Portfolio Review - BAM Portfolio

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typical.investor
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Re: Portfolio Review - BAM Portfolio

Post by typical.investor » Sat Aug 31, 2019 9:59 am

Random Walker wrote:
Sat Aug 31, 2019 9:43 am
typical.investor wrote:
Sat Aug 31, 2019 1:14 am

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

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

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

For peer lending, it seems to be the same.

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

Dave
A more relevant comparison would be Schwab instead of Vanguard. Schwab has many funds too, the problem I see would be having only SCHW in your holdings to represent the finance sector.

I do understand Stone Ridge has many contracts. What if Stone Ridge systematically misprices contacts the way the GE health unit mispriced their long term care policies?

Anyway, Stone Ridge returns seemed below the industry average. I’m not convinced by their execution as a company.

2014-18, I understood the industry had 6% return on equity. Why were Stone Ridge returns so different? Or weren’t they?

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nedsaid
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Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Sat Aug 31, 2019 10:23 am

typical.investor wrote:
Fri Aug 30, 2019 9:39 pm
riplip wrote:
Thu Aug 29, 2019 11:12 am
I am very comfortable with the AA, but have begun to second guess the SCV tilt side of the portfolio because of the recent performance, or lack thereof (3-5 years). I am also unhappy with myself for transitioning into the Alt funds recommended by BAM over the last few years. I will most likely sell these funds prior to transition and move this allocation back into Fixed Income.
I think the cow is out of the barn.

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

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

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

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

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

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

https://www.businesswire.com/news/home/ ... -Permeates
https://www.stoneridgefunds.com/documen ... Report.pdf
I will be pretty gentle here. This definitely touched a sensitive nerve with Larry because he has gone all-in with the Alts personally, have recommended them to clients, and has been pretty well bashed around here for that. Lots of folks (not typical.investor) have questioned Larry's motives, what I will say is that Larry really believes in the Alts he has recommended and he has made substantial investments with his own money.

Larry has a great background, he has run trading floors a couple of times so he is pretty familiar with the world of trading. He also has access to the best and the latest academic research. He is pretty well connected. I would love to have someone like that as my own advisor. My concern is that the top 10% of hedge funds are really good at what they do, what they do is risky, and what they do is a tremendous intellectual challenge. You need the very best of minds and technology to succeed here. Pretty good probably won't cut it. So not knocking Larry or his firm in any way but to be really, really, really good at something, you have to be doing it all the time. AQR and Stone Ridge are going up against the Ray Dalios and the David Swensons of the world. Cliff Asness is very talented and no doubt has a very good team, ditto for Stone Ridge. Can AQR and Stone Ridge play with the big boys here? Asness has said that Renaissance Technologies is better than AQR but that his firm does well enough for the retail investor, Asness also charges much less in fees.

And yes, the concern that once retail investors make the Alts mainstream, the premiums from these techniques will go away. Or worse, that the successful hedge funds will do the equivalent of taking candy from a baby with the retail Alt funds. My favorite mutual company is in the Alt space, they are competent asset managers, but I have the same concerns here that I have with Buckingham, AQR, and Stone Ridge. They all just may be in over their heads. I don't know that but I suspect it but we won't really know until a couple of decades have passed.

In defense of Larry and others that have gone in with Alts, future expected returns from both Stocks and Bonds might be pretty meager going forward. When Central Banks around the world flooded markets with liquidity, it floated asset prices everywhere. In this environment, it is harder to find truly cheap assets. So the search for new sources of return is on, no way to know for sure if the new sources will deliver over time.

As far as personal messages from Larry, I did repost some things from him with his permission. I am not doing even that anymore, partly because I don't want to violate trust or abuse a privilege.

I have been investing my own money for over 35 years now. I have learned a whole lot doing this but the more I know, the more I realize that I don't know. There are a lot of things that I suspect but don't know but have found over time that my suspicions are mostly correct. You just sort of get a sense for certain things. Larry knows a whole lot more than I do as he has spent his entire career doing this whereas I put in a few hours a week studying these things. My knowledge and experience pales in comparison with his. But I know there are things Larry doesn't know, as good as he is. Even Warren Buffett, as great as he is, doesn't know everything. That is why he talks about a circle of competence.
A fool and his money are good for business.

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nedsaid
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Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Sat Aug 31, 2019 10:28 am

Also want to say that I hope this discussion doesn't turn into a Buckingham bashing session. It sounds to me that they are a good firm and very conscientious. We are in a period where Value is out of style so inevitably such strategies will experience tracking error compared to the broad indexes. The Alts have promise but we are in uncharted territory here. I have admitted to a lot of things here, don't want to take on infallibility. My foibles are out there for everyone to see. Lots and lots that I don't know.
A fool and his money are good for business.

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nedsaid
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Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Sat Aug 31, 2019 10:32 am

Rick Ferri wrote:
Fri Aug 30, 2019 5:57 pm
Year 1: "I'm a long-term investing. I can wait for this to work."
Year 2: "This strategy still seems OK, I guess. I'd just like to see it do something."
Year 3: "I've really become annoyed with this."
Year 4: "I want a DIVORCE!"

Moral of the story:

Excess return from any active strategy is not guaranteed - only the fee is guaranteed.
The entire thread in a nutshell. Excellent post Rick.
A fool and his money are good for business.

Random Walker
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Re: Portfolio Review - BAM Portfolio

Post by Random Walker » Sat Aug 31, 2019 10:51 am

nedsaid wrote:
Sat Aug 31, 2019 10:28 am
Also want to say that I hope this discussion doesn't turn into a Buckingham bashing session. It sounds to me that they are a good firm and very conscientious. We are in a period where Value is out of style so inevitably such strategies will experience tracking error compared to the broad indexes. The Alts have promise but we are in uncharted territory here. I have admitted to a lot of things here, don't want to take on infallibility. My foibles are out there for everyone to see. Lots and lots that I don't know.
I’m a BAM client. I strongly believe that the more one understands investing and understands himself, the more benefit he can derive from an advisor. Of course those qualities also make him better suited to do it himself. An informed client is a better and happier client. Previously I posted on the similarity between using an advisor and buying a used car.

viewtopic.php?t=213282

Dave

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Re: Portfolio Review - BAM Portfolio

Post by BigJohn » Sat Aug 31, 2019 1:02 pm

nedsaid wrote:
Sat Aug 31, 2019 10:28 am
Also want to say that I hope this discussion doesn't turn into a Buckingham bashing session. It sounds to me that they are a good firm and very conscientious. We are in a period where Value is out of style so inevitably such strategies will experience tracking error compared to the broad indexes. The Alts have promise but we are in uncharted territory here. I have admitted to a lot of things here, don't want to take on infallibility. My foibles are out there for everyone to see. Lots and lots that I don't know.
I don't think it has and it certainly would not be appropriate to get personal regarding Larry and his motivations. However, I don't think BAM should get a pass just because Larry is such a valuable contributor either. From what I've read in this discuss, these alt funds are not exactly Boglehead type investment (a high AUM adviser, very high ERs, very tax inefficient, etc). So it seems reasonable that you're going to get a significant push back on these just as often happens here with other funds and advisers with similar characteristics.

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Re: Portfolio Review - BAM Portfolio

Post by KyleAAA » Sat Aug 31, 2019 1:09 pm

Looks like a very sensible portfolio to me. Not conservative, but that’s fine. The only real reason to switch would be if the fees are too high. I guess it would be more difficult to own the alternatives on your own, but that’s a small portion and you don’t seem to like them anyway.

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Re: Portfolio Review - BAM Portfolio

Post by KyleAAA » Sat Aug 31, 2019 1:35 pm

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

This is the kind of over weight I keep referring to in the Small Value thread, yet we have folks saying there is nothing wrong with tilting to SCV factor.
There isn’t anything wrong with tilting to small value if you understand and accept the resulting tracking error. My tilt is deeper than this and I’ve outperformed since I began investing. 3-5 years simply isn’t long enough to evaluate such a strategy. Besides, the underperformance is much more a product of international than the small value tilt, and you don’t see many people ranting against owning international at this point.

Elysium
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Re: Portfolio Review - BAM Portfolio

Post by Elysium » Sat Aug 31, 2019 1:56 pm

KyleAAA wrote:
Sat Aug 31, 2019 1:35 pm
Elysium wrote:
Thu Aug 29, 2019 10:19 pm
In this thread and in the other BAM thread the common thing I noted is the huge bet on Small Value they took on, and lost. I calculated 30% in US + Intl SV in the portfolio posted by OP. That is out of a total of 75% equities, so a whopping 40% of equities is in SCV! That too deep value funds like Bridgeway, and DFA. Talk about the risks of tilting. It is one thing to say TSM alone portfolio is not diversified and adding SCV on the edges, but totally another to make it equal to the same weight as Large Caps.

This is the kind of over weight I keep referring to in the Small Value thread, yet we have folks saying there is nothing wrong with tilting to SCV factor.
There isn’t anything wrong with tilting to small value if you understand and accept the resulting tracking error. My tilt is deeper than this and I’ve outperformed since I began investing. 3-5 years simply isn’t long enough to evaluate such a strategy. Besides, the underperformance is much more a product of international than the small value tilt, and you don’t see many people ranting against owning international at this point.
If you have outperformed with deep value tilt then I would assume you have been investing for 20 or more years, because the last time we had a value bull was 2000-07, and you made significant gains over the market portfolio back then that is carrying over. Let me ask you this, are you in accumulation stage? and if so was your portfolio smaller in the beginning and larger now (typically). Because you may be underperforming on Money Weighted Returns as opposed to IRR, if you have more money now and value is lagging last several years.

