Right about now @Roy may be wondering why no one (except Junkster) responded to his thread on Synthetic Investments like MetWest AlphaTrak 500 MWATX.
http://mutualfundobserver.com/discuss/discussion/28903/synthetic-investments
Enhanced funds where the "enhancement" comes from bond investments (as opposed, say, to quant tinkering with the baseline index) tend to use the same technique - gain exposure to the specified index via derivatives and invest in bonds with the remaining cash. So you can see where the "alpha" in AlphaTrak 500 comes from, and you can pretty well guess which index it's "trak"ing.
AlphaTrak is characterized as a large cap blend fund even though it holds no stocks, just bonds and derivatives (that track the S&P 500). DSENX fund in contrast does hold some stocks, but it's still mostly bonds and derivatives using the same basic technique to enhance its baseline index. It's the index, not the fund, doing the sector rotation.
From the prospectus:
The Fund will seek to use derivatives, or a combination of derivatives and direct investments to provide a return that tracks closely the performance of the Index. The Fund will also invest in a portfolio of debt securities to seek to provide additional long-term total return. The Fund uses investment leverage...
Emphasis in prospectus. I'm curious that the web page quoted mentions only swaps. The prospectus in commenting on the derivatives used, says "the Fund might enter into swap transactions or futures transactions" to track the index.

I bought DSENX earlier this year, and I and remember nothing about swaps and derivatives. Maybe I misunderstood objectives but basically the fund is a value fund investing in sector indexes that are at the time the 5 cheapest s&p500 sectors to invest in. It throws out the sector with the poorest momentum.
Fom the double Line website:
Strategy
The Shiller Enhanced CAPE® strategy offers exposure to the “cheapest sectors” of the large cap equity markets using an “Index Overlay” technique while the remaining assets are invested in a fixed income portfolio. Both segments of the portfolio offer a value play in their respective markets. The Barclays Shiller CAPE® US Sector Index strives to outperform the S&P 500 Index, while the fixed income side strives to outperform cash, thus offering one diversified value product with two unique source of possible value.
Philosophy
The Barclays Shiller CAPE® US Sector Index shifts the exposure to the “cheapest” sectors of the large cap equity market by using Dr. Robert Shiller’s CAPE® Ratio which seeks to assess longer term equity valuations by using an inflation adjusted earnings horizon that is 10 times longer than the traditional Price Earnings or P/E measure. The Relative CAPE® Ratio subdivides the S&P 500 into 10 sectors, eliminating the 5 with the highest relative CAPE® ratios, leaving what we believe are the 5 better value proposition sectors. Index methodology eliminates the one sector with the worst one-year momentum, to try and avoid the value trap.
Index Overlay Process
Using a total return index swap to gain the exposure to the Barclays Shiller CAPE® US Sector Index, the remaining assets are then invested into, what we believe to be, a lower-risk bond portfolio with the goal of trying to outperform cash. This provides a double-value proposition, where we believe we can add value to both sides of the portfolio.

Yes, and furthermore, the fund owns Cardinal Financial, which is in talks with U.S. Bancorp to be acquired. CFNL up 5% as of 1010 EDT.

FYI: Some of the largest mutual fund owners of Valeant Pharmaceuticals International bid adieu to the troubled drug maker in the first half of the year.
Not Fidelity.
The Boston-based mutual-fund giant, which holds Valeant’s stock in a number of its funds, sharply boosted its holdings in the second quarter
Regards,
Ted
http://blogs.wsj.com/moneybeat/2016/08/16/fidelity-was-a-big-second-quarter-buyer-of-valeant-shares/

FYI: Fund managers are begging for someone — anyone — to increase investment spending.
That's the primary takeaway from Bank of America Merrill Lynch's monthly survey of money managers.
A net 48 percent of investors surveyed thought fiscal policy was too tight around the world (that's a record proportion who espouse that view), while 56 percent said they wanted companies to boost capital spending — a rise of 10 percentage points over the past four months.
A net 69 percent of those surveyed say that businesses aren't investing enough, which is close to the record level for this survey.
Regards,
Ted
http://www.bloomberg.com/news/articles/2016-08-16/fund-managers-are-crying-out-for-governments-and-businesses-to-invest

FYI: Investors would have generally done better in portfolios of passive investments than in target-return funds.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=764610

I think the increase in market volatility makes active management increasingly difficult. When a company misses earnings by a penny the stock sells off by 15% or when you buy the right stock at the right price and it does not behave as it should (even if you analyze the equity correctly) because the price is more influenced by the number of ETF's it is held in rather than the quality of the reported earnings.

That's okay. I hear next month they're launching a Phonetic Integrated Alpha fund with a ER waiver that brings the fee down to .53, which is a rock-bottom STEAL. Of course there's a 6.25% 12(b)-1 fee but who's looking? The more complex the name, the more retail sheeple will flock to it, thinking they're part of the 'smart' money.
In this case, Phonetic version is 3x-leveraged. The Numeric version is unlevered. ;)

Yes, it's closing to new investors on 30 Sept. ... Anyone else catch this, though? PrivateBank Corp. is the largest holding in MSCFX (3.55% of assets), and it's being bought by Canada's CIBC. (Ticker CM in both Toronto and NY.) I like to follow the big Canadian banks.
http://investor.theprivatebank.com/Cache/1500088182.PDF?O=PDF&T=&Y=&D=&FID=1500088182&iid=1023170

https://www.sec.gov/Archives/edgar/data/809593/000113322816011586/e446873_485apos.htm
(Very expensive...)

