Tag Archives: etfs

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

Long/short equity mutual funds and ETFs posted average returns of -1.23% in December, making it the third time in four months that the average fund in the category failed to post positive returns. This compares to a return of -1.58% for the S&P 500 Index and -5.02% for the Russell 2000 Index. The three top-performing long/short equity funds had monthly gains ranging from 1.74% to 2.01%, while the worst performers suffered losses of at least 5.65%. Top Long/Short Performers in December The three best-performing long/short equity funds in December were: KZSIX led all long/short equity funds in December with one-month gains of 2.01%. The $160 million fund launched on August 3, 2015, and thus did not have one- or three-year returns available, but its three-month returns through December 31 stood at +3.40%, ranking in the top 26% of the category. GURAX, with $106 million in assets and an inception date of March 2014, was December’s second-best long/short equity fund, in terms of returns, as it gained 1.88% for the month. The fund’s 3.59% gains in 2015 ranked in the top 12% of the Morningstar long/short category. Finally, SSPLX’s 1.74% gains in December ranked third among long/short equity mutual funds. The $22 million fund, which launched in October 2014, returned +0.47% in 2015, ranking in the top 31% of Morningstar’s Long/Short Equity category. Click to enlarge Worst Long/Short Performers in December The three worst-performing long/short equity mutual funds in December were: CIAXX, which returned -7.33% in December, was the category’s worst performer for the month. The $5 million fund launched on October 28, 2010, and through the end of 2015, its three-year returns stood at an annualized -4.70%, giving it a 1.43 beta (relative to the S&P 500) and -23.87% alpha for the three-year period. Its three-year Sharpe ratio stood at -0.15, with a standard deviation of 19.28, compared to respective category averages of 0.68 and 7.92. SLSAX lost 6.01% in December, making it the month’s second-worst-performing long/short equity mutual fund. The $63 million fund launched in December 2013 and returned -14.24% in 2015, ranking in the bottom 5% of the category. And the $644 million FMLSX, which lost 5.65% in December, rounded out the category’s bottom-three performers for the month. It launched way back in 2003 and generated 10-year annualized returns of +3.85% through the end of 2015. Over the past three years, however, FMLSX has lost an annualized 0.89%, ranking in the bottom 8% of its category for that time, with a beta of 0.79 and -12.03% alpha. Its three-year Sharpe ratio and standard deviation stood at -0.04 and 10.41, respectively. Past performance does not necessarily predict future results. Jason Seagraves contributed to this article.

What I Do When The Market Tumbles

When stocks take a dive, investors call their financial advisors and ask them what they should do. I received a few of those calls this week. Most advisors respond with some version of “Don’t panic.” Here’s what I do when the market crashes: nothing. To be completely honest, I wasn’t aware that the market had fallen 8% so far in January until my wife told me late this week. I don’t watch business news – life is too short. She picked it up on CNN while she was watching election news. (I don’t follow that, either.) Here’s my theory. If you have such a high allocation to equities that market declines make you anxious, you own too much stock. Find the allocation at which severe bear market losses won’t keep you up at night. In the 2007-2009 bear market, the S&P 500 fell over 50%. My portfolio fell just 15% because I had a 40% equity allocation. As one of my favorite baristas, Mandy, would say, “It didn’t feel totally awesome.” On the other hand, I didn’t lose sleep. William Bernstein addressed this in a couple of his early books, including The Four Pillars of Investing (page 268). He suggests that the initial pass at the correct asset allocation for you be based on how much you can tolerate losing in a bear market. He provided the following table: I can tolerate losing this percent in a bear market Invest this much in stocks 35% 80% 30% 70% 25% 60% 20% 50% 15% 40% 10% 30% 5% 20% 0% 10% Every December I evaluate my finances and plan for the coming year. I calculate my desired asset allocation, which might not be the same as last year’s. If my current allocation is within an absolute 5% or so of my desired allocation, I do nothing. Otherwise, I may trade a few funds or ETFs to implement my new allocation. In reality, this rarely happens because my allocation doesn’t often stray very far. Because I am willing to lose 15% in a severe bear market, I don’t labor over my portfolio value daily. I probably check it four times a year, at most. I retired to enjoy the remainder of my life, not to fret over the stock market. Here’s some advice from other advisors I trust. Wade Pfau suggests reading this piece in the New York Times entitled, ” 6 Tips for Investors When the Stock Market Tumbles. ” It’s a good one. Dana Anspach suggests that if you feel that you must do something, instead of selling stocks, enroll in her free online class on retirement – another great idea. Joe Tomlinson and I provided suggestions in Robert Powell’s USA Today column, ” Advice for investors during crazy stock market volatility .” If you’re retired or plan to be soon, set your asset allocation to a level of equities that you can tolerate. By definition, that means you won’t feel the need to do anything at all when stocks tumble. For young people still accumulating savings for retirement, invest most of your portfolio in stocks and don’t you do anything, either. In fact, do less than nothing. Time will fix this for you. As I recall, the 22% loss on a single day on Black Monday in 1987 didn’t feel totally awesome, either, but now it is barely a blip on the history of the S&P 500. So, here’s my advice: pick an allocation you can stomach and ignore the noise. If you owned too much equity this time, gradually adjust it downward. You’ll know you’re at the right allocation when the market takes a dive and you don’t feel a need to call me. Oh, and don’t panic.

