Oakmark International Fund

[Brat]

I am really disappointed in the performance of OAKIX this last year.

My accounts are now with Vanguard and am thinking of replacing it with VTIAX (Total International Stock x US) with a dose of VINEX (Vanguard International Explorer). OAKIX is my only international fund and this will comprise a small % of our portfolio.

Anyone have any better ideas?

 

[kaneohe]

Wonder what the right pick is if A underperforms B&C for the 1 yr period but outperforms for the 3, 5, & 10 yr periods.

 

[target2019]

Wonder what the right pick is if A underperforms B&C for the 1 yr period but outperforms for the 3, 5, & 10 yr periods.

I think your comment gets to the heart of the matter. As a holder of VTIAX Total Int'l (about 7-8% of our overall portfolio), I look back at a comparison with OAKIX, and wish that I had been invested with OAKIX since the big one hit. Just eyeballing a comparison of VGTSX (investor shares of VTIAX) and OAKIX, looks like at least 80% more performance since the lowpoint. Of course that means little if you look back just one year. This is what happens when you compare a managed fund to an index. OAKIX does get high marks, but going forward it may never beat the index. Hard decision to make at this juncture for the OP.

Also worth noting that VTIAX has approximately 20% EM component, while OAKIX has 5-10% at this time. If really wanting to drop OAKIX, maybe others are more familiar with the best Vanguard substitute.

 

[kaneohe]

target..............I agree w/ your comments and no crystal ball here either.
The only reason I don't feel too bad about owning Oakmark Intl is its longer term performance. I don't like the high ER and knowing what I know today, perhaps might never have bought Oakmark Intl to begin with.........but index funds were just starting then and I didn't want to be just "average".
But the relevant question always is what to do now and it isn't always easy to answer absent that crystal ball................

 

[panacea]

I like the long-term performance (net of fees) of OAKIX. If you're concerned about having too much in one place, why not divide your international exposure between OAKIX and the Vanguard Total Int'l index?

 

[target2019]

target..............I agree w/ your comments and no crystal ball here either.
The only reason I don't feel too bad about owning Oakmark Intl is its longer term performance. I don't like the high ER and knowing what I know today, perhaps might never have bought Oakmark Intl to begin with.........but index funds were just starting then and I didn't want to be just "average".
But the relevant question always is what to do now and it isn't always easy to answer absent that crystal ball................

If it's in taxable, that would persuade me to keep it if there are large gains.

My VTIAX is 5.88% of total allocation. The e/r is 0.05, and the effective e/r is 0.0029.

If I swapped my VTIAX for your OAKIX, it would be 0.98 e/r, and effective e/r of 0.0577.

Of course going into the future OAKIX would lag the index forever, given my luck.

How about the OAKIX managers? Maybe their philosophy suits yours?

 

[kaneohe]

If it's in taxable, that would persuade me to keep it if there are large gains.

My VTIAX is 5.88% of total allocation. The e/r is 0.05, and the effective e/r is 0.0029.

If I swapped my VTIAX for your OAKIX, it would be 0.98 e/r, and effective e/r of 0.0577.

Of course going into the future OAKIX would lag the index forever, given my luck.

How about the OAKIX managers? Maybe their philosophy suits yours?

Yes, by the time I finally bought into the passive index idea, the gains were large enough to scare me into doing nothing so leaving alone for the heirs to get stepped-up basis and escape the tax. What I should have done earlier but just started doing a few yrs ago was to stop reinvesting distributions and invest in the low index funds instead........so much simpler too for recordkeeping.

btw.....what is effective e/r and how do you calculate it?

 

[target2019]

Yes, by the time I finally bought into the passive index idea, the gains were large enough to scare me into doing nothing so leaving alone for the heirs to get stepped-up basis and escape the tax. What I should have done earlier but just started doing a few yrs ago was to stop reinvesting distributions and invest in the low index funds instead........so much simpler too for recordkeeping.

btw.....what is effective e/r and how do you calculate it?

I multiply the allocation percentage (as decimal) times the e/r. That gives you the weighted effective e/r. I should have specified that.

You can do this for each asset, then add up to get the total weighted e/r of your portfolio. I'm probably using wrong terms, but that is how I think of it.

The point I was making was that changing the expense ratio from .1 to .9 doesn't really budge the overall weighted expense ratio of your portfolio. When I did the change I mentioned in previous post, my overall e/r moved from .16 to .20.

 

[Brat]

My investments are all in IRAs.

If I understood and agreed with the current OAKIX investment strategy then their recent performance would be tolerable. I prefer that the international segment of my portfolio be managed rather than indexed because of exchange and political risks.

Still thinking...

 

[kaneohe]

Does this help? http://www.oakmark.com/Oakmark-files/summary-prospectus/OAKIX_International_SummaryProspectus.pdf

I have to confess that I don't read these much anymore.

 

[Brat]

I have had the fund for several years and read the prospectus. I just don't see any explanation of their change in results. 2008 I understand, 2014 I don't.

 

[gcgang]

You'd be foolish to sell this fund for one year of underperformance. As long as David Herro and his team are in charge, I'd stick with them. He seems to be one of the few managers that is more than worth his fees.


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[Animorph]

I have three Oakmark funds, though not OAKIX. I always compare my active funds to a relevant index, but I would never consider dumping one for one year of underperformance. Ideally you would select based on a full up/down cycle. It's supposed to act differently from the index, and that won't always be better.

 

[Brat]

You guys have convinced me to give it more time, and I agree that until recently it has done very well.

 

[gcgang]

http://www.oakmark.com/Commentary/International/Oakmark-International-Fund-Second-Quarter-2014.htm

Above is managements 2nd quarter comments.

The fund was up 21% for 12 months thru 6/30, and you're complaining?

Good managers often underperform in big up markets. They seem to prove their worth by outperforming in difficult times.


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[Brat]

To swing from 21% in 12 months to -2.2% (their numbers) YTD return in 7 months... something went sour.

Credit Suisse Group is their largest holding as of 6/30 and it has had, shall I say, challenges. This explains some of their results.

After the banking bath of 2008 I wonder about the wisdom of any fund having a substantial portion of their portfolio in banking. Their next largest holding is Allianz which doesn't concern me. 26% of OAKIX's investments are in financials.

 

[LOL!]

Rather than VTIAX and VINEX, I would suggest VTIAX and VSS/VFSVX. VINEX is actively-managed while VSS/VFSVX is an index fund of small-cap foreign.

I used to own OAKIX, but that was in the 1990's I think before VTIAX and VSS were invented.