Random Walker
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Re: Portfolio Review - BAM Portfolio

Post by Random Walker » Sat Aug 31, 2019 2:31 pm

We can only invest looking forward. Looking forward, overall equity market is generously valued and the growth-value spread very wide. Not the best time to toss in the SV equity tilt or the alts. That being said if the AA is truly wrong for the individual, the time to make the change is now.

Dave

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Re: Portfolio Review - BAM Portfolio

Post by KyleAAA » Sat Aug 31, 2019 4:50 pm

Elysium wrote:
Sat Aug 31, 2019 1:56 pm
KyleAAA wrote:
Sat Aug 31, 2019 1:35 pm
Elysium wrote:
Thu Aug 29, 2019 10:19 pm
In this thread and in the other BAM thread the common thing I noted is the huge bet on Small Value they took on, and lost. I calculated 30% in US + Intl SV in the portfolio posted by OP. That is out of a total of 75% equities, so a whopping 40% of equities is in SCV! That too deep value funds like Bridgeway, and DFA. Talk about the risks of tilting. It is one thing to say TSM alone portfolio is not diversified and adding SCV on the edges, but totally another to make it equal to the same weight as Large Caps.

This is the kind of over weight I keep referring to in the Small Value thread, yet we have folks saying there is nothing wrong with tilting to SCV factor.
There isn’t anything wrong with tilting to small value if you understand and accept the resulting tracking error. My tilt is deeper than this and I’ve outperformed since I began investing. 3-5 years simply isn’t long enough to evaluate such a strategy. Besides, the underperformance is much more a product of international than the small value tilt, and you don’t see many people ranting against owning international at this point.
If you have outperformed with deep value tilt then I would assume you have been investing for 20 or more years, because the last time we had a value bull was 2000-07, and you made significant gains over the market portfolio back then that is carrying over. Let me ask you this, are you in accumulation stage? and if so was your portfolio smaller in the beginning and larger now (typically). Because you may be underperforming on Money Weighted Returns as opposed to IRR, if you have more money now and value is lagging last several years.
It is irrelevant if I am underperforming the last 5 years on a MWR basis. I will never not have a small value tilt so the 50 year numbers are what is relevant to my situation. I fully expect long periods of underperformance, some much longer than this.

Elysium
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Re: Portfolio Review - BAM Portfolio

Post by Elysium » Sat Aug 31, 2019 5:00 pm

KyleAAA wrote:
Sat Aug 31, 2019 4:50 pm
Elysium wrote:
Sat Aug 31, 2019 1:56 pm
KyleAAA wrote:
Sat Aug 31, 2019 1:35 pm
Elysium wrote:
Thu Aug 29, 2019 10:19 pm
In this thread and in the other BAM thread the common thing I noted is the huge bet on Small Value they took on, and lost. I calculated 30% in US + Intl SV in the portfolio posted by OP. That is out of a total of 75% equities, so a whopping 40% of equities is in SCV! That too deep value funds like Bridgeway, and DFA. Talk about the risks of tilting. It is one thing to say TSM alone portfolio is not diversified and adding SCV on the edges, but totally another to make it equal to the same weight as Large Caps.

This is the kind of over weight I keep referring to in the Small Value thread, yet we have folks saying there is nothing wrong with tilting to SCV factor.
There isn’t anything wrong with tilting to small value if you understand and accept the resulting tracking error. My tilt is deeper than this and I’ve outperformed since I began investing. 3-5 years simply isn’t long enough to evaluate such a strategy. Besides, the underperformance is much more a product of international than the small value tilt, and you don’t see many people ranting against owning international at this point.
If you have outperformed with deep value tilt then I would assume you have been investing for 20 or more years, because the last time we had a value bull was 2000-07, and you made significant gains over the market portfolio back then that is carrying over. Let me ask you this, are you in accumulation stage? and if so was your portfolio smaller in the beginning and larger now (typically). Because you may be underperforming on Money Weighted Returns as opposed to IRR, if you have more money now and value is lagging last several years.
It is irrelevant if I am underperforming the last 5 years on a MWR basis. I will never not have a small value tilt so the 50 year numbers are what is relevant to my situation. I fully expect long periods of underperformance, some much longer than this.
That is good if you are able to do that. How much of a tilt are we talking? 10% or 50%, and is it also in Intl as well? The BAM portfolio posted above is almost 50% Value and roughly 60/40 US/Intl with an EM overweight within that.

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Re: Portfolio Review - BAM Portfolio

Post by KyleAAA » Sat Aug 31, 2019 5:23 pm

Elysium wrote:
Sat Aug 31, 2019 5:00 pm
KyleAAA wrote:
Sat Aug 31, 2019 4:50 pm
Elysium wrote:
Sat Aug 31, 2019 1:56 pm
KyleAAA wrote:
Sat Aug 31, 2019 1:35 pm
Elysium wrote:
Thu Aug 29, 2019 10:19 pm
In this thread and in the other BAM thread the common thing I noted is the huge bet on Small Value they took on, and lost. I calculated 30% in US + Intl SV in the portfolio posted by OP. That is out of a total of 75% equities, so a whopping 40% of equities is in SCV! That too deep value funds like Bridgeway, and DFA. Talk about the risks of tilting. It is one thing to say TSM alone portfolio is not diversified and adding SCV on the edges, but totally another to make it equal to the same weight as Large Caps.

This is the kind of over weight I keep referring to in the Small Value thread, yet we have folks saying there is nothing wrong with tilting to SCV factor.
There isn’t anything wrong with tilting to small value if you understand and accept the resulting tracking error. My tilt is deeper than this and I’ve outperformed since I began investing. 3-5 years simply isn’t long enough to evaluate such a strategy. Besides, the underperformance is much more a product of international than the small value tilt, and you don’t see many people ranting against owning international at this point.
If you have outperformed with deep value tilt then I would assume you have been investing for 20 or more years, because the last time we had a value bull was 2000-07, and you made significant gains over the market portfolio back then that is carrying over. Let me ask you this, are you in accumulation stage? and if so was your portfolio smaller in the beginning and larger now (typically). Because you may be underperforming on Money Weighted Returns as opposed to IRR, if you have more money now and value is lagging last several years.
It is irrelevant if I am underperforming the last 5 years on a MWR basis. I will never not have a small value tilt so the 50 year numbers are what is relevant to my situation. I fully expect long periods of underperformance, some much longer than this.
That is good if you are able to do that. How much of a tilt are we talking? 10% or 50%, and is it also in Intl as well? The BAM portfolio posted above is almost 50% Value and roughly 60/40 US/Intl with an EM overweight within that.
My portfolio is more tilted than the one above.

typical.investor
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Re: Portfolio Review - BAM Portfolio

Post by typical.investor » Sat Aug 31, 2019 5:29 pm

Random Walker wrote:
Sat Aug 31, 2019 2:31 pm
We can only invest looking forward. Looking forward, overall equity market is generously valued and the growth-value spread very wide. Not the best time to toss in the SV equity tilt or the alts. That being said if the AA is truly wrong for the individual, the time to make the change is now.

Dave
Given the large growth value spread, I too wouldn't advise switching out of a value tilt.

A few questions though:

1) is the growth value spread relevant to the decision on the alts? If it is, how is this diversification when only the CDs aren’t so affected by the spread? If they aren’t, why does moving away from alts now when the spread is large matter?

2) how do you rebalance such a portfolio? Usually treasuries are a good tool. Reinsurance, peer lending and CDs wouldn’t seem to have much liquidity. Peer lending seems like it might function like junk bonds and drop more in a recession.

3) why is Stone Ridge better than holding one of the major publicly traded reinsurance funds? I can’t even find Stone Ridge in S&P’s 2018 reinsurance report. If you aren’t paying an advisor to monitor the position anymore, how do you keep up on it. I mean commodities were sold as a diversifier once, but not suggested anymore. Things can change and a 5% holding in Stone Ridge is a larger allocation than most have to even the worlds largest company.
https://www.spratings.com/documents/201 ... 89caaab0b0
Last edited by typical.investor on Sat Aug 31, 2019 5:55 pm, edited 2 times in total.

Elysium
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Re: Portfolio Review - BAM Portfolio

Post by Elysium » Sat Aug 31, 2019 5:34 pm

KyleAAA wrote:
Sat Aug 31, 2019 5:23 pm
Elysium wrote:
Sat Aug 31, 2019 5:00 pm
KyleAAA wrote:
Sat Aug 31, 2019 4:50 pm
Elysium wrote:
Sat Aug 31, 2019 1:56 pm
KyleAAA wrote:
Sat Aug 31, 2019 1:35 pm


There isn’t anything wrong with tilting to small value if you understand and accept the resulting tracking error. My tilt is deeper than this and I’ve outperformed since I began investing. 3-5 years simply isn’t long enough to evaluate such a strategy. Besides, the underperformance is much more a product of international than the small value tilt, and you don’t see many people ranting against owning international at this point.
If you have outperformed with deep value tilt then I would assume you have been investing for 20 or more years, because the last time we had a value bull was 2000-07, and you made significant gains over the market portfolio back then that is carrying over. Let me ask you this, are you in accumulation stage? and if so was your portfolio smaller in the beginning and larger now (typically). Because you may be underperforming on Money Weighted Returns as opposed to IRR, if you have more money now and value is lagging last several years.
It is irrelevant if I am underperforming the last 5 years on a MWR basis. I will never not have a small value tilt so the 50 year numbers are what is relevant to my situation. I fully expect long periods of underperformance, some much longer than this.
That is good if you are able to do that. How much of a tilt are we talking? 10% or 50%, and is it also in Intl as well? The BAM portfolio posted above is almost 50% Value and roughly 60/40 US/Intl with an EM overweight within that.
My portfolio is more tilted than the one above.
How did you arrive at this conclusion that having a deep value tilt is the way to go, and has anything made you question your strategy?

