Anyone have experience with Crawford Investments?

[Happyras]

Their dividend portfolio of 40 stocks had returns much lower than the s&p 500 so the risk is likely to be less also. It may be that the concentration on dividend payers is hurting the total return. I looked at their returns on that portfolio and was disappointed.

What time frame are you looking at for that particular portfolio? They have 2 dividend portfolios, one Growth and one Dividend Yield. Both seem to beat their respective indices.

You also have to look at their standard deviation and compare to their indices used for their model. The data I was presented shows their Dividend Growth beating both the S&P 500 and the Russel 1000 value, with lower risk (deviation) AND better YTD, 1yr, and 3yr, performance, but not since inception. The Core Equity has beaten the S&P 500 since inception but fell slightly short in 7yr and 10yr, per the one set of data provided. If they perform on par with the S&P with lower risk, as they demonstrate in their presentation, they would we worth the chance.

The one thing I keep looking at is their standard deviation of return which is much lower than the S&P 500, and what you hope you pay for in a managed account. I am looking at their Core Equity stocks primarily.

 

[Happyras]

+1
I show the students in my investment class this graphic:

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And then we talk about not buying investments they don't understand and the fact that the more complex an investment is, the more likely it was designed to benefit the seller and not the buyer.

Finally, we talk about frogs and princes, which pertains here. In all of the tens of thousands of promised magical investments out there it is entirely possible that one could find an investment or two that really was a good deal. The question is: How many frogs do you want to kiss, hoping for a prince, when each kiss costs you time and money?

In my case, and what I recommend to the class, the answer is: zero.

Exactly! Buying a mutual fund you have to dig deep into the facts to discover what the various fees (active) involve. Mutual funds are complex investments and by your logic no one should attempt to buy them. On the contrary a portfolio of stocks is easy to see, and if actively managed you know what is bought when, not like a mutual fund with lagging data and changing managers. Only simple index funds with market returns offer a less complex investment, but does so with higher volatility of returns.

I will never again have someone buy mutual funds for me, but hiring a competent firm to provide a custom stock portfolio is pretty straight forward on fees. If they can manage to provide lower risk for the same performance, then its worth considering. I just need to prove this last point is true either from others experience with them for reference, or proximate modeling of their suggested stock allocation as a back test to prove their claimed standard deviation of return.

 

[Happyras]

+1

Sounds like the standard "we can beat the market" sales pitch. There is no secret sauce.

Also - fixed income is your ballast. Stop reaching for performance. Equities should be the risky part of your portfolio, not bonds.

Just use index funds and keep the 1% for yourself.

Thanks for your advice, but we have significant value in private notes at low risk high returns, so our IRA funds are really legacy accounts and can be subject to risk of full equity exposure for our kids and grandkids benefit. I originally thought of pulling out of equities and move to cash/CD/MM positions but this does not make real sense at today's rates when investing for the next generations lifetime.

True, there is no secret sauce but a complacent indexed view on equities leads you to buying funds that hold stocks with lower quality along with higher quality. I would like to stick with high quality stocks with historic growth or dividends without those several stocks with higher risk. So you are saying no one can do this? All stocks have some risk, but some failures can be avoided with proper insight.

 

[Happyras]

I have heard many times that greater risk creates higher returns. This last 10 years has been a monster bull market. I would worry that they have cherry picked data to be "audited". Or that the "stock picker" loses his edge/leaves/killed by a bus. Bill Gross/Peter Lynch syndrome. Eventually everybody corrects to the mean (or is that median?) If they are handling billions why are they looking for 1-3 million? Seems like the cost of the small guy to service would be prohibitive

Let me ask...there was a 20% correction (just barely) last year at this time. How did they do there? You went in looking for bond help & you came out with stock advice. What changed there in your thinking?

If you crunch the numbers front to back & you are happy....

So I looked at Core Equity 1 year return which would included the downturn, but this data was for 9/30. S&P 500 was 4.25% up, Core Equity was 13.34% up net of fees. For 2018 Core Equity total net return was -1.99%, S&P 500 was -4.38%. So, with the drop in 2018, they rode through it with less of a loss. Since Inception Core Equity has had an annualized return of about 6% net, with a low 13% standard deviation. The S&P 500 during this time frame had 5.67%, but with a higher risk of nearly 16%. This is since 2000 I believe, and their sauce looks mighty tasty to get lower risk for slightly better returns net of fees.

