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To me the label of Bond fund is less relevant than whether it has served the function of a bond fund. I.e. Decent return and low max dd. With that frame, here are some funds that have returned 7% or higher during the last 5Y with a drawdown of 3% or lower.
CEDIX, 15.6, 2.4 VFLEX 10, 2.1 LCTIX 7.4, 2.5
as compared to CBLDX 6.1, 1.4 PFIIX 4.5, 7.3 PAIIX 2.6, 8.9
The last two would be no-go's for me with those performance and max dd numbers.
The First Trust Alternative Opportunities Fund, known as VFLEX, is a closed-end interval mutual fund. It aims to achieve long-term capital appreciation by generating positive absolute returns across various market cycles.
The fund primarily invests in alternative asset classes, including private equity, private credit, real estate, and hedge funds.
From my limited understanding, $1m is the default setting that Yahoo places on a fund record when it can't extract a min investment from the prospectus or fact sheet. Lol, I got in at $50k over 10 years ago and I really haven't paid much attention to the metrics since. I just let it grow and focused on the growth stuff for the past 10 years. Ask your broker what the actual min is..maybe it depends on in/out of IRA.
Yeah, 2022 was awful. Should've been more proactive. Getting better with MFO.
On the topic of private credit, no idea how the next 5 years will pan out but the past 5 have been pretty amazing. As an example, CCLFX (large player in this space) returned 10.5% with a max dd of 0.2% (yep this is not a typo)
It's not just that CCLFX is an interval fund. It's also that the supposed lack of volatility of the NAV is due to the somewhat fictitious fair value pricing of a mostly illiquid portfolio (typical of interval funds).
The Fund calculates its NAV on a daily basis using the quarterly valuations provided by the Fund Managers. However, it is important to note that these valuations may not capture market changes or other events that take place after the end of the quarter. The Fund will adjust the valuation of its holdings in investment funds to account for such events, in accordance with its valuation policies.
So the valuations are at best guesses on a quarterly basis with numbers slightly tweaked in between. What little portfolio data M* does show for this fund suggests that it is somewhat leveraged (around 10%). And M* puts its risk score at 56 (bond funds typically fall between 1 and 15 or so).
The good news is that according to Larry Swedroe the prices are not too stale, and if you're invested for the long term things average out. Then again, if you're invested for the long term with an OEF, price fluctuations also average out. That is, day to day or month to month volatility is not all that important for the long term investor.
The empirical research findings demonstrate that stale pricing exists with funds that provide more liquidity than exists for their underlying assets. That creates the risk of wealth transference through NAV timing. This is especially true for private equity and private real estate funds. However, at least in the case of CCLFX, which restricts investments to private credit that is senior, secured, and backed by private equity, the risk of stale pricing is minimal, and doesn’t even exist beyond a month from an economic and statistical significance viewpoint. The takeaway is that the volatility of CCLFX is somewhat understated somewhat when looking at one-month returns. However, when looking at volatility on a quarterly, or longer, basis that is not the case.
Unclear on where you are getting the valuations are best guesses at quarterly level. Swedroe clearly states that the quarterly NAV is reasonably accurate and that there is little probability of success of a NAV Timing arbitrage strategy. Daily NAV estimates are certainly guesses. Good article, tks for posting the link.
Holy Grail is the term I had in mind (at least for the last 5 years) but free lunch works too. Below is direct from the article.
However, at least in the case of CCLFX, which restricts investments to private credit that is senior, secured, and backed by private equity, the risk of stale pricing is minimal, and doesn’t even exist beyond a month from an economic and statistical significance viewpoint. The takeaway is that the volatility of CCLFX is somewhat understated somewhat when looking at one-month returns. However, when looking at volatility on a quarterly, or longer, basis that is not the case. The bottom line is that CCLFX provides investors with access to the credit premium and the illiquidity premium of private credit without being concerned about the risk of stale pricing. And for investors who don’t need liquidity for at least some portion of their portfolio the illiquidity premium is as close to a free lunch as one can find. Thus, one should eat as much of it as possible!
Full Disclosure: I own shares of CCLFX.
Larry Swedroe is the author or co-author of 18 books on investing. His latest is Enrich Your Future
asset values based on models and unobservable inputs. Assumptions from market participants are used when pricing the asset or liability, given that there is no readily available market information on them. Level 3 assets are not actively traded, and their values can only be estimated using a combination of complex market prices, mathematical models, and subjective assumptions.
