Due diligence on RAFI Pure Small Value

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Ketawa
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Re: Due diligence on RAFI Pure Small Value

Post by Ketawa »

jaab wrote:
Ketawa wrote:Portfolio Visualizer doesn't incorporate profitability (PMU):
Nowadays you can select the Frazzini/Pedersen data set, not just F/F research and benchmark. Then you get two additional options; QMJ (Asness) and BAB (low beta).

QMJ seems to be a better idea (multiple metrics), for similar reasons as for value, I think: vague concept in general (not like size), every single metrics has made or may make problems, every metric is just a second degree proxy in itself and may carry idiosyncratic noise or whatever. also there does not seem to be anything special about gross profitability: http://www.alphaarchitect.com/blog/2014 ... asurement/
Interesting, I wasn't aware of this option. But I'm not sure what to think. It seems like including QMJ results in some very strange outcomes for small cap value funds.

Typically, we expect them to have <1.0 loading on Mkt-RF and negative Mom. But if you look at common SCV funds that have been around a long time like IJS, VBR, RZV, and DFSVX with the Frazzini/Pedersen data set and include QMJ, you generally get >1.0 loading Mkt-RF, positive Mom, and fairly large positive loads on QMJ.

Sufficiently diversified equity funds should have a Mkt-RF very close to 1.0. SCV funds we expect to be a little lower due to higher REITs, but most of these are over 1.1. IJS in particular is an outlier since it has 0.5 loading on QMJ and worse than -3% annual alpha. Seems strange since it has followed the same index its entire history.

I find it hard to accept that those numbers have a lot of value. The French/Fama numbers result in far smaller alphas in either direction and seem to do just as good a job at explaining returns.
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Ketawa
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Re: Due diligence on RAFI Pure Small Value

Post by Ketawa »

grap0013 wrote:Not that you asked me, but the biggest bugaboo with QSMLX is the lack of underlying index. If this fund were to trail PXSV for 10 years you'd have no idea if it were due to luck of the draw in differences of indexes or if AQR had poor implementation and "frictional costs" were dragging 2% per year or something to that nature. You'd be in the dark. At that point do you switch to PXSV or stay the course for QSMLX hoping to turn it around? On the other hand, if PXSV trails QSMLX for 10 years I have no problem with it as long as PXSV keeps its returns close to its underlying index. I will not confuse strategy with outcome.

Therefore, PXSV is much more transparent than QSMLX in my view and I've read the Fundamental Index and I like their methodology.
True, but the same thing would apply to DFA as well. It seems like AQR is well respected, has been endorsed by Larry and approved for use in BAM, etc.

I already hold QICLX and QEELX; I don't think the alternatives for international developed and emerging are as good. Although I do have some PDN.
randomguy
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Re: Due diligence on RAFI Pure Small Value

Post by randomguy »

grap0013 wrote:
Ketawa wrote: I have been keeping my eye on QSMLX as a potential holding. I'm still undecided, but it looks pretty good in Portfolio Visualizer. There isn't much data on it yet and no index data available to evaluate it.
Not that you asked me, but the biggest bugaboo with QSMLX is the lack of underlying index. If this fund were to trail PXSV for 10 years you'd have no idea if it were due to luck of the draw in differences of indexes or if AQR had poor implementation and "frictional costs" were dragging 2% per year or something to that nature. You'd be in the dark. At that point do you switch to PXSV or stay the course for QSMLX hoping to turn it around? On the other hand, if PXSV trails QSMLX for 10 years I have no problem with it as long as PXSV keeps its returns close to its underlying index. I will not confuse strategy with outcome.

Therefore, PXSV is much more transparent than QSMLX in my view and I've read the Fundamental Index and I like their methodology.
You also can't confuse strategy with execution. If PXSV is trailing every other small value fund for 10+ years, you have to question if the index is the right one. Now figuring out if the underperformance is warranted (i.e. maybe you are getting beat by small value funds that invest in bigger growthier stocks) or not (maybe you index just buys high and sells low or is really inefficient).

