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Well, if it doesn't work out, it won't be their fault. Q4, 2008 "We just did what our models told us to do; it was their fault." [my interpretation of their explanation for the horrendous performance, from a fund whose very design was suppose to protect you from what happened]
It is beating its category YTD, according to M*, so you shouldn't be too hard on it. I remain skeptical of the category as a whole. It's hard but possible to pick undervalued stocks and wait for the market to catch up, if you're patient, I believe; it's nearly impossible to correctly guess repeatedly (since you have to repeatedly exit and reenter, or hedge and take down your hedges, wherever) where the overall market is going.
I am (re)learning this lesson to my dismay with SUBFX, an unconstrained bond fund that decided to bet that interest rates were going up.
"The performance data quoted for periods prior to April 30, 2012 is that of the Predecessor Fund. The Predecessor Fund commenced operations prior to the periods shown. The Predecessor Fund was not a registered mutual fund and was not subject to the same investment and tax restrictions as the Fund. If it had been, the Predecessor Fund's performance might have been higher. Performance shown for periods less than one year is cumulative; periods of one year and greater are annualized. Inception Date of the Predecessor Fund is 12/31/1999."
They used to have a chart listing every quarterly return back to 1999 (i.e. they were fully transparent and owned-up to all returns, both good/bad) on their website, here: http://gargoylegroup.com/overview&pid=96 Unfortunately, this site has recently undergone a significant re-do and I can't find the data anymore (albeit, I may be having a senior moment and am missing it).
David had a web conference call with the managers not too long ago, and a caller during Q&A did ask, specifically, about Q4 2008; "my take" on it is based on their rather evasive response. Frankly, I think they at least relaxed their hedges, in Sept 2009, thinking the correction was over (when if fact it had just begun), piled into financials for the juicy dvds, and then got their weenies caught in the wood chipper. In short, they may have "pulled a Bill Miller."
That said, I do think the managers are honest, hardworking guys, and their record prior to that awful call was pretty impressive (and what attracted David S. to it). I shouldn't have come off so snippy. If it does well in the next big downturn, I'd like to make it work in concert with my RSIVX holding, a position I'm currently building ... cautiously. Really.
Guys lot of L/S funds are not what we expect. First there is issue with M* classification. Second, these funds either claim to know when to go long and when short and do bad job. Or are always long and short but if they cannot pick funds on long side well, then they can't pick them well on the short side as well.
oh, hear. I thought I was the only one. Chasing rich-neighbor tips, for example, over the decades.
I am sticking with RGHVX for now for all the reasons cited and I honor their previous history. But I may not stick as long as I had planned if their downside protection is so damn weak. This is a seriously oversold market in any case.
I have FVALX which does not call itself a hedged equity fund but does same thing in times manager deems bad. Needless to say M* classifies it as L/s. What a joke.
Basically, you had generation one of L/S funds where managers often seemed to feel required to have a bunch of longs and a bunch of shorts. Either the funds didn't do that much of anything or didn't do that well. Then you started to have funds able to dial up and down risk more significantly and able to actually participate more in the markets. Now people are upset when the markets are down 7% or so and the funds were not able to move in a week or two.
They're not hedge funds, if you think they are going to dramatically change their holdings in a week's time, you're going to be disappointed. L/S funds are not going to shield you from every move lower in a market. If the market moves lower over months and over the course of 6-9 months they pull a "it's bad, not our fault market sucks", then yeah, that's a problem.
Funds like Pimco's All Asset/All Authority are upsetting because they're too conservative until they're not. People act like the manager of ARIVX is an evil lunatic for holding near 75% cash until this happens and the fund is suddenly near the very top of its category YTD and MTD and now I'll guess people are probably scrambling back into it. If things suddenly change for the better, those people will be all upset again.
Pimco Managed Futures has done astonishingly well. I can guarantee you that there will be a period where it's positioned wrong and people will be upset and dump it. That said, I remain rather fascinated by a managed futures mutual fund that is doing better than some managed futures hedge funds. It is also ahead of its category average by about 11%.
I have FVALX which does not call itself a hedged equity fund but does same thing in times manager deems bad. Needless to say M* classifies it as L/s. What a joke.
Doing better than Hussman, with a much simpler strategy that likely leads to far less costs for shareholders - it's what I've thought Hussman should be doing for a few years now: if you're that bearish, stop holding things like Panera and having a complex options hedging strategy and go to mostly cash and things like Walgreens.
Most L/S funds are heavily invested. People weren't happy with L/S funds that were basically close to market neutral, now you have ones that can be more long and .... most of them are.
