Roger Nusbaum submits: My post the other day on the two Lazard funds that use currency swaps to access emerging market currencies got me thinking about some of the more interesting products (that I am aware of) that allow do-it-yourselfers to access some interesting markets and strategies. While none these things may be appropriate or worthwhile for you, they are interesting and perhaps with some very diligent thinking, some sort of integrated alternative strategy could be woven together.
David Swensen has been very popular on the TV rounds of late and has been very public about the Yale Endowment allocation which has a very heavy weighting to various hedge fund strategies. I can't cover every fund that could be thought of in this way but here a couple with a brief description:
Old Mutual Claymore Long Short Fund (OLA): This fund listed in August. Its IPO premium has eroded steadily and the fund now has a discount of 11.5%. The NAV has barely budged. Its probably too short of time frame to know if the strategy is working but it has not been horrible so far. The fund is about to pay its first dividend this week. If the dividend can be maintained, the fund yields 9.5% based on its current market price. As of November 30 the fund was long 120% and short 20%. The list of shorts included a couple of energy stocks and a few perpetual underperformers. Since the fund came out, the NAV is down about 0.9%. In that same time the S+P 500 is up about 0.6%. The fund is not a bust but it has yet to prove itself. If you were going to hire someone to to run a long short strategy they might have similar results but probably not have paid the big dividend.
Rydex Weakening Dollar (MUTF:RYWBX). This fund goes up when the dollar goes down. It is leveraged to capture twice the effect. It is tied to the dollar index which measures the greenback against a basket of currencies. There are many ways to play the dollar up or down and some sort of falling dollar product, or something else that hedges the dollar, could become more important in the next few years, or sooner. One little quirk about the Rydex fund is that it was down on Friday. OK, but why was its counterpart, the Rydex Strong Dollar Fund (MUTF:RYSBX), also down? I don't know the answer.
Any of the current or coming commodity ETFs, and other products, allow for a purer bet, or hedge, on that asset class. Again I think this will continue to be very important for a while to come.
I have been saying from the beginning of this blog that investment products will evolve to offer do-it-yourselfers the chance to capture parts of the market that have been previously unavailable. This is good.
A little later I will write a follow up post to this. I got the chance to speak with someone who is trying to decide whether to manage his own portfolio or get some help. This conversation got me to thinking that there must be other people wondering the same thing.
The follow up will explore what I think is needed for this. Just because there are different types of products available does not mean that managing your own portfolio is easier.