I looked at alternatives ( L/S, Merger, futures, even market neutral) a year or so ago, because I thought stocks and bonds were overpriced even then and cash paid so little. I came to the same conclusion about L/S funds as David but BPLSX was closed (somehow SFHYX escaped my radar) so I started a position in it's global cousin BGLSX/BGRSX. It has done pretty well and seems to be positioned to avoid huge draw downs.
All of the other alternatives are reasonable, ie more cash, options etc, although the performance of FPACX has not inspired confidence in the last three years ( it lost more than the SP500) in Jan 2016, making me wonder what was involved.
One of the problems with mutual funds is you are investing in someone else's ideas about returns, safety and risk. Usually they are consistent, and reliable but not always. Of course the farther away from "bread and butter" diversification ( major asset classes, cash as ballast etc ) the more of a black box.
Certainly a portfolio with 30 to 50% cash will be significantly less volatile, but your returns will lower. There is a greater argument to made for cash with a 25 return now than a year ago
The key is 1) know what return you need and be sure you won't stick your neck out and get burned and 2) know exactly what you will do when a crunch comes and the market is down 20 % . If you can't stand the heat...

L/S funds are interesting and I have considered many with interest. However, upon analysis, I always come to the conclusion that 'my' objectives are better met with good balanced/allocation funds. I own OAKBX, FPACX, SGENX for a long time know and have handled the dips very well since I held them. Started accumulating from around 2001 and continue to add to them all these years. My suggestion is to at least consider them vs. L/S funds and see if they satisfy 'your' objectives.

Agreed that it's to each his own, @MikeM. What I object to is the authoritarian in chief telling others what to do in no uncertain terms, when it's clear he doesn't understand anything about them.
One other minor point: category returns aren't especially illuminating.

It’s very rare nowdays for folks eliciting assistance to state their age, years to retirement, other sources of income, etc. One size does not fit all. Never did.

@LLJB: is a Grandeur Peak US small cap fund a pleasant personal idea or is it something you know has been discussed and planned by Grandeur Peak?

@Ben, this from David's commentary roughly 6 months before Global Micro Cap and the Stalwarts funds were being launched, which was September/October 2015.
"Funds in Registration
This month our research associate David Welsch tracked down 14 no-load retail funds in registration, which represents our core interest. By far the most interest was stirred by the announcement of three new Grandeur Peak funds:
Global Micro Cap
International Stalwarts
Global Stalwarts
The launch of Global Micro Cap has been anticipated for a long time. Grandeur Peak announced two things early on: (1) that they had a firm wide strategy capacity of around $3 billion, and (2) they had seven funds in the works, including Global Micro, which were each allocated a set part of that capacity. Two of the seven projected funds (US Opportunities and Global Value) remain on the drawing board(emphasis mine). President Eric Huefner remarks that “Remaining nimble is critical for a small/micro cap manager to be world-class,” hence “we are terribly passionate about asset capping across the firm.”"
There was another discussion in David's commentary or in a fund review earlier than that and it discussed their plans for funds and their strategy in far more depth but I wasn't able to find that again easily or I just wasn't willing to keep trying once I found the above. Most likely its the latter.
I don't believe I've ever seen this information anywhere else but I have exchanged emails with the leadership at Grandeur Peak a handful of times over the years with questions about when we might see these and other funds. They've never said anything to make me question the validity of these intentions and their answer about when was that they wanted to get their teams comfortable with the funds they had already started and their process before they expanded further. It seems to me that goal should have been accomplished by now and the real reason is that they're waiting for a time they consider more opportune to launch the other funds they had planned and that's what I'm looking forward to.

@Ted The questions to me are do we expect the S&P 500 to deliver 16.08% annualized over the next five years and do long-short funds do what they're supposed to do in a downturn? I don't think it's fair to compare their returns to the S&P in a raging bull market. It would be better to look at risk adjusted returns, alpha, Sharpe, beta and downside capture. By that take, I would still agree with you that most long-short funds aren't worth the price of admission. Their fees tend to be too high and they don't always protect on the downside as much as they should. But there are a handful that are worthwhile.

@msf. Yes, I saw that from 2012 but on the TD Ameritrade website could find nothing about any fees on selling a transaction fee fund. I guess I will just contact an office and ask them about the fees. My Scottrade brokers haven’t been of any help. I can’t handle $49.99 on both purchases and sales unless I make some type of adjustment in my trading methodology. Then again been adjusting continually since my INVESCO and Strong days. Back then you could literally buy and sell their in house funds day after day if you wanted and zero commissions and without fear of being banned. Albeit eventually Strong banned me from datelining of their international funds.
They say luck is a big element in the success equation. Part of the reason my account is seven figures to the better over the past 25 years of buy and hold in the S@P was I lucked upon those two brokerage firms at just the right time in the 90s. I am a big believer in the Luck Factor!

