Vanguard Precious Metals and Mining Fund is changing

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by aspirit » Mon Jul 30, 2018 9:55 pm

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by TimeRunner » Mon Jul 30, 2018 10:06 pm

With apologies to Lake Wobegon, not all of Vanguard's children are above average.

https://en.wikipedia.org/wiki/Lake_Wobegon
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by nisiprius » Wed Aug 01, 2018 8:16 pm

It doesn't seem to me... never having even considered this fund or having paid much attention to it... that its behavior has pretty much reflected the behavior of precious metals equity, as shown by Morningstar's category average (orange) and a competitor's offering (FSAGX, Fidelity Select Gold Portfolio.

So I wonder what's going on, as it seems as if it's been a perfectly reasonable precious metals equity fund. The change seems like a vote of no confidence by Vanguard in precious metals equity itself.

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by John151 » Wed Aug 01, 2018 10:28 pm

sport wrote:
Fri Jul 27, 2018 3:13 pm
I love Vanguard. However, when it comes to "staying the course", that is something they tell others to do, but do not follow themselves. I am still unhappy about the change to what used to be the Tax Managed International Fund. It is no longer tax managed, but I am locked in.
Me too.

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by siamond » Wed Aug 01, 2018 11:12 pm

willthrill81 wrote:
Fri Jul 27, 2018 9:50 pm
I don't understand why those who didn't want to own gold and silver didn't just buy the physical metals and hold them in a safe deposit box, unless they were trying to just trade them in the short-term.
Investing [speculating] in the price of gold/silver isn't the same thing as investing with gold/silver miners (the companies digging for it). Before 2008, the recommendation (incl. from the good Dr. Bernstein) was to go with precious metals miners because, by virtue of being actual companies, they should display actual economic growth over time, while the price of gold doesn't really have a good economic reason to change (its price is primarily driven by speculation and investors' emotions & perceptions). And of course, the reasoning was based on the past negative correlation with the US market.

Then the 2008/09 crash occurred. And miners crashed and burned exactly like other companies, in a fully correlated way. While the price of gold did display some level of negative correlation during the crisis. In hindsight, it seems pretty clear that nobody in their right mind should have a dedicated asset allocation to precious metals miners. But, well, before 2008, the case did seem pretty solid...
willthrill81 wrote:
Fri Jul 27, 2018 9:50 pm
Portfolio Visualizer has used this fund as their proxy for the "precious metals" asset class. I've just notified them that they'll want to change their proxy to something else now.
Yeah, most of Portfolio Visualizer's categories were defined to match what we have in the Simba backtesting spreadsheet. We actually have two data series, one for the price of gold, the other for miners. And I just took a note that we need to think about the latter, because I totally agree that VGPMX is now going in a completely different direction. What a weird, weird, decision from Vanguard. :confused

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by willthrill81 » Wed Aug 01, 2018 11:33 pm

siamond wrote:
Wed Aug 01, 2018 11:12 pm
willthrill81 wrote:
Fri Jul 27, 2018 9:50 pm
I don't understand why those who didn't want to own gold and silver didn't just buy the physical metals and hold them in a safe deposit box, unless they were trying to just trade them in the short-term.
Investing [speculating] in the price of gold/silver isn't the same thing as investing with gold/silver miners (the companies digging for it). Before 2008, the recommendation (incl. from the good Dr. Bernstein) was to go with precious metals miners because, by virtue of being actual companies, they should display actual economic growth over time, while the price of gold doesn't really have a good economic reason to change (its price is primarily driven by speculation and investors' emotions & perceptions). And of course, the reasoning was based on the past negative correlation with the US market.

Then the 2008/09 crash occurred. And miners crashed and burned exactly like other companies, in a fully correlated way. While the price of gold did display some level of negative correlation during the crisis. In hindsight, it seems pretty clear that nobody in their right mind should have a dedicated asset allocation to precious metals miners. But, well, before 2008, the case did seem pretty solid...
I think that the miners-over-metals argument was coming from folks who just didn't like the idea of buying an inanimate object that didn't produce anything, even though they liked the idea of diversification through precious metals. But as you note, this clearly wasn't a good strategy.

