If I want to buy a $10K interest the Vanguard 500 portfolio, I could pay exactly $10K for VFIAX. Or I could pay a bit more for VOO shares representing the same $10K interest in the portfolio because of the added cost of the spread. I'd prefer not to pay more than $10K for $10K worth of securities.
Regardless of how large or small that added cost is, it is a drawback inherent in the ETF design. Though perhaps it is one that you may not personally care about.
Regarding the size of that spread, Ted's 1 basis point spread is more the exception than the rule. For example, CAPE has a typical spread of 15 basis points. Here's Vanguard's table of spreads on its ETF share class.
With SPY and VFINX Ted is comparing oranges and tangerines (close but still different). The question was what downsides there were to ETFs, not whether ETF 1 was better or worse than OEF 2.
The only way I know to do an apples to apples comparison using concrete funds rather than discussing different attributes of ETFs and OEF is to compare ETF and OEF shares of the same underlying portfolio. Say VFIAX vs. VOO. Since these are shares of the same portfolio, and since they have the same ER, the only factors affecting performance should be due to the nature of the shares and not of the particular fund.
Here's the M* comparison over the past ten years.
As of April 18, 2017, VFIAX'sVOO's cumulative return was 97.23%, while VOO's was 96.59%. That doesn't include dinging VOO for the cost of the spread.
If you add SPY to the M* comparison chart, you'll find its performance was even worse, at 95.66%. But that's because of the design of the fund (cash drag due to UIT structure plus higher ER). Those additional variables confound the data.
A tip for the linkster - to link to a M* page comparing funds, one needs to link to the chart page (there's a "share this chart" link there). The only fund that shows up when one links to a M* performance page is the original fund; the compared funds don't get passed through the link.

Hi @golub1,
I have three hybrid sleeves and with this I just decided to post a description of my sleeve management system along with current holdings which includes area allocations as of April 1, 2017. This does not include the seasonal revision to my portfolio's new overall allocations noted in my above post but it will provide fund holdings that you seek. Come fall, I'll most likely be back to the overall allocations described below.
Old_Skeet's Sleeve Management System
Now being in retirement here is a brief description of my sleeve management system which I organized to better help manage the investments held within mine & my wife’s combined portfolios. Currently, the master portfolio is comprised of two taxable investment accounts, two self directed ira accounts, a health savings account plus two bank accounts. With this, I came up with four investment areas. They are a cash area which consist of two sleeves … an investment cash sleeve and a demand cash sleeve. The next area is the income area which consists of two sleeves … a fixed income sleeve and a hybrid income sleeve. Then there is the growth & income area which has more risk associated with it than the income area and it consist of four sleeves … a global equity sleeve, a global hybrid sleeve, a domestic equity sleeve and a domestic hybrid sleeve. An finally there is the growth area, where the most risk in the portfolio is found and it consist of five sleeves … a global sleeve, a large/mid cap sleeve, a small/mid cap sleeve, a specialty/theme sleeve plus a special investment (spiff) sleeve. Each sleeve (in most cases) consists of three to nine funds with the size and the weight of each sleeve can easily be adjusted, from time-to-time, by adjusting the number of funds and amounts held the exception is the spiff sleeve. By using the sleeve system one can get a better picture of their overall investment landscape and weightings by sleeve and area. In addition, I have found it beneficial to Xray each fund, each sleeve, each investment area, and the portfolio as a whole quarterly. Again, weightings can be adjusted form time-to-time as to how I might be reading the markets along with using an adaptive allocation matrix as an aid to help set the stock allocation weighting. All funds pay their distributions to the cash area of the portfolio with the exception being those in my health savings accounts where reinvestment occurs. With the other accounts paying to the cash area builds the cash area of the portfolio to meet the portfolio’s monthly cash disbursement amount (if necessary) with the residual being left for new investment opportunity. Generally, in any one year, I take no more than a sum equal to one half of my portfolio’s average five year return. In this way, principal builds over time. In addition, most buy/sell trades settle from, or to, the cash area with some net asset value exchanges between funds taking place.
Last revised: 04/01/2017 Master Portfolio
Here is how I have my asset allocation broken out in percent ranges, by area. My neutral allocation weightings are cash 20%, income 30%, growth & income 35%, growth & other assets 15%. I do an Instant Xray analysis on the portfolio quarterly (sometimes monthly) and make asset weighting adjustments as I feel warranted based upon my assessment of the market, my risk tolerance, cash needs, etc. Currently, according to Morningstar Instant Xray, I am about 20% in the cash area, 25% in the income area, 35% domestic stocks area, 15% foreign stocks area & 5% in the other asset area. In addition, I have the portfolio set up in Morningstar’s Portfolio Manager by sleeve and as a whole for easy monitoring plus I use brokerage account statements along with some other Morningstar reports as well.
Cash Area (Weighting Range 15% to 25% with neutral weighting being 20%)
Demand Cash Sleeve… (Cash Distribution Accrual & Future Investment Accrual)
Investment Cash Sleeve … (Savings & Time Deposits)
Income Area (Weighting Range 25% to 35% with neutral weighting being 30%)
Fixed Income Sleeve: BAICX, CTFAX, FMTNX, GIFAX, LALDX, LBNDX, NEFZX, THIFX & TSIAX
Hybrid Income Sleeve: APIUX, CAPAX, DIFAX, FISCX, FKINX, ISFAX, JNBAX, PGBAX & PMAIX
Growth & Income Area (Weighting Range 30% to 40% with neutral being 35%)
Global Equity Sleeve: CWGIX, DEQAX & EADIX
Global Hybrid Sleeve: CAIBX, TEQIX & TIBAX
Domestic Equity Sleeve: ANCFX, FDSAX, INUTX & SVAAX
Domestic Hybrid Sleeve: ABALX, AMECX, DDIAX, FBLAX, FRINX, HWIAX & LABFX
Growth Area (Weighting Range 10% to 20% with neutral weighting being 15%)
Global Sleeve: ANWPX, SMCWX & THOAX
Large/Mid Cap Sleeve: AGTHX, BWLAX & SPECX
Small/Mid Cap Sleeve: PCVAX, PMDAX & TSVAX
Specialty & Theme Sleeve: LPEFX, PGUAX & NEWFX
Spiff Sleeve: VADAX
Total Number of Mutual Fund Positions = 48

