hmgodwin

A concern about the Launch Alert for American Beacon Shapiro Equity Opportunities Fund: There is almost no relevant information about the fund besides the strategy seems to have done well for the past decade-plus. There is almost no one who is going to put money into such fund without knowing what is currently in it or at least some examples of what used to be in the strategy during certain time periods.

Thanks for your comments.
Because the funds only recently launched, we will not see relevant information until EOY 4Q2017. Most new funds will not have current information available immediately after launch, and so this is as expected.
On the other hand, while investors may be unwilling to invest in these funds without knowing what is currently in them, ten years of detailed quarterly commentary for both private strategies are available from the firm. These commentaries have significant explanatory depth and clearly communicate specific stock positions, the reasons for owning, selling, or holding them, how discrete segments of the portfolio are constituted, and how current market conditions affect their positioning and outlook -- in other words -- we know what has been in them from detailed facts about how the strategies are being managed, not only currently, but also historically.
This year the Observer has done three launch alerts of new funds that have begun from successful predecessor strategies. The ones from Shapiro are the fourth. The launch alerts are not recommendations to buy these funds but are intended to provide relevant background, such as composite strategies, so that we can decide what potential they may have for investment based on what is already known.
The 3Q2017 commentary of the Shapiro composite strategies was released October 26th. While they don't discuss the new funds, they do provide information about some specific holdings replete with their usual overall depth about the strategies -- a helpful analysis in seeing how the new funds may be invested.

Thank you, openice. I didnt know that the past commentaries were available. Such is sufficient to determine if a personal investment is warranted. Thank you for the knowledge.

Regarding VGWIX, VGWAX, etc., my global allocation fund of choice is SGENX, available load-waived at Schwab. If bonds are needed, may be supplement with PONDX. I have owned SGENX for a very long time. My other long-term holds (>10 years, some >15 years) are OAKBX, FPACX, MACSX.

Hi all,
It is for sure some will have greater success at positioning than others. I have found it best for me to allocate even within the growth area of my portfolio where no sleeve is less than 20% nor greater than 30%. In this way, I don't put too much, or to less, into a sleeve. Thus far it has worked well. Last year my small/mid cap sleeve lead. This year it trails with the other three sleeves (large mid cap, global growth and specialty/theme) being the producers. And, even the small/mid cap sleeve has produced year-to-date (at just short of 7%); but, just not as much as the others.
We each have our style of investing. For me, I am for the most part an asset allocator who plays around the edges and moves some money from time-to-time based upon my read into what I perceive will be the faster moving currents within the market.
But, to do this I have to continue to be a good student following the markets as they are forever changing. And, that is why I maintain both a domestic and global market compass as well as my market barometer that follows and scores certain aspects the S&P 500 Index and scales it into a barometer reading.
Many years ago I enjoyed some weekend visits to the dog track betting the dogs. One of my strategies was to bet three dogs to win, place or show as it produced more winning proceeds for me over betting one dog to win. So, I modified this betting strategy and incorporated it into my investment portfolio.
For me, it has worked well. Both, at the track and within my portfolio.
I wish all ... "Good Investing."
Old_Skeet

@jlev,

How long would people wait before deciding their level of comfort/ trust with VGWAX?

I've thought about this as well. My take is when a mutual fund is introduced it has the benefit or challenges of the market cycle. Funds that became available in say 2007 had a serious set of challenges to overcome. Most new funds (less than 10 years) have not been tested through a serious bear market...well, maybe the energy and commodity funds have.
Two things strike me as interesting to follow with regard to VGWIX (VGWAX):
1. What will management select as initial purchases... equity, bond, and other.
2. How will VGWIX perform out of the gate and over the short term in comparison to VWINX...a brother from the same mother. Sibling rivalry or will big brother VWINX have VGWIX back? Me thinks the latter.

@MikeM: I use sector funds/etfs such as utility and staples to add ballast and counterbalance some of my more aggressive funds or to correct underweighting of sectors in my overall portfolio. I had to sell the utility fund I had at ML when I transferred, since it was not offered at Fido. They did accept FRUAX when I transferred the roth, but one year earlier when I transferred the traditional ira, they did not, so bought VPU in its place. Same story on the health care funds, they would not accept PHSZX in the ira, so I bought SHSAX, but did accept it by the time i transferred the roth. I added IHI and FRHFX when I sold PJP and my biotech fund. I liked the emphasis on medical devices over biotech going forward. I was light on financials, so I added JRBFX. No, I do not think I know more than mf managers, as a matter of fact, I used to be all funds and no etfs and over the last two years did some comparisons and in some of the sectors I actually liked the etfs better. I enjoy investing and most of my portfolio is in funds Ive had for many years such as the Vanguard funds. Im sure I could consolidate further by getting rid of the funds that I cannot add to that I brought over from ML but all of the ones I kept do well.
I basically am following the sector weightings my ML advisor set up, I just dont pay for the advice anymore, and I left ML because they have limited fund offerings. They sell very few Vanguard funds, which was my original impetus to start moving over to Fido.
We all invest as we see fit, mine works for me, and I assume your works for you.