I would never buy precious metals through a fund. I own a bit of physical precious metals, as David Stein said in today's episode the "Money for the Rest of Us" podcast, as an "option against the unknown," a sort of insurance policy.
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by Beehave » Wed Aug 01, 2018 11:35 pm

informal guide wrote:
Sun Jul 29, 2018 3:19 pm
One interesting element of the fund going forward - -they have a huge tax loss carryforward - -$8.36 per share or over 86% of NAV as of 6/30/2018. So if the new strategy is successful and generates realized capital gains, shareholders will not be taxed for an extended period of time as long as they continue to hold the fund.
Thanks for that insight. This fund looks interesting as a buffer against extreme events. For example, its investments in critical infrastructure may provide secure income during a downturn and increasing income during an inflation. Given the carry-forward loss, it seems like someone who wants some non-correlated investments could add this to their taxable or IRA-type investments.

A question, though - - if the fund attracts a lot of new money, would that dilute the carry-forward loss benefit for someone holding it in a taxable account?

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by asif408 » Thu Aug 02, 2018 8:04 am

nisiprius wrote:
Wed Aug 01, 2018 8:16 pm
It doesn't seem to me... never having even considered this fund or having paid much attention to it... that its behavior has pretty much reflected the behavior of precious metals equity, as shown by Morningstar's category average (orange) and a competitor's offering (FSAGX, Fidelity Select Gold Portfolio.

So I wonder what's going on, as it seems as if it's been a perfectly reasonable precious metals equity fund. The change seems like a vote of no confidence by Vanguard in precious metals equity itself.

Source
Image
The strategy of the fund has changed several times, IIRC. Larry Swedroe mentioned that they changed the strategy sometime in the mid-2000s. That could explain its divergence from the Fidelity fund in the 2007-2009 crash. Then in 2014 they changed management again and it seemed to be behaving more like it did in the pre-2000 era, at least from what I could tell correlation with gold mining funds increased since that time. Of course, now it is changing again. So just another reason, if you decide to own an active fund, to watch out for strategical changes.

It did seem to be a reasonable fund for the category when they didn't tinker with it. This move seems to be more of a market capitulation to the precious metals category than anything else.

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by siamond » Thu Aug 02, 2018 9:34 am

asif408 wrote:
Thu Aug 02, 2018 8:04 am
The strategy of the fund has changed several times, IIRC. Larry Swedroe mentioned that they changed the strategy sometime in the mid-2000s. That could explain its divergence from the Fidelity fund in the 2007-2009 crash. Then in 2014 they changed management again and it seemed to be behaving more like it did in the pre-2000 era, at least from what I could tell correlation with gold mining funds increased since that time. Of course, now it is changing again. So just another reason, if you decide to own an active fund, to watch out for strategical changes.
Sigh. Do you (or somebody else) know if the other sector-oriented Vanguard funds (e.g. Health VGHCX, Energy VGENX) went through similar strategy changes?

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by barberakb » Fri Aug 03, 2018 2:10 pm

abuss368 wrote:
Mon Jul 30, 2018 12:05 pm
barberakb wrote:
Mon Jul 30, 2018 11:10 am
abuss368 wrote:
Sun Jul 29, 2018 12:57 pm
Jack Bogle has often said that most investors could probably go their entire lifetime without the need for a sector fund.
could probably go and should or will be better off are different things.

I actually own this fund and maybe I just got in at the right time but I am up a nice 20% profit on it.

I also have a sizeable portion in the healthcare fund which has given me a 13% return over the last decade.

Different strokes for different folks...
I did invest in the healthcare fund many years ago. Was that the fund that Ed Owens managed? I believe he may have retired.
I believe so. I stayed the course even after he left. I think I started in this fund in 1998

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by asif408 » Fri Aug 03, 2018 2:32 pm

siamond wrote:
Thu Aug 02, 2018 9:34 am
asif408 wrote:
Thu Aug 02, 2018 8:04 am
The strategy of the fund has changed several times, IIRC. Larry Swedroe mentioned that they changed the strategy sometime in the mid-2000s. That could explain its divergence from the Fidelity fund in the 2007-2009 crash. Then in 2014 they changed management again and it seemed to be behaving more like it did in the pre-2000 era, at least from what I could tell correlation with gold mining funds increased since that time. Of course, now it is changing again. So just another reason, if you decide to own an active fund, to watch out for strategical changes.
Sigh. Do you (or somebody else) know if the other sector-oriented Vanguard funds (e.g. Health VGHCX, Energy VGENX) went through similar strategy changes?
I don't, unfortunately.

