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This fund sells call options against a value portfolio, and has been written up as a Star in the Shadows. I'm leery of the market continuing it's climb, but reluctant to reduce equity holdings. This fund seems like a good place to be for a chicken bull. I'd be interested in the opinion of others,
It would depend on your desired risk level. This fund lost around 35% in 2008 (I guess before it was a mutual fund) and it could easily do so again in another steep downturn.
If you are looking for lower risk, I'd go with Pimco L/S or Marketfield, although the latter's original, cheaper shares are now closed. The former may be inconsistent, given its concentrated nature.
I agree. I bought it earlier this year. Captures most of the S&P500 and does well with down side. A bit more aggressive than some other alternatives. I like the chicken bull comment. Seems to fit.
Reply to @Ted: It depends on how you value "insurance" and whether you feel the need. Insurance premiums always look like a bad idea in retrospect except in the few cases when you are glad you had it.
As to whether RGHVX would have provided that insurance if and when is a contra-factual and more difficult one to answer. Like most insurance, you never know how good it is until you have to rely on it!
I think it eventually boils down to whether one can sleep better without it or with it because you cannot make the decision to buy in retrospect.
Reply to @Ted: No disagreement there but would your opinion on price of being chicken have been any different if it had done better in a down market? You don't strike me as a "need insurance" guy, more like self-insured?
If I am wrong on the above assessment, of you, what price for being chicken would have been Ok for you? Less than 3% difference in a 30% bull market is hardly worth crying about.
Reply to @Ted: what I'm looking at is upside downside capture ratio. In the last year the fund has captured 97% of SPY. It has only seen 72% of SPY's losses. This has only been a mutual fund since Apr. 2012. Before that it was a hedge fund. Using hedge fund data over the last 5 years RGHVX has captured 88% of SPY and only 57% of downside insurance. So that my friend is what I was after. I know alternative funds aren't your cup of tea.
P.S,, the Bears really screwed themselves on that Roger's fumble. That will be talked about for a long time. Being a Bills fan I can feel your pain. My favorite team through the playoffs will be any team playing the Patriots!!!
Reply to @MikeM: Before buying RGHVX I wondered about this up/down as well, and whether it would continue (roughly) or change. I went ahead and also did the equivalent purchase with ARLSX, which I see has not entered into this discussion. (Ted?)
MikeM provided the stats quite well. I think my only thing is that the fund still presents a pretty sizable amount of risk and there are options a little further down the risk ladder if that is what someone is looking for.
Just curious as to why people are benchmarking this against SP500.
What role does a fund like this play in your portfolio?
If this was included as an alternative investment for strategy diversification, it would be compared against other alternative investments or long short funds against whom, it appears to have done very well.
If this is used as a risk managed equity exposure in a slice and dice portfolio, then it would be compared against some mid cap index or even perhaps an all caps fund against which it would have done poorly this year.
Just wondering how people benchmark the funds they own to see if it is working or not.
Reply to @Old_Skeet: Anyone who has watched Nature shows understands Ted very well I think. There is always an alpha male in every herd that constantly needs to assert that status and challenge anything that it thinks undermines that status. We have not evolved that much from animals after all
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.
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!
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.
I also keep some money in MFLDX. But I wonder whether during the next bear market it will do as good as it did in 2008? This fund has 19 billion now, and it continues to grow fast. What do you think?
For what interest it holds, I've scheduled a conference call with the managers of RGHVX for February. (Also with Matt Moran of ARLSX in January.) I'll post details in tomorrow's issue.
>> What role does a fund like this play in your portfolio?
Being newly semiretired I have cash plus three buckets, so called, corresponding to active live brokerage accounts, traditional IRAs, and Roths. I foolishly play with the cash just a little bit (tips from rich friends, dip purchases) in a bull market; I use long/short funds plus balanced funds in the brokerage acocunts; and the two retirement account sets, trad and Roth, are all equity funds with as much diversification and downside protection as I can scope out, hoping they stay predictive. So the short answer is I use RGHVX and similar in small amounts as a flavor of balanced fund for moneys I will be needing in perhaps 3 years.
Comments
If you are looking for lower risk, I'd go with Pimco L/S or Marketfield, although the latter's original, cheaper shares are now closed. The former may be inconsistent, given its concentrated nature.
SPY: YTD: 31.70% ER: 0.09%
RGHVX: YTD: 28.80%: ER: 1.50%
Regards,
Ted
As to whether RGHVX would have provided that insurance if and when is a contra-factual and more difficult one to answer. Like most insurance, you never know how good it is until you have to rely on it!
I think it eventually boils down to whether one can sleep better without it or with it because you cannot make the decision to buy in retrospect.
A live chicken is better than a slaughtered bull.
Regards,
Ted
If I am wrong on the above assessment, of you, what price for being chicken would have been Ok for you? Less than 3% difference in a 30% bull market is hardly worth crying about.
Regards,
Ted
P.S,, the Bears really screwed themselves on that Roger's fumble. That will be talked about for a long time. Being a Bills fan I can feel your pain. My favorite team through the playoffs will be any team playing the Patriots!!!
Regards,
Ted
P.S What ? You don't like Bill Belichick, he's a lot like me.
I believe damm in your reply to @cman is spelled correctly damn thanks for your
opinion of us little dogs
REGARDS circa33
What role does a fund like this play in your portfolio?
If this was included as an alternative investment for strategy diversification, it would be compared against other alternative investments or long short funds against whom, it appears to have done very well.
If this is used as a risk managed equity exposure in a slice and dice portfolio, then it would be compared against some mid cap index or even perhaps an all caps fund against which it would have done poorly this year.
Just wondering how people benchmark the funds they own to see if it is working or not.
Not Ted here ... But, where I come form it means you are out of your league.
It is really not a kind thing to say to someone. You have to understand Ted, he will challenge you at times.
I'd let it pass and move on ... and, don't even dwell on it.
Old_Skeet
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.
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!
I also keep some money in MFLDX. But I wonder whether during the next bear market it will do as good as it did in 2008? This fund has 19 billion now, and it continues to grow fast. What do you think?
As ever,
David
>> What role does a fund like this play in your portfolio?
Being newly semiretired I have cash plus three buckets, so called, corresponding to active live brokerage accounts, traditional IRAs, and Roths. I foolishly play with the cash just a little bit (tips from rich friends, dip purchases) in a bull market; I use long/short funds plus balanced funds in the brokerage acocunts; and the two retirement account sets, trad and Roth, are all equity funds with as much diversification and downside protection as I can scope out, hoping they stay predictive. So the short answer is I use RGHVX and similar in small amounts as a flavor of balanced fund for moneys I will be needing in perhaps 3 years.