Hi Guys,
I want to especially thank Hank and Lewis Braham for their thoughtful and thought provoking posts. I fully understand and appreciate the time commitment and deep thinking required to produce such excellent submittals. Their perspectives might not totally agree with all MFOers, but the diversity of opinion is what makes MFO so useful.
Data is the bedrock for investment decisions. Braham especially emphasized the market conditions when active fund management might add Alpha to a portfolio. SPIVA reviews the relative performance differences between actively managed funds and Index outcomes. Here is the SPIVA Link to their 2016 end of year report:
https://us.spindices.com/documents/spiva/persistence-scorecard-december-2016.pdf?force_download=true
It's a tough uphill road for active management and persistence is particularly challenging.
MFOer msf and I have been discussing John Neff's fund management performance in a running exchange on this thread.
It appears that he and I would choose to assess a fund manager's lifetime performance differently. That's not surprising since an assessment set of criteria was never established. Some measurement standard needs to be defined.
Based on his submittal, he would elect to evaluate a manager's lifetime achievements over several selected timeframes. I would choose the manager's overall record.
If you were a potential investor in 1985, it would have been difficult to ignore Neff's VWNDX performance of 20 years up to that point. It was superb. His relative record did slip a little thereafter but it was far from a disaster. Most importantly, projecting future returns is impossible. It's not a bad idea to cut a little slack for a proven winner if he subsequently stumbles. Slumps happen.
That policy paid dividends for me during Sumday's Super Bowl game. Tom Brady is a proven winner. I believed he and the Patriots would be winners before the starting kickoff. Brady had a miserable first half. The odds against a Pats victory lengthened and I took them. As you all know, Brady and the team rallied in the second half. Great for him and good for me. Recovery happened.
Do you assess his performance on the distinctive two halfs or for the entire game? The completed game is what matters. The final score and not the quarter-by-quarter scoring matters completely. Taken over multiple games, it's the total cumulative record that counts in winning a league championship and not a single game. The same is true in the investment world.
Best Wishes.

I had a Roth IRA in Ivy Asset Strategy since the late 90's, but transferred it to First Eagle Global a couple of years ago, glad I did. WASAX had $35 billion in assets a few years ago, and now is down to $5 billion - wow! There is nothing a manager can do when the outflows are that large. A lot of times a fund will do well again after significant outflows, but it's hard to buy again once you get burned!

FYI: e departure of a long-tenured manager can leave big shoes to fill.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=792059

It's too bad because I've owned this fund for more than 5 years and this will make me find an alternative. I wish the Vulcan Value guys would open their small cap fund for a short time so I could make that trade.

From review of the chart ...
Interesting ... Seems a lot of Edward Jones advisors must be pushing their firms Bridge Builder Small/Mid Cap Value Fund through selling their firms Advisor Solutions Program.
Seems, Jones is on the move towards managed money. As I understand, this fund can only be purchased through thier advisor; and, only if you opt to be a part of their Advisor Solutions Program. To me, this fund, as well as other Bridge Builder Funds, could potentially suffer from asset bloat.
I use to own WASAX (Ivy Asset Strategy) years back when it was nimble enough to reposition from time-to-time towards the faster moving market currents without market dislocations. Overtime, this fund, because of its good performance, became asset bloated and began to falter. So, I moved away from it into another world allocation fund years back after the 2010 Flash Crash where Ivy Asset Strategy allegedly flushed a large number of S&P E-Mini contracts into the system. When buyers dried up the flash crowd computers began massive sells and the markets crashed. Now, it seems, others are moving away from the fund. Currently at 5 Billion in assets I'm thinking it is still too large to run the type of strategies it did when I owned it. I might invest in it again if it were to reach a size where it could become more nimble moving back towards a more aggressive style of positioning.
And, what's up with folks moving away from Dodge & Cox Stock Fund? Is it asset bloat?
And, furthermore, seems likes Americn Funds has some good funds getting kicked to the curb as well.
Perhaps, too many investors chase good performance rather than position for it.
Makes me wonder?
Skeet

