@catch22
I already posted that my curiosity is for worst cases and dip intervals and how it compares with better-understood entities. You might even say known-stabler entities, depending on how one sees SP500 vol and general bond vol.
We all can see how it has done over time the last 3.5y, yes.
Maybe not the best period for comparison, a bull market, but it's all there is.
I have read (from others' posts here) that CAPE has been seriously backtested.
@msf
>> If you assume that the fund has 100% exposure to CAPE
a safe assumption, right?
>> impossible to figure all of them without a lot more data points to work with
Well, for this timespan it is a fair number of datapoints, a dozen or more market gyrations, as that phrase goes. And it's all there is to look at; I did not leave anything out.
So au fond I am not seeing that it has any more dynamic range and slope steepness than conventional investments. I do not see how M* calculates its downside capture figure. I do not see how the funds' evidently successful and exact derivatives' deployment really has much to do with its potential problems.
>> equity exposure is less than 100% (and possibly varying),
how likely is this, given goal of tracking CAPE?
>> or the bond return isn't as stable as Doubleline said,
and how likely is it they are fudging that?
Obvs all I am trying here is to address the 'if it sounds too good to be true it must be yada yada '. DSENX / DSEEX have consistently and seriously outperformed both SP500 and CAPE, and use a recipe that simply appears too good to be true. That's all. I ain't complaining. With more than half my nut in it, I am trying to be wary and plan in advance.
I figured this place of all places might be able to discuss worst cases vs, and potential worse situations than, some conventional and comprehensible concoction of LV blend + broad bonds.

Okay, for all valleys from mid-2015 on to the present, the performance and tracking of DSENX are as above: usually better than CAPE, a little, occasionally worse, a little, while always the same as or better than SP500. EXCEPT for October and November of last year, when performance consistently was marginally worse than CAPE and also worse than or equal to SP500.
All of this investigation is of growth of $10k.

It's 55% of my entire investment net.
To some degree I understand on paper what it does. What I am still trying to get my mind around are worst-case scenarios and how it would compare with some combo of conventional LV and broad bonds. The leverage explanations are interesting but the msf conclusion
>> think this as a 2x leveraged fund.
and the downside capture ratios that M* lists are confusing to me in terms of its actual performance.
I have begun analysis of every 2-week or longer dip since inception as compared w/ CAPE and w/ SP500. I am through 2014 and into the beginning of 2015, with the more recent years tk.
Thus far all that I see, from a sample of seven such dips, is as follows:
- no delta to speak of, though leveler (smoother) performance than SP500
- smooth outperformance, small, marginal
- smooth underperformance, small, marginal (only one of these valleys thus far)
- first one and then the other, smooth underperformance followed by smooth outperformance, with the result, at the end of the recovery point, higher than CAPE, which is higher than SP500.
Now, since its inception, 4.5y ago, it is true that we have not had long or deep dips ("drawdowns"), so this investigation of mine may not speak to what one can comparatively anticipate in a plummet of length. But thus far I see no increase in volatility, and depth or speed of drop (insofar as one can tell from M* data).
Maybe it would be the case that during a bad set of months and years it would be better to hold TWEIX [or insert your favored broad index here] with some mysterious bond portion.
But I ain't seein' it, and thus far I ain't finding it either.
Will report further results later, for dips the last two years.

Thanks guys for your thoughts!
DavidV, I, like Mike, was not trying to define a "core" holding as a "style (i.e. blend)" but more as a percentage of your portfolio and conviction. I certainly understand and appreciate your comment.
What I was really asking, is this fund worth 15%-20% of your portfolio and a long-term position?
I have been trying to condense my holdings and take larger stakes in them; my rule-of-thumb (pardon the cliche') is no more than 15%-20% in a given fund and no less than 5%.
Currently I have almost 8% in DSEEX and I am trying to get some thoughts and opinions from more seasoned investors on this forum.
Any further thoughts, opinions or suggestions are very welcome!!!
Thanks,
Matt

David, I am curious to know why folks like Deshpande think it is necessary to open a new fund that includes class A shares that carry a 5% commission. Especially given the emphasis on the role of fiduciaries, I am surprised he went this route, rather than having investor shares at 0% and institutional shares at 0% and lower expenses. Perhaps this is because of his tenure at First Eagle. But it is difficult to think he needs to offer commission products for his fund to make a go of it. It is disappointing. Wadhawaney chose to go the no-load route, perhaps because his former employer (Third Avenue) had that history.