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by pascalwager » Sun Aug 05, 2018 11:18 am

Years ago, W Bernstein advised avoiding this fund when it began including base-metal mining (iron, copper, lead, etc.).
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by siamond » Sun Sep 02, 2018 11:41 pm

I was pondering if we should switch the VGPMX data series in the Simba backtesting spreadsheet to something else, possibly complemented back in history by a proper index. Point being to illustrate with happened with this 'Precious Metals and Mining' sector that was clamored to be a good diversifier (and then miserably failed to do so in 2008).

Fidelity Fidelity® Select Gold Portfolio (FASGX) seems the best match (inception in 1986).

Strategy
Investing primarily in companies engaged in exploration, mining, processing, or dealing in gold, or to a lesser degree, in silver, platinum, diamonds, or other precious metals and minerals. Normally investing at least 80% of assets in securities of companies principally engaged in gold-related activities, and in gold bullion or coins. Potentially investing in other precious metals, instruments whose value is linked to the price of precious metals, and securities of companies that manufacture and distribute precious metal and mineral products (such as jewelry, watches, and metal foil and leaf) and companies that invest in other companies engaged in gold and other precious metal and mineral-related activities. Normally investing primarily in common stocks.

Others do not seem a good match or have limited history or do not seem to have a clear advantage over the Fidelity fund:
- SPDR S&P Metals and Mining ETF (XME): broder scope (all metals)
- iShares MSCI Global Select Metals & Mining Producers ETF: broader scope, excludes gold and silver
- Invesco Global Gold and Precious Metals (PSAU): right scope, inception in 2008
- Oppenheimer Gold & Special Minerals Fund (OPGSX): right scope, inception 1983 (nice!), high ER though 1.03%
- American Century Global Gold Fund (BGEIX): right scope, inception 1988, decent ER 0.67%
- VanEck International Investors Gold Fund (INIVX): right scope, a historical curiosity (inception 1956!), ER 1.43%
- Gabelli Gold Fund (GOLDX): right scope, inception 1994, ER 1.52%

Feedback?

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by asif408 » Tue Sep 04, 2018 9:46 am

siamond wrote:
Sun Sep 02, 2018 11:41 pm
I was pondering if we should switch the VGPMX data series in the Simba backtesting spreadsheet to something else, possibly complemented back in history by a proper index. Point being to illustrate with happened with this 'Precious Metals and Mining' sector that was clamored to be a good diversifier (and then miserably failed to do so in 2008).

Fidelity Fidelity® Select Gold Portfolio (FASGX) seems the best match (inception in 1986).

Strategy
Investing primarily in companies engaged in exploration, mining, processing, or dealing in gold, or to a lesser degree, in silver, platinum, diamonds, or other precious metals and minerals. Normally investing at least 80% of assets in securities of companies principally engaged in gold-related activities, and in gold bullion or coins. Potentially investing in other precious metals, instruments whose value is linked to the price of precious metals, and securities of companies that manufacture and distribute precious metal and mineral products (such as jewelry, watches, and metal foil and leaf) and companies that invest in other companies engaged in gold and other precious metal and mineral-related activities. Normally investing primarily in common stocks.

Others do not seem a good match or have limited history or do not seem to have a clear advantage over the Fidelity fund:
- SPDR S&P Metals and Mining ETF (XME): broder scope (all metals)
- iShares MSCI Global Select Metals & Mining Producers ETF: broader scope, excludes gold and silver
- Invesco Global Gold and Precious Metals (PSAU): right scope, inception in 2008
- Oppenheimer Gold & Special Minerals Fund (OPGSX): right scope, inception 1983 (nice!), high ER though 1.03%
- American Century Global Gold Fund (BGEIX): right scope, inception 1988, decent ER 0.67%
- VanEck International Investors Gold Fund (INIVX): right scope, a historical curiosity (inception 1956!), ER 1.43%
- Gabelli Gold Fund (GOLDX): right scope, inception 1994, ER 1.52%

Feedback?
Siamond,

Have you considered the Franklin Gold & Precious Metals fund (FKRCX): https://www.franklintempleton.com/inves ... fund/FKRCX. At least before the mid 2000s it appeared to track VGPMX pretty closely, and seems to do it a bit better than FSAGX, but I don't know it's complete history: http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

It goes back to 1969.

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by siamond » Wed Sep 05, 2018 9:05 pm

asif408 wrote:
Tue Sep 04, 2018 9:46 am
Have you considered the Franklin Gold & Precious Metals fund (FKRCX)? [...] It goes back to 1969.
Didn't know this one, thank you, this a good pointer. Its (loose) benchmark is FTSE Gold Mines index, which goes back to 1998.