The Study: The author (Ben Carlson) based his article on a newly released NACUBO Study of Endowments (NCSE).http://www.nacubo.org/Documents/about/pressreleases/2016 NCSE Press Release FINAL.pdf
Overview:
Over the past 10 years the Vanguard Portfolio (an index-based model comprised of 60% equities and 40% bonds) beat the performance of the average college endowment studied by about 1% per year (6% yearly for the Vanguard model and 5% yearly for the average endowment).
Unlike the Vanguard model, the endowments invested substantially in alternative investments. The amount so allocated varied by size of endowment, and was highest (58% of invested assets) for endowments over 1 billion dollars.
Author's Conclusions and Assertions:
(1) The author states that he was surprised by the results because the endowments are considered more "sophisticated" than the Vanguard balanced index. (He seems to equate using alternative investments with "sophistication").
(2) He notes that the higher costs of alternative and actively managed investments partially explain the underperformance of the endowments.
(3) He concludes that "sophisticated" investments (i.e. alternative and actively managed investments) do not work as well as "simple" investments.
My Observations:
- 10 years is a very short time on to base such sweeping generalizations. The past decade was marked by both generally positive equity and bond markets. In particular, the rate on the U.S. 10-year Treasury bond fell from around 5% in 2007 to 2.45% at the end of 2016. (Interest rates and bond prices are negatively correlated.) Thus, the balanced index fund was helped by the dramatic fall in interest rates.
- Indexes don't think. So they didn't have to consider the damage a sharp rate reversal would have imparted on their value. But human investors do think. By diversifying into alternatives the endowment managers were mitigating risk (away from bonds). From a gambler's perspective those sticking stodgily to a 40% bond component were the true gamblers.
- Since indexes don't think, they didn't have to consider the damage a prolonged bear market in equities would have imparted on their value either. Human investors, as already established, do think. By diversifying into alternatives the managers were mitigating risk away from equities.
Use of Alternatives:
- Alternatives are much maligned. What are they? Broadly defined they are investments not thought to be closely correlated with equity or bond performance. One common alternative is hard assets (real estate, commodities, energy, precious metals). While not necessarily expensive to own, these investments are highly volatile. Commodities, as defined by the Goldman Sachs Commodity Index (GSCI), endured one of their worst bear markets in history over the 10 year period covered by the study, off more than 50% from their peak at one point in 2016. Another popular alternative is short-selling. This approach also suffered over the past decade as equity prices were generally positive (excepting 2007-2008). Additionally, short selling and various forms of derivative investing are quite expensive. By owning these alternatives an investor is in-effect buying "insurance" to protect against a steep market decline.
Final Thoughts:
- Generally, a 100% equity based index should outperform most alternatives (including bonds) given a long enough time frame (but 10 years is painfully short). By logical extension (given a multi-decade time frame) lower cost index funds should prevail. I've no argument there - if one wants to assume the risk inherent in equities. I suspect that under normal circumstances the 60/40 Vanguard Portfolio represents significantly less risk than an all-equity portfolio and would be a prudent investment for many. However, in an era of ultra-low interest rates the risks were (and remain) considerably elevated.
- Think of what the endowments did during the decade studied as hedging their bets. They bought insurance to protect their portfolios (and institutions) against potential steep declines in equities and/or bonds. It cost them about 1% per year (compared to the Vanguard index) to carry this insurance. Indexes don't think. So, they'd never perceive a need to carry insurance. Over the past decade the unthinking won out over the thinking. That's my take-away.

Sigh.
"He underperformed in his final year."
Neff underperformed over the period from 1984 to 1995 - the final eleven years of his career, as I documented.
"Speculating, that [final year] might well have been a major influence on why he retired."
Bzzt. "Effective at year-end 1995, Mr. Neff will retire and Mr. Freeman will assume the position of portfolio manager of the Fund." That was from the Feb 23, 1995 prospectus for which I provided a link. Neff's retirement was planned well in advance.
Now, let me point out something I didn't write. In the thread on greatest investors, I did not say that Neff didn't belong in that list. You might think, "well, I wasn't critical about anyone mentioned, so that doesn't prove anything." Take a look, I specifically and in some detail criticized including Icahn.
So you didn't have to go digging up quotes to show me what a wonderful overall record Neff had. But ... the fact that he had a great couple of decades doesn't offer any insight into finding or sticking with active managers.
You wrote that you walked away. Why? How long did you wait before bailing? Was it bailing or something else? By emphasizing his career record and ignoring his last several years (calling out only his final year), are you tacitly suggesting that people should have ridden him all the way through those lackluster years? Even though they would be giving up some of the earlier excess gain?

