What's going on with Fidelity's mid cap value & small cap value index funds?

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JasonHutt
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What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

For those of us who like to tilt small-er and value-er, we typically think that the index used is not particular important. But I noticed a couple of years ago that certain of Fidelity's index funds were lagging comparable funds from Vanguard. I did not know whether the issue was the subcontractor (Geode), Fidelity dishonesty to make its equivalent managed funds look good, or the index used (Russell). When I read Hansen, who found the Russell poorly constructed and subject to arbitrage, I looked again. Here are relevant details. Note that if, say, the Russell cut up capitalization differently, one would expect a consistent size effect for a given period, depending on which period. If value/growth were handled differently, one would find a comparable pattern across capitalizations. It seems to me that the Russell-based funds seriously underperform the CRSP-based funds. This may have something to do with turnover, however. When one realizes that turnover also provides the opportunity for arbitrage, and that Russell-based funds are particularly sensitive to this, we perhaps have an answer. Note that Fidelity charges maybe 2 basis points less for the expense ratio. Note as well that, as I said at the top, I saw these same kinds of discrepancies about two years ago, though I don't remember whether blend or value was leading then.

------------------------------------

Vanguard Mid-Cap Index Fund Admiral (VIMAX): YTD -15.90%, 1Y -18.04%; CRSP US Mid Cap Index; 16% turnover
Fidelity Mid-Cap Index (FSMDX): YTD -14.21%, 1Y -17.13%; Russell Mid Cap Index; 12% turnover

Vanguard Mid-Cap Value Index Fund Admiral (VMVAX): YTD -5.07%, 1Y -6.04%; CRSP US Mid Cap Value Index; 17% turnover
Fidelity Mid-Cap Value Index Fund (FIMVX): YTD -8.88%, 1Y -10.24%; Russell Midcap Value Index; 41% turnover

Vanguard Small-Cap Value Index Fund Admiral (VSIAX): YTD -4.95%, 1Y -7.38%; CRSP US Sm Cap Value Index; 16% turnover
Fidelity Small-Cap Value Index Fund (FISVX): YTD -9.56%, 1Y -10.68%; Russell 2000 Value Index; 38% turnover
sycamore
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by sycamore »

It could be that front running is part of the problem, I'm not sure if they solved that problem or not.

But I think some of what you're seeing is just how Russell, CRSP, S&P and other index providers happen to define "mid cap" or "small cap". This Morningstar article Untangling How Index Providers Break the Market Down by Size explains that one provider's mid cap is not the same as another one. So it's not quite an apples to apples comparison.

To me, saying one index underperformed doesn't mean a whole lot -- I mean, there'll always be some other index (or market segment) that outperforms my preferred index. Better to pick your desired asset class and/or factor, then pick a fund which uses a good index and/or methodology to capture that asset class or factor returns.

More important is whether the fund is tracking its objective. And it does appear Fidelity's funds are at least keeping track with iShares ETFs that tracks the same Russell indexes. Here are three backtests comparing the relevant funds. They also include funds tracking the similar-styled index from S&P.

Mid-cap.
Mid-cap value.
Small-cap value.

(Hope I entered the info into Portfolio Visualizer correctly.)
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Nate79
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Nate79 »

I stopped reading at the accusation of dishonesty by Fidelity.
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SmileyFace
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by SmileyFace »

JasonHutt wrote: Wed Nov 23, 2022 3:14 pm Fidelity dishonesty to make its equivalent managed funds look good
You can rule this out. They want their index funds to be competitive with Blackrock, Vanguard, etc. They aren't purposely sabotaging index performance so that Bogleheads wake up one morning and move to managed funds.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by brad.clarkston »

Not sure about the dishonesty part, Fidelity is a good broker.

I moved from FISVX to AVUV which uses the same benchmark and it outpaces both Vanguard and Fidelity small cap funds/etfs.
The "only" thing different is the trade activity and managers.
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vineviz
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by vineviz »

sycamore wrote: Wed Nov 23, 2022 3:51 pm
To me, saying one index underperformed doesn't mean a whole lot -- I mean, there'll always be some other index (or market segment) that outperforms my preferred index. Better to pick your desired asset class and/or factor, then pick a fund which uses a good index and/or methodology to capture that asset class or factor returns.
This is right. Different indexes having different construction rules means that there will be subtle differences in factor composition, and this can lead to subtle differences in relative performance.

The S&P 400 mid-cap index, for instance, tends to hold slightly smaller companies with a bit more of a value tilt than mid-cap indexes from CRSP, Russell, and Morningstar.

So when small cap value is doing well, the S&P mid-cap funds will (generally) do best. When small cap value is doing poorly, the S&P mid-cap funds will (generally) do worse.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Deedub
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Deedub »

Besides the different underlying indexes, you also can’t just compare performance based on NAVs because the Fidelity funds pay capital gains distributions but the Vanguard funds do not. If you look at YTD performance on your phone and many online services, the returns you get are computed from prices (NAVs) alone.
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Kenkat
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Kenkat »

Value is doing well relative to growth this year so my guess is that the CRSP indexes capture value a bit better than the Russell indexes. If you’ve got a quarter I’ll throw in a cup of coffee with that robust analysis. :wink:
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Ocean77 »

See relative index performance here (for the Mid cap):

https://www.investopedia.com/comparing- ... es-5225246

The Fidelity fund tracks the Russell Index, and the Vanguard fund tracks the CRSP. The latter index has performed better lately (by 2% over the last year). There is no guarantee that this will continue. In fact there is often a reversion to the mean.
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JasonHutt
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

Thanks for the responses so far.

1/ Regarding index choice, let me quote Swensen from Unconventional Success:

"Even index fund investors need to consider the implications of portfolio turnover. Sensibly constructed indices, such as the S&P 500 and the Wilshire 5000, exhibit low implementation costs and high tax efficiency. Poorly structured indices, such as the Russell 1000 and the Russell 2000, demonstrate high costs and low tax efficiency." (p. 204)

"Poorly constructed indices, such as the Russell 1000 and Russell 2000, experience high turnover, leading to unattractive cost attributes and poor tax outcomes." (p. 251)

So, according to Swensen, the issue is not just capitalization and value/growth slant. Moreover, in 2/3 of the Fidelity funds, portfolio turnover is about 2x that of the "comparable" Vanguard fund.

My review of the Fidelity Small-Cap Value suggests that Fido does track the Russell 2000 Value pretty well. The issue may be the index itself.

2/ Over time, even a pure Russell 2000 Value Index (zero costs) falls behind Vanguard's CRSP-based VBR ETF:

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Let's say one wants to tilt to small-cap value. It seems that it's better to do this with CRSP-based fund/etf. I mean, 9 years is a long time to balance out what should be relatively small differences.

3/ It is common knowledge that the Vanguard small cap value fund has on average bigger companies than the Russell 2000 Value. Now, we all know that the "small-value premium" is better realized with smaller companies. Yet the Russell has smaller companies. But so does the S&P 600 Value. The last of these also has the best performance over about a decade. In fact, in my Roth at Vanguard, which allows ETFs, I used SLYV, another ETF following S&P 600 Value.

