Looking at effective duration for an actively managed multi sector bond fund is a deeply flawed fund selection strategy. There is very little correlation between reported duration and returns for such funds. To see this, check the performance of different funds between mid Apr and mid June of last year when the 10 year went up almost 1.25%. Or any period when your interest rate metric went up.

Calvert Global Water Y - CFWYX M* rates this fund 5 star.

FYI:
Regards,
Ted
http://www.marketwatch.com/story/nasdaq-leads-us-stock-drop-with-26-loss-2014-04-04/print?guid=29ADD519-401E-418A-93D7-DBB29E8C0F84
Major Indexes: http://www.cnbc.com/id/15839215

FYI:
Regards,
Ted
http://www.marketwatch.com/story/confused-about-bonds-youre-not-alone-2014-04-04/print?guid=C518555F-FBD2-4EED-896E-F678FE51D8D3

Interesting White paper that documents the benefits on how owning equal amount of Real Assets (Timber, Farmland, Property, and Energy) with a 60/40 (equity / bond) investment. Paper contends adding real assets in equal amounts to a 60/40 investment lowers the overall volatility (by as much as 50%) while also slightly increasing returns verses purely holding just a 60/40 fund. Paper also documents that real assets did not provide downside protection when markets retreated. Finally, real assets did not provide an inflation hedge over the timeframe studied (1978-2012).
Another point made was the difficulty of finding well designed real asset investments for small investors who often use vehicles like mutual funds or etfs.
From this Paper:
In this paper, we considered the performance of direct investments in three real asset classes: natural resources (namely timberland and farmland), energy infrastructure, and commercial real estate. Using publicly available data for a period starting in 1978 (for real estate) or 1996 (for infrastructure) and ending in 2012, our main result is that investing in these real asset classes would have provided significant diversification benefits relative to a traditional portfolio consisting of only public equities and government bonds, without evidence of deteriorating overall performance. While investments in natural resources had particularly low downside risk, investments in energy infrastructure and commercial real estate showed significant downside risk, comparable to a traditional portfolio of equities and bonds.
Another important caveat is that with the exception of timberland investments (and commercial real estate for 1978-1987), the real asset classes did not provide any inflation hedging benefits over our full 1978-2012 time period. Further, the diversification benefits of direct investments in natural resources were much lower in times when equity markets went down.
White paper needs to be downloaded from this link:
https://dgfi.com/White-Papers/Direct-Investments-in-Real-Assets

David Winters was on CNBC today about this. I have never looked at his funds and don't follow KO to know what they may have done or not.
My first impression is that Winters is a lousy communicator even if he has a valid point, not that fund managers need to be. Combine that with media airheads, there is just smoke and dust.
From what I understood his main gripe was that KO had orchestrated a large flow of money from the company to the management. His inability to explain it clearly makes him irrelevant in this fight. From what I understand, the actions of KO, if he is correct isn't very different from the practices at most large corporations even if that seems wrong to a bystander.
If a company has a lot of cash, it can do two things with it. Either invest it in the company to grow the company top line or return it to shareholders via stock buy backs or increased dividends. The latter is what Carl Icahn is trying to do with Apple.
The modern American Management doesn't see a company this way because the shareholders have benefitted from the huge generational inflow of money into equities leading to multiple expansions. They see it more like a Limited Partnership where the top management directly benefits from the company finances while the shareholders bet amongst themselves as a derivative and realize their gains from each other. The recent moves by companies to create non voting share classes goes further in this direction.
So, from the management perspective, they play all kinds of financial games to get the top 5% in the company to take as much as possible for themselves.
The common compensation practice is to tie the compensation to share price. Conceptually, this is wrong in many ways since it incentivizes the management to prop up the share price which may be uncorrelated with the health of the company.
Two easy ways to do this is to do share buybacks or increase bottom line by cutting costs (mostly from reducing labor costs with layoffs and outsourcing). Neither of these necessarily imply the company is growing but both increase the share price and consequently the variable compensation of top management.
American Airlines management a few years ago while on the verge of bankruptcy, was an eggregious example of this. They negotiated a wage decrease with its unions under threat of bankruptcy and set up a compensation scheme to reward themselves if the share price went up. Typically these schemes are top heavy because an average employee gets very little as result of that and their wages make more sense than the individual gain from options.
The airline realized net revenue from this cost cutting and the top management got bonuses that totaled almost the entire net revenue. The per employee distribution of this bonus gave them a few cents on the dollar of the wage cut they had agreed to.
In the case of Coca-Cola, the argument from Winters seems to be that if the company had just done a cash buy back, the shareholders would have benefitted. But KO set up a compensation scheme that rewarded the top 5% handsomely based on share price. This compensation was in stock grants. On paper, this looks great. After all, the management is being rewarded for improving shareholder value.
The problem is how this happens. The stock grants and options dilute existing shareholder value and hurts both. If a company has a lot of cash, it can buy back enough so that the share price increase offsets the dilution and increases it just enough to trigger the bonuses to top management.
So what has happened is that you have transferred a chunk of cash from the company to top management and used more cash to prop up the share price. Instead, if they had used all that cash to just do a buyback, all the gains would have been realized by shareholders. It is a zero sum game in this financial engineering which has very little to do with growing the company. The too management is taking no risks with stock bonuses because they are the ones who decide to use cash to prop up the share price and they know exactly how much.
American corporate management at its finest. But it is not people like Winters that is going to change this.

