Chart of the Week: Are Managers Preparing to Repel Down the Fiscal Cliff?

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With 5 days until deadline, are there any indications mutual fund managers are systematically acting on the broadcasted hysteria and preparing their portfolios for a less sudden descent down an ominous Fiscal Cliff (or maybe just locking-in handsome double digit market gains YTD)?[1] Or are they broadly in the market, sanguine about the prospects for a deal (or perhaps just captivated by a continued rising QE-fueled tide and promise of further inventive “Gangnam Style” monetary maneuvers?

In an attempt to look beyond daily market activity we surveilled the mutual fund universe in our monitoring templates to see if our returns-based models perceived changes in defensive behavior, in this case measured by conservative factor exposures of cash and bonds, over a three month period (Y-axis as of 12.21.12, X-axis 90 days prior).[2]

As the above chart shows, managers do appear to be adjusting one way or the other, i.e. changing their defensive exposure. But all the Cliff ballyhoo does not exactly match the narrow, albeit growing, majority of managers with a perceived increasingly defensive tilt (as the rising post-election market and relatively muted volatility would indicate). We’ll see if the last trading days of the year show a more pronounced systematic shift as the Cliff approaches.

The model does pick up a number of outliers on both sides. Amongst those funds behaving more defensive, we count Matthew 25 (MXXVX), Clipper Fund (CFIMX), Fidelity Advisor Capital Development O (FDETX), Federated Strategic Value Dividend A (SVAAX). Of those behaving more ‘in the market’, we note both Yacktman Funds (YAFFX and YACKX).

To see our prior look at QE3’s winners, click here.

For more information on MPI Stylus Pro and how you can utilize its applications in a like manner, please contact us.


[1] MPI conducts performance-based analyses and, beyond any public information, does not claim to know or insinuate what the actual strategy, positions or holdings of the funds discussed are, nor are we commenting on the quality or merits of the strategies. This analysis is purely returns-based and does not reflect actual holdings. Deviations between our analysis and the actual holdings and/or management decisions made by funds are expected and inherent in any quantitative analysis. MPI makes no warranties or guarantees as to the accuracy of this statistical analysis, nor does it take any responsibility for investment decisions made by any parties based on this analysis.

[2] Using Daily NAV data of entire Lipper Large and multi-cap fund universe in our patented Dynamic Style Analysis (DSA) model.

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