I bought it ~2.5y ago because I pay very close attention to anything that catches DS's eye, like so many here. In a practice I am increasingly trying to avoid in retirement (and succeeding with since), I bailed out of it after a couple years because it was doing fine but not anything consistently better (reward or risk) than my 2-3-4 big holdings, PRBLX, FLPSX, YAFFX (yes, I know the categories are not the same). I'm trying to reduce and simplify. Subsequent performance has attested to the wisdom of my decision (the dumbest conclusion an investor can draw most of the time), and I did add some moneys into RGHVX since I wanted to continue with the nominal shop.

How can the Marketfield fund possibly be "highly flexible" with total assets over $21 billion. It may have been a great, flexible, well managed fund a couple years ago when you first started talking about it, but at some point the management sold out and decided to make it a profit maker for themselves and the new owner - a life insurance company.
I'm guessing MFLDX closed because the managers couldn't perform the same blueprint after so much money flowed into the fund. The fund should have closed before 1B in assets, as did BPLSX for example. This could be a very mediocre fund going forward.
I think the White Box funds or possibly other small asset alternative funds like RGHVX are a better alternatives... just my 2 cents.

Thanks Mike. RGHVX looks interesting.

Hi Hank. If you are looking for an alternative replacement for your market neutral fund, give RGHVX at least a look. I bought it about a year ago and have been very pleased with how it handles the ups and downs in the market. Steady-Edie so far.

Another down day today 3/13/2014:
Markets:
Dow -1.41%
Nasdaq -1.46%
S&P -1.19%
Russell 2000 -1.23%
EFA -1.86%
EEM -1.80%
GLD +0.34%
GDX +2.64%
AGG +0.26%
Alternative Funds:
TFS Market Neutral TFSMX -0.34%
TFS Hedged Futures TFSHX 0.00%
Whitebox Market Neutral Equity Investor WBLSX -0.36%
Whitebox Tactical Opportunities Investor WBMAX 0.00%
ASTON/River Road Long-Short N ARLSX -0.78%
BlackRock Global Long/Short Equity Inv A BDMAX +0.09%
LS Opportunity LSOFX -0.85%
PIMCO EqS Long/Short D PMHDX -0.65%
MainStay Marketfield I MFLDX -0.92%
Robeco Boston Partners L/S Equity Inv BPLEX +0.43%
Robeco Boston Partners L/S Rsrch Inv BPRRX -0.42%
RiverPark Structural Alpha Retail RSAFX -0.29%
RiverPark Long/Short Opportunity Retail RLSFX -1.36%
RiverPark/Gargoyle Hedged Value Retail RGHVX -0.74%
AQR Multi-Strategy Alternative N ASANX +0.52%
AQR Diversified Arbitrage N ADANX +0.09%
AQR Risk Parity N AQRNX +0.09%

Charting RGHVX against the Midcap Value TR Index indicates a lack of success:

As I understand it, RGHVX buys a basket of stocks which they think will out perform the index and sells "expensive" calls on the index. If S is the basket of stocks and C is the calls then their portfolio is S - C. If the index is I then we can re-write the fund portfolio as S - I + I - C = (S - I) + (I -C).
So the portfolio hopes to make money two ways --- first the (S - I) term represents how their basket of stocks outperforms the index; second the (I - C) term is how they hope to make money on the calls. Assuming the calls are "expensive" they were probably sold below or just above the index value. If the index closes below the strike price on the call then the call won't be exercised and the fund has pocketed the amount that the buyer paid for the call. If the index closes above the strike price on the call, then the fund has to pay the difference between the index's closing price and the strike price (with the price of the call as a cushion.)

Thanks for the education David and all the expressed viewpoints. Hats off to these men for staying fully invested during the 2008-2009 plunge. I have used PXTIX for LV as it seemed to be a no brainer as it combined the eRAFI 1000 with a declining interest rate environment. I'm going to start moving to RGHVX for LV for three reasons- interest rate direction is a bit muddled but RGHVX uses some of the long only concepts as eRAFI, RGHVX has a chance of outperforming in the forecasted years of so/so market returns (due to the options premium), and my age.

My main question in this respect is whether this fund is better than OAKBX and FPACX: These funds have better returns since inception of RGHVX with a much better protection in 2008. MFLDX is another interesting option, which is open for some of us. Also, there is a very new long/short global fund by Robeco, BGLSX, and a very interesting fund BDMAX, which is available without load at Schwab, see http://www.mutualfundobserver.com/discussions-3/#/discussion/10159

Just for kicks, I checked their M* chart. Barely better than S&P at 5 yrs, but better at 10 yrs. Looks like they made a faster rebound from 2008 than the S&P did, providing some of their positive margin. Since their fund holdings met M*'s medium value criteria, I compared them to VMVIX, Vanguard's mid-cap value index fund, which was $4K better at 5 yr (end ofthe VMVIX chart).
OTOH, clearly superior to the L/S peers M* selected for them, except for 2008.
I'm conflicted since I'd already bought a smidgen of RGHVX. If I buy more, I'd have to balance with VOE (V's mid-cap value etf).
Not sure why such an appealing fund isn't doing better against what seem like reasonable index comparators. (Now I'll kick back and wait for the explanations.)

