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Does anyone have any insight into this fund's recent performance? I invested in it soon after David S. profiled it. I am nervous about the market so wanted a hedged vehicle. Apparently it is not much safer (so far) than the market overall. It does not appear to be hedged very well at all. I have been in the fund for less than 2 months and already lost over 5%. Any thoughts or insight would be appreciated.
I'll note, in passing, that I have not profiled RLSFX. I did report on its launch and its background as a hedge fund, but I haven't had time to speak with the management or to work through its strategies.
I'm in the midst of a longer term series on risk-managed funds, which I hope with debut in June. I'd like to start by talking about when they might make sense, what you might reasonably expect of them and why so many fail, even by their own standards. I'll try to profile two long/short funds a month between June and September.
And I will drop a note to the RiverPark folks, asking if they have comment on their strategy's early bumps.
It's a relatively new fund, although apparently it is a conversion of an existing hedge fund, which is a little curious - what was the reasoning behind that? I'm not seeing David's profile of this particular Riverpark fund, but while this company has done well, in this particular space I'll continue to recommend Marketfield (MFLDX) instead, which can long/short multiple asset classes and both US and foreign.
Their long and short holdings have a lot of volatile/fairly volatile names. The previous record of the hedge fund that was converted to this fund was 1.7% in 2009, 4.7% in 2010 and 8.5% in 2011, with the worst quarter being a 6.3% loss in Q2 2010. This is from the prospectus. Obviously, that's no guarantee of what the mutual fund will do.
Additionally, I think the category is difficult and fundamental analysis is harder and at times less effective these days - both when looking at the positive and negative. Additionally, the category and the whole "hedge funds for the masses" has seen some good funds emerge, but there have been a number of high-profile disappointments (Nakoma Absolute Return, some others.)
I don't get a great sense of the fund from skimming the website (we short things we don't like, we're long things we do - nothing really above a standard long/short strategy.)
Reply to @scott: Hi, Scott. It's in my April cover essay. I noted that River Park was bringing two new hedged funds to market, and I also offered quick updates on two others. David
Reply to @scott: MFLDX is definitely not afraid to use it shorting ability, as noted by its very recent performance. Its fun to have a chance to make money on both sides (long-short), but so rarely is it executed well.
The only thing about MFLDX that bothers me is that the fund has gotten a bit larger (asset bloat) and thus less nimble. I suppose by today's standards its still not huge. Still, it would be nice if it closed.
RLSFX has been a disappointment in its extremely short life. I always try to watch these long-short funds to see if they "buck the trend". Just another Fail so far.
Reply to @JoeNoEskimo: Yeah, I don't agree with Marketfield on some macro themes, but I remain impressed by its flexibility and nimbleness, as well as performance (it's done quite well this year for a long/short fund, but how it's then managed to do in the last few days is particularly impressive.) It's really the closest thing - I think - to a hedge fund in the mutual fund space.
While on the subject of L-S funds, any thoughts on Pimco's PMHIX? Very new, but the preceding hedge fund's performance (particularly in 2008) is worth a look. Details are in the prospectus.
There are only 2 OEFs in the L/S space with attractive long-term returns: BPLSX and MFLDX. Since historically there has been an extremely high ratio of unattractive/attractive funds in this space, I would be very cautious about making more than a 5% bet in a L/S OEF. BPLSX is closed to new investors. And MFLDX has performed admirably, but its performance is a statistically outlier, and it has a very high expense ratio of 2.47%, which represents a stiff headwind to future performance.
Right here, right now, I would classify MFLDX as a "Buy," and I would "Watch" RLSFX and PMHIX. Knowing PIMCO, they will never, ever close PMHIX to new investors. So I think that it is safe to watch this fund and not worry that they will close the fund to new investors anytime soon.
Reply to @kevindow: Looking at the Pimco fund, the prospectus offers an interesting note: "A privately offered fund managed by the Fund’s portfolio manager is expected to be reorganized into the Fund as of the date the Fund commences operations (i.e., on or about April 20, 2012). This privately offered fund was organized on December 1, 2002 and commenced operations on January 1, 2003 and had an investment objective and strategies that were, in all material respects, the same as those of the Fund, and was managed in a manner that, in all material respects, complied with the investment guidelines and restrictions of the Fund"
While the performance of the prior fund is not an indicator of the new fund (yadda yadda fine print yadda yadda), as BWG noted, the performance of the prior fund is rather good for a long/short (although long-biased) offering. The global nature of this fund is also interesting (". The Fund may invest, without limitation, in securities and instruments that are economically tied to foreign (non-U.S.) countries, including securities and instruments that are economically tied to emerging market countries." The other element that makes this fund interesting - and what may also lead to higher volatility - is the note that it will be a concentrated fund.
I do find it interesting the hedge funds turning to mutual fund movement (although a little movement, it's what RLSFX was and what this fund effectively is), but I will say I find this fund a lot more interesting than RLSFX (no offense to any RLSFX holders.)
I am having difficulty reconciling the ER for MFLDX shown on M* as 1.56% and in the SAI as 2.47%. I would assume the fund documentation to be correct ?
1.56% reflects operating expenses but does not reflect expenses generated by the fund's short positions. Those expenses are variable, depending on the extent of the shorts.
2.47% is what the manager estimates it currently costs to run the fund.