FYI: There are no easy answers in the financial markets right now because of the run-up we’ve experienced over the past number of years. The alternative — lower valuations, higher yields, more bargains, etc. — is, however, worse because that would mean everyone would have less money in their portfolios. We have to play the hand we’re dealt and anyone who tells you with certainty they know how things will work out from here is nuts. Legendary investor Howard Marks gave investors 6 options in an update this summer. In a piece I wrote for Bloomberg, I give the pros and cons of the best options.
Regards,
Ted
http://awealthofcommonsense.com/2017/11/caution-alone-is-not-an-investment-strategy/

"Regardless of whether luck accounts of 92% or 98% of investment performance, the implications are the same: Almost all attempts to beat the market will fail."
A misleading statement because he's conflating beating the market with beating half of one's peers. Some other problems with the analysis:
It assumes that years are fungible. By that theory, even if only giant caps are doing well in a given year, a genuinely skilled manager in large (not giant) caps should still outperform his peers. Sure. Market conditions change over time. I'm happy with a manager who does very well some years and not excessively badly other years.
Because performance tends to bunch near the middle, tiny differences get amplified in percentile rankings. A small change in relative performance can easily shift rankings across deciles for one year. There is less instability over longer periods of time (thus highlighting another problem with focusing on year 1 vs. year 2).
There are enough studies showing that management skill does exist to raise doubts about the approach here. The usual question is not whether skill exists, but how to identify it prior to investing. MJG alludes to this with his coin toss.
Here's a random page pulled in searching for an example of a study on management skill:
https://www.gsb.stanford.edu/insights/jonathan-berk-are-mutual-fund-managers-skilled-or-just-lucky
"research [by Stanford faculty] suggests that the typical mutual fund manager is persistently skilled, and that top performers are especially good. It’s just that the market is so hypercompetitive that most investors can't benefit from the skill ..."
Here's the working paper referenced in the article:
http://www.nber.org/papers/w18184.pdf

Thanks @Ted. Interesting story. Reading over PRWCX’s most recent report (June ‘17 I think) Giroux commented that if rates rose much more he’d increase his high quality longer dated bond position - mostly out of concern over equity valuations. He went further in saying he felt bonds would prosper if equities fell off a cliff. Well - rates are up. We’ll see if he followed through. Somewhat unrelated to the CALPERS story - except that both point to a growing concern about valuations among money managers. Guess a lot of us are waiting for “the jello to hit the fan”.
Here’s where I’d appreciate more insight from those in the know: With the equity markets having roughly tripled in less than 10 years, why are so many public pension funds still in trouble? If the reported numbers are correct (particularly your own state, Illinois, Ted), than imagine the trouble those pension funds would be in had not the equity markets recovered.

They're in trouble because they promise too much money.

Hi @hank
Bondland: Short duration yields/rates are higher, but.....
http://www.reuters.com/article/usa-bonds/treasuries-u-s-2-year-note-yield-hits-another-9-year-high-flattening-continues-idUSL1N1NK0ZW
Pension funds:
1. Actuaries didn't anticipate the longevity of the "boomers".
2. Perhaps many pension funds never really achieved their goal of 8-8.5% real return adjusted for inflation.
3. At least relative to employee union pension funds; many had/have "cost of living" adjustments built into forward pension payments; including pension benefits that continue to have a "health plan", too.
4. Under-funding of pension plans, over the years. This is a known condition for many pension funds.
I recall over the past several years reading about existing pension funds in Michigan municipalities, though still having contributions to the fund; finding that paying the retired employee pension/health care outflows was consuming 50% of the assets of the fund.
Example: Central States Pension Fund (Teamsters); of which, I read about several years ago. A story of, we may be able to maintain the monetary base of the fund; but ya'll will have to take a 30% decrease in your pension or the fund will crash and burn. Check some of the links in the search below, in particular to "UPS" drivers who were moved into the Central States Pension Plan. The link below is for numerous search items.....read for your choosing.
https://www.google.com/search?source=hp&ei=EBoLWrGHNJuzjwSX9LzgDw&q=central+states+pension+fund+news&oq=central+states+pension+fund&gs_l=psy-ab.1.1.0l10.1146.11288.0.13276.27.27.0.0.0.0.314.3286.1j25j0j1.27.0....0...1.1.64.psy-ab..0.27.3280...46j0i131k1j0i46k1j0i10k1.0.clw8X-GyJ9Q
Side note: Although great to have a pension, the majority of pensions do not have a "cost of living" adjustment. If inflation was running at the "old" annual rate of 3%, or so; after 10 years folks would be loosing about 1/3 of their spending power from a pension, yes? I spoke with a few folks I know a number of years ago about this as a future planning tool relative to their spending habits going forward.
Well, this is my small take on such a big world.
The snowblower is lubricated, gas full and tested. Now waiting for April again in Michigan.
Take care,
Catch

