Portfolio Review - BAM Portfolio

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
riplip
Posts: 10
Joined: Tue Jul 15, 2014 3:44 pm

Portfolio Review - BAM Portfolio

Post by riplip » Thu Aug 29, 2019 11:12 am

As referenced in a previous topic I am also having difficulty staying the course with what I perceive as under performance of my portfolio which is currently with Buckingham. I don't necessarily have any issues with the firm but I am at a point where I am going to move to a self managed portfolio. They were helpful in developing our IPS and we have been diligent sticking to the plan. I am very comfortable with the AA, but have begun to second guess the SCV tilt side of the portfolio because of the recent performance, or lack thereof (3-5 years). I am also unhappy with myself for transitioning into the Alt funds recommended by BAM over the last few years. I will most likely sell these funds prior to transition and move this allocation back into Fixed Income.

AA - 75% Equities /15% Alt. / 10% Fixed Income

Domestic Equity - 44.9%
DFTCX -US Core Equity (19.7%)
DFMVX - US Market WIde Lg Value (6.4%)
BOTSX - US Sm Value (13.9%)
DTMVX - US Sm Value (4.9%)

International Equity - 30.1%
DFTWX - Int Mkt Equity (4.7%) -
DTMIX - Int Lg Value (8.7%) -
DWUSX - Int Sm Value (9.2%)
DFCEX - EM Equity (7.5%)

Alternative - 15%
QRPRX - Market Neutral (5%)
LENDX - Alt Lending (5%)
SRRIX - Reinsurance (5%)

Fixed Income - 10%
CD Ladder - 10 CD's of varying expiration.

Edit:
Returns for the portfolio:
YTD - 5.11%
3 Yr - 3.42%
5 Yr - 2.99% (Dec of 2014)



Would love any feedback/thoughts on this portfolio as well as thoughts on how to proceed once I move to self managed since I wont be able to add to the DFA funds. Three fund portfolio sure sounds a whole lot easier after writing all of this!
Last edited by riplip on Fri Aug 30, 2019 3:44 pm, edited 1 time in total.

livesoft
Posts: 68591
Joined: Thu Mar 01, 2007 8:00 pm

Re: Portfolio Review - BAM Portfolio

Post by livesoft » Thu Aug 29, 2019 11:35 am

Have you watched the 4 videos from a DFA guy Scott Bosworth linked in this thread:
viewtopic.php?t=205911 ?

I think they have had to pull out all the stops in assuaging client dissatisfaction. If these videos don't help you, then you are ready to switch. Please let us know.
Wiki This signature message sponsored by sscritic: Learn to fish.

bloom2708
Posts: 6957
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Portfolio Review - BAM Portfolio

Post by bloom2708 » Thu Aug 29, 2019 11:36 am

Is this all taxable/brokerage?

What are the fees and expense ratios? I wouldn't have much quibble with how the portfolio is laid out, except for the cost.

If taxable/brokerage (not tax-sheltered), then your gains are the anchor that keeps many from resetting their course.

You are in that "discovery" or "eye opening" phase that many of us have been in in the past. The steps to get out are very doable, but they do require some fortitude and patience. A strategy could be to move "in kind" (where possible) and once on your own, you can start to dissect and pair gains with losses and send dividends to settlement and start to unravel.

The good thing is, you have to start to finish a task and you are starting. It might help to add the fund names (next to the tickers) and the expense ratios of each fund. Click the Edit icon (pencil) and add that so people can better understand what you have.

Welcome and hopefully you get some good advice to ponder.
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words. Whole food, plant based. Bing it.

Elysium
Posts: 1829
Joined: Mon Apr 02, 2007 6:22 pm

Re: Portfolio Review - BAM Portfolio

Post by Elysium » Thu Aug 29, 2019 11:47 am

Given this the second poster in a week to complain about BAM portfolio, I have to wonder if they aren't doing a good job at explaining the logic behind the portfolio they built for the client and then supposed to help them stick with it. Isn't the whole purpose of building an IPS means the client has understood everything in their AA including periods of under performance and tracking error risk. Aren't they supposed to give advice to the clients when things don't work well always. If not, then what is the whole purpose of collecting the AUM fees.

DecumulatorDoc
Posts: 191
Joined: Sun Jan 28, 2018 7:48 am

Re: Portfolio Review - BAM Portfolio

Post by DecumulatorDoc » Thu Aug 29, 2019 11:56 am

riplip wrote:
Thu Aug 29, 2019 11:12 am
As referenced in a previous topic I am also having difficulty staying the course with what I perceive as under performance of my portfolio which is currently with Buckingham. I don't necessarily have any issues with the firm but I am at a point where I am going to move to a self managed portfolio. They were helpful in developing our IPS and we have been diligent sticking to the plan. I am very comfortable with the AA, but have begun to second guess the SCV tilt side of the portfolio because of the recent performance, or lack thereof (3-5 years). I am also unhappy with myself for transitioning into the Alt funds recommended by BAM over the last few years. I will most likely sell these funds prior to transition and move this allocation back into Fixed Income.
Your BAM advisors likely already recognize that you are not a good candidate to be able to potentially benefit from their advice over the long haul. It's probably a good thing that you acknowledge your difficulty in sticking with it during this period of short term under-performance. Given your comfort level, unless the Cap Gains are brutal, I would recommend a 3 fund portfolio or variation for you. Don't forget that your international component of the portfolio has been equally disappointing.

Respectfully, I feel you need to be revisit your risk tolerance in general. You are second guessing during this period of under-performance of portions of your equity portfolio. What happens when the US total market tanks, will you bail? The absolute best recommendation, given your current level of discomfort, would be to reconsider your equity to fixed income allocation. I believe your overall risk level is set too high at 10% or so fixed income. Keep in mind, the basic equity to bond allocation determines about 90% of your return, the small adjustments within each are icing on the cake. Pick an allocation you can stick with. What kind of market losses can you tolerate:

Max Equity - Exposure Max loss
20%...............5%
30%..............10%
40%..............15%
50%..............20%
60%..............25%
70%..............30%
80%..............35%
90%..............40%
100%.............50%

Elysium
Posts: 1829
Joined: Mon Apr 02, 2007 6:22 pm

Re: Portfolio Review - BAM Portfolio

Post by Elysium » Thu Aug 29, 2019 12:06 pm

riplip wrote:
Thu Aug 29, 2019 11:12 am
As referenced in a previous topic I am also having difficulty staying the course with what I perceive as under performance of my portfolio which is currently with Buckingham. I don't necessarily have any issues with the firm but I am at a point where I am going to move to a self managed portfolio. They were helpful in developing our IPS and we have been diligent sticking to the plan. I am very comfortable with the AA, but have begun to second guess the SCV tilt side of the portfolio because of the recent performance, or lack thereof (3-5 years). I am also unhappy with myself for transitioning into the Alt funds recommended by BAM over the last few years. I will most likely sell these funds prior to transition and move this allocation back into Fixed Income.

AA - 75% Equities /15% Alt. / 10% Fixed Income

Domestic Equity - 44.9%
DFTCX - US MKT Equity (19.7%)
DFMVX - US Lg Value (6.4%)
BOTSX - US Sm Value (13.9%)
DTMVX - US Sm Value (4.9%)

International Equity - 30.1%
DFTWX - Int Mkt Equity (4.7%) -
DTMIX - Int Lg Value (8.7%) -
DWUSX - Int Sm Value (9.2%)
DFCEX - EM Equity (7.5%)

Alternative - 15%
QRPRX - Market Neutral (5%)
LENDX - Alt Lending (5%)
SRRIX - Reinsurance (5%)

Fixed Income - 10%
CD Ladder - 10 CD's of varying expiration.

Would love any feedback/thoughts on this portfolio as well as thoughts on how to proceed once I move to self managed since I wont be able to add to the DFA funds. Three fund portfolio sure sounds a whole lot easier after writing all of this!
The main trouble with this portfolio is that it makes some huge bets against U.S. Just take a look at how much it is taking away from large established American business and into INTL, EM, and ALTS. A pretty dismal view of the U.S Large Companies. As Warren Buffet said "It's never paid to bet against America", which is what essentially exposure to Large U.S companies give you.