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nedsaid
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Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Sat Aug 31, 2019 8:06 pm

BigJohn wrote:
Sat Aug 31, 2019 1:02 pm
nedsaid wrote:
Sat Aug 31, 2019 10:28 am
Also want to say that I hope this discussion doesn't turn into a Buckingham bashing session. It sounds to me that they are a good firm and very conscientious. We are in a period where Value is out of style so inevitably such strategies will experience tracking error compared to the broad indexes. The Alts have promise but we are in uncharted territory here. I have admitted to a lot of things here, don't want to take on infallibility. My foibles are out there for everyone to see. Lots and lots that I don't know.
I don't think it has and it certainly would not be appropriate to get personal regarding Larry and his motivations. However, I don't think BAM should get a pass just because Larry is such a valuable contributor either. From what I've read in this discuss, these alt funds are not exactly Boglehead type investment (a high AUM adviser, very high ERs, very tax inefficient, etc). So it seems reasonable that you're going to get a significant push back on these just as often happens here with other funds and advisers with similar characteristics.
I have tried really hard to be objective here, certainly I have relied upon information Larry has given and often in posts referred to his work. Also not trying to turn the forum into a Larry Swedroe fan club. But we do have to realize what a special thing we have here, that is someone with Larry's stature willing to take time to answer questions from individual investors whether or not they are Buckingham clients. Doesn't mean he is infallible or above criticism but the input he has made here has been very valuable.

I can imagine e-mailing Bridgewater and asking Mr. Dalio to answer questions I had regarding his all-weather portfolio and risk parity. Can't imagine he would answer my e-mail or return my call. Nedsaid who? You know, the guy with 12,000 posts on Bogleheads? What are Bogleheads? Well we are an internet forum of disciples of John Bogle that believe in low-cost investing using index funds. Click.

Also hard to imagine Cliff Asness answering my e-mails, particularly after commenting that he slightly resembled Rob Reiner. Get out of my chair, meat head! Certainly no job offers are coming.

So certainly we can disagree with Larry, many folks here have, but we ought to step back and think about what we say here. We want Larry Swedroe, Rick Ferri, Bill Bernstein, and other authors to post here. Hopefully we don't run them off.
Last edited by nedsaid on Sat Aug 31, 2019 8:19 pm, edited 1 time in total.
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nedsaid
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Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Sat Aug 31, 2019 8:17 pm

I have been reflecting all day about my wondering if my favorite mutual fund company, Larry Swedroe, Buckingham, Stone Ridge, and AQR are all in over their heads trying to copy hedge fund techniques. The thing is, the hedge fund business is a tough one and most hedge funds have experienced subpar returns. Larry himself has written extensively on this topic. Maybe 10% or if I am in an optimistic mood, 20% of hedge funds are successful, at least as Bogleheads would define success which would be hedge fund complexity exceeding the risk adjusted returns of Boglehead simplicity. Might even be that only 5% of hedge funds are worth investing in. So maybe 80% of hedge fund managers are over their heads too.
Last edited by nedsaid on Sat Aug 31, 2019 8:43 pm, edited 1 time in total.
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Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Sat Aug 31, 2019 8:39 pm

typical.investor wrote:
Sat Aug 31, 2019 5:29 pm
Random Walker wrote:
Sat Aug 31, 2019 2:31 pm
We can only invest looking forward. Looking forward, overall equity market is generously valued and the growth-value spread very wide. Not the best time to toss in the SV equity tilt or the alts. That being said if the AA is truly wrong for the individual, the time to make the change is now.

Dave
Given the large growth value spread, I too wouldn't advise switching out of a value tilt.

A few questions though:

1) is the growth value spread relevant to the decision on the alts? If it is, how is this diversification when only the CDs aren’t so affected by the spread? If they aren’t, why does moving away from alts now when the spread is large matter?

2) how do you rebalance such a portfolio? Usually treasuries are a good tool. Reinsurance, peer lending and CDs wouldn’t seem to have much liquidity. Peer lending seems like it might function like junk bonds and drop more in a recession.

3) why is Stone Ridge better than holding one of the major publicly traded reinsurance funds? I can’t even find Stone Ridge in S&P’s 2018 reinsurance report. If you aren’t paying an advisor to monitor the position anymore, how do you keep up on it. I mean commodities were sold as a diversifier once, but not suggested anymore. Things can change and a 5% holding in Stone Ridge is a larger allocation than most have to even the worlds largest company.
https://www.spratings.com/documents/201 ... 89caaab0b0
The Valuation spread indicates this a bad time to give up on Value strategies whether they are executed within a Style Premia fund that uses shorts and leverage or within a Value fund or ETF. From what Larry has said, the valuation spreads between Growth and Value are similar to what were seen in 1999. This suggests that perhaps the Growth cycle in the stock market is near an end. Random Walker is encouraging the original poster not to give up, strategies often turn around when the true believers in utter disgust finally throw in the towel. Investors often give up too soon.

The semi-liquid Alts or the interval funds can be rebalanced, these funds allow limited distributions quarterly. Most of the time, rebalancing should not be a problem. It could be said that perhaps distributions could be frozen in a crisis but remember that in general liquidity tends to dry up in crisis situations. We saw this in 2008-2009 with much of the bond market.

The rationale of capturing the returns from reinsurance through an interval fund rather than through publicly traded reinsurance stocks are two-fold. First, you are trying to get the returns of the business itself without the effects of the volatility of the stock market itself. Second, you are attempting to capture the illiquidity premium.
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Re: Portfolio Review - BAM Portfolio

Post by typical.investor » Sat Aug 31, 2019 9:19 pm

nedsaid wrote:
Sat Aug 31, 2019 8:39 pm

The Valuation spread indicates this a bad time to give up on Value strategies whether they are executed within a Style Premia fund that uses shorts and leverage or within a Value fund or ETF. From what Larry has said, the valuation spreads between Growth and Value are similar to what were seen in 1999. This suggests that perhaps the Growth cycle in the stock market is near an end. Random Walker is encouraging the original poster not to give up, strategies often turn around when the true believers in utter disgust finally throw in the towel. Investors often give up too soon.
Yes, value is undervalued. Don't abandon it now. Ok.

But why is QRPRX (Market Neutral) said to be a diversifier to a value tilt if it is a Style Premia fund that is a type of value strategy that you can't sell when value has done poorly?

OK - maybe don't abandon QRPRX if that means ditching value at an inopportune time. I don't see why it was called a diversifier in the first place.

nedsaid wrote:
Sat Aug 31, 2019 8:39 pm
The semi-liquid Alts or the interval funds can be rebalanced, these funds allow limited distributions quarterly. Most of the time, rebalancing should not be a problem. It could be said that perhaps distributions could be frozen in a crisis but remember that in general liquidity tends to dry up in crisis situations. We saw this in 2008-2009 with much of the bond market.
Yeah, but when equities take a big drop in the upcoming crisis (just saying that like it's a fact so it won't happen), there really isn't anything to rebalance from is there. I wasn't talking about keeping the alts at their 5%. I am talking about rebalancing when your equities get cut in half.

I mean look at the portfolio:
riplip wrote:
Thu Aug 29, 2019 11:12 am
Domestic Equity - 44.9%
DFTCX -US Core Equity (19.7%)
DFMVX - US Market WIde Lg Value (6.4%)
BOTSX - US Sm Value (13.9%)
DTMVX - US Sm Value (4.9%)

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

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

Fixed Income - 10%
CD Ladder - 10 CD's of varying expiration.
I guess being able to rebalance when equities drop is of no concern.
nedsaid wrote:
Sat Aug 31, 2019 8:39 pm
The rationale of capturing the returns from reinsurance through an interval fund rather than through publicly traded reinsurance stocks are two-fold. First, you are trying to get the returns of the business itself without the effects of the volatility of the stock market itself. Second, you are attempting to capture the illiquidity premium.
And how do you know that that individual business can compete long term with other much larger entities in a competitive market? What do you think the OP's biggest single company exposure is? By global market cap, the world's largest company is under 2%. Probably the OP's biggest holding is Stone Ridge at 5%. I guess selecting and overweighting an individual company might have better returns, but if the OP sees themself as an index investor, why do it?

I know that when I was paying an AUM fee, that the advisor selected privately owned illiquid investments. I am less convinced that the investments were chosen in my interest as I am convinced they were chosen for the sake of diversification and as a way for the advisor to justify their AUM. Yes, my advisor was fiduciary and yes they put me in the lowest cost exposure to that asset. What the fiduciary didn't do I think was honestly evaluate the exposure I needed. The theoretical benefit of diversification was all they needed. That way my experience (not at BAM) anyway.

As someone who believes in broad indexes, do I really think an honest fiduciary should have concentrated me in exposure to one company. Based on my experience, I say firmly no. But that same fiduciary will argue (and likely win) that they were following a fiduciary standard. The fiduciary will argue that that concentration was actually diversification and more diversification is better for everyone and it was the cheapest type of diversification of that type they could get. Again, this is not BAM or Larry. It was a fiduciary working with the Independent Financial Group LLC.

