Author Archives: Scalper1

Long/Short Equity Funds: The Best And Worst Of November

After posting losses in September and gains in October, Morningstar’s long/short equity mutual fund category was flat for the month of November – but this doesn’t mean there weren’t standout funds. Indeed, one of the worst performers from October was able to bounce back into the top three for November. In this review of the category, we look not only at the one-month returns of the month’s best and worst funds, but also the composition of their three-year returns in terms of alpha and beta, as well as their three-year Sharpe ratios and standard deviations. A quick refresher: Beta refers to the risk level of a security relative to the market. A beta of 1.0 implies the same risk level as the market, while a beta of more than 1.0 means the security (or fund in this case) is riskier than the market. A beta of less than 1.0 implies a risk less than the market. Alpha is the amount of performance in excess of a security’s beta adjusted benchmark. Sharpe ratio is a measure of return (above the risk free rate) per unit of risk – the higher, the better. (click to enlarge) Top Performers in November The three best-performing long/short equity mutual funds in November were: For the second straight month, a Catalyst fund topped the list. But while October saw the Catalyst Hedged Insider Buying Fund (MUTF: STVIX ) lead all long/short equity mutual funds, in November it was the Catalyst Insider Long/Short Fund that led the pack at +7.21%. For the first eleven months of the year, CIAAX returned an even 2%, and its three-year return through November 30 stood at an annualized 4.42%. The fund had a negative alpha (-0.60) for the three-year period, with a three-year beta of 0.39, and a Sharpe ratio of 0.35. The Burnham Financial Long/Short Fund was November’s second-best-performing long/short equity mutual fund, with returns of +5.53%. While its gains lagged those of the Catalyst Insider fund, BURFX’s longer-term numbers are much more appealing: Its three-year return of 20.31%, and alpha of 11.98%, was accomplished with a relatively low level of volatility (9.17% standard deviation) and a beta of just less than half the market (0.45). The fund’s three-year Sharpe ratio of 2.07 is outstanding. Finally, the Turner Medical Sciences Long/Short Fund was the third-best long/short equity mutual fund to own in November, boasting returns of +5.36%. This was a turnaround for the Turner fund, which was the third-worst performer in October, with losses of 4.99%. Over the past three years, TMSCX has returned an annualized 14.61% with a beta of just 0.19. This has resulted in the fund’s alpha of 11.94% ranking just 4 basis points less than the Burnham fund above, despite a much lower 3-year annualized return. However, with it’s higher standard deviation over the period, the fund’s Sharpe ratio stood came it 0.93 for the three-year period, a bit less than half the Burnham fund’s Sharpe ratio. (click to enlarge) Worst Performers in November The three worst-performing long/short equity mutual funds in November were: The Philadelphia Investment Partners New Generation Fund, the month’s worst performer, lost more than the month’s top-performer gained, with a one-month return of -7.55%. Its dismal three-year returns of -5.45% can be broken down into a 0.80 beta and -17.54 alpha, resulting in a Sharpe ratio of -0.49 for the three years ending November 30. The Clinton Long Short Equity Fund hasn’t been around long enough to have three-year return data, but its one-month losses of 4.84% in November made it the second-worst long/short equity mutual fund to own that month. For the first eleven months of 2015, WKCIX lost 13.49% of its value. The Whitebox Tactical Opportunities Fund ( WBMIX ) was November’s third-worst long/short equity fund, with returns of -3.58%. For the first eleven months of 2015, WBMIX generated losses of 19.50%, and its three-year returns of -3.17% through November 30. The fund has a low 3-year beta of 0.13 and a -4.90 alpha. The fund’s three-year Sharpe ratio stood at -0.33 as of November 30. (click to enlarge) October’s Best and Worst: Follow-Up The Catalyst Hedged Insider Buying ( STVIX ), Tealeaf Long/Short Deep Value (MUTF: LEFIX ), and Giralda Manager (MUTF: GDAMX ) funds were October’s top three long/short equity mutual funds, with respective one-month returns of 10.71%, 9.05%, and 8.73%. In November, STVIX returned a category-matching 0.00%, while LEFIX and GDAMX posted respective one-month returns of 3.02% and 0.15%. October’s worst performers were the CMG Tactical Futures Strategy Fund (MUTF: SCOIX ) and the Highland Long/Short Healthcare Fund (MUTF: HHCAX ), which lost 6.74% and 5.54%. In November, those funds continued their losing ways with returns of -2.02% and -1.55%, respectively. Past Performance does not necessarily predict future results.

The Dynamics Of Liquidity And Investing

I’ve been getting questions recently about liquidity , specifically in the context of exchange traded funds ( ETFs ). Liquidity is a hot topic in financial markets these days, so let’s spend a little time going over it. First, we’ll explore what we mean by “liquidity” and then we’ll explain what it means when it comes to ETFs. Defining liquidity When I think about liquidity, I think about a transaction: I am able to buy or sell something at a known price. The more liquid an investment, the easier it is to buy and sell without affecting the asset’s price. More fully, liquidity has three main components: price, time and size. If an asset is liquid, I can trade it quickly, and I can trade a large amount of it, without moving its price. In reality, most investments involve trade-offs between these three components. Want to trade quickly? You may not be able to trade a large amount, or you may impact the price you are going to receive. Want to trade a large amount? Do it slowly, or be prepared to impact prices. A general rule of thumb for liquidity for most investments is that you can get two of the three attributes, but not all three at once. If we consider liquid assets, a large cap stock is a good example. Unless you are trading a significant number of shares, you can generally trade fairly quickly at a price that is close to what you see on the exchange. A home, on the other hand, is relatively illiquid; you can get an estimate on its price, but until a buyer signs on the dotted line and you have a check in hand, it’s unclear what you’ll actually get when selling your home. And it will generally take you a while to sell your home, no matter what its size. Liquidity and ETFs When it comes to a security like an ETF, I can see that it’s trading at a certain price, and I can generally buy or sell that ETF at a price that’s pretty close to the quoted price. I can generally trade fairly quickly, as long as my trade is not large compared to the security’s volume. A large ETF trade is in some ways similar to a large equity trade; I need to trade over time or risk impacting the price. Let’s take it a step further and look at bond ETFs. If you want to go out and buy a bond, you can’t just buy it on the open market via an exchange. Instead you would buy it over the counter, in a negotiated transaction with a broker. The price you would trade at is often unclear, and it can be difficult to trade a large amount, or trade quickly. In fact, some investors may find that individual bonds don’t have any of the three aforementioned features of liquidity. With a bond ETF, which is a basket of bonds traded on an exchange, you have much more price transparency. You can actually see the price at which a bond ETF is trading and have a sense of the price of a trade and how many shares might be available to trade at that price. As the bond ETF trades on an exchange, you can generally trade it with the same speed as an individual stock. The liquidity rule of thumb still applies to bond ETFs; it can be difficult to trade in large size, quickly and without impacting price, but overall, exchange trading liquidity can be greater than liquidity in underlying markets . And that is an improvement that all investors can benefit from. This post originally appeared on the BlackRock Blog.

Facebook Tests Business Search Page Similar To Yelp

Facebook (FB) is quietly testing a new Web page where users can locate local business services, posing a threat to similar concepts at Yelp (YELP) and Angie’s List (ANGI). Facebook has not announced the new feature, but there is a Web link where users can “find local businesses with the best Facebook reviews and ratings.” Featured listings on the searchable directory of professional service providers include plumbers, pet services, personal care,