I'd rather stick to a fund from one of the largest companies though.

Any more feedback?

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by TimeRunner » Wed Sep 05, 2018 9:34 pm

USAA Precious Metals and Minerals Fund (USAGX), goes back to 1994. https://www.usaa.com/inet/imco_mutualfund/ImFundFacts
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by siamond » Fri Sep 07, 2018 10:11 am

Ok, I thought more about it. So far, in the Simba backtesting spreadsheet, we have a VGPMX data series from 1985 till now, as a proxy for the precious metals and mining (PME) industry sector. The main point of tracking it is that this allows analytical people to develop an opinion about the diversification benefits (or lack thereof) of such sector, and check a popular theory from W. Bernstein and others that the PME sector was one of the best diversifiers around. With VGPMX radically changing its direction in Sep-18, we need to find a better proxy to keep doing so, while staying true to the original intent.

An easy non-disrupting fix could be to keep using VGPMX for 1985-2017, and then use PSAU (Invesco Global Gold and Precious Metals ETF) starting in 2018.
- Pros: PSAU seems to be one of the most passive PME funds around, closely tracking the NASDAQ OMX Global Gold and Precious Metals Index. And its ER is relatively low compared to most PME funds (0.75%). Recent trajectory is quite close to VGPMX.
- Cons: PSAU and its index have limited history (starting in 2008/09); Invesco isn't a large player; the fund itself is very small (assets $28M compared to the $1.1B of Fidelity FSAGX or the $1.8B of VGPMX).

Another approach would be to take the opportunity to entirely ditch VGPMX and assemble a data series with a longer history, more narrowly focused on PMEs. It appears that the VGPMX managers got a little 'overly active' and erred way outside the PME scope (see this post and this article; fertilizers, chemicals and coal, really?). For example, we could use INIVX (VanEck International Investors Gold, assets $560M, ER 1.43%) from 1957 to 1985, spliced with FSAGX (Fidelity Select Gold, assets $1.1B, ER 0.84%) from 1986 till now.
- Pros: this adds nearly 30 years of history, including the oil crisis period. Should be more focused on the PME sector, avoiding the vagaries of VGPMX.
- Cons: lack of continuity with previous Simba instances; staying anchored on active funds.

Checking correlation numbers, the latter approach actually reinforces the very low correlation theory (nearly zero). Returns over the 1985-2017 period wouldn't be terribly different from VGPMX (a little lower, unsurprisingly given the ER difference). The 2009+ trajectory is actually very similar between PSAU and FSAGX, so FSAGX doesn't seem 'overly active'. Finally, a comparison between various PME funds with long history shows that VGPMX dramatic fall in 2008 was somewhat atypical (see this chart for more focus).

Overall, I would vote for the second approach (ditch VGPMX in favor of INIVX+FSAGX). Feedback?

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by Castanea_d. » Fri Sep 07, 2018 12:22 pm

A little off-topic from the very interesting discussion of how to replace VGPMX in the back-testing spreadsheet...

After my initial anger at Vanguard for making these changes, I took several deep breaths (a couple weeks of them). Instead of closing my position in the fund, I reduced it by about a third. I'm leaving the rest of it in the new VGPMX. I consider Wellington to be a strong value-oriented manager, and if the fund now takes more of a deep-value approach, it will be interesting to see if they can be effective with it. But I have moved it from my precious metals allocation (8% of assets) to generic equity. I remain committed to the precious metals mostly for the diversification benefit, having gotten the idea from Wm. Bernstein (as siamond mentioned above).

In fairness to VGPMX, I enjoyed its (approx.) 90% climb a couple of years ago, 2015 or 2016 I think. That was enough so that even with its poor recent performance I was able to make my recent sale at a slight capital gain, which once seemed unlikely.

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by DartThrower » Fri Sep 07, 2018 12:47 pm

John151 wrote:
Wed Aug 01, 2018 10:28 pm
sport wrote:
Fri Jul 27, 2018 3:13 pm
I love Vanguard. However, when it comes to "staying the course", that is something they tell others to do, but do not follow themselves. I am still unhappy about the change to what used to be the Tax Managed International Fund. It is no longer tax managed, but I am locked in.
Me too.
The ordinary dividends from the Developed Markets Index fund which replaced my Tax Managed International fund seem really high. Maybe that's just because I compare it with dividends from my TSM fund. Both are in my after tax account. When I run Vanguard's Portfolio visualizer tool it tells me my portfolio is tax efficient. Now I wonder if this is really the case. I am locked in with capital gains as well.