FYI: U.S. equities fell on Wednesday as investors assessed the geopolitical landscape. The dollar hit a session low after President Donald Trump told the Wall Street Journal he thought the currency was getting "too strong."
Regards,
Ted
Bloomberg:
https://www.bloomberg.com/news/articles/2017-04-11/asia-set-for-mixed-open-as-tension-spurs-haven-bid-markets-wrap
Reuters:
http://www.reuters.com/article/us-usa-stocks-idUSKBN17E1DI
MarketWatch:
http://www.marketwatch.com/story/us-stock-futures-stay-in-holding-pattern-as-geopolitical-risks-linger-2017-04-12/print
IBD:
http://www.investors.com/market-trend/stock-market-today/stocks-broadly-lower-this-type-of-airline-is-outperforming/
CNBC:
http://www.cnbc.com/2017/04/12/us-markets.html
AP:
http://hosted.ap.org/dynamic/stories/F/FINANCIAL_MARKETS_MARKETS_RIGHT_NOW?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT
WSJ Markets At A Glance:
http://markets.wsj.com/us
SPDRs Sector Tracker:
http://www.sectorspdr.com/sectorspdr/tools/sector-tracker
SPDRs Bloomberg Sector Performance Pie Chart:
https://www.bloomberg.com/markets/sectors
Current Futures: Negative
http://finviz.com/futures.ashx

Hi Guys,
Most financial wizards recommend that some portion of our portfolios should be invested in foreign markets. The obvious question is which markets? There is no obvious answer and it is likely that the answer morphs over time anyway.
I have always liked the checkerboard presentation of returns data over time as a nice statistics summary. If patterns exist, they always escape my interpretations. Here is a Link that presents returns for various countries in that checkerboard format:
https://novelinvestor.com/international-st
Here is a Link to a more recent 2017 detailed report on international market performance as compiled by Credit Suisse:
https://publications.credit-suisse.com/tasks/render/file/?fileID=B8FDD84D-A4CD-D983-12840F52F61BA0B4
Enjoy. I hope you find these references useful when making your investment decisions.
Best Regards

'Manager execution' is different here, right?
CAPE alone has been backtested to '02, fwiw:
http://investwithanedge.com/new-barclays-shiller-cape-sector-rotation-etn
... annualized return [['02-'12]] of +10.8% (adjusting for investor fees) with 19.6% standard deviation. For the same period, the S&P 500 Total Return Index gained +7.2% with a 21.2% standard deviation.