User avatar
goingup
Posts: 3676
Joined: Tue Jan 26, 2010 1:02 pm

Re: Portfolio Review - BAM Portfolio

Post by goingup » Thu Aug 29, 2019 12:07 pm

I don't blame the OP for wanting to switch to a less tilted portfolio. Think how hard it would be to pay for an advisor, only to markedly underperform a simple SP500 + Intermediate bond fund portfolio.

Tax-advantaged holdings are easy to clean up. Taxable account holdings may have capital gains and therefore tax consequences to sell. I'd contact a firm such as Schwab, Fidelity or Vanguard and talk to them about having assets pulled over to them "in kind". You'll want to find out what trading fees will be.

You'll have to decide whether you're ready to self-manage your portfolio. It doesn't require special skill but it does require some sustained attention and discipline in the early stages.

User avatar
9-5 Suited
Posts: 418
Joined: Thu Jun 23, 2016 12:14 pm

Re: Portfolio Review - BAM Portfolio

Post by 9-5 Suited » Thu Aug 29, 2019 12:16 pm

Whether you stay with your advisor or not, you definitely shouldn’t have an SCV tilt if 3-5 year underperformance causes you to rethink your strategy. It simply isn’t for you at that point.

User avatar
hdas
Posts: 1270
Joined: Thu Jun 11, 2015 8:24 am

Re: Portfolio Review - BAM Portfolio

Post by hdas » Thu Aug 29, 2019 12:21 pm

Elysium wrote:
Thu Aug 29, 2019 11:47 am
Isn't the whole purpose of building an IPS means the client has understood everything in their AA including periods of under performance and tracking error risk.
This is too much to ask. Not even the BAM people understand well what they are doing (besides the fee collecting part). Cheers :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

pkcrafter
Posts: 13649
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Portfolio Review - BAM Portfolio

Post by pkcrafter » Thu Aug 29, 2019 12:28 pm

riplip wrote:
Thu Aug 29, 2019 11:12 am
As referenced in a previous topic I am also having difficulty staying the course with what I perceive as under performance of my portfolio which is currently with Buckingham.

The one thing that investors who use funds designed to capture and/or enhance factors such as small and value is they will not track benchmarks. As a result, these specialized funds can go extended times while not providing the expected (anticipated, hoped for, awaited) returns. This is normal, but having said that, inexperienced and/or investors who lack a thorough understanding of these specialized funds are going to be very disappointed at times. Investors who use these funds must hold for the looong term, meaning decades. I would suggest not using them if the time to needing the money is within 10-12 years. In addition, there is never a guarantee the funds will produce the desired returns.


I don't necessarily have any issues with the firm but I am at a point where I am going to move to a self managed portfolio. They were helpful in developing our IPS and we have been diligent sticking to the plan. I am very comfortable with the AA, but have begun to second guess the SCV tilt side of the portfolio because of the recent performance, or lack thereof (3-5 years). I am also unhappy with myself for transitioning into the Alt funds recommended by BAM over the last few years. I will most likely sell these funds prior to transition and move this allocation back into Fixed Income.

AA - 75% Equities /15% Alt. / 10% Fixed Income

Domestic Equity - 44.9%
DFTCX - US MKT Equity (19.7%)
DFMVX - US Lg Value (6.4%)
BOTSX - US Sm Value (13.9%)
DTMVX - US Sm Value (4.9%)

International Equity - 30.1%
DFTWX - Int Mkt Equity (4.7%) -
DTMIX - Int Lg Value (8.7%) -
DWUSX - Int Sm Value (9.2%)
DFCEX - EM Equity (7.5%)

Alternative - 15%
QRPRX - Market Neutral (5%)
LENDX - Alt Lending (5%)
SRRIX - Reinsurance (5%)

Fixed Income - 10%
CD Ladder - 10 CD's of varying expiration.

Would love any feedback/thoughts on this portfolio as well as thoughts on how to proceed once I move to self managed since I wont be able to add to the DFA funds. Three fund portfolio sure sounds a whole lot easier after writing all of this!

Yep, the 3-fund is easier in construction, rebalancing, cost, and emotional stress, but again there is no guarantee of final outcome.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

afan
Posts: 4407
Joined: Sun Jul 25, 2010 4:01 pm

Re: Portfolio Review - BAM Portfolio

Post by afan » Thu Aug 29, 2019 3:53 pm

And you don't have to pay anyone to put you into a three fund portfolio.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

stlutz
Posts: 5465
Joined: Fri Jan 02, 2009 1:08 am

Re: Portfolio Review - BAM Portfolio

Post by stlutz » Thu Aug 29, 2019 7:04 pm

What is held in a taxable account vs. a tax advantaged account? And for what is in taxable, what do you have in the way of unrealized gains?

If you *really* want to move to a simplified 3 fund portfolio, then you might as well just do it. You're likely going to pay the taxes at some point (unless you're planning to never sell before you die). If you don't sell the DFA funds now, I don't know that you ever will as they likely will increase in value (thus increasing your tax liability).

On the other hand, there is really nothing fundamentally wrong with those funds (aside form the "alternatives" which you are planning to unload). It would be perfectly reasonable to transfer those elsewhere and then just contribute new money to your new fund choices.

Either approach is reasonable. Do what you can stick with. Remember that at some point value will outperform the market. If it doesn't will you want to sell your total market funds and move to value funds? That's something to think about.

For me personally, as some of my views have evolved over time, I still tend to hold onto what I already own (as long as the fees are < .2% per year). Sticking with a reasonable plan generally works better than constantly searching for the perfect plan.

Elysium
Posts: 1829
Joined: Mon Apr 02, 2007 6:22 pm

Re: Portfolio Review - BAM Portfolio

Post by Elysium » Thu Aug 29, 2019 10:19 pm

In this thread and in the other BAM thread the common thing I noted is the huge bet on Small Value they took on, and lost. I calculated 30% in US + Intl SV in the portfolio posted by OP. That is out of a total of 75% equities, so a whopping 40% of equities is in SCV! That too deep value funds like Bridgeway, and DFA. Talk about the risks of tilting. It is one thing to say TSM alone portfolio is not diversified and adding SCV on the edges, but totally another to make it equal to the same weight as Large Caps.

This is the kind of over weight I keep referring to in the Small Value thread, yet we have folks saying there is nothing wrong with tilting to SCV factor.

BigJohn
Posts: 1801
Joined: Wed Apr 02, 2014 11:27 pm

Re: Portfolio Review - BAM Portfolio

Post by BigJohn » Fri Aug 30, 2019 6:56 am

Elysium wrote:
Thu Aug 29, 2019 10:19 pm
In this thread and in the other BAM thread the common thing I noted is the huge bet on Small Value they took on, and lost. I calculated 30% in US + Intl SV in the portfolio posted by OP. That is out of a total of 75% equities, so a whopping 40% of equities is in SCV! That too deep value funds like Bridgeway, and DFA. Talk about the risks of tilting. It is one thing to say TSM alone portfolio is not diversified and adding SCV on the edges, but totally another to make it equal to the same weight as Large Caps.

This is the kind of over weight I keep referring to in the Small Value thread, yet we have folks saying there is nothing wrong with tilting to SCV factor.
The counter to this is that a small tilt of 5-10% won’t move the total return needle very much even if the SCV premium shows up. This is one of the major reasons I decided not to tilt. A small tilt isn’t really worth the effort (at least to me) and a large tilt like this is just too risky, especially early in retirement.

I’ll also add that I hope at least some SCV premium shows up eventually for all those that have been talked into a big tilt but... my personal opinion is the the system that demonstrated that tilt is long gone due to two major changes. First, the “discovery” and publication of the tilt and second, the ease with which people can invest in the tilt. A correlation that is valid in one system is not necessarily valid in another and I just don’t see how these changes can’t have the impact of at least substantially reducing the premium. I know others disagree, and that’s fine but I’ll just stick with a 3-fund portfolios as good enough.

Elysium
Posts: 1829
Joined: Mon Apr 02, 2007 6:22 pm

Re: Portfolio Review - BAM Portfolio

Post by Elysium » Fri Aug 30, 2019 11:12 am

BigJohn wrote:
Fri Aug 30, 2019 6:56 am
Elysium wrote:
Thu Aug 29, 2019 10:19 pm
In this thread and in the other BAM thread the common thing I noted is the huge bet on Small Value they took on, and lost. I calculated 30% in US + Intl SV in the portfolio posted by OP. That is out of a total of 75% equities, so a whopping 40% of equities is in SCV! That too deep value funds like Bridgeway, and DFA. Talk about the risks of tilting. It is one thing to say TSM alone portfolio is not diversified and adding SCV on the edges, but totally another to make it equal to the same weight as Large Caps.

