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Post by chang on Jun 6, 2021 9:21:47 GMT
Short and simple: owned this for ~3 years, up 70%. Can't complain. Considered selling it last March when it nearly imploded, but didn't: since then it's Top 9% of LV category, so again no complaints. But YTD it trails SCHD, VVIAX, VEIRX and VWNDX -- all basic, solid value funds [active and passive]. It's a black box; though not totally black, since DL gives a good explanation of what it does. But it intersects with the Bond World inside the Twilight Zone, as we saw last March. Like all quant funds, it works until it doesn't, and when it doesn't, it really doesn't. Here's the chart: LINK. YTD the fund trails everything. Over 1Y it holds its own, bested only by SCHD and Windsor. Over 3Y: better still, bested only by SCHD. Over 5Y it tops them all, just ahead of SCHD. One last thing: switch to rolling returns ( link). DSEEX is volatile. Those blue bars punch higher and lower than all the others. This thing is as streaky as an elephant painting. Summarizing:- It's a black box, quant fund. I'll never really know what's in it.
- It's relative performance is deteriorating. It was red hot during 2014-2019, but that's ancient history now.
- It's not ridiculously expensive (0.57%), but it's not cheap either.
- It's volatile.
- SCHD seems to keep up with or beat DSEEX, with lower costs, more transparency, and less drama.
Is it time to pat myself on the back and sell DSEEX (it's in an IRA so there's no tax implications)?
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Post by yogibearbull on Jun 6, 2021 13:04:51 GMT
Fund creates equity exposure through index derivatives, not by holding any sector ETFs directly. The equity allocation is to 4 undervalued sectors (based on CAPE) that is changed monthly. The current sector allocations as of 4/30/21 is: Communication Services 24.78% Real Estate 25.47% Financials 25.23% Technology 24.52% Total 100.00% doublelinefunds.com/shiller-enhanced-cape/statistics/To understand DSEEX performance, one needs its monthly sector allocation history that exists somewhere but I only found the above as of 4/30/21. It is certainly not catching the cyclical bounce that other funds mentioned have done. I wonder how a strategy with 4 hot sectors, adjusted monthly, would have done. Stockcharts shows how S&P sector ETFs have done. LINK |
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Post by yogibearbull on Jun 6, 2021 18:09:19 GMT
More from PV Run, Metrics tab. #1 is equal-weighted with ETFs XLK, XLC, XLF, XLRE (current equity sector weights for DSEEX). #2 is DSEEX itself. #3 is ETF SCHD. Looking at beta and SD, it seems that DSEEX is 18-21% leveraged. This is not mentioned in the website info anywhere. I thought that through derivatives, it was aiming for 100% exposure to CAPE index but it is overshooting to 118-121%, based on PV data. |
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Post by chang on Jun 6, 2021 22:20:41 GMT
More from PV Run, Metrics tab. #1 is equal-weighted with ETFs XLK, XLC, XLF, XLRE (current equity sector weights for DSEEX). #2 is DSEEX itself. #3 is ETF SCHD. Looking at beta and SD, it seems that DSEEX is 18-21% leveraged. This is not mentioned in the website info anywhere. I thought that through derivatives, it was aiming for 100% exposure to CAPE index but it is overshooting to 118-121%, based on PV data. : See Question 4: doubleline.com/wp-content/uploads/DoubleLine-Shiller-Enhanced-CAPE-FAQ.pdf |
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Post by yogibearbull on Jun 6, 2021 23:09:22 GMT
I see that explanation in Q&A 4. But the end result for the "black box DSEEX" along with the others (4 ETF Mix, SP500, SCHD) is as follows:
4 ETF Mix DSEEX SP500 SCHD
Beta 0.98 1.18 1.00 0.97 (Beta for DSEEX is higher)
R^2 96.17% 94.82% 100% 90.54%
SD 18.87% 22.81% 18.79% 19.07% (SD for DSEEX is higher)
S.R. 0.98 0.82 0.92 1.00 (Sharpe Ratio shows SCHD MUCH ahead of DSEEX)
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Post by liftlock on Jun 7, 2021 0:26:50 GMT