 

[foxfirev5]

I would and do stick with VTSAX or ITOT for my core holding. Simple, transparent, low cost with very acceptable returns.

 

[nwsteve]

As a "for what it is worth" data point. the ETF USMV (min vol s&p), Jan 1-12/31/18 loss of 0.6%, s & p loss -6.9%--Price only. But still no AUM fees, fund charge .15%

 

[pb4uski]

Exactly! Buying a mutual fund you have to dig deep into the facts to discover what the various fees (active) involve. Mutual funds are complex investments and by your logic no one should attempt to buy them. On the contrary a portfolio of stocks is easy to see, and if actively managed you know what is bought when, not like a mutual fund with lagging data and changing managers. Only simple index funds with market returns offer a less complex investment, but does so with higher volatility of returns. ....

WADR, that's bunk. It's very easy to see the fees on today's actively managed mutual funds.... just read the prospectus. Mutual funds are not very complex at all.... they are nothing but a portfolio of stocks... and if one cares to do the work you can tell what was bought when as mutual funds disclose their holding quarterly. I don't see much difference between managed mutual funds and the managed stock portfolio that you are considering.

 

[pb4uski]

As a "for what it is worth" data point. the ETF USMV (min vol s&p), Jan 1-12/31/18 loss of 0.6%, s & p loss -6.9%--Price only. But still no AUM fees, fund charge .15%

Looks like USMV may be a good comparison: 2018 vs VFIAX is +1.36 vs -4.43.... YTD 2019 is 25.46% vs 27.61%... 5YE 2018 is 10.33% vs 8.46%.

Using Portfolio Visualizer.

 

[OldShooter]

... True, there is no secret sauce but a complacent indexed view on equities leads you to buying funds that hold stocks with lower quality along with higher quality. I would like to stick with high quality stocks with historic growth or dividends without those several stocks with higher risk. So you are saying no one can do this? ...

Since you ask ...

The behavior of stock prices is essentially random with a slight upward bias. This is the foundation of Modern Portfolio Theory. If this is true, then no one can predict prices through skill. The result of any prediction must be due only to luck. But there will be lucky predictions just as often as unlucky predictions. It's a zero sum game, after all. So, yes, it is possible for a stock picker to build a portfolio with stocks as you describe, but any future performance of the portfolio will be due to luck.

S&P publishes a semiannual report called the Manager Persistence Scorecard. ("Persistence" is the term for a manager's past performance "persisting" into the future.) You can download copies for any period; all of the reports come to the same conclusion: Persistence is almost nonexistent. As one would expect from a random process, past performance is no indicator of future performance. So we don't have to rely on Markowitz and MPT; we can just look at the data. Manager results are basically random.

Here is a graphic based on one of the S&P reports. The bar on the left is a ranking of managers' performance with the best performance over the previous five years at the top. Taking that top (green) quintile of managers, then, S&P reported their performance after the next five year period.

​

As you can see, the results are actually worse than random. Where a random result would predict that 20% of the top managers would "persist" in the top quintile, only 16% did so. One theory on the reason for this is that investors chasing performance gave them more money than they could successfully manage. But the reason doesn't matter. Note too that 25% of the top performers' funds were closed or merged due to poor performance. This occurs across the stock-picking fund universe at about 7% per year.

Check out Bill Miller's record at Legg Mason; ten years of being lauded as a market genius followed by a complete wipeout in only two years. Statisticians have calculated that random chance was 17% that someone would pull this off during the period. He was the lucky guy. Until he wasn't.

So ... even if Crawford's claimed record is accurate, history says that it will not persist over the long term. Here is an interesting 6 minute video where academic guru Ken French discusses how he and his research partner, Nobel winner Eugene Fama, failed in trying to use past performance to predict the future: https://famafrench.dimensional.com/videos/identifying-superior-managers.aspx More than you wanted to know: https://famafrench.dimensional.com/essays/luck-versus-skill-in-mutual-fund-performance.aspx

 

[Sunset]

This seems like one could look at what they run as funds, to compare to other funds.

