Ah, yes, the Fidelity New Millenium Fund, another good example (and, apparently, getting better) of how a fund, given enough time, can "reconstruct itself" by erasing history and memories.
I remember giving this fund some consideration in the mid-00s. At the time, if I'm recalling correctly, the fund was characterized variously as a multi-cap growth fund, or as a mid-cap growth fund (in Fidelity's own quarterly reports), that would push the envelope wherever the manager felt the best growth opportunities could be found, even if that meant a higher turnover (which were, in fact, invariably high). I don't recall the specific word "aggressive" ever applied to it. Top 20-30 hldgs were always an eclectic bunch, so it held some interest for me; however, I could not determine with any comfort level from where its returns actually came, and I suspected quite a bit came from momentum-chasing and IPO pops, not so much from stock picking acumen. There also had been a recent manager change, and then the financial crisis swoon occurred, and so it fell off my consideration list.
Now curious that it is characterized as an aggressive LC growth fund, without any indication that it has ever been anything else. Looking at Fidelity's fund snapshot and FMILX equity style map:
https://fundresearch.fidelity.com/mutual-funds/composition/316200302
Voila! Historically, according to the map, it has never existed as a fund whose hldgs have ever been predominantly midcap-anything.
It looks like it has done very well, since 2009 (?), as a LC fund with an aggressive bent. And that may be where it remains, for----evah. But its 10 yr and since-inception stats are irrelevant to peer comparison, because back then it was not LC. It would be only the most diligent new investor, willing to get into the way-back machine, who would ever be able discover this fact about FMILX's long-term record.