This is the kind of over weight I keep referring to in the Small Value thread, yet we have folks saying there is nothing wrong with tilting to SCV factor.
The counter to this is that a small tilt of 5-10% won’t move the total return needle very much even if the SCV premium shows up. This is one of the major reasons I decided not to tilt. A small tilt isn’t really worth the effort (at least to me) and a large tilt like this is just too risky, especially early in retirement.

I’ll also add that I hope at least some SCV premium shows up eventually for all those that have been talked into a big tilt but... my personal opinion is the the system that demonstrated that tilt is long gone due to two major changes. First, the “discovery” and publication of the tilt and second, the ease with which people can invest in the tilt. A correlation that is valid in one system is not necessarily valid in another and I just don’t see how these changes can’t have the impact of at least substantially reducing the premium. I know others disagree, and that’s fine but I’ll just stick with a 3-fund portfolios as good enough.
Totally agree with this. I am skeptical about long term persistence, especially with all these new found factor funds in the market, and the long/short portfolios. Although since market cycles are unpredictable we may see value performing well again, and in fact it did for the first 2 months this year when SCV was the best performer I think. That is when the talks of recession and trade wars got the market in a fuddle. Value has given up almost all those gains since then.

countmein
Posts: 476
Joined: Fri Dec 06, 2013 9:10 pm

Re: Portfolio Review - BAM Portfolio

Post by countmein » Fri Aug 30, 2019 11:51 am

stlutz wrote:
Thu Aug 29, 2019 7:04 pm
What is held in a taxable account vs. a tax advantaged account? And for what is in taxable, what do you have in the way of unrealized gains?

If you *really* want to move to a simplified 3 fund portfolio, then you might as well just do it. You're likely going to pay the taxes at some point (unless you're planning to never sell before you die). If you don't sell the DFA funds now, I don't know that you ever will as they likely will increase in value (thus increasing your tax liability).

On the other hand, there is really nothing fundamentally wrong with those funds (aside form the "alternatives" which you are planning to unload). It would be perfectly reasonable to transfer those elsewhere and then just contribute new money to your new fund choices.

Either approach is reasonable. Do what you can stick with. Remember that at some point value will outperform the market. If it doesn't will you want to sell your total market funds and move to value funds? That's something to think about.

For me personally, as some of my views have evolved over time, I still tend to hold onto what I already own (as long as the fees are < .2% per year). Sticking with a reasonable plan generally works better than constantly searching for the perfect plan.
Agree with this. Simplest thing to do is to drop the advisor and leave the funds alone, contribute new money to total market funds and gradually water down your tilt.

countmein
Posts: 476
Joined: Fri Dec 06, 2013 9:10 pm

Re: Portfolio Review - BAM Portfolio

Post by countmein » Fri Aug 30, 2019 11:53 am

Elysium wrote:
Thu Aug 29, 2019 12:06 pm
riplip wrote:
Thu Aug 29, 2019 11:12 am
As referenced in a previous topic I am also having difficulty staying the course with what I perceive as under performance of my portfolio which is currently with Buckingham. I don't necessarily have any issues with the firm but I am at a point where I am going to move to a self managed portfolio. They were helpful in developing our IPS and we have been diligent sticking to the plan. I am very comfortable with the AA, but have begun to second guess the SCV tilt side of the portfolio because of the recent performance, or lack thereof (3-5 years). I am also unhappy with myself for transitioning into the Alt funds recommended by BAM over the last few years. I will most likely sell these funds prior to transition and move this allocation back into Fixed Income.

AA - 75% Equities /15% Alt. / 10% Fixed Income

Domestic Equity - 44.9%
DFTCX - US MKT Equity (19.7%)
DFMVX - US Lg Value (6.4%)
BOTSX - US Sm Value (13.9%)
DTMVX - US Sm Value (4.9%)

International Equity - 30.1%
DFTWX - Int Mkt Equity (4.7%) -
DTMIX - Int Lg Value (8.7%) -
DWUSX - Int Sm Value (9.2%)
DFCEX - EM Equity (7.5%)

Alternative - 15%
QRPRX - Market Neutral (5%)
LENDX - Alt Lending (5%)
SRRIX - Reinsurance (5%)

Fixed Income - 10%
CD Ladder - 10 CD's of varying expiration.

Would love any feedback/thoughts on this portfolio as well as thoughts on how to proceed once I move to self managed since I wont be able to add to the DFA funds. Three fund portfolio sure sounds a whole lot easier after writing all of this!
The main trouble with this portfolio is that it makes some huge bets against U.S. Just take a look at how much it is taking away from large established American business and into INTL, EM, and ALTS. A pretty dismal view of the U.S Large Companies. As Warren Buffet said "It's never paid to bet against America", which is what essentially exposure to Large U.S companies give you.
No.

The US:Intl ratio is totally standard, same as VG Lifestrategy I think.

nix4me
Posts: 328
Joined: Sat Oct 13, 2018 9:32 am

Re: Portfolio Review - BAM Portfolio

Post by nix4me » Fri Aug 30, 2019 12:08 pm

90% in s&p 500 or total stock index fund.
10% in your cd ladder

Done

nix4me
Posts: 328
Joined: Sat Oct 13, 2018 9:32 am

Re: Portfolio Review - BAM Portfolio

Post by nix4me » Fri Aug 30, 2019 12:09 pm

countmein wrote:
Fri Aug 30, 2019 11:53 am
Elysium wrote:
Thu Aug 29, 2019 12:06 pm
riplip wrote:
Thu Aug 29, 2019 11:12 am
As referenced in a previous topic I am also having difficulty staying the course with what I perceive as under performance of my portfolio which is currently with Buckingham. I don't necessarily have any issues with the firm but I am at a point where I am going to move to a self managed portfolio. They were helpful in developing our IPS and we have been diligent sticking to the plan. I am very comfortable with the AA, but have begun to second guess the SCV tilt side of the portfolio because of the recent performance, or lack thereof (3-5 years). I am also unhappy with myself for transitioning into the Alt funds recommended by BAM over the last few years. I will most likely sell these funds prior to transition and move this allocation back into Fixed Income.

AA - 75% Equities /15% Alt. / 10% Fixed Income

Domestic Equity - 44.9%
DFTCX - US MKT Equity (19.7%)
DFMVX - US Lg Value (6.4%)
BOTSX - US Sm Value (13.9%)
DTMVX - US Sm Value (4.9%)

International Equity - 30.1%
DFTWX - Int Mkt Equity (4.7%) -
DTMIX - Int Lg Value (8.7%) -
DWUSX - Int Sm Value (9.2%)
DFCEX - EM Equity (7.5%)

Alternative - 15%
QRPRX - Market Neutral (5%)
LENDX - Alt Lending (5%)
SRRIX - Reinsurance (5%)

Fixed Income - 10%
CD Ladder - 10 CD's of varying expiration.

Would love any feedback/thoughts on this portfolio as well as thoughts on how to proceed once I move to self managed since I wont be able to add to the DFA funds. Three fund portfolio sure sounds a whole lot easier after writing all of this!
The main trouble with this portfolio is that it makes some huge bets against U.S. Just take a look at how much it is taking away from large established American business and into INTL, EM, and ALTS. A pretty dismal view of the U.S Large Companies. As Warren Buffet said "It's never paid to bet against America", which is what essentially exposure to Large U.S companies give you.
No.

The US:Intl ratio is totally standard, same as VG Lifestrategy I think.
And the reason for the under performance

User avatar
nedsaid
Posts: 12773
Joined: Fri Nov 23, 2012 12:33 pm

Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Fri Aug 30, 2019 2:23 pm

There does seem to be a lot of criticism of Buckingham here the last couple of weeks. There are two problems here that I see, unhappiness with recent Small/Value underperformance and uneasiness regarding the Alternative funds. It seems to me this is a "the grass is greener on the other side of the fence" problem. There is always someone out there whose investments are performing better than your own and that is hard to deal with.

Some comments.

