Tag Archives: mutual funds

Best-Performing Vanguard Mutual Funds In Q3 Of 2015

Calling the third quarter a bloodbath will not be far from the truth. In this quarter, the Dow, S&P 500 and Nasdaq declined 7.6%, 7% and 7.4%, respectively. In the third quarter, just 17% of mutual funds managed to finish in the green. China-led global growth fears, uncertainty about the Fed rate hike followed by the no lift-off decision, the sell-off in biotech stocks and tumbling commodity prices, among other factors, resulted in the worst quarter in four years. In a quarter ravaged by such headwinds, mutual funds from the Vanguard Group gave a decent performance. Its best gain hit 8.4%, achieved by Vanguard Extended Duration Treasury Index Fund Institutional (MUTF: VEDTX ). This fund, which requires a minimum initial investment of $5,000,000, was in fact the top performer among the Long Government Bond Funds. The commendable gain came not only when the markets suffered a rout, but at a time when the U.S. Fed was preparing for a possible rate hike at the end of this year. As for the worst performer, Vanguard Precious Metals & Mining Fund Investment (MUTF: VGPMX ) slumped to a loss of 21.9%. This was in line with the performance of the fund category. Morningstar data showed that the Equity Precious Metals category had lost 19.4% in the third quarter. Vanguard’s Q3 Performance vs. Q2 Popular for offering the no-load mutual funds, the top-performing Vanguard funds gave a better performance than those in the second quarter. As mentioned earlier, VEDTX gained 8.4%. In the second quarter, Vanguard’s top performer was the Vanguard Health Care Fund (MUTF: VGHAX ), which had gained just 3.8%. However, the magnitude of losses increased significantly in the quarter. Of the 258 funds under our study, 79 funds ended in the positive territory in the third quarter. The average gain for these 79 funds was 1.9%. This was an improvement from the average 0.8% gain scored by 101 Vanguard funds that had finished in the green in the second quarter. However, in the third quarter, the remaining 179 funds finished with losses averaging -8%. In the second quarter, of the 257 funds under our study, 156 funds had ended in the negative territory, with an average loss of 1.8%. Among the 79 gainers in the third quarter, only 8 funds posted above 5% return. On the other hand, 58 funds posted returns lower than 2%. Out of the 179 funds that finished in the red this time, only 30 funds had a sub-5% loss. Meanwhile, 45 funds lost by at least 10%. (Note: These numbers include same funds with varied asset classes.) Vanguard’s performance in the third quarter was also relatively better than that of many of its key peers. For instance, its top gaining fund had higher returns than the best gainers from Fidelity, BlackRock (NYSE: BLK ), Wells Fargo (NYSE: WFC ) and American Funds. In the second quarter, Vanguard had failed to beat any of these fund families. However, this time, it failed to beat the third-quarter performance of T. Rowe Price (NASDAQ: TROW ). Top-Performing Vanguard Mutual Funds Fund Name Objective Description Q3 Total Return Q3 % Rank vs. Obj. YTD Total Return % Yield Expense Ratio Beta vs. S&P 500 Vanguard Long-Term Treasury Inv Government 5.44 2 0.08 2.63 0.2 -0.04 Vanguard Long-Term Inv-Gr Inc Inv Corp.-Inv. 2.63 1 -2.29 4.18 0.22 0.03 Vanguard Long-Term Bond Index Inv Dvsfd Bond 2.32 1 -2.49 3.97 0.18 -0.01 Vanguard CA Long-Term T-E Inv Muni CA 2.08 8 1.88 3.12 0.19 -0.05 Vanguard MA Tax-Exempt Fd Muni State 2.01 2 1.79 2.68 0.15 -0.04 Vanguard Interm-Term Treasury Inv Government 2 5 2.77 1.58 0.2 -0.02 Vanguard OH Long-Term Tax-Exmpt Fd Muni State 2 2 1.95 2.96 0.15 -0.03 Vanguard REIT Index Inv Real Est 1.95 35 -4.49 3.77 0.26 0.55 Vanguard NY Long-Term T/E Inv Muni NY 1.88 7 1.8 2.91 0.19 -0.01 Vanguard PA Long-Term Tax-Exmpt Inv Muni State 1.88 4 1.81 3.17 0.19 -0.02 Vanguard Long-Term Tax-Exempt Inv Muni Natl 1.81 9 1.51 3.23 0.19 -0.02 Vanguard High-Yield Tax-Exempt Inv Muni Natl 1.77 10 1.58 3.24 0.19 0.01 Vanguard CA Interm-Term T-E Inv Muni CA 1.74 31 1.53 2.46 0.19 -0.03 Vanguard Interm-Term Bd Index Inv Corp.