Now the fact that vanguard doesn't let me buy the fund (seem to be short about 4.9 million dollars) is a good reason not to buy it:)
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Re: Due diligence on RAFI Pure Small Value

Post by caklim00 »

QSMLX Top Holdings
iShares Russell 2000 10.82%
Jpmorgan Us Var 12/49 5.60%

What's up with that?
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Ketawa
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Re: Due diligence on RAFI Pure Small Value

Post by Ketawa »

caklim00 wrote:QSMLX Top Holdings
iShares Russell 2000 10.82%
Jpmorgan Us Var 12/49 5.60%

What's up with that?
Looks inaccurate. It's not uncommon for funds like this to hold a liquid ETF in the same asset class, presumably for redemptions I would guess. From the fund's web site:

Top Ten Holdings % of Net Assets
RUSSELL 2000 INDEX ISHARES 0.7%
AMKOR TECHNOLOGY INC USD0.001 0.6%
DECKERS OUTDOOR CORP USD0.01 0.5%
SKECHERS USA INC USD0.001 A 0.5%
SYMETRA FINANCIAL CORP USD0.01 0.5%
DEVRY EDUCATION GROUP INC 0.5%
MENTOR GRAPHICS CORP 0.5%
FEDERAL- MOGUL HOLDINGS CORP 0.5%
PRIMERICA INC USD0.01 0.5%
SYNNEX CORP USD0.001 0.5%
Top Ten Total (%) 5.4%
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grap0013
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Re: Due diligence on RAFI Pure Small Value

Post by grap0013 »

randomguy wrote:
You also can't confuse strategy with execution. If PXSV is trailing every other small value fund for 10+ years, you have to question if the index is the right one. Now figuring out if the underperformance is warranted (i.e. maybe you are getting beat by small value funds that invest in bigger growthier stocks) or not (maybe you index just buys high and sells low or is really inefficient).
Nah. If it's trailing its index by a little I don't care if it underperforms relative to other SCV options. I like the "bones" of the underlying index and I'm immune to tracking error.
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grap0013
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Re: Due diligence on RAFI Pure Small Value

Post by grap0013 »

Ketawa wrote: True, but the same thing would apply to DFA as well. It seems like AQR is well respected, has been endorsed by Larry and approved for use in BAM, etc.
Good point.
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Re: Due diligence on RAFI Pure Small Value

Post by jaab »

Ketawa wrote:I find it hard to accept that those numbers have a lot of value.
This seems to be a general problem with those funds and quality/profitability regressions, regardless if done with PMU or QMJ. Because with PMU it's the same:
I am much less certain that the (Novy-Marx) profitability loads give meaningful results (particularly for smallcap stocks). For example the profitability ("company quality") load on S&P 600 pure value is about +0.30. This makes little sense to me. The RAFI fund also has a relatively large profitability load over the full 1976 to 2013 period, and a large negative momentum load (both much larger than CRSP Small Value). Since 07/2001, the momentum load on RAFI SV was -0.19 vs. CRSP Small Value = -0.05. So it seems RAFI is picking up much more negative momentum than most small value funds (including DFA), but the overall performance (all things considered) seems relatively good.
by Robert T » Fri Nov 22, 2013 9:23 pm | http://www.bogleheads.org/forum/viewtop ... 1#p1862811 and
The ‘profitability’ loads on both the RAFI pure value series and the S&P600 pure value series are positive and significant, and is larger on the S&P600 pure value series (+0.36), than the RAFI series (+0.2) [this compares to about a +0.06 ‘profitability’ load on the DFA small value fund). This does not make much sense to me. The correlation coefficient between the RAFI series and the ‘profitability premium’ is zero, and between HmL and the ‘profitability premium’ its -0.27. So if anything one would expect a negative coefficient.