First, I think the Buckingham portfolios are perfectly fine. They are doing what they are designed to do. Unfortunately, everything doesn't always work all of the time. We have had a decade of Large Growth stocks leading the market so Small/Value tilted portfolios would trail a Taylor Larimore 3 fund portfolio no matter what you would have done. It isn't that Small and Value haven't done well, they have, it is just that Large and Growth have done better.

I can remember all the articles about Warren Buffett back in the late 1990's. Value is dead, Buffett is a neat guy but time as passed him by, maybe the old guy doesn't quite have it upstairs like he once did. Buffett stuck to his Value/Quality strategy during the time when High Tech and Internet stocks were leading the market. In early 2000, the excesses in the market finally had their day of reckoning, many of the High Tech/Internet stocks lost 70% or more in the crash. Some companies went out of business and many that survived never saw their stock price recover. Buffett was vindicated and in the aftermath of the 2000-2002 bear market was the toast of the town again. From zero to hero.

Let's remember that the entire performance premium of Growth over Value has been from the High Tech sector, and might be just from the FAANG stocks (Facebook, Apple, Amazon, Netflix, Google). If there is a High Tech/Internet bubble today, it is far less than 1999. But there are amazing similarities between 2019 and 1999. Larry has posted that the valuation gaps between Value and Growth are close to what they were in 1999. Folks are starting to say Buffett has lost his touch. The Vanguard Growth Index has gone to non-diversified status. Value is dead.

So the posts I see here that Small/Value tilters are just getting killed are silly. Certainly there is tracking error from the Total Market Index but factor tilters have not lost their shirt. The 3 funders who are into triumphalism right now have forgotten all about the 2000-2002 bear market and how well tilted portfolios did during the 2000's. In fact the triumphalism has gotten so bad that it is getting to be taunting. They forget that their supposed brilliance might be because of just 5-6 stocks. High Tech/Internet is not going to forever lead the US Market, the market at some point will be lead by other sectors of the market. There is a cyclicality to the markets.

Not saying that Total Stock Market Index is a bad investment, it is my largest holding. Just saying that Value investing is a time honored and proven method of investing in stocks. It is out of favor right now, investors prefer the Large Growth stocks now. This will change, we don't know when.
A fool and his money are good for business.

Topic Author
riplip
Posts: 10
Joined: Tue Jul 15, 2014 3:44 pm

Re: Portfolio Review - BAM Portfolio

Post by riplip » Fri Aug 30, 2019 3:32 pm

livesoft wrote:
Thu Aug 29, 2019 11:35 am
Have you watched the 4 videos from a DFA guy Scott Bosworth linked in this thread:
viewtopic.php?t=205911 ?

I think they have had to pull out all the stops in assuaging client dissatisfaction. If these videos don't help you, then you are ready to switch. Please let us know.
Thank your for the link, I plan to watch these over the weekend.

Topic Author
riplip
Posts: 10
Joined: Tue Jul 15, 2014 3:44 pm

Re: Portfolio Review - BAM Portfolio

Post by riplip » Fri Aug 30, 2019 3:38 pm

DecumulatorDoc wrote:
Thu Aug 29, 2019 11:56 am
riplip wrote:
Thu Aug 29, 2019 11:12 am
As referenced in a previous topic I am also having difficulty staying the course with what I perceive as under performance of my portfolio which is currently with Buckingham. I don't necessarily have any issues with the firm but I am at a point where I am going to move to a self managed portfolio. They were helpful in developing our IPS and we have been diligent sticking to the plan. I am very comfortable with the AA, but have begun to second guess the SCV tilt side of the portfolio because of the recent performance, or lack thereof (3-5 years). I am also unhappy with myself for transitioning into the Alt funds recommended by BAM over the last few years. I will most likely sell these funds prior to transition and move this allocation back into Fixed Income.
Your BAM advisors likely already recognize that you are not a good candidate to be able to potentially benefit from their advice over the long haul. It's probably a good thing that you acknowledge your difficulty in sticking with it during this period of short term under-performance. Given your comfort level, unless the Cap Gains are brutal, I would recommend a 3 fund portfolio or variation for you. Don't forget that your international component of the portfolio has been equally disappointing.

Respectfully, I feel you need to be revisit your risk tolerance in general. You are second guessing during this period of under-performance of portions of your equity portfolio. What happens when the US total market tanks, will you bail? The absolute best recommendation, given your current level of discomfort, would be to reconsider your equity to fixed income allocation. I believe your overall risk level is set too high at 10% or so fixed income. Keep in mind, the basic equity to bond allocation determines about 90% of your return, the small adjustments within each are icing on the cake. Pick an allocation you can stick with. What kind of market losses can you tolerate:

Max Equity - Exposure Max loss
20%...............5%
30%..............10%
40%..............15%
50%..............20%
60%..............25%
70%..............30%
80%..............35%
90%..............40%
100%.............50%
Thank your for the reply, I do feel comfortable with my risk tolerance. Once I sell the Alt Funds, I will be a 75/25%. I guess what I wasn't prepared for was the under performance when compared to other investments (ie 3 fund portfolio) in a relatively overall strong market. I do understand the SCV tilt, but in hindsight I guess I didn't properly think through the scenario of comparing returns. Thanks again.

BigJohn
Posts: 1801
Joined: Wed Apr 02, 2014 11:27 pm

Re: Portfolio Review - BAM Portfolio

Post by BigJohn » Fri Aug 30, 2019 3:41 pm

nedsaid wrote:
Fri Aug 30, 2019 2:23 pm
First, I think the Buckingham portfolios are perfectly fine. They are doing what they are designed to do. Unfortunately, everything doesn't always work all of the time. We have had a decade of Large Growth stocks leading the market so Small/Value tilted portfolios would trail a Taylor Larimore 3 fund portfolio no matter what you would have done. It isn't that Small and Value haven't done well, they have, it is just that Large and Growth have done better.

I can remember all the articles about Warren Buffett back in the late 1990's. Value is dead, Buffett is a neat guy but time as passed him by, maybe the old guy doesn't quite have it upstairs like he once did. Buffett stuck to his Value/Quality strategy during the time when High Tech and Internet stocks were leading the market. In early 2000, the excesses in the market finally had their day of reckoning, many of the High Tech/Internet stocks lost 70% or more in the crash. Some companies went out of business and many that survived never saw their stock price recover. Buffett was vindicated and in the aftermath of the 2000-2002 bear market was the toast of the town again. From zero to hero.

Let's remember that the entire performance premium of Growth over Value has been from the High Tech sector, and might be just from the FAANG stocks (Facebook, Apple, Amazon, Netflix, Google). If there is a High Tech/Internet bubble today, it is far less than 1999. But there are amazing similarities between 2019 and 1999. Larry has posted that the valuation gaps between Value and Growth are close to what they were in 1999. Folks are starting to say Buffett has lost his touch. The Vanguard Growth Index has gone to non-diversified status. Value is dead.

So the posts I see here that Small/Value tilters are just getting killed are silly. Certainly there is tracking error from the Total Market Index but factor tilters have not lost their shirt. The 3 funders who are into triumphalism right now have forgotten all about the 2000-2002 bear market and how well tilted portfolios did during the 2000's. In fact the triumphalism has gotten so bad that it is getting to be taunting. They forget that their supposed brilliance might be because of just 5-6 stocks. High Tech/Internet is not going to forever lead the US Market, the market at some point will be lead by other sectors of the market. There is a cyclicality to the markets.
nedsaid, I can't disagree with these comments relative to the SCV tilt assuming that the investors knew what they were signing up for. Not sure you can say all this though for the 15% of this portfolio in the alt funds. How do you feel about those? I haven't done the detailed math but based on a quick look I think these are a much bigger performance drag than the SCV tilt. In my mind these investors have gotten killed in those funds (eg SRRIX down 20+% in 5 years).

Not sure I'd even call it tracking error since they don't profess to be stock like and they've had negative returns not just smaller positive returns. Others can correct me if I'm wrong but I don't think these alts have been around as long or are as "proven" a strategy as SCV tilts. Based on performance, they also seem to be far more risky than SCV tilts.

I'd really like to hear from the OP on whether he knew what he was signing up for when BAM invested his $$$ in these funds.