But yeah, on a personal level I do know the fiduciary was an upstanding moral individual. I am 100% sure. I just think they felt pressure to justify their AUM and that didn't lead to the best portfolio for me. And no, I never discussed AUM or fees after I was told them one time. There was no pressure for results from me. They just knew I think that investors had easy alternatives so to take 1%, they'd better be putting up something worthwhile or anyone with any brains would just stop paying.

I do believe Rick Ferri changed his model for a reason and likely gives better advice as a result.

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Re: Portfolio Review - BAM Portfolio

Post by abuss368 » Sat Aug 31, 2019 9:45 pm

Rick Ferri wrote:
Fri Aug 30, 2019 5:57 pm
Year 1: "I'm a long-term investing. I can wait for this to work."
Year 2: "This strategy still seems OK, I guess. I'd just like to see it do something."
Year 3: "I've really become annoyed with this."
Year 4: "I want a DIVORCE!"

Moral of the story:

Excess return from any active strategy is not guaranteed - only the fee is guaranteed.
Thanks Rick and well said.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: Portfolio Review - BAM Portfolio

Post by Random Walker » Sat Aug 31, 2019 10:27 pm

typical.investor wrote:
Sat Aug 31, 2019 5:29 pm
Random Walker wrote:
Sat Aug 31, 2019 2:31 pm
We can only invest looking forward. Looking forward, overall equity market is generously valued and the growth-value spread very wide. Not the best time to toss in the SV equity tilt or the alts. That being said if the AA is truly wrong for the individual, the time to make the change is now.

Dave
Given the large growth value spread, I too wouldn't advise switching out of a value tilt.

A few questions though:

1) is the growth value spread relevant to the decision on the alts? If it is, how is this diversification when only the CDs aren’t so affected by the spread? If they aren’t, why does moving away from alts now when the spread is large matter?

2) how do you rebalance such a portfolio? Usually treasuries are a good tool. Reinsurance, peer lending and CDs wouldn’t seem to have much liquidity. Peer lending seems like it might function like junk bonds and drop more in a recession.

3) why is Stone Ridge better than holding one of the major publicly traded reinsurance funds? I can’t even find Stone Ridge in S&P’s 2018 reinsurance report. If you aren’t paying an advisor to monitor the position anymore, how do you keep up on it. I mean commodities were sold as a diversifier once, but not suggested anymore. Things can change and a 5% holding in Stone Ridge is a larger allocation than most have to even the worlds largest company.
https://www.spratings.com/documents/201 ... 89caaab0b0

1. Growth value spread not relevant to my decision on alts. The overall equity valuations and low interest rates are not a reason for me to add alts, but perhaps create a bit of extra opportunistic incentive. I’m focused on portfolio efficiency. Any changes I’ve made have have just sort of perhaps been catalyzed by valuations. My changes , like adding alts, increasing international to 50%, or increasing value tilt are meant to be permanent. Valuations at the time were just a little extra incentive. Can’t time a market.

2.basically just rebalance as one would with any AA. The Stoneridge alts are interval funds, so can only buy and sell 4 times a year I think. The real rebalancing challenge is the issue of trying to keep the alts as much as possible in tax advantages accounts. For right or wrong, I’ve let a bit of the alts spill into taxable accounts.

3.Dont know anything about publicly traded reinsurance funds. But if they are stocks of reinsurance companies, I’d say those are more likely to behave as stocks than as reinsurance. SRRIX is effectively direct participation in a reinsurance business as opposed to having the stock of such a business. That’s part of the reason for the anti-Boglehead expense ratio.

Dave

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Re: Portfolio Review - BAM Portfolio

Post by Random Walker » Sat Aug 31, 2019 10:33 pm

Elysium wrote:
Sat Aug 31, 2019 5:34 pm
How did you arrive at this conclusion that having a deep value tilt is the way to go, and has anything made you question your strategy?
My conclusion came about this way. All our portfolios are dominated by market beta. Even long only deep value funds have a market beta of about 1. Size and market are weakly correlated. Market and value uncorrelated. Size and value uncorrelated. Higher expected return of SV equities allows one to decrease overall equity exposure and increase term exposure. Overall a move in the direction of risk parity and increased portfolio efficiency: both left and right tails cut, but left tail cut more.

Dave

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Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Sat Aug 31, 2019 10:40 pm

typical.investor please go through the thread and re-read my posts in this thread. There is a similar thread regarding Buckingham and I have posted there too. Think you will find that I have addressed your concerns.

It boils down to core beliefs of the two Buckingham clients who are reconsidering their commitment to Buckingham. It really boils down to some pretty basic things.

Do I believe in the Academic Research regarding factors? Pretty good folks on each side of the question. I know that Warren Buffett and Charley Munger have their strong doubts about this, Munger has outright disdain. John Bogle acknowledged the data but for various reasons wondered if any of this was actionable by the small investor. Others like Paul Merriman, Larry Swedroe, Cliff Asness are strong factor advocates. Pretty much, if you believe the research you should consider investing like Larry Swedroe. If you don't believe the research, invest like John Bogle.

I personally have done factor tilting but my tilts are mild and my approach cautious. I guess I was born to be mild. Most here would go with Bogle, there is a significant minority that tilt.

Do I need an advisor to implement which ever strategy I have chosen? Most folks here say that folks should do-it-yourself. I am somewhere in the middle on this question. Been mostly do-it-yourself but I have sought advice from time to time.

Should I consider alternative investments? The consensus here is no, I say maybe. I am pretty neutral on this question.

Why did I go to the advisor in the first place?

Am I getting enough benefit from the advisor to justify the fees?
A fool and his money are good for business.

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Re: Portfolio Review - BAM Portfolio

Post by Northern Flicker » Sun Sep 01, 2019 12:09 am

BigJohn wrote:
Sat Aug 31, 2019 5:21 am
Northern Flicker wrote:
Fri Aug 30, 2019 11:02 pm
A portfolio with alts does not have to be expensive. VPGDX has an expense ratio of 0.32% and no advisor fees needed.

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

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

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

https://www.portfoliovisualizer.com/bac ... 0&total3=0
Interesting... even at only 25% alt exposure it looks to have far less turnover than the BAM alt funds as well so it should be more tax efficient. Plus it avoids having to pay the adviser fee. I'm not interested in alt fund investing but if I was this sure seems a better approach to get that exposure unless I'm missing something.
I find it interesting, and have considered investing our Roth IRAs in this fund as a separate, less than fully correlated portfolio with respect to the portfolio of remaining assets. What has held me back so far is that the asset allocation for this fund has been actively managed, not with frequent changes, but maybe 1-3 times per year. The most recent change seems to be in response to the recent fall in interest rates and yield curve inversion— moving some of the total bond market holdings into the ultrashort bond fund. While this particular change is not likely to have a significant impact on return, the frequency of the changes introduces a modicum of additional manager risk.

Still I think this fund is a reasonable alternative to LifeStrategy Moderate Growth for investors wanting a portfolio with alts. The fund is best held in a tax-qualified account.
Last edited by Northern Flicker on Tue Sep 03, 2019 12:31 am, edited 1 time in total.
Index fund investor since 1987.

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Re: Portfolio Review - BAM Portfolio

Post by Elysium » Sun Sep 01, 2019 7:14 am

Random Walker wrote:
Sat Aug 31, 2019 10:33 pm
Elysium wrote:
Sat Aug 31, 2019 5:34 pm
How did you arrive at this conclusion that having a deep value tilt is the way to go, and has anything made you question your strategy?
My conclusion came about this way. All our portfolios are dominated by market beta. Even long only deep value funds have a market beta of about 1. Size and market are weakly correlated. Market and value uncorrelated. Size and value uncorrelated. Higher expected return of SV equities allows one to decrease overall equity exposure and increase term exposure. Overall a move in the direction of risk parity and increased portfolio efficiency: both left and right tails cut, but left tail cut more.

Dave
RW, Thank you for your response, but my question was to another poster KyleAAA. I understand you have become a client of BAM few years back and so it is easy to understand how you came to believe in the things you do. However, I would like to hear it from another poster who may have a different perspective.

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Re: Portfolio Review - BAM Portfolio

Post by KyleAAA » Sun Sep 01, 2019 11:03 am

Elysium wrote:
Sun Sep 01, 2019 7:14 am
Random Walker wrote:
Sat Aug 31, 2019 10:33 pm
Elysium wrote:
Sat Aug 31, 2019 5:34 pm
How did you arrive at this conclusion that having a deep value tilt is the way to go, and has anything made you question your strategy?
My conclusion came about this way. All our portfolios are dominated by market beta. Even long only deep value funds have a market beta of about 1. Size and market are weakly correlated. Market and value uncorrelated. Size and value uncorrelated. Higher expected return of SV equities allows one to decrease overall equity exposure and increase term exposure. Overall a move in the direction of risk parity and increased portfolio efficiency: both left and right tails cut, but left tail cut more.

Dave
RW, Thank you for your response, but my question was to another poster KyleAAA. I understand you have become a client of BAM few years back and so it is easy to understand how you came to believe in the things you do. However, I would like to hear it from another poster who may have a different perspective.
Same reasoning. The data is very convincing. Where the data leads, I will follow.
Last edited by KyleAAA on Sun Sep 01, 2019 11:30 am, edited 1 time in total.