IMO, just using the three factor model gets you most of the way, is simple, and the relative alphas likely embody the effects of omitted variables. A close to zero alpha seems to suggest no omitted variables or simply that they cancel each other out.
by Robert T » Sat Nov 23, 2013 12:04 pm | http://www.bogleheads.org/forum/viewtop ... 7#p1863397
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grap0013
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Re: Due diligence on RAFI Pure Small Value

Post by grap0013 »

RobertT wrote: I am much less certain that the (Novy-Marx) profitability loads give meaningful results (particularly for smallcap stocks). For example the profitability ("company quality") load on S&P 600 pure value is about +0.30. This makes little sense to me. The RAFI fund also has a relatively large profitability load over the full 1976 to 2013 period, and a large negative momentum load (both much larger than CRSP Small Value). Since 07/2001, the momentum load on RAFI SV was -0.19 vs. CRSP Small Value = -0.05. So it seems RAFI is picking up much more negative momentum than most small value funds (including DFA), but the overall performance (all things considered) seems relatively good.
This is why I actually give more weighting to PXSV's backtested results as opposed to factor loads.

I think it's better to have a long backtested formulaic data series with decent looking ballpark factor loads (both ex-ante and ex-post) rather than focusing on looking for the best factor loads first but having little or poor backtested data to support a fund.

Backtested results should come first in priorities IMO. Just look how factor loads dropped the ball and missed profitability until 2012. I think focusing on factor loads gives one more sense of control and that's probably why most favor them. Psych 101.
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Re: Due diligence on RAFI Pure Small Value

Post by jaab »

grap0013 wrote:I think focusing on factor loads gives one more sense of control and that's probably why most favor them. Psych 101.
I tend to agree with this. I am guilty myself. :happy
It's pretty noisy reverse engineering. Unless maybe you have access to full blown commercial analysis with reliable data (e.g. Factset with equity model of MSCI Barra, FI model of Wilshire Axiom and so on). Even then ex-post regressions are still not that great.
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Re: Due diligence on RAFI Pure Small Value

Post by randomguy »

grap0013 wrote:
randomguy wrote:
You also can't confuse strategy with execution. If PXSV is trailing every other small value fund for 10+ years, you have to question if the index is the right one. Now figuring out if the underperformance is warranted (i.e. maybe you are getting beat by small value funds that invest in bigger growthier stocks) or not (maybe you index just buys high and sells low or is really inefficient).
Nah. If it's trailing its index by a little I don't care if it underperforms relative to other SCV options. I like the "bones" of the underlying index and I'm immune to tracking error.
So if a normal cap weighted small value fund returns 20%/yr for a decade and the PXSV pure value index returns 15% for a decade, you are going to hold the course because you like the theory behind it? Personally I expect that is going to be real hard to do. It is easy to say SV is out of favor which is why I am getting less return than the S&p 500. It is a lot harder to hold the course when you are getting trounced by the same class of mutual fund.
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Re: Due diligence on RAFI Pure Small Value

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randomguy wrote: So if a normal cap weighted small value fund returns 20%/yr for a decade and the PXSV pure value index returns 15% for a decade, you are going to hold the course because you like the theory behind it? Personally I expect that is going to be real hard to do. It is easy to say SV is out of favor which is why I am getting less return than the S&p 500. It is a lot harder to hold the course when you are getting trounced by the same class of mutual fund.
If this was a concern I'd have too hold multiple SCV domestic funds, multiple iSCV funds, multiple EM funds. No way man. Pick the fund that you think gives you the best exposure (after extensive research) to an asset class and ride that horse into the ground. If you don't do that you will be performancing chasing within asset classes and not earn the premium. If PXSV trails SCV from 20% to 15% for 10 years I will think SCV is a little bubbly and that PXSV has a nice payday coming because it's staying more true to intrinsic stock valuations rather than its SCV brethren. Plus 15% a year is awesome! I wouldn't be complaining!
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Re: Due diligence on RAFI Pure Small Value

Post by JohnnyFive »

grap0013 wrote:
randomguy wrote: So if a normal cap weighted small value fund returns 20%/yr for a decade and the PXSV pure value index returns 15% for a decade, you are going to hold the course because you like the theory behind it? Personally I expect that is going to be real hard to do. It is easy to say SV is out of favor which is why I am getting less return than the S&p 500. It is a lot harder to hold the course when you are getting trounced by the same class of mutual fund.
If this was a concern I'd have too hold multiple SCV domestic funds, multiple iSCV funds, multiple EM funds. No way man. Pick the fund that you think gives you the best exposure (after extensive research) to an asset class and ride that horse into the ground. If you don't do that you will be performancing chasing within asset classes and not earn the premium. If PXSV trails SCV from 20% to 15% for 10 years I will think SCV is a little bubbly and that PXSV has a nice payday coming because it's staying more true to intrinsic stock valuations rather than its SCV brethren. Plus 15% a year is awesome! I wouldn't be complaining!
Couldn't agree more than this.
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Re: Due diligence on RAFI Pure Small Value