Topic Author
riplip
Posts: 10
Joined: Tue Jul 15, 2014 3:44 pm

Re: Portfolio Review - BAM Portfolio

Post by riplip » Fri Aug 30, 2019 3:49 pm

nedsaid wrote:
Fri Aug 30, 2019 2:23 pm
There does seem to be a lot of criticism of Buckingham here the last couple of weeks. There are two problems here that I see, unhappiness with recent Small/Value underperformance and uneasiness regarding the Alternative funds. It seems to me this is a "the grass is greener on the other side of the fence" problem. There is always someone out there whose investments are performing better than your own and that is hard to deal with.

Some comments.

First, I think the Buckingham portfolios are perfectly fine. They are doing what they are designed to do. Unfortunately, everything doesn't always work all of the time. We have had a decade of Large Growth stocks leading the market so Small/Value tilted portfolios would trail a Taylor Larimore 3 fund portfolio no matter what you would have done. It isn't that Small and Value haven't done well, they have, it is just that Large and Growth have done better.

I can remember all the articles about Warren Buffett back in the late 1990's. Value is dead, Buffett is a neat guy but time as passed him by, maybe the old guy doesn't quite have it upstairs like he once did. Buffett stuck to his Value/Quality strategy during the time when High Tech and Internet stocks were leading the market. In early 2000, the excesses in the market finally had their day of reckoning, many of the High Tech/Internet stocks lost 70% or more in the crash. Some companies went out of business and many that survived never saw their stock price recover. Buffett was vindicated and in the aftermath of the 2000-2002 bear market was the toast of the town again. From zero to hero.

Let's remember that the entire performance premium of Growth over Value has been from the High Tech sector, and might be just from the FAANG stocks (Facebook, Apple, Amazon, Netflix, Google). If there is a High Tech/Internet bubble today, it is far less than 1999. But there are amazing similarities between 2019 and 1999. Larry has posted that the valuation gaps between Value and Growth are close to what they were in 1999. Folks are starting to say Buffett has lost his touch. The Vanguard Growth Index has gone to non-diversified status. Value is dead.

So the posts I see here that Small/Value tilters are just getting killed are silly. Certainly there is tracking error from the Total Market Index but factor tilters have not lost their shirt. The 3 funders who are into triumphalism right now have forgotten all about the 2000-2002 bear market and how well tilted portfolios did during the 2000's. In fact the triumphalism has gotten so bad that it is getting to be taunting. They forget that their supposed brilliance might be because of just 5-6 stocks. High Tech/Internet is not going to forever lead the US Market, the market at some point will be lead by other sectors of the market. There is a cyclicality to the markets.

Not saying that Total Stock Market Index is a bad investment, it is my largest holding. Just saying that Value investing is a time honored and proven method of investing in stocks. It is out of favor right now, investors prefer the Large Growth stocks now. This will change, we don't know when.
Thank you for this well written thoughtful response.

User avatar
nedsaid
Posts: 12773
Joined: Fri Nov 23, 2012 12:33 pm

Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Fri Aug 30, 2019 4:29 pm

The point that I raised and forgot to talk about are the Alternative Investments. If you read what Larry Swedroe has said about them, the case for Alternatives makes a lot of sense. Four types of Alts he has recommended: liquid Style Premia fund (uses leverage and shorts), the semi-liquid Alternative Lending Fund, the semi-liquid Variance Risk Premium fund, and the semi-liquid Reinsurance fund. The semi-liquid funds I referred to are also called interval funds. This is an attempt to get sources of return unrelated and uncorrelated to Market Beta and to take advantage of the illiquidity premium.

The Alts are pretty controversial and Larry Swedroe caught a lot of static here on the forum when he started recommending them. It looks to me that the AQR Style Premia Fund is uncorrelated to stocks but so far has less returns than boring old bonds. The Alternative Lending, the Variance Risk Premium, and the Reinsurance funds have the potential for stock-like returns but so far it seems that only the Alternative Lending has delivered. The time periods have been maybe 3 years, really too early to judge the success of these funds. I see potential here but returns seem disappointing.

I don't think anyone denies the historical performance premiums of the ideas behind the Alt funds but this information is widely known. As more and more money flows into these strategies, you wonder if the premiums will disappear. The Alts are also an attempt to capture certain premiums the big hedge funds have been exploiting for years. Too many people and too much money chasing these strategies can cause the premiums to disappear. You could ask if Buckingham is cutting edge or late to the party.

I am the proud new owner of a couple new Alt funds, a market neutral fund and a long/short income fund. They will be a combined 1.5% of my retirement portfolio, I will watch them and see if they do what they are supposed to do. Hopefully they will provide returns uncorrelated to stocks and act as portfolio insurance. So I have dipped my toe into Alternative investments. My opinion of them is neutral but these came with a managed portfolio service that manages 30% of my retirement portfolio. One reason I signed up was to get financial and retirement planning.
A fool and his money are good for business.

User avatar
nedsaid
Posts: 12773
Joined: Fri Nov 23, 2012 12:33 pm

Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Fri Aug 30, 2019 4:44 pm

BigJohn wrote:
Fri Aug 30, 2019 3:41 pm
nedsaid wrote:
Fri Aug 30, 2019 2:23 pm
First, I think the Buckingham portfolios are perfectly fine. They are doing what they are designed to do. Unfortunately, everything doesn't always work all of the time. We have had a decade of Large Growth stocks leading the market so Small/Value tilted portfolios would trail a Taylor Larimore 3 fund portfolio no matter what you would have done. It isn't that Small and Value haven't done well, they have, it is just that Large and Growth have done better.

I can remember all the articles about Warren Buffett back in the late 1990's. Value is dead, Buffett is a neat guy but time as passed him by, maybe the old guy doesn't quite have it upstairs like he once did. Buffett stuck to his Value/Quality strategy during the time when High Tech and Internet stocks were leading the market. In early 2000, the excesses in the market finally had their day of reckoning, many of the High Tech/Internet stocks lost 70% or more in the crash. Some companies went out of business and many that survived never saw their stock price recover. Buffett was vindicated and in the aftermath of the 2000-2002 bear market was the toast of the town again. From zero to hero.

Let's remember that the entire performance premium of Growth over Value has been from the High Tech sector, and might be just from the FAANG stocks (Facebook, Apple, Amazon, Netflix, Google). If there is a High Tech/Internet bubble today, it is far less than 1999. But there are amazing similarities between 2019 and 1999. Larry has posted that the valuation gaps between Value and Growth are close to what they were in 1999. Folks are starting to say Buffett has lost his touch. The Vanguard Growth Index has gone to non-diversified status. Value is dead.

So the posts I see here that Small/Value tilters are just getting killed are silly. Certainly there is tracking error from the Total Market Index but factor tilters have not lost their shirt. The 3 funders who are into triumphalism right now have forgotten all about the 2000-2002 bear market and how well tilted portfolios did during the 2000's. In fact the triumphalism has gotten so bad that it is getting to be taunting. They forget that their supposed brilliance might be because of just 5-6 stocks. High Tech/Internet is not going to forever lead the US Market, the market at some point will be lead by other sectors of the market. There is a cyclicality to the markets.
nedsaid, I can't disagree with these comments relative to the SCV tilt assuming that the investors knew what they were signing up for. Not sure you can say all this though for the 15% of this portfolio in the alt funds. How do you feel about those? I haven't done the detailed math but based on a quick look I think these are a much bigger performance drag than the SCV tilt. In my mind these investors have gotten killed in those funds (eg SRRIX down 20+% in 5 years).

Not sure I'd even call it tracking error since they don't profess to be stock like and they've had negative returns not just smaller positive returns. Others can correct me if I'm wrong but I don't think these alts have been around as long or are as "proven" a strategy as SCV tilts. Based on performance, they also seem to be far more risky than SCV tilts.

I'd really like to hear from the OP on whether he knew what he was signing up for when BAM invested his $$$ in these funds.
Went to Bloomberg and found that SRRIX, the Stone Ridge Reinsurance fund has returned -.03% a year over the last five years and a -5.18% per year over the last three years. The Stone Ridge Alternative Lending fund, LENDX, has returned 5.57% per year over the last three years. The Stone Ridge Variance Risk Premium fund, AVRPX has returned 1.63% a year over three years. The AQR Risk Premia Fund, QSPIX, has a five year return of 1.15% per year and a three year return of -2.26% per year. Pretty much stuffing cash in your mattress territory. So far not much to write home about. Alternative lending has done the best over the last 3 years.

