Nine New Evaluation Periods

Nine new evaluation (or display) periods have been added to the main MultiSearch tool, bringing total available now to 57. The new periods all key on events since the Great Financial Crisis, ever more commonly referred to as “GFC.” The same nine have also been added to the Portfolios tool.

The new periods can be found in the Display selection field. They are:

  • Quantitative Easing (QE) 1 – 200812 To 201003
  • Quantitative Easing (QE) 3 – 201206 To 201312
  • Normalization – 201601 To 201812
  • Zero Interest Rate Policy (ZIPR) – 200812 To 201512
  • Obama Bull – 200903 To 201512
  • Trump Bump – 201601 To 201912
  • Dec ’18 Selloff – 201812 To 201812
  • CV-19 Bear – 202001 To 202003
  • QE Infinity – 202004 To 202004

The first two actually coincide with periods of increasing bond yield, which is rather counter-intuitive, since the Fed was actually buying bonds and one would expect yields to go down. But, they actually rose modestly. The yield on the 10-year T-note climbed from about 1.9 to 3.3% during the period known as QE 1 and from 1.1 to 2.3% during QE 3.

The only other time since GFC the 10-year yield approached 3% was during the period of Normalization started under Janet Yellen and continued by Jay Powell. From January 2016 to December 2018, the Fed Discount Rate rose from 0.3 to 2.4%. The 10-year yield peaked at 3.1% toward the end of that period and has not returned. Since the CV-19 crisis, it now sits below 1%, which is unprecedented.

The last time the 10-year yielded below 3% for an extended period of time was from 1934, during the Great Depression, through mid-late 1950s. More than 20 years!

Bond funds have enjoyed a bond bull market for nearly 40 years, seeing interest rates generally fall from mid-teens in early 1980’s to below 1% today. So, having three select periods that focus on periods of at least modest rate yield increase may help investors assess how their bond funds will hold-up when rates climb again … if ever.

The Zero Interest Rate Policy (ZIRP) period lasted through President Obama’s entire term, including the bull market the began in March of 2009 and lasted through December 2020. The two new periods called Obama Bull and Trump Bump can be used to evaluate fund behavior during an earlier part and then later part of the existing Up Cycle 6 evaluation period (aka post-GFC 11-year bull run).

The shorter Trump Bump period may be especially helpful screening for how younger funds behave during a bull market.

The period called Dec ’18 Selloff requires no explanation.

Finally, and again perhaps a bit presumptive, there is the 3 month CV-19 Bear and the period beginning April 2020 (first full month), called QE Infinity. The latter represents a period of extraordinary monetary measures by the Fed to help mitigate financial impact of CV-19 crisis.

All risk and return metrics and ratings are available across these new periods, as applicable.

MFO Ratings Updated Through April 2020

All fund risk and return metrics, ratings, and analytics have been uploaded to MFO Premium, reflecting performance through April 2020, which was the first positive month for S&P 500 this year.

Considering the shock to global economies caused by CV-19, year-to-date returns don’t seem so bad … S&P 500 off just 9.3% (thank you FAAMG). World indices off 15-20%. NASDAQ is just about even. Aggregate US bonds posting a comforting +5% (thank you Jay Powell).

You will find several new features in MultiSearch, including breakouts of Bond Credit & Duration, Yearly Return Ratings, Current Month Inflow/Outflow estimates, Price/NAV Premiums and Discounts (essential when investing in ETFs and CEFs), and ability to screen for Alpha, Tracking Error and Information Ratio. All as described in this month’s commentary “Back To Basics.”

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.

Damage Assessment: MFO Ratings Updated Through March 2020

All fund risk and return metrics, ratings, and analytics were uploaded yesterday to MFO Premium, reflecting performance through March 2020.

It was a bad month. The pandemic’s economic impact is reminiscent of the financial crisis, only transpiring much faster. The world was unprepared. Hearing about “CV-19” at first seemed remote and contained, like the term “sub-prime mortgages.” Then, all at once, it was everywhere and raging.

March ended with the S&P 500 down 20% year-to-date (19.7% actually), after bouncing back 20% in some of the most rapid and largest swings since the Great Depression, driven by panic and fear of missing out. The broader market was down more than 30%. We folded with “A Presumptive Bear Ends an 11-Year Bull Run.”

Looking through the damage with MultiSearch set to “Year-To-Date,” you’ll find:

  • Categories. US Treasuries were one of the few safe places to be; otherwise, average Small Cap Value funds are down 38%, Financial Services -34%, International Small/Mid-Cap -31%, and Emerging Markets -26%.