FYI: Cope & Paste 7/11/14: Kristian Grind: WSJ:
Choices Including Nontraded Real-Estate Investment Trusts and 'Liquid Alternative' Funds Have Numerous Risks
Regards,
Ted
Mutual funds that try to emulate hedge funds. Exchange-traded funds that use borrowed money to jack up their bets. Real-estate investment trusts that are hard to unload. Structured notes that look like conventional debt but can be far more risky, and "go anywhere" bond funds that are prone to trade safety for yield.
All these investments have at least one thing in common: They have seen their popularity soar recently as investors seek protection from perceived market dangers—or as fund companies market them heavily. They also are hard to understand, lack transparency, are expensive and don't have proven performance records.
In interviews, financial advisers, analysts and industry experts frequently said these investment types should be treated with extra caution by investors.
"Anything that is complicated is not something that the typical investor should buy," says Samuel Lee, an analyst at Chicago-based investment-research firm Morningstar MORN +0.44% who specializes in ETFs. "There are more opportunities for sophisticated players to take advantage of you."
To be sure, these investments can perform well and could have a place in a portfolio—albeit a small one—as long as they are used correctly. There are plenty of other risky investments marketed to individuals that aren't named here—foreign-exchange trading or options trading, for example.
Investors should ask several questions before they plunk down their money, says Robert Hockett, president and wealth manager at Atlanta-based Cambridge Wealth Counsel, which oversees $260 million in assets: Is it clear what the investment does? Does it come with high fees? Can you sell it easily? And does it have a proven record?
Here is what you need to know about the five investments—and some safer alternatives.
Liquid-Alternative Funds
"Liquid alternative" mutual funds typically employ hedge-fund-like strategies but don't come with the same restrictions. There isn't a high investment minimum, for example, and the funds aren't as difficult to exit as traditional hedge funds.
The category encompasses several different subsets, including so-called long-short funds—equity funds that hold long positions in some stocks while betting against others, and managed-futures funds, which bet on futures contracts. Other funds use leverage, or borrowed money, to ramp up their bets.
Liquid-alternative funds have skyrocketed in popularity, with investors pouring $40 billion into them in 2013, up from $14 billion the previous year, according to Morningstar. This year through June, they have taken in $14.6 billion.
Fund companies say they offer investors a chance to diversify their portfolio and capture at least some of the upside of stock returns in good markets while offering protection in down markets.
But skeptics say the strategies often are too complicated for the average investor to understand, and many are too new to have a proven track record. They also come with high fees: an average of 1.9% of total assets, or $190 per a $10,000 investment, compared with 1.2% for a typical actively managed stock mutual fund and 0.6% for a stock index fund, according to Morningstar.
"They have some ugly baggage and warts they carry," says Mark Balasa of Balasa Dinverno Foltz in Itasca, Ill., a wealth-management firm with $2.8 billion in assets under management. "Advisers are challenged to understand what they do, let alone investors."
Christopher Van Slyke, founder of WorthPointe, a wealth adviser in Austin, Texas, with $325 million of assets under management, says most of the funds he has seen pitched by investment firms don't have more than a six-month track record. He likens them to a "black box" because of their complex investment strategies.
Try instead: If you want some shelter from the risk of a bad decline in stocks, you could always keep more of your money in cash instead. It is safer and a lot cheaper.
Nontraded Real-Estate Investment Trusts
Nontraded real-estate investment trusts are similar to their public counterparts, which trade like stocks and allow investors to invest in an array of commercial properties.
Lately, nontraded REITs have been going gangbusters: In 2013, they raised $19.6 billion, up from $10.3 billion in 2012, according to Robert A. Stanger & Co., a Shrewsbury, N.J.-based investment bank that tracks the industry. Through June of this year, nontraded REITs have raised $8.8 billion.
Investors are attracted to them because of their high dividends—generally as much as 7% on invested capital versus 3% to 4% for publicly traded REITs, according to Green Street Advisors, a research firm in Newport Beach, Calif.
But nontraded REITs can be hard for investors to unload during a real-estate downturn, advisers say. The investments have become a concern of the Financial Industry Regulatory Authority, the industry's self-regulator. Because they are generally illiquid, their performance and value are difficult to understand and the cost is high, the agency has warned.
Disclosure is murkier than with publicly traded REITs. While nontraded REITs report their holdings quarterly, investors don't initially know more than the general asset class they are investing in when they buy in—what is known as a "blind pool."
What's more, say experts, because the REIT isn't trading publicly, it is hard to gauge its value until a liquidity event occurs, such as when the REIT is sold, merged or publicly listed, although the REITs typically use appraisals to report the share value after the offering closes.
Fees also are high, as much as 11% in initial sales charges to pay the retail broker, the dealer and the back-end costs of putting the REIT together, according to Stanger.
Nontraded REITs have a mixed track record. Of seven deals that were merged or sold in 2013, four are worth more now than the initial issuing price of the shares, according to Stanger. A $10 share in the Chambers Street REIT, for example, would now be worth $8.04, while a $10 investment in the Cole REIT would be worth $13.56.
Try instead: Publicly traded REITs aren't nearly as risky and are far more transparent, and they can be a good diversifier in a portfolio, experts say. A mutual fund that holds a basket of commercial real-estate companies also can provide exposure to the market and is liquid, says Dave Homan of Willow Creek Wealth Management in Sebastopol, Calif.
The $24 billion Vanguard REIT ETF, VNQ +0.01% for example, whose holdings include property developers and REITs, has returned an average of 10.5% over the past three years as of July 10, according to Morningstar. The ETF has an annual expense ratio of 0.1%, or $10 per $10,000 invested.
Graphic; http://online.wsj.com/news/interactive/INVESTOR0711?ref=SB10001424052702304642804580015090303169012

Hi Guys,
Sorry for the confusion, but this is my fourth workaround attempt to post. My patience is running thin.
As you know, I am skeptical of all forecasts. My overarching feeling is that forecasting is at best educated guesstimates with a low likelihood of prescience. Forecasters basically can not forecast. I contributed to this topic more as a fun submittal than as an actionable forecast.
The big danger in all these forecasts is the possibility of investor overreaction to unknowable Black Swan world events. Such overreactions destroy forecasts and happen frequently. But the marketplace has demonstrated strong recovery resilience.
I really like Charles Ellis' observation that “Time is Archimedes’ lever in investing”
Unfortunately, as John Maynard Keynes noted: “The market can stay irrational longer than you can stay solvent”. So don’t fall into that trap; keep a healthy cash reserve. I use the Vanguard short term corporate bond fund as my reserve unit.
I just discovered yet another meaningful financial axiom. This one is from Warren Buffett: “The difference between successful people and very successful people is that very successful people say “no” to almost everything”. My takeaway is to be judicious when seeking and accepting advice. Don’t be satisfied with unsupported assertions; check and verify the references and the statistics.
My patience is exhausted so I’ll stop here. Plenty of personal opinions are embedded in all these postings, but that’s what makes a vibrant marketplace. Enough serious talk committed to a supposedly fun exercise.
I’ll say Good-By for now. I’ve enjoyed most of our exchanges. I look forward to talking with you all further down the road.
Best Regards and Best Wishes.

