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Oakmark Funds - and Alternative suggestion(s) ?

Hi, been awhile since i've been here and wonder if i could get some opinion. My port is 40% equity, 60% FI. I have held OAKIX and OAKBX to fulfill diversification in providing foreign market exposure, and the positions combined comprise
less than 10% of my Taxable account. I'm disappointed in performance of both - lagging for a few years now but YTD both down double-digits. I recognize these are being hurt by the value-bias style that has been out of favor for quite a few years... Herro @ Oakmark has favored financials which of course negative interest rates are pummeling worse than the overall market. IF rates rise, theoretically financials - and in turn Oakmark funds would be expected to improve. However to exit basically 'at the bottom' in current conditions obviously invokes tax consequences. That said, how long is long enough to give these a chance; they are in the bottom 2% of Foreign Blend funds. NAV losses have mounted radically and obviously the CV market volatility is accelerating that. Similarly a recent buy into VG EM Fund VMMSX has yielded significant immediate losses but the OAK funds are more my concern right now. Longwinded lead-in to the question.. What would be pros/cons of holding vs taking the losses - what's an educated guess as to the realistic chance that the OAK funds rebound anytime in say, the next year or so.... What might be a lower risk more 'normal' international fund(s) substitute to consider? As for the EM equity side, again not a huge position but had been in the lagging AEMGX before chosing - a little too hastily to swap into VMMSX (VG) - tho Black Rock in hindsight MDDCX would've been a better choice IMO... but open to suggestions on others to study as well.

BTW, am 61 y/o, no debt, working less, PF generating in the realm of 55-65k/year in Dividend Income. PF value after today's/past week's crash, about 1.87M after recent all time high(Feb) of 2.1M. Thanks! Mike

Comments

  • TBGVX isn't doing much better. I just looked again. I owned it many years ago. Those 2 Oakmark funds are less than 10% of your taxable account, you say. With Markets that have fallen so far, so fast--- virtually into "Bear" territory--- you might pull the plug, in order to buy into a domestic fund or two. You can live just fine without necessarily owning any foreign stuff. I've reduced my foreign stuff to 7% of my total. The whole WORLD'S Markets are getting hammered. Or is there maybe a single-stock you've had your eye on, tracking just for fun--- until you have some money to throw at it?

    What you want to look for is a fund with good "downside capture." Check the Risk profile for any that catch your eye.
    OAKIX: 148, quite bad. (Morningstar.)
    OAKBX 160, also poor.

    DODFX 127, not great.
    MAPIX 93, much better, but its upside capture is not fabulous, though: 93. (yes, same number.)

    FIGSX 68 downside, 109 upside. Quite good. Still, that is only one metric, one statistic. It's down YTD by over 13%, though. I dunno if you'd find anything at all above the break-even line, tonight.

    Domestic: VLAAX
    BRUFX
    ...Hope this helps.
  • Thanks for the perspectives. Tough choice on whether to hold from here. Right now
    OAKIX, 2.3% of my taxable account, is down 20.8% as of yesterday. OAKEX, (2%
    position) down 16%. VMMSX -(3% position) down 17%. With the OAK funds, it comes
    down to not if but when I want to exit. I def. want to be in a less concentrated value
    holding(s) for foreign markets - finding an alternative isn't so much the issue as
    whether to cut losses because it's a difficult read how long a slog it might be to even
    get close to break even on these positions for a better price to sell. Appears to be
    pretty much total guesswork at this point.
  • OAKIX is a really volatile fund. Sometimes that's good, often not. I used to own it; held it for years until its dramatic ups and frequent downs got the better of me. I wanted a smoother ride, even at the potential cost of some measure of lost returns over (what I think would be) a very long time horizon. Plus, I felt the fund was charging too much given its size and poor medium-term performance. In the end I transitioned out of the fund and into a low cost all-cap foreign index fund. That's worked out well, relatively speaking, so far. Annual returns are never in the 99th percentile, which is where OAKIX has been landing (though they'll never be in the top 1% either). I also wonder whether the much smaller asset base during its earlier years had anything to do with the fund's historic outperformance. I'll never know the answer to that.
  • JABAX v good, and as others have noted in another thread, VL is even better
  • JABAX v good, and as others have noted in another thread, VL is even better

    . Thanks, and to others in this thread... I am really leaning toward exiting these today - not to cash but a suitable replacement for diversification so that's become my focus and appreciate the suggestions. I believe they'll see further decline this year.