So yes, the Alts would have been a drag over the last three years. The four in combination haven't done as well as good old boring bonds. Vanguard Total Bond Market Index Admiral has a 3 year performance of 3.01% a year and a five year performance of 3.30% per year. The combination of the four Alts recommended by Buckingham had returns that were flat or slightly negative.

Again, three years isn't enough to make definitive conclusions but the record here is disappointing.
A fool and his money are good for business.

User avatar
nedsaid
Posts: 12773
Joined: Fri Nov 23, 2012 12:33 pm

Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Fri Aug 30, 2019 5:09 pm

I want to thank riplip for posting his Buckingham portfolio. It is good to look at real life portfolios. We see too much backtesting here, to me real returns earned in real portfolios for real life people is much more meaningful. Thanks also for posting performance.
A fool and his money are good for business.

Wyodoc
Posts: 96
Joined: Sat Oct 27, 2018 9:32 am

Re: Portfolio Review - BAM Portfolio

Post by Wyodoc » Fri Aug 30, 2019 5:42 pm

I agree with most here that SCV is not for you and you should switch to 3 fund. That is a fairly extreme tilt. I personally believe this behavior of dropping small value funds when down is the exact reason the premium will persist as we hear more and more about people wanting out both here and in larger funds with decreasing AUM. Just my opinion :happy

BigJohn
Posts: 1801
Joined: Wed Apr 02, 2014 11:27 pm

Re: Portfolio Review - BAM Portfolio

Post by BigJohn » Fri Aug 30, 2019 5:46 pm

nedsaid, thanks for correcting the numbers on SRRIX, I was looking at price not total return :oops: So a drag but not nearly as bad as I stated. I also appreciate riplip posting the details, this has been an enlightening discussion.

Riplip, if you’re willing to share, I would like to better understand what education your BAM adviser gave you the nature and risks of these alt funds.

User avatar
Rick Ferri
Posts: 8935
Joined: Mon Feb 26, 2007 11:40 am
Location: Georgetown, TX. Twitter: @Rick_Ferri
Contact:

Re: Portfolio Review - BAM Portfolio

Post by Rick Ferri » Fri Aug 30, 2019 5:57 pm

Year 1: "I'm a long-term investing. I can wait for this to work."
Year 2: "This strategy still seems OK, I guess. I'd just like to see it do something."
Year 3: "I've really become annoyed with this."
Year 4: "I want a DIVORCE!"

Moral of the story:

Excess return from any active strategy is not guaranteed - only the fee is guaranteed.
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

skeptical
Posts: 125
Joined: Fri Jul 18, 2014 12:24 pm

Re: Portfolio Review - BAM Portfolio

Post by skeptical » Fri Aug 30, 2019 6:26 pm

nedsaid wrote:
Fri Aug 30, 2019 4:44 pm
So yes, the Alts would have been a drag over the last three years. The four in combination haven't done as well as good old boring bonds. Vanguard Total Bond Market Index Admiral has a 3 year performance of 3.01% a year and a five year performance of 3.30% per year. The combination of the four Alts recommended by Buckingham had returns that were flat or slightly negative.

Again, three years isn't enough to make definitive conclusions but the record here is disappointing.
For those that use alts, I am curious about three things:
- What do you consider "not successful" ? alts cannot be compared to bonds, as they are designed and marketed as "equity like returns". I would think that bond like (or less) returns is not a success.
- What is an acceptable failure rate over a five year or ten year period ? Phrased differently, would you hold an alt if you believed that over 5 years there was a 50% of not being successful, that is, having a flat return ?
- How is it possible for four alt funds, all uncorrelated to equities, all with very different strategies, to simultaneously "not succeed" over a 3-5 year period ? Is this just due to chance ? Or do you believe there is there a correlation between these four funds that is not currently understood ?

Thanks,
skeptical

livesoft
Posts: 68591
Joined: Thu Mar 01, 2007 8:00 pm

Re: Portfolio Review - BAM Portfolio

Post by livesoft » Fri Aug 30, 2019 6:28 pm

On alts: I own TIAA Real Estate Account. I would consider it an alt. In 2009 when everything was going up, it dropped 20%. It was famous for that because lots of people timed it as reported at bogleheads.org. Well, with 10% of portfolio in TREA a drop of 20% translates to a 2% underperformance of the portfolio from just this one position. That is "not successful."
Wiki This signature message sponsored by sscritic: Learn to fish.

skeptical
Posts: 125
Joined: Fri Jul 18, 2014 12:24 pm

Re: Portfolio Review - BAM Portfolio

Post by skeptical » Fri Aug 30, 2019 6:40 pm

livesoft wrote:
Fri Aug 30, 2019 6:28 pm
On alts: I own TIAA Real Estate Account. I would consider it an alt. In 2009 when everything was going up, it dropped 20%. It was famous for that because lots of people timed it as reported at bogleheads.org. Well, with 10% of portfolio in TREA a drop of 20% translates to a 2% underperformance of the portfolio from just this one position. That is "not successful."
I cannot find data going back further than 2014, but since then it has done about as well as total stock market, with far less variance, so as an alt over a five year period, I think it looks pretty successful - though I do not know how well it did after 2009

I would not expect an alt to do as well as stocks year by year, they are alts, but I would certainly expect that over a five year period there is a good chance it does at least as well.

I am just trying to wrap my head around the fact that four very different strategies that are all uncorrelated with each other can all do this poorly over a 3-5 year time frame. I guess I am not a patient man.

Random Walker
Posts: 4188
Joined: Fri Feb 23, 2007 8:21 pm

Re: Portfolio Review - BAM Portfolio

Post by Random Walker » Fri Aug 30, 2019 6:55 pm

skeptical wrote:
Fri Aug 30, 2019 6:26 pm

For those that use alts, I am curious about three things:
- What do you consider "not successful" ? alts cannot be compared to bonds, as they are designed and marketed as "equity like returns". I would think that bond like (or less) returns is not a success.
- What is an acceptable failure rate over a five year or ten year period ? Phrased differently, would you hold an alt if you believed that over 5 years there was a 50% of not being successful, that is, having a flat return ?
- How is it possible for four alt funds, all uncorrelated to equities, all with very different strategies, to simultaneously "not succeed" over a 3-5 year period ? Is this just due to chance ? Or do you believe there is there a correlation between these four funds that is not currently understood ?

Thanks,
skeptical
I expect pretax returns of about risk free rate +5% and after tax returns between bonds and equities. For me, I created my position overwhelmingly from municipal bonds in taxable. So I’m looking to increase portfolio after tax return a bit, increase volatility to a lesser extent, and overall increase Sharpe ratio.
I anticipate holding onto the alternatives indefinitely. I certainly wouldn’t give up after 5 years on any individual one.
I would be stunned if QRPRX, LENDX, SRRIX, AVRPX all showed significant correlation with each other. I’d have to think about that one!

Dave

typical.investor
Posts: 1258
Joined: Mon Jun 11, 2018 3:17 am

Re: Portfolio Review - BAM Portfolio

Post by typical.investor » Fri Aug 30, 2019 9:39 pm

riplip wrote:
Thu Aug 29, 2019 11:12 am
I am very comfortable with the AA, but have begun to second guess the SCV tilt side of the portfolio because of the recent performance, or lack thereof (3-5 years). I am also unhappy with myself for transitioning into the Alt funds recommended by BAM over the last few years. I will most likely sell these funds prior to transition and move this allocation back into Fixed Income.
I think the cow is out of the barn.

Personally, I would not play the "unhappy with returns - switching allocation" game for either the SCV tilt or international allocation. We know long term that valuations have a strong relation to subsequent returns.

For the ALTS, so seductive after listening to the marketing pitch aren't they?

Anyway, SRRIX 5 year returns are what? Their annual report states Since Inception (12/9/13) of 2.96%. I understand global reinsurance composite produced a return on equity of 6.0%. I wonder that the difference. Ff you read the CEO's comments, nothing went wrong in 2018. They lost money and it happens.

Other analysis shows risk may not have been accurately priced by the industry (especially in the Florida property market and Japan), and that the market in general suffers from overcapacity which affects pricing.