VBR (CRSP): Weighted Average Market Cap $5.66B
VTWV (Russell): Weighted Average Market Cap $2.11B
VIOV (S&P 600 Value): Weighted Average Market Cap $1.85B

https://www.portfoliovisualizer.com/bac ... ion3_3=100


4/ How can one explain a LOW turnover for Fidelity Mid-Cap and a HIGH turnover for Fidelity Mid-Cap Value? Is this some weird attribute of this particular part of the mid-cap index?

5/ As real investors and not academicians, I suggest that when we tilt small-er and value-er, we get good size and value premiums. When we see data like that those I have supplied, AND WE SEE FROM SWENSEN THAT THERE ARE PROBLEMS WITH THE RUSSELL INDEXES, I humbly maintain that we pay attention.

6/ Finally, I'm sorry that I have angered some Fidelity investors. I will be more careful in the future.
Last edited by JasonHutt on Wed Nov 23, 2022 6:13 pm, edited 2 times in total.
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JasonHutt
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

Ocean77 wrote: Wed Nov 23, 2022 4:31 pm See relative index performance here (for the Mid cap):

https://www.investopedia.com/comparing- ... es-5225246

The Fidelity fund tracks the Russell Index, and the Vanguard fund tracks the CRSP. The latter index has performed better lately (by 2% over the last year). There is no guarantee that this will continue. In fact there is often a reversion to the mean.
Yes, I know. However, maybe CRSP is a better index? The issue isn't just a year or two difference in performance.
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JasonHutt
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

Deedub wrote: Wed Nov 23, 2022 4:21 pm Besides the different underlying indexes, you also can’t just compare performance based on NAVs because the Fidelity funds pay capital gains distributions but the Vanguard funds do not. If you look at YTD performance on your phone and many online services, the returns you get are computed from prices (NAVs) alone.
I used data from the Fidelity retirement web site. There are no tax consequences for a 401k. However, I thought we should prefer (for tax purposes) fewer capital gains distributions.
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JasonHutt
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

vineviz wrote: Wed Nov 23, 2022 4:13 pm
sycamore wrote: Wed Nov 23, 2022 3:51 pm
To me, saying one index underperformed doesn't mean a whole lot -- I mean, there'll always be some other index (or market segment) that outperforms my preferred index. Better to pick your desired asset class and/or factor, then pick a fund which uses a good index and/or methodology to capture that asset class or factor returns.
This is right. Different indexes having different construction rules means that there will be subtle differences in factor composition, and this can lead to subtle differences in relative performance.

The S&P 400 mid-cap index, for instance, tends to hold slightly smaller companies with a bit more of a value tilt than mid-cap indexes from CRSP, Russell, and Morningstar.

So when small cap value is doing well, the S&P mid-cap funds will (generally) do best. When small cap value is doing poorly, the S&P mid-cap funds will (generally) do worse.
You make great points. How does one explain that Fidelity's Mid-Cap fund slightly out performs Vanguard's YTD but Fidelity's Mid-Cap Value substantially underperforms? If there are not inherent problems with the Russell, maybe the Value fund is less value-y? But if so, and I want a value premium, wouldn't the CRSP-tracking fund be a better choice?
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

sycamore wrote: Wed Nov 23, 2022 3:51 pm It could be that front running is part of the problem, I'm not sure if they solved that problem or not.

But I think some of what you're seeing is just how Russell, CRSP, S&P and other index providers happen to define "mid cap" or "small cap". This Morningstar article Untangling How Index Providers Break the Market Down by Size explains that one provider's mid cap is not the same as another one. So it's not quite an apples to apples comparison.

To me, saying one index underperformed doesn't mean a whole lot -- I mean, there'll always be some other index (or market segment) that outperforms my preferred index. Better to pick your desired asset class and/or factor, then pick a fund which uses a good index and/or methodology to capture that asset class or factor returns.

More important is whether the fund is tracking its objective. And it does appear Fidelity's funds are at least keeping track with iShares ETFs that tracks the same Russell indexes. Here are three backtests comparing the relevant funds. They also include funds tracking the similar-styled index from S&P.

Mid-cap.
Mid-cap value.
Small-cap value.

(Hope I entered the info into Portfolio Visualizer correctly.)
If my objective is to track a particular index, then I assess how well this is done. But if I care about results and certain indexes provide better ones, then I want to choose the indexes that do so.
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JasonHutt
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

I got factor coefficients from Portfolio Visualizer, comparing VSIAX & FISVX. If I read the results correctly, as expected the Fidelity SCV has a higher size advantage (smaller caps) and an equal value advantage. The superiority of VSIAX cannot be explained based on different size/value loadings. (I haven't studied these models, so I am hoping I have run this comparison correctly. I'm happy to be corrected if not.)

https://www.portfoliovisualizer.com/fac ... sion=false
Northern Flicker
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Northern Flicker »

JasonHutt wrote: Wed Nov 23, 2022 3:14 pm For those of us who like to tilt small-er and value-er, we typically think that the index used is not particular important. But I noticed a couple of years ago that certain of Fidelity's index funds were lagging comparable funds from Vanguard. I did not know whether the issue was the subcontractor (Geode), Fidelity dishonesty to make its equivalent managed funds look good, or the index used (Russell). When I read Hansen, who found the Russell poorly constructed and subject to arbitrage, I looked again. Here are relevant details. Note that if, say, the Russell cut up capitalization differently, one would expect a consistent size effect for a given period, depending on which period. If value/growth were handled differently, one would find a comparable pattern across capitalizations. It seems to me that the Russell-based funds seriously underperform the CRSP-based funds. This may have something to do with turnover, however. When one realizes that turnover also provides the opportunity for arbitrage, and that Russell-based funds are particularly sensitive to this, we perhaps have an answer. Note that Fidelity charges maybe 2 basis points less for the expense ratio. Note as well that, as I said at the top, I saw these same kinds of discrepancies about two years ago, though I don't remember whether blend or value was leading then.

------------------------------------

Vanguard Mid-Cap Index Fund Admiral (VIMAX): YTD -15.90%, 1Y -18.04%; CRSP US Mid Cap Index; 16% turnover
Fidelity Mid-Cap Index (FSMDX): YTD -14.21%, 1Y -17.13%; Russell Mid Cap Index; 12% turnover

Vanguard Mid-Cap Value Index Fund Admiral (VMVAX): YTD -5.07%, 1Y -6.04%; CRSP US Mid Cap Value Index; 17% turnover
Fidelity Mid-Cap Value Index Fund (FIMVX): YTD -8.88%, 1Y -10.24%; Russell Midcap Value Index; 41% turnover

Vanguard Small-Cap Value Index Fund Admiral (VSIAX): YTD -4.95%, 1Y -7.38%; CRSP US Sm Cap Value Index; 16% turnover
Fidelity Small-Cap Value Index Fund (FISVX): YTD -9.56%, 1Y -10.68%; Russell 2000 Value Index; 38% turnover
You cannot use the names of CRSP indices to decide on the correct comparisons. The CRSP taxonomy is non-standard and not what you would expect from the name. The CRSP "midcap" indices are large caps less megacaps. The CRSP smallcap indices are smallcaps and midcaps.

