OK, so what you're saying is the portfolio is both leveraged, adding to volatility, and has counterparty risk via the swaps. Look at the holdings here: https://sec.gov/Archives/edgar/data/1480207/000119312517055343/d321548dnq.htm
So the counterparties responsible for the swaps tied to the CAPE index are Barclays Capital, BNP Paribas, and Bank of America. Anything goes wrong with them and there's a problem. Additionally the swaps cost between 0.43% to 0.47% of the swap's value to put on, adding to fees. So there is added risk and cost and I still don't think this would be that hard to replicate with a small options position to add a little bit of leverage. Now you could say the leverage isn't bad in the fund as it is bonds on top of stocks and those two asset classes aren't highly correlated normally. The only problem is there are circumstances when those asset classes are correlated such as in a rising interest rate or highly inflationary environment causing both bonds and stocks to fall. I would say that environment or a credit crisis where Barclays, BNP or Bank of America get into trouble could expose the added risks here.

DSEEX is the institutional share class, which you can get for $5,000 only in retirement accounts. But you could also buy DBLFX, which has a 0.48% expense ratio, put 10% to 20% of what would have been your DSEEX allocation in that bond fund, then put the remaining 80% to 90% in four stock ETFs like XLK, which has a 0.14% expense ratio, and bring your average expense ratio down to about 0.20%. Since many of those ETFs trade transaction free at brokers, there'd be no cost there and you could also harvest losses on individual ETFs for tax purposes if need be instead of having them all lumped together in one fund. Periodically you could review what DSEEX is buying and try to get the ETFs it owns at a lower share price. I just don't see the great advantage of paying active management fees for a formula.
By contrast, I do see an advantage to paying active management fees for SFGIX, an active manager with a long successful track record at another fund shop--Matthews--and now his own shop. The manager of that fund doesn't follow a formula but does intensive fundamental research of the securities he owns, and has the results to prove it. Now you could call that just luck--a classic active versus passive debate--but at the very least you know Andrew Foster is definitely active. You're not paying for a formula. The only really active side in DSEEX is on the bond side, which is not the primary driver of its returns.

I'm not really sure why everyone loves this fund so much other than the fact it has performed well. Maybe that's enough for those extrapolating into the future, but believing the past is prelude often doesn't end well. For instance the idea that by avoiding the pricier parts of the market you'll do better in a bear market is actually not always the case. It depends on what type of bear market you're in. Value funds fared very poorly in 2008's credit crisis but fared very well in 2000-2002's valuation driven bear market. I hardly see why this formulaic fund that buys ETFs automatically based on their CAPE ratios with a small momentum overlay is worth an 0.89% expense ratio. Other than past performance, what makes it so great to investors buying it today assuming that the past is gone and today is the first day of your investment life? Also, how hard would it be to mimic the formula yourself for less?

That is why it is good to hold a diversified portfolio with funds having different styles, and this style has been successful so far. To me this is a good fund as part of that diversified portfolio. DSEEX has an ER of 0.64% (better than the 0.89% ER you mentioned), only a $5000 minimum if held within an IRA. To me that is a very reasonable expense.

@bee: Thanks for reminding the board about Puddhead's head's-up on auto loans. Just as an aside I own ALLY-A GMAC Capital Trust I, 8.125% Fixed Rate/Floating Rate Trust for it's excellent yield.
Regards,
Ted

Mentioned almost 2 weeks ago here at MFO by @Puddnhead with this link:

U.S. subprime auto lenders are losing money
on car loans at the highest rate since the aftermath of the 2008
financial crisis as more borrowers fall behind on payments,
according to S&P Global Ratings.
Losses for the loans, annualized, were 9.1 percent in
January from 8.5 percent in December and 7.9 percent a year ago,
S&P data released on Thursday show, based on car loans bundled
into bonds. The rate is the worst since January 2010 and is
largely driven by worsening recoveries after borrowers default,
S&P said.
Those losses are rising in part because when lenders
repossess cars from defaulted borrowers and sell them, they are
getting back less money. A flood of used cars has hit the market
after manufacturers offered generous lease terms. Recoveries on
subprime loans fell to 34.8 percent in January, the worst since
early 2010, S&P data show.