  • Families. All four FMI equity funds down 23-30%. All eight Grandeur Peak funds down 20-30%. All Tweedy Brown funds down 21-26%. Ditto for thirteen funds in Joel Greenblatt’s Gotham family. Ditto at AQR, half their funds. All three Dodge & Cox equity funds down 30%. Ditto high-flying DoubleLine/Shiller CAPE funds.

  • High Yield. All eight PIMCO fixed-income CEFs are down 20-28%. Energy CEFs? Down 58% on average. Several REIT ETFs are off 30-60%.

  • Multi-Sector. The MultiSector Income category, which became popular in the zero interest period after the financial crisis, is off just 9%, but includes illiquidity-driven causalities Braddock Multi-Strategy (BDKNX) down 51% and AlphaCentric Income (IOFIX) down 38%. The latter,  which rarely drew down 1% or more, lost five years of gain in one week.

  • What Worked? PIMCO’s Total Return (PTTRX). Dodge & Cox Income (DODIX). David Sherman’s RiverPark Short Term High Yield (RPHIX) and RiverPark’s Long Short Opportunity (RLSIX). A 50/50 portfolio of SPY and TLT. MultiSearch can help you find others.

Despite the chaos, equity markets seemed to work pretty well. Perhaps scarier was the pricing dislocations in bond markets, even within Investment Grade, until the Fed intervened. Part of the explanation is that bonds don’t trade as efficiently as equities; nonetheless, a lot of junk bond and leveraged funds appeared to end up in “illiquidity hell.”

I liken “illiquidity hell” to the following: A beach-front house is worth (on paper) its last appraisal. And, if you sell in normal times, you’ll likely receive that price. But if the National Weather Service suddenly reports that tsunami conditions in the region are increasing, everything changes. It is the proverbial perfect storm.

Given the number of credit downgrades anticipated, fixed income funds holding lots of BBB will likely struggle.

It does make one wonder: If you have to watch your fund’s performance daily, is it really a sound investment?

“What’s next?,” David writes in his commentary this month, “Three magic words: No. one. knows.” It’s a good issue, with good advice, and well worth the read, especially when used in conjunction with the latest search tools and data on MFO Premium.

MFO Ratings Updated Through February 2020

All fund risk and return metrics, ratings, and analytics have been uploaded to MFO Premium, reflecting performance through February 2020.

February marked the 11th full year of the current bull market, which began March 2009. But that was little conciliation to equity investors who suffered one of worst months in recent history with the S&P 500 retracting 8.2%. The 11 sector ETFs were down between 7% (health) and 14% (energy). Safe haven was found only in bond funds, especially long duration, and some alternative strategy funds.

Looking back ten decades, monthly drops this large occur once every couple years. Even during the current bull run, there have been a dozen times when the market retracted 5% or more. It dropped 9% in December 2018 and 8% in May 2010.

Monthly performance is best reviewed in the main MultiSearch tool, selecting the “1 Month” Display Period and the “Alt Summary” Group. You can do so in combination with your WatchLists and dozens of screening criteria, like Fund Family and Great Owls.

Please enjoy (if possible) the latest data.

New Decade Begins: MFO Ratings Updated – January 2020

All fund risk and return metrics, ratings, and analytics were uploaded yesterday morning to MFO Premium, reflecting performance through January 2020.

While the decade for equity funds began flat or mixed, bonds were up, especially long-term (e.g., TLT +7.0%). Dodge & Cox Income (DODIX), a long-time MFO Great Owl, returned 1.6% in Januray. It’s delivered nearly 10% this past year and regularly rewards with a 3% dividend.

The MultiSearch screener sports several new features, as described in this month’s commentary “Looking Under The Hood at Holdings.” Here’s a recap:

  • Holdings Info. Top-ten holdings for equities and fixed-income securities, countries, and main industry sectors … thanks to our expanded Lipper (now Refinitiv) Global Data Feed. You can now easily find which of the nearly 10,000 actively managed funds hold a large position in say Berkshire Hathaway.
     
  • Portfolio Info. Several new purchase and portfolio metrics, at the request of subscribers, including growth, capital gains, and quality. There are now more than two dozen such metrics, nearly all searchable.
     
  • Multi-Year Ratings. Users can now set rating thresholds across multiple years, making it convenient to apply the search criteria discussed in last month’s post: “MFO Premium’s Best Fund of the Decade.”
     
  • Ferguson Ratings. Brad Ferguson’s out-performance and consistency metrics now have ratings, making it easy to search for top-quintile performers. Combine these with other unique metrics, like rolling average and MFO (Martin) Rating, to establish compelling candidate lists across the risk spectrum for your clients.

As always, if you see anything amiss or have suggestions for improvement, let me know.

Please enjoy the latest data and site features.

MFO Premium Site Webinar – Wednesday, 15 January 2020

Thank you all for participating in yesterday’s webinar.

Here is link to chart deck.