The following tool may help visualize the market segments of exposure for these funds:

https://advisors.vanguard.com/investmen ... -products/
My postings represent my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
Northern Flicker
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Northern Flicker »

JasonHutt wrote: Wed Nov 23, 2022 6:33 pm I got factor coefficients from Portfolio Visualizer, comparing VSIAX & FISVX. If I read the results correctly, as expected the Fidelity SCV has a higher size advantage (smaller caps) and an equal value advantage. The superiority of VSIAX cannot be explained based on different size/value loadings. (I haven't studied these models, so I am hoping I have run this comparison correctly. I'm happy to be corrected if not.)

https://www.portfoliovisualizer.com/fac ... sion=false
Sure it can. If the size premium were negative during the performance period, then the fund with stronger loadings on size would tend underperform the fund with weaker loading on size, all else equal.

I still have some concerns about front-running of Russell 2000 index changes, but I doubt that the Russell midcap index is a target of front/running.
My postings represent my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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JasonHutt
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

Northern Flicker wrote: Wed Nov 23, 2022 6:37 pm
JasonHutt wrote: Wed Nov 23, 2022 6:33 pm I got factor coefficients from Portfolio Visualizer, comparing VSIAX & FISVX. If I read the results correctly, as expected the Fidelity SCV has a higher size advantage (smaller caps) and an equal value advantage. The superiority of VSIAX cannot be explained based on different size/value loadings. (I haven't studied these models, so I am hoping I have run this comparison correctly. I'm happy to be corrected if not.)

https://www.portfoliovisualizer.com/fac ... sion=false
Sure it can. If the size premium were negative during the performance period, then the fund with stronger loadings on size would tend underperform the fund with weaker loading on size, all else equal.

I still have some concerns about front-running of Russell 2000 index changes, but I doubt that the Russell midcap index is a target of front/running.
But front running seems to be much easier with the Russell. That's what I meant about arbitrage. (If I understand you correctly.). In addition, the S&P 600 Value is a bit smaller than the Russell, but its performance beats (slightly) the CRSP and beats substantially the Russell. See the results I've already posted. So if it's been bad for small, the CRSP small should have been in trouble.

I agree regarding Mid cap, which was why I juxtaposed Fidelity Mid Cap and Fidelity Mid Cap Value Index funds. How can the value component of this same index have twice the turnover of the index as a whole?
Last edited by JasonHutt on Wed Nov 23, 2022 7:01 pm, edited 1 time in total.
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vineviz
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by vineviz »

Northern Flicker wrote: Wed Nov 23, 2022 6:37 pm
JasonHutt wrote: Wed Nov 23, 2022 6:33 pm I got factor coefficients from Portfolio Visualizer, comparing VSIAX & FISVX. If I read the results correctly, as expected the Fidelity SCV has a higher size advantage (smaller caps) and an equal value advantage. The superiority of VSIAX cannot be explained based on different size/value loadings. (I haven't studied these models, so I am hoping I have run this comparison correctly. I'm happy to be corrected if not.)

https://www.portfoliovisualizer.com/fac ... sion=false
Sure it can. If the size premium were negative during the performance period, then the fund with stronger loadings on size would tend underperform the fund with weaker loading on size, all else equal.

Indeed, and since the size factor has had negative returns YTD the greater exposure to this factor by FISVX is what leads to most of the performance differential.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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JasonHutt
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

vineviz wrote: Wed Nov 23, 2022 6:59 pm
Northern Flicker wrote: Wed Nov 23, 2022 6:37 pm
JasonHutt wrote: Wed Nov 23, 2022 6:33 pm I got factor coefficients from Portfolio Visualizer, comparing VSIAX & FISVX. If I read the results correctly, as expected the Fidelity SCV has a higher size advantage (smaller caps) and an equal value advantage. The superiority of VSIAX cannot be explained based on different size/value loadings. (I haven't studied these models, so I am hoping I have run this comparison correctly. I'm happy to be corrected if not.)

https://www.portfoliovisualizer.com/fac ... sion=false
Sure it can. If the size premium were negative during the performance period, then the fund with stronger loadings on size would tend underperform the fund with weaker loading on size, all else equal.

Indeed, and since the size factor has had negative returns YTD the greater exposure to this factor by FISVX is what leads to most of the performance differential.
Then how do you explain the performance of the S&P 600 Value, which is the smallest we are considering?

And how do you explain the 10-year results that essentially control for size (that I've already posted)?
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Northern Flicker »

JasonHutt wrote: Wed Nov 23, 2022 6:48 pm
But front running seems to be much easier with the Russell. That's what I meant about arbitrage. (If I understand you correctly.). In addition, the S&P 600 Value is a bit smaller than the Russell, but its performance beats (slightly) the CRSP and beats substantially the Russell. See the results I've already posted. So if it's been bad for small, the CRSP small should have been in trouble.
The SP600 may over or underperform the Russell or CRSP indices during any period.

The CRSP Small-cap index is small and midcaps, so it would tend to overperform a true smallcap index when the size premium is negative.

You seem to be over-interpreting the ability of a backtest to generalize to future returns.

The Russell midcap index is an unlikely target of front-running because a much larger amount of assets is indexed to the Russell 2000.

Russell 1000 funds may even benefit slightly from any front-running activity targeting the Russell 2000. But this type of activity is unlikely to rival index differences in the effect on differences in performance of the funds in question.
Last edited by Northern Flicker on Wed Nov 23, 2022 8:02 pm, edited 1 time in total.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Northern Flicker »

JasonHutt wrote: Wed Nov 23, 2022 7:05 pm
vineviz wrote: Wed Nov 23, 2022 6:59 pm
Northern Flicker wrote: Wed Nov 23, 2022 6:37 pm
JasonHutt wrote: Wed Nov 23, 2022 6:33 pm I got factor coefficients from Portfolio Visualizer, comparing VSIAX & FISVX. If I read the results correctly, as expected the Fidelity SCV has a higher size advantage (smaller caps) and an equal value advantage. The superiority of VSIAX cannot be explained based on different size/value loadings. (I haven't studied these models, so I am hoping I have run this comparison correctly. I'm happy to be corrected if not.)

https://www.portfoliovisualizer.com/fac ... sion=false
Sure it can. If the size premium were negative during the performance period, then the fund with stronger loadings on size would tend underperform the fund with weaker loading on size, all else equal.

Indeed, and since the size factor has had negative returns YTD the greater exposure to this factor by FISVX is what leads to most of the performance differential.
Then how do you explain the performance of the S&P 600 Value, which is the smallest we are considering?