Post by randomguy »

JohnnyFive wrote:
grap0013 wrote:
randomguy wrote: So if a normal cap weighted small value fund returns 20%/yr for a decade and the PXSV pure value index returns 15% for a decade, you are going to hold the course because you like the theory behind it? Personally I expect that is going to be real hard to do. It is easy to say SV is out of favor which is why I am getting less return than the S&p 500. It is a lot harder to hold the course when you are getting trounced by the same class of mutual fund.
If this was a concern I'd have too hold multiple SCV domestic funds, multiple iSCV funds, multiple EM funds. No way man. Pick the fund that you think gives you the best exposure (after extensive research) to an asset class and ride that horse into the ground. If you don't do that you will be performancing chasing within asset classes and not earn the premium. If PXSV trails SCV from 20% to 15% for 10 years I will think SCV is a little bubbly and that PXSV has a nice payday coming because it's staying more true to intrinsic stock valuations rather than its SCV brethren. Plus 15% a year is awesome! I wouldn't be complaining!
Couldn't agree more than this.
On the other hand at some point don't you realize that you picked a poor execution of your strategy? You goal was to exploit the small value premium and if it turns out other funds do a better job, when do you reconsider. In the real world you are unlikely to see huge difference. And you need to decide if a .5% difference in returns is a fault of the index or random chance. It also gets easier to justify when after 10 years of underperformance, brand new fund Z with half the ER, and a new snazzy index (fundamental, momentum, high quality pure value, small cap fund returned 20%/yr for the past 40 years. Of course only 5 stocks passed its screens:)) is announced.
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Re: Due diligence on RAFI Pure Small Value

Post by Ketawa »

randomguy wrote:It also gets easier to justify when after 10 years of underperformance, brand new fund Z with half the ER, and a new snazzy index (fundamental, momentum, high quality pure value, small cap fund returned 20%/yr for the past 40 years. Of course only 5 stocks passed its screens:)) is announced.
QSMLX has 591 holdings. It meets all of your criteria except half the ER.

:sharebeer
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Re: Due diligence on RAFI Pure Small Value

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randomguy wrote: On the other hand at some point don't you realize that you picked a poor execution of your strategy?
Do you abandon emerging markets if they underperform the US for 15 years? If you liked the initial reason for adding them, the strategy should not change. Similar logic applies to selection of specific SCV funds. I confess I changed my Roth from PRFZ to PXSV in Feb. 2012. I did a couple weeks of research first and the switch made sense from a strategy perspective. I'm up an additional 6% total because of this, but I'm not really keeping track! :wink:
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Re: Due diligence on RAFI Pure Small Value

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grap0013 wrote:
randomguy wrote: On the other hand at some point don't you realize that you picked a poor execution of your strategy?
Do you abandon emerging markets if they underperform the US for 15 years? If you liked the initial reason for adding them, the strategy should not change. Similar logic applies to selection of specific SCV funds. I confess I changed my Roth from PRFZ to PXSV in Feb. 2012. I did a couple weeks of research first and the switch made sense from a strategy perspective. I'm up an additional 6% total because of this, but I'm not really keeping track! :wink:
Abandoning emerging markets is changing strategies. Switching between various small value funds is a tactical decision. If you have years where you expect great returns (small and value are in favor) and don't get them, you have to worry about your fund choice. I happen to like Arnott's logic but I am more than willing to admit it might be a poor tactical choice. I might be better off going VBR (i.e. PXSV doesn't make enough to cover its added fees ) or QSMLX (its random screen does generate enough return to pay for its higher ER). I am more than willing to reconsider that choice when more info becomes available. For example if vanguard lets you buy AQR funds for 8 bucks, I would be a heck of a lot more interested. Or if I had a spare 5 million to sink into one:)
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Re: Due diligence on RAFI Pure Small Value

