Beverly Goodman
Joel Arbaje
It was a very strange quarter.
Perhaps that shouldn’t have come as a surprise, given the year that had preceded it. News of the vicious attack on Congress at the U.S. Capitol building was quickly replaced by a steady stream of vaccine optimism.
A robust economic reopening sent inflation fears higher, making the future earnings of the tech giants seem pricey in today’s dollars, and their stocks faltered. Meanwhile, long-languishing value stocks finally seem to be having their day. After more than a decade of bemoaning how hard it has been to find income, steadily rising Treasury yields now have investors facing losses in their bond funds. Bitcoin went from $20,000 to more than $60,000 in a matter of weeks, reflecting…who knows what.
All this is to say that investors are in a tricky spot. Markets like these are a test—how much of your portfolio have you just “let ride” rather than having an asset-allocation strategy? Is your tolerance for risk actually lower than you had thought, now that there’s actually more volatility? What exactly do you own, and what does it reflect in terms of your investment philosophy?
This issue of Barron’s Fund Quarterly is aimed at helping investors navigate today’s what’s-up-is-down kind of market. It shouldn’t be that hard: After the financial crisis, a flood of funds aimed at “protecting” investors were launched. Most were solutions in search of a problem, and languished. Yet many have evolved and now offer some interesting opportunities for investors willing to put in the work to understand them.
For our cover story, Leslie P. Norton takes a deep dive into liquid alternatives—mutual funds and ETFs that use hedge-fund-like strategies. Her piece breaks these kinds of funds into three categories, and walks you through how and when to use them. And, of course, when not to. Alex Scaggs takes a look at unconstrained bond funds.
In the past few months, the Russell 1000 Value index has outperformed its Growth counterpart by the biggest margin in two decades. Over that time, however, some talented value managers have closed up shop. But Reshma Kapadia found the best funds for today’s value comeback. She offers six options, all with different approaches, so you can easily find what would be most appropriate for your current portfolio.
Prefer ETFs? They can be as varied in terms of strategy and performance as actively managed funds. Evie Liu has you covered.
And don’t miss Sarah Max’s delightful interview with veteran value manager Chris Davis. Find out why he’s even more optimistic about banks than usual, and, yes, you’ll also find his thoughts on Bitcoin. Enjoy.
Write to Beverly Goodman at [email protected]