Hi Guys,
Heavy weight fund managers do exist, but they do not persist. Yesterday's winners are likely to be tomorrow's losers. That's a fair summary of the historical record that is repeated time and time again.
“So if you can get a couple of decent years together and a decent story and then slide quietly into mediocrity, it’s a recipe for success for your fund company, and a recipe for disappointment for investors.” Thea's not me talking. That's a quote from Professor Snowball.
Fund managers do a terrific job at stock selection that would generate a positive Alpha without integrating research and trading costs into the equation. Most managers can not consistently overcome that frictional drag.
With a very few rare exceptions who can not be identified ahead of time, heavy weight fund managers are a myth. That's a major factor in the increasingly popular passive Index investment strategy. Actively managed mutual funds are becoming an ever decreasing fraction of my portfolio. I tend to apply lessons learned slowly.
EDIT: Sorry, I neglected to include a reference to the article that I extracted the David Snowball quote from. Here it is:
http://www.marketwatch.com/story/90-of-fund-managers-beat-the-market-but-their-shareholders-dont-2015-01-21
Best Wishes.

@expatsp: Apparently the attractiveness of low volatility portfolios has been known since the 1960s-1970s per AQR, but has only recently become indexed and become popular. But the effect is real and works for domestic and foreign equities.
AQR Paper
MSCI Risk Premia
JPMorgan Paper
Disclosure: we currently own VMVFX.
Kevin

FYI: Almost five years ago, when Bill Miller left the Legg Mason Value Trust — the mutual fund he once led to an astounding 15 straight calendar years of beating the S&P 500 — the question was whether the lasting memory of his career would be one of legendary success or epic failure.
Last week, when it was announced that Miller would formally break ties with Legg Mason after more than three decades, the answer was clear: the pains speak louder than the achievements.
Regards,
Ted
http://www.marketwatch.com/story/whatever-happened-to-the-heavyweight-mutual-fund-managers-2016-08-16/print

Well, yup is the answer.....somewhat.
From the article: "Powering the bond rally is an enormous thirst for yield, fueled by negative interest rates in nearly a quarter of the world. About $8 trillion of government bonds worldwide offered yields below zero, according to Bloomberg, affecting some 500 million people. Even though the bellwether 10-year Treasury note yields just 1.54%, that yield is far more appealing than a guaranteed loss."
Also from the article: "Investors worldwide have poured $202 billion into bond funds this year, according to J.P. Morgan Chase". Unknown is who "investors" are per the article.
>>>One shouldn't leave out the "twitchy" factor = perceived safety.
Total return = yield + price performance, eh?
I see the trend as much to the price performance as yield. Those continuing to suspect that yields will remain low for an extended period of time are banking on price performance, although perhaps at a slower pace than previous.
Similar trends exist in broad and various sector equity area, eh? Equity growth and value have their swings and trends, too. Hot money still looking for the best bang for the buck.
Are "investors" per the article, include sovereign funds, pension funds and related, as well as individual investors? Most of the "large monies" group of investors are scratching their investing heads as much as anyone at this discussion board. So, don't feel overly confused by the ongoing perversions of the market place; at least relative to your intellect. You have company for such a status, PhD's or not.

I allocate part of my portfolio to "alternative" strategies. Results to date have been generally terrible. Hopefully I will learn some lessons along the way, albeit painfully.
I think it is very important to define at the outset exactly what you expect this part of your portfolio to do for you. Whatever fund you pick, you should expect that it will eventually feel like it is underperforming. When that happens, going back to your original investment plan is the only way to determine whether your fund is "working" or not.
Some of my funds that are doing poorly this year include:
- Catalyst Macro Strategy MCXIX: Down over 20% this year. Terrible. I know others on this board had it, but maybe some (all?) of them have bailed by now.
- Wasatch Frontier WAFMX: Down over 2% year to date, and 10% for the past year. Not as terrible compared to MCXIX, but pretty bad compared to equity markets in general.
But I put it in context. Stocks and bonds are having a great year. Even Vanguard Wellesley, which is about as boring of a fund as it gets, is up over 9%. Alternative funds, I believe, should provide some diversification. That is, I hold them in the hopes that they will give some pleasant surprises when stocks and bonds are middling. Conversely, I try not to be too critical of them when the rest of the portfolio is doing well.
In that sense, I wouldn't classify DSENX / DSEEX as an alternative fund. It may use unusual methods, but it is basically a U.S. large cap value fund. That doesn't mean it isn't a good fund, but you should only add it if you're looking to add more U.S. large cap value to your portfolio (or if you're looking to replace your existing U.S. large cap fund).

@hank
Another President who "lusted" in his heart (s) ?

Clinton and Lewinsky on a 1998 Abkhazia stamp
https://en.wikipedia.org/wiki/Lewinsky_scandal

Feels like I've been here before - 1980 & 1999
Than there's poor Jimmy Carter who got himself in a heap of trouble in '76 for confessing (in a Playboy interview) that he had "lusted" in his heart many times. :)

In this space, I would consider and actually prefer XSLV:
CHART
Backtested Performance
Kevin

Also initiated a position in DSENX after listening to Mr Gundlach's July Webcast. In his words,for those.. (looking to) the stock market.. ,DSENX has an emphasis on risk management and risk adjusted returns. Recap here in Q and A.Two and 1/2 pages of quick hit commentary.
http://www.doublelinefunds.com/wp-content/uploads/7-12-16_AssetAllocationWebcast_Recap.pdf
Also opened small position in DRRAX today.Managed out of London.World view?
Trimmed Gold/Precious Metal positions over past 60 days.Now just under 5 % of investment total,mostly in TGLDX. Proceeds into PTIAX,now my largest bond holding.

FYI: Intermediate-term bonds took in $15 billion last month — the largest inflow of any Morningstar category.
Regards,
Ted
http://www.investmentnews.com/article/20160815/FREE/160819958?template=printart