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Re: Portfolio Review - BAM Portfolio

Post by BigJohn » Sun Sep 01, 2019 11:13 am

nedsaid wrote:
Sat Aug 31, 2019 8:06 pm
I have tried really hard to be objective here, certainly I have relied upon information Larry has given and often in posts referred to his work. Also not trying to turn the forum into a Larry Swedroe fan club. But we do have to realize what a special thing we have here, that is someone with Larry's stature willing to take time to answer questions from individual investors whether or not they are Buckingham clients. Doesn't mean he is infallible or above criticism but the input he has made here has been very valuable.
-----------------
So certainly we can disagree with Larry, many folks here have, but we ought to step back and think about what we say here. We want Larry Swedroe, Rick Ferri, Bill Bernstein, and other authors to post here. Hopefully we don't run them off.
You have been very objective and balanced in support of these ideas. I hope you agree that I've done the same in questioning the validity of the BAM portfolio alt components without making it personal about Larry. I full agree that Larry and the others are a tremendous resource for the site and deserve our respect and thanks. However, I think we both agree that this doesn't make any of their strategies beyond doubt or question.

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Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Sun Sep 01, 2019 11:27 am

BigJohn wrote:
Sun Sep 01, 2019 11:13 am
nedsaid wrote:
Sat Aug 31, 2019 8:06 pm
I have tried really hard to be objective here, certainly I have relied upon information Larry has given and often in posts referred to his work. Also not trying to turn the forum into a Larry Swedroe fan club. But we do have to realize what a special thing we have here, that is someone with Larry's stature willing to take time to answer questions from individual investors whether or not they are Buckingham clients. Doesn't mean he is infallible or above criticism but the input he has made here has been very valuable.
-----------------
So certainly we can disagree with Larry, many folks here have, but we ought to step back and think about what we say here. We want Larry Swedroe, Rick Ferri, Bill Bernstein, and other authors to post here. Hopefully we don't run them off.
You have been very objective and balanced in support of these ideas. I hope you agree that I've done the same in questioning the validity of the BAM portfolio alt components without making it personal about Larry. I full agree that Larry and the others are a tremendous resource for the site and deserve our respect and thanks. However, I think we both agree that this doesn't make any of their strategies beyond doubt or question.
This discussion is a good reminder that markets will do what markets will do. For one thing, the markets don't care how beautifully designed our portfolios are. Markets also don't care about our expectations of future performance. Frankly, markets don't care about us, our needs, our goals, our desires. Finally, it shows that many things are beyond our control. This is humbling, emotionally hard to deal with but it is reality.
A fool and his money are good for business.

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Re: Portfolio Review - BAM Portfolio

Post by afan » Sun Sep 01, 2019 1:48 pm

I am aware of abundant evidence that factors exist and that they are associated with patterns of returns to risky assets.

I have seen very little evidence that tilting towards certain factors can be expected to produce increased risk adjusted returns. Fama clearly does not believe that it does.

If one wants a tilted portfolio there is no need to pay someone to create one for you. If you tilt yourself you can expect returns that are determined by the tilts you chose and to a much lesser extent the particular funds you use. If you use index funds then the returns you get should be almost entirely determined by the market performance in your tilts.

If you pay someone to create a portfolio for you then you have every right to ask whether that portfolio does better than one you would have made yourself. The more you are paying someone the more you should expect their performance to beat the markets.

If you are paying an advisor 0.5% to 1% you should expect quite a boost in returns. If you are paying a hedge fund 2 and 20 then you have a right to expect very high returns and you have a right to look elsewhere when you don't get them.

I don't find it reassuring that some fund emulates the investing strategies of hedge funds since I don't believe hedge funds as a class generate market beating risk adjusted returns. Just as there are always some mutual fumds that have done well recently but that list is constantly changing, the same is true of hedge funds.

I don't believe anyone can predict when value will outperform growth. For those on this thread who think they can do this, when did you switch out of value, since you knew the current poor performance would happen? In what have you been invested during this down which surely you saw coming?
Last edited by afan on Sun Sep 01, 2019 6:52 pm, edited 1 time in total.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Re: Portfolio Review - BAM Portfolio

Post by Elysium » Sun Sep 01, 2019 2:04 pm

KyleAAA wrote:
Sun Sep 01, 2019 11:03 am
Elysium wrote:
Sun Sep 01, 2019 7:14 am
Random Walker wrote:
Sat Aug 31, 2019 10:33 pm
Elysium wrote:
Sat Aug 31, 2019 5:34 pm
How did you arrive at this conclusion that having a deep value tilt is the way to go, and has anything made you question your strategy?
My conclusion came about this way. All our portfolios are dominated by market beta. Even long only deep value funds have a market beta of about 1. Size and market are weakly correlated. Market and value uncorrelated. Size and value uncorrelated. Higher expected return of SV equities allows one to decrease overall equity exposure and increase term exposure. Overall a move in the direction of risk parity and increased portfolio efficiency: both left and right tails cut, but left tail cut more.

Dave
RW, Thank you for your response, but my question was to another poster KyleAAA. I understand you have become a client of BAM few years back and so it is easy to understand how you came to believe in the things you do. However, I would like to hear it from another poster who may have a different perspective.
Same reasoning. The data is very convincing. Where the data leads, I will follow.
That's good to know. Given that, what do you think data is pointing about other factors such as Momentum, Low Volatility, and Quality. Are they not convincing enough to merit a weight in your portfolio, or are you only convinced about data on Value. The data seem to point that Momentum is as strong as Value or even more. This is not me saying, as I believe they all go in cycles, but the research and data that factor proponents rely on.

If so, would you also tilt to Momentum and at a weight equal to value? what about other factors, would you include them or exclude them?

Evidence show that some of the factors actually cancel each other out, so if you do that then you are essentially going to get almost a zero Value load, or in other words re-created the market loads in a more expensive way.

Again, this is where the data is leading.

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Re: Portfolio Review - BAM Portfolio

Post by KyleAAA » Sun Sep 01, 2019 2:24 pm

Elysium wrote:
Sun Sep 01, 2019 2:04 pm
KyleAAA wrote:
Sun Sep 01, 2019 11:03 am
Elysium wrote:
Sun Sep 01, 2019 7:14 am
Random Walker wrote:
Sat Aug 31, 2019 10:33 pm
Elysium wrote:
Sat Aug 31, 2019 5:34 pm
How did you arrive at this conclusion that having a deep value tilt is the way to go, and has anything made you question your strategy?
My conclusion came about this way. All our portfolios are dominated by market beta. Even long only deep value funds have a market beta of about 1. Size and market are weakly correlated. Market and value uncorrelated. Size and value uncorrelated. Higher expected return of SV equities allows one to decrease overall equity exposure and increase term exposure. Overall a move in the direction of risk parity and increased portfolio efficiency: both left and right tails cut, but left tail cut more.

Dave
RW, Thank you for your response, but my question was to another poster KyleAAA. I understand you have become a client of BAM few years back and so it is easy to understand how you came to believe in the things you do. However, I would like to hear it from another poster who may have a different perspective.
Same reasoning. The data is very convincing. Where the data leads, I will follow.
That's good to know. Given that, what do you think data is pointing about other factors such as Momentum, Low Volatility, and Quality. Are they not convincing enough to merit a weight in your portfolio, or are you only convinced about data on Value. The data seem to point that Momentum is as strong as Value or even more. This is not me saying, as I believe they all go in cycles, but the research and data that factor proponents rely on.

If so, would you also tilt to Momentum and at a weight equal to value? what about other factors, would you include them or exclude them?

Evidence show that some of the factors actually cancel each other out, so if you do that then you are essentially going to get almost a zero Value load, or in other words re-created the market loads in a more expensive way.

Again, this is where the data is leading.
Yes, they are convincing and I would like to tilt to them as well. It's was too difficult to do so at low cost until very recently. It is not true that the factors cancel each other out, but you would tend to dilute your value loading significantly if you add momentum/value. But it need not be zero or almost zero. Look at VFMF as an example. But even if one can only tilt to 3 of the factors instead of 5 because of current availability of tools to do so, that doesn't invalidate the strategy. Three is still more than one.

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Re: Portfolio Review - BAM Portfolio

Post by Elysium » Sun Sep 01, 2019 4:49 pm

KyleAAA wrote:
Sun Sep 01, 2019 2:24 pm
Elysium wrote:
Sun Sep 01, 2019 2:04 pm
KyleAAA wrote:
Sun Sep 01, 2019 11:03 am
Elysium wrote:
Sun Sep 01, 2019 7:14 am
Random Walker wrote:
Sat Aug 31, 2019 10:33 pm


My conclusion came about this way. All our portfolios are dominated by market beta. Even long only deep value funds have a market beta of about 1. Size and market are weakly correlated. Market and value uncorrelated. Size and value uncorrelated. Higher expected return of SV equities allows one to decrease overall equity exposure and increase term exposure. Overall a move in the direction of risk parity and increased portfolio efficiency: both left and right tails cut, but left tail cut more.

Dave
RW, Thank you for your response, but my question was to another poster KyleAAA. I understand you have become a client of BAM few years back and so it is easy to understand how you came to believe in the things you do. However, I would like to hear it from another poster who may have a different perspective.
Same reasoning. The data is very convincing. Where the data leads, I will follow.
That's good to know. Given that, what do you think data is pointing about other factors such as Momentum, Low Volatility, and Quality. Are they not convincing enough to merit a weight in your portfolio, or are you only convinced about data on Value. The data seem to point that Momentum is as strong as Value or even more. This is not me saying, as I believe they all go in cycles, but the research and data that factor proponents rely on.