Link:
acrossthecurve.com/?p=28283

FYI: Holders of Puerto Rico's bonds are getting a harsh lesson in being careful what they wish for.
Investors cheered last year after U.S. lawmakers created a fiscal oversight board for Puerto Rico, with the goal of putting the island's finances in order. Traders pushed up Puerto Rico debt values by more than 5 percent in the four months after June. This new oversight committee was going to be great for bondholders.
High Hopes:
But a funny thing happened on the way to the payday:
On March 13, the federal oversight board approved a budget that devoted much less money to debt investors than markets had anticipated, and traders' sentiment shifted rapidly. Bond prices plunged toward record lows. Values still have much further to fall if this budget is anything close to a final version.
Regards,
Ted
https://www.bloomberg.com/gadfly/articles/2017-03-22/puerto-rico-bondholders-put-their-trust-in-wrong-ally

Prospectus:
https://www.sec.gov/Archives/edgar/data/1016073/000119312517091628/d281232d497.htm

Recent Article (3/21/2017)
Big Oil muscling in on Shale:
From Article:

If the big boys are successful, they’ll scramble the U.S. energy business, boost American oil production, keep prices low, and steal influence from big producers, such as Saudi Arabia. And even with their enviable balance sheets, the majors have been as relentless in transforming shale drilling into a more economical operation as the pioneering wildcatters before them.
and,
At Bongo 76-43, Shell is drilling five wells in a single pad for the first time, each about 20 feet apart. That saves money otherwise spent moving rigs from site to site. Shell said it’s now able to drill 16 wells with a single rig every year, up from six in 2013.
With multiple wells on the same pad, a single fracking crew can work several weeks consecutively without having to travel from one pad to other. At Bongo 76-43, Shell is using three times more sand and fluids to break up the shale, a process called fracking, than it did four years ago. The company said it spends about $5.5 million per well today in the Permian, down nearly 60 percent from 2013.

Article Link:
https://bloomberg.com/news/features/2017-03-21/big-oil-s-plan-to-buy-into-the-shale-boom

Several people (like me) have repeatedly wondered about what can go wrong w/ DSE_X. This is hardly an answer, but today I observe that its and CAPE's decline is significantly greater than that of all of the LCV div etfs and selected LCV funds I follow: OUSA, NOBL, DVY, SCHD, TWEIX, PRBLX, etc. etc.
Otoh, its decline still was less (marginally) than SP500.
So while there remain good arguments to hold pure LCV div vehicles, anyone who follows the wide and common advice to have a high equity percentage in SP500 may be well-served by instead choosing CAPE or DSE_X.

I think FTEMX would be my pick. Still it is still risky for me so I have to follow the "when you buy vs what you buy" mantra. So its on my list.
Now this ETOPX looks interesting, but $50K minimum.

That 5.75% load is a real turn-off ...

I keep seeing responses to loads on certain funds (probably because M* says so) having loads. Maybe it is you PopTart that brings it up, I don't keep track. But most big name brokerages offer these funds load waived. For this fund and many others, there is no load at Schwab.

This fund took a hit today (Tuesday). That 5.75% load is a real turn-off ...

This fund can be bought without a load at various brokerages. At this moment the day's NAV has not been reported. I'm sure most stock funds took hits today.

This fund took a hit today (Tuesday). That 5.75% load is a real turn-off ...

FYI: At least 10 U.S. fundsters, plus several fundster­adjacent folks, are
among the world's billionaires this year, as identified by Forbes.
Regards,
Ted
http://www.mfwire.com/common/artprint2007.asp?storyID=55944&wireid=2

