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Is this fund as good as it seems?
Old 02-20-2014, 01:30 AM   #1
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Is this fund as good as it seems?

Is this fund as good as it seems?

I was reading about the Blackrock Global Allocation fund (MALOX). The article said, "since the fund's inception (1989), it has recorded an annualized return of 10.63% through the end of last year, beating the benchmark portfolio of 60% global stocks and 40% global bonds by more than 250 basis points a year. A $100,000 investment in the fund would have grown to over $1.1 million today, $500,000 more than the benchmark portfolio. That outperformance has come with about one third of the downside."

I have a few questions maybe some of you here can help with: Can this be true? How does this compare with the 60-40 portfolios that most here use, like what Vanguard offers? How can they say it had one third if the downside? How is that measured?

If it really has been that good, I'm sure if I invest in it the performance will go in the toilet. But better performance, especially with less risk, sounds good. Less risk is getting more important to me every day.

Anyone help?
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Old 02-20-2014, 11:50 AM   #2
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I don't know anything about the fund, but the ticker symbol (MALOX) would give me pause.

Sorry, couldn't resist.
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Old 02-20-2014, 12:06 PM   #3
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It does have an impressive track record. I think this is an institutional fund ( has to be bought through an advisor ) and may not available to everyone, and the minimum looks to be $2,000,000... ouch.
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Old 02-20-2014, 01:03 PM   #4
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Sometimes long term returns can be deceiving, may been some lucky years at the beginning when the fund was small, and some big leverage, fund merge, etc. But comparing it to Vanguard Wellington Admiral over time periods to 10 years it doesn't look so stellar.

http://www.marketwatch.com/tools/mutual-fund/compare?Tickers=MALOX+vwenx&Compare=Returns

plus it has huge fees! Front load 5.25%, expense ration 1.05%, 0.25% 12b-1.

MALOX has approx 64/35 ratio, VWENX has about 62/34 stock bond ratio, so I think the comparison is valid.

Vanguard Wellington sure looks better to me. Watch out for those "selected" time periods.
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Old 02-20-2014, 01:16 PM   #5
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I don't know why the link I inserted shows MDLOX instead of MALOX, but you can type in MALOX over the MDLOX, but the results are similar, MALOX slightly higher than MDLOX, but both worse than Wellington.
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Old 02-20-2014, 01:25 PM   #6
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Try these:

SGENX
TIBAX
MFWTX
MDLOX (investor share class of MALOX)
FGBLX

MALOX has been doing OK over the past 10 years, but nothing amazing. SGENX has been on my radar for a long time, but I've never bought any since management turnover seemed to be a problem.
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Old 02-20-2014, 04:11 PM   #7
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Quote:
Originally Posted by CaliforniaMan View Post
Sometimes long term returns can be deceiving, may been some lucky years at the beginning when the fund was small, and some big leverage, fund merge, etc. But comparing it to Vanguard Wellington Admiral over time periods to 10 years it doesn't look so stellar.

http://www.marketwatch.com/tools/mutual-fund/compare?Tickers=MALOX+vwenx&Compare=Returns

plus it has huge fees! Front load 5.25%, expense ration 1.05%, 0.25% 12b-1.

MALOX has approx 64/35 ratio, VWENX has about 62/34 stock bond ratio, so I think the comparison is valid.

Vanguard Wellington sure looks better to me. Watch out for those "selected" time periods.
Is Wellington "global", or just US?
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Old 02-20-2014, 05:02 PM   #8
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Originally Posted by gcgang View Post
Is Wellington "global", or just US?
Wellington is mostly US.

But that is not the point I was attempting to make. It was just a quick comparison with the typical kind of balanced fund allocation that people here tend to use to show that your fund is not the stellar one that they make it out to be, but actually rather sub-par.

I encourage you to search yourself for various mixes of low expense Vanguard (or similar low expense) funds which match your asset allocation preference, and try to avoid the hype that comes with this kind of load fund.
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Old 02-20-2014, 05:48 PM   #9
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I think you are asking the wrong question gcgang. Seems to me that you are asking which is better, a BMW sedan or a Mercedes SUV. I'm speaking from naivety since I don't buy German vehicles. I would assume that both are excellent vehicles but they are different. One is a car and the other is a SUV. You asked how does this fund compare to something from Vanguard with both an allocation to stocks and bonds. However, this fund you mention from what I see when I look it up is a stock fund. Generally over a long term a 100% stock portfolio will perform better than a portfolio that contains some bonds. There is no such thing as a free lunch so the tradeoff for those higher returns is risk. My bonds may not perform as well as your stocks but I don't have to worry about them losing 50% of their value overnight. So yes I would assume that a world stock portfolio will do quite well over the long run but for those higher returns you are taking on more risk and higher volatility than a portfolio that also contains bonds. You just can't get around it. I think the real question should be how does this fund compare to the Vanguard Ttl US and Vanguard Ttl Foreign Funds.

