MXF is more risky clearly, the question is really about alpha after all. Adding EWW or MXF as diversification to EEMV seems wise portfolio management to me. Bought on one of those days or periods when the market is in a swoon may present a very alpha rich opportunity.
I state the NAV performance of the fund in my original comment, perhaps you misunderstood.. If you focus on that issue to determine the quality of the investment and are savvy enough to buy at discounts to NAV.. I believe a rational case for investment can be made. The funds are not identical in performance or composition as you stated.. but are similar
My take is that MXF(the NAV) has a higher beta. MS style boxes paint MXF as Large Growth, EWW as Large blend. The MXF NAV is down more in down markets, it's NAV is up more in up markets. There is currency risk. Perhaps you would entertain a fund with higher beta in an up and growing market?
I hope we understand both MXF and EWW better, as well as each others point of view and perspective. I am not fearful of the market pricing risk (discount/premium, I often profit from monitoring same.
"In an nutshell the two funds are practically identical, except that you get to pay an extra 1% in expenses each year for MXF."
Just the facts here. MXF's NAV has significantly outperformed EWW's over the past two years.. (data from Morningstar). I would be willing to pay an extra 1% for 30% to 100% better performance.
As for the premiums and discounts to NAV's, that is the magic sauce of profiting from the "yield chasers" perhaps as well as market sentiment. Were you perhaps a yield chaser in a former life? I like the opportunity. I will copy from MXF's annual report a little here on their concern, and apparent success at eliminating the discount...
---
Discount Reduction Efforts The Fund continues to maintain and implement the following strategies as part of its ongoing discount reduction efforts:
i) Under the Fund’s MDP, the Fund pays quarterly distributions at an annual rate of 10% of the Fund’s NAV per share recorded on the last business day of the previous calendar year. See details below.
ii) The Fund has in place an open market share repurchase policy. See details below.
iii) In an effort to provide investors with more timely information about the Fund’s assets, since March 2010, the Fund has been publishing, during the first five business days of each month, its portfolio of investments as part of its Monthly Summary Report, which is filed with the SEC on Form 8K and is also available at the Fund’s website. Please see the section captioned “Investors Relations; Reports to Stockholders” below for more information."
----
EWW is an excellent investment as is MXF. Why a rational investor would take additional risk is another topic entirely. Your prognostication of a sudden collapse of 15% (at some time) and alluding to being the cause of the effect in CH premium elimination last year.. is yet another topic..
I bought MXF below NAV in mid-April, was up dramatically today.. (again at a premium today. So much for the hedge..) Buy low..
The basis of your assertion regarding stock selection appears valid, the basis of your criticisim of EEMV beyond this point does not appear rational to me...
you commented..
"EEMV's tracking error was higher than 70% of ALL (PLACE EMPHASIS ON ALL) emerging market mutual funds (tracking error relative to MSCI EM Index). Details on each of the funds in the chart are out of the scope of this article (and yes, many of those funds sport a lower tracking error). " ... I fail to see how a fund that is designed as a subset of the MCSI EM Index with an emphasis in selection for low volatility should be discounted because it does not track an index that it is not designed to track! The tracking error to the index that the find is designed to track is actually lower than the tracking error of EEM or VWO to the MCSI EM index (.6 for EEMV, .7 for EEM, .7 for VWO).
Many of the funds you chose to compare EEMV are invested in "frontier markets", wikepedia defines frontier markets as follows:
Frontier markets are a sub-set of emerging markets, which have market capitalizations that are small and/or low annual turnover and/or market restrictions unsuitable for inclusion in the larger EM indexes but nonetheless "demonstrate a relative openness to and accessibility for foreign investors" and are not under "extreme economic and political instability.
As you commented in an earlier reply.. "Clearly, EEMV has a strong preference for the higher yielding assets, especially as you look at yields WITHIN THE CATEGORY."
