@JoJo26 The "some backtest" you are referring to actually tracks the very product of the "fundamental manager in an inefficient area of the market." In many instances, new ideas from such active managers turn out to be worse than the old ones. In other words, an investor would be better off sticking to a "backward-looking" replacement portfolio rather than using the fund a month forward.
An additional alpha, continuous control of the overall portfolio exposures (as opposed to relying on some "charter" or "category" of a fund), ability to trade your assets during the day and without any penalties, or investing into an equivalent of a closed or high-load or high-initial-investment fund, obviously do not come free. If you have a small amount to invest, sure, trading costs are a consideration. Otherwise, these days you can place limit orders for a $1-2 commission on a reasonable number of ETF shares at any of the leading discount brokerages.
That said, certainly, it may not be for everyone. At a minimum, an analysis, such as the one I provided above for MAPOX, shows whether the fund added value on a truly risk-adjusted basis.

I'd maybe have some confidence in this if there was some track record of an actual live portfolio replicating certain funds. Hindsight is 20/20.

By definition, running a rolling calculation is 1-month forward-looking, not a hindsight.
Conversely, you have no guarantee that any of these "fantastic" funds will continue to outperform on a truly risk-adjusted basis (i.e. taking all their exposures, and not just a single market factor, into account). As a matter of fact, the S&P Persistence Scorecard repeatedly shows that all winners eventually regress to the mean and below.

Running a rolling calculation is is exactly what it sounds like, "running a rolling calculation." There is nothing forward looking about it except for the fact that you are extrapolating those rolling periods into the future and assuming that the same (or something similar) will take place.
You are right, I do not know that "fantastic" funds will continue to perform well, but I have more confidence in fundamental managers in inefficient areas of the market than some backtest where you substitute 10 funds for 1 and would need to dynamically shift things regularly to achieve the same result (you aren't accounting for any of the transaction costs that would take place).

I'd maybe have some confidence in this if there was some track record of an actual live portfolio replicating certain funds. Hindsight is 20/20.

By definition, running a rolling calculation is 1-month forward-looking, not a hindsight.
Conversely, you have no guarantee that any of these "fantastic" funds will continue to outperform on a truly risk-adjusted basis (i.e. taking all their exposures, and not just a single market factor, into account). As a matter of fact, the S&P Persistence Scorecard repeatedly shows that all winners eventually regress to the mean and below.

almost half from just American funds and Vanguard. If you insist on cheap and "parent's rating of positive.. based on M* criteria" all you get are the behemoths. There are really two criteria people should focus on in evaluating single category funds 1) am I getting my money's worth paying for active management over an index and 2) can I stand the volatility if that is what is required to beat an index fund.
This piece seem like a shill for more add dollars from American, Vanguard and Fidelity...and what is the point about the survey at the top of the piece asking if Kumal Kapoor wears deodorant
A new low for M*.. People need serious investment advice, not cutsie little quizzes

@JoJo26 The replicating ETF portfolio does not have to be static (just as the fund's composition changes over time). You can run the calculation periodically and adjust the portfolio. One variant of the methodology does this monthly based on a rolling chunk of history. No fund, even one with a high turnover, changes all its holdings overnight, i.e. there is some inertia. So, even if you run the calculation with a one-month lag, you can still get a reasonably good tracking. Applying that approach to MAPOX over the same period, you get the ETF portfolio cumulatively outperforming by ~1.9% at ~0.5% lower standard deviation. See goo.gl/2Z3V5Q

Hi Guys,
I liked Kinnel's sorting approach. It's the approach that matters most, not the outcome.
Kinnel clearly specifies his multiple selection criteria and demands that all of them are satisfied, thus eliminating any weighting arguments. I'm not absolutely certain that I would choose those same criteria, but that's his choices. I surely admire the over performance he requires against a benchmark.
BobC, I don't understand your 10-year comment. Kinnel has elected to rate the funds based on fund management tenure if it exceeds a meaningful timeframe, not any fixed 10-year period. That seems like a reasonable criteria that allows market environment factors to statistically play out.
Best Wshes.