Here is link to video recording.

———————————————

This coming Wednesday, January 15th, we will host a webinar discussing latest features of the MFO Premium search tool site. Topics covered will include the new home page and user portal, the MultiSearch Portfolios tool, updated metrics for risk adverse investors, expense rating, expanded category averages, revised “Include Averages and Benchmarks” options, and finally allocation indices across ten decades.

There will be two sessions, one at 11 am Pacific time (2pm Eastern) and one at 2pm Pacific time (5pm Eastern). The webinar will be enabled by Zoom. Please use the following links Continue reading “MFO Premium Site Webinar – Wednesday, 15 January 2020”

MFO Premium’s Best Funds of the Decade

Yesterday, all fund risk and return metrics, ratings, and analytics were uploaded to MFO Premium, reflecting performance through December 2019 … end of the decade.

The decade brought us:

  • Low Volatility. By several measures, it was the lowest in decades, as described in Historically Low Volatility. In 2017, there was a stretch of 12 consecutive months with no drawdown in the S&P 500. While there were a few “sightings,” there were no bear markets.
  • Low Interest Rates. The 3-month T-Bill, one measure of “risk-free” investment, returned just 0.6% annualized … the lowest level since the 1930’s and 1940’s.
  • Longer Bull. The current bull market, which started in March of 2009, is now 130 months old. It has returned 450%, or 17% annualized. For the decade, 13.5% annualized returns versus -0.9% in the previous, which included two bear markets each inflicting 50% drawdown.

To mark the decade’s end, we’re bringing attention to a short list of funds that delivered exceptional returns while protecting downside, which has been at the heart of MFO’s Rating System since 2013.

We’ll call them MFO Premium’s Best Funds of the Decade:

  • Alternative: Metropolitan West Strategic Income M (MWSTX) – Team Managed
  • Bond: PIMCO Income Inst (PIMIX) – Daniel Ivascyn
  • Global Equity: Steward Global Equity Income Inst (SGISX) – John Wolf
  • International Equity: Hennessy Japan Inst (HJPIX) – Masakazu Takeda
  • Mixed Asset: Vanguard Wellesley Income Inv (VWINX) – W. Michael Reckmeyer III
  • Municipal Bond: Wells Fargo CoreBuilder Shares – Series M (WFCMX) – Team Managed
  • U.S. Equity: Akre Focus Retail (AKREX) – Charles Akre Jr.

There are just seven; one for each of the major subtypes. Each delivered the highest risk adjusted return based on Martin in their categories. Each delivered top quintile absolute return and averaged top quintile absolute return across 85 rolling 3-year periods. Each bested the annualized return on the 10-year T-Bill at the start of the decade, which was 3.7%. Here are their risk and return metrics, sorted by MFO Risk (volatility) then annualized return:

If Morningstar still selects Manager of the Decade, I suspect Dan Ivascyn and Charles Akre will be among the top contenders.

Other thoughts on the decade: Vanguard dominated and PIMCO stumbled, ETFs exploded, robo-advisors emerged as did FinTweet, numerous money managers launched podcasts, and we almost had a fiduciary rule. Perhaps most significantly, there’s been a race to the bottom on industry fees.

At decade’s end, there remain more than 12,200 funds, including 2,100 ETFs. It’s a lot to choose from. The primary goal of the premium site is to help you filter down … enabling you to construct satisfactory investment portfolios, individually and for your clients.

On January 15, we’ll be conducting another webinar to highlight the site’s latest features.

Once again, Happy New Year!

Data Across Ten Decades

All fund risk and return metrics, ratings, and analytics have been uploaded to MFO Premium, reflecting performance through November 2019.

We went live the morning of 10 December, which is typically the longest it takes. The first Saturday of the month, when Lipper (Refinitiv) drops the monthly data, occurred on the 7th.

The year-end data and attendant ratings should post the weekend of 4 January. It will mark the 60th year of Refinitiv’s database. How many funds have been around at least 60 years? Just 65. That’s right. Best absolute performer? T Rowe Price Small-Cap Stock (OTCFX) at 12.6% … per year! Or, how to turn $1,000 into $1,200,000.

The more interesting news is what went live on 24 December, including:

  • Data Across Ten Decades. MultiSearch now incorporates the Goyal public database, which has been used in several pieces on historical equity and bond performance, including How Bad Can It Get? The database reflects monthly S&P500 equity, long US Treasuries, and risk-free measures back to January 1926, before the Great Depression.
  • Allocation Indices. Pre-set screens are now available for four different allocation indices, which produce risk and return metrics for equity/bond combinations in 10% increments: 1) S&P500 with US Aggregate Bond, 2) S&P500 with Long US Gov Bonds (back to 1926), 3) Global Equity with Global Bond, and finally 4) Global xUS Equity with Global xUS Bond.
  • Expanded Rolling Averages. How many 50-year rolling periods date back to 1926? Precisely 528. Depending on which 50-year interval you were invested in the S&P500 (as if you could choose this random period), you earned anywhere from 7.4% per year to 13.9% … a huge difference. It’s fascinating! Just scroll-across to the rolling averages section (or select the Group) on the MultiSearch results page.