FYI:
Regards,
Ted
http://news.investors.com/print/investing-mutual-funds/040214-695709-vanguard-founder-john-bogle-speaks-out.aspx

Bruce Fund
Mannkind Cv 5.75% Portfolio Weight % 5.42
http://portfolios.morningstar.com/fund/holdings?t=BRUFX&region=usa&culture=en-US
I hold BRUFX as a core holding.Late to the party ,but I recently opened a small position in ETNHX for a pure BioTech play. Holds smaller companies than FBTCX and more readily available.

Not many managers claim to be selling protection. But, a nice straw-man for a reporter with time on his hands one supposes.
Hussman will sell you some. But it's costly. His flagship HSGFX is still negative over 1, 3, 5, and 10 year periods.
Can't help offering here that one can't have it all. If we're gonna dump funds after a year or so's under-performance and take our $$ elsewhere, than we're laying ourselves (and our managers too) a nice trap for when things suddenly turn and go south.

Hi Guys,
Not withstanding Ecclesiastes 9:11, in some instances the race often does go to the swiftest. Timely decision making and committed execution are primary assets in the investment universe.
Over the last week nothing much has changed in that investment world except that Michael Lewis’ book “Flash Boys” is now receiving wide publicity. The book is new; High Frequency Trading (HFT) is not. We have just been made more aware of its pervasiveness.
Being early into the marketplace is surely not a novel concept. The Rothschilds used carrier pigeons to secure a time advantage in the 17th century. Jesse Livermore practiced it all the time, and after he gained renown as a heavyweight stock plunger, he needed methods and ploys to disguise his intentions. Copycats have always existed. Today, the mutual fund houses (like Fidelity) deploy more sophisticate tactics to the same end.
The issue of HFT was ushered into the investing community with the development and introduction of computers into the financial marketplace in the 1970s. Decision making and execution speed have always been a powerful weapon in the professional investor’s weapon arsenal.
Algorithmic trading and HFT have been part of the investing environment since the 1980s. Like it or not, a tested and verified algorithm doesn’t take long to evaluate a dynamic evolving situation, and doesn’t make errors in execution. So it consistently generates superior outcomes than when a human being is in the loop. HFT became common in the late 1990s, and dominated the trading volume by the mid-2000s. In 2009, it is reported that HFT constituted roughly 70% of the daily trading volume.
I’m sure you guys remember the stories a few years ago that touted these HFT houses who located a few miles closer to the North New Jersey market computer facilities to benefit from a reduced hard-wire access physical distance. Now that’s really working hard to establish a microsecond trading advantage.
Recall the 1987 stock market crash. The most likely causes for that dire event were the popular use of the Black-Scholes Option Pricing model and the overused Portfolio Insurance concept. The primary causes for this fiasco are still debated however. Another example is that, after much detailed study, the May, 2010 Flash Crash was finally attributed to the HFT cadre. Recovery was all within a one day timeframe in that instance.
So far, recoveries seem to have been rapid, and the impact of HFT on a private investor’s end wealth seems limited; my zeal for the equity marketplace is not quenched by this disclosure.
One indisputable benefit from all this computer technology is that trading costs have been substantially lowered. I remember the excessive costs I begrudgingly accepted in the mid-1950s when I bought my first stock. Wow, the price to play was huge.
Are these HFT outfits gaming the system? Yes, but historically there have been financial adventurers who have always played in that dark arena. The SEC rules committee diligently tries to minimize their impact, but clever stock operators find and exploit loopholes. However, from a personal perspective, I suspect the money drains from these operations have little impact for my buy-and-hold style of mutual fund market participation.
So, I don’t get too exercised over Lewis’ new book. The book reviews suggest that the presentation is very asymmetrical; it is not a balanced research project. It has an agenda. At some point I will read it, but I feel that I need not rush.
Based on an aroused public, I’m sure one outcome from its release will be that various government agencies will expedite investigative efforts which have been under way for several years now. That’s goodness. Some rules loopholes will be closed, but just as night follows day, new loopholes will be discovered. As a group, investment professionals are forever searching for an exploitable edge, and they find it.
None of this dampens my enthusiasm for the US marketplace. It remains basically a fair game for small time investors. It is one of the few investment opportunities that offer a high likelihood of outdistancing the erosive effects of inflation. I’m more or less sanguine over the Lewis revelation.
I want to congratulate all the MFO contributors to this excellent exchange. Your diverse and carefully documented positions on this matter really added needed depth to the continuing HFT discussion. Thank you all.
Best Regards.