Your analysis while intricate, is in essence faulting EEMV for failing to track an index that it was not designed to track and also for being relatively more volatile to many investments that are focused on a different segment of the market. In comparing the volatility of EEMV to EEM and VWO, the evidence is clear that EEMV does indeed achieve the stated goal of lowering volatility with an investment emphasis in the "emerging markets". 1 year standard deviations as follows (EEM 15.54, VWO 15.45, EEMV 11.66) .
While the selection process position you advocate has some merit, the following statement bewilders me... "
The fund's performance was supported due to investor's strong preference for higher yielding assets (value oriented stocks dominate this theme). The low-volatility, high dividend names, which this ETF is very exposed to have helped to support its return."
The annualized yield of this ETF is less than 2%, this is not SDIV, which does almost what you allege EEMV is doing is selecting securities.
Why Reinvesting Your Dividends Matters [View article]
There are so many ways to approach this dividend and dividend growth investing strategy. I have a mix of approaches for different investment types. With the mid and large cap dividend growth stocks (LMT, GE, BGS, PM), I do not reinvest the dividends but wait for a dividend threshold to reinvest (e.g. 4% for BGS and PM, 5% for LMT).
Other income stream investments like REITS ond BDCs I do reinvest the monthly dividends (ARCP, PSEC, WSR, EPR). Every month the income increases. With ARCP and PSEC, the monthly dividend increases on a quarterly or monthly basis as well.
The Rodney Dangerfield Of Closed-End Funds [View article]
I am long HTD in my accounts and a couple managed accounts. This CEF has a long history of solid performance, though last time l looked at the holdings financials were a much smaller portion..
HTD is outperforming the S&P500 year to date (excluding dividends) 6.32% to 6.0%.
I believe that I read a great article on HTD by an author here some time ago and did some research.. This is a supportive community here :)
Monthly Pay Dividend Dogs: December Stocks Vs. Funds And Trusts [View article]
Once again, thanks for you analysis and efforts. I love the monthly pay dividend stocks, been in many and hold several CEF's and a few stocks that distribute dividends monthly.
I sold my position in ARR as it looks the distribution is under continuing pressure (as well as the stock price); currently holding PSEC, WSR and recently added ARCP. Both (ARCP & PSEC) of these securities have a history of increasing their dividends, which along with the monthly distributions are part of my investment thesis.
Do you think ARCP may be a valued addition to your analysis?
10 High-Yielding Dividends In Unique Industries [View article]
VGR and CLF have been in and out of my portfolio a few times, thinking seriously about selling some jan puts on CLF at the moment, if China continues to expand, Clf will leverage off that.. a very cyclical stock
Buy LinnCo Shares For Linn Energy Based 7.3% Dividend [View article]
Kinder and (KMR) and Enbridge (EEQ) have shares that avoid the tax complications in a somewhat less elegant fashion, I understand they do not issue K-1's either
High-Yield Ex-Dividend Opportunities To Consider And Avoid [View article]
"...The dividend has held steady around $0.10 per share since then, but such a high current yield dividend growth is not a requirement."
I'm holding PSEC and was in the stock through last years correction. The dividend actually has been increasing incrementally for over a year at a rate of $.000025/month, from 0.101325 in the October '11 dividend to 0.10165 for the October '12 dividend.
Not a requirement, but certainly a very shareholder friendly dividend policy. So wish I had scooped up (more) shares at last year's lows.
I must admit to struggling with the premise of this vision ... "the current market's ebb and flows should mimic that of 1987"
I did a little research on what was happening in the financial markets in 1987 and as a ten year anniversary article on the events summarizes...
"Although investors stand about today, white-knuckled and awaiting the next crash, it remains obvious that many of the principal drivers leading to the 1987 crash are not present today. The rise in bond yields, crude oil prices, and the trade deficit combined with the collapse of the dollar and general investor confidence all provided the context for the collapse in stocks.... People who talk of stock market crashes, major drops on the scale of 1987, as if they just happen are ignoring the facts. "
Though I do see a potential reward in investing in VXX call options at this time, (with the VXX at mufti-year lows) rather than closing non-extant short positions.