Staying on topic... I also remember, as others have, something Bill Bernstein wrote about PMM. He seemed to indicate that if you are going to commit to this fund then you would need to commit for a very very long time in order to reap the benefits. That approach has now been foreclosed on.
A Boglehead can stay the course longer than the market can stay irrational.

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by siamond » Fri Sep 07, 2018 2:08 pm

DartThrower wrote:
Fri Sep 07, 2018 12:47 pm
I also remember, as others have, something Bill Bernstein wrote about PMM. He seemed to indicate that if you are going to commit to this fund then you would need to commit for a very very long time in order to reap the benefits. That approach has now been foreclosed on.
While doing the research about the Simba data series, discovering the long history of some PME funds and some distortions specific to VGPMX, I also ran some numbers, and it seems to me that the jury might still be out about Dr. Bernstein's recommendation. Using the INIVX/FSAGX data series and comparing to more regular asset classes, the correlation was basically zero between 1957 and now.

A null correlation often confuses people, this does NOT mean that when PME zigs, the other asset classes tend to zag (only a negative correlation would be indicative of such behavior). It means that the trajectories are independent, and may occasionally align at times. So yeah, in 2008, PMEs dropped like everything else (less than VGPMX though), but this doesn't disprove the null correlation, nor does it mean that PMEs are poor diversifiers. I mean, I wouldn't advocate for such strategy, and have no plan of doing it myself, but it remains interesting to look at those historical numbers.

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by Theoretical » Sat Sep 08, 2018 1:17 pm

DartThrower wrote:
Fri Sep 07, 2018 12:47 pm
John151 wrote:
Wed Aug 01, 2018 10:28 pm
sport wrote:
Fri Jul 27, 2018 3:13 pm
I love Vanguard. However, when it comes to "staying the course", that is something they tell others to do, but do not follow themselves. I am still unhappy about the change to what used to be the Tax Managed International Fund. It is no longer tax managed, but I am locked in.
Me too.
The ordinary dividends from the Developed Markets Index fund which replaced my Tax Managed International fund seem really high. Maybe that's just because I compare it with dividends from my TSM fund. Both are in my after tax account. When I run Vanguard's Portfolio visualizer tool it tells me my portfolio is tax efficient. Now I wonder if this is really the case. I am locked in with capital gains as well.

Staying on topic... I also remember, as others have, something Bill Bernstein wrote about PMM. He seemed to indicate that if you are going to commit to this fund then you would need to commit for a very very long time in order to reap the benefits. That approach has now been foreclosed on.
In this case, the right approach would be to change funds to one that is investing in PMe like the ishares Silver and Gold Miners or the Invesco Precious Metals ETF PSAU. If it’s a part of the asset allocation but the fund used is changing, then the right approach is to stay the course by shifting to a congruent fund or funds, not close up and go home.

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by siamond » Thu Sep 13, 2018 3:07 pm

siamond wrote:
Fri Sep 07, 2018 10:11 am
Ok, I thought more about it. So far, in the Simba backtesting spreadsheet, we have a VGPMX data series from 1985 till now, as a proxy for the precious metals and mining (PME) industry sector. The main point of tracking it is that this allows analytical people to develop an opinion about the diversification benefits (or lack thereof) of such sector, and check a popular theory from W. Bernstein and others that the PME sector was one of the best diversifiers around. With VGPMX radically changing its direction in Sep-18, we need to find a better proxy to keep doing so, while staying true to the original intent.

An easy non-disrupting fix could be to keep using VGPMX for 1985-2017, and then use PSAU (Invesco Global Gold and Precious Metals ETF) starting in 2018.
- Pros: PSAU seems to be one of the most passive PME funds around, closely tracking the NASDAQ OMX Global Gold and Precious Metals Index. And its ER is relatively low compared to most PME funds (0.75%). Recent trajectory is quite close to VGPMX.
- Cons: PSAU and its index have limited history (starting in 2008/09); Invesco isn't a large player; the fund itself is very small (assets $28M compared to the $1.1B of Fidelity FSAGX or the $1.8B of VGPMX).