And how do you explain the 10-year results that essentially control for size (that I've already posted)?
The SP 600 Value index has different loadings on value and quality, and different residual alpha.
My postings represent my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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JasonHutt
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

Northern Flicker wrote: Wed Nov 23, 2022 8:00 pm
JasonHutt wrote: Wed Nov 23, 2022 7:05 pm
vineviz wrote: Wed Nov 23, 2022 6:59 pm
Northern Flicker wrote: Wed Nov 23, 2022 6:37 pm
JasonHutt wrote: Wed Nov 23, 2022 6:33 pm I got factor coefficients from Portfolio Visualizer, comparing VSIAX & FISVX. If I read the results correctly, as expected the Fidelity SCV has a higher size advantage (smaller caps) and an equal value advantage. The superiority of VSIAX cannot be explained based on different size/value loadings. (I haven't studied these models, so I am hoping I have run this comparison correctly. I'm happy to be corrected if not.)

https://www.portfoliovisualizer.com/fac ... sion=false
Sure it can. If the size premium were negative during the performance period, then the fund with stronger loadings on size would tend underperform the fund with weaker loading on size, all else equal.

Indeed, and since the size factor has had negative returns YTD the greater exposure to this factor by FISVX is what leads to most of the performance differential.
Then how do you explain the performance of the S&P 600 Value, which is the smallest we are considering?

And how do you explain the 10-year results that essentially control for size (that I've already posted)?
The SP 600 Value index has different loadings on value and quality, and different residual alpha.
I'm sorry, Flicker, but I've addressed this. AND Swensen pointed out the problem with the Russell indexes.

There seems to be an almost religious view here that all indexes are equal because they ... are indexes. This is illogical. I shifted to CRSP years ago. I stand by this decision.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Deedub »

JasonHutt wrote: Wed Nov 23, 2022 5:57 pm
Deedub wrote: Wed Nov 23, 2022 4:21 pm Besides the different underlying indexes, you also can’t just compare performance based on NAVs because the Fidelity funds pay capital gains distributions but the Vanguard funds do not. If you look at YTD performance on your phone and many online services, the returns you get are computed from prices (NAVs) alone.
I used data from the Fidelity retirement web site. There are no tax consequences for a 401k. However, I thought we should prefer (for tax purposes) fewer capital gains distributions.
It’s not about tax consequences: if a fund pays $1 in dividends or capital gains distributions, its NAV drops by $1. Compare the performance of Vanguard and Fidelity extended market funds—this makes the performance look much different.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Northern Flicker »

JasonHutt wrote: Wed Nov 23, 2022 8:52 pm
I'm sorry, Flicker, but I've addressed this. AND Swensen pointed out the problem with the Russell indexes.

There seems to be an almost religious view here that all indexes are equal because they ... are
Not really.

I believe you have misinterpreted the text in Dr. Swensen's book, which I also read btw.

The front-running of Russell index changes is front-running the movement of stocks between the Russell 1000 and Russell 2000. The idea is to try to predict which will move. With one set of predictions, you cannot simultaneously front-run both because you would be taking both sides of the trade, betting against yourself.

The issues have been with the Russell 2000 SC and SCV indices, as Dr. Swensen pointed out.

There is nothing wrong with using funds that track the CRSP indices (I hold VSIAX myself), but your backtests have not separated what part of the performance differences are due to front-running of Russell indices vs differences in exposures.

Since Dr. Swensen's book was published, Russell has made changes to address front-running. Has it been fully addressed? I'm skeptical, but I don't know.

I am skeptical that there is evidence that the performance Russell 1000 or Russell midcap indices have been harmed by front-running. If a front-runner successfully shorts a stock right before it is targeted for movement from the R2000 to the R1000, then the R1000 fund gets to buy it at a discount. Likewise buying a stock that is predicted to move from the R1000 to the R2000 helps the R1000 get a better price for it. And because there is more more $ indexed to the R2000 than the R1000, front-runners will target shorting stocks predicted to move from the R2000 to the R1000 and buying stocks long that are predicted to move from the R1000 to the R2000, not the other way around.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by FellsGuy »

JasonHutt wrote: Wed Nov 23, 2022 6:48 pm
Northern Flicker wrote: Wed Nov 23, 2022 6:37 pm
JasonHutt wrote: Wed Nov 23, 2022 6:33 pm I got factor coefficients from Portfolio Visualizer, comparing VSIAX & FISVX. If I read the results correctly, as expected the Fidelity SCV has a higher size advantage (smaller caps) and an equal value advantage. The superiority of VSIAX cannot be explained based on different size/value loadings. (I haven't studied these models, so I am hoping I have run this comparison correctly. I'm happy to be corrected if not.)

https://www.portfoliovisualizer.com/fac ... sion=false
Sure it can. If the size premium were negative during the performance period, then the fund with stronger loadings on size would tend underperform the fund with weaker loading on size, all else equal.

I still have some concerns about front-running of Russell 2000 index changes, but I doubt that the Russell midcap index is a target of front/running.
But front running seems to be much easier with the Russell. That's what I meant about arbitrage. (If I understand you correctly.). In addition, the S&P 600 Value is a bit smaller than the Russell, but its performance beats (slightly) the CRSP and beats substantially the Russell. See the results I've already posted. So if it's been bad for small, the CRSP small should have been in trouble.

I agree regarding Mid cap, which was why I juxtaposed Fidelity Mid Cap and Fidelity Mid Cap Value Index funds. How can the value component of this same index have twice the turnover of the index as a whole?
I'm not sure what you mean by front running? Are you claiming Fidelity is doing something illegal with small Cap stocks?
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JasonHutt
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

Northern Flicker wrote: Wed Nov 23, 2022 9:19 pm
JasonHutt wrote: Wed Nov 23, 2022 8:52 pm
I'm sorry, Flicker, but I've addressed this. AND Swensen pointed out the problem with the Russell indexes.

There seems to be an almost religious view here that all indexes are equal because they ... are
Not really.

I believe you have misinterpreted the text in Dr. Swensen's book, which I also read btw.

The front-running of Russell index changes is front-running the movement of stocks between the Russell 1000 and Russell 2000. The idea is to try to predict which will move. With one set of predictions, you cannot simultaneously front-run both because you would be taking both sides of the trade, betting against yourself.

The issues have been with the Russell 2000 SC and SCV indices, as Dr. Swensen pointed out.

There is nothing wrong with using funds that track the CRSP indices (I hold VSIAX myself), but your backtests have not separated what part of the performance differences are due to front-running of Russell indices vs differences in exposures.

Since Dr. Swensen's book was published, Russell has made changes to address front-running. Has it been fully addressed? I'm skeptical, but I don't know.