If so, would you also tilt to Momentum and at a weight equal to value? what about other factors, would you include them or exclude them?

Evidence show that some of the factors actually cancel each other out, so if you do that then you are essentially going to get almost a zero Value load, or in other words re-created the market loads in a more expensive way.

Again, this is where the data is leading.
Yes, they are convincing and I would like to tilt to them as well. It's was too difficult to do so at low cost until very recently. It is not true that the factors cancel each other out, but you would tend to dilute your value loading significantly if you add momentum/value. But it need not be zero or almost zero. Look at VFMF as an example. But even if one can only tilt to 3 of the factors instead of 5 because of current availability of tools to do so, that doesn't invalidate the strategy. Three is still more than one.
The tools are available now, there are ETFs available to capture all sort of so called factors. If you plan to add some of them, not all of them, what kind of framework do you have to determine which ones makes sense, because all of them must have been based on solid research one would imagine. In the absence of such a framework then what you would end up doing is guesswork, which could be very faulty, and ends up having to make further changes down the line.

Also, if you add other components, then given you already have an established portfolio you would need to take it away from something else. Would you take it away from Value, Size, Market, fixed income? more active decisions to make.

As for Value load, let's just say it will not be zero, but you admit that it will be diluted. Why would you want to do that given you believe Value is a superior strategy and willing to hold it for 50 years, why dilute it, unless you believe something else now is equally good. That presents the problem how do you determine estimated returns for the new strategy.

Overall, a lot of active management and moving around components in the portfolio, possibly some at the wrong time.

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Re: Portfolio Review - BAM Portfolio

Post by stlutz » Sun Sep 01, 2019 6:04 pm

Elysium wrote:
Sun Sep 01, 2019 4:49 pm

Also, if you add other components, then given you already have an established portfolio you would need to take it away from something else. Would you take it away from Value, Size, Market, fixed income? more active decisions to make.

As for Value load, let's just say it will not be zero, but you admit that it will be diluted. Why would you want to do that given you believe Value is a superior strategy and willing to hold it for 50 years, why dilute it, unless you believe something else now is equally good. That presents the problem how do you determine estimated returns for the new strategy.

Overall, a lot of active management and moving around components in the portfolio, possibly some at the wrong time.
I think the question is whether the strategy is "invest in value stocks" or "invest in what long-term quantitative backtests show performs well."

Strategies like momentum and low vol have been around for decades, but haven't been available in essentially zero cost ETF form until recently.

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Re: Portfolio Review - BAM Portfolio

Post by KyleAAA » Sun Sep 01, 2019 8:15 pm

Elysium wrote:
Sun Sep 01, 2019 4:49 pm
KyleAAA wrote:
Sun Sep 01, 2019 2:24 pm
Elysium wrote:
Sun Sep 01, 2019 2:04 pm
KyleAAA wrote:
Sun Sep 01, 2019 11:03 am
Elysium wrote:
Sun Sep 01, 2019 7:14 am


RW, Thank you for your response, but my question was to another poster KyleAAA. I understand you have become a client of BAM few years back and so it is easy to understand how you came to believe in the things you do. However, I would like to hear it from another poster who may have a different perspective.
Same reasoning. The data is very convincing. Where the data leads, I will follow.
That's good to know. Given that, what do you think data is pointing about other factors such as Momentum, Low Volatility, and Quality. Are they not convincing enough to merit a weight in your portfolio, or are you only convinced about data on Value. The data seem to point that Momentum is as strong as Value or even more. This is not me saying, as I believe they all go in cycles, but the research and data that factor proponents rely on.

If so, would you also tilt to Momentum and at a weight equal to value? what about other factors, would you include them or exclude them?

Evidence show that some of the factors actually cancel each other out, so if you do that then you are essentially going to get almost a zero Value load, or in other words re-created the market loads in a more expensive way.

Again, this is where the data is leading.
Yes, they are convincing and I would like to tilt to them as well. It's was too difficult to do so at low cost until very recently. It is not true that the factors cancel each other out, but you would tend to dilute your value loading significantly if you add momentum/value. But it need not be zero or almost zero. Look at VFMF as an example. But even if one can only tilt to 3 of the factors instead of 5 because of current availability of tools to do so, that doesn't invalidate the strategy. Three is still more than one.
The tools are available now, there are ETFs available to capture all sort of so called factors. If you plan to add some of them, not all of them, what kind of framework do you have to determine which ones makes sense, because all of them must have been based on solid research one would imagine. In the absence of such a framework then what you would end up doing is guesswork, which could be very faulty, and ends up having to make further changes down the line.

Also, if you add other components, then given you already have an established portfolio you would need to take it away from something else. Would you take it away from Value, Size, Market, fixed income? more active decisions to make.

As for Value load, let's just say it will not be zero, but you admit that it will be diluted. Why would you want to do that given you believe Value is a superior strategy and willing to hold it for 50 years, why dilute it, unless you believe something else now is equally good. That presents the problem how do you determine estimated returns for the new strategy.

Overall, a lot of active management and moving around components in the portfolio, possibly some at the wrong time.
Lots of misunderstandings here. Nobody has claimed value is a "superior strategy," just that it is an identifiable, independent source or risk that we can use to diversify our portfolio. So is beta, so is momentum, etc. Furthermore, small and value together are especially attractive because 1.) they are dirt cheap to own, and 2.) they are more tax-efficient than a total market strategy. That is why so many people start and end with a small/value tilt. One doesn't determine estimated returns for a factor strategy any more reliably than one determines estimated returns of beta. It is no more an "active decision" than deciding how much to keep in bonds, or international, or real estate. You seem to be starting with the assumption that 100% market weighted domestic stocks is the "least active" choice, but that isn't the case.

Elysium
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Re: Portfolio Review - BAM Portfolio

Post by Elysium » Mon Sep 02, 2019 7:49 am

KyleAAA wrote:
Sun Sep 01, 2019 8:15 pm
Elysium wrote:
Sun Sep 01, 2019 4:49 pm
KyleAAA wrote:
Sun Sep 01, 2019 2:24 pm
Elysium wrote:
Sun Sep 01, 2019 2:04 pm
KyleAAA wrote:
Sun Sep 01, 2019 11:03 am


Same reasoning. The data is very convincing. Where the data leads, I will follow.
That's good to know. Given that, what do you think data is pointing about other factors such as Momentum, Low Volatility, and Quality. Are they not convincing enough to merit a weight in your portfolio, or are you only convinced about data on Value. The data seem to point that Momentum is as strong as Value or even more. This is not me saying, as I believe they all go in cycles, but the research and data that factor proponents rely on.

If so, would you also tilt to Momentum and at a weight equal to value? what about other factors, would you include them or exclude them?

Evidence show that some of the factors actually cancel each other out, so if you do that then you are essentially going to get almost a zero Value load, or in other words re-created the market loads in a more expensive way.

Again, this is where the data is leading.
Yes, they are convincing and I would like to tilt to them as well. It's was too difficult to do so at low cost until very recently. It is not true that the factors cancel each other out, but you would tend to dilute your value loading significantly if you add momentum/value. But it need not be zero or almost zero. Look at VFMF as an example. But even if one can only tilt to 3 of the factors instead of 5 because of current availability of tools to do so, that doesn't invalidate the strategy. Three is still more than one.
The tools are available now, there are ETFs available to capture all sort of so called factors. If you plan to add some of them, not all of them, what kind of framework do you have to determine which ones makes sense, because all of them must have been based on solid research one would imagine. In the absence of such a framework then what you would end up doing is guesswork, which could be very faulty, and ends up having to make further changes down the line.

Also, if you add other components, then given you already have an established portfolio you would need to take it away from something else. Would you take it away from Value, Size, Market, fixed income? more active decisions to make.

As for Value load, let's just say it will not be zero, but you admit that it will be diluted. Why would you want to do that given you believe Value is a superior strategy and willing to hold it for 50 years, why dilute it, unless you believe something else now is equally good. That presents the problem how do you determine estimated returns for the new strategy.

Overall, a lot of active management and moving around components in the portfolio, possibly some at the wrong time.
Lots of misunderstandings here. Nobody has claimed value is a "superior strategy," just that it is an identifiable, independent source or risk that we can use to diversify our portfolio. So is beta, so is momentum, etc. Furthermore, small and value together are especially attractive because 1.) they are dirt cheap to own, and 2.) they are more tax-efficient than a total market strategy. That is why so many people start and end with a small/value tilt. One doesn't determine estimated returns for a factor strategy any more reliably than one determines estimated returns of beta. It is no more an "active decision" than deciding how much to keep in bonds, or international, or real estate. You seem to be starting with the assumption that 100% market weighted domestic stocks is the "least active" choice, but that isn't the case.
Starting with the market portfolio is the least active decision, that is so by definition, not my opinion. That and your stock / bonds split is the most important drivers of your returns, rest are all active management strategies, no matter how much academic theory one tries to place behind it. The more you split the market into it's sub-components, more active decisions you make.

That said, I do not have a problem with anyone doing it so long as we all know it is active management, trying to prove otherwise is just an effort to camouflage seeking higher alpha through active strategies. I do understand the need to do for firm like BAM that need to justify their value by showing something different than investing in the market portfolio to collect their fees.