More from PV Run, Metrics tab. #1 is equal-weighted with ETFs XLK, XLC, XLF, XLRE (current equity sector weights for DSEEX). #2 is DSEEX itself. #3 is ETF SCHD. Looking at beta and SD, it seems that DSEEX is 18-21% leveraged. This is not mentioned in the website info anywhere. I thought that through derivatives, it was aiming for 100% exposure to CAPE index but it is overshooting to 118-121%, based on PV data. It's not clear whether the 4 sectors in Portfolio 1 were held by DSEEX for the period being analyzed. This makes it more difficult to evaluate the comparison. Replacing the 4 tickers in Portfolio 1 with the ticker "CAPE", Shiller Cape ETN, provides an alternate comparison. If DSEEX were leveraged by 18-21% I would think it would be outperform by the leveraged amount. However that's not the case. DSEEX is simply more volatile than CAPE and has higher drawdowns. The performance of the CAPE ETN compares more favorably with SCHD. As I recall DSEEX and CAPE both invest in the most relatively undervalued market sectors based on Shiller CAPE with the strongest price momentum. The short term performance of both tickers may lag the markets as a sector and or style rotation occurs. That has been happening to the Momentum ETF - MTUM I suspect outperformance of momentum is likely to resume once the funds rebalance to the stronger performing sectors. Any performance lag may be temporary. |
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Post by yogibearbull on Jun 7, 2021 1:15:36 GMT
liftlock , some good points. DSEEX (and CAPE?) rebalance monthly, so yes, current positioning doesn't explain the past much. But its underperformance compared to funds mentioned in the OP was noted, so one has to start somewhere. I am also not impressed by its current positioning (that may have changed on 5/31/21), meaning that I doubt that it would lead to future outperformance - it is missing serious elements of both growth (healthcare) and cyclicals (industrials, consumer-discretionary, energy, materials). ETNs are different animals. They are just promises/IOUs of the sponsors based on the outcome of some index. They don't hold anything. Sponsors can stop creation, or redeem the ETN, when you least want that to happen. So, to me, ETNs are not genuine investment products, but are investment betting products similar to sports betting. But to compare DSEEX to ETN CAPE, I have added a column for CAPE and it doesn't make DSEEX look any better. 4 ETF Mix DSEEX CAPE SP500 SCHD Beta 0.98 1.18 1.01 1.00 0.97 (Beta for DSEEX is higher) R^2 96.17% 94.82% 98.11% 100% 90.54% SD 18.87% 22.81% 19.11% 18.79% 19.07% (SD for DSEEX is higher) S.R. 0.98 0.82 0.98 0.92 1.00 (Sharpe Ratio shows SCHD MUCH ahead of DSEEX)
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Post by paulr888 on Jun 7, 2021 4:44:22 GMT
Sorry Chang, I was the guy who convinced you to not sell when you wanted to.
I continue to hold and like DSEEX. DSEEX uses sector rotation and currently rotates between 1/2 Value and 1/2 Growth but still the cheapest sectors of the market. That is why Sherman calls it a Large Value fund but it could also be viewed as a Large Blend fund. And as a LB, it historically outperforms the S&P 500 except it did lag it in 2020 because the Collateral FI portfolio got hammered by the worst bond market in many years when spreads blew out due to indiscriminate selling. As a LV, it has beaten SCHD every year except this year probably due to the 1/2 Growth hold. This year DSEEX is closer to SPY (beats it a little) but lags SCHD.
I don't criticize you for selling if it is not living up to your standards and expectations for holding it.
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Post by chang on Jun 7, 2021 5:14:55 GMT
paulr888 No need to apologize: its performance post-2020 crash was excellent, and there is no question that I benefited from not selling it. But the charts (TR and RR) don't convince me that DSEEX is a no-brainer. I am trying to reduce expenses, and also reduce complexity and unknown risks. If the rotation to value takes hold and sustains itself, DSEEX may not regain its superiority for awhile. Also, I don't share your comfort with DL. So: this fund is up for review within my portfolio. All feedback gladly welcomed.
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Post by Norbert on Jun 7, 2021 6:52:02 GMT
DSEEX does have very good longer term CAGR, but it has also experienced significant downside volatility compared to the S&P 500.
Personally I like the CAPE- driven sector rotation strategy and wouldn't be concerned about a short period of underperformance compared to this or that fund.
I also don't see it as a black box, as its components and process are well documented.
However, DSEEX is effectively two funds in one. It holds a multi-sector bond portfolio plus it takes exposure to sector equities using derivatives. That's makes it challenging to classify in our portfolios. And if you're not a fan of multi-sector bond funds, well ...
