With Cd's soon to be 1% or lower, we need to discuss the best cash alternative funds.
Last cycle, RPHYX and then ZEOIX were heros. RPHYX has been soso for the past 1 yr while ZEOIX has kicked butt (maybe because they had some high quality but junk type short term bonds like Lions gate).
IOFIX has been a monster; have added to the PAIAX and the Angel Oak ultrashort as well recently.
Anyone have other suggestions + maybe what ratio they'd put in each of those going forward for a 2-3% absolute return.
Thanks!

Thank you David. Yes it still looks to be holding steady, but when I read the last few write-ups about its sharpe ratio being so high, I thought maybe I was looking at the wrong fund for a second. Where does the risk free rate number come from? I think you must be correct. I just looked up how sharpe ratio is calculated. Since the other numbers haven't changed, the risk free rate has to be the answer. My new questions are: why did Morningstar change that number so much and did they change it across the board or just for the category of RPHYX? To be honest this is all a little above my knowledge base, but I am learning.

Hi, Gundlar.
Sharpe is a calculation of a fund's risk-adjusted returns minus the returns available from a risk-free investment, typically a T-bill.
Neither the risk nor the returns of RPHYX have meaningfully changed. The volatility measures for RPHYX have not materially changed over the trailing 1, 3, 5, and since inception periods. The standard deviation, for example, is 0.7 / 0.6 / 0.7 / 0.7. Downside deviation is 0.4 / 0.3 / 0.3 / 0.3. Max drawdown and such, likewise.
Annual returns since at 2.5 / 2.6 / 2.6 / 3.1.
My best guess, then, is that the "risk-free rate of return" has increased.
Out of curiosity, I passed along your question and my speculation to the manager, David Sherman. If I hear back, I'll share what I learn.
David

I noticed that the Sharpe Ratio for RPHYX is much lower than it used to be 3 yr 0.75 and 5 yr 1.41, according to Morning Star. Is this cause for concern? I currently own DHEAX as a lower risk bond fund. I was thinking of adding more cash to it or starting a position in RPHYX now that it is open. Thank you for your thoughts.

@Old_Skeet I turn 70 this month and am about 15 years into retirement having taken advantage of a downsizing "early out" opportunity in 2005. My stock weighting has varied between about 40% and 60% during that time.
My portfolio percentages will probably be in the neighborhood of 55% stocks, 40% bonds and 5% Other after the new cash arrives. Most of that new cash will likely be used to increase existing positions in VWINX, WFLEX, IOFIX, ZEOIX, and SEMPX. (I'm thinking about adding to RPHYX too given its recently improving performance.) My tendency to overweight stocks (vs my current 50/50 default mix) may well persist until 10 year treasury rates move meaningfully higher...maybe into the 3 to 4% range will get my attention (of course something else may come to convince me to abandon my current overweight to stocks!). My present plan is to keep the default mix at 50/50 at least until I turn 80 unless my health status declines significantly.
I have incorporated a sub-portfolio within my ongoing mutual fund portfolio over the past year and a half. Its settled out at 22.5% of the total portfolio (counting the new cash). Its 1/2 income oriented and 1/2 "income with growth" oriented and is populated with individual dividend paying stocks (3%+ dividends), REITS, CEFs, BDCs, and LPs. The individual holding sizes are bit sized enough that it could be used to engage in some "spiffing" although my current plan is to invest for income and long term capital gains.....Anyway, your comments and perspectives are appreciated.

Matt Kelly, one of the RiverPark folks, wrote to confirm that and to lament the amount of time it took Schwab to register the change. "Schwab has told us that RPHYX and RPHIX will finally be reopened there tomorrow. Apparently they are experiencing a “backlog” at the moment and that’s why it took so long."

Thank you Chip and David.
For what it's worth, as of today, you can now purchase RPHYX at Charles Schwab. I put some of my MM cash in there today. I know Fidelity and some others opened it to new investors a couple weeks ago, so Schwab was a little behind on making it available.

Welcome to the “It’s not the Super Bowl without the Steelers, but it’s great that Troy was recognized as a first-ballot Hall of Famer” edition of the Mutual Fund Observer which is posted at https://www.mutualfundobserver.com/issue/february-2020/. Highlights include:

• my publisher's letter takes a swipe at robo-writers, and reports on an unusually fervent hug between Rob Arnott and Cliff Asness. Good news: the long-time sparring partners have agreed on something important. Bad news: it’s that 10-year returns look uniformly low. Both point you toward the long-unloved emerging markets, while Mr. Asness offers a version of “it’s time to be a bit grown-up” financial advice.