It seems to me, if I go to them with 3 or 4 million dollars to invest, they are going to basically buy the same stocks they already buy in their funds. As hopefully the stocks are the best of the best in their opinion.

Here is a random mutual fund they run: cdgix

https://mutualfunds.com/funds/cdgix-crawford-dividend-growth-i/#performance-anchor

Unfortunately this site only lists 3 of their mutual funds: CDOFX , CMALX , CDGIX
https://mutualfunds.com/fund-company/crawford-funds/#tm=1-fund-company&r=ES%3A%3AFundCompany%23crawford

 

[Happyras]

This seems like one could look at what they run as funds, to compare to other funds.

It seems to me, if I go to them with 3 or 4 million dollars to invest, they are going to basically buy the same stocks they already buy in their funds. As hopefully the stocks are the best of the best in their opinion.

Here is a random mutual fund they run: cdgix

https://mutualfunds.com/funds/cdgix-crawford-dividend-growth-i/#performance-anchor

Unfortunately this site only lists 3 of their mutual funds: CDOFX , CMALX , CDGIX
https://mutualfunds.com/fund-company/crawford-funds/#tm=1-fund-company&r=ES%3A%3AFundCompany%23crawford

Thanks, I appreciate your research. Their allocation is a little different than their mutual funds, but it does show a better real world to look into these funds which I would not choose based on what detail I can see. The funds do not have the long history they presented to me for their managed portfolios, but clearly show a different take on both returns and risk.

 

[Janet from FIRE Planet]

Thanks for your advice, but we have significant value in private notes at low risk high returns, so our IRA funds are really legacy accounts and can be subject to risk of full equity exposure for our kids and grandkids benefit. I originally thought of pulling out of equities and move to cash/CD/MM positions but this does not make real sense at today's rates when investing for the next generations lifetime.

Have you read about the recently signed SECURE ? Our kids and grandkids will not have the STRETCH benefit any longer when they inherit our IRA. IRAs are now a 10 year "legacy" at best. No longer are inherited IRAs stretched out for the next generation's lifetime.

This is a short article explaining:

https://money.yahoo.com/retirement-secure-act-190223364.html

 

[Happyras]

Thanks for your advice, but we have significant value in private notes at low risk high returns, so our IRA funds are really legacy accounts and can be subject to risk of full equity exposure for our kids and grandkids benefit. I originally thought of pulling out of equities and move to cash/CD/MM positions but this does not make real sense at today's rates when investing for the next generations lifetime.

Have you read about the recently signed SECURE ? Our kids and grandkids will not have the STRETCH benefit any longer when they inherit our IRA. IRAs are now a 10 year "legacy" at best. No longer are inherited IRAs stretched out for the next generation's lifetime.

This is a short article explaining:

https://money.yahoo.com/retirement-secure-act-190223364.html

We may be well ahead of you on this. In our estate plan we established IRA Trusts in anticipation of this change in law. (which I believe is totally unfair to those who have counted on the law to make their legacy plan) The change in US estate tax is welcome, but in our socialist state of Washington, we have egregious estate taxes requiring us to do trust structures to preserve our hard earned wealth for our innocent grandchildren. A trust with a Coverdell provision and an IRA trust helps us to preserve the stretch while avoiding estate taxes in excess of 35% in WA. Its not fair that the homeless now own the rights to our rental property, but to give in further taxes makes us a bit

 

[Janet from FIRE Planet]

We may be well ahead of you on this. In our estate plan we established IRA Trusts in anticipation of this change in law. (which I believe is totally unfair to those who have counted on the law to make their legacy plan) The change in US estate tax is welcome, but in our socialist state of Washington, we have egregious estate taxes requiring us to do trust structures to preserve our hard earned wealth for our innocent grandchildren. A trust with a Coverdell provision and an IRA trust helps us to preserve the stretch while avoiding estate taxes in excess of 35% in WA. Its not fair that the homeless now own the rights to our rental property, but to give in further taxes makes us a bit

Sounds interesting. Our estate plan attorney specifically advised us to not include the IRA in our trust....