I'm curious to see when/if ARIVX buys. The manager stayed more than 50% cash through the 2011 correction, when small value went down over 20%. He's made clear he's looking for a major, 2008 style crash. If we get it, he'll look like a genius, as he did in 2008-9.
I'm skeptical that people can get calls like that right more than once or twice in a lifetime, but if he does, or if he proves flexible and buys in on a mere 10-20% correction, I will eat humble pie.
I don't think he's evil, and I did well in my brief time in the fund, but I think that, like Hussman, he's got rigid beliefs and refuses to mark them to market. But I hope I'm wrong for all the ARIVX investors our there, and I hope he's wrong about a 50% crash for the sake of the rest of us.
Comments
http://portfolios.morningstar.com/fund/summary?t=RGHVX
Q4, 2008
"We just did what our models told us to do; it was their fault." [my interpretation of their explanation for the horrendous performance, from a fund whose very design was suppose to protect you from what happened]
I am (re)learning this lesson to my dismay with SUBFX, an unconstrained bond fund that decided to bet that interest rates were going up.
The fund has been great the last year and a half I've held it. But Dave, as you say, wtf.
"The performance data quoted for periods prior to April 30, 2012 is that of the Predecessor Fund. The Predecessor Fund commenced operations prior to the periods shown. The Predecessor Fund was not a registered mutual fund and was not subject to the same investment and tax restrictions as the Fund. If it had been, the Predecessor Fund's performance might have been higher. Performance shown for periods less than one year is cumulative; periods of one year and greater are annualized. Inception Date of the Predecessor Fund is 12/31/1999."
They used to have a chart listing every quarterly return back to 1999 (i.e. they were fully transparent and owned-up to all returns, both good/bad) on their website, here:
http://gargoylegroup.com/overview&pid=96
Unfortunately, this site has recently undergone a significant re-do and I can't find the data anymore (albeit, I may be having a senior moment and am missing it).
David had a web conference call with the managers not too long ago, and a caller during Q&A did ask, specifically, about Q4 2008; "my take" on it is based on their rather evasive response. Frankly, I think they at least relaxed their hedges, in Sept 2009, thinking the correction was over (when if fact it had just begun), piled into financials for the juicy dvds, and then got their weenies caught in the wood chipper. In short, they may have "pulled a Bill Miller."
That said, I do think the managers are honest, hardworking guys, and their record prior to that awful call was pretty impressive (and what attracted David S. to it). I shouldn't have come off so snippy. If it does well in the next big downturn, I'd like to make it work in concert with my RSIVX holding, a position I'm currently building ... cautiously. Really.
oh, hear. I thought I was the only one. Chasing rich-neighbor tips, for example, over the decades.
I am sticking with RGHVX for now for all the reasons cited and I honor their previous history. But I may not stick as long as I had planned if their downside protection is so damn weak. This is a seriously oversold market in any case.
They're not hedge funds, if you think they are going to dramatically change their holdings in a week's time, you're going to be disappointed. L/S funds are not going to shield you from every move lower in a market. If the market moves lower over months and over the course of 6-9 months they pull a "it's bad, not our fault market sucks", then yeah, that's a problem.
Funds like Pimco's All Asset/All Authority are upsetting because they're too conservative until they're not. People act like the manager of ARIVX is an evil lunatic for holding near 75% cash until this happens and the fund is suddenly near the very top of its category YTD and MTD and now I'll guess people are probably scrambling back into it. If things suddenly change for the better, those people will be all upset again.
Pimco Managed Futures has done astonishingly well. I can guarantee you that there will be a period where it's positioned wrong and people will be upset and dump it. That said, I remain rather fascinated by a managed futures mutual fund that is doing better than some managed futures hedge funds. It is also ahead of its category average by about 11%. Doing better than Hussman, with a much simpler strategy that likely leads to far less costs for shareholders - it's what I've thought Hussman should be doing for a few years now: if you're that bearish, stop holding things like Panera and having a complex options hedging strategy and go to mostly cash and things like Walgreens. Most L/S funds are heavily invested. People weren't happy with L/S funds that were basically close to market neutral, now you have ones that can be more long and .... most of them are.
I'm skeptical that people can get calls like that right more than once or twice in a lifetime, but if he does, or if he proves flexible and buys in on a mere 10-20% correction, I will eat humble pie.
I don't think he's evil, and I did well in my brief time in the fund, but I think that, like Hussman, he's got rigid beliefs and refuses to mark them to market. But I hope I'm wrong for all the ARIVX investors our there, and I hope he's wrong about a 50% crash for the sake of the rest of us.
>> L/S funds are not going to shield you from every move lower in a market.
Oh, sure. I just expect them not to double the decline of SPY the last 2-3 mos like some crazy x2 etf.