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Summary

Mutual, Closed, and Exchange Traded Funds are compared for Enhanced, Active and Passive management styles for the past 18 months and during the 2007 recession.

A ranking system is used to evaluate nearly 3,000 funds based upon Risk, Risk Adjusted Return, Yield, 3 and 10 month trends, and P/E Ratio (for Equity).

Top performing funds are listed using these classifications and ratings with Fidelity, Vanguard and Great Owl funds highlighted.

Introduction

  • Actively managed funds have been a significant part of our history going back to our start in 1975. In fact, our first 11 mutual funds were actively managed.
  • The numbers tell the story of how we've become one of the largest managers of actively managed funds in the world. Today, we manage more than $1.3 trillion in active assets.
  • Over the past 10 years, 88% of our actively managed funds performed better than their peer-group averages.

- Vanguard Website

A quick screen of Vanguards Investor funds shows 69 actively managed and 49 index funds. What? Vanguard is known for its index funds, but has more managed investor funds than index?

My thanks goes out to Seeking Alpha Member, SC2, for forwarding this article, Morningstar's Active/Passive Barometer, to me which points out that actively managed funds perform worse than their peers:

  • Just 38% of active U.S. stock funds survived and outperformed their average passive peer in 2018, down from 46% in 2017...
  • In general, actively managed funds have failed to survive and beat their benchmarks, especially over longer time horizons; only 24% of all active funds topped their average passive rival over the 10-year period ended December 2018...
  • The cheapest funds succeeded about twice as often as the priciest funds (32.5% success rate versus 17.2% success rate) over the 10-year period ended Dec. 31, 2018. This not only reflects cost advantages but also differences in survival, as about two thirds of the cheapest funds survived, whereas only around half of the most expensive did so.

- Morningstar

Why buy actively managed funds when they underperform passive funds over the long term? Aren't managed funds supposed to outperform passive funds during recessions? Julia Butler at The Fiduciary Group (in 2014) answers these questions:

The [following] chart is divided horizontally into quartiles. If the black dot is in the top quartile, it means that the passively managed fund did better than 75% or more of the actively managed funds on a rolling 3-year basis. If the black dot is in the third quartile (falling between the horizontal lines marked 50%-75%), it means that the passive fund's performance was below more than half of the actively managed funds in this category. What is interesting is that over a longer period of time (more than 30 years), it's easy to see that in some market cycles the passive strategy outperformed most active strategies, and in other market cycles, the passive strategy underperformed most active strategies.

- Active vs. Passive Mutual Funds | The Fiduciary Group, Julia Butler

Chart #1: Active versus Passive Fund Performance

For this article, I extracted about a thousand US Equity funds in existence during the 2007 bear market and a second data set from the past 18 months, broken out by enhanced, managed and index strategies classifications along with the Great Owl Funds from Mutual Fund Observer with the goal of evaluating them for risk and risk adjusted returns.

Definitions

Let's begin with a few definitions of terms used in this article.

Enhanced Strategy:

Infers a fund's use of leverage or hedging, or non-traditional holdings. Such funds do not comprise long-only portfolios of traditional holdings in stocks, bonds, or cash. Lipper's database does not include an explicit "short" or hedged allocation, unfortunately; therefore, the method generally used to infer Enhanced Strategy is if the "Other" portfolio allocation exceeds 1%, or if the allocation of equity, bonds, or cash exceeds 101% or is below -1%. By default, funds with the following SubTypes are flagged as having Enhanced Strategy: Trading Funds, Alternative Funds, and Commodities.

- Mutual Fund Observer

Ulcer Index: The Ulcer Index was developed by Peter G. Martin in 1987 to measure the depth and duration of drawdowns from earlier highs.

The greater a drawdown in value, and the longer it takes to recover to earlier highs, the higher the UI [Ulcer Index]. Technically, it is the square root of the mean of the squared percentage drawdowns in value. The squaring effect penalizes large drawdowns proportionately more than small drawdowns (the SD calculation also uses squaring).

- Mutual Fund Observer

Martin Ratio: The Sharpe Ratio is the risk free return divided by the volatility (standard deviation). The Sortino Ratio is similar except that it uses the downside deviation. The Martin Ratio is similar to the Sharpe and Sortino Ratios except that it uses the Ulcer Index instead of standard deviation.