I am skeptical that there is evidence that the performance Russell 1000 or Russell midcap indices have been harmed by front-running. If a front-runner successfully shorts a stock right before it is targeted for movement from the R2000 to the R1000, then the R1000 fund gets to buy it at a discount. Likewise buying a stock that is predicted to move from the R1000 to the R2000 helps the R1000 get a better price for it. And because there is more more $ indexed to the R2000 than the R1000, front-runners will target shorting stocks predicted to move from the R2000 to the R1000 and buying stocks long that are predicted to move from the R1000 to the R2000, not the other way around.
Swensen referred negatively to the Russell 1000 as well. One of the issues that cannot be explained away is the high portfolio turnover of both the Russell Mid-Cap Value and the Russell Small-Cap Value. That is relevant NOW. A turnover that is twice that of the CRSP will necessarily affect returns, leaving aside anything else. Furthermore, I cannot ignore a clear performance advantage for the CRSP SCV and the S&P 600 Value over the Russell 2000 Value over the 10 years for which data are available (I can't find raw CRSP time series). I have not been able to run parallel analyses for the mid-cap funds, but because I want to cover all capitalizations, if I add SCV from CRSP, I should also use the mid cap value from CRSP, and the large cap value from CRSP.

I appreciate your expertise, which seems more extensive than my own. But I think your position requires hypothesizing a bunch of auxiliary theories to avoid noticing where the data point. I have put my money into CRSP over Russell, even though there is a fee to buy most of the Vanguard funds (no fee for regular contributions) in my 401k.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by muffins14 »

JasonHutt wrote: Wed Nov 23, 2022 8:52 pm
Northern Flicker wrote: Wed Nov 23, 2022 8:00 pm
JasonHutt wrote: Wed Nov 23, 2022 7:05 pm
vineviz wrote: Wed Nov 23, 2022 6:59 pm
Northern Flicker wrote: Wed Nov 23, 2022 6:37 pm
Sure it can. If the size premium were negative during the performance period, then the fund with stronger loadings on size would tend underperform the fund with weaker loading on size, all else equal.

Indeed, and since the size factor has had negative returns YTD the greater exposure to this factor by FISVX is what leads to most of the performance differential.
Then how do you explain the performance of the S&P 600 Value, which is the smallest we are considering?

And how do you explain the 10-year results that essentially control for size (that I've already posted)?
The SP 600 Value index has different loadings on value and quality, and different residual alpha.
I'm sorry, Flicker, but I've addressed this. AND Swensen pointed out the problem with the Russell indexes.

There seems to be an almost religious view here that all indexes are equal because they ... are indexes. This is illogical. I shifted to CRSP years ago. I stand by this decision.

Where did you post 10-year returns that control for size? And how did you control for it? Two funds that are both called mid cap or both called small may have quite different factor exposures

The factor regression you posted showed that FISVX is much smaller than VSIAX on SmB, and you evaluated it during a time when the SmB premium is negative, so you should expect it to have lower returns
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Northern Flicker »

JasonHutt wrote: I appreciate your expertise, which seems more extensive than my own. But I think your position requires hypothesizing a bunch of auxiliary theories to avoid noticing where the data point.
Quite the reverse. You have to conjecture that the difference in performance you are seeing between two different portfolios is not caused by the different exposures of the portfolios.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Northern Flicker »

The S&P600 SC Value index is not immune to the types of problems seen by the Russell 2000 indices. The S&P600 Small-Cap index gets index changes as needed, not on a fixed schedule, which is why Dr. Swensen preferred it to the Russell 2000. But the S&P style indices are administered like the Russell 2000 and Russell 2000 Value indices with rebalancing once/year. ( see page 13.)

This is susceptible to front-running in the same manner. In fact, the S&P600 SCV funds got stuck with Gamestop as their largest holding until the Dec rebalance, long after it stopped being a value stock. Anyone who was half paying attention knew it would be booted out.

CRSP has a better methodology for index maintenance. If this is your concern, funds like AVUV or VFVA are even less susceptible to front-running. I don't think it is an issue for VBR/VSIAX in any case.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by exodusNH »

JasonHutt wrote: Wed Nov 23, 2022 9:45 pm
Northern Flicker wrote: Wed Nov 23, 2022 9:19 pm
JasonHutt wrote: Wed Nov 23, 2022 8:52 pm
I'm sorry, Flicker, but I've addressed this. AND Swensen pointed out the problem with the Russell indexes.

There seems to be an almost religious view here that all indexes are equal because they ... are
Not really.

I believe you have misinterpreted the text in Dr. Swensen's book, which I also read btw.

The front-running of Russell index changes is front-running the movement of stocks between the Russell 1000 and Russell 2000. The idea is to try to predict which will move. With one set of predictions, you cannot simultaneously front-run both because you would be taking both sides of the trade, betting against yourself.

The issues have been with the Russell 2000 SC and SCV indices, as Dr. Swensen pointed out.

There is nothing wrong with using funds that track the CRSP indices (I hold VSIAX myself), but your backtests have not separated what part of the performance differences are due to front-running of Russell indices vs differences in exposures.

Since Dr. Swensen's book was published, Russell has made changes to address front-running. Has it been fully addressed? I'm skeptical, but I don't know.

I am skeptical that there is evidence that the performance Russell 1000 or Russell midcap indices have been harmed by front-running. If a front-runner successfully shorts a stock right before it is targeted for movement from the R2000 to the R1000, then the R1000 fund gets to buy it at a discount. Likewise buying a stock that is predicted to move from the R1000 to the R2000 helps the R1000 get a better price for it. And because there is more more $ indexed to the R2000 than the R1000, front-runners will target shorting stocks predicted to move from the R2000 to the R1000 and buying stocks long that are predicted to move from the R1000 to the R2000, not the other way around.
Swensen referred negatively to the Russell 1000 as well. One of the issues that cannot be explained away is the high portfolio turnover of both the Russell Mid-Cap Value and the Russell Small-Cap Value. That is relevant NOW. A turnover that is twice that of the CRSP will necessarily affect returns, leaving aside anything else. Furthermore, I cannot ignore a clear performance advantage for the CRSP SCV and the S&P 600 Value over the Russell 2000 Value over the 10 years for which data are available (I can't find raw CRSP time series). I have not been able to run parallel analyses for the mid-cap funds, but because I want to cover all capitalizations, if I add SCV from CRSP, I should also use the mid cap value from CRSP, and the large cap value from CRSP.

I appreciate your expertise, which seems more extensive than my own. But I think your position requires hypothesizing a bunch of auxiliary theories to avoid noticing where the data point. I have put my money into CRSP over Russell, even though there is a fee to buy most of the Vanguard funds (no fee for regular contributions) in my 401k.
Value companies could switch from value to growth, or shrink / expand / go out of business. You'd have to examine the exact details of how they evaluate companies. They may be sensitive to relatively smaller changes than the other indices. Or have worse "smoothing" rules to keep churn down / or reduce predictability.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Northern Flicker »

FellsGuy wrote: Wed Nov 23, 2022 9:25 pm I'm not sure what you mean by front running? Are you claiming Fidelity is doing something illegal with small Cap stocks?
Some indices are reconstituted once/year on a set schedule. Hedge funds and other active market participants may try to guess which funds will move in or out of an index, and then front-run the changes. If a bunch of market participants try, some will make some correct guesses, to the detriment of funds tracking the index, whether or not the front-runners make enough correct guesses to make money on the activity.

