Index Huggers

Is your fund manager just an index hugger in disguise? (Cartoon from www.nicholsoncartoons.com.au )

Investing in most mutual funds is a waste of time as they rarely offer any benefit over low cost index funds. Sure there are some exceptions of managers willing to hold unconventional portfolios like CGM (CGMFX), Fairholme (FAIRX), and Hussman (HSGFX) – but most simply track an index with more fees.

To give an example, I looked at the 9114 funds Morningstar ranks as “all-diversified stock funds”. Of these funds, the average performance is around -12% YTD, and only about 50 have positive performance YTD. The top five are:

HRVIX	Heartland Value Plus		11.17
PARSX	Parnassus Small-Cap		9.96
FVALX	Forester Value		9.29
AARFX	Akros Absolute Return		7.81
HFTFX	Hennessy Focus 30		7.29

Of the 158 long short funds, only 14 are positive, with the top five being:

HSKSX	Highbridge Statistical Mkt Neutral Sel		7.99
DDMIX	DWS Disciplined Market Neutral Instl		6.20
HSGFX	Hussman Strategic Growth		5.01
MGAAX	Managers AMG FQ Global Alt.		3.98
PALIX	Palantir Fund		3.66

In a related note, if you had been following the simple TAA timing model from my paper, you would be up around 2% (gross of fees) through the end of July. Even a simple buy and hold would have flat performance YTD through July. . .