Great Owl Fund: Mutual Fund Observer introduced the Great Owl rating system in 2013. These funds have consistently delivered top quintile risk-adjusted returns (based on Martin Ratio) in their categories.

2007 Bear Market Performance

Table #1 contains the Enhanced, Managed and Index Funds with a U.S. equity objective broken out by Mutual, Exchange Traded, and Closed End Funds. The majority of the Enhanced Funds are mutual funds. The Martin Ratio is similar for each of the categories, which infers that, to improve performance during a bear market, an investor should reduce risk over seeking funds that outperform for the same level of risk. Another note is that the gap in expenses has narrowed considerably.

Table #1: 2007 Bear Market Funds

U. S. Equity
Count Enhanced Managed Index Great Owls
Mutual Funds 240 678 61 31
Exchange Traded Funds 7 1 107 6
Closed End Funds 26 19 2 0
Total 273 698 170 37
Martin Ratio Enhanced Managed Index Great Owls
Mutual Funds -1.58 -1.58 -1.62 -1.63
Exchange Traded Funds -1.53 -1.61 -1.62 -1.63
Closed End Funds -1.62 -1.64 -1.55
Average -1.58 -1.58 -1.62 -1.63
Expenses Enhanced Managed Index Great Owls
Mutual Funds 0.63 0.85 0.15 0.63
Exchange Traded Funds 0.38 0.38 0.13 0.09

Source: Created by the Author based on Mutual Fund Observer

Chart #2 is the annualized return versus Ulcer Index (Risk) for the Managed Funds. The risk adjusted return was in a narrow band between -1.4 and -1.8. It also shows that higher risk funds tended to do slightly better which at first does not make sense, but upon further investigation is due to growth funds with had higher risk but slightly less negative returns over the 16-month period.

Chart #2: 2007 Bear Market US Equity Martin Ratio vs Ulcer Index

Source: Created by the Author based on Mutual Fund Observer

Chart #3 is a more important view which shows that the less risk (Ulcer Index) you take during a recession, the less you lose. No kidding! The remainder of this section focuses on the funds with an Ulcer Index less than 30.

Chart #3: 2007 Bear Market US Equity Annualized Return vs Ulcer Index

Source: Created by the Author based on Mutual Fund Observer

Table #2 shows the risk (Ulcer Index) of US Equity funds during the November 2007 to February 2009 bear market. Lowest risk funds are at the top, and highest risk are at the bottom. US Equity fund categories with the least risk were Specialized Diversified Equity, Options Arbitrage/Strategies, Equity Income, and Large Cap Core, while those with the highest risk were growth and value funds.

Table #2: 2007 Bear Market Fund Ulcer Index

Source: Created by the Author based on Mutual Fund Observer

Table #3 contains some of the best performing U.S. Equity Funds during the 2007 bear market. They had negative returns but much lower than the average. The funds highlighted in light blue are closed end funds.

Table #3: 2007 Bear Market Fund Top Ranked US Equity Funds

Symbol Name LipperCategory APR MAXDD Ulcer Martin
ETJ Eaton Vance Risk-Mngd Div Eq Inc Opts Arbtrg/Strtgies (4.4) (10.0) 4.2 (1.4)
RBCGX Reynolds Blue Chip Growth Multi-Cap Growth (5.8) (7.7) 5.3 (1.4)
ICMAX Intrepid Endurance Small-Cap Value (12.7) (18.6) 7.7 (1.9)
MLSCX Aberdeen Fcsd US Eq Large-Cap Core (11.7) (15.5) 8.8 (1.5)
EQS Equus Total Return Diversified Equity (2.0) (23.7) 8.9 (0.4)
PVFIX Pinnacle Value Small-Cap Core (19.2) (24.8) 11.9 (1.7)
BRBPX Bridgeway Mngd Vol Opts Arbtrg/Strtgies (18.7) (24.1) 12.4 (1.6)
BHBFX Madison Div Inc Equity Income (23.3) (29.8) 14.3 (1.7)
BIF Boulder Growth & Inc Diversified Equity (25.1) (33.2) 15.1 (1.8)
RYSEX Royce Special Eq Small-Cap Value (25.5) (32.5) 15.5 (1.7)
POPFX Prospector Oppor Mid-Cap Core (25.6) (32.7) 15.6 (1.7)
BXMX Nuveen SP500 Buy-Write Opts Arbtrg/Strtgies (26.2) (33.7) 15.7 (1.8)
NEIMX Neiman Large Cap Value Large-Cap Value (23.5) (33.1) 15.8 (1.6)
PRBLX Parnassus Core Eq Equity Income (28.1) (35.6) 15.9 (1.9)
BBTEX BBH Core Select Large-Cap Core (29.4) (37.1) 16.4 (1.9)
IOCCX ICON Risk-Mngd Blncd Specialty Div Eq (26.2) (34.0) 16.6 (1.7)
ETB Eaton Vance Tax-Mngd Buy-Write Inc Opts Arbtrg/Strtgies (25.7) (32.8) 16.7 (1.6)

