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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
  • Alpha Female
    FYI: A special report on how far women have got
    in fund management and how they are performing.
    Regards,
    Ted
    http://citywire.co.uk/Publications/WEB_Resources/Creative/smart-alpha/alpha-female-may-2016.pdf
  • Informed Simplicity from Charles’ Balcony
    Hi Guys,
    I want to direct your attention to the June edition of Charles’ Balcony. It’s yet another fine example of Charles’ research orientation and depth. Good work Charlie. It illustrates how an informed simplistic investment approach can eviscerate complex, costly alternatives in the portfolio construction arena. Please give it a thoughtful read.
    American Funds is famous for its in-depth research, independent bottom-up decision making, and heavy-weight cost structure. In much earlier days, their process appears to have delivered a performance edge, that more lately seems to have suffered significant erosion. A more professional investment cohort looks like they are neutralizing one another and battling to near zero positive Alphas.
    Active fund management is struggling to demonstrate its superiority over Indexing.
    That’s particularly difficult for the American group because of its fees. But that’s also the case when those fees are reduced. Cost leader Vanguard offers a rather complete array of both actively and passively managed funds in almost all fund categories. That offers a superior, natural opportunity for a real world test. How have the Vanguard products performed lately in a direct competition?
    A 2015 article from the AssetBuilder website has addressed that issue and provides a partial answer. Here is a Link to that excellent study:
    https://assetbuilder.com/knowledge-center/articles/do-vanguards-indexes-beat-their-own-actively-managed-funds
    Some active Vanguard funds do and some do not deliver as advertised. I’m sure conclusions are timeframe sensitive.
    Even with Vanguard’s low cost structure, the hurdle is a severe challenge for active fund managers. Over the 10-year timeframe of the referenced study, please note how similar the cumulative returns were. Advantages were minor in terms of that meaningful measurement.
    Are the incremental and uncertain payoffs worth the risk of choosing a deadbeat manager? Everyone has their own answer to that question. My answer is a portfolio split that includes both active and Index holdings.
    Thank you Charles.
    Best Regards.
  • Gold Down Nine Days In A Row
    "Didn't gold basically go down about 75% from roughly 1980 to 2001?"
    Peaked at $850 in 1980. Slid to around $350 in 1993. In dollar terms (non-inflation adjusted) that's a loss of around 60%. As rjb says, the inflation adjusted loss was much greater.
    I bought a little just before the 80s peak and attempted to buy down on the frequent dips for three or four years after. A terrific first lesson in investing. One I won't forget.
  • Fidelity Sued By Delta 401(k) Participants Over Alleged Fiduciary Breach
    Here's another article, this one with a paragraph explaining the argument behind the brokerage window complaint. That is, by selecting available funds, Fidelity is allegedly exercising discretionary authority which makes it a fiduciary and not merely an order taker (brokerage gofer).
    It also contains a link to the actual filing (hosted by Bloomberg).
    http://www.bna.com/fidelity-faces-erisa-n57982072865/
    I'm more interested in the brokerage window complaint. What Fidelity is doing is providing access to a retail brokerage account to 401(k) participants.
    Since Fidelity is using its own brokerage (and benefiting from that), it has to be careful about self-dealing. But since it's providing access to an off-the-shelf brokerage account competitive with those of Schwab, TDA, etc. that doesn't seem to be a problem.
    The complaint also, um, complains about Fidelity not selling the cheapest share classes for some funds. That's a retail account for you. It is true (as stated in the complaint) that Fidelity aggregates the shares of a fund owned by all its customers (an omnibus account). That's what gives it access to institutional share classes (with TF).
    I suspect that this part of the complaint will be dismissed. Alternatively, if the ruling is for the participants, then would it also affect non-window retail accounts? After all, there's no fundamental difference in the way these retail accounts function depending on whether they are retirement plan windows or taxable accounts.
    Finally, the complaint is worth reading for Table 1 on p. 15. (Just look for something in color). It shows (for 2009) the fees that funds paid to be sold by Fidelity. The median and mode was 35 basis points; some funds paid as much as 55 basis points. I didn't know the fees went that high.
  • Muni-Bond Yield Curve Flattest Since 2008 Credit Crisis: Chart
    FYI: The difference between short- and long-term yields in the $3.7 trillion municipal-bond market is the smallest in more than eight years.