Well, yeah, maybe, but who says that you have to put all of your bond allocation in that one fund? You can spread out your sector allocations any way that you want to (as Skeet, with some 52 funds, would be the first to tell you). I'm less than impressed.

Agreed Old_Joe. Even John Bogle, who I believe 'invented' the first bond index fund, agrees with the author that this index is too heavily weighted toward US government bonds. So Bogle's solution is very simple: he says couple the total bond index fund with a corporate bond index fund, and you have the problem solved. Bogle also entertains the idea of 'fixing the total bond market index', but feels the resistance to that would be too great, as the Barclay's Index is very much ingrained in the financial world. So he says take one third to two thirds of the money you would have in the total bond index and put it in a corporate bond index. Now you own two bond index funds, with a more correct aggregate weighting of government vs. corporate bonds.

Hi Jungster,
Thanks for joining the commentary.
I’m not sure if this will disappoint you, but I’m not a “walking encyclopedia of stock market platitudes”. But I do try to integrate appropriate ones into my MFO postings.
Since I usually document my market prospective with a heavy dose of statistics and academic references, I feel that these posts tend to the dry end of the writing spectrum. I feel that the addition of market wit and wisdom helps to make these posts more entertaining and more enjoyable as well as educational. That’s just my opinion of my own writing style.
I surely am not an encyclopedia of investment sayings. I get many of them from a Mark Skousen book titled “The Maxims of Wall Street”. I extracted the Ellis quote from Chapter 5 of the Roger Gibson book titled “Asset Allocation: Balancing Financial Risk”. I thought Ellis’ comment was pithy.
Take care.

>>>The most powerful weapons in an investor’s arsenal are time and patience. <<<
You are a walking encyclopedia of stock market platitudes. Not a criticism, just an observation. Let's see, when I was approaching my 38th birthday in the spring of 1985 I was unemployed and had around $2200-$2300 in my account. I actually had a negative net worth if you take into consideration credit card debt, etc. Taking your beloved index approach with my account coupled with "time and patience" would put me about where almost 30 years later? Not in a very secure financial situation that's for sure.
Edit: Stock market platitudes aren't all that bad. For instance, I think the best wealth creation tool out there is the tax free compounding of your capital over time (but please no patience as that leads to subpar returns) You talk to some of the traders on the trading forums and tax free accounts ala IRAs etc are foreign concepts to them.

Crash- I can't find any direct info on it, but if you put "Vereinigte Mexikanische financial" into a search you come up with a whole lot of funds which have what must be various bond issues, as the %'s seems to be between 5 and 7 %. With rates that high, probably not the highest possible quality rating.

Hi BobC,
Great stuff! Thank you for joining the discussion. I really liked your general battle plan to protect against a possible market downturn. It’s a plan that is designed to sacrifice a little upside potential to dampen significant downside danger.
I have always practiced a little defense in my portfolio allocations, probably not as effectively as your professional constructions. Many investors don’t fully appreciate the benefits that a dedicated advisor can deliver.
I am old enough to remember Elaine Gazzarelli. Not only was she good looking, she was also very smart. Indeed she enjoyed momentary fame and then faded rapidly with a series of misdirected forecasts. Her crystal ball became cloudy.
She is a committed quant and is recognized as such by the financial industry. Back when she made her famous “call”, Gazzarelli depended solely on a multi-dimensional market correlation model. I seem to remember that the correlation model had about 12 linear parameters. That’s an early danger signal that some data mining might be in play. I challenged her accordingly by email. She graciously replied and we had an energetic exchange that likely profited both of us.
She still deploys her 12-component market econometric model, hopefully with refined and updated correlation coefficients. I wish her well.
Best Regards.

Guido-
To repeat what I said in another thread, "If it works, don't screw with it!". By that I simply mean that there are many, many paths to financial security. Some may be more lucrative (and adventurous) than others, some certainly less so. But if what you're doing works for you, then be happy with it and leave it alone. That's not to say that one should absolutely never make any changes- sometimes new funds or approaches come along, and if you want to modify what you are doing with a portion of your setup, then give it a try. Whatever works!
NO ONE has an absolute "right answer" for any of this stuff. It's a dynamic, constantly changing scene with a few underlying repetitive themes. There will be some combination that works for almost everyone most of the time, but that particular combination may need to be changed/tweaked to reflect different life-stages and needs of any particular investor.
Regards- OJ