Post by Ketawa »

TD Ameritrade lets you buy AQR funds for $50 and the minimum invesment isn't $5 million. They once made a mistake and forgot to charge me, so I bought two funds for an average of $25 each. You just need to limit transactions.
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Re: Due diligence on RAFI Pure Small Value

Post by JohnnyFive »

In looking at the AQR fund in question, I don't really see why it would be a better option than PXSV.
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Re: Due diligence on RAFI Pure Small Value

Post by Ketawa »

JohnnyFive wrote:In looking at the AQR fund in question, I don't really see why it would be a better option than PXSV.
QSMLX is about as small and a little less valuey. The big differences I see are:

1. QSMLX targets momentum, PXSV has had a pretty big negative loading on momentum
2. QSMLX explicitly targets profitability, PXSV has had a positive loading on it which should probably continue
3. QSMLX has had negative alpha in regressions, PXSV has had positive alpha
4. QSMLX has a higher ER

Depending on your opinion of how these things will play out in the future, you might prefer one or the other. I did some more detailed analysis in this thread.
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Re: Due diligence on RAFI Pure Small Value

Post by JohnnyFive »

The momentum thing I don't quite get, and it doesn't bother me. Momentum is almost always inversely proportional to value. The more valuey a fund, the more likely it will suffer from negative momentum. If that sort of thing bothers you, I would say...tilt less.
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Re: Due diligence on RAFI Pure Small Value

Post by Ketawa »

A small cap value fund doesn't have to suffer from negative momentum. QSMLX hasn't been around for very long, and there's only 15 months of data for regressions. For comparison over the same time period:

VBR: 0.17
QSMLX: 0.10
BOSVX: 0.02
PXSV: -0.13
DFSVX: -0.30
RZV: -0.68

Obviously a very short time period, but I'd be willing to bet that QSMLX will be able to maintain a positive loading. All these other funds have been negative over longer time periods. Momentum mixes so well with a value portfolio, why would you settle for having negative exposure?
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Re: Due diligence on RAFI Pure Small Value

Post by JohnnyFive »

Yes, but, I would argue that, while it doesn't HAVE to suffer from negative momentum, it's probably not as "valuey" as those that do. RZV is an etf that gets KILLED for it's negative momentum, but, it's likely the most "valuey" fund out there right now. Maybe I'm wrong on this, but, that's how I'm seeing it.
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Re: Due diligence on RAFI Pure Small Value

Post by vesalius »

Johnny, if you have not already, check out these 2 threads for some data as to why incorporating momentum as opposed to using only value may help bolster and diversify your returns.

DFA-RAFI & factor diversification within 30:30:40 portfolio
A close look at value and momentum
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Re: Due diligence on RAFI Pure Small Value

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^ Right. And just as we shouldn't look at assets in isolation, nor should we look at factor loads in isolation. I think with RZV the large negative momentum load is a big drag on overall returns. For other funds with smaller negative momentum loading it still might be worth it depending on the amount of other factor loads.
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Re: Due diligence on RAFI Pure Small Value

Post by JohnnyFive »

Grap, I'm curious as to what your overall AA looks like. Do you use MTUM or any other fund loading on momentum?
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Re: Due diligence on RAFI Pure Small Value

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JohnnyFive wrote:Grap, I'm curious as to what your overall AA looks like. Do you use MTUM or any other fund loading on momentum?
No momentum load targeted. Sent you a PM.
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Re: Due diligence on RAFI Pure Small Value

Post by supertreat »

I'm curious as to what knowledgeable people consider the best funds to gain exposure to all the risk factors without DFA access. Anyone?
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Re: Due diligence on RAFI Pure Small Value

Post by caklim00 »

supertreat wrote:I'm curious as to what knowledgeable people consider the best funds to gain exposure to all the risk factors without DFA access. Anyone?
The originator of this post Robert T. Look at his page and he walks through his methodology. There is a bunch of useful information in there.
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Re: Due diligence on RAFI Pure Small Value