Thanks Ted. Happened to catch the 60-Minutes segment Sunday. A lot of positive take-aways, including the charitable aspects. For us 70+ geezers it was encouraging watching a relaxed 75-year old Bloomberg piloting his own chopper along the Hudson, gabbing with a reporter, and seeming not even to bother watching where he was going. The technological capabilities of the Bloomberg terminals highlighted are extraordinary as well.
Regards

Thanks @Ted,
Some additional notes I have been accumulating regarding Roth IRA's mostly from Ed Slott"s Discussion Forum here:
Discussion Forum:
Understanding Roth IRA Inheritance:
Q: If my spouse passed away and I transfer his ROTH IRA into my own new ROTH. Does a new 5 year window start. If I then pass away 1 year later how are my Beneficiaries treated and what options do they have?

This is a confusing topic because you can either continue as beneficiary, or assume ownership and roll into your own Roth IRA. The best decision depends on your age, the age of the Roth, and how much money you need from it before you reach 59.5.
If you assume ownership of the inherited Roth, you are treated as if you were the owner from Day 1. The 5 year holding period starts in the year your spouse first contributed, but then you must also be 59.5 before your distributions are qualified. If you already had your own Roth IRA, you could combine the Roths and the 5 year holding period is treated as starting with the first contribution either one of you made.
If you then pass, your beneficiaries continue to treat the holding period as starting the same time your holding period started. But they do not have to wait until 59.5 as that non spouse inherited Roth would be fully qualified after 5 years starting with your holding period. However, your non spouse beneficiaries will have annual RMDs and if they create separate inherited Roth IRA accounts before the end of the year following the year of your death, they can each use their own age to calculate the RMDs.

also, the order of Roth IRA withdrawals:

Your balance in regular Roth contributions can be withdrawn tax and penalty free any time. After all your regular contributions have been withdrawn, additional distributions must come from your conversions, oldest conversions first. If you get to conversions less than 5 years old, you owe the 10% recapture tax on the taxable portion of those conversions. Earnings come out last. To properly report any of these distributions on Form 8606, you must have kept track of your regular and conversion balances.

finally, a good strategy for Roth Conversions:

Having a separate account for each conversion makes the recharacterization process simpler, but if you is going to invest the accounts in the same investments, it is probably not worth the trouble. The number of accounts is not a factor for taxation of withdrawals since for those purposes all Roths are treated as one combined account regardless. All Roths are fully qualified and tax free after 5 years from the first contribution and age 59.5. But before the Roths are qualified, there is a 5 year holding requirement for each conversion that will end when one reaches 59.5, if 59.5 comes sooner. If one withdraws conversion money before 5 years or 59.5, he/she will owe a 10% penalty on the conversions withdrawn. Roth IRA ordering rules apply with respect to which portion of the Roth comes out first. If one is already 59.5, the conversion 5 year holding period does not apply, but 5 years must still pass before any earnings will be tax free.

FYI: (Never thought I's see the day when this would happen, Oh Well ! only in America)
he Bloomberg Intelligence Global Cannabis Competitive Peers Index—an equally weighted index of 54 stocks with significant exposure to cannabis-related operations—tripled since the start of 2015
Regards,
Ted
https://www.bloomberg.com/graphics/2017-weed-index/

FYI: (Believe it or not, if he would have run, the Linkster would have voted for him.)
So far, Bloomberg has given away $5B to causes that often dovetail with his political interests, like gun control and the environment. The ex-mayor of NYC would have bankrolled a 2016 presidential campaign if he thought he had a “reasonable chance” of getting elected. Who would have been his running mate? Retired Navy Adm. Mike Mullen, say aides.
Regards,
Ted
http://ritholtz.com/2017/04/bloomberg-60-minutes/

Well, the French have spoken in round one of their elections. Is this the reason for some of the happy areas of the futures world? Wait, no; tis cause a tax plan is in place for the very, really big and great announcement on Wednesday. Nah. Dismiss this statement as fake news from me. Don't bet the farm just yet, eh?
https://www.washingtonpost.com/news/worldviews/wp/2017/04/23/this-chart-shows-how-the-french-election-is-a-break-from-the-past/?utm_term=.08df83e95dc6
http://finviz.com/futures.ashx
Pillow time at this place. Can't do these 12 hour hard work days anymore.
Catch

