Gyroscopic Investing

It appears Global X is about to offer a PRPFX-like ETF.

http://etfdailynews.com/2011/11/15/glob ... anent-etf/

longeyes wrote: It appears Global X is about to offer a PRPFX-like ETF.

http://etfdailynews.com/2011/11/15/glob ... anent-etf/

A quick glance leaves me the impression that they are allocating way too much (20%) to highly speculative investments.  Also their prospectus offers no details on two critical questions, asset allocation and fees and expenses.  The first issue alone is a deal breaker for me. But I would be interested to see what they come with for asset weighting and their F&E.

It says it uses a passive index approach. That is very promising. I am going to monitor how this progresses.

On the face of it this could be closer to the HB PP than PRPFX is. It doesn't have silver or corporate bonds or Swiss Francs and does have LTT. The only "novelty" seems to be long term TIPS (perhaps inoccuous enough?) and having some stratification within the stocks. It is curious how they have a mysterious "Solactive Permanent Index" rather than simply saying 25% stock index, 25% LTT index or whatever. They say fixed allocations but don't  say what size those allocations are. The biannual reballancing seems a very bad idea if the fund were ever to grow large. For a fund, I'd have thought it really important to avoid anything that could benefit front running.

I wonder why they say that the index will include "gold ETFs" rather than simply gold?

They say that at least 80% of the index replication will be direct holding of securities and up to 20% synthetic via derivatives. I guess some people on here have said that they hold euro PP consisting of ETFs that are 100% synthetic (eg the dbxtracker ETFs).

If it is passively investing than fees will be low.

I think there are sector plays to make it more appealing to investors.

Depending on the prospectus I may buy this.

Indices wrote: If it is passively investing than fees will be low.

I think there are sector plays to make it more appealing to investors.

Depending on the prospectus I may buy this.

I agree that they probably feel they have to have a better story to tell than a 4x25 split in order to sell it to more investors.

At a minimum, this could be a decent way for folks who are interested in setting and forgetting.  It could be a solid alternative to PRPFX if the fees are lower.

That thing looks like a disaster waiting to happen. It includes TIPS, can use options and futures for whatever purpose, and 20% of the allocation is open to whatever the manager wants to do. The other 80% can be changed with 60 days written notice according to the article. No thanks.

[EDIT: The above comment was based on the posted news article. The actual prospectus of the ETF does not contain the same information that I based my original comment upon. I am in a 'wait and see' mode with this ETF.]

They have combined the permanent and the variable portfolio in this fund.  I think the issue is, that if they lose money in the variable 20% portion they will fill that 20% back up again, pulling from the permanent portion.  Makes me hesitant to put money into the fund until there is proof and a track record of responsible handling of the variable portion of this fund.   

I wish there was a true 4x25 mutual fund or ETF for a one stop shop, it would sure make it a lot easier to hold the portfolio in 401ks, etc.

It starts trading tomorrow with the symbol PERM.

http://etfdailynews.com/2012/02/07/glob ... uary-08th/

longeyes wrote: It starts trading tomorrow with the symbol PERM.

http://etfdailynews.com/2012/02/07/glob ... uary-08th/

Here is the composition:

http://www.structured-solutions.eu/aktu ... 000SLA1PM4

[EDIT: This comment was based on the posted news article. The actual prospectus of the ETF does not contain the same information that I based my original comment upon. I am in a 'wait and see' mode with this ETF.]

craigr wrote: Again it looks like a disaster. I'd stay far away from it.

But kudos to their marketing team for hopping on the bandwagon with a complicated and expensive investment product.

It is a passive index tracking fund with a .48% management fee.  Other than the up to 20% which can be used to "better represent the Underlying Index" which reads to me as an allowance to be able to use ETFs/futures to representatively sample stock indexes, I don't see that it goes all that far off the reservation compared to PRPX.... gold is 25%, 25% LT TBonds are > 20y maturity, 25% ST TBonds are < 3y maturity, 25% stocks is tilted (presumably they found an allocation that was better risk-adjusted than just broad?).

I'm just not seeing where the "disaster" is.  Sure, its not bread and butter, low risk, low fees, direct ownership HBPP, but it seems like a much better fund than the PRPFX (which, last I calculated, requires 50% of a portfolio into EDV to balance off the extreme commodity exposure).  Heck did anyone ever notice the huge potential loss the PRPFX has been carrying for years in Symantec warrants?  Nice result of active management there.

