May 31, 2018 Peer Ranking

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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 3 and eventually 5 year numbers. This month is the first time I have one year numbers to show.

As of May 31, 2018:

1 Mo3 Mo1 Yr3 Yrs5 Yrs
Equal  87%  86% 73%  -na-  -na-
TA  93%  64% 97%  -na-  -na-
Enhanced  23%  80% 59%  -na-  -na-
# of Funds  308  301   289   239   179
Max   7.46%  6.64% 23.14% 10.55% 10.67%
Min  -2.13% -6.38% -9.73%-12.49%  -9.59%

COMMENTARY:

It is great to finally have one year numbers and I am very happy with all of the 1 year results (they are all above 50%, meaning they all did better than the median manager. The TA fund did outstanding at 97% meaning only 3% of managers performed better over the past year.  The short term metrics can jump around a lot (all three strategies have had one and three month marks above 90% as well as below 10%). I am a bit surprised at the strong performance of the Equal fund as I would expect it to be closer to the median. I expect that the Enhanced fund will see better days and will move up the ranks but for now I am happy that it is still better than median even when it is struggling.

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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