Hi msf,
Thanks for your comments concerning John Neff. Certainly his illustrious investment career does not end with a bang, but more with a whimper. He underperformed in his final year.
Speculating, that might well have been a major influence on why he retired. Perhaps his time had passed and he recognized that he lost that magic feeling. But one year a career does not make.
I was definitely not rating the man on only the final years of his long tenure with Windsor. I did own that fund for some fraction of that period. I based my statement that he was a legondary fund manager on his entire tenure. I sure didn't know his complete record so I extracted it from the Imvestopedia website.
Here is the paragraph from that source that convinced me that he truly earned his reputation:
"John Neff\'s average annual total return from Vanguard\'s Windsor Fund during his 31-year tenure (1964-1995) as portfolio manager was 13.7%, against a similar return from the S&P 500 Index of 10.6%. He showed a great consistency in topping the market\'s return by beating the broad market index 22 times during his tenure and was regularly in the top percent of money managers."
If it interests you, here is a Link to that website:
http://www.investopedia.com/university/greatest/johnneff.asp#ixzz4XxnIh8Xn
I was presenting John Neff's complete total performance record. I hope the summary data presented by Investopedia was accurate. It was part of their greatest investor series. They quoted the CFA Institute as the source. You might be motivated to check it. I am not.
Best Wishes

From my most recent post here

"Vanguard actively managed funds have been and are managed by some famous investors. For a very long period legendary John Neff directed the Windsor Fund to outperform his benchmark until his recent retirement. He's just one of several examples."
Actually not so much. He did have an outstanding two decade record. Unfortunately, he managed Windor for another 11 years, "recently" retiring at the end of 1995.
Over the first ten of those years 1984-1994 (using fiscal years ending Oct. 31), he underperformed the fund's benchmark, the S&P 500, a bit, 14.5% vs. 14.8%. His final year was a relative (albeit not absolute) disaster, with a total return of 17.8% vs. the S&P's 26.4% (for fiscal 1995).
Those of us who became aware of him at the end of his career wondered what all the hubbub was about.
1995 Prospectus (for ten year records, 1984-1994)
1994 Prospectus (for 1995 record, and 10 year record 1985-1995)

Oh, that's book's not bad in general, and in many particulars too. But as a journalist (or anyone else) you're never going to communicate efficiently, 'omit needless words' and all that spirit, much less ingratiate your confidence-boosted readers into grokking things for themselves, if your basic tenet is that they know nothing. Readers just love to be flattered, actually, treated with respect about knowledge just slightly beyond their grasp, and trusted to remember what they read earlier. There are nice, cool ways to do that.
And then Zinsser jumps oddly from journalism to TW, of which financial writing is a subset, I suppose. I'll have to go get my buried copy and see what he was about in that extreme passage. He had a huge career as writer, teacher, and preacher of this stuff.
I've spent almost 50y doing paying technical journalism, writing and editing writers, a fair amount of it financial, including a beginner bond guide for Fidelity. Prudently balanced reader assessment is seldom easy to achieve, and is an area where reasonable people forever disagree about assumptions and sophistication. I bet a nickel that comm professor Snowball has thoughts about and considerable experience in this slippery area, as he deals with it all the time with students and moreover does such a solid job balancing info are this site.
I read recently how a 9th-grade-English teacher in our largest (Mass.) high school was assigning her kids to write a note instructing a younger sib how to make a PB&J sandwich. Not her original idea for sure, but always a good thing to do as a writing teacher for kids (or anyone), down even to like 5th grade. Do you start with turning on the kitchen light? Do you explain what the sandwich is? Do you do branching for toasting, or crust removal? Do you assume they've had one and just need to be reminded of the steps for what they saw mom do? What if they're impaired? Cognitively (adult) or physically? Do you adhere to / guide toward a standard outcome or discuss freedom of quantity and spreading? Etc.

