crowd probably idolizes him, but he stole his first Superbowl victory by illegal means and paid a very low price, unless one considers respect worth something.
OTOH, the cost of insurance at 1.4%/yr (1.5 - 0.09) adds up, and some of us want to reduce the 2008 type losses primarily. If I paid 7% (1.4 x 5 yr - or select your own percent and interval and total cost versus an index), I'd like to be sure I had an absolute loss at least 15% less than the index. I'm not really sure how much the upside/downside capture gains in "normal" markets. Having read Bernstein's "The Investor's Manifesto" last week, I'm pretty depressed about all the ER's I've paid.