Thanks @Ted. Interesting story. Reading over PRWCX’s most recent report (June ‘17 I think) Giroux commented that if rates rose much more he’d increase his high quality longer dated bond position - mostly out of concern over equity valuations. He went further in saying he felt bonds would prosper if equities fell off a cliff. Well - rates are up. We’ll see if he followed through. Somewhat unrelated to the CALPERS story - except that both point to a growing concern about valuations among money managers. Guess a lot of us are waiting for “the jello to hit the fan”.
Here’s where I’d appreciate more insight from those in the know: With the equity markets having roughly tripled in less than 10 years, why are so many public pension funds still in trouble? If the reported numbers are correct (particularly your own state, Illinois, Ted), than imagine the trouble those pension funds would be in had not the equity markets recovered.

Anyone getting giddy on European Funds?
Europe Heading Toward Golden Period:
from-lost-decade-to-golden-years-euro-economy-picks-up-the-pace
To me, a good managed fund navigates these dynamics better than a broad index. Many here are familiar with risk averse FMIJX.
Using a "European only" fund screen shows:
DFA's (DFCSX),
Brown Advisory's (BAHAX) and
Columbia's (CAEZX) all having higher risk adjusted returns (high Sharpe Ratios).
From a fee expense angle the nod goes to (VEURX), but it is an index approach.
PIMCO's USDollar unhedged (PPUDX) has 97% exposure to Developed EU and uses PIMCO's derivative strategies in an attempt to outperform the index. The USDollar hedged version is PPIDX.
T. Rowe Price's (PRIDX) has International Small/Mid Cap exposure splitting itself between Europe/UK (48%) and Japan / Em Asia (45%).
Fidelity's (FSCOX) has a similar approach with a strong convictions towards Japan (33%), Europe (32%) and the UK (19%).
Under performers with high exposure to Europe include:
AAIPX - 4*, (68%/24%) Greater EU / Greater Asia
TRIGX - 3*, (64/32) Greater EU / Greater Asia
LISOX - 3*, (56/30) Greater EU / Greater Asia
BBHLX - 3*, (65/19) Greater EU / Greater Asia, (17%) cash
THGIX - 2*, (62/24) Greater EU / Greater Asia
USIFX - 4*, (62/33) Greater EU / Greater Asia
CIVVX - 4* (65/27) Greater EU / Greater Asia
MQIFX - 4*, (58/37) US/Greater EU
USAWX - 5* (58/39) US/Greater EU
IVFLX - 1* (28/65) US/Greater EU
An interesting World Allocation fund, BBALX, which is divided pretty evenly into thirds-US Equity, Non US equities, and US Bonds- but over weights Non US equities (50/50 Greater EU/Asia) compared to the category.

FYI: The California Public Employees’ Retirement System, the largest U.S. pension fund, is considering more than doubling its bond allocation to reduce risk and volatility as the stock bull market approaches nine years.
Regards,
Ted
https://www.fa-mag.com/news/calpers-considers-more-than-doubling-bond-allocation-to-44-35690.html?print