Assuming that Doubleline bond funds behave similarly to DODIX (far from a sure bet, they're more like black boxes), the difference between a 50/50 combo of TWEIX (or CAPE) and DODIX would be due primarily to leverage.
Effectively, $100 of DSENX buys you the movement of $100 of TWEIX and $100 of movement in DODIX. So when both are doing well, you add the two and do better. (BTW, I tried combining CAPE and various Doubleline bond funds to find a Doubleline bond fund that approximated the bond portion of DSENX, but none matched well on a year by year basis).
Likewise, when both TWEIX and DODIX are doing poorly, you add their returns and that's more or less what you'd expect to get from this fund. Suppose TWEIX dropped 20% and DODIX dropped 10%. Your $100 investment in DESNX would move like $100 in TWEIX (dropping $20) and also move like $100 in DODIX (dropping $10).
Because of 100% exposure to each of the funds (thanks to leverage) you'd lose $30, or 30% of your investment. 20% (TWEIX) + 10% (DODIX). If it helps, just think this as a 2x leveraged fund.
Of course there's always slop when leveraging, and the exposure is only up to 100% on the equity and fixed income sides. So this is just a crude approximation. But I think it shows how this fund can amplify simultaneous drops in equity and fixed income.
What you hope is that equity and bonds are out of sync, so that you get some protection. Since equity and bonds are closer to uncorrelated than negatively correlated, sometimes you get that protection, sometimes you don't.

You will find a lot of differing opinions on what is a "core" holding. What is your definition? Personally I don't pay much attention to the word core. DSENX is ~15% of my self managed portfolio FWIW.

The article lauds PRMTX's 15 year performance, but PRGTX has handily beaten its YTD, 1 yr, 3 yr, 5 yr, and 10 yr annualized performances. That's as of 3/31/17 and per page 36 of Morningstar FundInvestor, April 2017 issue.

Obviously there has been a lot of discussion regarding this fund and rightfully so given its performance, albeit just 3 years.
I am a recent investor in DSEEX/DSENX and like the price action vs the S&P500. I have read on this and other forums that some feel this fund is NOT a "core" holding unlike an S&P500 idx fund.
Maybe this comparision is not exactly "apples-to-apples" but it does seem to be a fair correlation.
What are your thoughts on this fund as a "core" holding and what percentage-range of your stock holdings should a fund like DSEEX be?
Of course, I recognize everybody's risk tolerance and objectives are different. I am just looking for some guidance and opinions; I am still in the growth stage.
Thank you for any input and thoughts,
Matt

Please note that many American funds are available to tax-defer accounts, the R classes, the 5% front load is waived. Their dominance started to decline when inexpensive index funds are widely available in many tax-defer accounts.

Hi BrianW,
Indeed there is more to investing than the title of the referenced article suggests. I suspect the author did not plan to be all inclusive in his brief presentation. He addressed one aspect of the investment process.
It all begins with a commitment by an individual to save. That's the start of a process that includes an asset allocation decision. In the investment hierarchy, the asset allocation decision precedes the decision to adopt a low cost Indexing decision. Here is a Link to an article that addresses this process:
http://www.investmentu.com/content/detail/gone-fishin-index-fund-portfolio
Note that in the " gone fishin" portfolio illustrated in the article, a respectful commitment was proposed for those investment categories that you also recommended. The S&P 500 alone is not a balanced portfolio.
A high fraction of my portfolio is indexed components, but I also own some actively managed elements. I suspect that is very common among MFO participants. I'm inclined to patiently rideout market swings. I suspect that too is common among MFOers. Patience wins many games, especially when investing.
I agree that some Indexers will overreact to market corrections, but some will not. That general observation is likely to be representative of the public investors writ large. There will be a mix of reactions indepemdent of whether the investor iis actively or passively inclined.
Thank you for your contribution to this discussion.
Best Wishes

The title of the article is eye catching, but I fear there's more to it than the article seeks to address. I've always asked the question of indexers: how do you create your asset allocation? Do you just merely grab an S&P 500 index or Total market fund and call it a day? If yes, doesn't this ignore the fact that overtime Value beats growth, Small beats large. Also, I believe the number one mistake made by investors is buying at the wrong time (top) and selling at the wrong time (bottom). If you start out with an index fund, you may begin with a beta/alpha of 1 (before adding satellite funds). When things are screaming upward (as they have since 2009), you'll feel rather good about your brilliance. But, I imagine that when we have the next correction, the indexers will not ride it out. I imagine they'll repeat the same pattern of behavior. Not saying that low beta investors are necessarily smarter. I just believe there's less incentive to do something stupid.