 

[Another Reader]

We may be well ahead of you on this. In our estate plan we established IRA Trusts in anticipation of this change in law. (which I believe is totally unfair to those who have counted on the law to make their legacy plan) The change in US estate tax is welcome, but in our socialist state of Washington, we have egregious estate taxes requiring us to do trust structures to preserve our hard earned wealth for our innocent grandchildren. A trust with a Coverdell provision and an IRA trust helps us to preserve the stretch while avoiding estate taxes in excess of 35% in WA. Its not fair that the homeless now own the rights to our rental property, but to give in further taxes makes us a bit

I am not familiar with your complex estate strategy, but the simpler option (and one I am contemplating here in revenue hungry California) is to move somewhere else.

 

[Retired Expat]

Seems like Inget that and more from my guys

I use a wealth management team at UBS. Management Fee is .5%but trades are free. They have done a great job for me but not just in dealing with portfolio. Suggested I speak to a lawyer they know who took over some estate work for me and saved over a million in taxes compared to the legal advice we were getting. More probably...

Helped me use my accounts to get a great deal on a mortgage from UBS Bank. Resolved a 20 year dispute and battle I had been having with Computer Share to release stock given to me under the UGMA.

Sometimes it is not just about the fee or making .5% more in returns. It is feeling and knowing that there are people looking out for your best interests and not just churning trades or racking up fees while you take all the risk....

 

[Happyras]

I am not familiar with your complex estate strategy, but the simpler option (and one I am contemplating here in revenue hungry California) is to move somewhere else.

I do not recommend Jim Lange, however, he did point out the initial IRA trust structure advantages, and now is claiming god rights to this idea to preserve the stretch. There are complications with this type of trust, as it must pay its own taxes on earnings, but it does allow a longer withdrawal period for any beneficiaries of the trust.

 

[pb4uski]

Around 1:45 he says that the IRS is roughly a third of our IRA when we die. Since marginal tax rates are 22% or 24% or lower for most people, it seems to be that his is a gross overstatement for most people.

I don't see what the fuss is about... if you live long then that money will be subject to 22-24% tax for most people.... if you die and you children inherit it then once they withdraw it over 10 years it'll be subject to 22-24% for most people. Keep in mind that the top of the 24% tax bracket in 2020 is $163,300 for a single and $326,600 for a couple. It'll get up to 32% only for people with income plus inherited IRA withdrawals above that amount.

Say that a married couple that earns $200k a year inherits a $1m IRA and decides to take it out over 10 years. In the first year their income is $300k, their TI is $275k so they are in the 24% tax bracket. Excluding the inherited IRA distribution their income would be $200k and their TI would be $175k and they would be in the 22% tax bracket. So that additional $100k will be taxed at 22-24%.

It would be more troublesome for a single earning $100k a year. Before any inherited IRA distribution their TI would be ~$88k putting them in the 24% tax bracket and the additional $100k would put them in the 32-35% tax brackets.

Above is before any mitigating factors like increasing 401k or other retirement contirbutions to offset the IRA distribution.

 

[Happyras]

I guess for most folks this is not so much of an issue. I would like to see our kids being able to take the money when needed, hopefully in retirement. If they are forced to take it early, they will pay more in taxes and not have the advantage of maintaining the leverage of keeping the whole lump sum invested until needed. But I think we are off topic at this point....

 

[pb4uski]

I guess for most folks this is not so much of an issue. I would like to see our kids being able to take the money when needed, hopefully in retirement. If they are forced to take it early, they will pay more in taxes and not have the advantage of maintaining the leverage of keeping the whole lump sum invested until needed. But I think we are off topic at this point....

The last part... keeping the whole lump sum invested until needed... is not an issue... it is a common misconception... at the end of the day it all comes down to tax rates.

Let's say that someone inherits a $500k IRA and pays 25% in taxes and have $350k left that in 10 years the account doubles from investment growth to $750k. OTOH, if they didn't have to do any distribution and it doubled to $1m over 10 years and they then withdrew and pay 25% in tax they would have $750k. So much for any advantage of keepng the wholeump sum invested until needed.