Bottom line: Gundlach has delivered very good returns, but it's a complex fund that has seen big gains and declines for a combination of reasons. It's difficult to attribute its price behavior to the stock exposure vs. the bond holdings. Both the stock and bond components may be contributing to the find's returns as well as its risks.
So, yes, in that sense it's a black box.
N.
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Post by paulr888 on Jun 7, 2021 7:38:14 GMT
Ciao Norbert .... DSEEX collateral bond portfolio is a cousin to DBLSX which I use as my tier 2 liquidity fund (along with FJRLX and GILPX). Very diversified, global multi-sector. Short to intermediate duration (1-3 yrs) and higher quality holdings. A lot of securitized credit. Generates decent yield with goal to outperform cash and cover management fees and swap costs. These DoubleLine cousins are among my safest bond funds.
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Post by jcserc on Jun 7, 2021 13:10:57 GMT
I did sell it around April last year because I was holding it in a taxable account and gave me an opportunity to book a sizable loss. I immediately replaced it with other funds and, although it did rebound better than the replacements, I have not looked back as I did not like how it moved during those rough days.
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Post by Norbert on Jun 7, 2021 15:05:01 GMT
An argument in favor of holding DSEEX is the dual exposure to multi-asset bonds + equities. This is NOT a balanced fund (e.g. 60% stocks + 40% bonds). It's essentially 100% stocks + 100% bonds (ignoring the cost of the derivatives). That's a clever use of capital.
Logically you would expect high returns, and indeed they have been strong.
But, the strategy has resulted in considerable price volatility, plus it's not easy to grasp what's generating the results.
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Post by anitya on Jun 7, 2021 20:48:51 GMT
Fund creates equity exposure through index derivatives, not by holding any sector ETFs directly. The equity allocation is to 4 undervalued sectors (based on CAPE) that is changed monthly. The current sector allocations as of 4/30/21 is: Communication Services 24.78% Real Estate 25.47% Financials 25.23% Technology 24.52% Total 100.00% doublelinefunds.com/shiller-enhanced-cape/statistics/To understand DSEEX performance, one needs its monthly sector allocation history that exists somewhere but I only found the above as of 4/30/21. It is certainly not catching the cyclical bounce that other funds mentioned have done. I wonder how a strategy with 4 hot sectors, adjusted monthly, would have done. Stockcharts shows how S&P sector ETFs have done. LINKlatest disclosed CAPE ETN sectors- "Shiller Barclays CAPE™ US Core Sector Index Index Sector Weightings (as of 04/30/2021) Communication Services 25% Healthcare 25.00% Financials 25.00% Technology 25.00%" There are other sector rotation ETFs. |
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Post by chang on Jun 8, 2021 0:28:49 GMT
Everyone's feedback has been very helpful - many thanks. I am going to stand pat for another three months or so, and then review how things stand.
I didn't mention that I am already a LT holder of SCHD. I own both funds in roughly equal (and fairly chunky) amounts. So I am exposed to both of them equally now. I do want to reduce expenses, but obviously this takes a back seat to a confirmed performance differential. (I say that whimsically since no future performance differential can ever be confirmed, except between two funds that are identical apart from expenses.)
This is not an urgent decision; it can wait a few more months. Let's see how DSEEX performs through the 3rd quarter. I will try to remember to revisit this thread in October.