Post by grap0013 »

supertreat wrote:I'm curious as to what knowledgeable people consider the best funds to gain exposure to all the risk factors without DFA access. Anyone?
See my posts:

PXSV
PDN
DGS/PXH
There are no guarantees, only probabilities.
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Re: Due diligence on RAFI Pure Small Value

Post by garlandwhizzer »

I have a question. Many factor investors on this board believe that, other than DFA funds, PXSV is perhaps the best way to get small value factor exposure. According to Morningstar charts, PXSV has been around for almost 10 years and during that time it has underperformed VB, Vanguard's cap weighted small cap index fund. PXSV outperformed over the last 5 years but it underperformed YYD, 1 yr., and for the longest time period available (since it started). In short sometimes it outperforms ultra-cheap SC Blend, sometimes it underperforms, but over the longest period for which we have a comparison, almost 10 years, it has failed to beat a simple cap weighted index of small cap stocks. Does this mean that the value factor plus the small factor haven't been positive during that time or that they have been positive but haven't been captured by the fund? I know factors can have negative returns for long periods of years occasionally but I didn't know that the last 9 - 10 years or so has been such a period for SCV.

Garland Whizzer
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Re: Due diligence on RAFI Pure Small Value

Post by vesalius »

garlandwhizzer wrote:I have a question. Many factor investors on this board believe that, other than DFA funds, PXSV is perhaps the best way to get small value factor exposure. According to Morningstar charts, PXSV has been around for almost 10 years and during that time it has underperformed VB, Vanguard's cap weighted small cap index fund. PXSV outperformed over the last 5 years but it underperformed YYD, 1 yr., and for the longest time period available (since it started). In short sometimes it outperforms ultra-cheap SC Blend, sometimes it underperforms, but over the longest period for which we have a comparison, almost 10 years, it has failed to beat a simple cap weighted index of small cap stocks. Does this mean that the value factor plus the small factor haven't been positive during that time or that they have been positive but haven't been captured by the fund? I know factors can have negative returns for long periods of years occasionally but I didn't know that the last 9 - 10 years or so has been such a period for SCV.

Garland Whizzer
The Fund tracked an active Intellidex index prior to 2011. It shifted to the Rafi pure small value index after that and has tracked that index well subsequently. Check out this great explanation by bernston: PXSV shift from Intellidex to Rafi
Last edited by vesalius on Tue Sep 30, 2014 6:55 pm, edited 1 time in total.
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Re: Due diligence on RAFI Pure Small Value

Post by supertreat »

grap0013 wrote:
supertreat wrote:I'm curious as to what knowledgeable people consider the best funds to gain exposure to all the risk factors without DFA access. Anyone?
See my posts:

PXSV
PDN
DGS/PXH
Grap,
Thanks for the list. I'm currently using vanguard mutual funds as I prefer them over ETFs due to ease of automatic transactions and rebalancing, but have been thinking about biting the bullet and switching to ETFs to get more factor tilts. Now I'm trying to figure out the best brokerage to use...
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Re: Due diligence on RAFI Pure Small Value

Post by Ketawa »

I hold PXSV and PDN, as well as QICLX and QEELX. Considering moving to QSMLX for domestic SCV and adding QSPIX, but haven't made final decision. AQR funds are available with low minimums at Fidelity and TD Ameritrade, and possibly other brokerages.
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Re: Due diligence on RAFI Pure Small Value

Post by JohnnyFive »

Ketawa wrote:I hold PXSV and PDN, as well as QICLX and QEELX. Considering moving to QSMLX for domestic SCV and adding QSPIX, but haven't made final decision. AQR funds are available with low minimums at Fidelity and TD Ameritrade, and possibly other brokerages.
What is it about QSMLX that you seem to like better than PXSV, given that you are considering the shift over? And, what are the fees at Fidelity and TDA for buying into these funds?
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Re: Due diligence on RAFI Pure Small Value

