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Arnott's Views, and Viable Alternatives

steppinrazor
edited May 2013 in Fund Discussions
If you agree with Mr. Arnott's view's from the latest commentary and I think most of here probably do, but if you also think funds can be come too big...............

1. Can (PAUDX/PAUIX) continue their run of success at their current size?
2. If not, what are the most viable options within the "world allocation", or whatever you want to call it, space?
3. What kind of DIY fund of funds could you cobble together to fit the bill. Sort of like the question from earlier in the year regarding a 3 or 4 fund portfolio.

Comments

  • sma3
    1) I admire anyone willing to stare these demographics in the face and tell the truth. If he really believes this, his current investment policy must require him to also believe that the threat is a long long way ( over 2 to 5 years ) in the future, because a sharp rise in interest rates would destroy PAUDX as it is so leveraged ( M* says 42% as of 9/2012) and so big. It is hard to believe he would not have a way out that he really thinks will work, and that has been back tested, front tested and over the moon tested, you can't imagine that he will have a way to judge when the fed is about to crack down, when no one else in the world will be able to predict it. In answer to your question directly, it is unlikely, given the law of big numbers his preformance will continue

    2) IS there a way to tell other than yearly with M* what amount of leverage he is currently using?

    3) PAUDX is the ultimate black box bet on one man's abilities, as it can do anything, and does it all within another closed box, ie PIMCO funds. So even if you look at the Quarterly Statements, you have to then deal with the quarterly statements of 5 or 10 other funds.

    4) Most other "world allocation" funds stick to more traditional assets and therefore follow indexes in their behavior. I have had MDLOX for decades and the manager does a very good job over a market cycle, but you need a long horizon.

    5) To set up a DIY fund you have to know what you are modeling and what you want to do. It is obviously not possible to even come close to duplicating PAUDX ( well you could buy the quaterly PIMCO allocations with borrowed money, but you lag horribly).

    6) A better bet is to start with a traditional equity bond mix, assume that there may not be a lot (any?) protection in the bond side with the next big crash, and spread it out into many different assets, including gold, Real estate, alternative funds like MERGX, "unconstrained" bond funds, TIPS, long short, managed futures, short funds and true alternatives like JHAAX and back test it since 2007. Barron's has interviews with "contraians" who mention funds that work well for some of these, but a lot of the most prominent funds (Hussman) have been disappointing. I don't think you can do it with three or four funds... Maybe 6 or 10, but many of these strategies depend on an individual and if you guess wrong you can get killed.

    7) For safety don't put any money you need to live on in the next five years in anything but T-bills or short term bonds
  • steppinrazor
    edited May 2013
    I agree. It's like he's saying my house is going to burn down at some point, guess I'll have to get that dynamite out of the basement before it happens. Of course the dynamite is in 5x5 boxes and the door to the cellar is 3x3.
  • VintageFreakVintageFreak
    I own PAUDX in a small leftover IRA I have which when I bought I equally split between PAUDX and PGMDX. I see now PAUDX has $36 billion in assets. Whaaa....? When I bought it had like $20B. When did that happen?

    More importantly, does PIMCO ever close funds? I don't seem to recall any news of a PIMCO fund closing, ever.
  • JimH
    According to PIMCO the fund is 27% leveraged as of 3/31/13. Here's the info, see page 3 for holdings breakdown and leverage. Fund assets up from 28B to 33B in first 3 months of '13.
    http://investments.pimco.com/ShareholderCommunications/External Documents/All Asset All Authority Fund - 791 QIR.pdf
  • CharlesCharles
    edited May 2013
    Mr. Arnott addresses the AUM concern in his recent shareholder letter:

    http://investments.pimco.com/Products/pages/284.aspx

    (Click on Insight's Q&A link about midway down on right side of page.)

    Here is very brief bottom-line:
    ...today, we see very little evidence that our strategy is bumping up against any liquidity issues.
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