June 2023 IssueLong scroll reading

Leuthold Core Investment (LCORX/LCRIX), June 2023

By David Snowball

Objective and strategy

Leuthold Core pursues capital appreciation and income through the use of tactical asset allocation. The objective is to avoid significant loss of capital and deliver positive absolute returns while assuming lower risk exposure and lower relative volatility than the S&P 500. Assets are allocated among stocks and ADRs, corporate and government bonds, REITs, commodities, an equity hedge, and cash. Portfolio asset class weightings change as conditions do; exposure is driven by models that determine each asset class’s relative and absolute attractiveness. Equity and fixed-income exposure each range from 30-70% of the portfolio. As of April 1, 2023, the portfolio had a net exposure to equities of 50%, which was the balance of a 63% equity exposure offset with a 13% equity hedge.


Leuthold Weeden Capital Management. The Leuthold Group began in 1981 as an institutional investment research firm. Their quantitative analyses eventually came to track several hundred factors, some with data dating back to the Great Depression. In 1987, they founded LWCM to direct investment portfolios using the firm’s financial analyses. As of December 30, 2022, they managed about $1.1 billion through four mutual funds, an ETF, separate accounts, and a limited partnership.


Doug Ramsey, Chun Wang, Greg Swenson, and Scott Opsal. Mr. Ramsey joined Leuthold in 2005 and is their chief investment officer. Mr. Swenson joined Leuthold in 2006 from FactSet Research. Mr. Wang joined in 2009 after a stint with a Hong Kong-based hedge fund and serving as director of research & development for Ned Davis Research. Mr. Opsal is Director of Equities and Director of Research for The Leuthold Group. He has been twice named as one of Barron’s Top 100 Mutual Fund Managers. In a previous life, he was Director of the Applied Investments Program and finance professor at the University of Wisconsin ̶ Whitewater. Collectively the team shares responsibility for testing and refining the firm’s quantitative models and for managing Core Investment, Core ETF, Select Industries, and Global.

Strategy capacity and closure

About $5 billion, although they will soft close in advance of that level so as to maintain ongoing capacity for existing clients. Core was hard closed in 2006 when it reached $2 billion in assets. Following Steve Leuthold’s retirement, the managers studied and implemented a couple of refinements to the strategy (somewhat fewer but larger industry groups, somewhat less concentration) that gave the strategy a bit more capacity.

Management’s stake in the fund

The fund’s four managers all have investments in the fund, with Mr. Ramsey over $1 million and his colleagues all in the range of $100,000 – 500,000. Three of the fund’s four directors have invested substantially in the fund or in a separately managed account whose strategy mirrors the fund’s.

Opening date

November 20, 1995.

Minimum investment

$10,000, reduced to $1,000 for IRAs. The minimum for the institutional share class (LCRIX) is $1,000,000.

Expense ratio

1.38% on retail shares and 1.30% on institutional shares on assets of $513 million, as of July 2023. 


Leuthold Core Investment was the original tactical asset allocation fund. While other, older funds changed their traditional investment strategies to become tactical allocation funds when they came into vogue in the 2010s, Leuthold Core has pursued the same discipline for nearly three decades.

Core exemplifies their corporate philosophy, “Our definition of long-term investment success is making money . . . and keeping it.”

It does both of those things. Here’s how:

Leuthold Group’s asset allocation funds construct their portfolios in two steps: (1) asset allocation and (2) security selection. They start by establishing a risk/return profile for the bond market and establishing the probability that stocks will perform better. That judgment draws on Leuthold Group’s vast experience with statistical analysis of the market and the underlying economies. Their “Major Trend Index,” for example, tracks over 100 variables. This judgment leads them to set the extent of stock exposure. Security selection is a twofold strategy: 1) identify attractive equity industries and themes, then 2) select a basket of the theme’s underlying individual stocks with well-rounded attributes that appear poised for leadership.

Core focuses on industry selection, and its equity portfolio is mirrored in Leuthold Select Industries (LSLTX). Leuthold Group uses its quantitative screens to run through 115 industry-specific groups composed of narrow themes, such as Airlines, Health Care Facilities, and Semiconductors, to establish each group’s quantitative investment appeal. Core and Select Industries choose group investments from among those rated attractive per the model. Mr. Ramsey notes that out of the 115 group universe, only those industries in the top 20% of the ratings are viewed as attractive and considered for investment; currently, they have positions in 16 of them. Within the groups, they target attractively priced, financially sound industry leaders. Mr. Ramsey’s description is that they function as “value investors within growth groups.” They short the least attractive stocks in the least attractive industries.

Why should you care? Leuthold Group believes that it adds value primarily through the strength of its asset allocation and industry selection decisions. By shifting between asset classes and shorting portions of the market, it has helped investors dodge the worst of the market’s downturns.

We can measure that ability using a series of risk and risk-return measures. Leuthold Core Investment is above average by every measure we track. That’s too weak. Let’s be clear: they’re not just “above average.” By every measure of risk and risk-return balance, they are elite. They have outperformed their Lipper Flexible Fund peers by 1.5% annually for the decade. More importantly, they have done so with dramatically less volatility.