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Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Mon Sep 02, 2019 9:57 am

Golly Gee Whiz, the original poster was wondering whether he should stay with Buckingham and wanted analysis for his portfolio. He had some questions. I don't know, maybe check back with the poster and ask him if he has any more questions? Just a thought.
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vineviz
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Re: Portfolio Review - BAM Portfolio

Post by vineviz » Mon Sep 02, 2019 10:17 am

Elysium wrote:
Mon Sep 02, 2019 7:49 am
Starting with the market portfolio is the least active decision, that is so by definition, not my opinion.
This argument only works if you define “active” as “deviating from the market”, which invokes a circularity that cant be avoided.
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Re: Portfolio Review - BAM Portfolio

Post by typical.investor » Mon Sep 02, 2019 10:29 am

vineviz wrote:
Mon Sep 02, 2019 10:17 am
Elysium wrote:
Mon Sep 02, 2019 7:49 am
Starting with the market portfolio is the least active decision, that is so by definition, not my opinion.
This argument only works if you define “active” as “deviating from the market”, which invokes a circularity that cant be avoided.
And what’s the difference between Bogle himself and vineviz?

Both had a habit of selecting the slice of equities they thought would outperform.

Bogle chose the US slice (and for darned good reason), vineviz chooses various factors (backed by academic research).

I actually see few here who hold equites at global market-cap.

If Bogle can divide stocks into subgroups and be a total market investor, why can’t Vineviz?

Yes, the total equity market is a special portfolio, but few hold it. Most make an active choice on equity allocation. So what?

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Re: Portfolio Review - BAM Portfolio

Post by KyleAAA » Mon Sep 02, 2019 10:56 am

Elysium wrote:
Mon Sep 02, 2019 7:49 am
KyleAAA wrote:
Sun Sep 01, 2019 8:15 pm
Elysium wrote:
Sun Sep 01, 2019 4:49 pm
KyleAAA wrote:
Sun Sep 01, 2019 2:24 pm
Elysium wrote:
Sun Sep 01, 2019 2:04 pm

That's good to know. Given that, what do you think data is pointing about other factors such as Momentum, Low Volatility, and Quality. Are they not convincing enough to merit a weight in your portfolio, or are you only convinced about data on Value. The data seem to point that Momentum is as strong as Value or even more. This is not me saying, as I believe they all go in cycles, but the research and data that factor proponents rely on.

If so, would you also tilt to Momentum and at a weight equal to value? what about other factors, would you include them or exclude them?

Evidence show that some of the factors actually cancel each other out, so if you do that then you are essentially going to get almost a zero Value load, or in other words re-created the market loads in a more expensive way.

Again, this is where the data is leading.
Yes, they are convincing and I would like to tilt to them as well. It's was too difficult to do so at low cost until very recently. It is not true that the factors cancel each other out, but you would tend to dilute your value loading significantly if you add momentum/value. But it need not be zero or almost zero. Look at VFMF as an example. But even if one can only tilt to 3 of the factors instead of 5 because of current availability of tools to do so, that doesn't invalidate the strategy. Three is still more than one.
The tools are available now, there are ETFs available to capture all sort of so called factors. If you plan to add some of them, not all of them, what kind of framework do you have to determine which ones makes sense, because all of them must have been based on solid research one would imagine. In the absence of such a framework then what you would end up doing is guesswork, which could be very faulty, and ends up having to make further changes down the line.

Also, if you add other components, then given you already have an established portfolio you would need to take it away from something else. Would you take it away from Value, Size, Market, fixed income? more active decisions to make.

As for Value load, let's just say it will not be zero, but you admit that it will be diluted. Why would you want to do that given you believe Value is a superior strategy and willing to hold it for 50 years, why dilute it, unless you believe something else now is equally good. That presents the problem how do you determine estimated returns for the new strategy.

Overall, a lot of active management and moving around components in the portfolio, possibly some at the wrong time.
Lots of misunderstandings here. Nobody has claimed value is a "superior strategy," just that it is an identifiable, independent source or risk that we can use to diversify our portfolio. So is beta, so is momentum, etc. Furthermore, small and value together are especially attractive because 1.) they are dirt cheap to own, and 2.) they are more tax-efficient than a total market strategy. That is why so many people start and end with a small/value tilt. One doesn't determine estimated returns for a factor strategy any more reliably than one determines estimated returns of beta. It is no more an "active decision" than deciding how much to keep in bonds, or international, or real estate. You seem to be starting with the assumption that 100% market weighted domestic stocks is the "least active" choice, but that isn't the case.
Starting with the market portfolio is the least active decision, that is so by definition, not my opinion. That and your stock / bonds split is the most important drivers of your returns, rest are all active management strategies, no matter how much academic theory one tries to place behind it. The more you split the market into it's sub-components, more active decisions you make.

That said, I do not have a problem with anyone doing it so long as we all know it is active management, trying to prove otherwise is just an effort to camouflage seeking higher alpha through active strategies. I do understand the need to do for firm like BAM that need to justify their value by showing something different than investing in the market portfolio to collect their fees.
Owning the market portfolio is the least active decision, but neither you nor bogleheads generally advocate a market portfolio. A three fund portfolio is not a market portfolio. What I do is no more active than what you do.

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nedsaid
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Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Mon Sep 02, 2019 1:03 pm

Random Walker wrote:
Sat Aug 31, 2019 10:51 am
nedsaid wrote:
Sat Aug 31, 2019 10:28 am
Also want to say that I hope this discussion doesn't turn into a Buckingham bashing session. It sounds to me that they are a good firm and very conscientious. We are in a period where Value is out of style so inevitably such strategies will experience tracking error compared to the broad indexes. The Alts have promise but we are in uncharted territory here. I have admitted to a lot of things here, don't want to take on infallibility. My foibles are out there for everyone to see. Lots and lots that I don't know.
I’m a BAM client. I strongly believe that the more one understands investing and understands himself, the more benefit he can derive from an advisor. Of course those qualities also make him better suited to do it himself. An informed client is a better and happier client. Previously I posted on the similarity between using an advisor and buying a used car.

viewtopic.php?t=213282

Dave
Hi Dave:

I looked through your thread on the similarity between using an advisor and buying a used car. I noticed that you said your all-in costs for your BAM portfolio was between 0.90% and 1.00% a year. Last month, I switched over my active funds within my American Century IRA to their Private Client Group and they charge 0.90%. This includes the expense ratios of the funds and the planning fees as this service includes retirement and financial planning. One reason I went with this service is that I figured it would be competitive with Buckingham. About 30% of my retirement portfolio will be managed by this service.

They have me invested in their Conservative portfolio in a similar manner to their One Choice Conservative fund. The difference is that they mix their new ETFs into the portfolio and put 5% of the portfolio into Alts, a Market Neutral fund and an Alternative Income fund that uses shorting. What piqued my interest is that American Century is starting their own version of DFA, called Advantis, and in fact are hiring former DFA employees. My guess is that the DFA-like funds and ETFs will be at some point be used by their Private Client group. So I may wind up with something pretty similar to what you are getting at Buckingham less the interval funds. But already I am getting a couple of their Liquid Alts.

I use Morningstar and subscribe. I put their Private Client Group portfolio into Morningstar and the underlying fund and ETF expense ratios are 0.60%. So pretty much 0.60% for asset management and 0.30% for the retirement and financial planning. The other difference between American Century and Buckingham is that the funds they use, except for the ETFs, are active. They do use special share classes to get the fees close to institutional rates. My expectation is that when the Advantis funds and ETFs are introduced that they will have similar expense ratios to DFA. With smaller asset bases than DFA, I may wind up getting better funds.

Another way of looking at this is that I could have put all of that into their One Choice Conservative fund and they would have charged 0.81%. The Private Client Group is 0.90% all inclusive. Their Moderate Portfolio, what I really wanted, in Once Choice Moderate fund form charges 0.90%.

So it is ironic that you and I might wind up in a very similar place but in a different fashion. Buckingham is an Advisory firm and is not an asset manager. American Century is an asset manager getting into the advisory business. So in the investing world, we are seeing the lines blur.
A fool and his money are good for business.

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Re: Portfolio Review - BAM Portfolio

Post by Random Walker » Mon Sep 02, 2019 2:34 pm

Hi Nedsaid,
Think I heard of Avantis before here at BH. If I remember they are going to be pretty much doing same as DFA, but perhaps with increased focus on International and EM. Competition is good, and we should both benefit from it. I know BAM’s clients benefit from competition between fund firms. Pretty sure BAM is looking very closely at Avantis.

Dave

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Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Mon Sep 02, 2019 2:52 pm

Random Walker wrote:
Mon Sep 02, 2019 2:34 pm
Hi Nedsaid,
Think I heard of Avantis before here at BH. If I remember they are going to be pretty much doing same as DFA, but perhaps with increased focus on International and EM. Competition is good, and we should both benefit from it. I know BAM’s clients benefit from competition between fund firms. Pretty sure BAM is looking very closely at Avantis.

Dave
Hi Dave. Not here to boost American Century or Advantis. Simply providing my own experience to give context to the discussion. Back in 2007-2008, I was looking into Paul Merriman's firm, their Assets Under Management Fee was 1.00% and the expense ratios of the DFA funds were 0.34%. So in context of Merriman and what I read about Buckingham, what American Century was offering looked pretty good particularly since I have been invested at AC for 35 years. It wasn't like I was jumping into the unknown. Have read a lot of good things here about Vanguard Personal Advisor Service which charges 0.30% plus the expense ratios of the funds. There are also pretty good robo-advisory services out there. I always said that a robot that would tell me how good looking I was, how brilliant I was, and who laughed at my jokes would get my business. Now I have to pay humans to do that.

