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"When going beyond the obvious winners, are too new, too small or too expensive deal killers?"
1) I like to see funds which have experienced several market downturns (preferably going back to GFC). If the manager(s) ran similar strategies this data could be considered as well.
2) If a fund is too small, it may not be profitable for the fund firm and it could be closed. I've read that a fund needs to have ~$100M AUM to be viable (haven't verified). Trading costs for small ETFs will generally be greater than that for larger peers. If an actively managed fund is too large, this can potentially inhibit performance.
3) Numerous studies have indicated that costs are one of the greatest predictors of future performance.
There are other factors that I consider as well: parent firm, manager/analyst turnover, etc. It's rare for funds to meet all my criteria so I often need to make judgement calls when selecting funds. I scrutinize core funds (e.g., large blend, foreign large blend, interm. core/core-plus) more than satellite funds.
Yes, with satellites, you already know that you're playing in a specialized space. I always check the ER and size of the fund. I would not consider infant funds, unless it's Giroux. I own 3 single stocks: 2 regional banks and an LP in the oil/ngl space. Price appreciation is nice, but my main purpose with those is dividends.
My two fund anchors are PRWCX and with bonds, it's PRCPX.
Comments
Expense always matters. Isn't it the single biggest drag on performance?
With small, you have to wonder how long it will be around.
1) I like to see funds which have experienced several market downturns (preferably going back to GFC).
If the manager(s) ran similar strategies this data could be considered as well.
2) If a fund is too small, it may not be profitable for the fund firm and it could be closed.
I've read that a fund needs to have ~$100M AUM to be viable (haven't verified).
Trading costs for small ETFs will generally be greater than that for larger peers.
If an actively managed fund is too large, this can potentially inhibit performance.
3) Numerous studies have indicated that costs are one of the greatest predictors of future performance.
There are other factors that I consider as well: parent firm, manager/analyst turnover, etc.
It's rare for funds to meet all my criteria so I often need to make judgement calls when selecting funds.
I scrutinize core funds (e.g., large blend, foreign large blend, interm. core/core-plus) more than satellite funds.
My two fund anchors are PRWCX and with bonds, it's PRCPX.