I think counterparty risk is reduced, not eliminated, because in a bear market or some sort of crisis you'd expect the fund was losing even if it wasn't as bad as the S&P. There is no counterparty risk in that case. Of course there's still a risk because the swaps have a time period associated with them so if you're winning and there's a sudden crisis then you could still lose some money. They can manage that risk to some degree but you'd hope they've thought about it and how they'd manage that risk.
I also don't think the leverage is typical leverage risk either. Normally the really big risk with leverage is that you end up with a bigger debt than you have assets. That isn't the case here except in a situation so extreme that the fund isn't able to liquidate bonds in an orderly way to pay losses on the swaps when they expire. Considering the bonds they have, especially a decent chunk of Treasuries, and the fact that their swaps are laddered, my assessment would be that the risk related to being levered is small, not zero, but not something that would concern me.
You're right there are costs to the swaps and the management fee, but the swaps are essentially paper bets as I understand them. That means you're not dealing with a bid-ask spread and you don't have any trading costs for the equity. Considering the impact trying to buy or sell $750 million of a sector fund at the end of a month I guess the savings in this regard aren't insignificant. In addition, if you tried to mimic this yourself, assuming you wouldn't be trading enough volume to affect the market, you would almost certainly incur higher costs than the fund to create the leverage and to trade the etfs, plus whatever small expense ratio the etfs charge anyway.
I think it mostly boils down to whether you believe in the CAPE approach to the equity side and whether you believe in Gundlach (and Sherman) to manage the bond side well. CAPE isn't known for forecasting short-term movements so I wouldn't count on the equity side always being as good as it has been but I wouldn't bet against Gundlach on the bond side.

>> other than the fact it has performed well.
What else is there, ultimately? Plus the method.
I just now looked at the best LCV at M* for 3y and 5y, and graphed IFUTX and TWEIX, their winners, against DSENX since inception (3.5y ago). Outperformance. Also for every other period I could graph, short and longer, it is no contest.
Yes, past performance etc. My question would be how it would do against its category.
I am not comparing it with CGMFX or WEMMX or FRIFX.
As for mimicking, yeah, I also have looked at many bondy ways to augment CAPE and thus far come up short.
So that's the love answer, for me.

What I like about DSENX is that its stock selection is based on mathematical model instead of human selection subject to emotions and other drawbacks. The model for CAPE index was back tested for at least 15 years and it shows very good results comparing to SP500.
If I could find another mutual fund or ETF based on math. model with similar consistency and outperformance of benchmark for at least 10 years I would be happy to jump in.

OK, so what you're saying is the portfolio is both leveraged, adding to volatility, and has counterparty risk via the swaps. Look at the holdings here: https://sec.gov/Archives/edgar/data/1480207/000119312517055343/d321548dnq.htm
So the counterparties responsible for the swaps tied to the CAPE index are Barclays Capital, BNP Paribas, and Bank of America. Anything goes wrong with them and there's a problem. Additionally the swaps cost between 0.43% to 0.47% of the swap's value to put on, adding to fees. So there is added risk and cost and I still don't think this would be that hard to replicate with a small options position to add a little bit of leverage. Now you could say the leverage isn't bad in the fund as it is bonds on top of stocks and those two asset classes aren't highly correlated normally. The only problem is there are circumstances when those asset classes are correlated such as in a rising interest rate or highly inflationary environment causing both bonds and stocks to fall. I would say that environment or a credit crisis where Barclays, BNP or Bank of America get into trouble could expose the added risks here.