Also, as CaliforniaMan so aptly points out the fees for this fund are shall we say on the high side. Yes gentlemen expenses do matter. My Vanguard TTl US Stock has an expense ratio of .05 and the Ttl Foreign has an expense ratio of .16 with none of those other nasty fees that CaliforniaMan rightly points out. Remember BlackRock and other providers show their returns before expenses, I believe, so factor those additional costs in and perhaps that sparkling performance isn't as stellar as one would think. Of course you could buy this Blackrock fund without that front end charge if you invest $1,000,000 in it. That would save some on the costs.

In any event, thanks for the question and good luck.
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Old 02-20-2014, 09:50 PM   #10
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Originally Posted by Brooks Saddle View Post
I think you are asking the wrong question gcgang. Seems to me that you are asking which is better, a BMW sedan or a Mercedes SUV. I'm speaking from naivety since I don't buy German vehicles. I would assume that both are excellent vehicles but they are different. One is a car and the other is a SUV. You asked how does this fund compare to something from Vanguard with both an allocation to stocks and bonds. However, this fund you mention from what I see when I look it up is a stock fund. Generally over a long term a 100% stock portfolio will perform better than a portfolio that contains some bonds. There is no such thing as a free lunch so the tradeoff for those higher returns is risk. My bonds may not perform as well as your stocks but I don't have to worry about them losing 50% of their value overnight. So yes I would assume that a world stock portfolio will do quite well over the long run but for those higher returns you are taking on more risk and higher volatility than a portfolio that also contains bonds. You just can't get around it. I think the real question should be how does this fund compare to the Vanguard Ttl US and Vanguard Ttl Foreign Funds.

Also, as CaliforniaMan so aptly points out the fees for this fund are shall we say on the high side. Yes gentlemen expenses do matter. My Vanguard TTl US Stock has an expense ratio of .05 and the Ttl Foreign has an expense ratio of .16 with none of those other nasty fees that CaliforniaMan rightly points out. Remember BlackRock and other providers show their returns before expenses, I believe, so factor those additional costs in and perhaps that sparkling performance isn't as stellar as one would think. Of course you could buy this Blackrock fund without that front end charge if you invest $1,000,000 in it. That would save some on the costs.

In any event, thanks for the question and good luck.
Broke
Thanks for your input. I'm trying to compare the exact same vehicle, to use your terms, that being a 60/40 global AA. Maybe an Audi A8L with a BMW 750 to use two big German sedans with which I'm familiar. The article says the fund had only one third the downside as a 60/40 global allocation. I agree that 100% stock would usually outperform 60/40, but you'd think it would have MORE downside. Hmm.

While fees DO matter, it said they've outperformed their benchmark by 2.5% per year, which would be after annual fees, but not any front end loads, for 25 years. I have trouble believing they could do this with the high annual fees they charge.

I think the comments on the timeframe evaluated could make a difference, although the article said for the fund's entire lifetime, so I don't see where they are cherry picking their evaluation period. But I could see that the fund may have done very well in its early years, when presumably it was smaller, and maybe it's performance over recent times is nothing great.

Still, I like the IDEA of less downside, although to repeat my first post, I'm not sure what data they use to support that claim. How can they say one third the downside?

As far as actually buying it, Hey, a million here, a million there, you can get lots of funds for no load, I suppose. But the account I use allows me to buy this fund, although it is the MDLOX class shares with the 12b fee, without any upfront load.
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Old 02-22-2014, 08:42 PM   #11
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Try these:

SGENX
TIBAX
MFWTX
MDLOX (investor share class of MALOX)
FGBLX

MALOX has been doing OK over the past 10 years, but nothing amazing. SGENX has been on my radar for a long time, but I've never bought any since management turnover seemed to be a problem.
Our two largest holdings are SGIIX and TIBIX -- in that order -- institutional share classes of SGENX and TIBAX.
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Old 02-22-2014, 09:34 PM   #12
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Our two largest holdings are SGIIX and TIBIX -- in that order -- institutional share classes of SGENX and TIBAX.
I own a fund that I think is run by the guys who ran SGENX until a few years ago, IVWAX. They are very much concerned with preservation of capital. Also more concerned with shareholders returns than their own compensation, evidenced by the fact they have been closed to new investors for some time.
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