The point is that what Buckingham has been delivering to the original poster is pretty competitive. Hard to get the all-in costs lower than that unless you want to go to the robots. I think this thread has provided some good context. Also want to point out that Vanguard's service is a human/robot hybrid. The robot cranks out the portfolio plan and I suppose the advisor laughs at the client's jokes! For a human, you aren't going to get hardly anything lower than 0.50% Assets Under Management plus fund expenses.

I wanted to add that I worked briefly for a firm that as part of its business provided financial planning and portfolio management. They charged 0.75% and used no commission ETFs at a discount broker. They were a small firm, 0.75% is probably as low as they could go and still make a profit. A larger firm like Buckingham could go down to 0.50% once client portfolios get large enough, not aware of the break even points.
A fool and his money are good for business.

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Re: Portfolio Review - BAM Portfolio

Post by pascalwager » Mon Sep 02, 2019 4:07 pm

I have a 1995 taxable-account DFA stock grouping (LV, microcap, ILV, ISC, EM) which I've self-managed since late 2011. My int'l DFA funds have lost a lot of ground to the US DFA funds; but I'm not allowed to rebalance internally, so I stay at 50/50, US/int'l by combining the DFA funds with Vanguard DM and EM funds. I keep overall EM at market % and adjust DM as determined by my spreadsheet rebalancing table.

I'm not a real factor believer, but I like the way my DFA funds outperformed the market during the 2000's when the S&P 500 was flat. (Also, since 1995 my LV, and especially microcap, funds have both outperformed the US market.)

I also have an allied Vanguard (legacy-accounts) US/int'l, 50/50 total markets grouping. (The DFA non-EM funds are 51% of my overall equities.) The VG grouping feeds money into the DFA grouping VG int'l funds as needed for rebalancing.

I formerly had a large 1995 DFA funds variable annuity, but I transferred it to Vanguard at the beginning of this year to reduce the insurance fees. Ironically, Vanguard is now transferring administration of the VA back to the insurance company I left, but the low fees won't change.

I have no personal interest in, or knowledge of, any alternative funds.

Elysium
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Re: Portfolio Review - BAM Portfolio

Post by Elysium » Mon Sep 02, 2019 4:59 pm

KyleAAA wrote:
Mon Sep 02, 2019 10:56 am
Elysium wrote:
Mon Sep 02, 2019 7:49 am
KyleAAA wrote:
Sun Sep 01, 2019 8:15 pm
Elysium wrote:
Sun Sep 01, 2019 4:49 pm
KyleAAA wrote:
Sun Sep 01, 2019 2:24 pm


Yes, they are convincing and I would like to tilt to them as well. It's was too difficult to do so at low cost until very recently. It is not true that the factors cancel each other out, but you would tend to dilute your value loading significantly if you add momentum/value. But it need not be zero or almost zero. Look at VFMF as an example. But even if one can only tilt to 3 of the factors instead of 5 because of current availability of tools to do so, that doesn't invalidate the strategy. Three is still more than one.
The tools are available now, there are ETFs available to capture all sort of so called factors. If you plan to add some of them, not all of them, what kind of framework do you have to determine which ones makes sense, because all of them must have been based on solid research one would imagine. In the absence of such a framework then what you would end up doing is guesswork, which could be very faulty, and ends up having to make further changes down the line.

Also, if you add other components, then given you already have an established portfolio you would need to take it away from something else. Would you take it away from Value, Size, Market, fixed income? more active decisions to make.

As for Value load, let's just say it will not be zero, but you admit that it will be diluted. Why would you want to do that given you believe Value is a superior strategy and willing to hold it for 50 years, why dilute it, unless you believe something else now is equally good. That presents the problem how do you determine estimated returns for the new strategy.

Overall, a lot of active management and moving around components in the portfolio, possibly some at the wrong time.
Lots of misunderstandings here. Nobody has claimed value is a "superior strategy," just that it is an identifiable, independent source or risk that we can use to diversify our portfolio. So is beta, so is momentum, etc. Furthermore, small and value together are especially attractive because 1.) they are dirt cheap to own, and 2.) they are more tax-efficient than a total market strategy. That is why so many people start and end with a small/value tilt. One doesn't determine estimated returns for a factor strategy any more reliably than one determines estimated returns of beta. It is no more an "active decision" than deciding how much to keep in bonds, or international, or real estate. You seem to be starting with the assumption that 100% market weighted domestic stocks is the "least active" choice, but that isn't the case.
Starting with the market portfolio is the least active decision, that is so by definition, not my opinion. That and your stock / bonds split is the most important drivers of your returns, rest are all active management strategies, no matter how much academic theory one tries to place behind it. The more you split the market into it's sub-components, more active decisions you make.

That said, I do not have a problem with anyone doing it so long as we all know it is active management, trying to prove otherwise is just an effort to camouflage seeking higher alpha through active strategies. I do understand the need to do for firm like BAM that need to justify their value by showing something different than investing in the market portfolio to collect their fees.
Owning the market portfolio is the least active decision, but neither you nor bogleheads generally advocate a market portfolio. A three fund portfolio is not a market portfolio. What I do is no more active than what you do.
I cannot disagree with that statement. Finally something we can agree on :|

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riplip
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Re: Portfolio Review - BAM Portfolio

Post by riplip » Tue Sep 03, 2019 11:13 am

First of thank you for all of the responses and information, at a minimum my post has certainly resulted in a healthy discussion.

As I mentioned in my original post, I am in no way bashing Buckingham. I chose them after significant due diligence after a windfall approximately five years ago. They are a very good company with significant resources and I have no major complaints with their service. I was running a large company at the time and decided that my time was better spent on running my company and looked at the decision to hire an advisor as part of my overall team (attorney's, CPA's, brokers etc.) all of whom are paid for the expertise and service. For what its worth the size of my portfolio (AUM) dictated a blended fee of approx .5%, which I believed to be reasonable, expecialy in light of their "projected" return for my account. I am in a different stage of life and business cycle and thus things have slowed down a bit, combined with the relatively low returns I have received and I am now at a point where I am considering a move to a self managed account.

I will try to address some of the questions/comments:

BAM did and continues to do a very good job explaining the investments and I was given a significant amount of information regarding their investment philosophy and the SCV tilt of the designed portfolio during my initial due diligence of the company. The alternatives were not introduced until 2017 or so, and they once again did a very good job of explaining their position on the benefits of the alt's and why they would be a good addition to my portfolio. In hindsight they really sold the benefits of these funds and as result I amended my original IPS which was only drafted a few years prior. (-no blame here...they gave me the information, I made the decision!) In hindsight I wish I would have stuck with my original AA, and will reduce my exposure to the alt funds going forward. Not chasing returns, just don't have the confidence in them over the long term when compared to equities and bonds. Could be right or wrong, but one I am comfortable with this action.

I consider myself a patient investor and I believe in a long term plan. I am certainly not trying to chase returns and I am not going to make any quick or drastic changes to the portfolio. I do believe in the benefits of SCV tilt, although I acknowledge that current tilt may be a too aggressive for my comfort level. I certainly understand that 3-5 years is a very small time frame to judge any of this, and was simply questioning the returns of the designed portfolio over this period compared to other more simple portfolios and wanted to get feedback from BH community.

At this point I will most likely trim the alts down to 5%, so that my AA going forward will be 75% Equities; 20% FI ; 5% Alt's. I am also going to slowly re-balance the portfolio so that is has a bit less SCV tilt and a little less exposure to International.

Thanks again for all of the feedback and discussion.

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Re: Portfolio Review - BAM Portfolio

Post by Gemini » Fri Nov 15, 2019 10:12 am

Can one recreate this portfolio w/o utilizing an advisor or having access to DFA funds?

3funder
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Re: Portfolio Review - BAM Portfolio

Post by 3funder » Fri Nov 15, 2019 10:15 am

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

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

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

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

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

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

Would love any feedback/thoughts on this portfolio as well as thoughts on how to proceed once I move to self managed since I wont be able to add to the DFA funds. Three fund portfolio sure sounds a whole lot easier after writing all of this!
The main trouble with this portfolio is that it makes some huge bets against U.S. Just take a look at how much it is taking away from large established American business and into INTL, EM, and ALTS. A pretty dismal view of the U.S Large Companies. As Warren Buffet said "It's never paid to bet against America", which is what essentially exposure to Large U.S companies give you.
I don't think the allocation to INTL and EM stocks is problematic; I agree with you about the ALTS, though.

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Re: Portfolio Review - BAM Portfolio

Post by nedsaid » Fri Nov 15, 2019 1:10 pm

3funder wrote:
Fri Nov 15, 2019 10:15 am


I don't think the allocation to INTL and EM stocks is problematic; I agree with you about the ALTS, though.
It is telling that American Century Investments are quietly closing down their Alt funds. After January 2020, they will be down to two such funds. They even are closing a 130 long/30 short fund that isn't listed among their Alt funds. Looks like they are giving up the ship on the Liquid Alts.
A fool and his money are good for business.

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Re: Portfolio Review - BAM Portfolio

Post by whodidntante » Fri Nov 15, 2019 1:14 pm

9-5 Suited wrote:
Thu Aug 29, 2019 12:16 pm
Whether you stay with your advisor or not, you definitely shouldn’t have an SCV tilt if 3-5 year underperformance causes you to rethink your strategy. It simply isn’t for you at that point.
In this scenario I wonder what will happen if a float weighted portfolio (or whatever OP buys next) underperforms for 3 to 5 years. Some people perpetually chase performance.

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