-Inv. 1.73 1 1.93 2.27 0.18 -0.01 Vanguard Interm-Term Tax-Exempt Inv Muni Natl 1.58 19 1.23 2.56 0.19 -0.01 Note: The list excludes the same funds with different classes, and institutional funds have been excluded. Funds having minimum initial investment above $5000 have been excluded. Q3 % Rank vs. Objective* equals the percentage the fund falls among its peers. Here, 1 being the best and 99 being the worst. The list of top 15 Vanguard fund performers is dominated by funds belonging to the Municipal bond funds category. Nine of the 15 funds belong to this category. This was expected as many sub-Municipal fund categories, such as Muni California Long, Muni Pennsylvania and Muni New York Long, featured in the top performers list for the third quarter, according to Morningstar data. However, the gains were modest, with Muni California Long performing the best, notching up a 1.7% gain in the quarter. Among the best-performing Vanguard Municipal Bond funds, Vanguard California Long-Term Tax Exempt Fund Investment (MUTF: VCITX ) gained 2.1% and was the best performer. The other funds from this category were Vanguard Massachusetts Tax-Exempt Fund Investment (MUTF: VMATX ), Vanguard Ohio Long Term Tax Exmpt Fund Investment (MUTF: VOHIX ), Vanguard New York Long Term Tax Exempt Fund Invesment (MUTF: VNYTX ), Vanguard Pennsylvania Long Term Tax Exmpt Fund Investment (MUTF: VPAIX ), Vanguard Long Term Tax Exempt Fund Investment (MUTF: VWLTX ), Vanguard High Yield Tax Exempt Fund Investment (MUTF: VWAHX ) and Vanguard California Intermediate Term Tax Exempt Fund Investment (MUTF: VCAIX ). Moreover, all these funds carry a favorable Zacks Mutual Rank. VCITX, VMATX, VOHIX, VNYTX, VPAIX, VWLTX, VWAHX carry Zacks Mutual Fund Rank #1 (Strong Buy) , while VWITX holds a Zacks Mutual Fund Rank #2 (Buy) . However, the best gainer from this list was a Government Bond Fund – Long, Vanguard Long Term Treasury Fund Investment (MUTF: VUSTX ), which added 5.4% in the quarter. Another fund from the category, Vanguard Intermediate Term Treasury Fund Investment (MUTF: VFITX ), was up 2% and was the sixth best gainer. Both VUSTX and VFITX carry a Zacks Mutual Fund Rank #1. Vanguard Long Term Investment Grade Fund Investment (MUTF: VWESX ), also carrying a Strong Buy rank, from the Investment Grade Bond Category, gained 2.6% and was the second best performer. While none of the funds carried an unfavorable Zacks Mutual Fund Rank, Vanguard Long-Term Bond Index Inv (MUTF: VBLTX ), Vanguard REIT Index Inv (MUTF: VGSIX ) and Vanguard Interm-Term Bd Index Inv (MUTF: VBIIX ) currently carry a Zacks Mutual Fund Rank #3 (Hold) . Original Post

Market Neutral Funds: The Best And Worst Of September

Market-neutral funds are a subset of long/short equity strategies. Both market-neutral and more standard long/short equity strategies combine both long and short positions in stocks to mitigate portfolio volatility and to capitalize on the downside of correctly identified underperformers. But while traditional long/short strategies typically remain net long , market-neutral funds aim to balance their long and short holdings to generate returns that are entirely uncorrelated with the broad market. Alternative mutual funds pursuing market-neutral strategies provide investors with professional security selection and portfolio management. These funds, which aim to achieve positive returns regardless of overall market conditions, eked out a tiny aggregate gain of 0.12% in September, according to Morningstar, but there were several that greatly outperformed – and others that posted significant monthly losses. Top Performing Funds in September The Invesco All Cap Market Neutral Fund (MUTF: CPNAX ) was the top-performing mutual fund in Morningstar’s Market Neutral category for September, returning +7.03% for the month. This brought the fund’s year-to-date gains through September 30 to +7.63%. In the third quarter, the fund posted huge gains of 15.01%, boosting its one-year returns to +8.64%. The fund, which debuted in December 2013, had assets under management (AUM) of $32.1 million, accounting for just a tiny fraction of the category’s $25 billion total AUM. The AQR Equity Market Neutral Fund (MUTF: QMNIX ) was the second-best performer in the category in September, gaining 5.79% for the month. The fund, which debuted October 7 of last year and had $127.6 million in AUM as of October 19 of this year, gained an impressive 14.99% in the first nine months of 2019. Finally, the Vanguard Market Neutral Fund (MUTF: VMNIX ) rounded out the category’s top-three performers with September gains of 5.11%. Unlike the other funds mentioned thus far, which have debuted in the past two years, VMNIX has a much longer track record – through September 30, the fund had generated respective three- and five-year returns of +6.19% and +4.67%, easily besting the category averages of +1.04% and +1.49%, respectively. The fund debuted on October 19, 2008 and had $446.2 million in AUM precisely seven years later. Worst-Performing Funds in September The worst-performing market-neutral mutual funds for September were: Castlerigg Event Driven and Arbitrage Fund (MUTF: EVNTX ) Visium Event Driven Fund (MUTF: VIDIX ) The Arbitrage Event-Driven Fund (MUTF: AEDNX ) The Castlerigg fund debuted in February 2015. It lost 