The Russell 2000, Russell 2000 Value or Growth, and S&P 600 Small Cap style indices (value, growth, pure value, pure growth) are examples of indices with annual reconstitution schedules.

Stocks moving between the Russell 2000 and Russell 1000 are a handful of some of the largest stocks in the R2000 and smallest in the R1000. This is a tiny percentage of R1000 total market cap that is even in play in this regard.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by nedsaid »

I always said that Bogleheads were index snobs. Sort of like how I feel when confronted with so many choices when I want coffee: the names are hard to pronounce, not quite sure what I am ordering, and I'll find out how it actually tastes when I get it. I mean, what is a shot? I figured three was better than two and my nerves could tell the difference, won't do that again! The coffee snobs know the subtle differences and I ask them what tastes good. If I am not with a coffee snob when I am at the coffee shop, I just order hot chocolate. Bogleheads are sort of like that with index funds.

We get told that stock picking is such a terrible thing but Bogleheads are really into index picking. To me, if coffee tastes good, I like it, even if I can't pronounce the name. In a similar fashion, with investing good enough is good enough and close enough is close enough. What really gets difficult is talking to people who are both index fund snobs AND factor snobs. Many subtleties here, my unrefined taste buds have a hard time telling the difference. I really must get myself into high-class culture, I am just too low brow of an investor. Sort of a hick from the sticks.
Last edited by nedsaid on Thu Nov 24, 2022 3:26 am, edited 1 time in total.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Triple digit golfer »

The holdings are different.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by BitTooAggressive »

JasonHutt wrote: Wed Nov 23, 2022 5:53 pm
Ocean77 wrote: Wed Nov 23, 2022 4:31 pm See relative index performance here (for the Mid cap):

https://www.investopedia.com/comparing- ... es-5225246

The Fidelity fund tracks the Russell Index, and the Vanguard fund tracks the CRSP. The latter index has performed better lately (by 2% over the last year). There is no guarantee that this will continue. In fact there is often a reversion to the mean.
Yes, I know. However, maybe CRSP is a better index? The issue isn't just a year or two difference in performance.
CRSP is a better index I believe. It has a way to minimize volatility at to and bottom end so you are not constantly trading on top and bottom of index as stocks float in and out of index.

https://www.crsp.org/files/weighting-g ... thaler.pdf
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by dcabler »

nedsaid wrote: Thu Nov 24, 2022 3:25 am I always said that Bogleheads were index snobs. Sort of like how I feel when confronted with so many choices when I want coffee: the names are hard to pronounce, not quite sure what I am ordering, and I'll find out how it actually tastes when I get it. I mean, what is a shot? I figured three was better than two and my nerves could tell the difference, won't do that again! The coffee snobs know the subtle differences and I ask them what tastes good. If I am not with a coffee snob when I am at the coffee shop, I just order hot chocolate. Bogleheads are sort of like that with index funds.

We get told that stock picking is such a terrible thing but Bogleheads are really into index picking. To me, if coffee tastes good, I like it, even if I can't pronounce the name. In a similar fashion, with investing good enough is good enough and close enough is close enough. What really gets difficult is talking to people who are both index fund snobs AND factor snobs. Many subtleties here, my unrefined taste buds have a hard time telling the difference. I really must get myself into high-class culture, I am just too low brow of an investor. Sort of a hick from the sticks.
There are actually several dimensions to this for us snobs to consider. :D
- there's the index itself and its construction and maintenance rules
- then there are funds who track this index and the e/r's they might charge
- finally there is how the funds actually track against the index

I went through all of this a number of years ago for midcaps and looked at everything I could get my hands on. I ultimately decided that S&P midcap 400 was a very good choice after looking at all of the indexes which have funds that track them. I liked its construction rules, especially the quality gate. Then I looked at all of the ETF providers who tracked this index, including

IJH (e/r 0.05%)
MDY (e/r 0.22%)
IVOO (e/r 0.10%)
SPMD (e/r 0.05%)

I compared performance vs. index and I also looked at AUM. In the end, I chose IJH.

By the way, there are BH wikis for most indexes by size/styles with historic annual returns
here's the one for midcaps: https://www.bogleheads.org/wiki/US_mid_ ... ex_returns

Cheers.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by nedsaid »

dcabler wrote: Thu Nov 24, 2022 6:21 am
nedsaid wrote: Thu Nov 24, 2022 3:25 am I always said that Bogleheads were index snobs. Sort of like how I feel when confronted with so many choices when I want coffee: the names are hard to pronounce, not quite sure what I am ordering, and I'll find out how it actually tastes when I get it. I mean, what is a shot? I figured three was better than two and my nerves could tell the difference, won't do that again! The coffee snobs know the subtle differences and I ask them what tastes good. If I am not with a coffee snob when I am at the coffee shop, I just order hot chocolate. Bogleheads are sort of like that with index funds.

We get told that stock picking is such a terrible thing but Bogleheads are really into index picking. To me, if coffee tastes good, I like it, even if I can't pronounce the name. In a similar fashion, with investing good enough is good enough and close enough is close enough. What really gets difficult is talking to people who are both index fund snobs AND factor snobs. Many subtleties here, my unrefined taste buds have a hard time telling the difference. I really must get myself into high-class culture, I am just too low brow of an investor. Sort of a hick from the sticks.
There are actually several dimensions to this for us snobs to consider. :D
- there's the index itself and its construction and maintenance rules
- then there are funds who track this index and the e/r's they might charge
- finally there is how the funds actually track against the index

I went through all of this a number of years ago for midcaps and looked at everything I could get my hands on. I ultimately decided that S&P midcap 400 was a very good choice after looking at all of the indexes which have funds that track them. I liked its construction rules, especially the quality gate. Then I looked at all of the ETF providers who tracked this index, including

IJH (e/r 0.05%)
MDY (e/r 0.22%)
IVOO (e/r 0.10%)
SPMD (e/r 0.05%)

I compared performance vs. index and I also looked at AUM. In the end, I chose IJH.

By the way, there are BH wikis for most indexes by size/styles with historic annual returns
here's the one for midcaps: https://www.bogleheads.org/wiki/US_mid_ ... ex_returns

Cheers.
Thank you for pointing out the Wiki article, I didn't realize it had index returns for size/styles. I have recommended
the Wiki to new forum members, it goes into more depth than I knew. I was surprised that the MSCI Mid-Cap Index had the best 15 year return at 11.59% at the end of 2021, the "awful" Russell Index was in the middle at 11.15%, and the "great" S&P Index returned "only" 10.89% annually over 15 years. The truth is that I would be thrilled at 10.89% annual returns only to be disappointed that I could have had 11.59%. That is if I picked the right mutual fund or ETF to track the MSCI Mid-Cap Index if it even existed.

