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@TheShadow mentioned 3 TDF series now from T Rowe Price. IMO, more changes are coming - Price won't be done UNTIL there is an index-only TDF at Price too.
Awesome. A month’s worth of reading. Reminds me of trying to digest one of Bogle’s comprehensive guides to investing years ago. Thanks to all who contribute.
@Sven, at one time I thought the Fido would never do that! Now, my own large Fido 403b plan has Fido index TDFs. So, the firms have to deliver what the plans want or lose business. Let us see how long T Rowe Price can hold - my guess is not long.
July MFO covered GOODX. For those interested in exploring this fund, it has a 2% short term redemption fees <60 days and is a TF fund at the major brokerages I checked. While I understand why a fund would have a 2% lock up fees, I would rather they charge me a higher ER than a 2% lock up fees.
Over the past 3 years, the fund has gathered close to zero inflows while delivering 80% in cumulative total return. Given the fund's recent good performance, and if we were to believe that the bear market is over, the fund should not worry about short term redemptions and can gather a lot of AUM (currently below <$125M) if they were to get rid of the lock up fees. Prior to the change in fund strategy three years ago, the fund had approx $70M in AUM, after steady outflows for years. I always thought short term redemption fees are a good substitute for closing a fund. Is that what the fund manager trying to accomplish?
May be @David (David Snowball) could convey the above to the fund manager or invite them to read this post.
P.S.: I currently do not have a dedicated mid cap fund but would invest in GOODX if there was no STR fees.
Short-term redemption fees are preferable over higher expense ratios. GoodHaven is a concentrated fund (24 holdings, 65% in top 10) with low turnover. Excessive redemptions can be very detrimental to this fund's strategy. If an investor is unwilling to commit to a mutual fund for 60 days, perhaps they will be better served with an ETF?
Google and BRK (top two holdings) comprise 23% of GOODX per fact sheet. Those are among the few single stock investments I have in my portfolio for more than a decade.
I have held some mutual funds for decades but the one time I ventured into a fund with STR fees, I had a bad experience. It would be nice to know how much of the fund is owned by the manager but I understand the manager is not required to disclose this information. (I think the RCRIX discloses similar info.) GOODX SAI has the standard disclosure that the manager has >$1M.
Not sure I am allowed to have discussions in a pinned (Announcement) thread. I will stop.
@yogibearbull, It boils down to the expense ratios. In David July commentary, Vanguard is attracting the second most asset while BlackRock is leading everyone.
Currently BlackRock offers institutional TDF with 0.06% fees while Vanguard offers TDF with comparable low fees. Since TDF are funds of funds, it is equally important to examine the underlying index funds, share classes and fee structures. Preferably, only institutional shares should be used so to keep the overall fees low.
This month’s commentary @shadow discussed T. Rowe Price’ 3 series of TDFs. One of them
Retirement Blend funds: relatively aggressive glide path (the same as Retirement’s), diversified portfolio, a mix of active and passive funds.
I am sure TRP will come up with an all index fund-based TDF. Question is will their fee competitive to those of BlackRock and Vanguard? Think Fidelity is subsidizing their index funds as a way to lower their fees.
I shared a link to this discussion with the Good Haven manager and invited him to weigh in, either directly or indirectly. He seemed intrigued. I'll share what, if anything, I hear back.
A couple notes from Mr. P. On inside ownership of the fund:
The GoodHaven Fund disclosed in its annual and semi-annual reports insider ownership as follows - and please note the vast majority of these shares are related to Mr. Pitkowsky and entities connected to his immediate family - "As of November 30, 2022, the members, officers, and employees of GoodHaven Capital Management, LLC, the investment advisor to the GoodHaven Fund, owned approximately 124,075 shares of the Fund. It is management’s intention to disclose such holdings (in the aggregate) in this section of the Fund’s Annual and Semi-Annual reports on an ongoing basis."
He's also thinking about the redemption fee question, and might yet share thoughts there.