Yeah - if you can get a "high number" R-class (ie, R-5 or R-6) w/the AFs you are in good shape. I've got R-6 shares (no load, no 12b1, VERY low ER) in my 403(b) and am quite pleased.

I'm investing in the Balanced fund (class R shares) in my 401k account with my current employer. The fee is pretty low for that share class. We only had American Fund choices and I chose this fund as being relatively reliable.
This is a job to tide me over until actual retirement in five years or so and I'm just putting in the 6% to get the match. It is all going into this fund and I've been happy with it so far.

@MJG - you're correct, I missed it (3-5-10). Actually I saw it but failed to connect the dots. Anyway, I am in agreement with Hank that 3 terms for the same item unnecessarily confuses the reader and the portfolio composition should have been stated up front. I also think he might have or should have provided a link to his data source but I don't intend for my nit-picking to detract from the basic premise that simple beats complex. Occam's razor always leaps to mind.

"With this, I'm thinking there is just no "free lunch" for the American Funds small retail investor. However, I do admire you for trying to find one."
Well, you are paying a 12b-1 fee (F-1 shares) that goes to brokers for NTF shelf space, so it's not exactly a free lunch. But that lunch doesn't cost more than dining on, say, DLTNX or any other NTF fund that's paying for shelf space.
Schwab and Fidelity offer 57 American Funds NTF (e.g. CIBFX at Schwab and at Fidelity). This is a new arrangement that was set up a couple of months ago.
Note that this is not the first time that American Funds has made class F shares available NTF. Around 2004, American Funds sold the shares NTF through some lesser known brokerages. It took me a fair amount of digging to find any info, but apparently this fact had been posted to misc.invest.mutual-funds in mid-2004 with a link to Firstrade's American Fund page.
That link no longer works, of course, and Firstrade is not one of the brokers American Funds is working with this time around. Also back then, the shares were called class F. It wasn't until a few years later, when American Funds added class F-2 (F shares without the 12b-1 fee) that the name was changed to F-1.
I know you can't believe everything you read on the internet, but if I see something that I had posted myself, well that's good enough for me. :-)

Hi Mark, Hi Hank,
Thanks for reading my post.
Please take a second look at the referenced article. It has both data for several,extended timespans up to 10 years, and does include a definition of the Bogle Model,which was invented by the author.
The 3 and 5 year data show that the simple Bogle portfolio that contains 3 Index funds outdistanced 75% of the top quartile of endowment funds and just marginally lost to the top decile of endowment operations. At the 10-year comparison period, the Bogle Model even outperformed that top decile endowment group. That's impressive. Simple beats complex!
A definition of the Bogle Model is provided at the bottom of the article. It is 40% of the US stock index fund, 40% total bond index fund, and 20% total international stock index fund. That's a respectable benchmark that is easily implimented by individual investors.
My portfolio is a little more complex with a mix of actively managed and passive products.
Thanks again for taking an interest in the post.
Best Wishes
EDIT: Sorry guys for my belated reply which was already covered by quicker. MFOers: That seems to be a constant with me: a dollar short and a day late. Thank you all for your help.
EDIT 2: Hank, the article did link Vanguard and the Bogle Model. To quote: " As I’ve done in the past, I broke down these numbers to see how things stacked up against a simple Vanguard 3-fund portfolio* which I have labeled the Bogle Model." That quote was just above the first table in the article.

Interesting. That 'alternative' stuff will get you every time.
Seriously though, I couldn't tell from the article but it seemed as though Mr. Carsons conclusions were based on the past years results. If so, what happens when you stretch that out 3, 5, 10 years and beyond? One commentator suggested that commodities might make up the bulk of those alternate investments and the current down cycle in same explains the poor comparison showing of endowments vs Bogle. Year by year that could have an affect if one is caught leaning the wrong way but it might balance out over the long run.....