@Patrick1 You may want to consider that an equal-weight S&P 500 is really a large-cap index with a mid-cap tilt -- see RSP analysis at goo.gl/q1t6Lf

From that list, MAPOX: over the 3 years through July 2016, underperformed a simple ETF portfolio of ~29% CORP, 26% SDY, 22% VIG, 8% KBWB, and a few smaller positions, by a cumulative 2.2% and at similar volatility. Where are the "superior risk-adjusted returns"?

@Mulder420 asked for thoughts on FISMX, so I provided an alternative. No shenanigans, pure math. If you do not care about strict replication accuracy, use fewer ETFs. Sure, FISMX performance may divert from that of the ETF portfolio over time. Nevertheless, thanks to the fund inertia, you can track it reasonably well with a 1-month delay (a different fit mode) and still get better risk-adjusted results (e.g. by about 1.3% since Aug 2015). In addition, ETFs will give you an immediate visibility into exposures, as opposed to the "black box" nature of the mutual fund (re: the delayed semi-annual holdings disclosures subject to all sorts of manipulation). This is very useful when constructing the overall investment portfolio.

5 year records:
GBLAX "This fund makes the Fantastic 45 in its first year of eligibility. Launched in February 2011 ..."

A couple that don't involve liquidity per se:
* Longer duration is what got whacked in fixed income, and OSTIX is short duration.
* The carnage in the FI cef's I own/follow (which generally live right around the boundary of investment grade and junk with short to moderate duration) was all in the price, not the nav. Most of the nav's were flat-ish: some slightly down, some flat, some even had tiny gains. Oef's of course trade on nav, so I'd expect similarly positioned oef's to have also come in flat-ish on nav/price.
P.S. Looks like short taxable junk oef's have been little affected, as a category. ASHAX, MDHAX, and OSTIX have TR losses of 0.1% or less for the last week, whereas taxable junk oef's with intermediate duration report larger losses.

FYI: I have been quite surprised by the number of queries I’ve received recently from advisors and clients regarding the dire economic and market forecasts of Frank Porter Stansberry. So, I thought I would share my response.
Regards,
Ted
http://www.etf.com/sections/index-investor-corner/swedroe-ignore-forecasts-theyre-usually-wrong?nopaging=1

Yawn. Same old, same old. Why only funds with 10-yr records? And how in the heck was PRWCX NOT on the list last time? They actually pay someone to do this?

FYI: GMO’s Jeremy Grantham and Lucas White came out with a report entitled An Investment Only a Mother Could Love this past week laying out the prospects for natural resource equities. Here’s the executive summary of their findings and thoughts.
Regards,
Ted
http://awealthofcommonsense.com/2016/09/an-allocation-only-a-mother-could-love/
GMO Website:
(An Investment Allocation Only A Mother Could Love: The Case For Natural Resource Equities)
https://www.gmo.com/docs/default-source/research-and-commentary/strategies/equities/global-equities/an-investment-only-a-mother-could-love-the-case-for-natural-resource-equities.pdf?sfvrsn=3

It would be real nice to have the Symbol column stick (stay) when scrolling horizontally.
Here's an exercise for US LC div / value types. Examine mfund PRBLX against the usual etfs SPHD, CAPE, NOBL, OUSA, HDV, SCHD, VYM, DVY, with IJH for a side entity. (Some are 'high-div', yes.) Observe that the UI range is over an order of magnitude for these similarish funds, with DVY by some measure the worst. Is this chiefly because it is older than all the other LC etfs save one? Examine the various risk columns. Check which are GO (CAPE!). Then do a $10k-growth graph at M* for 1/3/5/6/7/8/9y when available, with changing start points, looking at the the fall 08 dip and recovery the next spring or later, ditto for more-recent dips, and see if you can fathom the UI range noted above.
All very puzzling and for me not such a helpful screen. Why would anyone prefer DVY, for example, based on this? Or IJH? It is as though we are ranking by recovery months (say) when one has had mild allergic rhinitis and the other whopping pneumonia. Gosh, the former has to be a healthier person, right?