Source: Created by the Author based on Mutual Fund Observer

Past 18 Months

I use the past 18 months because it marks a more volatile period as investors shifted into late business cycle stage funds. This section is based on nearly 3,000 funds, excluding sector funds. It is not surprising that most of the closed end funds are Enhanced, but it may be more surprising that 25% of the exchange traded funds are Enhanced.

Table #4: Funds By Asset Universe

Enhanced Managed Index Total
Mutual Funds
Alternative 58 - - 58
Equity 315 759 62 1,136
Mixed Asset 77 64 1 142
Bond 239 328 11 578
Total 689 1,151 74 1,914
Exchange Traded Funds
Alternative 19 - - 19
Equity 75 12 318 405
Mixed Asset 5 1 2 8
Bond 62 18 110 190
Total 161 31 430 622
Closed End Funds
Alternative - - - -
Equity 48 34 2 84
Mixed Asset 35 - - 35
Bond 149 46 - 195
Total 232 80 2 314
All Funds
Alternative 77 - - 77
Equity 438 805 382 1,625
Mixed Asset 117 65 3 185
Bond 450 392 121 963
Total 1,082 1,262 506 2,850

Source: Created by the Author based on Mutual Fund Observer

Table #5 shows the risk adjusted return (Martin Ratio) for the categories. Green shading represents the best return and red represents the lowest. Visually, Enhanced Funds tend to have consistently, although only slightly, higher risk adjusted returns. The largest outperformance has occurred in Corporate Debt and income categories.

Table #5: Risk Adjusted Return (Martin Ratio) By Objective

Source: Created by the Author based on Mutual Fund Observer

Table #6 shows that the Enhanced and Index management styles have lower risk than the Managed Funds with the highest outperformance being in Emerging Markets, Global, International, and Small Cap funds.

Table #6: Risk (Ulcer Index) By Objective

Source: Created by the Author based on Mutual Fund Observer

Top Ranked Funds - Past 18 Months

In this section, I highlight the top ranked funds based on Risk, Risk Adjusted Returns, Yield, 3 and 10-month trends. One table exists for each of Enhanced, Managed, Index and Great Owl Funds. Equity Funds also included price to earnings ratio in the ranking. The funds are sorted from lowest risk to highest. The funds are intended to be accessible to the small investor. Closed End Funds were restricted to a Premium of less than 10% using Morningstar. Table #11 includes top funds of that were excluded from the other three tables because the fund could not be purchased in a Vanguard account. The funds in these five tables provide a good starting point for reducing risk in a portfolio but are not intended as fully researched lists.

Table #7: Top Ranked Enhanced Funds

Enhanced Name (Abbrv) Universe APR Ulcer Martin Yield
IAGG Core Intrntl Aggr Bond ETF 7.5 0.1 73.0 4.3
ISTB Core ST USD Bond ETF 3.7 0.1 15.0 2.7
VFSTX Short-Term Invest-Grade Mutual 3.7 0.1 11.0 2.8
VMLTX Limited-Term Tax-Ex Mutual 3.3 0.1 8.9 1.9
JLS Mort Opportunity Term CEF 3.7 0.4 4.1 7.4
NXQ Select Tax-Free Inc Port CEF 6.6 0.4 10.8 3.3
VFIIX GNMA Inv Mutual 4.2 0.4 5.6 2.9
VWAHX High-Yield Tax-Ex Mutual 6.4 0.4 9.9 3.5
NIQ Interm Dur Qual Muni Term CEF 6.6 0.5 8.8 2.5
USAIX Income Mutual 5.1 0.7 4.0 3.4
VFICX Interm-Term Invest-Grade Mutual 5.6 0.7 5.4 3.2
HSNIX Strategic Inc Mutual 4.9 0.8 3.5 6.4
NMZ Muni High Inc Oppor CEF 8.6 0.8 8.6 5.0
NZF Enhanced Muni Credit Inc CEF 8.9 0.9 8.0 4.8
NBB Taxable Muni Inc CEF 5.5 1.3 2.6 5.3
SHIAX Short Dur High Inc Mutual 3.8 1.3 1.3 5.6
PGX Preferred ETF 7.9 2.0 2.9 5.4
NMZ Municipal High Inc Oppor CEF 8.6 0.8 8.6 5.0
FALN Fallen Angels USD Bond ETF 3.8 2.1 0.8 5.6
PRULX US Treas Long-Term Mutual 8.0 2.1 2.9 2.5
SAHYX Global HY Bond Mutual 4.1 2.1 1.0 5.4
JPC Preferred & Inc Opportunities CEF 4.2 2.7 0.8 7.2
VEIPX Equity Inc Inv Mutual 3.2 4.1 0.3 2.7
CCD Dynamic Conv And Inc CEF 8.2 4.7 1.3 4.7