MG

I thought only 10-15% should be put into EDV if using PRPFX?

This ETF has risks but it seems less risky than PRPFX. Or am I missing something?

beafet wrote: I thought only 10-15% should be put into EDV if using PRPFX?

I don't know about the other figures I've seen stated, but I arrrived at mine using Monte Carlo mean variance optimization just to see if 10% was enough.  It didn't seem to be, but EDV has a very limited history.

I just took a look at the PRPFX portfolio.  The >20 year maturity bonds comprise about 14% of the Treasury securities which is in the 35% U.S. Cash allocation of the fund, so that works out to be 4.9% of the fund.  4.9% multiplied by 5 (50%/10%) is 24.5%.

Maybe someone else can explain why 10%-15% was suitable?

MG

I'm surprised that Cuggino & Co. let Global X beat them to the punch with an ETF variant.  Well, there goes the "PERM" symbol.

I don't buy new funds, but I think it's at least worth tracking.  I've done that with GTAA, another pretender to the throne.

MachineGhost wrote:

craigr wrote: Again it looks like a disaster. I'd stay far away from it.

But kudos to their marketing team for hopping on the bandwagon with a complicated and expensive investment product.

It is a passive index tracking fund with a .48% management fee.  Other than the up to 20% which can be used to "better represent the Underlying Index" which reads to me as an allowance to be able to use ETFs/futures to representatively sample stock indexes, I don't see that it goes all that far off the reservation compared to PRPX.... gold is 25%, 25% LT TBonds are > 20y maturity, 25% ST TBonds are < 3y maturity, 25% stocks is tilted (presumably they found an allocation that was better risk-adjusted than just broad?).

I'm just not seeing where the "disaster" is.  Sure, its not bread and butter, low risk, low fees, direct ownership HBPP, but it seems like a much better fund than the PRPFX (which, last I calculated, requires 50% of a portfolio into EDV to balance off the extreme commodity exposure).  Heck did anyone ever notice the huge potential loss the PRPFX has been carrying for years in Symantec warrants?  Nice result of active management there.

I just reviewed the prospectus again and it is different (or at least the reports are different) than my first post where they indicated they held TIPS, etc.. The fund could be a good competitor to PRPFX. Although I'm not a fan of the silver in the fund and hope that this ETF just sticks to passive index for the stocks and says out of the active management business.

Please....

PRPFX exposure to Symantec warratns? With 15 bil in assets I'm thinking that is not too significant. Sometimes I get the feeling there is a little too much petty criticism of PRPFX and maybe this new fund already. 6-7 yrs has passed for me and PRPFX and I'm doing as well or better than the classic. And I'm up 7% YTD, yipes!

I would go with the classic or PRPFX and give this new one a chance to perform. It's not worth a move for 3/10's %.

I did not check all the links carefully, here's mine in case its missing.

http://etfdb.com/2012/global-x-debuts-f ... anent-etf/

MachineGhost wrote: I don't know about the other figures I've seen stated, but I arrrived at mine using Monte Carlo mean variance optimization just to see if 10% was enough.  It didn't seem to be, but EDV has a very limited history.

I just took a look at the PRPFX portfolio.  The >20 year maturity bonds comprise about 14% of the Treasury securities which is in the 35% U.S. Cash allocation of the fund, so that works out to be 4.9% of the fund.  4.9% multiplied by 5 (50%/10%) is 24.5%.

Maybe someone else can explain why 10%-15% was suitable?

MG

Just taking a wild stab at it, but EDV, unless I am mistaken, holds zero coupon bonds which are more volatile so to achieve the same correlation as the classic 4x25, it would seem intuitive to have a smaller slice.  10 or 15 percent in zeros against PRPFX seems like a reasonable "back of the envelope" calculation to me.  I personally don't know why you wouldn't just do 80% PRPFX and 20% VUSTX if you just really wanted to go with two mutual funds.  I suppose the 20% could be TLT if you weren't adverse to using a mutual fund and an ETF.

It probably wouldn't be the worst investment portfolio in the world at least.

As for the rest of this thread, I went to EDGAR and pulled the prospectus.

This... oh it's so close.  But oh so far away too.