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Real Story On Inflation Wiil Soon Be Told : Rob Arnott
Arnott manages Pimco All Asset All Authority (PAUAX), PIMCO's ultimate "go anywhere" fund which, in 2008, lost just 7.5%. The "D" class is available as a no-load NTF at some of the brokerages.
Three things that struck me:
1. Arnott and company think that inflation, as experienced by real people who buy food and drive cars, is north of 8%.
2. he's buying commodities and emerging markets stocks in anticipation of the "official" rate moving up.
3. MFO is the #4 or #5 result, depending on the day, in Google's search results for the fund. That turns out to be true for several funds that I browsed. We're a major source of information for some combination of three reasons:
you folks are brilliant, active and insightful (a given)
Chip is, in managing search engine optimization for us, brilliant, active and insightful (ditto)
the pool of folks discussing actively-managed funds is contracting, leaving fewer oases of calm and insight.
The latter is sad, but consistent with the steadily shrinking number of Google searches for the term "mutual funds".
Interesting fund, certainly one of the few attractive "world allocation" options even though the 1.82% on "D" shares is modestly extortionate for a billion-dollar fund.
Reply to @David_Snowball: I couldn't agree more with your last statement on Pimco's D shares - in short, it is a quite an expensive fund for retail investors, especially for a fund-of-fund. I know Scott probably has different option.
Unless one wants to trade in and out, it is better to pay the transaction fee and buy the I (institutional) share without incurring 12-b-1 and other fees. Expense ratio of the institutional share of the fund above, PAUIX, is 1.11%. Even though it listed $1M as the minimum, Fidelity allows much less smaller amount for IRA accounts with $75 transaction fee. Additional purchase is only $5 via automatic investment.
Reply to @Sven: "I know Scott probably has different option. "
hmmmm... not necessarily. Is it expensive, especially given the asset base? Yeah. I do believe the fund can use leverage and that probably does add to cost (although is still rather expensive.)
That said, I've always been - it seems - a little less sensitive than most on this board to expense ratios (within reason.) If a fund offers me something unique or a manager whose views I particularly respect, I'll go with it.
Maybe I'm alone in this opinion, but I just think expense ratio can't be the absolute first priority in every fund decision and sometimes ya gotta pay a premium and whether or not that premium is worthwhile is going to vary with everyone's views, risk tolerance, etc. I agree pretty strongly with Arnott's views and while All Authority isn't going to be a core holding, I do have it as a supporting position and may add further if the opportunity arises.
As for what David said: "1. Arnott and company think that inflation, as experienced by real people who buy food and drive cars, is north of 8%."
I'm certainly seeing it when shopping, not only from things simply creeping higher, but a box of three pizzas at Sam's Club is now two, toilet paper has less paper per roll but is now "stronger" (that's a particularly amusing example), etc. Given where oil prices are at, I don't see how food prices are going to cool, given the oil/energy needed at every stage to try and get food from farm-to-store or factory-to-store or whatever.)
Otherwise, lately I've been looking more at individual stocks and ETFs than funds because I am just interested in more specific things/themes.
An educational clip on energy use in every step of food production at the link below. Worth a view.
No need- they've already taken care of that for you. Couple of weeks ago I saw a "great deal" at Safeway on Hawaiian Punch. (I know, I know- a 73 year old has no business drinking that crap and certainly should know betterby now. Even the Safeway clerk said as much.) I figured that this new batch was a little less worse for me 'cause it had a big splash on the label about "New- Lower Calories!"
Less calories all right- they watered it down by about 25%- less calories, less flavor, and less of my all-time favorite, US Red#4. Crap.
Rono and I have been saying for quite some time that the 'official' announced and reported inflation rate is a joke, especially as it pertains to the average joe who has to feed & clothe their family and get them from here to there.
ShadowStats, debunked or blasted by some on this board has been tracking the REAL rate that pertains to us for quite awhile. While every product gets smaller and smaller the price for same just keeps growing.
Reply to @David_Snowball: Imho, Vanguard is the go-to brokerage for Pimco I-funds (Pauix, Pttrx, Pimix, Pdiix, etc.): $25k minimum in taxable or IRA, with a transaction fee, which is $20 if you have $50k or more with Vanguard in total, or $35 if less. (The TFs at Vanguard are charged both ways, buy and sell, versus I think at Fido, where it's a buy-only fee.) Auto-purchase of additional shares beyond the minimum is $3, 2 transactions minimum.
Reply to @Old_Joe: OJ, I take it you remember the "How about a nice Hawaiian Punch (bam!)" commercials, which for accuracy would now need to feature a guy swinging his fist underwater.
Folks, we need to evaluate ER of PAUDX properly. The nature of a fund sometimes makes it expensive because of what it takes to operate the fund. For instance, a fund that hedges is bound to spend more on trades than a fund that does not. Arnott, I'm sure does all kinds of hanky panky in PAUDX. I'm linking you to everyone else's favorite fund site
Net Expense Ratio: Annual Report 03/31/2011 0.65% Net Expense Ratio: Prospectus 11/02/2011 1.51% Management Actual 0.40% Management Maximum 0.20% 12b-1 Actual 0.25% Administrative Maximum 0.20% Expense Waivers Acquired Fund Fees and Expenses (Underlying PIMCO Fund Expenses) include interest expense of 0.02%. Total Annual Fund Operating Expenses excluding interest expense is 1.38% for Class D shares.
Look at the "Management portion of the ER". One legit complaint I have is 0.25 for 12b-1 fee. Then again, how can I complain when I seek to purchase it through my brokerage? I cannot have my cake and eat it too.