David and Crash
I don't necessarily disagree with you but when I started investing as a young man I went to reading Bogle and he has influenced my decision making and it has worked for me. I am glad that I did because I didn't know much about investing at that time.My first experience with a financial advisor was a disaster. I guess I should be frequenting the Bogleheads forum instead of here . But, I don't completely but into everything Bogle says about investing and he has been wrong at times as has just about everybody else. You probably know what you are doing. The average joe doesn't and Bogle's fundamental philosophies has worked for me amazingly well. As I have gained sophistication I have strayed a little from Bogle's advice with no ill effects because I am a bit smarter than I used to be.
Super aggressive portfolios however have never worked for me because it could never predict the right time to buy or sell and usually left me with disastrous results and that was under the wings of a Certified Financial Advisor!
I guess right now Bogle sounds lame but should we have another major correction that takes many years to recover from, Bogle's advice will sound so correct.
Take care
Guido

A lot of stress would be relieved if investors just did one thing to be less stupid in their investing...don't be greedy. And perhaps one more thing would be to create an allocation that is appropriate for their financial and emotional situation and then turn off the TV. As MJG so eloquently said, there is no one-size-fits-all answer. Each person must do this for himself, or hire a fee-only planner/advisor to assist. My plan is to continue working until I am 70 (6+ years) at which point I will turn my portfolio over to one of my current associates. Frankly I do not want to spend time on this when I am retired, and I find that most people think the same. One thing I do know is that I will be less willing to accept the kind of risk I have in my portfolio now.

As to the first law noted above: "First Law of Financial Conferences"....hell, from my expericences and observations, this is how human beings function in many cases....period.
I can only confirm that after my 60 plus years on this planet, that I am fully assured that my intuition (the summation of all my experiences combined with my original DNA) provides for reasonal investment returns that in most cases, year after year outperforms at least 5 percent of the active fund managers and the majority of hedge funds.
And of course, I am much ahead of the 99% of folks who don't care or don't know about investing.
What more could a person ask for; in spite of the original expression of this thread.
What a lucky fellow I am.
End of story.
Signed: Smart Ass
NOTE: perhaps an equity buying chance coming our way near term; after some of the selloff smoke clears.........well, at least if the machines don't jump back into the game too soon.
Regards,
Catch

Hi Old Joe and rjb112,
Thank you guys for your pity observations.
It doesn’t get too much older then this, but Publilius Syrus in the 1st century BC said: “It is a bad plan that admits of no modifications”. That ancient wisdom applies today and everyday, especially in spades, for investment matters. All investment decisions, both bad and good, are transient and require constant monitoring and hopefully infrequent changes.
I took the mutual fund Alpha performance data from a 2010 report that I failed to reference. Sorry about that. The title of the study is “False Discoveries in Mutual Fund Performance: Measuring Luck in Estimated Alphas”. The three authors are Barras, Scaillet, and Wermers. For completeness, here is a Link to that study:
http://www.rhsmith.umd.edu/faculty/rwermers/FDR_published.pdf
The paper is rather dense. I only reviewed the Introduction and Conclusions sections.
For brevity in my initial post, I omitted some other findings and observations by these researchers that might interest you. For example, the authors discovered that the overall positive Alphas generated by active fund managers have significantly eroded over time. They report that positive Alpha funds have decreased from a roughly 15% level to the present 1% level in the last 20 years.
Are fund managers getting dumber? My answer is NO. My interpretation is that active fund managers have proliferated and the field had gotten stronger with increased competition that lowers opportunities to outperform.
Another intriguing aspect of the study is the rather long-term survival of the underperforming funds. The authors included the following statement in their Conclusions section: “Still, it is puzzling why investors seem to increasingly tolerate the existence of a large minority of funds that produce negative alphas, when an increasing array of passively managed funds have become available (such as ETFs).”
I suppose, many of us are slow learners and/or are reluctant to omit a mistake. Another dimension to this misguided loyalty is that we often fail to make relevant benchmark comparisons. I attribute this failure, at least partially, to our limited understanding and trust in statistics.
As Zig Ziglar said:” The first step in solving a problem is to recognize that it does exist”. I believe successful investing requires testing outcomes against some pertinent (designed for your specific purposes) benchmark standard. I suspect that some (perhaps most) individual investors don’t do this simple task to their end financial detriment.
Thanks again guys for keeping this discussion fresh.
Best Wishes.

