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on the failure of focus

Long ago I developed a curious about whether focused / non-diversified / concentrated portfolios offered some distinctive advantage. The purest test I could imagine was finding paired sets of funds run by the same manager using the same strategy, one of which was a focused fund. Found five, one of which (ICAP / ICAP Select) is now dead.

Purely in total return, not risk-adjusted return, terms:

Ariel / Ariel Focus - Focus wins the 3-year race, loses the 5-year
Marsico / Marsico Focus - Focus wins 3-year and 5-year
Oakmark / Oakmark Select - Select loses 3-year and 5-year
Yacktman / Yacktman Focused - virtual tie for 3-year and 5-year, with Focus trailing by 15 bps

My interim conclusion: concentration is not a reliable tool for adding alpha. Am I missing fund pairs or an insight?


  • I know a website where you can search for funds by their partial name, like select, or focus. :)
  • Interesting. If it was not a matter of choosing / strategy, and was in other words more random, you might expect that fewer (notionally 'best of the best') would invariably be better.
    Same as when you compare TR for XLG, VOO, and VONE 10-5-3-1y. Diworsification and all that.
  • @david_snowball I have tried to figure out how to capture concentration risk better for portfolios. I have not succeeded given the tools at hand. I am convinced however that most investors have few good ideas. All the money comes from those ideas and everything else is a go along waste of time. I would rather have managers focus than not focus. If they can't make money, then get out. But going with the non-focused is a waste of fees and money. It also doesnt taste a manager's level of conviction or investing skills. No person can have 75 good ideas for stocks and holding 1-1.5% per position is just blah.
  • Am I missing fund pairs or an insight?

    Probably too new to provide meaningful performance insight are the three Vanguard Advice Select funds.

    Vanguard 2021 launch announcement

    In particular, Vanguard Advice Select Dividend Growth (VADGX) is described as "A more concentrated version of the strategy used in Vanguard Dividend Growth Fund."

    VADGX / VDIGX - Select wins over lifetime (since 11/9/2021)

    Another of the funds, Vanguard Advice Select International Growth (VAIGX) is described as using "as a more concentrated version of the strategy used in Vanguard International Growth Fund" (VWIGX). However, since management of the latter is split between Baillie Gifford and Schroeder, this isn't a good pairing for comparison.

    But a comparison with Baillie Gifford International Growth (BGESX) may be apt, especially since the two BG managers of VWIGX are the two longest managers at BGESX. Though BGESX is concentrated (56 equity holdings, per M*), VAIGX is doubly focused, holding only 28 equity securities.

    VAIGX / BGESX - Select wins over lifetime (since 11/9/2021), losing "only" 10.03%/year vs. an annualized 11.49% loss for the BG fund. Though the latter held the lead until February of this year.

    IMHO what this really shows for Vanguard conspiracy theorists (I count myself among them) is that Vanguard is pushing investors either out or into managed accounts. These select funds are available only in managed accounts.

  • edited July 10
    Not apples to apples, but a comparison where the manager uses an alternative strategy using specific stock picks compared to the same strategy using representative index ETFs would be Leuthold Core Investment, LCORX versus LCR. I would assume LCORX is picking their best stock picks represented in the LCR indexes.

    Amazing to me, but using PerfCharts, it shows starting at LCR's inception, Jan 2020, to today, a bit over 4 1/2 years, LCR and LCORX both have the exact accumulated return, 39.6%. The trend lines don't lay exactly on top of each other, but close, and they end up with the same return.

    I don't know what to make of this other than management's preferred stock picks (LCORX) don't return any more or any less than a comparative index (LCR). The gain or loss is in the management process.
  • edited July 10
    +1 @Devo.

    I would add that if you are a bottom up only investor / fund, focus can hurt biggly. High conviction with no flexibility can be dangerous. Having an eye on macro / momentum, in addition to focused, bottom up approach, allows one to navigate better. Some of you know examples of funds that practice focused approach with multi year losses.
  • Wondering quietly, isn't a focused fund comprised of an existing fund by definition a different strategy?
  • edited July 10
    I compared SP50/XLG, SP100/OEF, SP500/IVV. All 3 had comparable SDs, but,

    performance-wise, XLG < OEF < IVV.

    I didn't expect that despite their ERs of 20 bps, 20bps, 3 bps, respectively.

    Edit/Add. Performance for other timeframes,
    3 Years IVV < OEF < XLG
    5 Years IVV < OEF < XLG
    10 Years IVV < XLG < OEF
  • >> 10 Years IVV < XLG < OEF


    Not when I graph TR $10k growth at Fidelity; rather, what you'd expect:

    XLG $39,782; OEF $36,332; IVV $33,403
  • edited July 11
    @davidrmoran, I tried PV for 10 years, and the results were closer to your results. I double-checked TestFol and its numbers are the same as before.

    It looks that TestFol has some error in the data for XLG and its numbers for XLG are consistently lower (compared with PV).

    New picture with PV:

    3 Years IVV < OEF < XLG
    5 Years IVV < OEF < XLG
    10 Years IVV < OEF < XLG
    That is what I was expecting because SP500 has become increasingly concentrated in mega-stocks. But at the time of my previous post, I didn't suspect errors in TestFol, so simply noted that the results were unexpected.

    Edit/Add, 7/11/24. I contacted TestFol on this issue. It acknowledged the problem for XLG and fixed it promptly. Interestingly, my old linked runs now show the updated data for XLG (and they are now close to those from PV), but those for OEF and IVV are unchanged (i.e. I didn't have re-run those TestFol).

    Many have now started using TestFol because after the recent update, FREE Portfolio Visualizer (PV) is quite limited or unfriendly. As this is sort of off topic for the OP, I won't post more here, but interested posters can find details at,
  • FAIRX comes to mind as a fund that succeeded as a focus fund and then for a combination of reason failed significantly.

    Hennessy Japan Fund = HJPNX attempts to identify best Large Cap Japanese companies.
    HJPNX - 27 Holdings
  • ybb, maybe stick w (or at least doublecheck via) Fido and/or stockcharts?

    (rather than post mistaken conclusions)
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