That’s a tough universe to tread in. I can understand the appeal however. I’ve been burned more than once with these types of funds. Generally they run hot and cold. After a few hot years money piles in. Than, next thing you know they turn cold. They are usually beset with high fees - often having ERs in the 2% range. They have to pay interest on their short positions and that gets reflected in the ER. I’d agree with David. Or, if you feel up to it, develop your own scheme for raising and lowering cash or short-term bonds.

I did some research after posting my response above. Based on M* numbers, ARTKX beat OAKIX over 15 years, 10 years they are even, and OAKIX beat ARTKX over 5, 3 and 1 years. However, over all periods, ARTKX has better Alpha and Sharpe ratios for whatever it is worth. Having said that, both of them are good/great funds in opinion. ARTKX managers were trained/worked at Oakmark with Herro before going on their own with Artisan.

May be a good time to invest in value, seeing all the capitulations to growth: looking hard at RPG, PRDGX an "obvious" choice within the TRP house, etc.
If you've ever used "mean regression" as a mantra, how does that apply here? I agree with hank that "a decade is a pretty short period".
RPG and RPV go back barely a decade. Using VIVAX and VIGRX instead (going back to 1992), here are their last 10 year cumulative returns, their their previous 10 year cumulative returns, the cumulative returns for those 20 years, and their lifetime cumulative returns (11/2/1992 through 1/22/2018).
last 10 yr:    196.29% (growth) vs. 141.12% (value)
prev 10 yr:    44.05% (growth) vs.  76.08% (value)
last 20 yr: ;   326.80% (growth) vs. 324.55% (value) - a virtual dead heat
lifetime:        983.07% (growth) vs. 991.05% (value) - a virtual dead heat
You can get these figures from M*'s chart here (just tweak the date ranges).
Annualized, the first three are:
last 10 yr:  11.47% (growth) vs. 9.20% (value)
prev 10 yr:  3.72% (growth) vs. 5.82% (value)
last 20 yr:   6.10% (growth) vs. 6.06% (value)

I am a 77 year old retiree and not a sophisticated investor. Had my selfdirected IRA for many years with Scottrade and it will transferred to TDA on February 23, 2018. TDA has “hundreds” while E*trade offers “thousands” of funds, but without an account in either company I cannot find out which ones they are. TDA charges $50.- for a transaction fee funds while I paid $17.- at Scottrade and don’t know what other fees may apply. I wonder if I would be best off with Vanguard which is known for low fees. I already have 3 Vanguard Funds and one Vanguard ETF. I also have one fund each from Fidelity, T Rowe Price, Oakmark, Mairs&Power and a James Fund. I am grateful for any advice I can get.

Simon said:
“I have an IRA with T. Rowe Price” - Good. It doesn’t get much better than these guys.
“and have some dry powder ready to buy on the next correction” - Not me. I believe the next “correction” from these levels will more closely resemble a trap door over a rather deep pit (maybe something out of Alice in Wonderland).
“I've been waiting an awfully long time” - That’s not your fault. It’s silly season in the equity markets.
“The obvious choice is PRDGX but it has lost a Morningstar” * - Don’t be seduced by the stars. Read the Prospectus and a couple recent annual or semi-annual fund reports to garner the flavor of the fund and how it invests. Always balance out the M* reviews with at least 2 other opinions. I like Lipper and Max Funds.
Suggestions:?
It’s a big fund universe. My own experience is limited to about a dozen families. But you did say you wanted answers based on personal experience.
(1) Dodge and Cox are deep value investors. Low fees. Solid long term performance. However, their flagship DODGX lost over 43% in 2008. (How strong is your stomach?)
(2) OAKBX doesn’t advertise itself as deep value, but in owning it and reading their commentaries for over a decade, I’m convinced it is run like deep value. They bought GM 4-5 years ago when you couldn’t give the stock away (slight exaggeration). It eventually paid off. The nice thing about this fund is it does a pretty good job hedging against steep losses. It lost 16.2% in 2008 - less than half as much as DODGX. I’ll point out that the former is normally classified as a stock fund and the latter a balanced fund. I’m not sure those distinctions mean a whole lot at this point in time. It’s more about your risk appetite and willingness to stick to your investment decisions.
The growth and value labels can be confusing. Sometimes value houses move into traditionally “growth” areas because they find the price attractive. And I suppose it could work the other way around as well.