    Am inclined too to look to an ETF vs MF. Not familiar with the VL option you mention. Will take a look around for that thread. Thanks
  • I have never understood the extent to which M* has championed Oakmark funds over the past three decades. They are Chicago homies, so maybe there's some reason there for the back-scratching. I long ago exited positions is Herro's and Nygren's funds and I have not regretted the decision. If value and international diversification prove their worth some day, I still believe the person who held on to Oakmark funds through these bad years will have a lot of ground to make up.
  • Agreed, the M* ratings seem at the least, outdated relative to these funds actual performance. Looking at alternatives in an ETF. EFAV and IEFA have been a couple of ideas from Schwab...
  • Mike, in my opinion, there is very little potential downside to selling 1 equity fund and buying or adding to another at the same time. Selling and not buying a new fund would be a different story. At that point you sold at a loss with no potential to get that loss back.
  • MikeM said:

    Mike, in my opinion, there is very little potential downside to selling 1 equity fund and buying or adding to another at the same time. Selling and not buying a new fund would be a different story. At that point you sold at a loss with no potential to get that loss back.

    Mike, yes that's my goal in this case. Definitely want to replace these with a better fund or funds to "cover" this slice of my portfolio's overall diversification - in this case, foreign/international. Currently my total International allocation is less than 10%...
    so now am focused on deciding between candidates suggested here and elsewhere to go with in place of these.

  • beebee
    edited March 10
    @mikes425 without knowing your income needs its hard to give accurate advice, but with such a sizeable PF value would you be comfortable with a PF that mimics a conservative allocation?

    Looking back over the last 25 years, merely owning a conservative allocation fund such as VWINX and taking a 4% withdrawal annually (based on the PF annual value) would have:
    -limited downside (worst year) losses to 9% (which is where you are right now)
    -provided an ever increasing annual withdrawal never less than year 1 withdrawal
    (4% of $1.87M = $86K)
    -almost doubled your portfolio value during these draw downs from $1.87M to $3.45M

    You have done very well.

    I used Portfolio Visualizer to construct the historical data:
    https://portfoliovisualizer.com/backtest-portfolio
  • bee said:

    > with such a sizeable PF value would you be comfortable with a PF that mimics a conservative allocation?

    Looking back over the last 25 years, merely owning a conservative allocation fund such as VWINX and taking a 4% withdrawal annually (based on the PF annual value) would have:
    -limited downside (worst year) losses to 9% (which is where you are right now)
    -provided an ever increasing annual withdrawal never less than year 1 withdrawal
    (4% of $1.87M = $86K)
    -almost doubled your portfolio value during these draw downs from $1.87M to $3.45M

    You have done very well.

    I used Portfolio Visualizer to construct the historical data:
    https://portfoliovisualizer.com/backtest-portfolio

    >

    Yep, actually I would. I've reflected on that many times in just the past year or so...and VWINX as a benchmark but well you know, hindsight!: ). I'll likely look at some form of consolidation such as you suggest to simplify things, and of course have to take all of the tax aspects into account for the transition. Have been with Schwab for a long time but might consider taking everything to VG and converting it all to a simple handful of allocation funds or whatever it may be;

    Meantime tho, to maintain a diversified PF, have an immediate need to fill in the small OAKEX/OAKIX holdings to be replaced... (about 4.5% of PF combined). Part of me wants to select a managed fund for foreign exposure, but recommendations have leaned toward index ETFs for this, such as FNDC and FNDF (for the OAK funds respectively). ALternately EFAV, IEFA.

    Just having a few percent in EM VMMSX is irking me since I only recently replaced AEMGX with that - and as of now would've been better off simply going to cash with it for awhile ; )
  • edited March 10
    VLAAX
    mikes425 said:



    \\ Not familiar with the VL option you mention.


    VLAAX

    be sure to use MFOP
  • VLAAX

    mikes425 said:



    \\ Not familiar with the VL option you mention.


    VLAAX

    be sure to use MFOP
    Ok thanks. But as a diversifier in substitution for a foreign /international sector position...? Isn't VL a broad spectrum balanced fund?
  • beebee
    edited March 10
    FMIJX has only been around since 2011, but it seems to offer a less bumpy ride on the international roads than OAKIX

    Comparison (FMIJX is Blue)
    https://screencast.com/t/aH8SN5eam
  • mikes425 said:

    VLAAX

    mikes425 said:



    \\ Not familiar with the VL option you mention.


