Thanks @Catch - I agree LQD has done much better over time. But look at the 2022 performance of the 2 funds.
While we can compare performance to other bond funds, I’m mostly interested in how the use of interest rate swaps to hedge rate sensitivity could blow up. Are there hidden dangers in this kind of hedging? On the surface it looks like a simple way to capture the difference between what Treasuries return and what investment grade corporates do. I’ve compared the return over 10 years to money market funds, short term bond funds and ultra-short bond funds. It seems to have done better - and on a reasonably consistent basis.

Looking at M* for the past several months, LQD has outperformed LQDH for each of the monthly periods. One might have expected better from LQDH in anticipation of rate cuts and their swaps, etc. The portfolio indicates 95% of the portfolio is LQD. Am I correct with this and what you see?
You noted:

M* shows LQDH returning north of 3% annually over the past 10 years. That’s about double what money market funds achieved.

MMKT's were paying only about .01% yields for many years. As of April, 2022 the Fido MMKT's were paying .11% yield. This is when the move up to the current yields began. So, comparing to 10 years backwards against a MMKT yield 'is not valid'.
6 month CHART of the two.

I don't see any direct short Treasury positions.
Basically, it holds corporate LQD & tons of rate-swaps plus supporting cash. Duration is very low. So, the overall effect is m-mkt like returns out of intermediate-term bonds overlaid with derivatives. But the current yield is well below VMFXX, so, what's the point?

I’m not sure that’s a fair comparison, With the present inverted yield curve money market funds should yield better than longer dated bonds. Were yield the only factor nobody would invest in longer dated bonds today. Any (perceived) advantage would accrue to someone who wanted to own longer term investment grade bonds for diversification and who thought the inverted curve will return to normal some day.
* Isn’t the ultra low “effective” duration (0.15 years) really just a reflection of the hedging? Duno. Just trying to learn.
Here’s a link to Blackrock / LQDH with some performance data. Seems to have outdistanced money market funds in recent years. - M* shows LQDH returning north of 3% annually over the past 10 years. That’s about double what money market funds achieved.
Appreciate the comments from @yogibearbull

The good news for all of us is fd1mm has found someone they are impressed by.

Two people. See "US family finances as of 2y ago" thread.

The good news for all of us is fd1mm has found someone they are impressed by.

Howard Marks is very smart and articulate, but you get generic ideas, and many shades of gray. You also get opinions on both sides to cover his Axx. The one thing you hardly get is what to do now and how markets work, and that's exactly what I'm looking for.
Listen to Tom Bowley and you will learn a lot more about markets, what actually happens, and what to do with a degree of success. Every week, he posts his podcast.
He is my number 1 and only analyst I listen to, no BS, just pure opinions. There is a good chance you will learn something useful.
See (https://www.youtube.com/channel/UCm7uW8Ekk0b-7n02F-C4ApQ?view_as=subscriber)

I tried listening to the latest Bowley podcast. Could not get very far. I'm with @hank. Bowley just sounds so casual and informal. I'm waiting, waiting, waiting for him to make his ..... ..... POINT.

@FD1000
reading comp, man, reading comp (study my hed)
2022 is 2y ago
As for:
>> Since 1980, no other president except Trump has achieved above 10% real wage growth.
cite?
Are you thinking fig 3 of this supports your assertion?
https://www.aei.org/articles/have-wages-stagnated-for-decades-in-the-us/
An answer may lie in this thicket; search for "real wage":
https://en.wikipedia.org/wiki/Economic_policy_of_the_Donald_Trump_administration
Also delve these:
https://en.wikipedia.org/wiki/Economic_policy_of_the_Donald_Trump_administration
https://www.dallasfed.org/research/economics/2022/0215
Will be interested in your evidence. Above 10%, huh.

First, it's 3 years, not 2 years.
Second, looks to me they started in 2019, not showing the peak of 2020. If you look at this chart(https://fred.stlouisfed.org/series/LES1252881600Q)
Trump started in Q1/2017 and by Q2/2020, real wages after inflation grew up from 355 to 393. That is 10.7% real growth. Then covid hit, and since Q2/2020, it went from 393 back to 368, this is a decline of 6.4%,
2 more observations:
1) From Q4/1099 to Q1/2017 = 18 years, it grew from 335 to 355 = 5.9%
2) Since 1980, no other president except Trump has achieved above 10% real wage growth.

Does this report take in the Covid-19 effect ?

A snippet from my Bloomberg feed FWIW
”Nvidia stock has gained 3,776% since the start of 2019 as the company benefits from selling the main chip necessary for artificial intelligence. It’s been minting many new multimillionaires in the process. But work hours at the company are grueling and high-stress, current and former employees said, leaving little time for jet-setting, homebuying or leisure many can now afford. Nvidia has a brewing culture problem, they warn.”
From Bloomberg Media 8/26/27

We should make this a permanent thread to post all future Howard Marks memos and related forum discussion in one thread.