Finally, yesterday we finished adding Transaction History to the user account page. Please give it a look when you get the chance and let me know if you see anything amiss … yes, a very kind subscriber recently pointed out we had over credited his account by 2 years … thank you! (Please note that the dollar amount tracked is the portion of your donation that was applied for access to the premium site.)

Please enjoy the latest data and site features.

And, Happy New Year to all!

Revised MultiSearch “Include” Options

Nearly all MFO fund ratings are relative to category peers. So, having an easy way to compare fund risk and return metrics against peer or category average performance is a helpful feature, which is precisely what the “Include Average” option enables in MultiSearch.

When MultiSearch users select “Include Averages,” along with say Dodge & Cox fund family, they will now get risk and return metrics on 12 results across the evaluation period selected: the six D&C funds and the six corresponding Category averages. Similarly, selecting “Include Benchmarks” will result in the so-called Lipper Global (LG) Benchmarks. Yes, selecting both will yield 18 results! These new options also work with Watchlists.

Here’s a simple example of “Include Averages” with two D&C funds (DODIX and DODGX), sorted by Category:


And here’s a simple example of “Include Benchmarks” with the same two D&C funds, sorted by LG Benchmark:


LG Benchmarks are assigned by Lipper to all 12,000 plus funds in the Lipper Global Data Feed and are always Lipper namesake, similar to Morningstar’s namesake benchmarks. There are 126 such LG Benchmarks versus the 175 Categories.

The MultiSearch results table includes two other benchmarks: a Peer Benchmark, also assigned by Lipper, and a Fund Manager’s Benchmark.

The Peer Benchmarks are somewhat broader than the LG Benchmarks numbering 107, but they are more commonly recognized indices by Russell, S&P, Bloomberg, MSCI, Dow Jones, etc.

The Fund Manager Benchmarks number over 1000 and are not always available to Lipper. Also, if a fund manager uses multiple benchmarks, Lipper provides only the primary, which can be awkward with say balanced funds.

While all three benchmarks are presented in the MultiSearch results table, the Analysis tool and the “Include Benchmarks” option currently use only the LG Benchmarks.

Certain firms will only consider funds that track to recognized benchmarks. So, it may be useful to expand the MultiSearch benchmark tools to reflect both the Peer Benchmark and Fund Manager Benchmark. Would welcome any feedback from users that find comparisons with such benchmarks useful.

PS. A David suggestion … JIC, here’s screenshot of MultiSearch page showing the “Include” options, under Basic Info, which you can expand and contract by clicking the down/up gray arrow next to Basic Info.

MFO Ratings Updated Through October 2019

All fund risk and return metrics, ratings, and analytics have been uploaded to MFO Premium, reflecting performance through October 2019.

We went live Tuesday night. Ratings were updated on 12,254 funds holding about $25 trillion in assets under management. Can you believe that?

In addition to the ratings, more updates worth mentioning:

  • Fund Fee Rating. MultiSearch now allows users to screen by expense ratio (ER) rating, which groups fund expense ratios by quintile for each category. Our data shows that if you’re holding a fund with an ER Rating of 5 (highest and worst), you’d better have a good reason why.
     
  • Category Averages. MultiSearch now provides averages of all metrics, as applicable, by category. Just set Asset Universe to “Averages” or select “Include Averages” in your screening criteria.
     
  • Subscription Price. We increased the price (donation level) of an annual subscription to MFO Premium from $100 to $120 for individuals. The increase covers corresponding price increases in our Lipper (now Refinitiv) datafeed and a new service sales tax being imposed on Lipper by Iowa, where our non-profit is based.
     

We’ve received considerable praise this past year (we share some in Premium Site Updates), so we trust you’ll find that the price remains a bargain. And thanks to your continued feedback and recommendations, the site has evolved considerably since its inception four years ago.

A couple quick but extraordinary observations in this month’s data:

  • Fund companies rarely have numerous funds on the Honor Roll, but none on the Three Alarm list. This month Vanguard, which seems to invariably accomplish this feat, has 25 funds on Honor Roll. Wasatch has 5. Neither have funds sounding the alarm. Both are Top Fund Families.
     
  • American Funds has 8 funds on the Three Alarm list and none on the Honor Roll.


As always, if you see anything amiss, let us know and we will respond soonest.

Please enjoy the latest data and site features.