Another approach would be to take the opportunity to entirely ditch VGPMX and assemble a data series with a longer history, more narrowly focused on PMEs. It appears that the VGPMX managers got a little 'overly active' and erred way outside the PME scope (see this post and this article; fertilizers, chemicals and coal, really?). For example, we could use INIVX (VanEck International Investors Gold, assets $560M, ER 1.43%) from 1957 to 1985, spliced with FSAGX (Fidelity Select Gold, assets $1.1B, ER 0.84%) from 1986 till now.
- Pros: this adds nearly 30 years of history, including the oil crisis period. Should be more focused on the PME sector, avoiding the vagaries of VGPMX.
- Cons: lack of continuity with previous Simba instances; staying anchored on active funds.

Checking correlation numbers, the latter approach actually reinforces the very low correlation theory (nearly zero). Returns over the 1985-2017 period wouldn't be terribly different from VGPMX (a little lower, unsurprisingly given the ER difference). The 2009+ trajectory is actually very similar between PSAU and FSAGX, so FSAGX doesn't seem 'overly active'. Finally, a comparison between various PME funds with long history shows that VGPMX dramatic fall in 2008 was somewhat atypical (see this chart for more focus).

Overall, I would vote for the second approach (ditch VGPMX in favor of INIVX+FSAGX). Feedback?
One last attempt to get some feedback... Otherwise, I'll just proceed with the second approach in the next Simba update (e.g. Jan-19).

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by Tyler9000 » Mon Sep 17, 2018 10:20 am

siamond wrote:
Thu Sep 13, 2018 3:07 pm
One last attempt to get some feedback... Otherwise, I'll just proceed with the second approach in the next Simba update (e.g. Jan-19).
Sorry I'm a little late to the game, but I'd definitely vote for option 2. The data is a lot more relevant for the thing you're looking to model.

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Re: Vanguard Precious Metals and Mining Fund is changing

Post by staythecourse » Mon Sep 17, 2018 10:31 am

Wow that is about as random of a change as you can get. They have been changing for some time to be more mining then precious metals, but this change makes it a COMPLETELY different fund. I would not be happy if I owned the fund. Likely, the 25% that is still PM and M is the MINIMUM for the fund to keep its AUM without being shut down and distributing all of its capital gains.

I am not sure what they are trying to achieve as the other 75% has nothing to do with PM or M. If they (Vanguard) are not happy with the performance and don't want it in their line up just be honest to the investors and shut it down. Shame on Vanguard on this one.

Good luck.
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by Walkure » Mon Sep 17, 2018 2:14 pm

staythecourse wrote:
Mon Sep 17, 2018 10:31 am
Wow that is about as random of a change as you can get. They have been changing for some time to be more mining then precious metals, but this change makes it a COMPLETELY different fund. I would not be happy if I owned the fund. Likely, the 25% that is still PM and M is the MINIMUM for the fund to keep its AUM without being shut down and distributing all of its capital gains.

I am not sure what they are trying to achieve as the other 75% has nothing to do with PM or M. If they (Vanguard) are not happy with the performance and don't want it in their line up just be honest to the investors and shut it down. Shame on Vanguard on this one.

Good luck.
I think someone above nailed the real point. The fund doesn't have capital gains - it has a huge accrued capital loss. As far as I know there is no mechanism for the fund to shut down in which those losses are "distributed" to the owners for their own TLH? So it would be a huge waste to simply abandon the fund. Instead they cleverly came up with a completely different fund that they might have launched anyway on its own, but by dropping into the shell of VGPMX they get the benefit of a head start on carryover losses + an existing AUM base to help with the early growing pains. Doesn't make it right from the standpoint of existing investors, myself included, but I can understand why they'd be stupid not to.

staythecourse
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by staythecourse » Mon Sep 17, 2018 3:15 pm

Walkure wrote:
Mon Sep 17, 2018 2:14 pm
staythecourse wrote:
Mon Sep 17, 2018 10:31 am
Wow that is about as random of a change as you can get. They have been changing for some time to be more mining then precious metals, but this change makes it a COMPLETELY different fund. I would not be happy if I owned the fund. Likely, the 25% that is still PM and M is the MINIMUM for the fund to keep its AUM without being shut down and distributing all of its capital gains.

I am not sure what they are trying to achieve as the other 75% has nothing to do with PM or M. If they (Vanguard) are not happy with the performance and don't want it in their line up just be honest to the investors and shut it down. Shame on Vanguard on this one.