Source: Created by the Author based on Mutual Fund Observer

Table #8: Top Ranked Managed Funds

Managed Name (Abbrv) Universe APR Ulcer Martin Yield
PRWBX Short-Term Bond Mutual 3.0 - 18.9 2.5
PRFSX Tax-Free Short-Interm Mutual 3.0 0.2 3.9 1.6
FTHRX Interm Bond Mutual 4.5 0.3 8.4 2.5
HHMIX Muni Opportunities Mutual 5.7 0.3 11.6 3.0
LEXNX GNMA Inc A Mutual 4.0 0.3 5.4 2.5
TOTL Total Rtn Tactical ETF 4.4 0.3 8.1 3.4
BIAZX Mort Securities Mutual 4.7 0.4 7.4 2.5
NXR Select Tax-Free Inc Port CEF 7.4 0.4 13.3 3.2
PRINX Muni Inc Mutual 5.1 0.4 7.1 3.0
PMX Muni Inc CEF 9.7 0.5 14.9 5.7
AVEFX Schwartz Ave Maria Bond Mutual 3.8 0.6 3.0 1.8
PRFHX Tax-Free HY Mutual 5.4 0.6 6.0 3.5
PRFIX Fxd Inc Inv Mutual 5.2 0.6 5.0 2.5
DHHIX High Yield Mutual 7.4 0.8 6.9 5.7
FSAHX Short Dur High Inc Mutual 3.7 1.0 1.6 4.5
MCR Inc Trust CEF 7.0 1.0 5.2 7.7
EMTL EMs Fxd Inc ETF 5.6 1.2 3.0 3.8
PRPIX Corp Inc Mutual 4.8 2.0 1.4 3.4
VUSTX Long-Term Treas Inv Mutual 8.2 2.0 3.0 2.6
FJSIX High Inc Bond Mutual 3.4 2.1 0.6 6.5
FAMEX Dividend Focus Inv Mutual 14.8 3.3 3.9 0.6

Source: Created by the Author based on Mutual Fund Observer

Table #9: Top Ranked Index Funds

Index Name Universe APR Ulcer Martin Yield
SPSB State Street SPDR Port ST Corp Bond ETF 3.4 0.1 15.5 2.8
VTABX Ttl Intrntl Bond Index Mutual 7.4 0.1 69.4 2.9
VCSH Short-Term Corp Bond Index ETF 4.1 0.2 11.6 2.8
PGHY Invesco Global Short Term HY Bond ETF 3.2 0.3 3.8 5.3
SMB VanEck Vectors AMT-Free Short Muni Index ETF 3.4 0.3 5.1 1.5
HYMB State Street SPDR Nuveen S&P HY Muni Bond ETF 7.5 0.4 12.2 4.0
VGIT Interm-Term Treas Index ETF 5.1 0.4 8.5 2.2
VMBS Mort-Backed Securities Index ETF 4.3 0.4 6.1 2.9
VTEB Tax-Ex Bond Index ETF 5.3 0.4 8.5 2.3
ITM VanEck Vectors AMT-Free Interm Muni ETF 6.4 0.5 9.2 2.2
VTBIX Ttl Bond Market II Index Mutual 4.9 0.6 4.8 2.8
SJNK State Street SPDR Blmbrg Brcly ST HY Bond ETF 4.2 1.1 1.9 5.7
HYG iBoxx $ HY Corp Bond ETF 5.2 1.4 2.3 5.3
QLTA Aaa - A Rated Corp Bond ETF 5.2 1.4 2.2 3.0
SPTL State Street SPDR Port Long Term Treas ETF 8.3 2.1 2.9 2.6
VWOB EMs Gov Bond Index ETF 5.6 2.3 1.5 4.4
ILTB Core Lt USD Bond ETF 7.1 3.1 1.6 3.7
ICVT Conv Bond ETF 7.8 3.3 1.7 3.3
VCLT Long-Term Corp Bond Index ETF 6.7 4.2 1.1 4.0
VIG Dividend Appreciation Index ETF 8.6 4.3 1.5 1.8