Can Grain ETFs Sustain The Recent Rally?

Taking the market by surprise, grain prices and the related investments popped lately. This is perhaps the sole good news in the investing world to start 2016 as the broader market has seen choppy trading so far. And as far as commodities are concerned, nobody knows when and where their prolonged rout will end. Lower estimates for U.S. crops showered these unexpected gains on grains. Lately, USDA reduced its numbers for the 2015 corn and soybean harvests and sharply cut winter wheat planted acreage to 36.61 million acres, which was “the smallest winter crop in six years.” The figure exceeded analysts’ expectation of a decline of 141,000 acres. Per USDA, corn harvest is presently at 13.6 billion bushels, lower than USDA’s December reading of 13.654 billion. The soybean produce was recorded at 3.93 billion while USDA’s latest reading was similar to the 2014 levels. While many agricultural commodities advanced, wheat prices soared the most in two months. As a result, the Teucrium Wheat ETF (NYSEARCA: WEAT ) , the iPath DJ-UBS Grains Total Return Sub-Index ETN (NYSEARCA: JJG ) , the Teucrium Soybean Fund (NYSEARCA: SOYB ) and the Teucrium Corn ETF (NYSEARCA: CORN ) added about 2.1%, 1.8%, 1.4% and 1%, respectively, on January 12 (read: Invest in America with These 4 ETFs ). Can the Positive Momentum Sustain? Per Bloomberg, while U.S. output may moderate, global supplies of wheat remain ample thanks to solid output in Russia, Pakistan and the European Union. On the other hand, the demand scenario is as sluggish as it has been in recent times. Global growth worries mainly in most of the developed economies and in some emerging economies too resulted in softer demand for food. USDA also pointed to this issue with “a small reduction in domestic usage and a cut to exports.” USDA lowered the export numbers for corn and soybean to 1.7 billion bushels from its previous 1.75 billion and to 1.69 billion from 1.715 billion, respectively. Still, there are a few agro-based products which could deliver decent gains to investors despite the broad-based gloom. Below we highlight those products in detail (read: 3 Commodity ETFs Defying Weakness in 2015 ). iPath Dow Jones-UBS Sugar Total Return Sub-Index ETN (NYSEARCA: SGG ) The sugar prices are expected to remain steady though most of the other commodities are finding the going tough. This is because; supply glut is an easing issue in the global market due to adverse weather. SGG tracks the Dow Jones-UBS Sugar Subindex Total Return Index, which provides returns that are in an investment in the futures contracts on the commodity of sugar. The note has garnered nearly $53.2 million in assets. It charges 75 bps in annual fees. The note was up 1.1% in the last five days (as of January 13, 2016). iPath Dow Jones-UBS Cotton Total Return Sub-Index ETN (BAL Notably, cotton price is also showing hopes on higher purchase from the spinners and exporters. Also, in India, a key grower of cotton, the central government’s move to intervene in the pricing of cotton might help in shoring up the commodity. The product has amassed about $17 million in assets and charges 75 bps in fees. BAL gained 1% in the last five days (as of January 13, 2015). iPath Dow Jones-UBS Softs Total Return Sub-Index ETN (NYSEARCA: JJS ) The note looks to provide the returns that are available through an investment in the futures contracts on the softs sector of the commodity world. Components currently include sugar, coffee, and cotton. This $2.6-million ETF charges 75 bps in fees. Though the product lost 2% in the last five days, it added about 1.5% on January 13. Link to the original article on Zacks.com