Short of nuclear missiles flying in middle eastern skies, I do not see a catalyst that would engender a record sell off as you surmise. Perhaps the "something big" will be a coordinated easing of monetary policy by EM and European policy makers?
A Great Hedge For Mexico Exposure [View article]
A Great Hedge For Mexico Exposure [View article]
My take is that MXF(the NAV) has a higher beta. MS style boxes paint MXF as Large Growth, EWW as Large blend. The MXF NAV is down more in down markets, it's NAV is up more in up markets. There is currency risk. Perhaps you would entertain a fund with higher beta in an up and growing market?
I hope we understand both MXF and EWW better, as well as each others point of view and perspective. I am not fearful of the market pricing risk (discount/premium, I often profit from monitoring same.
A Great Hedge For Mexico Exposure [View article]
Just the facts here. MXF's NAV has significantly outperformed EWW's over the past two years.. (data from Morningstar). I would be willing to pay an extra 1% for 30% to 100% better performance.
............... 2012 ........2013 (04/30)
EWW......31.25%......4...
MXF....... 40.60%......8.40%...
As for the premiums and discounts to NAV's, that is the magic sauce of profiting from the "yield chasers" perhaps as well as market sentiment. Were you perhaps a yield chaser in a former life? I like the opportunity. I will copy from MXF's annual report a little here on their concern, and apparent success at eliminating the discount...
---
Discount Reduction Efforts
The Fund continues to maintain and implement the following strategies as part of its ongoing discount reduction efforts:
i) Under the Fund’s MDP, the Fund pays quarterly distributions at an annual rate of 10% of the Fund’s NAV per share recorded on the last business day of the previous calendar year. See details below.
ii) The Fund has in place an open market share repurchase policy. See details below.
iii) In an effort to provide investors with more timely information about the Fund’s assets, since March 2010, the Fund has been publishing, during the first five business days of each month, its portfolio of investments as part of its Monthly Summary Report, which is filed with the SEC on Form 8K and is also available at the Fund’s website. Please see the section captioned “Investors Relations; Reports to Stockholders” below for more information."
----
EWW is an excellent investment as is MXF. Why a rational investor would take additional risk is another topic entirely. Your prognostication of a sudden collapse of 15% (at some time) and alluding to being the cause of the effect in CH premium elimination last year.. is yet another topic..
I bought MXF below NAV in mid-April, was up dramatically today.. (again at a premium today. So much for the hedge..) Buy low..
Overlooked Drawbacks To iShares MSCI Emerging Market Minimum Volatility ETF [View article]
The basis of your assertion regarding stock selection appears valid, the basis of your criticisim of EEMV beyond this point does not appear rational to me...
you commented..
"EEMV's tracking error was higher than 70% of ALL (PLACE EMPHASIS ON ALL) emerging market mutual funds (tracking error relative to MSCI EM Index). Details on each of the funds in the chart are out of the scope of this article (and yes, many of those funds sport a lower tracking error). "
...
I fail to see how a fund that is designed as a subset of the MCSI EM Index with an emphasis in selection for low volatility should be discounted because it does not track an index that it is not designed to track! The tracking error to the index that the find is designed to track is actually lower than the tracking error of EEM or VWO to the MCSI EM index (.6 for EEMV, .7 for EEM, .7 for VWO).
Many of the funds you chose to compare EEMV are invested in "frontier markets", wikepedia defines frontier markets as follows:
Frontier markets are a sub-set of emerging markets, which have market capitalizations that are small and/or low annual turnover and/or market restrictions unsuitable for inclusion in the larger EM indexes but nonetheless "demonstrate a relative openness to and accessibility for foreign investors" and are not under "extreme economic and political instability.
As you commented in an earlier reply.. "Clearly, EEMV has a strong preference for the higher yielding assets, especially as you look at yields WITHIN THE CATEGORY."