I mentioned this a year ago I think and got a nasty response from Larry. This time I will post any private PMs to the public forum. Hope that doesn't violate any policies.

The CEO's letter to shareholder's has a long rant about Vanguard's "Price-insensitive buying", but no mention of reinsurance over-capacity. Of course.

https://www.businesswire.com/news/home/ ... -Permeates
https://www.stoneridgefunds.com/documen ... Report.pdf
Last edited by typical.investor on Fri Aug 30, 2019 10:04 pm, edited 1 time in total.

marcopolo
Posts: 2499
Joined: Sat Dec 03, 2016 10:22 am

Re: Portfolio Review - BAM Portfolio

Post by marcopolo » Fri Aug 30, 2019 10:03 pm

In another thread there was a discussion on how tilting to factors like this can under perform for long periods of time and investors committing to this strategy need to understand that and be in it for the long term.

I asked whether proponents were telling people that a decade ago when they were pushing the tilting strategy or if that advise is a new phenomenon after a decade of under performance. I did not get much response to that.

We have had a couple of threads recently where the investor seems disenchanted with the tilting strategy despite paying advisors to get them into this strategy. I wonder again if these advisors are doing an adequate job explaining the long term commitment they say is needed.
Once in a while you get shown the light, in the strangest of places if you look at it right.

BigJohn
Posts: 1801
Joined: Wed Apr 02, 2014 11:27 pm

Re: Portfolio Review - BAM Portfolio

Post by BigJohn » Fri Aug 30, 2019 10:18 pm

typical.investor wrote:
Fri Aug 30, 2019 9:39 pm
Anyway, SRRIX 5 year returns are what? Their annual report states Since Inception (12/9/13) of 2.96%. I understand global reinsurance composite produced a return on equity of 6.0%. I wonder that the difference. Ff you read the CEO's comments, nothing went wrong in 2018. They lost money and it happens.
At least on this site the SRRIX 5 year return is shown as -0.03% and 3 year return is -5.18%.

https://www.bloomberg.com/quote/SRRIX:US

I also noted that the ER is very high at 2.28%. From others who've posted, alt funds are significantly more tax inefficient than index funds. It sure seems like the deck is stacked against these funds giving stock like after tax performance. Since I'm a firm believer in the no free lunches, if they do give similar after tax returns, the risks must be much higher than a stock index fund.

Northern Flicker
Posts: 4921
Joined: Fri Apr 10, 2015 12:29 am

Re: Portfolio Review - BAM Portfolio

Post by Northern Flicker » Fri Aug 30, 2019 11:02 pm

A portfolio with alts does not have to be expensive. VPGDX has an expense ratio of 0.32% and no advisor fees needed.

https://investor.vanguard.com/mutual-fu ... olio/vpgdx

Despite the name (managed payout) dividends can be reinvested and the portfolio is a modern portfolio theory-based construction with exposure to alternative strategies, commodities, and a market neutral portfolio.

Annualized return since Dec 2014 is 4.43%. Cost does matter.

https://www.portfoliovisualizer.com/bac ... 0&total3=0
Index fund investor since 1987.

FoolStreet
Posts: 867
Joined: Fri Sep 07, 2012 12:18 am

Re: Portfolio Review - BAM Portfolio

Post by FoolStreet » Sat Aug 31, 2019 12:03 am

riplip wrote:
Thu Aug 29, 2019 11:12 am
As referenced in a previous topic I am also having difficulty staying the course with what I perceive as under performance of my portfolio which is currently with Buckingham. I don't necessarily have any issues with the firm but I am at a point where I am going to move to a self managed portfolio. They were helpful in developing our IPS and we have been diligent sticking to the plan. I am very comfortable with the AA, but have begun to second guess the SCV tilt side of the portfolio because of the recent performance, or lack thereof (3-5 years). I am also unhappy with myself for transitioning into the Alt funds recommended by BAM over the last few years. I will most likely sell these funds prior to transition and move this allocation back into Fixed Income.

AA - 75% Equities /15% Alt. / 10% Fixed Income

Domestic Equity - 44.9%
DFTCX -US Core Equity (19.7%)
DFMVX - US Market WIde Lg Value (6.4%)
BOTSX - US Sm Value (13.9%)
DTMVX - US Sm Value (4.9%)

International Equity - 30.1%
DFTWX - Int Mkt Equity (4.7%) -
DTMIX - Int Lg Value (8.7%) -
DWUSX - Int Sm Value (9.2%)
DFCEX - EM Equity (7.5%)

Alternative - 15%
QRPRX - Market Neutral (5%)
LENDX - Alt Lending (5%)
SRRIX - Reinsurance (5%)

Fixed Income - 10%
CD Ladder - 10 CD's of varying expiration.

Edit:
Returns for the portfolio:
YTD - 5.11%
3 Yr - 3.42%
5 Yr - 2.99% (Dec of 2014)



Would love any feedback/thoughts on this portfolio as well as thoughts on how to proceed once I move to self managed since I wont be able to add to the DFA funds. Three fund portfolio sure sounds a whole lot easier after writing all of this!
It looks like your AA is somewhere between 75-25 and 85-15, depending on how you count the alternatives. I figure they are for non-equity diversification, so I’m going to broad stroke say you have a 75-25 AA. To compare it to a Boglehead style approach, go to Vanguard’s web page and find the equivalent LifeStrategy fund with the same AA and look for it’s YTD, 3yr and 5yr returns to compare. Let us know what you find out!

Northern Flicker
Posts: 4921
Joined: Fri Apr 10, 2015 12:29 am

Re: Portfolio Review - BAM Portfolio

Post by Northern Flicker » Sat Aug 31, 2019 12:38 am

VSMGX LifeStrategy Moderate Growth returned 5.7% annualized since Dec 2014:

https://www.portfoliovisualizer.com/bac ... 0&total3=0
Index fund investor since 1987.

HippoSir
Posts: 65
Joined: Tue Jul 03, 2018 2:56 pm

Re: Portfolio Review - BAM Portfolio

Post by HippoSir » Sat Aug 31, 2019 1:01 am

riplip wrote:
Thu Aug 29, 2019 11:12 am
I am very comfortable with the AA, but have begun to second guess the SCV tilt side of the portfolio because of the recent performance, or lack thereof (3-5 years).
I just want to note that 3-5 years is a small amount of time when evaluating portfolio performance. The right time to switch your tilt was 5 years ago, doing it now seems like performance chasing, one of the most common reasons for investor underperformance.

A link discussing the detrimental effect of performance chasing from Vanguard: https://pressroom.vanguard.com/nonindex ... y_2014.pdf

If your portfolio was a mess I'd be telling you to switch, but it's a well designed portfolio that happens to target asset classes that have underperformed recently. What's your confidence in being able to hold on if total market underperforms for the next 5 years? If you do switch, I implore you to hold fast from then on and keep things simple rather than continuing to chase asset classes after the fact.

typical.investor
Posts: 1258
Joined: Mon Jun 11, 2018 3:17 am

Re: Portfolio Review - BAM Portfolio

Post by typical.investor » Sat Aug 31, 2019 1:14 am

HippoSir wrote:
Sat Aug 31, 2019 1:01 am
riplip wrote:
Thu Aug 29, 2019 11:12 am
I am very comfortable with the AA, but have begun to second guess the SCV tilt side of the portfolio because of the recent performance, or lack thereof (3-5 years).
I just want to note that 3-5 years is a small amount of time when evaluating portfolio performance. The right time to switch your tilt was 5 years ago, doing it now seems like performance chasing, one of the most common reasons for investor underperformance.

A link discussing the detrimental effect of performance chasing from Vanguard: https://pressroom.vanguard.com/nonindex ... y_2014.pdf

If your portfolio was a mess I'd be telling you to switch, but it's a well designed portfolio that happens to target asset classes that have underperformed recently. What's your confidence in being able to hold on if total market underperforms for the next 5 years? If you do switch, I implore you to hold fast from then on and keep things simple rather than continuing to chase asset classes after the fact.
I agree for the equities, but what about the alternatives?

Generally an index investor will have broad exposure. Even the DFA value funds have that.

For reinsurance though, you are holding one company. What if the industry is solid but that one company not so much?

For peer lending, it seems to be the same.

In the name of "diversification", the portfolio seems to have quite a bit of exposure to the execution of those particular companies.