I'm not really sure why everyone loves this fund so much other than the fact it has performed well. Maybe that's enough for those extrapolating into the future, but believing the past is prelude often doesn't end well. For instance the idea that by avoiding the pricier parts of the market you'll do better in a bear market is actually not always the case. It depends on what type of bear market you're in. Value funds fared very poorly in 2008's credit crisis but fared very well in 2000-2002's valuation driven bear market. I hardly see why this formulaic fund that buys ETFs automatically based on their CAPE ratios with a small momentum overlay is worth an 0.89% expense ratio. Other than past performance, what makes it so great to investors buying it today assuming that the past is gone and today is the first day of your investment life? Also, how hard would it be to mimic the formula yourself for less?

That is why it is good to hold a diversified portfolio with funds having different styles, and this style has been successful so far. To me this is a good fund as part of that diversified portfolio. DSEEX has an ER of 0.64% (better than the 0.89% ER you mentioned), only a $5000 minimum if held within an IRA. To me that is a very reasonable expense.

I'm not really sure why everyone loves this fund so much other than the fact it has performed well. Maybe that's enough for those extrapolating into the future, but believing the past is prelude often doesn't end well. For instance the idea that by avoiding the pricier parts of the market you'll do better in a bear market is actually not always the case. It depends on what type of bear market you're in. Value funds fared very poorly in 2008's credit crisis but fared very well in 2000-2002's valuation driven bear market. I hardly see why this formulaic fund that buys ETFs automatically based on their CAPE ratios with a small momentum overlay is worth an 0.89% expense ratio. Other than past performance, what makes it so great to investors buying it today assuming that the past is gone and today is the first day of your investment life? Also, how hard would it be to mimic the formula yourself for less?

Several people (like me) have repeatedly wondered about what can go wrong w/ DSE_X. This is hardly an answer, but today I observe that its and CAPE's decline is significantly greater than that of all of the LCV div etfs and selected LCV funds I follow: OUSA, NOBL, DVY, SCHD, TWEIX, PRBLX, etc. etc.
Otoh, its decline still was less (marginally) than SP500.
So while there remain good arguments to hold pure LCV div vehicles, anyone who follows the wide and common advice to have a high equity percentage in SP500 may be well-served by instead choosing CAPE or DSE_X.

Yes, pretty interesting given recent discussion of DSE_X; SDOG beat CAPE last year, but in this year CAPE has come back to slightly surpass.

Vangaurd has a nice interactive chart that illustrates the impact Expense Ratio (ER) fees have on "lost return".
By sliding the expected return control closer to the left (simulating a low return environment where CAPE is historically high) fees grab proportionally more of the return that the investor keeps.
I will also note that fees always have a negative impact on investor returns. What the chart fails to shown is a negative returns scenario and the additive effect ERs have on negative returns. Investors deal with negative risk while also absorbing the negative impact of fees during down markets. Mutual fund managers never have a losing year when their funds have negative years, the investor does. ER is paid regardless as to whether the investor subtract the fee from gains or adds the fee to losses.
https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-cost

>> Each of the etfs should get 12.5% and the bond fund should get 50%
? That would make it much more a balanced fund than I was arguing earlier or elsewhere. But the only balanced fund whose bonds goosed results rather than chiefly modulating them. (Still not fully persuaded given the tracking of CAPE with persistent slight but real outperformance.)

MikeM said "But all this talk about this "could" happen to the fund or the fund "could" be susceptible to that... I don't see where that should scare people away."
I agree. The goal wasn't to scare anyone away but rather to learn something about a fund I didn't understand very well previously and, because it's performance has been so good since inception, to figure out whether that's durable and/or what could derail it.
I don't think there's anything crazy about what either MikeM or davidrmoran are doing. As an approximation you can put the four sector etfs and a bond proxy into M*'s instant X-ray. You can use another Doubleline bond fund if you think one is reasonable or you can just use a Total Bond Market fund, which won't do a great job but I don't think its the most important part. Each of the etfs should get 12.5% and the bond fund should get 50% because that's effectively what he's doing, he's using the assets twice. Obviously the equity side is focused on the 4 sectors but everything else, from a statistical point of view, doesn't seem bad to me. The stock stats are a little high compared to the total S&P but I'd think that's what you'd expect. CAPE compares earnings to what you'd expect over the business cycle while M* just looks at the present.