Hi Guys,
Well I’ll risk jumping from the frying pan into the fire with this reference, but it does address a serious shortcoming in many investor's behavior.
I’m referring to a recent Motley Fool article cobbled together by Morgan Housel titled “How to Get Less Stupid at Investing”. The article touts the benefits of seeking a divergent set of market opinions, especially those that directly conflict with your special preferences and biases. Here is the Link:
http://www.fool.com/investing/general/2014/07/08/how-to-get-less-stupid-at-investing.aspx?source=iaasitlnk0000003
Housel’s bottom-line observation is: “If you want to become less stupid at investing, one of the best things to do is surround yourself with people who disagree with you….”.
That’s one of two primary reasons why I have been a constant visitor and occasional contributor to MFO. My other reason harbors a goal to diminish investment innumeracy, especially in the statistical domain. Individual investors better understand and appreciate that historically, equities offer a 7 out of 10 likelihood of positive annual returns over quoting the same statistic as a 70% probability. That’s surprising, but is true.
Near the end of the article, Housel formulates a Law: “This made me realize the First Law of Financial Conferences: People think they go to conferences to learn something, but most often they go to have their beliefs confirmed and reinforced by others.”
Unfortunately, I suspect more than a few MFO members populate and interact on this fine website for the same dubious purpose. To steal a famous Charles Ellis quote and book title, that’s a “loser’s game”. That’s a primary contributor as to why individual investors consistently don’t realize market-like returns.
There is a common human tendency to summarily reject new data or new findings that contradict a previously established position. In the academic community, this tendency has a name; it’s called the “Semmelweis Reflex”. In the end, this Reflex erodes investment performance.
I suppose one of the lessons from this body of research is that we should all seek and be tolerant of divergent market perspectives and investment opportunities. I believe most MFO participants are in this cohort.
So, permit me to conclude with yet another frying pan exposure which will test your active fund manager appetite.
Recent academic studies once again conclude that about 75% of active fund managers have long term performance records that roughly hover near the zero Alpha benchmark. Of the residual 25%, about 24% produce negative Alpha. That means that only 1% generate measurable positive Alpha over an extended timeframe. That’s the sad odds when establishing an actively managed portfolio.
Good luck to all you guys who pursue the active strategy, and I really mean it. Most importantly, I want everyone to succeed. Almost equally importantly, it is the pursuit of active management that keeps the market pricing discovery mechanism functioning well. Thank you for accepting that necessary and costly task. In a sense, the passive Index fund investor is indeed getting a free lunch.
Best Regards.

I hope that VT gets a lot more attention in the financial press. It's quite an interesting fund. It could serve as a one stop shopping for some investors' total stock investing needs.

Hi Kaspa,
I really like Rick Ferri, both as a financial advisor and as an author. I own several of his easy to read books and his advice makes investment decision making easier. I’m frequently on the same investment page as he is. Occasionally we do have a parting of the ways.
Your referenced article is one such instance, at least partially so. In this case, Ferri gets a little sloppy in his calculations.
My bifurcation with Ferri’s prospective on correlation is that he simplified a bit too much. And as Albert Einstein cautioned: “Everything Should Be Made as Simple as Possible, But Not Simpler”. I’m afraid that Ferri went a bridge too far in his article by oversimplifying the portfolio standard deviation relationship.
For a two major class portfolio, the complete equation for the portfolio’s volatility is not a simple average. It includes a corrective term for the interaction aspects of the holdings. These components typically do not perfectly zig while the other zags.
To be mathematically precise, the portfolio standard deviation (SD) squared includes an additional positive (plus in the equation) term evaluated as the product 2 X Weight of component One X Weight of component Two X SD of component One X SD of component Two X Correlation Coefficient. A portfolio’s standard deviation calculation gets more complicated as the number of components increases.
The equation presented in Ferri’s article is wrong; it is incomplete. Correlation Coefficients between investment classes are almost never Zero, and if they are temporarily Zero, they surely do not remain so for very long. Ferri does have it right when he recognizes that correlations are NOT stable in time.
But ignoring the impact of the dynamic component Correlation Coefficient’s interactions on a portfolio’s performance is a hazardous simplification. Typically, it results in an underestimation of the portfolio’s volatility because most category correlation coefficients reside in the positive domain.
Since portfolio compound return is negatively influenced by its volatility, if an investor underestimates standard deviation, he/she will overestimate compound return and cumulative return while underestimating the number of negative annual returns. None of this will inspire the portfolio’s owner confidence level. Over time, his results will fall short of expectations. It’s equivalent to ignoring the wind drag influence on an automobile’s gas mileage performance, and the car running short of fuel before the destination is reached.
I do agree with Rick Ferri’s assessment that correlation coefficients should be judiciously judged given their historical high volatility. Given the high volatility of most investment statistics, their utility in decision making must be tempered by a recognition of that volatility. Uncertainty always exists in the marketplace, so the stats merely give some guidance as to what might happen, but will never yield the precise answer as to what will really happen.
If you are interested in category and/or individual mutual fund/ETF correlation coefficients you might be inclined to visit the Linked Portfolio Visualizer website that provides a comprehensive and easy to use tool. It facilitates the calculation of correlation coefficients between a host of investment products for whatever timeframes suit your purposes:
http://portfoliovisualizer.com/asset-correlations
I hope this helps. Please enjoy playing what-if scenarios with the referenced website. Correlation Coefficients are not constant, but nothing else is so in the investment world either. Good luck in your investing adventures.
Best Regards.