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Post by liftlock on Jun 8, 2021 3:23:04 GMT
liftlock , some good points. DSEEX (and CAPE?) rebalance monthly, so yes, current positioning doesn't explain the past much. But its underperformance compared to funds mentioned in the OP was noted, so one has to start somewhere. I am also not impressed by its current positioning (that may have changed on 5/31/21), meaning that I doubt that it would lead to future outperformance - it is missing serious elements of both growth (healthcare) and cyclicals (industrials, consumer-discretionary, energy, materials). ETNs are different animals. They are just promises/IOUs of the sponsors based on the outcome of some index. They don't hold anything. Sponsors can stop creation, or redeem the ETN, when you least want that to happen. So, to me, ETNs are not genuine investment products, but are investment betting products similar to sports betting. But to compare DSEEX to ETN CAPE, I have added a column for CAPE and it doesn't make DSEEX look any better. 4 ETF Mix DSEEX CAPE SP500 SCHD Beta 0.98 1.18 1.01 1.00 0.97 (Beta for DSEEX is higher) R^2 96.17% 94.82% 98.11% 100% 90.54% SD 18.87% 22.81% 19.11% 18.79% 19.07% (SD for DSEEX is higher) S.R. 0.98 0.82 0.98 0.92 1.00 (Sharpe Ratio shows SCHD MUCH ahead of DSEEX) YBB, Your points on ETNs being different animals are well taken. I have been reluctant to invest in them as one is dependent on the credit worthiness and skill of the fund sponsor in managing the derivative nature of the product. My investment in CAPE is the only ETN I have ever owned. I first learned about CAPE a year or two ago on one of the other forums. It subsequently showed up on an AAII fund screen as a small size fund that consistently outperformed. I heard Shiller speak about it on CNBC and decided to take a position in it. The strategy appeals to me as something that I could potentially hold for a long time, recognizing that there might be periods when it might lag. I had looked at DSEEX but I didn't understand the bond component and so I decided to stay away from it. I find the sector selection of CAPE and DSEEX to be a bit strange. I would never have picked Tech as being undervalued. However, as I recall CAPE uses a 10 Year look back period and the valuation comparisons are relative and not absolute. Apparently it's selecting the cheapest sectors relative to each sectors historical norms. While the re-balancing period is monthly, the look back period is so long that there may not be much month to month change in the sector selection. I have not studied this. Beyond that, I don't recall reading any thing that described the period being used to measure the momentum and so that aspect of CAPE / DSEEX is also hard to judge. Your comment about the ETN sponsor being able to stop the ETN creation / redemption when you least expect it reminds me of the Morningstar poster, was it ElLobo?, who invested heavily in SDYL, the 2x version of SDY. Imagine owning a 2x fund and taking the risk that it might stop trading in the middle of a large stock market correction. I believe SDYL stopped trading in fall of of 2020 when any losses were likely recovered. |
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Post by paulr888 on Jun 8, 2021 4:49:00 GMT
Chang .... As long as you plan to wait until Oct, you might mark your calendar for Oct 26 at 1:15pm PDT for CAPE webcast by Sherman. I think you are sleeping at that time, but replays generally within a week.
Tuesday June 8 at 1:15pm PDT is Total Return webcast by Gundlach. I think this is your bedtime as I mentioned. But you might enjoy first half on macro econ, stock, bond and commodities and more. Same thing on the replay.
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Post by chang on Jun 8, 2021 5:01:09 GMT
Chang .... As long as you plan to wait until Oct, you might mark your calendar for Oct 26 at 1:15pm PDT for CAPE webcast by Sherman....... Excellent idea - thanks for the heads-up. |
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Post by yogibearbull on Jun 8, 2021 13:04:16 GMT
In the new 11 GSCI sectors (MSCI & S&P), the top 5 in some now are:
Tech XLK: AAPL, MSFT, NVDA, V, MA
Communications XLC: FB, GOOGL/GOOG, TMUS, CHTR, ATVI
Consumer-Discretionary XLY: AMZN, TSLA, HD, MCD, NKE
As a company can be in one sector only, sometimes the GSCI selections are not obvious at the first glance. The so-called FAAMG are sort of distributed among XLK, XLC, XLY.
These GSCI sector definitions may impact Shiller's CAPE strategy that is on/off - 5 of 11 are selected by relative-CAPE and then 1 with weakest momentum is dropped, so the end result is 4 of 11 sectors monthly. This may explain why the CAPE-story sounds better than the results delivered.
