Vanguard Market Neutral Fund

[pb4uski]

Is anyone out there using this fund? If so, what say you? Considering it as a bond fund substitute.

This fund has a unique and complex investment approach, compared with other Vanguard funds. Its goal is to “neutralize,” or limit, the effect of stock market movement on returns. Because of this, the fund’s return is often uncorrelated to that of the stock market. Unlike other Vanguard funds, this fund uses long- and short-selling strategies, which involve specific risks not apparent in traditional mutual funds. The fund may be appropriate for a small portion of an already well-diversified portfolio.

Of course with a $250,000 minimum if it is to be a "small portion of an already well-diversified portfolio" then it would have to be a pretty big portfolio!

 

[braumeister]

This fund has a unique and complex investment approach

They lost me at this point.

 

[Onward]

IMO Vanguard has gone somewhat off the rails since Bogle stepped down.

 

[DyNess]

Greetings!

I use it as a portion of my portfolio; however, I primarily use the Managed Payout (VPGDX) fund in my taxable investments. Hence part of the portfolio.

It is a stock based fund, but produces returns similar to bonds. There is a lot of hate and discontent surrounding it. I think it is a nice part of the overall Managed Payout fund, as its price is relatively stable, while producing some returns.

As far as using it on your own. I would not recommend it, unless you have a massive amount invested elsewhere and are looking to somehow diversify. Hope this helps.

~Dy'Ness

 

[Markola]

It's in the portfolio of the Vanguard Managed Payout Fund, which sunk like everything else in 08/09 and has been lackluster since. Like a lot of market strategies, it makes sense on paper.

 

[Walt34]

IMO Vanguard has gone somewhat off the rails since Bogle stepped down.

That may well be. A while back I received a letter from them about a free consultation, so I called. It turned out to be they wanted me to subscribe to a "management group" (I think that's what he called it.) that would manage my funds. For a 1% fee. He goes on to say that in general they do better than 2% or more than people can do by themselves. Knowing the answer, I ask "Is that guaranteed?" Well, no.

Finding this very difficult to believe since it is contrary to everything I've read on investing I declined the offer.

 

[COcheesehead]

I had a fund like this from Guggenheim. It ultimately underperformed and was very expensive. I dropped it.

 

[Boho]

I've been considering a market neutral fund. It actually looks like there's a niche for it. Here's a comparison between top market neutral, taxable bond, and municipal bond funds, along with the S&P.

$2,500 minimum investment.

 

[NW-Bound]

"... this fund uses long- and short-selling strategies... "

Sounds like a hedge fund for people who are not rich. Those hedge funds for the super-rich do not beat the market every year either, and in fact often do poorer than plain old active MFs. That's what I have read.

To invest in a hedge fund, one must be an accredited investor, meaning having an annual income of $200K or investable assets of more than $1M. Many posters here would qualify, but I don't think too many go for it.

PS. About this VG fund, if one has only a percentage of portfolio in it, say less than 1/10, then it would not make a dent in the total result, does it? One can just keep his $250K under the mattress. Usually, people put a lot more if not all of their stash in a hedge fund, I think.

 

[ERD50]

I've been considering a market neutral fund. It actually looks like there's a niche for it. Here's a comparison between top market neutral, taxable bond, and municipal bond funds, along with the S&P.

$2,500 minimum investment.

Run that chart over the max time frame. Looks like the 'market neutral' fund under-performs just about everything.

I guess many of us have to make this search, before we end up just picking an AA and letting it go.


-ERD50

 

[samclem]

Is anyone out there using this fund? If so, what say you? Considering it as a bond fund substitute.

Quote:

This fund has a unique and complex investment approach, compared with other Vanguard funds. Its goal is to “neutralize,” or limit, the effect of stock market movement on returns.

Sounds like a CD. Except that a CD is really totally delinked from the stock market, I wouldn't need $500K to open one, the government guarantees I'll get my money back, and the issuer guarantees it will be worth more (nominally) when I take the money out than when I put it in.