Post by grap0013 »

supertreat wrote: Grap,
Thanks for the list. I'm currently using vanguard mutual funds as I prefer them over ETFs due to ease of automatic transactions and rebalancing, but have been thinking about biting the bullet and switching to ETFs to get more factor tilts. Now I'm trying to figure out the best brokerage to use...
Not a big decision. Just use Vanguard. Make monthly automatic contributions to money market fund and buy ETFs quarterly or even semiannually. Occasional tax lost harvesting. Should be <$100 per year in annual fees. Easy, cheap, and effective.
There are no guarantees, only probabilities.
supertreat
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Re: Due diligence on RAFI Pure Small Value

Post by supertreat »

grap0013 wrote:
supertreat wrote: Grap,
Thanks for the list. I'm currently using vanguard mutual funds as I prefer them over ETFs due to ease of automatic transactions and rebalancing, but have been thinking about biting the bullet and switching to ETFs to get more factor tilts. Now I'm trying to figure out the best brokerage to use...
Not a big decision. Just use Vanguard. Make monthly automatic contributions to money market fund and buy ETFs quarterly or even semiannually. Occasional tax lost harvesting. Should be <$100 per year in annual fees. Easy, cheap, and effective.
This is actually the option I was looking at. Thanks for the reassurance.
Assets - Liabilities = Equity + (Income - Expenses)
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Ketawa
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Re: Due diligence on RAFI Pure Small Value

Post by Ketawa »

JohnnyFive wrote:
Ketawa wrote:I hold PXSV and PDN, as well as QICLX and QEELX. Considering moving to QSMLX for domestic SCV and adding QSPIX, but haven't made final decision. AQR funds are available with low minimums at Fidelity and TD Ameritrade, and possibly other brokerages.
What is it about QSMLX that you seem to like better than PXSV, given that you are considering the shift over? And, what are the fees at Fidelity and TDA for buying into these funds?
I explained earlier in this post and the thread linked in it.
Ketawa wrote:
JohnnyFive wrote:In looking at the AQR fund in question, I don't really see why it would be a better option than PXSV.
QSMLX is about as small and a little less valuey. The big differences I see are:

1. QSMLX targets momentum, PXSV has had a pretty big negative loading on momentum
2. QSMLX explicitly targets profitability, PXSV has had a positive loading on it which should probably continue
3. QSMLX has had negative alpha in regressions, PXSV has had positive alpha
4. QSMLX has a higher ER

Depending on your opinion of how these things will play out in the future, you might prefer one or the other. I did some more detailed analysis in this thread.
The AQR funds are considered Transaction Fee funds at both TD Ameritrade and Fidelity. Transactions are $50, except Fidelity does not charge to sell shares. I am limiting my transactions to once a year. It seems that Fidelity would be better due to far less fees for annual rebalancing.
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Robert T
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Re: Due diligence on RAFI Pure Small Value

Post by Robert T »

.
FWIW - Here are some historical simulated returns since 2002 - the first calendar year that we have data for CRSP US Small Value (the index tracked by the Vanguard Small Value fund).

2002-2014 - Annualized return
14.0% = RAFI Fundamental Small Value [tracked by PXSV]
12.5% = Dimensional US Small Value (with profit sort) [tracked by DFSVX]
11.9% = FTSE RAFI US 1500 [tracked by PRFZ]
11.5% = CRSP US Small Value [tracked by VISVX]
11.2% = S&P SmallCap 600 Pure Value [tracked by RZV]
.9.6% = S&P SmallCap 600 Value [tracked by IJS]
.8.9% = Russell 2000 Value [tracked by IWN]

(actual fund data was used where available, index return data was used for period before fund started tracking the associated index).

Quite a wide dispersion of (simulated) small value index performance.
Obviously no guarantees.

Robert
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oneleaf
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Re: Due diligence on RAFI Pure Small Value

Post by oneleaf »

Thanks for the update, Robert T!
I am still trying to make room for small value in tax sheltered space, which is difficult because I have a very high bond allocation. So I actually own one share, just for kicks, of PXSV. Hopefully there will be a buying opportunity when small value is cheap, and hopefully then, I will actually have space to build a real position in it.
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