Reply to @Charles: I'm having difficulty getting my arms around this fund. Looking at it's returns plus a expense ratio of 1.50% over time I'll stick with SPY. Please don't tell RGHVX, has better risk adjusted returns.
Regards,
Ted
My Arms Around You

It is indeed a very interesting fund, but unfortunately I will be unable to participate in the call at that time, hope to listen to it later. It is true that the fund outperformed S&P 500 since inception in 1999. $10 invested there at inception would become $34 now, which is very good. However the same $10 invested in OAKBX would give $37, and in FPACX it would yield $42. Volatility of OAKBX and FPACX is much, much smaller than of RGHVX. Is it possible to ask the managers why this fund dropped in 2007-2009 by almost 50% from top to bottom, almost as much as S&P 500? Do they think that they can outperform OAKBX and FPACX, or it is a wrong question to ask since nobody knows how these two funds will perform in the future because they cannot use bonds as efficiently as before?

As always, we'd be delighted to have you join in our upcoming call - either by dialing-in (it's free, just a phone call, no web nothing) or by sharing questions for the RGHVX managers.
Why might you want to hear a bit more from the guys?

• Gargoyle Hedged Value launched as a hedge fund at the end of 1999, so this is not a team that requires training wheels. They converted to a mutual fund, importing the same strategies they’d used all along, in April 2012.
  
• The fund’s goal is to outperform the stock market with significantly less risk.
  
• The Fund combines a “relative value” long portfolio with the sale of “expensive” index options, so that it has characteristics similar to traditional buy/write option strategies.
  
• The fund is always hedged and therefore offers investors the ability to stay invested in the market with some downside protection.
  
• The strategy is a top performer within the long/short category of mutual funds since its inception 14 years ago.
  
• In 2013, the fund was up almost 30%, in spite of losing 20% on its hedging strategies; that reflects the costs of hedging into a strong market and the effects of reduced equity exposure.
  
• The fund should benefit from the recent increase in volatility as it will be able to sell options with greater premium than in recent years.
  

So it's Wednesday, February 12, from 7:00 - 8:00 EST. Just click REGISTER. I'm really looking forward to the conversation and hope that you'll join us.
As ever,
David

Bottom Line publishes a number of micro-articles each issue, say 150 - 500 words. This was one of those.
At base, Mark called me and said their readers were fretting about volatility and he asked my thoughts on minimum-vol or low-vol ETFs. I am, eternally, skeptical in part because traditionally low-vol sectors are bid up and undergoing structural changes (utilities, for example).
I suggested that there were three basic volatility management strategies: absolute value investing with a concurrent emphasis on cash, long-short investing, and long hedged with an options overlay.
They asked for three examples in each category (BRTNX, ARLSX, RGHVX ... )but they like larger funds with longer records, and they were a bit hesitant on hedging strategies so ...
David

Today: Mon. 2/3/2014
Markets:
Dow -2.08%
S&P 500 -2.28%
Nasdaq -2.61%
Russell 2000 -3.21%
10 yr. bond -3.26%
Gold -0.28%
EFA -2.04%
EEM -2.83
VIX +16.46%
Alternative ETFs/Mutual Funds:
Global X Guru Index ETF GURU -2.92%
Barclays S&P 500 Dynamic VEQTOR ETN VQT +0.01%
TFS Market Neutral TFSMX -0.40
Whitebox Long Short Equity Investor WBLSX -0.09%
Whitebox Tactical Opportunities Investor WBMAX +0.32%
ASTON/River Road Long-Short N ARLSX -0.70%
BlackRock Global Long/Short Equity Inv A BDMAX -0.25%
LS Opportunity LSOFX -1.34%
PIMCO EqS® Long/Short D PMHDX -1.27%
MainStay Marketfield I MFLDX -1.47%
Robeco Boston Partners L/S Equity Inv BPLEX +0.48%
Robeco Boston Partners L/S Rsrch Inv BPRRX -1.00%
RiverPark Long/Short Opportunity Retail RLSFX -1.29%
RiverPark/Gargoyle Hedged Value Retail RGHVX -1.94%
AQR Multi-Strategy Alternative N ASANX -0.73%
AQR Diversified Arbitrage N ADANX 0.00%
AQR Risk Parity N AQRNX -0.07 -0.66%
BPLEX and both Whitebox funds did quite well on this very "down" day.
Any other funds that performed well today?

Reply to @cman:
>> 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.

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.
As ever,
David

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!

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.