What Happens When Management Changes Reference was made the other day to Source Capital (SOR) in regards to Mr. Braham's article in Barron's about CEF's. Steve Romick and his FPA team took over the fund in Fall, 2015. They must have done some real housecleaning of the portfolio resulting in a huge distribution to shareholders. Here's a quotation from a fund document "apologizing" for how long it took for the transactions to settle:
"Los Angeles (April 22, 2016) – Source Capital, Inc. (the “Fund”) is pleased to announce that the Agent for its Dividend Reinvestment Plan (the “Plan”), American Stock Transfer & Trust Company, completed its purchases of the Fund’s common stock for shareholders participating in the Plan with respect to the distributions announced on February 8, 2016. As you may recall, on March 15, 2016, the Fund paid the $33.65 long-term capital gain distribution combined with the $0.41 regular quarterly distribution announced on February 8, 2016. Due to the large combined size of these distributions and the commensurate number of shares that were required to be purchased for Plan participants, it took the Agent several weeks to complete the share purchases. The Agent will be posting the reinvested shares to your account by Monday April 25, 2016 and statements will be mailed shortly thereafter. Thank you for your patience."
I guess this is one way to deal with the persistent discount which averaged -9.57% for the past three years. It's now -1.69%. Fund price was a bit north of $65 at the time of the distribution. Now it's about $39. I wonder if SOR is going to be a clone of FPACX, albeit on a much smaller scale.
MLPs Are Rallying—But They're Still Risky @kevindow You might want to check this one out; MLPs are kind of Simon Lack's thing:
http://www.sl-advisors.com/wrong-mlp-fund/
For those who follow MLPs closely, one of the enduring mysteries must be the mindset of investors in the Alerian MLP ETF (AMLP). Investors who desire MLP exposure but don’t want K-1s have been attracted to AMLP and a whole host of other inefficient ETFs and mutual funds. As we’ve written before (see, for example, The Enormous Misunderstanding About MLP Funds and Taxes), funds such as these convert the K-1s they receive into the 1099s desired by their investors by paying corporate income tax on their returns. The result is that an investor in a C-corp MLP fund such as this earns substantially less than the index – somewhere close to 35% less since that’s the portion ultimately paid to the U.S. Treasury.
[...]
The Mainstay Cushing MLP Fund (CSHAX) is similarly structured and invariably underperforms its benchmark. Portfolio Manager Jerry Swank was asked by Barron’s in June 2012 why the fund had lagged its benchmark since inception in 2010 and he replied, “As a corporation, what a mutual fund gives up is a tax drag on the net asset value, as much as a 38% tax drag on NAV.” CSHAX has an expense ratio of 9.42%, of which 7.94% is taxes. The questioner should have asked, ‘Can you really claim to put investors’ interests first if you design a vehicle like this?’ Instead she moved on, but really; who seriously expects a mutual fund to pay away almost 8% of its clients’ capital in taxes?
[...]
These securities and others like them (we calculate there are around $20BN outstanding) are deeply flawed. They exploit the unfortunate proclivity of many investors towards superficial research and while their shortcomings are disclosed in documents they’re certainly not understood by their investors.
You also might find an article he wrote in January to be enlightening re. how the various tax issues for these investment vehicles came to be. It certainly cleared up some lingering confusions I had.
http://www.sl-advisors.com/2015-mlp-crash-whats-next/
Larry Swedroe: Ignore Gundlach’s Forecasts
Can anybody access this article?
I'm not able to
Larry Swedroe: Ignore Gundlach’s Forecasts
Can anybody access this article?
I'm not able to
FPACX - er 1.11 vs VWELX - er 0.23 -- std dv. comparable I held it until a couple of years ago, and since 1998. Fwiw.
What criteria do you use to select Mutual Finds? @mcmarasco I totally agree with Ted ! Fewer funds is better, and no more than
10 positions even if you have large total assets. My minimum position is 5-7.5% and maximum is 20% for extremely high conviction funds. We currently have 7 holdings, but they are pretty rock-solid.
Among actively managed funds, there are very few excellent funds out there. And these funds must be slam-dunk excellent, and of course, they must beat their respective lower cost passive funds.
I like to use the standard risk metrics available at google finance and Morningstar: standard deviation, sharpe ratio and sortino ratio. Then I use
Barchart Opinion, especially for trading positions. And of course I always follow moving averages, specifically the
20/50/100/200 EMA.
Investing is not easy, and there are too many opinions out there. My best advice is to befriend a few smart investors out there, and have private correspondence by email regarding optimization of your portfolio.
Kevin
MLPs Are Rallying—But They're Still Risky Thanks to all for the excellent advice.
As a pure short-term trade, I bought AMLP on 2/
18/
16 merely because it gave me decent exposure to the MLP space and most importantly, it was very liquid.
I have purchased CEFs before, but I never was comfortable with the discount/premium issue, and felt that smarter investors would game me. And I don't have the time or expertise to carefully research individual MLPs. I really want one mutual fund/ETF/ETN to cover the MLP space.
So after reading
THIS and
THIS, I am leaning toward owning AMJ or EMLP in my retirement account. Between the two, I am leaning toward EMLP due to the risk metrics, although EMLP is not a pure MLP play.
Kevin
