FactorShares ETFs Might Actually Be Working

About a month ago FactorShares listed five spread ETFs. Each one tracks the spread between two asset classes and levers the result times two targeting a daily result. I wrote about them for theStreet.com when they first came out with a sort of I don’t know what to make of them conclusion. FactorShares is presenting them as a potential low vol, low correlation, absolute return sort of a thing. The volume on them is very low which either means that the market does not know what to do with them either or the people who actually want to trade the long crude/short SPX spread are continuing to do so in the same manner they did before the FactorShares came out. The results of the five vary but FOL is up 20% in the month (through Tuesday) and FSU is up 13.9% versus 3.1% for the S&P 500 and I would note the other three are slightly positive. FOL is long crude/short SPX and FSU is long SPX/short USD and again both are 2X. Strategically there are several moving parts here. There can be no certainty that the dynamics between oil and stocks that lead to FOL going up 20% will persist. In fact it is more likely that the relationship between the two will change all the time. The long stock/short treasury fund which is symbol FSE could be on the verge of doing something meaningful based on how people have couched the Fed’s press conference. Likewise the long gold/short SPX fund. Further complicating this is that no matter the correlation right now between any of these funds and...

FactorShares ETFs Might Actually Be Working

About a month ago FactorShares listed five spread ETFs. Each one tracks the spread between two asset classes and levers the result times two targeting a daily result. I wrote about them for theStreet.com when they first came out with a sort of I don’t know what to make of them conclusion. FactorShares is presenting them as a potential low vol, low correlation, absolute return sort of a thing. The volume on them is very low which either means that the market does not know what to do with them either or the people who actually want to trade the long crude/short SPX spread are continuing to do so in the same manner they did before the FactorShares came out. The results of the five vary but FOL is up 20% in the month (through Tuesday) and FSU is up 13.9% versus 3.1% for the S&P 500 and I would note the other three are slightly positive. FOL is long crude/short SPX and FSU is long SPX/short USD and again both are 2X. Strategically there are several moving parts here. There can be no certainty that the dynamics between oil and stocks that lead to FOL going up 20% will persist. In fact it is more likely that the relationship between the two will change all the time. The long stock/short treasury fund which is symbol FSE could be on the verge of doing something meaningful based on how people have couched the Fed’s press conference. Likewise the long gold/short SPX fund. Further complicating this is that no matter the correlation right now between any of these funds and...

TFSMX

TFSMX is the symbol for the TFS Market Neutral Fund that I first mentioned in the summer of 2008 after hearing the manager interviewed on CNBC. There have been four blog posts on this fund here, here, here and here. The reason to bring it up now is that someone affiliated with the fund left a comment over the weekend on one of the posts asking if I wanted to revisit the once over I gave the fund back then. In re-reading all four posts it is not clear why I am being asked to review the previous analysis. As I read the old posts I note the results were good but the nature of the fund appeared to be very complex and that I generally prefer simple where possible. Back then the fund had over 1300 holdings and the manager in the CNBC interview said there is a lot of turnover. The chart is from Morningstar which I believe is the best way to chart a mutual fund because it accounts for the payouts. It captures TFSMX in dark blue against the Rydex Managed Futures Fund (RYMFX) in green (which has been my preferred choice in the space and we which we still own), the SPDR S&P 500 ETF (SPY) in yellow and the market neutral category in orange. If you’ve ever used a market neutral fund, why did you use it? What were you hoping for? Did it do what you wanted when you wanted? There is no single answer for any of those questions but I think they are relevant as there are many funds in...

TFSMX

TFSMX is the symbol for the TFS Market Neutral Fund that I first mentioned in the summer of 2008 after hearing the manager interviewed on CNBC. There have been four blog posts on this fund here, here, here and here. The reason to bring it up now is that someone affiliated with the fund left a comment over the weekend on one of the posts asking if I wanted to revisit the once over I gave the fund back then. In re-reading all four posts it is not clear why I am being asked to review the previous analysis. As I read the old posts I note the results were good but the nature of the fund appeared to be very complex and that I generally prefer simple where possible. Back then the fund had over 1300 holdings and the manager in the CNBC interview said there is a lot of turnover. The chart is from Morningstar which I believe is the best way to chart a mutual fund because it accounts for the payouts. It captures TFSMX in dark blue against the Rydex Managed Futures Fund (RYMFX) in green (which has been my preferred choice in the space and we which we still own), the SPDR S&P 500 ETF (SPY) in yellow and the market neutral category in orange. If you’ve ever used a market neutral fund, why did you use it? What were you hoping for? Did it do what you wanted when you wanted? There is no single answer for any of those questions but I think they are relevant as there are many funds in...

The Big Picture for the Week of June 6, 2010

Credit Writedowns hosted a guest post by Frederick Sheehan titled Should Investors Boycott The Stock Market? Candidly the article didn’t really focus on that question but it is interesting nonetheless. More interesting perhaps could be to wonder if investors should boycott volatility? On the Seeking Alpha version of my Put Write post the other day Geoffrey Lordi mentioned the Merger Fund (MERFX). I wrote about this fund in a little bit of detail not quite four years ago. The fund chugs along doing its own thing regardless of what else is going on the (stock market) world. In the last ten years as the S&P 500 has had a wild ride on the way to a 30% decline the Merger Fund has had a much smoother ride to unchanged. Unchanged for a decade may not seem so hot but in a down 30% world I think it is pretty good. The strategy of merger arbitrage lends itself to a smoother ride. While I do not know how good the people running MERFX are I can say that over a similar period of time (the beginning of the chart for ten years did not look right so moved it in a little) the Arbitrage Fund (ARBFX) has had a much better result and also a very smooth ride. There are other funds and strategies that that accomplish similar results, I’ve written about quite a few of them over the years. To the extent this site does share process these types of funds help with managing portfolio volatility which is a very important concept. If you’ve been reading this site for...

The Big Picture for the Week of June 6, 2010

Credit Writedowns hosted a guest post by Frederick Sheehan titled Should Investors Boycott The Stock Market? Candidly the article didn’t really focus on that question but it is interesting nonetheless. More interesting perhaps could be to wonder if investors should boycott volatility? On the Seeking Alpha version of my Put Write post the other day Geoffrey Lordi mentioned the Merger Fund (MERFX). I wrote about this fund in a little bit of detail not quite four years ago. The fund chugs along doing its own thing regardless of what else is going on the (stock market) world. In the last ten years as the S&P 500 has had a wild ride on the way to a 30% decline the Merger Fund has had a much smoother ride to unchanged. Unchanged for a decade may not seem so hot but in a down 30% world I think it is pretty good. The strategy of merger arbitrage lends itself to a smoother ride. While I do not know how good the people running MERFX are I can say that over a similar period of time (the beginning of the chart for ten years did not look right so moved it in a little) the Arbitrage Fund (ARBFX) has had a much better result and also a very smooth ride. There are other funds and strategies that that accomplish similar results, I’ve written about quite a few of them over the years. To the extent this site does share process these types of funds help with managing portfolio volatility which is a very important concept. If you’ve been reading this site for...