+1.

Most of these ratings are machine driven anyway.
True, and that's what disqualifies most funds from the list.
"Funds must be rated by Morningstar analysts". That's human beings, not machines. If you're making a broader statement, that analysts rely on numbers that machines generate, what would be better? 100% touchy-feely analyses?
I spot checked a few of the funds: MERDX, RPMGX, BUBIX, SIGIX, POAGX. Admittedly not a huge sample, but every one of them has a rating that is 100% analyst-driven.
This is why I wrote: "the real problem is with the requirement that the funds must be 100% covered by analysts. " It's not so much fees that guarantees massive funds; it's analyst coverage. M* assigns analysts almost exclusively to the most popular (largest) funds. Though one can sometimes find an oddball or two, such as MERDX ($1.1B AUM).

Howard Marks is very smart and articulate, but you get generic ideas, and many shades of gray. You also get opinions on both sides to cover his Axx. The one thing you hardly get is what to do now and how markets work, and that's exactly what I'm looking for.
Listen to Tom Bowley and you will learn a lot more about markets, what actually happens, and what to do with a degree of success. Every week, he posts his podcast.
He is my number 1 and only analyst I listen to, no BS, just pure opinions. There is a good chance you will learn something useful.
See (https://www.youtube.com/channel/UCm7uW8Ekk0b-7n02F-C4ApQ?view_as=subscriber)

ok, the summary i wanted to dig out...please correct as needed :
tax-exempt lineup discussed above :
- the current MFs are active
- the current ETFs are passive
- the ETFs are ~1-2bps cheaper (~10% cheaper on already very low amt)
- the active ETFs are to debut 'sometime' in 2024
while the duration\maturity roughly follows the name (except high yield), the quality mix requires going into each fund page.

A one year CHART for the major home builders of PULTE, D.R. HORTON, LENNAR, TOLL BROS. AND NVR; in this order in the chart.
One year CHART of 3 widely traded home builders ETF's.
In opinion: these stocks and sometimes the ETF's receive a fair amount of action from hedge funds and other volume traders. It appears that 'options trading' is also available for the ETF's.
Remain curious,
Catch

I wrote: "How much better, and how much is already priced in, I have no idea."

For more recent 3m RE is 1st, up almost 14%

Now I have a clue :-)

Thanks for the link @msf,
For more recent 3m RE is 1st, up almost 14%

RE in general has had a good year.
VNQ
VGSIX
Even FRIFX has moved up 10%ish

The sector's raw performance is good. A rising tide lifted all boats. Relatively speaking, not so impressive.
YTD, S&P 500 RE is the third worst (out of 11) performing sectors. The worst sector (Consumer Discretionary) is up over 6% YTD. We won't mention Energy - second worst YTD, and worst by a long shot over the past year, barely in positive territory.
https://digital.fidelity.com/prgw/digital/research/sector

I don't pay too much attention to sectors, so take the following as questions and observations from someone who knows just enough to be dangerous:
Do homebuilders like Pulte (a name I do recognize from having lived in suburbs) take out short term loans to purchase building materials? The reason for the question is that interest rates for mortgages don't move in tandem with short term rates. In this industry each rate can have an impact.
In looking at companies like BLDR, are you thinking about remodeling or new home construction, or both? I believe that the stock of existing homes has been held down by high mortgage rates - people are reluctant to walk away from low rates they locked in years ago. So many have chosen to make improvements rather than move. When (if) mortgage rates drop significantly, this may change and affect who is buying building materials.
It could also affect the market for new homes, since they'll now be competing with more existing homes than before (acknowledging that there is still an overall housing shortage).
The construction industry seems (from my 30,000 foot vantage point where I rarely look out the window) to be bad at dealing with market cycles. In good times, they build on spec. Though often by the time the construction is put on the market, demand has cooled.
I'm guessing that you're referring to this article:
https://www.barrons.com/articles/buy-dr-horton-stock-price-pick-72f0f4e1
(Thank you Google and public libraries; I got free access both ways)
It presents a nice, level headed picture of a well run company. As to the industry prospects, it's looking more than two years out. "Fed governors see short-term rates falling by about roughly two percentage points over the coming couple of years". However, over the next year+, both Fannie Mae and the Mortgage Bankers Association are seeing rates drop by just over 1/2%, from 6.46% (8/22/24 actual) to 5.9% (Q4 2025).
https://finance.yahoo.com/personal-finance/when-will-mortgage-rates-go-down-164144910.html
Certainly the prospects for the industry look better now than they have been for awhile (perhaps excepting building materials - lumber prices soared during the pandemic as people spent money on home improvements). How much better, and how much is already priced in, I have no idea.

@MikeM
RE in general has had a good year.
VNQ
VGSIX
Even FRIFX has moved up 10%ish