Good luck.
I think someone above nailed the real point. The fund doesn't have capital gains - it has a huge accrued capital loss. As far as I know there is no mechanism for the fund to shut down in which those losses are "distributed" to the owners for their own TLH? So it would be a huge waste to simply abandon the fund. Instead they cleverly came up with a completely different fund that they might have launched anyway on its own, but by dropping into the shell of VGPMX they get the benefit of a head start on carryover losses + an existing AUM base to help with the early growing pains. Doesn't make it right from the standpoint of existing investors, myself included, but I can understand why they'd be stupid not to.
Thanks for the informative response. That does make sense. Guess for most holding the fund it would be easier to just dump it once notified and take the capital loss carry over if they are not satisfied with the new fund's direction.

Just find it odd on a marketing standpoint. The new approach may be the greatest idea in the world, but most won't know it as they will just see a PM and mining fund going up so does not help in the advertising aspect IF they are successful.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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dratkinson
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by dratkinson » Mon Sep 17, 2018 6:28 pm

^^^ An investor taking a loss doesn't get much help if PMM is held in a rIRA.

The description makes it sound like a commodities fund, with a PMM tilt. Not certain what commodities are up when equities are down. Thought commodities were stable, at best, in bad equity years.

But if the new incarnation works as advertised---counter to equities, and really up when equities are down---that would be nice (a miracle?). So guess I'll hold it a little longer to see what happens. My small rIRA is my play money account, so might as well play.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

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siamond
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by siamond » Mon Sep 17, 2018 10:59 pm

dratkinson wrote:
Mon Sep 17, 2018 6:28 pm
But if the new incarnation works as advertised---counter to equities, and really up when equities are down---that would be nice (a miracle?). So guess I'll hold it a little longer to see what happens. My small rIRA is my play money account, so might as well play.
The historical numbers seem to indicate that the correlation between PMM and Total-Market was roughly zero so far, but was NOT negative. When two market segments displayed a null correlation, this means that the first market moved on its own, with no relation to the second market's moves, but that it didn't necessarily zig when the 2nd market zagged... So they may very well go up or down together, at times. As 2008 clearly showed. Call me skeptical that the new VGPMX incarnation will do any better than that.

integrity
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by integrity » Wed Sep 26, 2018 10:10 am

FYI, I received the following email from Vanguard today.

Dear Shareholder:

A few weeks ago, we let you know that Vanguard Precious Metals and Mining Fund would be changing. We're happy to share that as of September 26, 2018, all of the changes have been made.

Vanguard Precious Metals and Mining Fund is now Vanguard Global Capital Cycles Fund. In addition to a new name, the fund has a new strategy and a new advisor—Wellington Management. To learn more about the details of these changes, please read the shareholder letter.

There's nothing you need to do. These changes won't affect the number of fund shares you own or any account options you've set up, such as dividend and capital gains reinvestments.

Thanks for investing with Vanguard.

Jiu Jitsu Fighter
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by Jiu Jitsu Fighter » Thu Oct 11, 2018 1:59 pm

What a contrarian indicator this has proved out to be so far. GDX (Gold Miners) is up over 6% today and up over 8% over the last two days.

I don't even know who this fund is targeted towards. I get precious metal mining stocks. Most are run horribly, but they are uncorrelated to the broad market and the volatility can create a rebalancing opportunity. Both Bill Bernstein and Allan Roth recommend GDX for those who can stomach the long periods of underperformance (as far as myself, I have a 5% allocation to gold bullion, not the miners themselves, approximately half is physical and the other half in an ETF for ease in rebalancing and use wide rebalancing bands. I don't invest in gold because of an end of the world scenario/hyperinflation but to create a better risk adjusted portfolio). I get the arguments and they are tiresome (you can't eat gold, it doesn't pay a dividend, buy some lead so you can kill the zombies, etc...). Better risk adjusted returns and a hedge against a financial crisis although, I'm not planning on one. That's it.

That said, this fund doesn't even make sense. I have to laugh at the timing. Either have a fund similar to GDX or GLD or close this fund. Good job, Vanguard!

ccorona1
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by ccorona1 » Sun Oct 14, 2018 8:16 pm

I have to say I am extemely upset by Vanguard’s actions here. I have my I-401k with Vanguard, and was contributing a substantial amount of my retirement contributions over the last 3 years to this fund. I understood the risks investing in a sector specific fund, and it was my risk to take (not looking to get into an argument over whether precious metal miners were a smart investment or not - clearly over the last 3 years they weren’t). What I didn’t expect was Vanguard to sell me out of that sector at what appears could very well be near a cyclical bottom, without giving me any ability to put my money into a something that would give me similar sector coverage within the Vanguard family (which in my I-401k I’m limited to).