1.75% is the maximum that the advisor will charge investors, pursuant to a waiver in place through August 2013. Here's their regrettably unclear text:
The Adviser has agreed to waive its management fees and/or to reimburse expenses of the Fund to ensure that total Annual Fund Operating Expenses (exclusive of taxes, leverage, interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, dividends on short positions, acquired fund fees and expenses and extraordinary or non-recurring expenses, such as litigation) do not exceed 1.75% of the Fund’s average annual net assets, at least through August 31, 2013 and for an indefinite period thereafter.
I'll note that at $1.5 billion, one might have wished for somewhat lower expenses.
I just called the fund, and that 2.47% ER is the latest expense figure that investors are charged to own the fund, and the NAV is adjusted for all expenses on a daily basis. Of course the fund management wants us to focus on any figure lower than the 2.47%, maybe the 1.75%, but if you own this fund, you are paying about 2.47% to own it. I say "about" as a number of expenses vary on a weekly, and maybe daily basis.
And I agree with you that fund expenses should have declined as the fund grew from $8.3M in AUM on 3/31/08 to the current $1.4B in AUM. Since inception, the fund has had a constant 1.40% management fee despite the tremendous growth in assets. It's unfortunate that the fund directors have not acted in the best interest of shareholders to reduce expenses, but that appears to be the accepted practice in the OEF space.
Comments
I'll note, in passing, that I have not profiled RLSFX. I did report on its launch and its background as a hedge fund, but I haven't had time to speak with the management or to work through its strategies.
I'm in the midst of a longer term series on risk-managed funds, which I hope with debut in June. I'd like to start by talking about when they might make sense, what you might reasonably expect of them and why so many fail, even by their own standards. I'll try to profile two long/short funds a month between June and September.
And I will drop a note to the RiverPark folks, asking if they have comment on their strategy's early bumps.
David
Their long and short holdings have a lot of volatile/fairly volatile names. The previous record of the hedge fund that was converted to this fund was 1.7% in 2009, 4.7% in 2010 and 8.5% in 2011, with the worst quarter being a 6.3% loss in Q2 2010. This is from the prospectus. Obviously, that's no guarantee of what the mutual fund will do.
Additionally, I think the category is difficult and fundamental analysis is harder and at times less effective these days - both when looking at the positive and negative. Additionally, the category and the whole "hedge funds for the masses" has seen some good funds emerge, but there have been a number of high-profile disappointments (Nakoma Absolute Return, some others.)
I don't get a great sense of the fund from skimming the website (we short things we don't like, we're long things we do - nothing really above a standard long/short strategy.)
The only thing about MFLDX that bothers me is that the fund has gotten a bit larger (asset bloat) and thus less nimble. I suppose by today's standards its still not huge. Still, it would be nice if it closed.
RLSFX has been a disappointment in its extremely short life. I always try to watch these long-short funds to see if they "buck the trend". Just another Fail so far.
Right here, right now, I would classify MFLDX as a "Buy," and I would "Watch" RLSFX and PMHIX. Knowing PIMCO, they will never, ever close PMHIX to new investors. So I think that it is safe to watch this fund and not worry that they will close the fund to new investors anytime soon.
Kevin
expected to be reorganized into the Fund as of the date the Fund
commences operations (i.e., on or about April 20, 2012). This privately
offered fund was organized on December 1, 2002 and commenced
operations on January 1, 2003 and had an investment objective and
strategies that were, in all material respects, the same as those of the
Fund, and was managed in a manner that, in all material respects,
complied with the investment guidelines and restrictions of the Fund"
While the performance of the prior fund is not an indicator of the new fund (yadda yadda fine print yadda yadda), as BWG noted, the performance of the prior fund is rather good for a long/short (although long-biased) offering. The global nature of this fund is also interesting (". The Fund may invest, without limitation, in securities and instruments that are economically tied to foreign (non-U.S.) countries, including securities and instruments that
are economically tied to emerging market countries." The other element that makes this fund interesting - and what may also lead to higher volatility - is the note that it will be a concentrated fund.
I do find it interesting the hedge funds turning to mutual fund movement (although a little movement, it's what RLSFX was and what this fund effectively is), but I will say I find this fund a lot more interesting than RLSFX (no offense to any RLSFX holders.)
1.56% reflects operating expenses but does not reflect expenses generated by the fund's short positions. Those expenses are variable, depending on the extent of the shorts.
2.47% is what the manager estimates it currently costs to run the fund.
1.75% is the maximum that the advisor will charge investors, pursuant to a waiver in place through August 2013. Here's their regrettably unclear text: I'll note that at $1.5 billion, one might have wished for somewhat lower expenses.
David
Hi David,
I just called the fund, and that 2.47% ER is the latest expense figure that investors are charged to own the fund, and the NAV is adjusted for all expenses on a daily basis. Of course the fund management wants us to focus on any figure lower than the 2.47%, maybe the 1.75%, but if you own this fund, you are paying about 2.47% to own it. I say "about" as a number of expenses vary on a weekly, and maybe daily basis.
And I agree with you that fund expenses should have declined as the fund grew from $8.3M in AUM on 3/31/08 to the current $1.4B in AUM. Since inception, the fund has had a constant 1.40% management fee despite the tremendous growth in assets. It's unfortunate that the fund directors have not acted in the best interest of shareholders to reduce expenses, but that appears to be the accepted practice in the OEF space.
Kevin