Nov 30, 2017 Peer Rank

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MORNINGSTAR PEER RANKS:




Often the most difficult test is to look at a fund against its peers.

How does performance stack up against the other active managers who are trying to run a similar strategy? I went out to Morningstar and found a Tactical Allocation Peer group (you can see it here). These numbers will be more meaningful as my strategy gets a longer history and I can compare 1, 3 and eventually 5 year numbers.

As of November 30, 2017:

1 Mo3 Mo1 Yr3 Yrs5 Yrs
Equal  68%  67%  -na-  -na-  -na-
TA  91%  98%  -na-  -na-  -na-
Enhanced  43%  33%  -na-  -na-  -na-
# of Funds  307  307  295   245   192
Max 4.15% 8.98%27.99% 11.49%12.38%
Min-1.26%-2.27%-2.36%-11.42%  -6.36%

COMMENTARY:

The TA fund has had a very good three months. It is interesting to note that last quarter, the Enhanced fund's 3 month rank was 99% and now it is 33%. It is also interesting that the even allocation (Equal Fund) has beaten almost 70% of tactical allocators over the last three months. These metrics can jump around a lot. The most informative numbers will be the 1, 3 and 5 year ranks but I only have 6 months of recorded data for this blog so I can not report those yet.

Over time I would expect the equal weighted fund to average somewhere near the 50% rank and the other two well above that.

UNDERSTANDING THE PEER RANKING:

The numbers in the row titled # of Funds tell us how many funds are included in the research (around 300 for recent time periods). This means that there are around 300 funds in the Morningstar universe that focus on tactical allocation.

The Max and Min rows give the best and worst return reported for that time period. Note that these often come from different funds, i.e. the worst 1 and 3 month returns usually come from different funds. Also note the spread in results, even at the 5 year period, there is a very big difference between the best and worst result.

The percentages shown in my three strategies (Equal, TA, and Enhanced) rows tell where they rank among the universe in percentage terms. 100% would be the top performing fund, 0% would be the bottom.

Another way to think of it is, if a fund's ranking is 90%, then 10% of the funds did better and 90% did worse than the fund.

These rankings will jump around a lot month to month but over time you want to see a successful strategy remain above 50% pretty consistently. Also, the longer time periods are more telling, and change slower.  They are a better gauge of skill.

DISCLAIMER:
Past performance is not a guarantee of future performance.  This strategy is presented for informational purposes only and is not a solicitation to buy or sell any securities. October is one of the peculiarly dangerous months to speculate in stocks in.  The others are July, January, September, April, November, May , March, June, December, August and February. ~ Mark Twain





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