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Re: Mutual Fund Window Dressing?
04-05-2006, 05:55 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Re: Mutual Fund Window Dressing?
Happens al the time in the fund industry. It is one of the reasons I do not like actively managed funds, on the whole. Note that this is a non-issue with index funds, by and large.
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"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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Re: Mutual Fund Window Dressing?
04-05-2006, 06:20 AM
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#3
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 2,450
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Re: Mutual Fund Window Dressing?
I learned about this stuff in the early days of the fool.com. Now they are suggesting some active funds :P
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- Hurry! to the cliffs of insanity!
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Re: Mutual Fund Window Dressing?
04-05-2006, 01:40 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 4,005
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Re: Mutual Fund Window Dressing?
The crux of the article:
15% of funds "window dress". They are mostly growth funds with high turnover and those with managers experiencing recent poor performance.
One of my big screens for actively managed mutual funds (after expenses) is portfolio turnover. High portfolio turnover is a red flag for me unless there is some legitimate explanation (change in style or target index, etc).
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Re: Mutual Fund Window Dressing?
04-05-2006, 07:34 PM
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#5
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Full time employment: Posting here.
Join Date: Oct 2002
Posts: 717
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Re: Mutual Fund Window Dressing?
While I understand that window dressing may not do the funds who practice it any good, is there a way I could identify the candidates and use it to front run the stocks they buy?
__________________
Random Reinforcement is Highly Addictive.
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Re: Mutual Fund Window Dressing?
04-05-2006, 08:43 PM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,145
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Re: Mutual Fund Window Dressing?
Quote:
Originally Posted by justin
The crux of the article:
15% of funds "window dress".* They are mostly growth funds with high turnover and those with managers experiencing recent poor performance.*
One of my big screens for actively managed mutual funds (after expenses) is portfolio turnover.* High portfolio turnover is a red flag for me unless there is some legitimate explanation (change in style or target index, etc).
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Justin's got it right! A good way to avoid those funds is to avoid funds with high turnover.
Audrey
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Retired since summer 1999.
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Re: Mutual Fund Window Dressing?
04-05-2006, 09:20 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2003
Location: Kansas City
Posts: 7,968
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Re: Mutual Fund Window Dressing?
Ahem!
We born again Bogleheads have long ago been blessed with the mantra of high turnover.
The prime reason I dumped my VG Small Cap Value Index. Even an index sliced too thin can exhibit some nasty characteristics. Unfortunately popularity of a given asset class can mask the effect - for long time until the flow reverses to the ebb.
Heh heh heh
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Re: Mutual Fund Window Dressing?
04-06-2006, 11:46 AM
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#8
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Dryer sheet aficionado
Join Date: Apr 2006
Posts: 43
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Re: Mutual Fund Window Dressing?
I guess Window Dressing is sort of like cheating on your taxes and sex:
EVERYBODY DOES IT!
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Re: Mutual Fund Window Dressing?
04-06-2006, 11:50 AM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
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Re: Mutual Fund Window Dressing?
Quote:
Originally Posted by riskaverse
While I understand that window dressing may not do the funds who practice it any good, is there a way I could identify the candidates and use it to front run the stocks they buy?
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Not really. The 'window dressing' is usually buying stocks that have gone up, but after they've done so. So you look at your window dressed fund and see lots of stocks that have done well. While they have to tell you whats in the fund, they dont have to tell you they bought it pre or post run-up.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Re: Mutual Fund Window Dressing?
04-06-2006, 01:07 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,145
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Re: Mutual Fund Window Dressing?
Quote:
Originally Posted by frujinator
I guess Window Dressing is sort of like cheating on your taxes and sex:
EVERYBODY DOES IT!
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Not really. There are fund families which pride themselves on their conservative approach (and low turnover). Vanguard, Dodge and Cox, Davis Funds, Longleaf, etc., etc. In some of these fund families the company owners have a lot of their own money in the funds. If you study mutual funds for a while you'll be able to figure out which companies are reputable and do right by their shareholders and which are chasing performance and trying to look like "high fliers".
Window dressing was rampant in 1999/2000. It's usually the "hot sector" funds that abuse it. The funds where "everyone wants in".
Audrey
__________________
Retired since summer 1999.
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Re: Mutual Fund Window Dressing?
04-06-2006, 01:54 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 4,005
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Re: Mutual Fund Window Dressing?
The inverse of turnover is average holding period. A 33% turnover equals a 3 yr average holding period. 50% = 2 yr avg holding period. 100% = 1 yr avg holding period. At some point, the fund managers switch from "investors" to speculators.
Window dressers will get caught when their turnover rate jumps up.
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