In last month's Elevator Talk, Paul allows that he'll pursue for SFVLX some investments that are riskier than what would be appropriate in SFGIX.
If you want to limit downside, consider a fund that hedges its equity exposure. There are three possible hedges: a hybrid fund that holds bonds (often flagged "Total" or "Multi-asset"), a fund that's willing to hold a lot of cash, or a fund with a formal hedging policy. I screened for open, retail funds with the lowest downside deviation over the past five years. Here are 14 of the 15 "best" (the other was an institutional fund). Ten of the 14 have peer-beating returns over that period. Remember: these aren't recommendations, these are just a set of funds that meets one of your criteria that you might want to learn a bit more about.
David
GuideMark Emerging Markets GMLVX - 98% equity exposure
Capital Group Emerging Markets Total Opportunities ETOPX - 45% equity
Deutsche X-trackers MSCI Emerging Markets Hedged Equity ETF DBEM - hedged equity
Harding Loevner Frontier Emerging Markets HLFMX -95%
ICON Emerging Markets Fund ICARX - 88%
New World Fund NEWFX - 84%
Amana Developing World AMDWX - 87%
AB Emerging Markets Multi-Asset ABYEX - 47%
Fidelity Total Emerging Markets FTEMX - 63%, a Great Owl
Lazard Emerging Markets Multi Asset EMMIX -47%
Baron Emerging Markets BEXIX - 92%
Calamos Evolving World Growth CNWIX -80%
Seafarer Overseas Growth and Income Fund SIGIX - 90%, a Great Owl
iShares Edge MSCI Min Vol Emerging Markets ETF EEMV - hedged equity

A few more to throw in (some attributable to Bernard Baruch):
1. Don't try to buy at the bottom and sell at the top. It can't be done except by liars.
2. I made my money by selling too soon.
3. Every man has a right to be wrong in his opinions. But no man has a right to be wrong about his facts.
4. I never lost money by turning a profit.
5. The main purpose of the stock market is to make fools of as many men as possible.
6. When good news about the market hits the front page of the New York Times, sell.
7. If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.
8. A speculator is a man who observes the future, and acts before it occurs.
9. Don't be afraid of income taxes when deciding whether to turn a profit. (my own)
10. Sooner or later economics always takes over. (my own)

Indeed Ted but that's where the money is. I wonder how long it will take for any of them to reach 5* status. Stay tuned.

FYI: Morningstar launching their own funds feels a little bit like an
Olympic judge deciding to participate in the games — it's weird.
Regards,
Ted
http://www.mfwire.com/common/artprint2007.asp?storyID=55925&wireid=2

@MFO Members: It's been about 20 years since I first linked Max Gunther's Zurich Axioms to the FundAlarm Discussion Board. One of the major problems I see on the MFO Discuaaion Board is that many members don't take enough risk. Here's what Max Gunther had to say about risk. " Put your money at risk. Don’t be afraid of getting hurt a little. The degree of risk you will usually be dealing with is not hair-raisingly high. By being willing to face it, you give yourself the only realistic chance you have of rising above the great unrich."

The biggest risk is not taking risk. I agree. The problem is easy to convince someone who started investing in 1990, not 1999. Blaming the investor is the easiest thing to do.
Trading is not always speculation. And it is not "market timing". Ask those who got out of the market the last 2 times it went down 50%. Don't just say they never got back in soon again. They slept well and someone has to produce proof they are worse off today. And until the next 50% correction.
"If you had invested $X in year Y...." is all available in hindsight. In the real world things work differently. When I'm 80 (nah, I don't think I'll live that long, I couldn't afford it, but dream with me a bit...) and I don't have responsibilities, sure I'll go to Vegas.
PS - by the way I've never been to Vegas. I know, I suck.

I like your approach @Ted and I believe you are correct in your assessment of risk-averse MFOers. Your three top fund holdings revealed in a recent thread show that you walk the walk. For my part, I put a slice of my active portfolio into PTIAX for diversity's sake, but you won't see me agonizing over or discussing bond durations or other arcane metrics fixed income investors revel in. According to my age, I should have 25% equity exposure, but it's closer to 75% because I believe I'll be around for 20 more years, a long-term target. I realize what the risk is.
A few years ago my TIAA advisor showed me a graph depicting a line going straight up from 2000 to 2014. It represented the performance of TIAA's fixed income portfolio returning 5% per annum. Stocks came nowhere near that level of performance. I felt kind of dumb until I realized that no one could have told me in 2000 to put everything into bonds and I now doubt many TIAA investors achieved that extraordinary performance. I've done fine in equities despite periods of lagging performance and I've enjoyed the ride. 2008 was a sickening time, but it didn't last forever and it provided a great time to put more money into stocks.