Catch, A great write-up. Thanks.
- Catch said: I've become more of a technical investor with a big dose of leftover "what are the fundamentals of this investment world today"?
I never understood technical analysis, but respect those who invest based on moving averages, etc. and appear to do well. Fundamentals is hard to access. However, Europe seems to have pulled out of its multi-year slump. Japan is finally seeing some inflation and stock market rebound following a decades long bear market. Interest rates remain low at home and abroad. Larry Summers, speaking on Bloomberg recently, suggested some of the global market gains are due to people shifting money out of the U.S. due to our current banana republic political atmosphere. (Things like pledges to arrest / imprison your opponent if you win the election).
- Catch said: Does the market place remain a hugh pile of other folks money seeking profits, or does some real value exist, somewhere? Is this just a chase, chase, chase?
My sense, having invested for 50 years, is that there’s a whole lot of “chase chase” going on. That doesn't mean the equity markets can’t continue to spiral upwards for many more years. It does mean that as a 70+ year old retiree, I’m not willing to put a large amount of money at risk. So much depends on one’s situation and time horizon.
- Catch said: It is apparent that the really big money does much care one way or another about what is going on in politics, in general, yes? The U.S bombing North Korea or North Korea bombing Guam; well, that might change a few things for a week or so, eh?
Catch lists more potential black swans than I care to dissect. Most have been out there for years. But don’t you love “The law of unintended consequences” ? So many threats emanating from Washington to reign down fire and fury on the Korean Penninsula that it has driven the two nations there closer together. Some real dialogue is taking place between the two adversaries. Some revolves around the 2018 Winter Olympics in South Korea. Neither country wants to partake of all out nuclear war on their peninsula.
- Catch said: Interest rates (still touchy/feely as to central bank actions) remain low, inflation remains low and the yield spread between the 10 and 30 year Treasury's has continued to shrink.
The HY spread doesn’t surprise me. There is often a strong correlation between the equity and junk bond markets. What happens to rates depends on the health of the world economy. Low rates have boosted the global markets higher following the near depression in ‘08. As the punch bowl is gradually taken away, do we achieve orbit or careen back to earth in flames? Nobody knows for certain. However, higher short term rates could actually help longer dated bonds if a recession were to occur as a result. For that reason I’m averaging a bit into a GNMA fund - the equivalent of taking a parachute along with you on a flight. A lot of dead weight - but priceless in an emergency.

I'm holding too. I dumped FSCRX and bought MSCFX last year as Myers' retirement grew closer and I normally give funds at least a few years to make me happy before I'd consider dropping it for another. What I've been hoping for, for a number of years now, is Grandeur Peak's US small cap fund. I'm pretty confident they're just waiting for a time that looks opportune to register the fund but whenever that happens MSCFX will either be eliminated or at least limited to its then current value in my portfolio.

I use to mess in this space years back.
Now, I just hold extra cash so when the market pulls back I'v got some cash to do some buying. Plus the extra cash (including CD's) acts as a dampner and reduces portfolio volatility as David notes in his above post.

AKREX/AKRIX: my all time favorite. Chuck Akre is a getting up there in years but he hasn't disappointed. His fund typically is called 'Growth' but he's a Value Manager.

The AQR long short equity fund QLEIX looks pretty good but it is closed and just has a 3 year history.

Not that it matters, since it's not available to new investors, but it's been around 4 1/2 years and will hit 5 in July. (Even some L/S funds without a long history have been around for a few short weak periods for equities, e.g., a few months in 2014 and 2015, 2015 overall, and Jan. 2016, for peeks into down-market performance. None of those were deep and sustained like 2007-2008, of course, but the GR was back far enough that many funds of all kinds with that extensive a record have changed managers/strategies or have had big increases in AUM that have likely affected strategy and performance since.)
That Calamos fund (CPLSX) looks interesting. So many different strategies within long-short ...

Calamos has an interesting looking fund that was originally a hedge fund that was converted to a mutual fund a few years ago. It has beaten the s&p 500 over the past ten years. Here is a link to a Barron profile of the fund - http://webreprints.djreprints.com/54361.pdf?utm_source=calamoscom&utm_medium=site&utm_campaign=barrons1122

"[TBGVX] hedges back to the dollar. The dollar is getting beat up, in 2017 and into 2018."
I'm glad you said that. I'm beginning to sound like a broken record when I point out hedging with some funds (posts mentioning VMVFX, FMIJX). Tweedy, Browne does also have an unhedged version, TBCUX.
After Tweedy, Browne spent years saying how wonderful hedging was (that they could focus on what they knew, stock selection), they came out with an unhedged version of their fund. Call me a cynic, but I viewed that as selling out their investing principles for AUM. Consistent with their charging very high ERs.

Hi guys!
Last week, in The Economist, they had a piece on India.....the great lie of the middle class in India. It's not China of 20 years ago. E-commerce in India in 2017 was about that in China for a week. US companies can't make any money there. GDP per person is $1700 --- and 80% of the people make less. 3% of the population own these 5 things: car or scooter, TV, computer, A/C or refrigerator. Top 1% make $20,000 --- good paying jobs are thin. Education is very poor.....1 in 9 is illiterate. Most US companies aren't selling basics, so they can't make money. Slick said a while back India was not a buy. From what I read, good call!
God bless
the Pudd

EMs (bonds and stocks) are highly cyclical. Conventional wisdom over the last 40-50 years has been that EM stocks will outpace more modernized economies over the long haul. Sir John Templeton used to make that point. However, during the decade or so that I owned his funds, his more sedate TEMWX did much better than the EM heavy TEGOX, which had higher fees and a lot more volatility.
I don’t think anyone really knows. At my age I’d maybe play them if they looked beaten up enough to catch a nice bounce. But I don’t want to own EM on a protracted basis - particularly the stocks, which can drop 30-40% before you can say “ouch”.