FYI:
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=641775

cman's comment on the likelihood of a misinformed public is very common today. I'll add "Climate Change" and "Autism" to that list. Most of these opinions are based on misinformation and emotion. I think it's human nature to form opinions quickly even if they are initially incorrect. The challenge is digging deeper (educate yourself) and reveal the true nature of the problem and hopefully design actionable solutions.
When it comes to the GMO debate I like to remind people how much starvation existed in the world due to a host of problems associated with growing food. To better understand the science (the facts) and engineering (the problem solving) that brought about GMOs I would suggest reader familiarize themselves the "The Man Who Fed the World", Norm Borlaug.
online.wsj.com/news/articles/SB10001424052970203917304574410701828211352

(On the other hand, Gundlach's DLFNX is in top 12% YTD, top 12% for the month of March, top 31% over the past year, and top 5%, looking 3 years back.)
M* has DLFNX in the "Interm. -Term Bond" category with DODIX and many others. DLTNX is ......... ALSO in that same category......?????!!!!! "Total Return" is a different animal, I had thought. Go figure...
ACTUAL performance between them:
YTD 1 month 1 year 3 years
DLTNX +2.24 -0.25 +0.79 +5.84
DLFNX +2.57 +0.14 +0.59 +5.85
I chose not to follow the crowd into DLTNX and went to the much smaller DLFNX. I couldn't tell you what the difference in strategy might be..........

Me too Hank.
Hey, how about this...most actively managed funds charge too much versus say VWELX or DODBX.
But, they charge what they think they can get away with...from their shareholders and boards.
Is it that simple?
Now, I do believe the industry has come a long way in reducing fees. Glancing over a list of 50 Large, Common Stock Mutual Funds from the mid 70s, I see most of them had front loads of 8.5%. Yes, in addition to the 1% management fee Ed mentions, plus admin fees.
And, for what it is worth, I believe transaction fees are lower, certainly for stocks and I suspect for MFs too.
But at the end of the day, the fees of most actively managed funds remain too high given their below average performance.

FYI: Follow-up Article.
Regards,
Ted
http://www.etf.com/sections/monthly-etf-flows/21695-vanguard-utterly-dominates-q1-etf-flows.html

@mman: I watched the most recent Wealthtrack interview last night, as an interested day one investor, having been very happily invested with David Winters in Mutual Beacon.
I was pleasantly surprised when Consuelo Mack asked him about the expense ratio, and very disappointed with the answer. If I recall correctly, he said something like 'when you go to the doctor or the money doctor, you don't want to hire the cheapest you can find, but the best you can find.' I thought that lacked humility and even accuracy, considering his 1, 3 and 5 year performance as listed on Morningstar.
He continued by saying that the vast majority of mutual funds are just closet indexers, hewing very closely to an index.......and that he doesn't do that at all; he manages very actively and, and something to the effect of 'this sort of thing is very expensive.'
I scratched my head in wonderment. What on earth is he talking about? I agree with you 100%. If he had a team the size of Dodge & Cox, I could understand it. If he had stock analysts with offices in Asia, Europe, far and wide, scouring the globe for undervalued investments, I could see it. What does he do that costs so much money?
The icing on the cake.....I did not appreciate his next statement at all.......he said something to the effect that he felt that the fact that they offer lower expense Institutional shares made up for the higher expense ratios. First of all, the institutional shares charge a 1.63% expense ratio, still expensive, and require a $100,000 minimum investment. And second, that is not showing a lot of regard for those of us not in the institutional shares. He did not win any points on that answer.
So your point is very well taken: if he only has 8 employees total, and 4 investment professionals, I think the $30MM in fees you stated (I calculated $25.5 MM) is not acceptable, and they should lower the 1.85% (per M) expense ratio. How about something like 1.00% to 1.25%? That should be quite sufficient.

Great job as always. Those 4 featured funds should send u a little something for the free pub and funds that come their way!
I love the idea of the model portfolio of the best funds.
Maybe one for Age 35, Age 55, Age 75..........

FYI:
Regards,
Ted
http://www.nanex.net/aqck2/4456.html