4.72% in September and a painful 10.37% in the first nine months of 2015 – ouch! The fund had just $10.3 million in AUM, as of October 19. The Visium fund is another small and underperforming market-neutral fund. It lost 4.70% in September, barely outpacing Castlerigg, and it was down 9.14% for the year ending September 30. The Visium fund’s AUM, as of October 19, were $23.4 million. Finally, the Arbitrage Event-Driven Fund rounded out September’s list of market-neutral underperformers, with monthly losses of 3.73%. But this much bigger fund, which debuted in 2010 and had $357.5 million in AUM as of October 19, has a much longer track record than last month’s other laggards: For the five years ending September 30, 2015, the fund returned an annualized +0.63%. Unfortunately for investors who didn’t buy in before 2012, the fund’s returns for one- and three-year periods, as well as three- and nine-month terms, were all negative. Conclusion A recent white paper by Northwestern Mutual further explains the benefits and drawbacks of market-neutral strategies and market-neutral mutual funds in particular. According to Northwestern, these funds “tend to generate consistent returns that are above the historic U.S. Treasury Bill rate (3-6%) whether the market is up or down” – and this makes them particularly attractive amid the current market environment.

As Oil Prices Plummet, Investors Flee Natural Resources Funds

By Patrick Keon Over the past two months, we witnessed a repeat of last summer’s oil price activity. As in 2014, prices of the U.S. and global oil benchmarks (West Texas Intermediate Crude [WTI] and Brent Crude) peaked near the end of June and then headed into decline. Last year, this resulted in seven consecutive months of negative price performance for both WTI and Brent, during which time they lost 54.9% and 57.2%, respectively. As the end of August approaches, the descent for both benchmarks has been more volatile than that in 2014; both WTI and Brent have recently traded at six-year lows, and are down roughly 36% and 30% from their highs at the end of June 2015. This slump in oil prices has impacted the performance and fund flows activity as well as the buy/sell decisions for funds in Lipper’s Global Natural Resources (GNR) Funds and Natural Resources (NR) Funds classifications. Mutual funds in the GNR and NR categories invest primarily in the equity securities of domestic and foreign companies engaged in the exploration, development, production, or distribution of natural resources (including oil, natural gas, and base minerals) and/or alternative energy sources (including solar, wind, hydro, tidal, and geothermal). For the purposes of the current discussion, we look only at those funds that invest the majority of their assets in oil companies; these types of funds account for the lion’s share of the funds in the GNR and NR classifications. Since July 2014, the returns on funds in the GNR and NR categories showed a positive correlation to the movement in oil prices. As illustrated in the table below, the average performance for GNR funds and NR funds followed the direction of WTI and Brent prices during the vast majority of the period. The only times all four groups did not move in the same direction occurred during August 2014 and May 2015. In August 2014, both NR (+3.2%) and GNR (+1.8%) experienced slight bumps when WTI (-0.4%) and Brent (-3.6%) trended downward, while in May 2015, WTI prices appreciated slightly (+1.1%) as the other groups fell off a bit. During the latest slide for WTI and Brent prices (late June through August), funds in the GNR (-24.2%) and NR (-24.5%) categories also experienced a similar sharp downward trend. There was also consistency within the universe: every fund in the two categories suffered at least a double-digit loss during this time frame. Lipper’s data indicates that a positive correlation also existed between the direction of oil prices and fund flows for the GNR and NR categories. During the most recent period in which WTI (-36%) and Brent (-30%) were both down significantly, we saw net outflows from both the fund classifications. GNR funds saw over $480 million leave their coffers, while NR funds had net negative flows of approximately $330 million. Within GNR, three funds were responsible for most of the money leaving the group. Leading the way was the T. Rowe Price New Era Fund No Load (MUTF: PRNEX ) with outflows of over $165 million, followed closely by the Prudential Jennison Natural Resources Fund B (MUTF: PRGNX ) and the Vanguard Energy Fund Inv (MUTF: VGENX ), down $146 million and $126 million, respectively. Within the NR grouping, one fund family accounted for the bulk of the net outflows: Fidelity