Thanks for your comments guys,I expected the too many funds and too low on some questions. Will try and address your comments:
@Art: Over the last ten years, converted quite a bit from traditional ira to roth. 2/3 of my retirement funds are now in the roth. I treat the roth a bit differently than the traditional ira, as it will be the last to be used, and it much more aggressive.
@Pudd: I only started VWINX this year, and because it is $75 each time I want to add to it, I wait until I sell another fund or stock to fund it more. As I stated, I tend to use a barbell approach rather than allocation or balanced funds, but will add to it over time. I use the staples, utilities, and more value and moderate stock funds as ballast to my more aggressive holdings. I have two general hc funds basically because I cant add to PHSZX at Fido, it was bought when I was with ML I sold the amount I had in the traditional ira and bought SHSAX so I could add to it. I used to have a biotech and a pure pharma etf but sold those to invest in IHI and FSPHX. Regarding the reit, I only bought FRIFX on Friday, selling VNQ after 5 years. I wanted to give a managed fund a try in this sector and liked the Fido offering. It is not a spif, I like having reits as a permanenet part of the portfolio. Not expecting rates to rise very fast anyway. I like how FRIFX is a bit more diversified in its components. Ive had MINDX for over 3 years, but probably would not be buying it now but perhaps a more diversified Asian fund. I have enough diversity in my other foreign holdings that I could risk it. I know I have many funds, primarily because I could not bring some of them from ML and had to find a comparable fund. I brought the traditional ira over first, a year later the rest, so in that year, some I could not bring over, and had to sell, and some closed so had to find alternatives.
@MikeM: I was expecting this comment from someone lol. I love small caps, but the reason they are so low is that I have many funds that have small caps in the portfolio and already at 24% small and mid.
Hope I addressed your comments enough, and no Im not sensitive, many times I think I have too many funds myself, but there is somethng I like about each of them that I hold. And each does have a role, maybe someday this will change :)

Some thoughts on private account composite returns: I find them useful to a degree, but one has to take them with a grain of salt and understand the nuances of a fund's individual strategy as to whether that translates well into fund world. For instance, the more illiquid the strategy--small caps, high yield bonds--the less credence I would give to the private accounts composite returns because such accounts tend to have much stickier assets and don't have to deal with the daily ebb and flows of mutual fund cash flows on brokerage platforms which can wreak havoc with illiquid strategies. The same goes for low turnover versus high turnover strategies. Low turnover translates well I think into mutual fund format while high turnover which suffers more market impact costs as assets grow in the mutual fund format can cause the manager to lose its edge. Also, concentrated versus non-concentrated. A diversified strategy can absorb more assets than a concentrated one in a mf format. Finally, and very important is the lumpiness of composite private account returns. Some funds have excellent composite returns annualized over a number of years but if you look at the calendar year returns you'll notice that much of that performance is due to one really big year while the rest of the years are mediocre or sub-par. Look at those calendar year returns on the composite and notice the outliers and ask why. Also, look at how much assets the strategy had in those big blow out years and whether the returns are repeatable in a much larger bigger mutual fund format. In other words, the key question is--is this strategy scalable?

hmgodwin

A concern about the Launch Alert for American Beacon Shapiro Equity Opportunities Fund: There is almost no relevant information about the fund besides the strategy seems to have done well for the past decade-plus. There is almost no one who is going to put money into such fund without knowing what is currently in it or at least some examples of what used to be in the strategy during certain time periods.

Thanks for your comments.
Because the funds only recently launched, we will not see relevant information until EOY 4Q2017. Most new funds will not have current information available immediately after launch, and so this is as expected.
On the other hand, while investors may be unwilling to invest in these funds without knowing what is currently in them, ten years of detailed quarterly commentary for both private strategies are available from the firm. These commentaries have significant explanatory depth and clearly communicate specific stock positions, the reasons for owning, selling, or holding them, how discrete segments of the portfolio are constituted, and how current market conditions affect their positioning and outlook -- in other words -- we know what has been in them from detailed facts about how the strategies are being managed, not only currently, but also historically.
This year the Observer has done three launch alerts of new funds that have begun from successful predecessor strategies. The ones from Shapiro are the fourth. The launch alerts are not recommendations to buy these funds but are intended to provide relevant background, such as composite strategies, so that we can decide what potential they may have for investment based on what is already known.
The 3Q2017 commentary of the Shapiro composite strategies was released October 26th. While they don't discuss the new funds, they do provide information about some specific holdings replete with their usual overall depth about the strategies -- a helpful analysis in seeing how the new funds may be invested.