• a long-overdue profile of FAM Dividend Focus (FAMEX). Over the past year, we’ve done a series of data-driven articles that focused on equity-oriented funds that thrive when all others falter, but that still make decent returns. FAM Dividend Focus has earned its way into more of those articles than any other single fund. It was time to say just a bit more about it.


• Edward Studzinski has been meeting with, and sparring with, some very fine independent fund managers. He shares what he's learned about researching management strategies, the changing landscape, hubris and managers' insistence on tripping themselves up.


• “Getting More Bang” explores high capture / low downside capture equity funds. Capture ratio is a sort of “bang for the buck” measure: funds with a capture ratio over 1.0 are delivering more of the market’s upside than its downside. By picking a downside target (“I’m willing to take 90% of the market’s losses, but no more”), you can use the capture ratio to identify the funds which offer the greatest return for the risk you endure. It’s a simple and intuitive way to create your due diligence list. We offer the top 20 domestic and international funds.


• Lynn Bolin continues to explore the six rules of successful investing. This month: knowing your investment environment.


• Charles Boccadoro has responded to user requests for more fund portfolio data at MFO Premium; traditionally, we were analytics-rich but portfolio-poor. As he explains, that changed on February 1st.


• on a bright note, several first-rate funds have reopened to new investors, including RiverPark Short-term High Yield (RPHYX). RPHYX seems forever maligned because its portfolio doesn’t fit neatly in any box. RPHYX had the distinction of having the highest Sharpe ratio of any fund in existence for years. It's a low volatility / low-risk fund that's best used as a strategic cash fund. (I've owned it for a long time and use it in lieu of a savings account.) It has averaged 3.1% annually with a maximum drawdown, lifetime, of 0.6%. David Sherman's current reading of the market, bond as much as equity, is that it's time to maximize caution and his funds are positioned commensurately.

Liquidations, 74 manager changes, a dozen new names, two retirements and more …
The long scroll version is available at https://www.mutualfundobserver.com/2020/2/.
As ever,
David

RPHYX available NTF at Vanguard RPHIX also but $100,000 minimum. $50 redemption fee in 60 days

Hi @Graust. I'm curious if your Fidelity order for RPHYX went through. The fund still can't be purchased at Schwab. I inquired by email and got the following response today. So far, not available.

Thank you for reaching out to Charles Schwab eServices with your inquiry on RPHYX last week. While the website for RPHYX may report that this fund has been re-opened to new investors, it is not guaranteed to be made available for purchase at Schwab. That being said, the Mutual Fund Support Specialist still advised that you reach out in about a week to see if any updates have been made to the availability status of RPHYX at Schwab. You can chat in, or call our General Customer Service Line at 800-435-4000 and we will be able to research that for you.

It seems that there has been a lot of interest Muni bond options for taxable accounts recently. It is hard to generalize about whether it is best to purchase a Muni bond fund, or if a taxable bond fund might be a better, or at least an acceptable choice. For some years, I have used Tax Cost Ratios of each fund to help decide if I want to seriously consider it. In case you are not familiar with Tax Cost Ratios, here is its definition from the M* Glossary.
"Tax Cost Ratio
The Morningstar Tax Cost Ratio measures how much a fund's annualized return is reduced by the taxes investors pay on distributions. Mutual funds regularly distribute stock dividends, bond dividends and capital gains to their shareholders. Investors then must pay taxes on those distributions during the year they were received.
Like an expense ratio, the tax cost ratio is a measure of how one factor can negatively impact performance. Also like an expense ratio, it is usually concentrated in the range of 0-5%. 0% indicates that the fund had no taxable distributions and 5% indicates that the fund was less tax efficient.
For example, if a fund had a 2% tax cost ratio for the three-year time period, it means that on average each year, investors in that fund lost 2% of their assets to taxes. If the fund had a three-year annualized pre-tax return of 10%, an investor in the fund took home about 8% on an after-tax basis. (Because the returns are compounded, the after-tax return is actually 7.8%.)"
You can find what the average Tax Cost Ratio is by category, with Munis being 0, short term bonds being .88 Nontraditional bond oef being 1.38, HY bond oefs being 2.06 etc. but you have to go to each fund to find out the Tax Cost Ratio specifics for it. Here are a few examples of TCR for some funds in various categories:
HY Munis: NVHAX and SDHAX (0)
NonTraditional Bond OEFs: MWCRX (1.36), SEMPX (2.13)
Short Term Bond OEFs: DHEAX (1.38), DBLSX (1.13)
HY Bond oefs: ZEOIX (1.20), RPHYX (1.01)
The above TCRs are for 3 years, but at Schwab you can also get them for the last year.

