MFO Ratings Updated Through July 2020 … New Bull Market

All fund risk and return metrics, ratings, and analytics reflecting performance through July 2020 were uploaded to MFO Premium on Tuesday, 4 August.


There’s a lot worth pointing out this month …




Given the severity of March’s drawdown and the impact of CV-19 to world health and global economies, I find it remarkable that markets have held up. As evidence, here’s year-to-date (YTD) return of five broad Vanguard “reference funds,” which David often uses when profiling funds … available via one of the Pre-Set Screens in MultiSearch:



The S&P 500 has recovered all of its March drawdown and is again at an all-time high, based on month ending values, marking the sixth bull market since 1968. It took only four months. By contrast, it took 18 months to recover from the sudden market retraction of October 1987.


But a closer look, using another Pre-Set Screen of the 11 Sector ETFs, shows the recovery is hardly broad-based. The rocketing technology sector, which now dominates market indices, helps explain the apparent resilience, while energy, financials, real estate, industrials, and transportation remain largely depressed from recent highs.



What a contrast to history! Almost 18 years ago this month, XLK had drawn down a heart stopping 79%. (Just set Display Period to Full Cycle 4 and see for yourself.) Global wars tend to shift economic power and a result of CV-19 may be no different. Now, tech is the new super power.

Robert Shiller’s book “Irrational Exuberance” was published about 20 years ago. At the time he questioned the rationale behind historically high market valuations … he found none satisfactory. And since its publication, we’ve experienced three bear markets. Given current valuations, I suspect his search continues today.

Data from one last Pre-Set Screen, new this month, of Morningstar’s Barometer ETFs, reveals the continued disparity between growth versus value funds and large cap versus small cap funds. Calls that the “value premium is really dead this time” are deafening, though not without some holding-out hope, as described in David’s “Value Investors Unite.”




My colleague Ed Studzinski recently asked “… has the time for quants passed?” Quants is short for quantitative analysts, who rely on math, statistics, historical databases, algorithms and computers to exploit opportunities in markets. AQR and DFA are examples of quant shops that have struggled, if not fallen short of expectations. The MFO Fund Family Scorecard shows only 55% of DFA’s 110 funds have beaten its peers since inception, while less than 1/3rd have done so with AQR’s 37 funds.

DFA made news recently because it’s launching a series of ETFs, making its strategies available directly to the public. You may recall that historically its funds are available only through advisers that attend DFA training.

Sam Lee, former staff writer for Morningstar and now head of SVRN Asset Management, remains unimpressed:


“DFA’s core product is a commodity. The only thing that distinguishes them from other fund companies is they run an extremely powerful marketing operation that leverages Fama and French’s reputations to make advisers think it’s a privilege to have access to DFA funds. Once they open the door to the public with ETFs, their unique selling proposition is gone.”


Bloomberg’s Eric Balchunas and Alpha Architect’s Ryan Kirlin argue that DFA likely changed its strategy after watching the success of American Century Avantis ETFs, which have attracted $1.7B AUM in just 10 months. Avantis is run by former DFA officers, including Eduardo Repetto, and charge Vanguard-like fees. And how is the Avantis fund family doing? So far, nine of ten are under-performing their category peers.


Wisdom Tree


I’ve written previously of these offerings in Wisdom Tree Fund Family. Ed recently admitted he’s been “intrigued by the Wisdom Tree ETFs that are dedicated to Japanese investments, with a bias towards the ones also investing in small cap issues.”


This month, Wisdom Tree became a “Top Fund Family” on MFO’s Scorecard, joining the ranks of families like Vanguard. Seven out of 10 of its 67 (surviving) funds have beaten their peers since inception, which is the same percentage that Vanguard enjoys. Its AUM is now about $32B. Vanguard? $6.3T. Can you believe that?


New Features


New features in MultiSearch this month include:


  • ESG Scores. ESG stands for environmental, social and governance. Refinitiv now provides ESG scores for over 6000 funds. The searchable scores range from “D-” (lowest) to “A+” (highest). Their complete methodology can be found here.
  • New Metrics. ETF investors will now find several additional metrics, including “smart beta” factor (eg., value, momentum), management approach (active/passive), and security lending. Leverage ratio has also been added, which is helpful for CEF investors.


As always, if you see anything amiss or have suggestions for improvement, let us know and we will respond soonest.

Please enjoy the latest data and new site features.