You heard my rant about index fund snobs, don't get me started on factor snobs. Even worse, are the index fund AND factor snobs. :wink: Or is it factor AND index fund snobs?

I think this could be a Seinfeld episode.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by dcabler »

nedsaid wrote: Thu Nov 24, 2022 6:55 am
dcabler wrote: Thu Nov 24, 2022 6:21 am
nedsaid wrote: Thu Nov 24, 2022 3:25 am I always said that Bogleheads were index snobs. Sort of like how I feel when confronted with so many choices when I want coffee: the names are hard to pronounce, not quite sure what I am ordering, and I'll find out how it actually tastes when I get it. I mean, what is a shot? I figured three was better than two and my nerves could tell the difference, won't do that again! The coffee snobs know the subtle differences and I ask them what tastes good. If I am not with a coffee snob when I am at the coffee shop, I just order hot chocolate. Bogleheads are sort of like that with index funds.

We get told that stock picking is such a terrible thing but Bogleheads are really into index picking. To me, if coffee tastes good, I like it, even if I can't pronounce the name. In a similar fashion, with investing good enough is good enough and close enough is close enough. What really gets difficult is talking to people who are both index fund snobs AND factor snobs. Many subtleties here, my unrefined taste buds have a hard time telling the difference. I really must get myself into high-class culture, I am just too low brow of an investor. Sort of a hick from the sticks.
There are actually several dimensions to this for us snobs to consider. :D
- there's the index itself and its construction and maintenance rules
- then there are funds who track this index and the e/r's they might charge
- finally there is how the funds actually track against the index

I went through all of this a number of years ago for midcaps and looked at everything I could get my hands on. I ultimately decided that S&P midcap 400 was a very good choice after looking at all of the indexes which have funds that track them. I liked its construction rules, especially the quality gate. Then I looked at all of the ETF providers who tracked this index, including

IJH (e/r 0.05%)
MDY (e/r 0.22%)
IVOO (e/r 0.10%)
SPMD (e/r 0.05%)

I compared performance vs. index and I also looked at AUM. In the end, I chose IJH.

By the way, there are BH wikis for most indexes by size/styles with historic annual returns
here's the one for midcaps: https://www.bogleheads.org/wiki/US_mid_ ... ex_returns

Cheers.
Thank you for pointing out the Wiki article, I didn't realize it had index returns for size/styles. I have recommended
the Wiki to new forum members, it goes into more depth than I knew. I was surprised that the MSCI Mid-Cap Index had the best 15 year return at 11.59% at the end of 2021, the "awful" Russell Index was in the middle at 11.15%, and the "great" S&P Index returned "only" 10.89% annually over 15 years. The truth is that I would be thrilled at 10.89% annual returns only to be disappointed that I could have had 11.59%. That is if I picked the right mutual fund or ETF to track the MSCI Mid-Cap Index if it even existed.

You heard my rant about index fund snobs, don't get me started on factor snobs. Even worse, are the index fund AND factor snobs. :wink: Or is it factor AND index fund snobs?

I think this could be a Seinfeld episode.
Bwahahaha! :D :D

Yeah, then there are factors on top of that. IJH has had a slight value tilt, though it isn't clear from where in the SP400 construction rules it originates. But I'll take it.

Yup, that's a great wiki. I personally like to take that sort of data (even better to get monthly data if you can) and then generate tell-tale charts of all of them vs. some reference, which could be any of the indexes or even the average of them all or anything else you might want to choose like maybe a TSM or SP500 index. Main thing is that you can then see the trajectory of relative returns and whether there is some sort of long term pattern that might make one stand out above the others. Of course even if such a pattern exists, there will never be enough data to know for sure that it's persistent, so it's back to taking a leap of faith. :shock:
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by nedsaid »

I guess I am getting to be curmudgeony in my old age. While I am at it, Vanguard has a habit of changing the indexes that its index funds track. Ranting is a lot of fun but not very constructive.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by dcabler »

nedsaid wrote: Thu Nov 24, 2022 7:19 am I guess I am getting to be curmudgeony in my old age. While I am at it, Vanguard has a habit of changing the indexes that its index funds track. Ranting is a lot of fun but not very constructive.
Yeah I was explaining to some friends that there is always the danger of your favorite index fund changing horses and how that could impact things like performance, e/r, etc. iShares has been doing that some lately as well, but mainly with some of the more esoteric funds (so far).
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by nedsaid »

dcabler wrote: Thu Nov 24, 2022 7:23 am
nedsaid wrote: Thu Nov 24, 2022 7:19 am I guess I am getting to be curmudgeony in my old age. While I am at it, Vanguard has a habit of changing the indexes that its index funds track. Ranting is a lot of fun but not very constructive.
Yeah I was explaining to some friends that there is always the danger of your favorite index fund changing horses and how that could impact things like performance, e/r, etc. iShares has been doing that some lately as well, but mainly with some of the more esoteric funds (so far).
My best guess is that Fidelity does this too but I am too lazy to check.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by dcabler »

nedsaid wrote: Thu Nov 24, 2022 7:25 am
dcabler wrote: Thu Nov 24, 2022 7:23 am
nedsaid wrote: Thu Nov 24, 2022 7:19 am I guess I am getting to be curmudgeony in my old age. While I am at it, Vanguard has a habit of changing the indexes that its index funds track. Ranting is a lot of fun but not very constructive.
Yeah I was explaining to some friends that there is always the danger of your favorite index fund changing horses and how that could impact things like performance, e/r, etc. iShares has been doing that some lately as well, but mainly with some of the more esoteric funds (so far).
My best guess is that Fidelity does this too but I am too lazy to check.
Not that I'm aware of. Their index-based small/midcap index offerings are actually fairly recent.

Of course with all of their active funds, they can certainly change strategies at any time and wouldn't surprise me at all if they have multiple times over the years.

Cheers.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by SmileyFace »

nedsaid wrote: Thu Nov 24, 2022 7:19 am I guess I am getting to be curmudgeony in my old age. While I am at it, Vanguard has a habit of changing the indexes that its index funds track. Ranting is a lot of fun but not very constructive.
I was thinking the same thing. The OP said essentially they switched to CRSP years ago as if it was their choice (and maybe it was at the time - but you can't maintain it necessarily since its not fully under your control). Lots of Bogleheads switched to CRSP in 2012 but not because they had a choice - they happened to be in Vanguard funds who decided to flip many index funds to CRSP at that time. Its been 10 years now - they may he looking to make another change sometime soon.
I initially thought the OP was complaining because they held Fidelity funds which were under performing similarly named Vanguard funds - turns out that isn't the case at all.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by vineviz »

JasonHutt wrote: Wed Nov 23, 2022 8:52 pm I'm sorry, Flicker, but I've addressed this. AND Swensen pointed out the problem with the Russell indexes.

There seems to be an almost religious view here that all indexes are equal because they ... are indexes. This is illogical. I shifted to CRSP years ago. I stand by this decision.
You're running off the rails here, I'm afraid.