Management & Research. Fidelity, which has six NR funds, had roughly $240 million leave during this time, with the Fidelity Select Energy Service Portfolio No Load (MUTF: FSESX ) and the Fidelity Select Natural Gas Portfolio No Load (MUTF: FSNGX ) (with net outflows of $71 million and $63 million) taking the two biggest hits. (click to enlarge) When oil prices rose this year (from the late first quarter to the late second quarter), the GNR and NR classifications both responded with overall net inflows. The NR group took in over $840 million, once again paced by the Fidelity family of funds. Fidelity accounted for $340 million in net new money total, with the Fidelity Select Energy Portfolio No Load (MUTF: FSENX ) taking in the largest chunk (+$183 million). Also contributing significantly to NR’s positive showing during this time frame was the Invesco Energy Fund Inv (MUTF: FSTEX ), which registered $118 million of positive net flows. The net flows into GNR (+$423 million) were roughly half of the NR net intake. The largest positive net flows were recorded by VGENX and the RS Global Natural Resources Fund A (MUTF: RSNRX ), at $353 million and $167 million. Of note, going against this trend was PRNEX, which posted net outflows (-$153 million) during the time of oil price appreciation to go along with its $165 million of negative flows during the current oil price decline. Focusing our scope on the changes in holdings in oil company stocks for GNR and NR funds during the current oil price slump, we see the selling was fairly concentrated within NR, but spread out among more stocks within GNR. Within the NR classification, four companies saw their net overall shares reduced by over one million shares, while this number grew to sixteen for the GNR category. The four companies within NR that experienced the most selling were Vantage Drilling (NYSEMKT: VTG ) (-27.6 million shares), BG Group Plc ( OTCQX:BRGXF ) (-3.1 million shares), Halliburton (NYSE: HAL ) (-2.7 million shares), and Weatherford International Plc (NYSE: WFT ) (-2.1 million shares). The number of shares of Vantage Drilling sold represented 8.8% of the company’s shares outstanding (SHOUT). Four funds completely sold out of Vantage, led by FSENX, which closed out an 18.1-million-share position. For the remainder of the group, the shares sold of each accounted for less than 1% of the company’s SHOUT. Weatherford’s activity was the result of four funds liquidating their positions, while BG Group had three funds close out their entire positions. We observe that for the selling within GNR, nine companies went from having a total aggregate position of over one million shares of their stock being held to being completely liquidated. The companies that had the largest positions closed out were Pacific Exploration and Production Corporation ( OTCPK:PEGFF ) (-3.9 million shares) and Brightoil Petroleum Holdings Ltd. ( OTC:BRTPF ) (-2.2 million shares). In each case for these nine stocks, one fund accounted for the entire initial position. The most widely held stocks within NR were essentially static during this period. Schlumberger (NYSE: SLB ) (11 funds) and Baker Hughes (NYSE: BHI ) (10 funds) were the most widely held within NR, and their totals did not change. The GNR classification showed a little more movement in its most widely held stocks. GNR started with five stocks being held by a double-digit number of funds: EOG Resources (NYSE: EOG ) (held by 15 funds), Cabot Oil & Gas (NYSE: COG ) (12 funds), Anadarko Petroleum (NYSE: APC ) (11 funds), Concho Resources (NYSE: CXO ) (11 funds), and Antero Resources (NYSE: AR ) (10 funds). Within this group, EOG Resources was unchanged, while Cabot Oil & Gas, Anadarko Petroleum, and Concho Resources all added one fund each to their totals. Antero Resources had three funds liquidate their positions, to reduce the funds holding Antero to seven. For Antero Resources, the Putnam Global Natural Resources Trust A (MUTF: EBERX ), the AllianzGI Global Natural Resources Fund Inst (MUTF: RGLIX ), and the Putnam Global Energy Fund A (MUTF: PGEAX ) liquidated positions of 4.9 million shares, 550,400 shares, and 353,200 shares, respectively. Oil prices as well as their impact on the performance and fund flows activity of natural resources funds warrant continued observation going forward. The glut in the oil supply does not show signs of abating anytime soon, since the U.S. and OPEC have not indicated any plans to reduce production. If this summer’s downturn in oil prices stretches out as long as last year’s (seven months), we can expect to see additional significant net outflows from funds in Lipper’s natural resources classifications, as well as negative returns for the groups.