There are 105 “flexible portfolio” funds and ETFs with a 10-year record. For the purpose of comparison, we will look only at flexible funds that have managed to return 5% or more, approximately the top 50% of all flexible funds.

Ten-year performance vs. all “flexible portfolio” funds returning 5% or more APR

Annual Percentage Return 6.1% Average annualized returns for the period
Maximum drawdown Top fund Measures an investment’s deepest loss
Ulcer Index Top fund A risk-return measure focused on the downside; it measures both the depth and duration of a fund’s greatest loss
Sharpe ratio #4 of 51 The most widely cited measure of risk-adjusted performance
Standard deviation #2 of 51 A measure of “everyday” volatility, both upside and downside
Downside deviation #2 of 51 A measure of “bad” volatility, focused only on the downside
Down market deviation #2 of 51 A measure of downside volatility in declining markets
Bear market deviation #2 of 51 A measure of downside volatility in bear markets
Capture ratio, S&P 500 #3 of 51 A “bang for the buck” ratio of how much of the S&P 500’s upside you capture versus how much of the S&P’s downside you do.
Downside capture, S&P 500 #2 of 51 A measure of how much of the S&P 500’s losses, or downside, you capture
Capture ratio, 60/40 #4 of 51 A “bang for the buck” ratio of how much of the typical 60/40 hybrid’s upside you capture versus how much of its downside you do.
Downside capture, 60/40 #2 of 51 A measure of how much of the 60/40 hybrid’s losses, or downside, you capture
Beta, S&p 500 #2 of 51 A measure of how much of the S&P 500’s volatility you experience.  49% in this case.

Source: MFO Premium and the Lipper Global Datafeed, data through April 2023

Leuthold Core Investment uses the S&P 500 as a benchmark for its objective of producing “total return in amounts attainable by assuming only prudent investment risk over the long term.”

They have accomplished that goal.

Comparison of Lifetime Performance (12/1995 – 04/2023)

  Annual return Maximum Drawdown Standard deviation Downside deviation Ulcer Index Sharpe Ratio
LCORX 7.8 -36.5% 10.4% 7.1% 8.0 0.55
S&P 500 9.3 -51.0 15.5 10.7 15.4 0.47
  83% 71% 67% 66% 1.9x 1.17x

Source: MFO Premium. See definitions in the table above.

In summary: since inception, Leuthold has captured more than 80% of the S&P 500’s annual returns while exposing its investors to less than 70% of the volatility. As a result, Leuthold’s risk-adjusted returns are between 1.2 to 1.9 times greater than the S&P 500’s.

Bottom Line

At the Observer, we’re always concerned about the state of the market because we know that investors are much less risk tolerant than they think they are. The years ahead seem particularly fraught to us. Lots of managers, some utterly untested, promise to help you adjust to quickly shifting conditions. Leuthold Core has delivered on such promises more consistently, with more discipline, for a longer period than virtually any competitor. Investors who perceive that storms are coming but who don’t have the time or resources to make frequent adjustments to their portfolios should add Leuthold Core to their due-diligence list.

Variation on a theme

Investors who are impressed with Core’s discipline but would like a simplified version of the portfolio should consider the Leuthold Core ETF (LCR), an actively managed fund of funds that was launched in 2020. Those seeking a higher degree of international exposure should investigate Leuthold Global (GLBLX/GLBIX). Global applies the same disciplines as Core but starts with a universe of 5000 global stocks rather than the 3000 domestic-plus-ADRs universe. As of March 31, 2023, Global is 60% equities (25% US, 35% international), while Core is about 60% equities with a 52% US / 8% international split.

Three-year performance comparison

  APR Maximum drawdown Standard deviation Sharpe ratio ER Yield Correlation to LCORX
Leuthold Core Investment 8.5 -12.9 9.6 0.77 1.38 0.3 1.0
Leuthold Global 8.1 -14.5 10.4 0.66 1.91 1.5 .97
Leuthold Core ETF 7.8 -12.8 9.5 0.69 0.85 0.7 .97

Source: MFO Premium

Fund website

Leuthold Funds

© Mutual Fund Observer, 2023. This article reflects publicly available information current at the time of publication. The views and opinions expressed in this article are those of David Snowball of Mutual Fund Observer and do not necessarily reflect the views of the Leuthold Group or its employees. Leuthold Group has no editorial control over the content of the article or subject matter and is independent of Mutual Fund Observer.

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About David Snowball

David Snowball, PhD (Massachusetts). Cofounder, lead writer. David is a Professor of Communication Studies at Augustana College, Rock Island, Illinois, a nationally-recognized college of the liberal arts and sciences, founded in 1860. For a quarter century, David competed in academic debate and coached college debate teams to over 1500 individual victories and 50 tournament championships. When he retired from that research-intensive endeavor, his interest turned to researching fund investing and fund communication strategies. He served as the closing moderator of Brill’s Mutual Funds Interactive (a Forbes “Best of the Web” site), was the Senior Fund Analyst at FundAlarm and author of over 120 fund profiles. David lives in Davenport, Iowa, and spends an amazing amount of time ferrying his son, Will, to baseball tryouts, baseball lessons, baseball practices, baseball games … and social gatherings with young ladies who seem unnervingly interested in him.