@MikeM (and others),
RPHYX shows as open at TD Ameritrade, but at Fidelity it still shows as closed. However, I put an order in today at Fidelity, and the order went through....well, I should say, the system accepted the order. I will let you know if it goes through tomorrow :)

On RPHYX's return: David Sherman's line is close to "we take what the market is willing to give us." The translation is, "there is a level of risk that we're willing to subject our investors to, we target assets that meet our risk criteria and returns flow from that decision." He's been very clear, repeatedly, that he's never going to stretch for yield - he's not going to squint at the risk profile in hopes of adding a bit of the returns - because that's contrary to the nature of the short-term high-yield fund's mission.
He's also, for what interest it holds, deeply concerned about the health of the market and the economy. In particular, he seems to perceive that liquidity is problematic and that downgrades of bonds that are "just above junk" are much likely than are upgrades. As a result, both of his portfolios are positioned conservatively.

There is a reason majority of my cash is in VMMXX...the only thing safer would be a bank money market fund. I do have a smattering of RPHYX and RSIVX.

While I agree that a bank money market account, so long as it were within FDIC insurance limits, would be safer than VMMXX, I consider VUSXX to be safer still.
VMMXX holds corporate debt and can break a buck. While it is the "sense of Congress" that the FDIC is backed by the Treasury, there is no statute providing that level of backing. In contrast, the treasuries held by VUSXX are backed by the full faith and credit of the US government.
Dancing on the head of a pin, perhaps.
As of 1/14/20, M* reports identical 1 year returns for VMMXX and RPHYX of 2.20%, which means that RPHIX has returned about a quarter percent more than the MMF (no 12b-1 fee).

@RisklessInSeattle There is a reason majority of my cash is in VMMXX...the only thing safer would be a bank money market fund. I do have a smattering of RPHYX and RSIVX.

It is interesting that this fund reopened now, after a significant slow down: During the last 1/2 year it reached a plateau with almost zero slope (no return). The only time it happened in the past it was in 2015, see M*

@finder - Right on. I noticed the same, that the Vanguard Money Market VMMXX has a higher one year return than RPHYX. RPHYX lost its magic?

msf: "When giving secondary source figures, it helps to cite the source. I'll guess that you're looking at M* (47% cash as of Dec 31). M* has its own definition for cash that distorts figures for funds like RPHYX."
Yes, the 47% figure came from M*, and yes before you make a decision to purchase, it is important to go to the website. I doubt you will ever see ZEOIX at 47% cash, as they seem pretty committed to stay fully invested, but with RPHYX, you do see higher cash figures periodically in a calendar year. I am not sure that what M* does should be labeled as "distorting" figures, but they do include things that are both cash and "cash like" in their figures.

I agree with what Lewis said. ZEOIX doesn't fit for me because the TF makes it restrictive for liquidity, unlike what I want from a MM fund or a cash alternative. The restrictions defeat the purpose in my opinion. I will get my foot in the door with RPHYX as soon as it is available at Schwab.

RPHYX also reduces risk by holding a much higher percentage in cash (about 46%),
I try to go the horse's mouth. The latest annual report, Sept. 30, 2019, Statement of Assets and Liabilities (according to GAAP, see note 2 for the statement) gives the cash and cash equivalent holdings as $4.56K out of $809K, or less than 6% in cash.
When giving secondary source figures, it helps to cite the source. I'll guess that you're looking at M* (47% cash as of Dec 31). M* has its own definition for cash that distorts figures for funds like RPHYX.

Cash encompasses both actual cash and cash equivalents (fixed-income securities with a maturity of one year or less) held by the portfolio plus receivables minus payables.

https://www.morningstar.com/InvGlossary/percentage_cash.aspx
Certainly much of what RPHYX buys has short maturities. That's by design. But they still have non-cash-like attributes.

"wxman123">What would be the argument to choose this fund over Zeoix (better performance) or BBBMX (better and even safer)?
When I compare the 2 funds, RPHYX is less risky compared to ZEOIX. RPHYX has a portfolio credit rating of using BB rated corporate assets, compared to B rated for ZEOIX. RPHYX also reduces risk by holding a much higher percentage in cash (about 46%), compared to about 5% cash for ZEOIX. Also RPHYX does not require redemption fees compared to ZEOIX. When you look at performance charts, you see the lower volatility/standard deviation in RPHYX, and in the toughest downmarket for the 2 funds (2015/2016), RPHYX showed almost no dip, compared to a slight dip for ZEOIX. As a result of the 2 similar funds, you get a safer fund in RPHYX that performs more like a Money Market fund than RPHYX, but with ZEOIX you get more yield, with a bit more long term return, and a fund that stays largely invested in corporates. For an investor, who wants a fund more like cash, RPHYX is a bit more similar without redemption fees.