    Regards,
    Ted
    http://www.bloomberg.com/news/articles/2016-05-31/muni-bond-yield-curve-flattest-since-2008-credit-crisis-chart
  • Fidelity Sued By Delta 401(k) Participants Over Alleged Fiduciary Breach
    FYI: Claim alleges Fidelity 'wanted a piece of the action' when Financial Engines was hired to provide plan advice.
    Regards,
    Ted
    http://www.investmentnews.com/article/20160531/FREE/160539996?template=printart
  • Gold Down Nine Days In A Row
    Nine days? LOL.
    I watched it go down for nine years one time.
    Didn't gold basically go down about 75% from roughly 1980 to 2001?
    On an after inflation basis, I think it went down roughly 90% during that time.
  • Gold Down Nine Days In A Row
    @Derf: Yes, gold turned positive about an hour after the open, and finished at 1,217, up .07% to advert a nine day slide.
    Regards,
    Ted
  • Gold Down Nine Days In A Row
    FYI: Ever since those FOMC minutes from the April meeting came out back on 5/18, gold has been in an absolute tailspin. As shown in the chart below, prices have now declined in every session since the release of the minutes. They’re now testing their March lows and are on pace for their lowest close since early February.
    Regards,
    Ted
    https://www.bespokepremium.com/think-big-blog/gold-down-nine-days-in-a-row/
    Barron's: The Big Boys Are Dumping Gold Futures As Rally Pauses:
    http://blogs.barrons.com/focusonfunds/2016/05/31/the-big-boys-are-dumping-gold-futures-as-rally-pauses/tab/print/
  • Seafarer Overseas Value Fund now available
    https://www.sec.gov/Archives/edgar/data/915802/000091580216000161/fitseafareroverseasvaluefund.htm
    497 1 fitseafareroverseasvaluefund.htm
    FINANCIAL INVESTORS TRUST
    Seafarer Overseas Value Fund
    (the “Value Fund”)
    SUPPLEMENT DATED MAY 31, 2016 TO THE VALUE FUND’S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 15, 2016
    As of the date of this Supplement, shares of the Value Fund are now being offered for sale.
    PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.
    13931427.1 (9/8/2015 9:21 AM)
  • Asset Managers: The Tide Turns
    Hi Heezsafe,
    I completely agree: “it's what you know for sure that just ain't so” that could do you major league harm.
    In the 1950s I decided to invest in the stock market. Given my rookie status, I was absolutely sure that everyone knew more than I did. I put my trust and my money on investment tips that I received from false prophets like radio personalities and stock brokers. I couldn’t have been more wrong.
    Do you remember the Walter Winchell Sunday night radio broadcasts? Do you even remember radio? Well, Winchell gave hot stock tips that eventually proved to be front-running, especially by his friends in Florida. I fell victim to that trap as well as many other hot tip disasters from brokers, who had incentives that did not include profits for me.
    But I did slowly learn. The problem was that I learned all too slooooowly.
    Best Wishes.
  • Asset Managers: The Tide Turns
    Hi msf,
    I appreciate your perspective.
    I'm an amateur investor and consequently have huge knowledge holes. I suppose you mean Money Market Funds with your mmf abbreviation. Or perhaps you mean Makes Money Fast. Either is appropriate.
    I have zero direct experience dealing with Dreyfus. I learned of their early beginnings from Charles D. Ellis’s book titled “Capital”. I own that volume and dug it up to refresh my memory. Ellis discusses Dreyfus in Chapter 9 of that volume. He is the historian, not me, that I referenced in my earlier post.
    Although I started investing in the 1950s, I was totally unaware of the existence of mutual funds in that timeframe. At one point, I foolishly believed that I could invest my paltry savings with George Soros. Dream On!
    Best Wishes.
  • Asset Managers: The Tide Turns
    Speaking of asset manager commercials, I still remember this one the most:

    Don't know if it actually brought in more business, but its been 40 years and I recall it clear as a bell.
  • Alternatives Monthly: Andrew Lo's Strategy
    "Andrew Lo: Please Keep Your Day Job at MIT" (from 2012)
    http://www.mutualfundobserver.com/discuss/discussion/2311/andrew-lo-please-keep-your-day-job-at-mit
    The only ALT funds that interest me at this time are LCSIX, OTTRX, QLEIX and QMNIX. Disclosure: we have a position in QMNIX.