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Post by anitya on Jun 8, 2021 17:39:08 GMT
liftlock , There is a stated liquidation date in 2022 for CAPE. Of course, the sponsor can liquidate anytime at its own discretion. All disclosed on sponsor website. I rolled my proceeds from DSEEX into CAPE but sold only after a short time as I no longer wanted to monitor for any surprise redemptions or illiquidity and discount as we get closer to liquidation time. Otherwise, it is as good as any. Please post if you ever see an ETF based on CAPE strategy - not sure why there is not one already as it can pull in AUM in Billions. ETNs as wrappers have not been very successful in gathering AUMs for obvious reasons. A
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Post by liftlock on Jun 11, 2021 19:32:22 GMT
liftlock , There is a stated liquidation date in 2022 for CAPE. Of course, the sponsor can liquidate anytime at its own discretion. All disclosed on sponsor website. I rolled my proceeds from DSEEX into CAPE but sold only after a short time as I no longer wanted to monitor for any surprise redemptions or illiquidity and discount as we get closer to liquidation time. Otherwise, it is as good as any. Please post if you ever see an ETF based on CAPE strategy - not sure why there is not one already as it can pull in AUM in Billions. ETNs as wrappers have not been very successful in gathering AUMs for obvious reasons. A A. Yes, I am aware of the planned liquidation. It will be interesting to see what happens at maturity and whether CAPE be replaced with another 10 year offering. CAPE just had a 10 for 1 stock split which reduced the price to the $25 range. I am hoping that is a good sign that the sponsor Barclays doesn't plan to do away with it. In looking at the DoubleLine docs, it appears that Barclays has licensed the name or the strategy to them. I have searched far a wide for some other version of CAPE and haven't found one. I will let you know if I do. I am considering putting some money in the international CAPE, Ticker DLEUX, as its currently outperforming the domestic CAPE, DSEEX. |
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Post by liftlock on Jun 11, 2021 19:44:16 GMT
In the new 11 GSCI sectors (MSCI & S&P), the top 5 in some now are: Tech XLK: AAPL, MSFT, NVDA, V, MA Communications XLC: FB, GOOGL/GOOG, TMUS, CHTR, ATVI Consumer-Discretionary XLY: AMZN, TSLA, HD, MCD, NKE As a company can be in one sector only, sometimes the GSCI selections are not obvious at the first glance. The so-called FAAMG are sort of distributed among XLK, XLC, XLY. These GSCI sector definitions may impact Shiller's CAPE strategy that is on/off - 5 of 11 are selected by relative-CAPE and then 1 with weakest momentum is dropped, so the end result is 4 of 11 sectors monthly. This may explain why the CAPE-story sounds better than the results delivered. YBB, Thanks for the sector info. I am now looking at the European CAPE as Europe just emerged as the top rated relative strength sector by last weeks Decision Moose. It's recently outperforming the domestic CAPE. As of March 31 European CAPE had a 25% allocation to Health Care which has since been replaced by Energy. This makes sense as Energy has been strong while Health Care has been lagging. Current European CAPE allocation as of 4/30/21: Energy 24.50% Consumer Staples 25.18% Consumer Discretionary 25.17% Communication Services 25.15% |
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Post by richardsok on Jun 11, 2021 20:41:23 GMT
R48 -- Didn't you mention a couple of months ago you had bought MDT ?
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Post by chang on Oct 8, 2021 9:09:54 GMT
Everyone's feedback has been very helpful - many thanks. I am going to stand pat for another three months or so, and then review how things stand. I didn't mention that I am already a LT holder of SCHD. I own both funds in roughly equal (and fairly chunky) amounts. So I am exposed to both of them equally now. I do want to reduce expenses, but obviously this takes a back seat to a confirmed performance differential. (I say that whimsically since no future performance differential can ever be confirmed, except between two funds that are identical apart from expenses.) This is not an urgent decision; it can wait a few more months. Let's see how DSEEX performs through the 3rd quarter. I will try to remember to revisit this thread in October. Well, it's October. DSEEX has performed absolutely neck-and-neck with FXAIX (S&P500) over 3M, 6M and 9M (YTD) -- see the charts below. This means that the sector valuation analysis, rotation strategy, and bond income has delivered absolutely no value whatsoever (beyond making up for the difference in expense ratio). In fact, since the Nasdaq/Growth has been the market laggard, I conclude that DSEEX is actually failing slightly, since it should really be beating the S&P500. Is it time to move the money into FXAIX?    |
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Post by chang on Oct 8, 2021 9:20:16 GMT
An argument in favor of holding DSEEX is the dual exposure to multi-asset bonds + equities. This is NOT a balanced fund (e.g. 60% stocks + 40% bonds). It's essentially 100% stocks + 100% bonds (ignoring the cost of the derivatives). That's a clever use of capital. Logically you would expect high returns, and indeed they have been strong. But, the strategy has resulted in considerable price volatility, plus it's not easy to grasp what's generating the results. : volatility has been more or less the same as the S&P500 this year, but so have the results. I am willing to overlook March 2020 as an unrepeatable black swan. But so far in 2021, I am paying more in fees and taking some additional complexity risk, without compensation. The strategy does not seem to be unlocking significant value, at least this year. I was hoping for more evidence of alpha to assuage the concerns I aired earlier, but that hasn't materialized yet. |
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Post by chang on May 7, 2022 20:43:06 GMT
I actually sold all DSEEX on October 8th, 2021 (same day as the last post above; a parallel post on the BSW thread is easily searchable). That was one of my better moves. It hasn’t done well, I assume because of its bonds.
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