@VintageFreak CAPE is also up today 0.26%. I believe it is because 1/4 portfolio is in technology.

I'm enjoying all the interesting facts and discussion on this fund, especially all the facts you have supplied @LLJB. You found information I couldn't find on my own. But all this talk about this "could" happen to the fund or the fund "could" be susceptible to that... I don't see where that should scare people away. That is a warning for any fund method. Bottom line is I bought into the fund at a fairly heavy percentage about 1 year ago, mostly my interest was intrigued by posts from @davidrmoran, and now my investment is up 23%. CAPE is a winning method if you believe in value investing IMHO. There is obviously some special management sauce that has made results even better than CAPE.
This fund is 15% of my self managed portfolio. I don't think that is any more risky then having 15% in the S&P 500 index or having 15% in "many" different large cap funds someone else might hold. I don't believe there is any value in 'manager diversification', especially in the domestic large cap field. Just my 2 cents.

These numbers prove 2 things. One is that the fund is capable of putting up some bad numbers. As wxman123 reminded us there's no such thing as a free lunch. The other is that timing is everything. It looks like that 173% downside capture is almost entirely explained by one month (Oct 2016) and if you had looked 2 months ago the 1 year downside capture might have been something more like 80% because the fund did a lot better than the S&P in Jan and Feb 2016 when the index was down both months.
You'd think if the CAPE approach to the equity portion of the strategy proves consistently better than the S&P, which it has so far, then people will attempt to arbitrage that advantage away. I'm not sure it's a completely easy thing to do but people would no doubt try and computers are more than powerful enough these days to manage the difficulty.

@MikeM - .Thanks for the feedback. You apparently own the fund and understand it better than I ever will as an outsider looking in. The strategy seems to be, first, value based and, secondly, momentum based (focusing on recent appreciation of value stocks or sectors). Nothing wrong with that. Just stating how I understand the approach to operate.
What concerns me a bit is the heavy reliance on derivatives. That's what led me first to use the term "black box" - which I later backtracked on. You are correct that the fund is quite different from MFLDX, which as I recall was a "go anywhere" fund. I'm pretty sure, however, that the latter also used derivatives.
While I have a pretty good sense of what a "derivative" is, I'd have a very hard time giving a succinct definition without citing Investopedia or some other source. Therin lies the problem I think. Derivative investing is highly complex - and you're pretty much at the mercy of the manager as far as successful execution. There's a lot of moving parts and things can go wrong.
Glad you've had good luck with this one.
-----
The Fund will seek to use derivatives, or a combination of derivatives and direct investments to provide a return that tracks closely the performance of the Index. The Fund will also invest in a portfolio of debt securities to seek to provide additional long-term total return. The Fund uses investment leverage in seeking to provide both the Index return and the return on a portfolio of debt securities ...
The Fund will normally use derivatives in an attempt to create an investment return approximating the Index return. For example, the Fund might enter into swap transactions or futures transactions designed to provide the Fund a return approximating the Index’s return. The transaction pricing of any swap transaction will reflect a number of factors, including the limited availability of the Index, that will cause the return on the swap transaction to underperform the Index. Please see “Index Risk — Note regarding Index- Based Swaps” in the Prospectus for more information. The Fund expects to use only a small percentage of its assets to attain the desired exposure to the Index because of the structure of the derivatives the Fund expects to use. As a result, use of those derivatives along with other investments will create investment leverage in the Fund’s portfolio. In certain cases, however, such derivatives might be unavailable or the pricing of those derivatives might be unfavorable; in those cases, the Fund might attempt to replicate the Index return by purchasing some or all of the securities comprising the Index at the time. If the Fund at any time invests directly in the securities comprising the Index, those assets will be unavailable for investment in debt instruments, and the Fund’s ability to pursue its investment strategy and achieve its investment objective may be limited.
http://www.doublelinefunds.com/wp-content/uploads/Shiller_Enhanced_CAPE_Sum_Pro.pdf