@LLJB
Here's link to Patrick O’Shaughnessy's Commentary page. He's a true student of the markets. And, here is link to the paper he briefed in Chicago Friday, Alpha or Assets?
Market cap index investing certainly making a lot of smart money managers look not so smart these past several years. Everyone would have been wise to simply invested in VFINX or VBINX back in 2009 and forgotten about it.

Value investors, which have all the academic findings to back-up the strategy's premium, have underperformed during this period. Hard to say exactly why. Some argue it's the cheap money that enables investors to chase growth stocks, which would otherwise be "unaffordable," if you will. Others argue since all assets have been "artificially inflated," again because of ZIRP, there has not been much distinction between value and growth ... everything is expensive!
It's interesting to think of the market cap index as the first quant fund. And, in fact, because it is market cap, it's actually a momentum strategy.
Yes, I'm skeptical of many money managers, fund families, and attendant fees. Published misuses of investors by firms like Edward Jones abound. Heck, look at what Wells Fargo did recently! I hate front loads, back loads, 12b-1 fees, and multiple share classes. I have made my dislike of American Funds known for all these reasons. Assets are sticky, so asset gathers abound.
All that said, I remember Peter Lynch once saying that just because an investment wins, does not mean it was for the right reason. And, just because it underperforms, does not mean it was for the wrong reason. I do think there are money managers and shops out there that are really trying to do the right kind of investing for all the right reasons.
I know David's mission for MFO is to help investors identify those very opportunities, especially when they are under-the-radar, like the individuals and firms you mentioned.
@MikeM2
I did not make it over to the Fidelity booth, unfortunately. But will keep eye out for Fidelity's new offering.

All ratings have been updated on MFO Premium site, including MultiSearch, Great Owls, Fund Alarm (Three Alarm and Honor Roll), Averages, Correlation, Dashboard of Profiled Funds, and Fund Family Scorecard.
Three perennial GOs remain GOs this month along with Honor Roll distinction: Vanguard Wellesley Income (VWINX), Vanguard Wellington Balanced (VWELX), and Vanguard PRIMECAP (VPMCX). The past 12 months, they've each delivered top quintile excess returns. They are also among the highest AUM funds in their respective categories. So much for scale eating returns, in this case anyway ... it's been that kind of market. All these funds, more than 10% return! So much too for 1% real return predictions.
Also, interesting to see how low the volatility of Aggregate Bond Index ("USBond") has been this past year, especially with respect to SP500 Index, placing bonds in bottom quintile risk category versus below average (2nd) quintile historically.

Agreed, being a one-issue investor isn't always wise, but it is not worth looking at State Street's 2015 numbers. The important news here is the shift in voting in 2016. According to the article: "State Street supported the resolutions 51 percent of the time at S&P 500 companies including Exxon Mobil Corp and Chevron Corp in this year's proxy season, up from 14 percent last year, according to a review of recent securities filings by research firm Fund Votes." This is an important change that could ultimately influence other fund companies. It will be interesting to see whether State Street has shifted its votes on any other governance issues as well.

I'm not sure there are any great managers in terms of voting records, but I'll take a look.
FWIW, here's SSgA's 2015 proxy voting record (all 9945 pages):
https://www.ssga.com/investment-topics/environmental-social-governance/2016/2015-Vote-Summary-Report.pdf
and its proxy voting guidelines:
https://www.ssga.com/investment-topics/environmental-social-governance/2016/Proxy-Voting-and-Engagement-Guidelines-US-20160301.pdf
As important as the environment is, I'm not a one-issue voter or investor. For instance, I've mentioned executive compensation. On that, SSgA is among the worst (though the average is nearly as bad):
http://www.asyousow.org/wp-content/uploads/2015/12/statestreet-2016-execcomp-resolution.pdf
Pick your poisons and your managers accordingly.

Hi,
I saw that you expressed interest in fund shops that supported climate change resolutions. Well, it seems State Street has officially acknowledged that climate change matters and is now expressing its concern with its proxy votes:
reuters.com/article/us-climate-statestreet-idUSKCN11C2HK
Since State Street offers competing low-cost index ETFs, it is a worthy alternative to the naysayers.