I feel this move is completely contrary to Vanguard’s “Stay the Course” motto. This move reeks of bailing on an out of favor sector at the worst moment. I’ve already lost tens of thousands of dollars with the recent gains in the precious metals market having been sold out of it, and will only get worse if the market continues to recover.

Regardless of what may or may not happen in the market, Vanguard took away from me my investing choice after I had already ridden the escalator down. If there was a way I could take legal action against Vanguard on this I would, given that I had no options in my 401k other then to just take my money to another company (which I should have done).

Shame on Vanguard.

pdavi21
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by pdavi21 » Thu Oct 18, 2018 2:40 pm

Anyone look at the new holdings yet?
What's a good ETF (or mix of ETFs) to compare the new strategy with?

On the original topic, I should have ditched this fund long ago, and the change is a kick to the nuts when down. They essentially caused a sell off by forecasting unloading over 1 bln assets and then sold at the bottom (although part of the sell off has likely to do with appreciation of the USD).

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dratkinson
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by dratkinson » Thu Oct 18, 2018 7:35 pm

Prospectus implied this would be an active fund, so we'll need to wait and see what Wellington Mgmt buys to get a better idea of direction.

I have a loss in this fund. Acknowledge the uncertainty and urge to run for the exit.

But it's in my play money Roth IRA, so can't TLH. And play money is for that purpose. (We're suppose to always have something doing poorly. Check, got that.)

Maybe this is a case of "...be greedy when others are fearful." Maybe this is a buying opportunity. (If more people would sell and depress the price further, I'd have a better chance of buying low to recover my loss. :) )

Maybe it's time to play a little and rebalance into it.

Guess I'll stick around for a couple of years and see how it plays out.

I could be wrong.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

saves nine
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by saves nine » Sun Oct 21, 2018 11:35 pm

Like a few others posting here, the change in VGPMX fund policy and its timing put me between a rock and a hard place. For me, this personal, practical difficulty is small and manageable. Still, I was annoyed by, what seemed to me, the sophistic justification given for making such a large change without a shareholder vote. It was particularly irksome when I considered it alongside that familiar corporate self-congratulation: "At Vanguard, there are no outside owners, and therefore, no conflicting loyalties. The company is owned by its funds, which in turn are owned by their shareholders—including you. . ." Another learning opportunity; thanks a bunch.

Walkure
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Re: Vanguard Precious Metals and Mining Fund is changing

Post by Walkure » Mon Nov 05, 2018 1:57 pm

Portfolio stats have been updated on Vanguard's site for holdings as of 9/30/18, our first look at Wellington's new strategy.
https://investor.vanguard.com/mutual-fu ... olio/vgpmx
Region allocation
as of 09/30/2018
7.60% Emerging Markets
21.70% Europe
12.80% Pacific
1.40% Middle East
55.50% North America
1.00% Other
Although the headline percentages look fairly close to global market weight, the foreign holdings of 71.1% (below) suggest that nearly 20% of the fund is North America ex-US, a holdover from the Canadian miners tilt.
Equity characteristics
as of 09/30/2018

Number of stocks: 82
Median market cap: $23.8 billion
Price/earnings ratio: 14.5x
Price/book ratio: 1.4x
Return on equity: 6.7%
Earnings growth rate: 7.8%
Foreign holdings: 71.1%
Turnover rate (as of fiscal year end January): 34.7% (meaningless for now)
Short-term reserves: 2.0% not a lot of "dry powder" here, looks like they wasted no time getting fully invested!
Fund total net assets: $1.7 billion
Month-end ten largest holdings
as of 09/30/2018

Rank/holdings
1 B2Gold Corp.
2 Endeavour Mining Corp.
3 OceanaGold Corp.
4 National Grid plc
5 Sony Financial Holdings Inc.
6 Simon Property Group Inc.
7 China Unicom Hong Kong Ltd.
8 PG&E Corp.
9 SEMAFO Inc.
10 Lockheed Martin Corp.

10 largest holdings = 29.50% of total net assets
Obviously some infrastructure/utility giants making a showing as promised. More interestingly, the remaining miners are a decidedly different group than before, more emphasis on smaller players. Wouldn't exactly call this a "deep value" approach but it's definitely a move in that direction.

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