I'll continue the rest of the paragraph I previously quoted from the prospectus on valuations:
There are no guarantees or assurances regarding the valuation methodology employed or the adequacy of systems utilized by any Fund Manager. Additionally, there is no assurance regarding the accuracy of valuations provided by the Fund Managers, their compliance with internal policies or procedures for record-keeping and valuation, or the stability of their policies, procedures, and systems without prior notice to the Fund. Consequently, it is possible that a Fund Manager’s valuation of securities may not align with the ultimate realized amount upon the disposition of such securities. The information provided by a Fund Manager may be subject to inaccuracy due to fraudulent activity, misvaluation, or inadvertent errors. It is important to note that the Fund may not identify valuation errors for a significant period of time, if at all.
Since you linked to Swedroe's article, could be useful for folks here to know that Swedroe owns CCLFX.
That would tend to undermine one's confidence in "Swedroe['s] clear.. state[ment] that the quarterly NAV is accurate and that there is little probability of success of a NAV Timing arbitrage strategy." However, since Swedroe was only citing and recapitulating third party work, I considered his ownership disclosure pro forma, not material.
Your quotes from the prospectus around valuation risk of holdings make the case for "buyer beware" I agree.
Your reference to a particular snippet in Swedroe's article as further support of risk confuses me because all said and done, Swedroe is invested in CCLFX. Actions speak louder than words imo.
If a fund manager invests in a fund, it is possibly because they have confidence in their work. (If you want something done right, do it yourself.) Perhaps, or perhaps they overestimate their skills. Or perhaps they view investing in their fund as a job requirement. So for managers, it may be more telling when they do not invest in their funds (less ambiguous lack of faith).
[Side note: this violates the rule of thumb: don't invest in where you work; you're putting too much at risk. OTOH, managers who invest in their funds may just be investing what to them is pocket change.]
If someone not connected with a security invests in that security, that's also a good indication that they have confidence in it. However, that in turn suggests that (a) they will tend to praise the investment (wanting to show theirs was a good decision), and/or (b) they will seek out / pay more attention to data that supports their investment choice (confirmation bias).
There may be a way around that. Mins are typically reduced when one goes through third parties. Though as yogi mentioned, that likely means working with an advisor.
For example, Schwab shows a $1 min. But if you try to place an order, it says: "Buy orders are not currently being accepted on this fund. Please contact a Schwab representative for assistance."
I got burned several years ago by NAV based on models. They probably work better for Interval funds, as the Company knows ahead of time about withdrawals and can limit them, but they are still guesses.
Remember IOFAX? NAV dropped 20% overnight!
In an another OEF I owned they changed the NAV after I sold it before Settlement Date. I complained to the SEC and got the difference restored. Good luck trying that now.
@Bitzer - QDSIX primarily. Slightly higher volatility than BND but much higher Sortino and returns since inception in 2020 and much lower max dd. - I would also consider APHPX as a solid bond sub
@stayCalm. QDSIX? QDSIX? As a substitute for bonds ? Or as a substitute for money previously allocated to Certificates of Deposit as per the original poster? Anyway with a 5m mini I am not going to allocate 10% of my IRA to that particular fund.
@Bitzer - - I would also consider APHPX as a solid bond sub
As of 6-30-2025, Artisan Global Unconstrained Fund had a Yield to Worst of 11.83%. Its been very solid in it's short ~3 year life, but not yet firmly battle tested. Bought some this year, may add.
@stayCalm. QDSIX? QDSIX? As a substitute for bonds ? Or as a substitute for money previously allocated to Certificates of Deposit as per the original poster? Anyway with a 5m mini I am not going to allocate 10% of my IRA to that particular fund.
FYI, another share class, QDSNX, is available at Fidelity or at Vanguard, for example, as a NTF fund with a $2,500 initial minimum investment. Good luck.
Comments
Overall Rating Out of 534 Funds: 2 star
3 Year Rating Out of 534 Funds: 1 star
5 Year Rating Out of 474 Funds: 1 star
10 Year Rating Out of 353 Funds: 2 star
Historic Return Below Average
Historic Risk High
Not sure that I'd want to put a million on that one...
CEDIX, 15.6, 2.4
VFLEX 10, 2.1
LCTIX 7.4, 2.5
as compared to
CBLDX 6.1, 1.4
PFIIX 4.5, 7.3
PAIIX 2.6, 8.9
The last two would be no-go's for me with those performance and max dd numbers.