Of course different indexes before differently. Why should this surprise or confuse you?

I, too, disfavor the Russell style indices relative to the CRSP and S&P versions but I think you're seeing a mountain when there's merely a molehill.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

SmileyFace wrote: Thu Nov 24, 2022 7:45 am
nedsaid wrote: Thu Nov 24, 2022 7:19 am I guess I am getting to be curmudgeony in my old age. While I am at it, Vanguard has a habit of changing the indexes that its index funds track. Ranting is a lot of fun but not very constructive.
I was thinking the same thing. The OP said essentially they switched to CRSP years ago as if it was their choice (and maybe it was at the time - but you can't maintain it necessarily since its not fully under your control). Lots of Bogleheads switched to CRSP in 2012 but not because they had a choice - they happened to be in Vanguard funds who decided to flip many index funds to CRSP at that time. Its been 10 years now - they may he looking to make another change sometime soon.
I initially thought the OP was complaining because they held Fidelity funds which were under performing similarly named Vanguard funds - turns out that isn't the case at all.
This OP purchased Fidelity Mid-Cap and Mid-Cap Value when the latter became available in my retirement program with no fee. I thought I might switch to Fidelity Small-Cap Value as well. But then I read the Swensen book, saw an even higher portfolio turnover than now in the Fido Mid-Cap Value and SCV. I called Fidelity to ask about this, and got no adequate explanation. I then immediately moved the mid-caps to Vanguard. So, I lost barely anything. Recently I decided to revisit these funds and saw the same situation.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

nedsaid wrote: Thu Nov 24, 2022 7:25 am
dcabler wrote: Thu Nov 24, 2022 7:23 am
nedsaid wrote: Thu Nov 24, 2022 7:19 am I guess I am getting to be curmudgeony in my old age. While I am at it, Vanguard has a habit of changing the indexes that its index funds track. Ranting is a lot of fun but not very constructive.
Yeah I was explaining to some friends that there is always the danger of your favorite index fund changing horses and how that could impact things like performance, e/r, etc. iShares has been doing that some lately as well, but mainly with some of the more esoteric funds (so far).
My best guess is that Fidelity does this too but I am too lazy to check.
Vanguard was using the Russell but switched to the CRSP indexes about 10-11 years ago, I believe. I think this was a good move.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

vineviz wrote: Thu Nov 24, 2022 8:38 am
JasonHutt wrote: Wed Nov 23, 2022 8:52 pm I'm sorry, Flicker, but I've addressed this. AND Swensen pointed out the problem with the Russell indexes.

There seems to be an almost religious view here that all indexes are equal because they ... are indexes. This is illogical. I shifted to CRSP years ago. I stand by this decision.
You're running off the rails here, I'm afraid.

Of course different indexes before differently. Why should this surprise or confuse you?

I, too, disfavor the Russell style indices relative to the CRSP and S&P versions but I think you're seeing a mountain when there's merely a molehill.
Oh well, I guess I'm off the rails then. But it looks like we both ended up with the same general opinion regarding these indexes anyway.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by nedsaid »

JasonHutt wrote: Thu Nov 24, 2022 11:45 am
nedsaid wrote: Thu Nov 24, 2022 7:25 am
dcabler wrote: Thu Nov 24, 2022 7:23 am
nedsaid wrote: Thu Nov 24, 2022 7:19 am I guess I am getting to be curmudgeony in my old age. While I am at it, Vanguard has a habit of changing the indexes that its index funds track. Ranting is a lot of fun but not very constructive.
Yeah I was explaining to some friends that there is always the danger of your favorite index fund changing horses and how that could impact things like performance, e/r, etc. iShares has been doing that some lately as well, but mainly with some of the more esoteric funds (so far).
My best guess is that Fidelity does this too but I am too lazy to check.
Vanguard was using the Russell but switched to the CRSP indexes about 10-11 years ago, I believe. I think this was a good move.
Vanguard has made the switches for a couple of reasons: first, they saved on licensing fees and second, CRSP gradually moves in and out of stocks to minimize front running of the indexes.

I was having a bit of fun in the thread but making a point that an index fund may have changed indexes during its lifetime. I believe Vanguard's Total Stock Market Index has used three different indexes and Total Bond Market Index has used at least two. I do think that index construction is important and also that fees are a consideration as well.
A fool and his money are good for business.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by JasonHutt »

nedsaid wrote: Thu Nov 24, 2022 11:52 am
JasonHutt wrote: Thu Nov 24, 2022 11:45 am
nedsaid wrote: Thu Nov 24, 2022 7:25 am
dcabler wrote: Thu Nov 24, 2022 7:23 am
nedsaid wrote: Thu Nov 24, 2022 7:19 am I guess I am getting to be curmudgeony in my old age. While I am at it, Vanguard has a habit of changing the indexes that its index funds track. Ranting is a lot of fun but not very constructive.
Yeah I was explaining to some friends that there is always the danger of your favorite index fund changing horses and how that could impact things like performance, e/r, etc. iShares has been doing that some lately as well, but mainly with some of the more esoteric funds (so far).
My best guess is that Fidelity does this too but I am too lazy to check.
Vanguard was using the Russell but switched to the CRSP indexes about 10-11 years ago, I believe. I think this was a good move.
Vanguard has made the switches for a couple of reasons: first, they saved on licensing fees and second, CRSP gradually moves in and out of stocks to minimize front running of the indexes.

I was having a bit of fun in the thread but making a point that an index fund may have changed indexes during its lifetime. I believe Vanguard's Total Stock Market Index has used three different indexes and Total Bond Market Index has used at least two. I do think that index construction is important and also that fees are a consideration as well.
Good to hear this. I was beginning to think that I had missed something fundamental. Swensen's book dedicates sections on obvious and subtle reasons for fund underperformance. I was surprised at what expense ratios did not include.
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Re: What's going on with Fidelity's mid cap value & small cap value index funds?

Post by Northern Flicker »

JasonHutt wrote: Thu Nov 24, 2022 11:43 am This OP purchased Fidelity Mid-Cap and Mid-Cap Value when the latter became available in my retirement program with no fee. I thought I might switch to Fidelity Small-Cap Value as well. But then I read the Swensen book, saw an even higher portfolio turnover than now in the Fido Mid-Cap Value and SCV. I called Fidelity to ask about this, and got no adequate explanation. I then immediately moved the mid-caps to Vanguard. So, I lost barely anything. Recently I decided to revisit these funds and saw the same situation.
Have you even bothered to look at what Vanguard calls a small-cap or small-cap value fund or the mid-cap funds? The CRSP indices have an atypical taxonomy.

The CRSP "small-cap" index funds hold small-cap and mid-cap stocks. The CRSP "mid-cap" index funds hold large-cap stocks.

The CRSP Large-cap index is made up of a combination of the stocks in the CRSP Mega-cap index and Mid-cap index. Yes, the large-cap index is a subset of the mid-cap index, counterintuitively.
My postings represent my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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