At the end of the day, the total ER of a fund is a hurdle to overcome for an active manager over a corresponding index portfolio. In the case of PAUDX we don't even have an index to compare with. I'm not saying simply disregard ER. I'm just saying we need to be subjective of our rejection of a fund due to higher than "normal" ER.
Reply to @AndyJ: I think TD Ameritrade is even better -- no minimum at all for Pimco Institutional shares, and the transaction fee is $15. That said, I also hold Pimco funds through Vanguard and have no complaints, but TD Ameritrade gives a little more flexibility on this particular point.
Note that the Institutional shares are not always a good idea with small balances, since your transaction fees might outweigh the savings in the expense ratio. I always do a rough calculation at how much the expense ratio saves me per year vs. how many times I plan to buy or sell the fund. For example if you invest $10k in PCRIX, you only save $25 a year compared to PCRDX, but PCRDX is (usually) available without transaction fees. If your transaction fees are $15 or $20 per transaction, then you might as well go with PCRDX.
Comments
Three things that struck me:
1. Arnott and company think that inflation, as experienced by real people who buy food and drive cars, is north of 8%.
2. he's buying commodities and emerging markets stocks in anticipation of the "official" rate moving up.
3. MFO is the #4 or #5 result, depending on the day, in Google's search results for the fund. That turns out to be true for several funds that I browsed. We're a major source of information for some combination of three reasons:
- you folks are brilliant, active and insightful (a given)
- Chip is, in managing search engine optimization for us, brilliant, active and insightful (ditto)
- the pool of folks discussing actively-managed funds is contracting, leaving fewer oases of calm and insight.
The latter is sad, but consistent with the steadily shrinking number of Google searches for the term "mutual funds".Interesting fund, certainly one of the few attractive "world allocation" options even though the 1.82% on "D" shares is modestly extortionate for a billion-dollar fund.
David
Unless one wants to trade in and out, it is better to pay the transaction fee and buy the I (institutional) share without incurring 12-b-1 and other fees. Expense ratio of the institutional share of the fund above, PAUIX, is 1.11%. Even though it listed $1M as the minimum, Fidelity allows much less smaller amount for IRA accounts with $75 transaction fee. Additional purchase is only $5 via automatic investment.
hmmmm... not necessarily. Is it expensive, especially given the asset base? Yeah. I do believe the fund can use leverage and that probably does add to cost (although is still rather expensive.)
That said, I've always been - it seems - a little less sensitive than most on this board to expense ratios (within reason.) If a fund offers me something unique or a manager whose views I particularly respect, I'll go with it.
Maybe I'm alone in this opinion, but I just think expense ratio can't be the absolute first priority in every fund decision and sometimes ya gotta pay a premium and whether or not that premium is worthwhile is going to vary with everyone's views, risk tolerance, etc. I agree pretty strongly with Arnott's views and while All Authority isn't going to be a core holding, I do have it as a supporting position and may add further if the opportunity arises.
As for what David said: "1. Arnott and company think that inflation, as experienced by real people who buy food and drive cars, is north of 8%."
I'm certainly seeing it when shopping, not only from things simply creeping higher, but a box of three pizzas at Sam's Club is now two, toilet paper has less paper per roll but is now "stronger" (that's a particularly amusing example), etc. Given where oil prices are at, I don't see how food prices are going to cool, given the oil/energy needed at every stage to try and get food from farm-to-store or factory-to-store or whatever.)
Otherwise, lately I've been looking more at individual stocks and ETFs than funds because I am just interested in more specific things/themes.
An educational clip on energy use in every step of food production at the link below. Worth a view.
http://www.bloomberg.com/news/2012-02-15/pepsico-adds-water-to-tropicana-to-juice-brand-s-margin-retail.html
Less calories all right- they watered it down by about 25%- less calories, less flavor, and less of my all-time favorite, US Red#4. Crap.
ShadowStats, debunked or blasted by some on this board has been tracking the REAL rate that pertains to us for quite awhile. While every product gets smaller and smaller the price for same just keeps growing.
http://financials.morningstar.com/fund/expense.html?t=PAUDX®ion=USA&culture=en-US\\
Net Expense Ratio: Annual Report 03/31/2011 0.65%
Net Expense Ratio: Prospectus 11/02/2011 1.51%
Management Actual 0.40%
Management Maximum 0.20%
12b-1 Actual 0.25%
Administrative Maximum 0.20%
Expense Waivers
Acquired Fund Fees and Expenses (Underlying PIMCO Fund Expenses) include interest expense of 0.02%. Total Annual Fund Operating Expenses excluding interest expense is 1.38% for Class D shares.
Look at the "Management portion of the ER". One legit complaint I have is 0.25 for 12b-1 fee. Then again, how can I complain when I seek to purchase it through my brokerage? I cannot have my cake and eat it too.
At the end of the day, the total ER of a fund is a hurdle to overcome for an active manager over a corresponding index portfolio. In the case of PAUDX we don't even have an index to compare with. I'm not saying simply disregard ER. I'm just saying we need to be subjective of our rejection of a fund due to higher than "normal" ER.
Note that the Institutional shares are not always a good idea with small balances, since your transaction fees might outweigh the savings in the expense ratio. I always do a rough calculation at how much the expense ratio saves me per year vs. how many times I plan to buy or sell the fund. For example if you invest $10k in PCRIX, you only save $25 a year compared to PCRDX, but PCRDX is (usually) available without transaction fees. If your transaction fees are $15 or $20 per transaction, then you might as well go with PCRDX.