Sorry if this article has been posted previously.
Copy & paste from WSJ: By Jason Zweig, June 20, 2014
If you trade up for a “liquid-alternative” fund, make sure you understand you also are making a trade-off.
That is the lesson that emerges from the rise and fall of the Natixis ASKN.FR -2.43%G Diversifying Strategies Fund, a pioneering portfolio that has just been put out of its misery by its manager.
Liquid-alternative funds generally offer the prospect of doing well when U.S. stocks do poorly. That hope comes at a price, however: Such funds, which tend to charge high fees, typically do poorly when U.S. stocks do well. Investors who don’t understand this link will inevitably be sorry.
Many banks and brokerages are urging their salespeople to put 20% of their clients’ assets into “liquid-alt” funds. Over the 12 months ended May 31, such portfolios took in $98.8 billion of new money from investors, according to Lipper, the fund-research company. All stock and bond funds combined took in $147.5 billion over the same period, meaning that two out of every three dollars that came into mutual funds went into liquid alts.
One of the earliest of these funds was the Diversifying Strategies fund, run by AlphaSimplex Group, a money-management firm in Cambridge, Mass. The founder and chief investment strategist of AlphaSimplex is Andrew Lo, a finance professor at the Massachusetts Institute of Technology and director of the MIT Laboratory for Financial Engineering. If the phrase “He’s no dummy” didn’t exist, it would have been invented to describe Prof. Lo.
Launched in 2009, Diversifying Strategies set out to achieve “absolute return,” or positive performance in up markets and less-negative performance in down markets.
The fund used futures contracts and other so-called derivatives to mimic the return and risk of various hedge-fund strategies, including currency hedging, commodity trading and other techniques. These approaches historically have done well when stocks have done badly—and have generated returns that can help smooth out the bumpy ride of a stock-and-bond-centered portfolio.
In 2010, the fund’s first full year, U.S. stocks gained 15%. Diversifying Strategies was up 8.5%—but its returns were much less herky-jerky than those of the stock market. Investors piled in, and by January 2012 the fund’s assets peaked at $419 million.
But the tables already had turned. Around the world, central banks were driving interest rates down, wreaking havoc on the performance of “global macro” hedge funds—whose returns the Diversifying Strategies fund was partly designed to mimic. The fund lost 2.7% in 2011, 7.7% in 2012 and another 8.1% in 2013—even as U.S. stocks rose 2.1%, 16% and 32%, respectively. The fund also underperformed the Barclay Hedge Fund of Funds Index by 4.2 percentage points annually since its launch.
At last count, Diversifying Strategies’ assets had shriveled below $15 million. On June 13, the fund’s board of directors voted to close and liquidate it, giving the remaining investors their money back.
The decision, said Natixis in a statement, “was based on the fund’s small asset level relative to the cost of implementing these more sophisticated strategies.”
The fund’s siblings have done better. The Natixis ASG Global Alternatives Fund, for example, seeks to replicate the returns of a wider spectrum of hedge-fund techniques, such as convertible-bond trading and “event-driven” portfolios that attempt to cash in on mergers or other corporate changes.
Global Alternatives has $2.9 billion in assets, attempts to minimize short-term risk and has outperformed the Barclay fund of funds index by 3.5 points annually since its launch in September 2008—although it, too, has trailed the bullish stock market by a wide margin.
Diversifying Strategies’ results are “disappointing, certainly,” says Prof. Lo. “But the fund was designed to provide alternative sources of expected risk and return, and it did exactly that.” He adds: “This is what diversification is supposed to look like.”
Speaking of liquid-alternative approaches in general, Prof. Lo says, “When equities are doing well, you’re not going to like this strategy. When they’re doing poorly, you will.”
That might sound like a cop-out, but Prof. Lo is making a point every current or prospective investor in liquid-alt funds had better understand.
“There’s no doubt that everybody will look stupid when the S&P is up 30%,” he says. “That’s when it will be a challenge to remember why you bought in. That’s human nature. Only after the froth blows away and stocks go down will [investors] remember, ‘Oh, I needed to hedge.’”
If you want an investment that can do well when stocks and bonds do badly, a liquid-alt fund can do that for you. But you will have nobody but yourself to blame when stocks and bonds do well and you get annoyed at your alternative fund for underperforming. That is what it is supposed to do.
If you can’t accept that, maybe you should just keep some of your money in cash.
— Write to Jason Zweig at [email protected], and follow him on Twitter:@jasonzweigwsj