So I'd want to get rid of the alternatives, but bonds have done stellar lately - probably too good - and I expect will come back to earth in time. Meaning of course maybe it's not the best time to jump in -- going to something that's done well recently from something that hasn't.

I'll agree with whatever the OP decides but just yuck. I don't have the stomach for switching allocations and I don't have the stomach for those alts.

HippoSir
Posts: 65
Joined: Tue Jul 03, 2018 2:56 pm

Re: Portfolio Review - BAM Portfolio

Post by HippoSir » Sat Aug 31, 2019 1:28 am

typical.investor wrote:
Sat Aug 31, 2019 1:14 am
I agree for the equities, but what about the alternatives?
I didn't want to ramble on for too long so avoided discussing the alternatives, but I completely agree, it's an asset class I avoid (in truth, primarily because I don't understand them). If I found myself in OPs position I would keep the equity allocation but change the alternatives for bond funds. Like you said however, bonds have been on a tear lately, so maybe in reality I'd end up just not changing anything...

BigJohn
Posts: 1801
Joined: Wed Apr 02, 2014 11:27 pm

Re: Portfolio Review - BAM Portfolio

Post by BigJohn » Sat Aug 31, 2019 5:21 am

Northern Flicker wrote:
Fri Aug 30, 2019 11:02 pm
A portfolio with alts does not have to be expensive. VPGDX has an expense ratio of 0.32% and no advisor fees needed.

https://investor.vanguard.com/mutual-fu ... olio/vpgdx

Despite the name (managed payout) dividends can be reinvested and the portfolio is a modern portfolio theory-based construction with exposure to alternative strategies, commodities, and a market neutral portfolio.

Annualized return since Dec 2014 is 4.43%. Cost does matter.

https://www.portfoliovisualizer.com/bac ... 0&total3=0
Interesting... even at only 25% alt exposure it looks to have far less turnover than the BAM alt funds as well so it should be more tax efficient. Plus it avoids having to pay the adviser fee. I'm not interested in alt fund investing but if I was this sure seems a better approach to get that exposure unless I'm missing something.

User avatar
dogagility
Posts: 635
Joined: Fri Feb 24, 2017 6:41 am

Re: Portfolio Review - BAM Portfolio

Post by dogagility » Sat Aug 31, 2019 5:22 am

riplip wrote:
Thu Aug 29, 2019 11:12 am
Would love any feedback/thoughts on this portfolio as well as thoughts on how to proceed once I move to self managed since I wont be able to add to the DFA funds. Three fund portfolio sure sounds a whole lot easier after writing all of this!
For factor investing, here's a useful video on the Periodic Table of Investment Returns. https://www.evidenceinvestor.com/video/ ... t-returns/.
I would take the video's conclusions to heart:
1. Don't look for trends
2. Don't get carried away
3. Don't discard
4. Do diversify
5. Do rebalance

Yes, the Taylor Larimore/Boglehead three fund portfolio is a whole lot easier in practice as well as psychologically.
Taking "risk" since 1995.

3funder
Posts: 1082
Joined: Sun Oct 15, 2017 9:35 pm

Re: Portfolio Review - BAM Portfolio

Post by 3funder » Sat Aug 31, 2019 7:06 am

The only issue I have with your portfolio is the allocation to alternative investments. In my opinion, stock and bonds are all one needs.

livesoft
Posts: 68591
Joined: Thu Mar 01, 2007 8:00 pm

Re: Portfolio Review - BAM Portfolio

Post by livesoft » Sat Aug 31, 2019 7:40 am

Let me ask the OP this: Since US large-caps have done quite well, have the performance of the US large-cap funds in your portfolio done quite well as well? Namely DFTCX and DFMVX?
Wiki This signature message sponsored by sscritic: Learn to fish.

FoolStreet
Posts: 867
Joined: Fri Sep 07, 2012 12:18 am

Re: Portfolio Review - BAM Portfolio

Post by FoolStreet » Sat Aug 31, 2019 9:27 am

Northern Flicker wrote:
Sat Aug 31, 2019 12:38 am
VSMGX LifeStrategy Moderate Growth returned 5.7% annualized since Dec 2014:

https://www.portfoliovisualizer.com/bac ... 0&total3=0
You see what I’m getting at. OP should now compare costs.

Random Walker
Posts: 4188
Joined: Fri Feb 23, 2007 8:21 pm

Re: Portfolio Review - BAM Portfolio

Post by Random Walker » Sat Aug 31, 2019 9:43 am

typical.investor wrote:
Sat Aug 31, 2019 1:14 am

I agree for the equities, but what about the alternatives?

Generally an index investor will have broad exposure. Even the DFA value funds have that.

For reinsurance though, you are holding one company. What if the industry is solid but that one company not so much?

For peer lending, it seems to be the same.

In the name of "diversification", the portfolio seems to have quite a bit of exposure to the execution of those particular companies.
Not sure what you mean lack of diversification / one company regarding the alternatives. Just like Vanguard is a single company with funds comprised of hundreds or even thousands of stocks, Stone Ridge is one company. It’s reinsurance fund has many insurance contracts across a diverse collection of risks. It’s alternative lending fund is involved with multiple, I think about 10, different lending platforms that each have probably thousands of individual loans.

Dave

User avatar
nedsaid
Posts: 12773
Joined: Fri Nov 23, 2012 12:33 pm

Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Sat Aug 31, 2019 9:50 am

skeptical wrote:
Fri Aug 30, 2019 6:26 pm
nedsaid wrote:
Fri Aug 30, 2019 4:44 pm
So yes, the Alts would have been a drag over the last three years. The four in combination haven't done as well as good old boring bonds. Vanguard Total Bond Market Index Admiral has a 3 year performance of 3.01% a year and a five year performance of 3.30% per year. The combination of the four Alts recommended by Buckingham had returns that were flat or slightly negative.

Again, three years isn't enough to make definitive conclusions but the record here is disappointing.
For those that use alts, I am curious about three things:
- What do you consider "not successful" ? alts cannot be compared to bonds, as they are designed and marketed as "equity like returns". I would think that bond like (or less) returns is not a success.
- What is an acceptable failure rate over a five year or ten year period ? Phrased differently, would you hold an alt if you believed that over 5 years there was a 50% of not being successful, that is, having a flat return ?
- How is it possible for four alt funds, all uncorrelated to equities, all with very different strategies, to simultaneously "not succeed" over a 3-5 year period ? Is this just due to chance ? Or do you believe there is there a correlation between these four funds that is not currently understood ?

Thanks,
skeptical
I am not the biggest expert here on Alternative investments. Part of it is how you define them, my definition now would be Style Premia type of funds that use shorts/leverage/derivatives and the interval (semi-liquid) funds that attempt to take advantage of the illiquidity premium. I suppose you could add what I call "portfolio insurance", investments that have little or no real return but have no correlation to stocks. Commodities and Gold would be in this area of portfolio insurance. I am neutral on these as well. Also I invested in cutting edge investments when they came available like REITs and TIPS which were the Alts of their day but became mainstream pretty quickly.

Three things I expect from Alts: Uncorrelated returns from stocks, the 6% to 7% returns you used to be able to get from bonds, and portfolio protection when you most need it as in a crisis. The reality seems to be that you get maybe 2% to 3% returns, the meager returns aren't as uncorrelated as you think, and the Alts might crash with everything else in a crisis. We are in uncharted territory here, we are trying to bring to retail investors techniques that the big hedge funds and the Yale Endowment have been doing for years. I am not sure this is going to work.

One issue is that the hedge funds and the very large institutions might be getting the best of everything in the Alt space. Hard to succeed here when you get the scraps the big boys don't want. So pretty much the firms like AQR and Stone Ridge need to attract the same caliber of talent that the Ray Dalios of the world attract with their successful hedge funds. Most hedge funds don't enjoy the success that Mr. Dalio has achieved. If you are going to play in this area, you really need to know what you are doing. It isn't enough just to think you know what you are doing. My concern is that Advisory firms like Buckingham could be in over their head with these investments. It will take time to see if retail firms can compete here.

I have dipped my toe with about 1.5% of my retirement in a couple of Liquid Alts: a market neutral fund and a long/short income fund. I took these on with the portfolio service that will manage 30% of my retirement.
A fool and his money are good for business.

Post Reply