We also talked about two misrepresentations of the fund's portfolio, which Chip will correct from the wilds of the Catskills tonight. First, I reported Morningstar's cash stake of the fund and concluded it was fully invested. It's not because the fund uses T-Bills as cash equivalents. Cash-like is around 10%, still less than half of its pre-transition average. Seond, I suggested they had too much exposure to special situations. Mr. P's take is that they had too much exposure to not-quite-special-enough situations leading to a portfolio with a lot of exposure to "the messy middle." Those were stocks that weren't super high quality or super distressed, which are his targets. They've been mostly purged. Following the transition the fund's turnover ratio has dropped 80% from an average of 15% pre-transition to around 3% now.
thanks, David. 3% turnover is close to no turnover. I do not worry about turnover. I also do not worry about cash levels. I give a manager a lot of leeway -I do not believe in micro managing the manager. I certainly would like GOODX to succeed, irrespective of my ownership. Good professionals deserve to succeed.
I agree. Mostly I was discomforted by misrepresenting two datapoints about the fund in our original write-up. I'll probably send an email update once Chip returns from New York.
Comments
@yogibb, hard to imagine TRP will offer index-only target date funds. Additionally, they cannot compete with the low fees offers at Vanguard.
Over the past 3 years, the fund has gathered close to zero inflows while delivering 80% in cumulative total return. Given the fund's recent good performance, and if we were to believe that the bear market is over, the fund should not worry about short term redemptions and can gather a lot of AUM (currently below <$125M) if they were to get rid of the lock up fees. Prior to the change in fund strategy three years ago, the fund had approx $70M in AUM, after steady outflows for years. I always thought short term redemption fees are a good substitute for closing a fund. Is that what the fund manager trying to accomplish?
May be @David (David Snowball) could convey the above to the fund manager or invite them to read this post.
P.S.: I currently do not have a dedicated mid cap fund but would invest in GOODX if there was no STR fees.
GoodHaven is a concentrated fund (24 holdings, 65% in top 10) with low turnover.
Excessive redemptions can be very detrimental to this fund's strategy.
If an investor is unwilling to commit to a mutual fund for 60 days,
perhaps they will be better served with an ETF?
I have held some mutual funds for decades but the one time I ventured into a fund with STR fees, I had a bad experience. It would be nice to know how much of the fund is owned by the manager but I understand the manager is not required to disclose this information. (I think
theRCRIX discloses similar info.) GOODX SAI has the standard disclosure that the manager has >$1M.Not sure I am allowed to have discussions in a pinned (Announcement) thread. I will stop.
Currently BlackRock offers institutional TDF with 0.06% fees while Vanguard offers TDF with comparable low fees. Since TDF are funds of funds, it is equally important to examine the underlying index funds, share classes and fee structures. Preferably, only institutional shares should be used so to keep the overall fees low.
This month’s commentary @shadow discussed T. Rowe Price’ 3 series of TDFs. One of them I am sure TRP will come up with an all index fund-based TDF. Question is will their fee competitive to those of BlackRock and Vanguard? Think Fidelity is subsidizing their index funds as a way to lower their fees.
We also talked about two misrepresentations of the fund's portfolio, which Chip will correct from the wilds of the Catskills tonight. First, I reported Morningstar's cash stake of the fund and concluded it was fully invested. It's not because the fund uses T-Bills as cash equivalents. Cash-like is around 10%, still less than half of its pre-transition average. Seond, I suggested they had too much exposure to special situations. Mr. P's take is that they had too much exposure to not-quite-special-enough situations leading to a portfolio with a lot of exposure to "the messy middle." Those were stocks that weren't super high quality or super distressed, which are his targets. They've been mostly purged. Following the transition the fund's turnover ratio has dropped 80% from an average of 15% pre-transition to around 3% now.
For what interest that holds,
David
And Jefferson's penultimate words (on July 3) are reported to be "Is it the Fourth?"
I also do not worry about cash levels. I give a manager a lot of leeway -I do not believe in micro managing the manager. I certainly would like GOODX to succeed, irrespective of my ownership. Good professionals deserve to succeed.