Your analysis while intricate, is in essence faulting EEMV for failing to track an index that it was not designed to track and also for being relatively more volatile to many investments that are focused on a different segment of the market. In comparing the volatility of EEMV to EEM and VWO, the evidence is clear that EEMV does indeed achieve the stated goal of lowering volatility with an investment emphasis in the "emerging markets". 1 year standard deviations as follows (EEM 15.54, VWO 15.45, EEMV 11.66) .
Source for all data: Fidelity
Overlooked Drawbacks To iShares MSCI Emerging Market Minimum Volatility ETF [View article]
The fund's performance was supported due to investor's strong preference for higher yielding assets (value oriented stocks dominate this theme). The low-volatility, high dividend names, which this ETF is very exposed to have helped to support its return."
The annualized yield of this ETF is less than 2%, this is not SDIV, which does almost what you allege EEMV is doing is selecting securities.
4 Dividend Achievers 50 Dogs Hound 7.3% To 25.7% Net Gains In April [View article]
"VGR - has had the same dividend since 2009 and the same 5% stock award in September for a long time now. "
VGR's quarterly dividend payments have increased annually in the third or fourth quarter each year as follows:
2012 - 0.40
2011 - 0.380952
2010 - 0.362812
2009 - 0.345535 (Q3)
2008 - 0.329081
2007 - 0.313411
2006 - 0.298486
2005 - 0.284273 (Q3)
2004 - 0.270736 (Q3)
2003 - 0.257844 (Q3)
2002 - 0.245565
Why Reinvesting Your Dividends Matters [View article]
Other income stream investments like REITS ond BDCs I do reinvest the monthly dividends (ARCP, PSEC, WSR, EPR). Every month the income increases. With ARCP and PSEC, the monthly dividend increases on a quarterly or monthly basis as well.
The Rodney Dangerfield Of Closed-End Funds [View article]
HTD is outperforming the S&P500 year to date (excluding dividends) 6.32% to 6.0%.
I believe that I read a great article on HTD by an author here some time ago and did some research.. This is a supportive community here :)
Monthly Pay Dividend Dogs: December Stocks Vs. Funds And Trusts [View article]
I sold my position in ARR as it looks the distribution is under continuing pressure (as well as the stock price); currently holding PSEC, WSR and recently added ARCP. Both (ARCP & PSEC) of these securities have a history of increasing their dividends, which along with the monthly distributions are part of my investment thesis.
Do you think ARCP may be a valued addition to your analysis?
10 High-Yielding Dividends In Unique Industries [View article]
More To Vanguard Emerging Markets ETF's Asset Loss Than Meets The Eye [View article]
http://onforb.es/SBwFb7
Buy LinnCo Shares For Linn Energy Based 7.3% Dividend [View article]
Buy LinnCo Shares For Linn Energy Based 7.3% Dividend [View article]
High-Yield Ex-Dividend Opportunities To Consider And Avoid [View article]
I'm holding PSEC and was in the stock through last years correction. The dividend actually has been increasing incrementally for over a year at a rate of $.000025/month, from 0.101325 in the October '11 dividend to 0.10165 for the October '12 dividend.
Not a requirement, but certainly a very shareholder friendly dividend policy. So wish I had scooped up (more) shares at last year's lows.
Betting On Volatility [View article]
I did a little research on what was happening in the financial markets in 1987 and as a ten year anniversary article on the events summarizes...
"Although investors stand about today, white-knuckled and awaiting the next crash, it remains obvious that many of the principal drivers leading to the 1987 crash are not present today. The rise in bond yields, crude oil prices, and the trade deficit combined with the collapse of the dollar and general investor confidence all provided the context for the collapse in stocks.... People who talk of stock market crashes, major drops on the scale of 1987, as if they just happen are ignoring the facts. "
http://bit.ly/NTaQiY
Though I do see a potential reward in investing in VXX call options at this time, (with the VXX at mufti-year lows) rather than closing non-extant short positions.
Short of nuclear missiles flying in middle eastern skies, I do not see a catalyst that would engender a record sell off as you surmise. Perhaps the "something big" will be a coordinated easing of monetary policy by EM and European policy makers?