Hi Guys,
That's really an eye-catching title. It is sure to win a wide readership. It did exactly that with me.
Many techniques and schemes exist to beat Index returns. However, overtime, most of them fail. One favorite method is to use market timing signals, but market " timer's Hall of Fame is an empty room." That is a quote from financial author Jane Bryant Quinn. It is an accurate summary of an industry that hasn't deliver on its promises.
If Ted posted this reference earlier I apologize for this repeat. But I just discovered it, and it summarizes much actionable historical data in a few well constructed thoughts. I hope you visit this Link:
https://www.forbes.com/sites/trangho/2017/04/12/how-to-beat-90-of-mutual-fund-managers-in-the-long-run/#211dc2074257
So most active fund managers don't score well when contrasted against their Index targets. That's not a shocking outcome. In fact, given the expenses of doing that task just about guarantees that shortfall conclusion. Indeed, most will and do fail.
A 90% headwind is a tough challenge for me also. I suspect it is equally difficult for most MFOers. The bottom line is that most of us would do better in the investment universe if we simply defaulted into Index products rather than trying to outdistance the Indices. Our failure rates are just much too high in terms of the returns shortfalls and the time we commit to this losing game. Of course, exceptions exist and some of those rare exceptions post here (or are they miscalculating or misrepresenting their results?).
Enjoy the article.
Best Regards

I tend to agree with MikeM that the "black box" thesis is overblown, though with different details.
If you look at DSENX's portfolio, it has full exposure to the Schiller CAPE US sector index by buying total return equity swaps on the index. If you're spooked by all derivatives (including options like covered calls), then by all means stay away. As far as derivatives go, equity swaps seem pretty tame, especially as the counterparty can hedge away the equity risk on its side.
Basically, DSENX pays Barclays and BNP Paribas (two huge investment banks) a large enough cash stream to cover the cost of borrowing money to buy the index equities (should they choose to hedge). The banks can make a profit on their ability to actually raise that money at lower cost, on lending the securities, etc. In exchange for that cash stream, these banks pay DSENX the total return on those equities. (If the portfolio loses money, DSENX has to cover the loss). Alternatively, the banks can use this to reduce their exposure to equities they already have in their portfolio, while simultaneously pocketing that cash stream.
Pretty basic stuff as far as derivatives go. Since DSENX has to put up virtually $0 cash for its equity exposure, it can simultaneously be 100% long in bonds. It uses some of the fixed income to pay the cash stream to the banks, and holds the rest as profits for the fund's investors.
Therein lie the risks. The first risk is in the fact that this is a highly leveraged fund. Not in the traditional sense of investing, say 150% in the market by borrowing, but by investing 100% in equities and 100% in bonds. The prospectus even says this, emphatically (in italics) and explicitly:
The Fund uses investment leverage in seeking to provide both the Index return and the return on a portfolio of debt securities; it is likely that the Fund will have simultaneous exposures both to the Index and to debt securities, in each case in an amount potentially up to the value of the Fund’s assets.
Fidelity recognizes this, going so far as to require you to sign a declaration form before it allows you to invest in DSENX. You have to state that you're a sophisticated investor, that you know what you're doing, that you can afford losing 100% of your investment, etc.
The second risk is with Doubleline's style of bond investing. IMHO that's where the black box is. I can't tell you what's going on in their bond funds any more than I can tell you what PIMCO is doing. If you want to trust Gundlach with bonds that's fine, you're buying into his black box.
What I normally expect from this kind of strategy is 100% exposure to the index being tracked, plus a small alpha from a conservatively managed bond portfolio. But what this fund is doing is investing aggressively on the bond side. Hence the outsized returns since inception, a period when both equities and bonds have done well.
Unfortunately, if you buy into the CAPE sector index thesis, there's not a "safe" vehicle to get exposure. You've got this fund which has the risks above, and you have CAPE, which as an ETN has single creditor risk. (You risk your principal if an ETN defaults; you risk only your profits if a total return swap counterparty defaults.)

Hi @Catch22,
Thanks for posting the findings from your study.
I have also enclosed a link below to a study that @Ted posted in another post about this topic and strategy. The study provides returns based upon different investment concepts for the off season.
http://www.etf.com/sections/features-and-news/should-you-sell-may-go-away?nopaging=1
Now, for this year I have sold equities down thus far instead of going to all cash I put some into a few hybrid income funds, some into a bond fund, some into a couple of opening positions in a CD Ladder and also some to cash.
I've made some good money with the strategy this season ... and, rather than see it get vaporized by some geopolitical mess I felt it was harvest time so I am now in the process of reducing my equity allocation towards the low range within my asset allocation. When completed my portfolio should bubble somewhere around 45% equity in Instant Xray. So, even if equities continue to rally through the summer I will still be at the equity party.
I'm not saying by any means what I am doing is right for others.
Take care ... and, thanks again for posting your findings.
Old_Skeet