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Interesting view of TMSRX through Lipper Lens

edited May 4 in Fund Discussions
Lipper Holdings for TMSRX

-1% Stocks

68% Bonds

30% Cash

3% Other

KEY STATISTICS

Total Net Assets $205.82M
Total Stock Holdings 35
Total Bond Holdings 141
% Foreign Stocks 8%
Portfolio Turnover Rate 100%

It’s hard to get a grasp on the inner workings of “alternative” (sometimes called black-box) funds. Actually, the layout above copied from Lipper is clearer than for many. Note the 1% (negative) holdings in equities (short position).

Just wanted to share. I do own it. My bigger gripe is the near 1.3% ER. However, that’s in line with similar funds, actually on the low end. Obviously, the managers aren’t “high” on prospects for stocks at current valuations.

my guess - The fund is long some stocks and short some others in roughly equal amounts. Net-net it’s 1% negative stocks. What about all that cash? Likely that’s to cover the short equity positions. Another oddity is that everything appears to equal about 100%. Funds that short equities and play in derivatives often have large cash / bond positions which laid out on paper display a total invested amount of 120% or greater / ISTM.

Comments

  • Yes, the investor share at 1.22% is not cheap, but other alternative funds could cost even more. Don't recall that the fund ever took aggressive short equity position greater than 5%. Nevertheless 2020 drawdown was -8%, whereas Vanguard balanced index was down 2x as much. The fund did well by year end. The 100% turnover indicated very active trading of the positions in the fund. These days AI or machine learning algorithms is used in these type of funds.

    BTW, I also invested in it too since the inception. It will be interesting to see how this fund held up today as the market pullback.
  • edited May 4
    Hi @hank. I assume the accumulative short and long positions in equity sum to -1%, but how can the bond/cash/other percentages be correct if it uses the 35 stock positions as a total of -1% ? Very confusing. Seems equity positions, regardless of being short or long, would be some greater percentage than -1% which in turn would reduce the given % for bond, cash and other. given above.

    Very confusing to understand the break down of distribution. Or am I missing something?
  • @MikeM - maybe this will help you out. Or not.

    Derivitives in mutual funds
  • edited May 4
    :) Thanks for chiming in guys.

    @MikeM - My less than expert take is that a lot of the cash / bond position is actually held in “reserve” to back the short positions. And that that method of displaying is to comport with SEC disclosure rules.

    As Mark implies, I think, funds that play in derivatives can post some pretty weird numbers. One commodities fund I once owned would typically display about 150% cash and bonds. Consider that your fund manager has no way to store crude oil or pork bellies. So the “commodity” exposure in commodity funds is achieved with smoke and mirrors (derivatives).

    If I can find another fund with weird numbers like that, I’ll post it here.

    My take on owning TMSRX - “Making the best of a bad situation”. That’s because of the super low prevailing interest rates along with what appear to me to be overvalued equity markets. So, by default, TMSRX has just north of 12% of my retirement assets. On a sharp equity selloff, I’d probably cut that back a couple %. With funds like that it boils down to a matter of trust in the fund’s operator not to gamble with your money.
  • @hank : You said, " On a sharp equity selloff, I’d probably cut that back a couple %." With -1 on the short side of equity that should be a positive. Presuming the shorts & longs cancel out .
    Just wondering, Derf
  • edited May 4
    You could tell by its recent pricing behavior that TMSRX was short or neutral on equities this past month. But that's part of the allure of "diversifiers" - they can cut against the grain, at times.

    Can mgmt at TRP time these market moves correctly? Better to be too early than too late with their calls. Lets see how it all plays out.
  • edited May 4
    You guys know what you're looking at, I'm certain. Such a fund is too weird and funky for my tastes. I'd rather just choose funds which let me make my desired bond-stock-shorts positions in a more straightforward way. (No black-box.) Lately, I notice that PRSNX has grown a small "short" position that wasn't there, before. (Morningstar's X-Ray.) Falling dollar, I suspect, is what's going on, in that case.
  • edited May 4
    Derf said:

    @hank : You said, " On a sharp equity selloff, I’d probably cut that back a couple %." With -1 on the short side of equity that should be a positive. Presuming the shorts & longs cancel out .
    Just wondering, Derf

    @Derf - Inquiring minds like to wonder … You are correct that the fund is pretty much neutral as far as equity exposure goes. The NASDAQ got whacked today. I’ll guess that’s mainly what the fund is shorting. So don’t be surprised to see it gain a bit today.

    What I meant was that if equities sold off sharply, I’d sell a couple percent of TMSRX and buy something more invested in equities - maybe add to PRSIX which has an ER about half of what TMSRX charges. TMSRX is 1 of 3 funds in my alternative camp. Combined they amount to 32% of holdings. Maybe drop it to 30%. We’re not taking about BIG moves here.
    -
    Crash said:

    Lately, I notice that PRSNX has grown a small "short" position that wasn't there, before. (Morningstar's X-Ray.) Falling dollar, I suspect, is what's going on, in that case.

    @Crash - Here’s the Lipper breakdown on PRSNX

    -13% Cash

    111% Bonds

    2% Other

    0% Stocks

    Total Net Assets $1.50B
    Total Stock Holdings 1
    Total Bond Holdings 560
    % Foreign Stocks 0%
    Portfolio Turnover Rate 144%

    It’s not at all unusual for bond funds to hold short positions. Sometimes they’ll short the 30 year Treasury Bond. By doing so, they hedge losses in their shorter duration bonds when rates tick upward. Pretty sure DODIX has done that in the past. However, the short on a 30 year bond would only amount to a few percent.
  • Thanks, @hank!
  • @hank : Thanks for the reply. That move now makes sense to me.
  • I have learned from past mistakes when I bought a new to market fund that promised it was the next best thing since sliced bread.Fool me once shame on you - shame me twice shame on me!! Crash summed up my feelings pretty well.
  • TMSRX The fund posted a one cent lose after Tuesday market drop. Now that leads me to wonder , what are they shorting ? Just guessing , the longs lost about the same as their shorts made ?
    Just Wondering, Derf
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