Source: Created by the Author based on Mutual Fund Observer

Table #10: Top Ranked Great Owl Funds

Symbol Name Universe APR Ulcer Martin Yield
TRBUX Ultra Short-Term Bond Mutual 2.8 - 61.8 2.8
NID Interm Dur Muni Term CEF 7.6 0.2 23.9 3.6
VCSH Short-Term Corp Bond ETF 4.1 0.2 11.6 2.8
DODIX Inc Mutual 4.7 0.5 4.9 3.1
BATEX Alloc Target Port Mutual 7.3 0.5 11.4 4.1
RCS Strategic Inc CEF 7.4 0.6 8.4 11.5
PCI Dyn Credit and Mort Inc CEF 9.0 0.6 10.8 9.9
PDI Dynamic Inc CEF 9.0 0.6 11.0 11.2
DHHIX High Yield Mutual 7.4 0.8 6.9 5.7
GHY PGIM Global High Yield Inc CEF 7.8 1.0 5.7 6.5
VEMBX EM Bond Mutual 8.8 1.3 5.3 4.8
TRECX EM Corp Bond Mutual 5.2 1.9 1.7 4.7
VWINX Wellesley Inc Mutual 5.0 1.9 1.6 3.0
VMNVX Global Min Vol Mutual 8.0 2.7 2.2 2.1
LGLV US Large Cap Low Vol ETF 13.4 2.9 3.9 1.8
FAMEX Div Focus Mutual 14.8 3.3 3.9 0.6
PRDGX Div Growth Mutual 9.6 3.5 2.1 1.6
PARMX Mid Cap Mutual 8.7 3.8 1.7 0.6
ONEV Russell 1000 Low Vol ETF 7.2 4.0 1.3 1.9

Source: Created by the Author based on Mutual Fund Observer

Table #11: Top Ranked Excluded Funds

Excluded Name APR Ulcer Martin Yield
FLTDX Nuveen Limited Term Muni Bond 4.1 0.1 14.7 1.9
SRHQX Principal Short-Term Inc 3.0 0.1 15.8 2.2
BRASX BlackRock Alloc Target Shares Port 3.8 0.2 11.2 2.9
FXIMX PIMCO Fxd Inc Shares 6.5 0.2 21.0 4.1
GGIFX Victory INCORE for Inc 3.0 0.2 4.4 5.5
TIFUX Morgan Stanley Intrntl Fxd Inc 6.4 0.2 20.0 3.3
TIXRX TIAA-CREF 5-15 Year Ldrd Tax-Ex Bond 5.8 0.3 11.2 2.3
CPTNX American Century Gov Bond 1.0 0.4 5.1 2.5
BATEX BlackRock Alloc Target Shares Port 7.3 0.5 11.4 4.1
DODIX Dodge & Cox Inc 4.7 0.5 4.9 3.1
PMOAX Principal Opportunistic Muni 7.0 0.5 10.6 3.8
PYTRX Putnam Fxd Inc Absolute Rtn 4.1 0.5 3.7 4.9
PIOBX Pioneer Bond A 4.2 0.6 3.5 3.1
HYSZX PGIM Short Dur HY Inc Z 5.6 0.7 5.0 5.7
MWHYX Metropolitan West HY Bond M 5.5 0.7 4.6 4.2
PGSIX Putnam Mort Securities A 5.2 0.7 4.6 4.5
RPIHX T Rowe Price Global High Inc Bond 4.9 1.2 2.5 5.7
BRACX BlackRock Alloc Target Shares Port 5.9 1.3 2.9 3.7
PCSFX Principal Capital Securities S 3.9 1.9 1.0 5.3
TRECX T Rowe Price EM Corp Bond Inv 5.2 1.9 1.7 4.7
PQIAX Principal Equity Inc A 5.6 4.4 0.8 1.9

Source: Created by the Author based on Mutual Fund Observer

Fidelity and Vanguard

My preference is to purchase Vanguard or Fidelity funds if comparable to other top rated funds. Table #12 contains top ranked Vanguard Funds and Table #13 contains top ranked Fidelity Funds.