    VLAAX

    be sure to use MFOP
    Ok thanks. But as a diversifier in substitution for a foreign /international sector position...? Isn't VL a broad spectrum balanced fund?

    by VL I meant Value Line
  • I had OAKIX in an IRA and after a good 15-20 years got tired of its performance and swapped it for more VTSAX and never looked back (it wasn't a large amount). I've posted before that upon recs here and other research, I've channeled my int'l holdings into MGGPX and VWIGX and content with that. Good luck!
  • This is what is going to happen. As soon as you sell Oakmark funds, they will start outperforming.

    IMO stop worrying about beating the market, category or being performance leader. Focus on WHEN to buy before WHAT to buy.

    If you ever think an actively managed fund is not working for you, look for an index fund. In this case you can look at VBINX instead of OAKBX.

    For the record, I own OAKBX. I also own VWELX. Now if you look out 5 years, VWELX outperforms VBINX, otherwise VBINX edges out VWELX for shorted periods. Bottom line, you are not going to know which fund is going to outperform OAKBX over the next 5 years.
  • edited March 10
    <<i>blockquote class="Quote" rel="VintageFreak">This is what is going to happen. As soon as you sell Oakmark funds, they will start outperforming.

    IMO stop worrying about beating the market, category or being performance leader. Focus on WHEN to buy before WHAT to buy.
    If you ever think an actively managed fund is not working for you, look for an index fund. In this case you can look at VBINX instead of OAKBX.

    For the record, I own OAKBX. I also own VWELX. Now if you look out 5 years, VWELX outperforms VBINX, otherwise VBINX edges out VWELX for shorted periods. Bottom line, you are not going to know which fund is going to outperform OAKBX over the next 5 years.

    Oh, I don't doubt the notion of a turnaround like that ' as soon as i sell' : ) - I mean, this very afternoon, while pondering a sell order on OAKEX - I happened to flip on CNBC today and out of the entire universe of possible fund mgrs - and someone I've NEVER seen interviewed on FI-Media EVER, there's Oakmark Manager David Herro at 3:30 LOL. And I don't 'watch' CNBC much other than occasionally checking indexes. I totally get where you are coming from on this. That said I may hang on to OAKIX - but OAKEX i is spotty and quite disappointing over a 5 year timeframe at this point with 98% of funds outperforming. I don't think it's 'the right' fund as a core position for exposure to foreign/international - bit too concentrated/value oriented - so, still probably going to replace it - maybe with an index such as FNDC, EFAV IEFA... a few that've been mentioned as a possible substitution by a Schwab CFP I chat with from time to time.
  • The Morningstar downside capture of 148 is during the drawdown period of 11 months in 2018. I checked this under risk of OAKIX. Called Morningstar and they stated there were a lot of inquiries and they have to redo their website as the reliability and meaningfulness of there capture figures measure too narrow a time period and is in question.
  • @prinx thanks for letting us know!
  • Another vote for FMIJX in international space.
    For replacement of OAKBX, consider Vanguard Wellington, Wellesley or VLAAX. I am not as familiar with the last one, but looks good at first glance. The Vanguard duo has a long history of consistent performance in their class. You can choose one or a mixture of both to adjust the risk profile between conservative and moderate allocation.
    For global allocation, I have been using SGENX for a long time.
  • Kaspa said:Another vote for FMIJX in international space. For replacement of OAKBX, consider Vanguard Wellington, Wellesley or VLAAX. ... ...You can choose one or a mixture of both to adjust the risk profile between conservative and moderate allocation. For global allocation, I have been using SGENX for a long time.

    Hi! I did sell OAKEX - about a 3% i had in it yesterday. Have been using this and OAKIX to comprise international exposure. OAKIX is slightly less concerning than OAKEX - so I decided not to sell out of both. Any event, am inclined to use an ETF to replace OAKEX... Not racing right back into it - figuring there's no sudden surge in store, but hate to wait too long - again the OAK funds just serve the role as diversifier for my stake in International, While VMMSX is a recent purchase as main equity EM fund - which i'd rather use Black Rock MDDCX for, and may swap after 90 day early redemption period into that bec. Schwab offers for NTF vs fee for VG funds.

    Any thoughts on OAKEX substitute in ETFs? Again I am not foreseeing how being in cash with the proceeds for it can hurt, with this much uncertainty out there... but i don't want to make mistake of not getting back in with a "like" sector equity fund - because I had significant losses in it.

    Thanks
  • The only Oakmark fund I never got is OAKEX. Seems to be a perpetual laggard with little to recommend it.

    I hold Oakmark (as well as D&C) so that I can readily allocate between funds in market downturns. They have without a doubt hit a rough patch the last few years. I don't think OAKBX has been the same since Ed Studzinski left.
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