The fund primarily invests in alternative asset classes, including private equity, private credit, real estate, and hedge funds.
Well, that sure sounds like an adventure...
Yeah, 2022 was awful. Should've been more proactive. Getting better with MFO.
https://www.mutualfundobserver.com/discuss/discussion/comment/182683/#Comment_182683
So the valuations are at best guesses on a quarterly basis with numbers slightly tweaked in between. What little portfolio data M* does show for this fund suggests that it is somewhat leveraged (around 10%). And M* puts its risk score at 56 (bond funds typically fall between 1 and 15 or so).
The good news is that according to Larry Swedroe the prices are not too stale, and if you're invested for the long term things average out. Then again, if you're invested for the long term with an OEF, price fluctuations also average out. That is, day to day or month to month volatility is not all that important for the long term investor. https://alphaarchitect.com/nav-time/
If you don't want to go through an adviser, you can invest directly with the fund for a mere $10M. (Thanks to yogi for the link to the application.)
Unclear on where you are getting the valuations are best guesses at quarterly level. Swedroe clearly states that the quarterly NAV is reasonably accurate and that there is little probability of success of a NAV Timing arbitrage strategy. Daily NAV estimates are certainly guesses. Good article, tks for posting the link.
However, at least in the case of CCLFX, which restricts investments to private credit that is senior, secured, and backed by private equity, the risk of stale pricing is minimal, and doesn’t even exist beyond a month from an economic and statistical significance viewpoint. The takeaway is that the volatility of CCLFX is somewhat understated somewhat when looking at one-month returns. However, when looking at volatility on a quarterly, or longer, basis that is not the case. The bottom line is that CCLFX provides investors with access to the credit premium and the illiquidity premium of private credit without being concerned about the risk of stale pricing. And for investors who don’t need liquidity for at least some portion of their portfolio the illiquidity premium is as close to a free lunch as one can find. Thus, one should eat as much of it as possible!
Full Disclosure: I own shares of CCLFX.
Larry Swedroe is the author or co-author of 18 books on investing. His latest is Enrich Your Future
Swedroe cites to this Investopedia piece on Level 3 valuations: I'll continue the rest of the paragraph I previously quoted from the prospectus on valuations:
Since you linked to Swedroe's article, could be useful for folks here to know that Swedroe owns CCLFX.
That would tend to undermine one's confidence in "Swedroe['s] clear.. state[ment] that the quarterly NAV is accurate and that there is little probability of success of a NAV Timing arbitrage strategy." However, since Swedroe was only citing and recapitulating third party work, I considered his ownership disclosure pro forma, not material.
Your reference to a particular snippet in Swedroe's article as further support of risk confuses me because all said and done, Swedroe is invested in CCLFX. Actions speak louder than words imo.
[Side note: this violates the rule of thumb: don't invest in where you work; you're putting too much at risk. OTOH, managers who invest in their funds may just be investing what to them is pocket change.]
If someone not connected with a security invests in that security, that's also a good indication that they have confidence in it. However, that in turn suggests that (a) they will tend to praise the investment (wanting to show theirs was a good decision), and/or (b) they will seek out / pay more attention to data that supports their investment choice (confirmation bias).
Hence the idioms: no horse in this race and no dog in this fight.
For example, Schwab shows a $1 min. But if you try to place an order, it says:
"Buy orders are not currently being accepted on this fund. Please contact a Schwab representative for assistance."
I'll try calling Schwab, thanks @msf.
Remember IOFAX? NAV dropped 20% overnight!
In an another OEF I owned they changed the NAV after I sold it before Settlement Date. I complained to the SEC and got the difference restored. Good luck trying that now.
- QDSIX primarily. Slightly higher volatility than BND but much higher Sortino and returns since inception in 2020 and much lower max dd.
- I would also consider APHPX as a solid bond sub
FYI, another share class, QDSNX, is available at Fidelity or at Vanguard, for example, as a NTF fund with a $2,500 initial minimum investment. Good luck.
https://www.portfoliovisualizer.com/fund-performance?s=y&sl=3hYp9dTgZx25fW564h0zrq
Key take-aways
CAGR of 12.59% vs. -0.43%
MaxDD 4.45% vs. 17.54%
Sortino 2.85 vs. -0.64
Short story is that QDSIX has blown the lights out of BND across various time periods since inception in 2020 at significantly lower volatility.