Getting Wellington Fund returns with less risk?

[steadyeddy]

The graph  compares a 50/50 allocation of VTI/TLT [total US stock market + 20 Yr US Treasuries] to Wellington Fund.

Results seem surprising.. Nearly identical performance.

Less Drawdown
Better Sharpe/Sortino ratios
Less  Market Correlation

Similar CAGR & similar SD - well close enough over 19 years 

Could this repeat into the future? That is the million dollar question. Your thoughts welcome!

[ignatz]

Well, what's the equity/fixed ratio been on average for Wellington over that time frame. Probably 60 to 65 equity and 35 to 40 fixed?

Presumably, Wellington's slightly more equity "advantage" has been offset by the bond tailwind over that same time frame. What are the chances that bond tailwind will persist over the next 5, 10, or 20 years?

And Wellington's so called value tilt may have hurt it somewhat compared to VTI in the last 10 or 15 years of "growth" stocks.

I've seen a lot of chatter about trying to replicate Wellington over the years, but can't recall the conclusions reached.

[steadyeddy]

Oct 7, 2021 0:51:15 GMT ignatz said:

Well, what's the equity/fixed ratio been on average for Wellington over that time frame. Probably 60 to 65 equity and 35 to 40 fixed?

Presumably, Wellington's slightly more equity "advantage" has been offset by the bond tailwind over that same time frame. What are the chances that bond tailwind will persist over the next 5, 10, or 20 years?

And Wellington's so called value tilt may have hurt it somewhat compared to VTI in the last 10 or 15 years of "growth" stocks.

I've seen a lot of chatter about trying to replicate Wellington over the years, but can't recall the conclusions reached.

ignatz, what I see is that TLT worked as a better ballast to stocks than the IT corp bonds that Wellington held - and I presume that attribute is likely to remain into the future as well.

Given that the sovereign US debt is so high, the odds of interest rates running away are low (just my humble opinion) - lest the Fed will step in to do QE or whatever.

[roi2020]

The Wellington Fund hews closely to a 65% equity, 35% fixed income allocation.
The fund's equity holdings tended to be in the value category until recently.
As ignatz inferred, value has underperformed blend/growth for more than a decade.
After a manager change in 2020, the fund's equity holdings shifted to the blend category.
Most core, core-plus, and corp bond funds should generate higher returns than TLT based on current conditions.
I seriously doubt future performance for the 50% VTI / 50% TLT portfolio will look as favorable vis-a-vis the Wellington Fund.

[ignatz]

There is no substitute for being lucky about time periods:

Compound Annual Growth Rates:

2000 through 2002, 3 years:

Oakmark Equity and Income (OAKBX) historically around 60 to 65 equity; 11.46 (10k becomes 13487)

Wellington; 2.31
Vanguard Total US/Total bond 70/30; negative 7.18
Ditto, 60/40; negative 4.81
SP 500; negative 14.55 (10k becomes 6239)

2000 through 2020; 21 years

Oakmark Equity and Income 8.78

Wellington; 8.13
70/30 Vanguard Total Market/Total Bond: 6.77
60/40; 6.62
SP 500; 6.61

For last 10 years, 2011 to 2020;

SP 500; 13.89
70/30; 10.82
Wellington; 9.86
60/40; 9.84
Oakmark Equity and Income 7.70

It seems that Wellington’s outperformance is mostly due to its superiority in the 3 years from 2000 to 2002. Even moreso for OAKBX. “Value” had its day, but has waned a lot in recent years. This shows the long term advantage of minimizing losses in major declines.

Wellington has also had circa 10 percent in foreign stocks in recent years. Not sure if that was true in 2000 or 2005, but foreign has been a drag for a long time also.