    Kevin
  • Asset Managers: The Tide Turns
    The article says that "the average manager is likely to do no better than the market, before fees". This of course is wrong. The average dollar is likely to do no better than the market, at least assuming that funds for all intents and purposes are the market.
    There are lots and lots of poorly run, small (and expensive) funds that I believe skew the "averages" (i.e. unweighted average fund performance). Maybe a modicum of diligence in avoiding the worst managed or highest expense won't bring the odds of success up to 50:50, but it surely will make the reported figures less bleak.
    With respect to Dreyfus leading the way in aggressive investing (at least in advertising), that may well be true. But some of us haven't quite reached the level of your esteemed seniority, and recall Dreyfus differently. By the 80s, it was best known for Dreyfus Liquid Assets (MMF), selling primarily MMFs and to a lesser extend bond funds. Sure it still had (and still has) equity funds, but they were also rans. Interesting how people's impressions can differ so much.
    Here's a NYTimes article describing this incarnation of Dreyfus:
    Dreyfus Bets on the Lion Again, Januay 16, 1983.
    For the classic Dreyfus comercial (which according to one site shows the J train subway exit on Wall Street - many different subway lines converge there):
    ""
  • Asset Managers: The Tide Turns
    +1 @MJG. "We do learn, although far too slowly." I'm finally achieving the insights you describe.
  • Asset Managers: The Tide Turns
    Hi Guys,
    In the referenced article, The Economist reports that the tide has finally turned in terms of active fund management. Active fund management is losing market share. It’s about time! It has been statistically established that professional money managers have been swimming naked for a long time.
    Yes there are a few rare exceptions, but the bulk of the money management community have indeed generated excessive royal rewards for themselves, but not much for their customers, either individually or institutionally. It is common knowledge that passive Index investing has left these experts high and dry on the beach of under-delivered promises.
    These experts promise excess returns (Alpha) over benchmarks and do not produce. In any given year 50% to 70% do not match their benchmarks; when the measurement timeframe expands to multiple years that underperformance increases to the 80% to 90% level. That’s true even in the Emerging markets sector where these guys are supposedly at an advantage. That’s a sad record.
    It’s not that these experts have not had an opportunity to display their talents. Aggressive active investment organizations that were established to specifically service institutions (like company retirement funds) were assembled in the 1960s. According to some industry historians, these newly formed firms were motivated by the success of the Dreyfus Lion prowling out of the New York subway exit. Dreyfus was attracting tons of money.
    In those days, individual investors did 90% of the trading activity; today, a few giant money management firms do 90% of that trading. At a minimum, these experts interact to cancel any of each other’s perceived investment insights and/or tactics. In fact, any such insights are more than neutralized by their operational cost drags.
    Most money managers fail to satisfy their extravagant promises by not meeting their benchmark goals. Integrating globally, the active money managers who are on the negative side of the measurement criteria lose more on a percentage basis than those on the positive side of that balance sheet that incrementally gain against that same criteria. Now that’s a practical Loser’s game!!
    So after these many decades, even the investing institutions, the preferred customers in terms of profit potential, are slowly learning the lesson that many private investors learned much earlier. The California pension fund, CALPERS, has finally reduced the number and the resource commitments to active fund managers. The shortfalls of active fund management has ultimately prompted even these moribund sleeping institutional giants into some action.
    Good for them, good for their clients, not so good for the professional money managers. Their services do warrant some payoff, but their investment decisions have been a disaster. They have earned a pay-cut, and that’s now happening. We do learn, although far too slowly.
    Best Wishes.
  • Jason Zweig: Hold Your Nose And Buy Europe
    Leave it to J. Wag. to nail it: "In any event, you need two factors for an international fund to beat the U.S. First, you need international markets to fare better than the U.S. Second, you need the dollar to fall against foreign currencies."
    The last time both of those were running in the right direction for a U.S. investor was in the 'noughties, and it lasted long enough that even I realized it and made $ hand over fist in plain old VEURX and TRP's EM stock and bond funds:
    https://research.stlouisfed.org/fred2/series/DTWEXM (set the time frame to "maximum")
    No wonder that over the last 5y, currency-hedged FMIJX ranks in the top 1% of foreign large blend funds (that, and very little invested directly in EMs), but as good as the FMI guys are, it still trails the S&P 500 by a lot.