Alexis: So Roger what do you think?
Roger : Um, der, well, gerflack.
Alexis: Back to you in the studio.
Just kidding, it went fine.
WSJ had an article yesterday about long/short mutual funds having a better run lately than during the market beat down from last summer. According to Morningstar there are 162 long/short mutual funds but if you look at the last and take out all the multiple classes of the same fund the number is closer to 53, at least that is what I got when I counted.
The idea of owning absolute return is appealing and probably more so than it was a year ago. It might be so appealing that some folks may want to switch to more of these in their portfolios. This could be a good idea but doing so after a big decline, like we've just had, and before the comeback that will happen at some point is probably a bad idea. There will likely be some big rallies when the new cycle starts, whenever that is.
Speaking of Morningstar they have some new ETF coverage in a blog they are calling Basis Points. So does this mean they are moving the direction of offering useful content? Based on the first real post... no.
They found a filing for some fixed income funds that apparently dive into credit default swaps and maybe some other fixed income derivatives too, not sure about that. After an attempt to explain how the CDS markets work (not critical of that, it is a good summary) and a rehash of the risks mentioned in the prospectus the author concludes "long story long, these funds look like trouble."
Writing a summary that attempts to be a detailed study they need to explore the uses of these funds especially since, IMO, they never met a new concept they liked and don't have much cred in analyzing ETFs. I have not studied the CDS ETFs, I may not be able to even understand them if I did study them but a one sided exploration doesn't really do much. The issuer has something in mind and I am quite certain that like most products there are probably positives and negatives and anyone considering them should be able to rely on getting the pros and cons to make their own decisions.