Table #12: Top Ranked Vanguard Funds

Symbol Name Management RTN Ulcer Martin Yield Trend 3 mo Trend 10 mo
VTABX Total Intern Bond Index 7.4 0.1 69.4 2.9 1.5 5.3
VWITX Interm-Term Tax-Ex Enhanced 5.2 0.3 10.4 2.7 0.6 3.7
VWAHX HY Tax-Exempt Enhanced 6.4 0.4 9.9 3.5 0.7 4.6
VFICX Interm-Term Invest-Grade Enhanced 5.6 0.7 5.4 3.2 0.7 4.9
VCIT Interm-Term Corp Bond Index 6.5 1.1 3.9 3.4 1.1 6.3
VEMBX EM Bond Inv Enhanced 8.8 1.3 5.3 4.8 2.1 8.3
VWEHX HY Corp Managed 5.2 1.5 2.1 5.6 1.2 4.8
VWINX Wellesley Inc Managed 5.0 1.9 1.6 3.0 1.4 5.5
VGLT Long-Term Treas Index 8.3 2.0 3.1 2.5 0.6 8.7
VUSTX Long-Term Treas Managed 8.2 2.0 3.0 2.6 0.5 8.6
VMNVX Global Min Vol Enhanced 8.0 2.7 2.2 2.1 2.0 6.8
VEIPX Equity Inc Enhanced 3.2 4.1 0.3 2.7 2.3 5.4
VIG Div Appreciation Index 8.6 4.3 1.5 1.8 3.6 8.9
VOOV S&P 500 Value Index 2.4 5.4 0.1 2.3 3.7 6.8

Source: Created by the Author based on Mutual Fund Observer

Table #13: Top Ranked Fidelity Funds

Symbol Name Management RTN Ulcer Martin Yield Trend 3 mo Trend 10 mo
FLTMX Interm Muni Inc Enhanced 5.0 0.3 9.1 2.4 0.7 3.6
FTABX Tax-Free Bond Managed 6.1 0.4 9.5 2.9 0.7 4.6
FTBFX Total Bond Enhanced 4.9 0.6 4.8 3.3 0.7 4.5
FBNDX Invest Grade Bond Enhanced 5.2 0.6 4.8 3.0 0.7 4.6
FHIFX Focused High Inc Managed 5.3 1.3 2.5 4.7 1.2 5.0
FCOR Corp Bond Enhanced 5.8 1.6 2.2 3.4 1.2 6.5
FTLTX Long-Term Treas Bond Managed 8.3 2.0 3.1 2.7 0.6 8.7
FCVSX Conv Securities Enhanced 9.9 2.7 2.9 2.4 3.1 9.0
FEDCX EM Debt Managed 2.8 3.3 0.2 6.0 1.7 5.4
FSDIX Strategic Div & Inc Enhanced 5.1 3.3 0.9 2.6 1.9 5.6
FIOOX Large Cap Value Index 2.4 4.7 0.1 2.5 2.8 5.8
FDGFX Div Growth Managed 2.3 4.8 0.1 2.0 2.9 5.3
FUQIX SAI US Quality Index 7.4 4.9 1.1 1.3 3.1 7.5

Source: Created by the Author based on Mutual Fund Observer

Conclusion

This article focused on performance of funds during a bear market and business cycle late stage because of the slowing global and US economies and rising risks. If interest rates continue to fall or risks continue to rise, most of the funds in this article should do well. My preference is for overweighting in quality bonds and defensive equities.

I will add many of these funds to my watch lists and evaluate them in more detail in future articles. In my mind, I have cleared up some generalized misconceptions about Managed versus Passive funds with the Enhanced category. The other thing that may be surprising to many is that the closed end funds are often among the funds with low risk of drawdown.

Disclosure: I am/we are long FHIFX, FTHRX, VTABX, VMNVX, VWINX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am an engineer with an MBA nearing retirement and not an economist nor an investment professional. The information provided is for educational purposes and should not be considered as advice. Investors should do their due diligence research and/or use an investment professional.