FYI: The passage, or failure, of a single piece of legislation is going to tell us a lot about whether our Congress represents the people of the United States or just its financial service industry donors
Regards,
Ted
http://assetbuilder.com/scott_burns/will_congress_keep_your_investments_safe_maybe_maybe_not

FYI: Copy & Paste 7/1/14: Laura Saunders: WSJ:
Prohibition Applies to Both Fidelity and Non-Fidelity Mutual Funds
Fidelity Investments and other asset managers are telling U.S. clients who live outside the country that they can no longer buy or trade mutual funds in their brokerage accounts.
Stephen Austin, a spokesman for the financial-services firm, said the change, effective Aug. 1, was prompted by "today's continually evolving global regulatory environment," but he said it wasn't in response to a specific issue.
The change will affect about 50,000 accounts, or less than 0.3% of Fidelity's 20 million accounts, he said.
"Customers will not be forced to sell holdings simply because they live in a foreign country," Mr. Austin said.
Observers said fund managers are becoming more conservative in the wake of global developments such as the U.S. Foreign Account Tax Compliance Act and other U.S. efforts.
Following large settlements paid to the U.S. by Credit Suisse Group AG CS +1.66% and BNP Paribas SA, BNP.FR -2.05% "Other countries are getting angry about the size of the fines and are grumbling about retaliation," said Jonathan Lachowitz, a cross-border investment adviser based in Lexington, Mass., and Lausanne, Switzerland.
Mutual funds are regulated differently from other investments and could be a target, he said.
David Kuenzi, an investment manager in Madison, Wis., who works with Americans abroad, said that selling U.S. mutual funds to those investors had long been prohibited. "But it was matter of 'Don't ask, don't tell.' Now the firms are getting more aggressive about compliance," he said.
Other fund companies also are changing policies for investors who live abroad.
A spokesman for Putnam Investments said the firm is no longer accepting additional investments into existing accounts held by non-U.S. residents.
The spokesman said the changes were made "in accordance with U.S. anti-money-laundering and 'Know Your Customer' policies" and in response to recent tightening of European laws limiting sales of funds not registered in their jurisdictions.
A spokesman for Charles Schwab Corp. SCHW +2.55% said the firm "has made changes and will continue to make changes to our policies" in reaction to regulatory changes but declined to specify them.
In a recent letter to overseas clients, Fidelity said that its prohibition would apply to both Fidelity and non-Fidelity mutual funds, and to exchanges between funds.
However, account holders still will be permitted to reinvest dividends in additional shares of a fund.
Employer-sponsored plans such as 401(k) and 403(b) plans aren't affected by the prohibition, but individual retirement accounts and Roth IRAs are, the spokesman said.
The letter also said that if an investor has an automatic investment plan with periodic deposits of cash, then the additions can continue but the money won't be invested in mutual funds. Instead, the funds will be added to the investor's other "core position," such as a money-market fund. The letter added that additions to such funds will still be permitted, but that this could change in the future.
The Fidelity spokesman said that account holders' ability to purchase individual securities or exchange-traded funds varies from country to country.
A spokesman for the Investment Company Institute, a fund industry group, declined to comment.
A spokesman for Vanguard Group said its funds are typically only for sale to people who live in the U.S., although there are some exceptions for investors residing abroad, for example, some people with inherited accounts.