FYI: I think a lot about happiness – what makes a person happy,
whether or not happiness should even be a life’s priority – things
like that. A good high school friend stunned me at the early age
of 17 by suggesting we should not necessarily try to be happy.
Sacrifice, service, devotion to a cause were higher orders, he felt,
although presumably, since those were choices, their pursuit could
secondarily lead to happiness
Regards,
Ted
https://17eb94422c7de298ec1b-8601c126654e9663374c173ae837a562.ssl.cf1.rackcdn.com/Documents/umbrella/bill gross/47655_ TL-Bill Gross Investment_ Happiness Runs.pdf

Hey American Funds - first timer ... (aka @VintageFreak),
Better take a closer look at those F shares ... I'm thinking most F shares are C share converts and the only way to come by them is to first buy C shares and over time (10 years) let them convert to F shares. Not sure if this is so; but, if you are sincerely interested you might pick up the phone and call American Funds to comfirm or dispel. Their listed phone number is 1-800-421-4225.
In addition, I believe, some F shares can be bought out right and are for advisor wrap account purchase programs. So, I'm thinking, although the F shares expense ratios might be low compared to A shares with sales loads some F shares will be subject to on-going advisor/broker wrap account fees and charges. Invest a million with them and I believe they will wave sales charges on their A share funds.
With this, I'm thinking there is just no "free lunch" for the American Funds small retail investor. However, I do admire you for trying to find one.
Skeet

Shiller Enhanced CAPE® & Shiller Enhanced Int'l CAPE® Webcast
Hosted by Jeffrey Sherman
Tuesday, February 7, 2017
1:15 pm PT / 4:15 pm ET / 3:15 CT
Please join us for a live webcast titled "Timing Equity Markets using the CAPE Ratio" hosted by:
Jeffrey Sherman, CFA
Deputy Chief Investment Officer & Portfolio Manager Jeffrey Sherman will discuss the strategy, sector allocations and outlook for the DoubleLine Shiller Enhanced CAPE® ( DSEEX / DSENX ) & DoubleLine Shiller Enhanced Int'l CAPE ( DSEUX / DLEUX ) for 2017.
Register
https://event.webcasts.com/starthere.jsp?ei=1129090

Dear friends,
There's always a balance between broader issues and discussions of individual funds. This month tilted in the direction of funds.
AMG Chicago Equity Partners Balanced (MBEAX): a singularly low-profile, low-risk balanced fund. US equities, including a larger serving of small and mid-caps than most, plus high-grade bonds. For any comparison period that takes down cycles into account, it has gold performance. For comparison periods that look narrowly at periods marked by rising markets (the easy-to-find 1/3/5 year stuff), it's a notch down. Even in those markets, it's risk-adjusted returns are better than its peers or Vanguard STAR.
T. Rowe Price Global Multi-Sector Bond (PRSNX): formerly TRP Strategic Income, we profiled it in 2011 and I own it in my retirement portfolio. It's the first in a series of profiles labeled "left behind by Morningstar." As Morningstar focuses more resources on passive products and big funds, bunches of funds that it once recognized by meritorious get dropped from coverage. In 2011, their final word was "promising but it needs a longer track record before we upgrade it." Five years later and it's a consistently top 10 fund but still no notice.
GQG Partners Emerging Equities (GQGPX): An Elevator Talk with Rajiv Jain about his new fund.
Symons Concentrated Small Cap Value, Institutional: an interesting possibility. It'll be by far the most concentrated small cap fund out there and is based on a successful small SMA cluster. $1 million minimum, so it's mostly FYI.
Osterweis Emerging Growth (OSTGX): just wanted to share word of Jim Callinan's return with the rest of the world.
My essay mostly focused on the wisdom of keeping your head when all those about you are losing theirs. Ed addresses the ugly reality that a number of big name firms are likely in their last decade. And Bob C begins walking folks through the decisions to be made in the transition to retirement.
For what interest all that holds, and with thanks for your patience and good spirits,
David