We thought we’d start catching up with the 130 U.S. equity funds which have passed their second anniversary but have not yet reached their third, which is when conventional trackers such as Morningstar and Lipper pick them up. As Charles has repeatedly demonstrated, the screener at MFO Premium allows you to answer odd and interesting questions. I’ll try to look at several questions over the next week, starting with “which of these new funds might be badly miscategorized?”
That’s an important question, since investors tend to buy the (Morning)stars. In general, that’s an okay decision: five star funds rarely become stinkers, one star funds rarely become gems. Except when a fund has gotten dropped in an inappropriate peer group, so that Morningstar is looking at a banana and trying to judge it as an apple. Our two favorite examples are RiverPark Short Term High Yield (RPHYX) and Zeo Strategic Income (ZEOIX). Both are outstanding at what they do: generate low single-digit returns (say, 2-4%) with negligible volatility. And both get one star from Morningstar because they’re being benchmarked against funds with very different characteristics.
How did we check for miscategorized funds? Simple, we get our screener to identify all U.S. equity funds that had been around for under three years. We downloaded that to Excel, eliminated funds with under two years of history then sorted them by their correlation to their peers. We found that over half of the funds were indexes or closet indexes (correlations over 95, with some “active” funds at 98). Just six funds, three active and three index, had correlations under 75.
Cambria Value and Momentum ETF (VAMO, as in Vamoose?) has the lowest correlation (0.43) with peers of any of the two-year-olds; Lipper thinks it's a large cap value fund. Why should you care? Because a low correlation with the peer group raises the prospect that a fund has been miscategorized and it makes it very likely that any rating it receives – positive or negative – will be unreliable. One illustration of that possibility: 5 of 6 six low correlation funds trail their peer group with VAMO lagging by 14% annually. Does that mean they’re bad funds? No, it means that its strengths and weakness can’t be predicted from its peer group.
The other two-year-olds with peer group correlations under 0.75 so far:
HTDIX Hanlon Tactical Dividend and Momentum Fund (Lipper: Equity Income)
PTMC Pacer Trendpilot 450 ETF (Mid-Cap Core)
BMVIX* Baird Small/Mid Cap Value Fund (Small-Cap Core)
PTLC Pacer Trendpilot 750 ETF (Large-Cap Core)
FSUVX Fidelity SAI US Minimum Volatility Index Fund (Multi-Cap Core)
Note: BMVIX is actually just shy of 2 years through October, but I want to touch on it for December commentary.
Next up: two-year-olds leading their packs.
David

FYI: For the past 20 years or so, as a business columnist for The New York Times, I’ve had a front-row seat for bull and bear markets, scandals, crises and management mischief.
But I am leaving The Times, and this is my last shot at Fair Game. So it seems a fitting moment to look back at what’s changed and what hasn’t in the financial world, for better or worse.
Regards,
Ted
https://www.nytimes.com/2017/11/10/business/after-20-years-of-financial-turmoil-a-columnists-last-shot.html?rref=collection/sectioncollection/business&action=click&contentCollection=business&region=rank&module=package&version=highlights&contentPlacement=1&pgtype=sectionfront

@msf, you're right about the fund but the question is how much reality should we suspend for a decision that isn't very realistic to begin with. There are other funds people would have chosen that are closed to new investors and picking a single fund for the next 15 years isn't really a model for diversification, admitting that some of the choices would be far better than others just in terms of being reasonably diversified. I don't think GPMCX is a bad choice and while I'd agree with you on growth vs. value these guys are GRP guys and that makes me more comfortable. The thing I'd think long and hard about is how big can the fund get before it's a lot more difficult to pursue their stated purpose. The fund was started at roughly $25 million 2 years ago and it's now $41 million according to M*. If it doubles in 7 years plus the contributions existing investors are allowed to make, does $80 or $100 million make pursuing the tiniest of the tiny a lot more difficult. They currently have 187 holdings and the average market cap of their holdings is $326 million. That's $200K on average and suggests to me they could deal with more assets as long as the float isn't a small percentage of the market caps. Nothing suggests a big problem to me in the few minutes I worked on it but that's what I'd be focused on.

There's some ambiguity in the question. Does owning a fund for 10-15 years mean only that one doesn't make changes, or does it also imply that one is investing with the intent to draw from the fund after 10-15 years?
jlev seems to take the former view - starting at age 31, the portfolio could still have many years to go past the 15 year target before getting tapped. In that case, a more aggressive, pure equity fund would be a reasonable choice. No disagreement on that broad perspective.
Ted is hooked on growth funds (we've had this exchange before). Value and growth tend to take turns leading, but the alternations can be glacial. Personally, I wouldn't bet the farm on growth over the next fifteen years considering the long run that growth has already had. So in that sense I'd disagree with GPMCX.
Note that even existing shareholders can't buy much of GPMCX. From the prospectus:
"Fund is closed to both new and existing investors seeking to purchase shares of the Fund either directly or through third party intermediaries, subject to certain exceptions for participants in certain qualified retirement plans with an existing position in the Fund and direct shareholders with existing accounts who may purchase up to the amount of the current IRA catch up limit per year in additional shares, regardless of account type."

@MFO Members: If your investing for the long-term,some of your money should be invested in an aggressive LCG fund and or a techonology and health care sector fund. They've had the best annualized returns over time. I can't believe some of the funds that some of you have picked.
Regards,
Ted

Large cap growth, plus technology and healthcare? I agree...which is why my choice would be VHCOX. Second choice would be POAGX. (Obviously I'm a Primecap fan. Those were my top funds over the past ten years, and I see no reason to make a change).