FYI: Copy & Paste 7/4/14: Jason Zweig: WSJ
Regards,
Ted
Workers are cutting back on the stock of their own companies. It is a welcome sign of investment maturity.
Trimming your exposure to your employer’s shares is one of the most important decisions—but toughest psychological challenges—any investor can face. The wisdom of such a move has been made stunningly clear by the demise of companies like Enron, Bear Stearns and Lehman Brothers. In order to cut back, you will have to set your emotions aside and think hard about risks you otherwise might not be willing or able to recognize.
Even some people who work for Warren Buffett—arguably the best investor of our time—have gradually been reducing their holdings of Berkshire Hathaway’s stock.
Financial disclosures filed at the Securities and Exchange Commission at the end of June show that the 401(k) plans for employees of Burlington Northern, one of Mr. Buffett’s largest holdings, had slightly more than 10% of their assets in Berkshire’s stock at the end of 2013, down from nearly 22% in 2009. Employees at General Re, the reinsurer Mr. Buffett bought in 1998, shaved their discretionary Berkshire holdings to 4.6% from 5.1% over the same period. (The SEC requires companies to file these disclosures only for retirement or savings plans that hold the company’s stock.)
According to two people familiar with the matter, Mr. Buffett doesn’t set policy on retirement plans for Berkshire’s subsidiaries, and employees make their own decisions on where to put their money.
If you worked for Warren Buffett, why would you not want to put as much of your money alongside his as you could? No one can say for sure, but his employees are probably influenced by the nationwide trend to cut back on company stock.
The collapse of Enron in 2001 and Bear Stearns and Lehman Brothers in 2008 brought out tragic tales of employees who had nearly all their retirement assets riding on those firms’ own shares. The Pension Protection Act of 2006 imposed new restrictions on companies offering their stock in their retirement plans.
As a result, companies have steadily been making it harder for employees to load up on their own stock in 401(k)s. Burlington Northern, for instance, doesn’t permit its staff to invest more than 20% in Berkshire’s shares.
Between the end of 2005 and mid-2011, the most recent data available, more than one-third of companies that offered their own stock either removed it from the retirement plan or stopped permitting new investments in it, according to fund giant Vanguard Group. And none of the more than 1,350 companies tracked by Vanguard during that period launched any new company-stock funds in their plans.
A decade ago, 36% of companies offering their own stock as an investment option in their 401(k) plans required that matching contributions be initially invested in their own shares, according to Aon Hewitt, the benefits-consulting firm. Today, only 12% do.
While the problem of holding too much company stock has dwindled, it hasn’t disappeared. As of 2012, according to the most recent available data from the nonprofit Employee Benefit Research Institute and the Investment Company Institute, a fund-industry trade group, 12% of employees who could invest in company stock had at least half of their 401(k) assets in it. And 6% had 90% or more of their money in company stock.
The company you work at is so familiar to you, it can be hard to think objectively about it.
Meir Statman, a finance professor at Santa Clara University, points out that familiarity isn’t the same as superior insight.
You know quite a bit about your company because you work there. But that doesn’t mean you know more about its customers, suppliers, products, technologies and competitors than the 100 million people who collectively price its stock every day.
Familiarity also “fools people into thinking their company is safe,” says Prof. Statman.
In 2002, right after Enron’s bankruptcy, I urged an audience of individual investors to “avoid the next Enron” by diversifying out of their own companies’ shares. One person protested that he knew with his own eyes and ears that his company was safe—while diversifying into other stocks would inevitably expose him to owning at least some of the next Enron.
You might be right that your company is the next Google or could never be the next Enron, says William Bernstein, an investment manager at Efficient Frontier Advisors in Eastford, Conn., but “the consequences of being wrong are dire.”
By diversifying out of company stock, you forgo the hope of a spectacular gain, but you also eliminate the risk of being wiped out if something goes disastrously wrong at your company.
You might dismiss the risk of an Enron-type implosion as ridiculously far-fetched. But bankruptcy isn’t the only risk that your company faces, nor the most probable.
Far more likely is what Daniel Egan, director of behavioral finance at Betterment, an online financial adviser, calls “tectonic risk”—the chances that your company could be hurt by new competitors, regulations or technologies that fundamentally alter the profitability of the business.
These risks tend to blindside everyone, including chairmen and chief executives; they can surely blindside you, too. Having more than a tiny sliver of your retirement money in your company stock is an idea whose time has come—and gone.