David Snowball's March Commentary Is Now Available Hi, Kevin.
I know. The problem is that small caps (well, stocks) are volatile and I'm rotten at timing the market or making other tactical allocation moves. Mostly I've got too much else going on to spend a lot of time with assessing the Russell 2K's p/e or peg or whatever, and partly I've got a spectacular track record for guessing wrong. As a result, I try to focus my non-retirement portfolio on multi-asset managers; that is, folks who have the freedom to dodge and weave on my behalf. Sometimes that's an overtly multi-asset fund like FPACX or BBALX, sometimes it's a fund with a broad mandate (Seafarer can invest in companies domiciled in the developed world with substantial earnings in the developing one and such stocks represent something like half of the portfolio) and sometimes it's absolute-value guys who say "if it's not a compelling value, I'm sitting on cash."
There are just a couple focused equity funds (Grandeur Peak, Artisan International Value, Wasatch Microcap Value) where I think the managers are doing something useful and distinctive. On whole, my non-retirement portfolio is about 50% growth (half US, half international) and 50% income (Price Spectrum Income, Matthews Asia Strategic Income, RiverPark Short Term High Yield and so on).
To be clear: I'm not preaching that that's The One Right Way. It's just what allows me to make a little money, sleep well and focus elsewhere.
Over the course of the full market cycle, the small cap fund -inclusive of growth, core, and value - with the highest Sharpe ratio, a measure of whether you're getting compensated for the risks you're taking - is Intrepid. It's #1 of 410. VSTCX is about 120th, just behind NAESX and VISVX. Its correlation with those two funds is .99 and .98, respectively. In addition to a higher Sharpe ratio, Intrepid has higher absolute returns over the market cycle (through 1/30/16) than does VTSCX and a substantially lower correlation to the small cap indexes.
Pinnacle isn't far behind Intrepid at 15th by Sharpe with a much lower correlation to any of the above, though also with lower absolute returns than Intrepid or Vanguard. The Aston fund hasn't been around long enough to have full market cycle data, though its five-year profile is strikingly similar to ICMAX.
Up-cycles present a different picture and these guys get left in the dust. But since I don't get to invest just during up-cycles, I don't tend to focus there.
In short, what I find attractive is the combination of higher returns and lower volatility over meaningful market periods.
David
NextShares’ New Product Combines Active Management With ETFs I still think this is a solution in search of a problem. This "hybrid that combines what some consider the best parts of the actively managed fund with an ETF" also seems to combine some of the worst attributes.
Like an ETF (and unlike a mutual fund) you're subject to a bid/ask spread (generally paying more than NAV to buy, and selling for less). And it is subject to broker commissions.
It does avoid market tracking error (where the ETF price deviates from the underlying portfolio's NAV) by using the end of day NAV - but that also means that the pricing (aside from bid/ask spread) is like a mutual fund. Even if you sell mid-day in a falling market, you'll get the end-of-day price. So from a pricing perspective, ISTM this is the worst of both worlds - the cost of the spread without the attribute of instantaneous pricing.
The cost difference (vs. the mutual fund) is misleading. The article suggests that the ETMF cost should be lower because it has no 12b-1 fee. But neither does the share class (EIERX) to which it is comparing the ETMF.
Both ETMF and mutual fund are benefiting from temporary fee waivers, though the mutual fund waiver is greater. Thus the difference in costs is artificially small. The cost benefit of the ETMF (sans waivers) would be larger. However, that just means the even the ETMF would cost more than the stated 0.65% ER, to wit 0.83% - hardly compelling for a large cap blend fund.
NextShares’ New Product Combines Active Management With ETFs FYI: (This is a follow-up article)
The mutual fund industry’s latest attempt to deal with the rising threat of the exchange traded fund comes from Eaton Vance (EV).
On Friday, the Boston fund giant’s subsidiary, NextShares, launched a brand new structured product called an exchange traded managed fund, or ETMF, a hybrid that combines what some consider the best parts of the actively managed mutual fund with an ETF.
The first ETMF, Eaton Vance Stock NextShares (EVSTC), invests in the same portfolio as $95 million Eaton Vance Stock Fund (EAERX), an equity mutual fund that holds mostly large U.S. stocks. Both are managed by Charles Gaffney. The mutual fund has outperformed the S&P 500 index for the past one-, three- and
10-year periods
Regards,
Ted
http://www.investors.com/etfs-and-funds/etfs/nextshares-new-product-combines-active-management-with-etfs/M* Snapshot EAEFX:
http://portfolios.morningstar.com/fund/holdings?t=EAERX
Preferred Stock ETFs For A Low-Yield Environment
Investors Pull $600 Million From Pimco Total Return Fund In February
Consumer Staples ETFs Find Allure as Investors Play Defense FYI: In a year in which investors have prized defensive, low volatility assets and sectors, it’s not surprising that the Consumer Staples Select SPDR (NYSEArca: XLP) is one of the best-performing sector exchange traded funds on a year-to-date basis with a gain of nearly 2%.
XLP’s bullishness this year is a reversal of fortune from late 20
15. XLP and rival staples ETFs had their hands full with rising rate-related issues. For example, several of the largest staples names have reported lackluster earnings, blaming the strong dollar for weak overseas currency conversions.
Regards,
Ted
http://www.etftrends.com/2016/03/consumer-staples-etfs-find-allure-as-investors-play-defense/Click On XLP YTD & Click On Consumer Staples For Holdings
:
http://www.sectorspdr.com/sectorspdr/tools/sector-tracker
Chuck Jaffe: Be Smart About Saving Money Now And Avoid Financial Worries Later
David Snowball's March Commentary Is Now Available @NumbersGal,
With all due respect to you and David, I continue to see absolutely nothing attractive about ARIVX or ICMAX. With current 82% and 67% cash positions, respectively, an investor in these funds are paying dearly (
1.42% and
1.40% ER) for funds primarily investing in cash. And one is therefore deriving the diversifying benefits of owning cash but not small cap value equities.
For domestic SC exposure, I continue to favor VSTCX and VTMSX, which are both low cost and consistent performers.
Kevin
