The current full market cycle began in October 2007 as domestic markets peaked just ahead of the worst financial meltdown since the Great Depression. Domestic markets hit bottom in early March, 2009, and have rebounded sharply since then.
Mostly. Vanguard’s Total Stock Market Index took 52 months to recover from the crisis; that is, it took 52 months to regain its October 2007 levels. The Total Stock Market gained 6.2% annually if you measure from October 2007 and 19.5% if you measure from March 2009. The relentless bull market that began in March 2009 has lifted all boats.
Almost all boats.
It turns out that dozens of equity funds are still underwater. That is, $1000 entrusted to them eight years ago is still worth less than $1000. We screened for domestic and global equity funds (that took three runs, one by checking the nine domestic equity categories, a second for selecting multi-cap categories, and a third for global) that have launched before October 2007 (select “full cycle 5” to set that screen) . We sort each set of results by “recovery” period and looked for funds with the value “95+.” That means, after 95 months they’re still trying to get back to even.
Here are the (apparently) Eternal Losers, sorted by annual returns over this full cycle. In each case, we default to showing a fund’s oldest share class. Just to rub salt in their investors’ wounds, we’ve also included a calculation of how far below mediocre the fund has been. That’s column 4 (“versus peers”) which tells you the amount by which the fund annually trails its average peer.
| Fund | Category | Full-cycle APR | versus peers |
|---|---|---|---|
| Nysa NYSAX | SC growth | -8.4 | -13.8 |
| Guggenheim S&P Global Dividend Opportunities Index ETF LVL | Global equity income | -4.6 | -4.5 |
| Jacob Small Cap Growth JSCGX | SC growth | -4.0 | -9.5 |
| API Efficient Frontier Core Income APIMX | Global multi-cap core | -3.6 | -5.9 |
| Marketocracy Masters 100 MOFQX | Global multi-cap growth | -3.4 | -5.2 |
| Brandywine Mid Cap Growth BWAFX | MC growth | -3.1 | -8.6 |
| Stonebridge Small Cap Growth SBSGX | SC growth | -2.9 | -8.6 |
| Horizon Spin-off & Corporate Restructuring LSHAX | Global SMid cap | -2.7 | -4.9 |
| Alpine Dynamic Dividend ADVDX | Global equity income | -2.6 | -2.6 |
| Schneider Value SCMLX | Multi-cap value | -2.3 | -6.7 |
| Forward Multi-Strategy AAGRX | Multi-cap core | -2.0 | -6.8 |
| Alger Global Growth CHUSX | Global multi-cap growth | -1.8 | -3.6 |
| ClearBridge Global Growth LMGTX | Global multi-cap growth | -1.7 | -3.5 |
| WisdomTree Global High Dividend DEW | Global equity income | -1.7 | -1.6 |
| Deutsche Global Equity MGINX | Global multi-cap growth | -1.6 | -3.4 |
| Deutsche World Dividend SGEX | Global equity income | -1.6 | -1.6 |
| Hatteras Alpha Hedged Strategies ALPHX | Absolute return | -1.5 | -1.4 |
| Transamerica Global Equity IMNAX | Global multi-cap core | -1.4 | -3.6 |
While some of these funds have rebounded mightily and some have changed managers in hope to avoid repeating the disaster, the fact remains that investors in any of these funds have the right to be deeply troubled.
The most hopeless case is Nysa (NYSAX) but that’s pretty typical. It’s been pretty relentless about losing money since its launch almost 20 years ago. $10,000 invested at launch in 1997, for instance, would be worth $4800 today. It’s not only below its October 2007 level, it’s also still below its previous peak in April 2004.
Nysa got a new manager, Robert Cuculich, in February 2013. Sadly, the fund has fallen 28% during his tenure while his average peer has risen 30%. Some of that is surely due to an expense ratio of 4.5%. To his credit, Mr. Cuculich has between $100,000 – 500,000 of his own money in his fund.
Nysa is inconsequential, in the sense of having just $2 million in assets. Several of the Eternal Losers, though, have between $100 million and $400 million in assets:
| Fund | AUM, $M |
|---|---|
| Hatteras Alpha Hedged Strategies | 392 |
| Alpine Dynamic Dividend | 186 |
| Transamerica Global Equity | 151 |
| Brandywine Advisors Mid Cap Growth | 144 |
| ClearBridge Global Growth | 134 |
| WisdomTree Global High Dividend | 101 |
Perhaps not coincidentally, ClearBridge announced in early December the addition of three new portfolio managers. Robert Hagstrom managed the fund through 2012. It’s had two managers since then, one of whom left in October. The change will bring the fund up to four managers. Any of these funds might be a candidate for a quick tax-loss sale. Or, alternately, a quick trip to the “what were you thinking?” booth.
