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Frequent Contributor

CTFAX - automatically adjusted to changing markets

CTFAX(link) - a strategy that rebalances automatically to adjust to changing markets. Aims to buy low and sell high by adjusting equity exposure based on the price level of the S&P 500 Index.  We have seen over the years several funds that tried to achieve similar goals.

PV (link) has data since 2003 and shows that both VWIAX+PRWCX were better risk-adjusted choices. No surprise.

But, when I look at YTD and for 1-3 years CTFAX is a better choice than VWIAX+PRWCX.  See 3 year PV(link).  I still don't think LT it would be better than PRWCX but if you want/need another lower risk/SD fund CTFAX looks promising.  When I look at 5 years and longer CTFAX volatility isn't as good and why I'm guessing something changed in the way they have been investing in the last 3 years.

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Re: CTFAX - automatically adjusted to changing markets


@FD1001 wrote:

When I look at 5 years and longer CTFAX volatility isn't as good and why I'm guessing something changed in the way they have been investing in the last 3 years.


 

Looks like the fund has new managers since May of 2018 and, as of May 2020, CTFAX now has a minimum 50/50 stock/bond allocation. However, the allocation can go as high as 90/10, as the price level of the fund's benchmark, the S&P 500 Index,  declines. The stock/bond allocation is rebalanced automatically, increasing or decreasing equity exposure based on the movement of the S&P 500 Index. The process is outlined in the Asset Allocation Chart of the fund's 6/30 Fact Sheet.

As of 6/30, CTFAX's stock allocation is 54%. M* has not adjusted its classification yet, it still assigns the fund to the 15-30% equity allocation category.

Fred

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Explorer ○○

Re: CTFAX - automatically adjusted to changing markets

Let’s give credit where credit is due.  This fund has been discussed extensively this year by Old_Skeet on the Mutual Fund Observer discussion board.

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Re: CTFAX - automatically adjusted to changing markets


@Remotetrader wrote:

Let’s give credit where credit is due.  This fund has been discussed extensively this year by Old_Skeet on the Mutual Fund Observer discussion board.


 

That's great for MFO members, @Remotetrader, but not helpful to M* members. And who is Old Skeet, anyway? Haven't come across him/her on the M* Discussion Forum.

Do you expect us to check all the postings on M*, MFO, and maybe even Fidelity, to make sure we "give credit where credit is due"? What is your point?

Fred

 

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Frequent Contributor

Re: CTFAX - automatically adjusted to changing markets


@Remotetrader wrote:

Let’s give credit where credit is due.  This fund has been discussed extensively this year by Old_Skeet on the Mutual Fund Observer discussion board.


Sure, he mentioned it already in March 2012 but he also mentioned 100-200 other funds in many other posts.  I would not be surprised if he owns at least 30-40 funds. He actually is a pretty good analyst with thoughtful posts.

I don't care who comes up with ideas, the more the better.

OK, so let me post a list of all the funds at Fidelity (link).  The list has 9905 funds. From now on I can claim I mentioned almost any fund before  :-)

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Contributor ○

Re: CTFAX - automatically adjusted to changing markets

My interpretation of the charts is that CTFAX made good due to it's YTD performance. FD explained their strategy which appears to have worked in this last downturn and recovery. It will be interesting to see if they get it right in the next 2-3 dip and recoveries. 

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Follower ○○○

Re: CTFAX - automatically adjusted to changing markets

An interesting fund that I see as a complement to stalwarts such as VWIAX, VWENX and PRWCX. I initiated a postition earlier this year after I found the institutional version (COTZX) is NTF at Vanguard with a $3,000 minimum. It saves you from paying the 12b-1 fee. I have much larger positions in the aforementioned T. Rowe Price and Vanguard funds, but I see value in adding to COTZX over time.

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Explorer ○○

Re: CTFAX - automatically adjusted to changing markets

Couple things concern me. First, managers have only been in place since May, 2018.  Second, M* category is US Allocation 15-30% equity, for a fund that currently 50% equity, which skews the performance comparison badly. Does this concern anyone else?

 

 

"The good thing about science is that it’s true whether or not you believe in it." Neil DeGrasse Tyson
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Frequent Contributor

Re: CTFAX - automatically adjusted to changing markets


@SlipSliding wrote:

Couple things concern me. First, managers have only been in place since May, 2018.  Second, M* category is US Allocation 15-30% equity, for a fund that currently 50% equity, which skews the performance comparison badly. Does this concern anyone else?

 

 


So, you are worried with their success? Would you be happier if the fund have done poorly?

M* is wrong? it's not the first or last but let's be fair, where else can they put it?  there is no category of allocation at 10-60% so M* put it in the middle.

This is how it looked in the last 5 years

ctfax.PNG

It depends on your style and goals if you trust this fund and how much you want to invest.  I would use core(70-80%) + explore (the rest of your portfolio) and purchase CTFAX as part of your explore portion.

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Contributor ○○○

Re: CTFAX - automatically adjusted to changing markets


@SlipSliding wrote:

Couple things concern me. First, managers have only been in place since May, 2018.  Second, M* category is US Allocation 15-30% equity, for a fund that currently 50% equity, which skews the performance comparison badly. Does this concern anyone else?

 

You are right to be concerned, @SlipSliding.

As I pointed out in my previous post, CTFAX changed its investment posture in May. The previous baseline asset allocation has changed from 10% equity to 50% equity. Based on the fund's literature, it will now always have at least a 50% equity allocation. Depending on the downward movement of the S&P 500 Index, the equity exposure can go as high as 90%. For more details, go to the 6/30 Fund Fact Sheet.

With this change, the fund now moves to the 50 - 70% M* allocation category, which includes such stalwarts as PRWCX, JABAX, VWELX, etc.

I was also interested in the fund until I found out about these recent changes. The ultimate source of information is always the fund company, not M*.

Good luck,

Fred

                                                                                                         

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Re: CTFAX - automatically adjusted to changing markets


@fred495 wrote:

@SlipSliding wrote:

Couple things concern me. First, managers have only been in place since May, 2018.  Second, M* category is US Allocation 15-30% equity, for a fund that currently 50% equity, which skews the performance comparison badly. Does this concern anyone else?

 

You are right to be concerned, @SlipSliding.

As I pointed out in my previous post, CTFAX changed its investment posture in May. The previous baseline asset allocation has changed from 10% equity to 50% equity. Based on the fund's literature, it will now always have at least a 50% equity allocation. Depending on the downward movement of the S&P 500 Index, the equity exposure can go as high as 90%. For more details, go to the 6/30 Fund Fact Sheet.

With this change, the fund now moves to the 50 - 70% M* allocation category, which includes such stalwarts as PRWCX, JABAX, VWELX, etc.

I was also interested in the fund until I found out about these recent changes. The ultimate source of information is always the fund company, not M*.

Good luck,

Fred

                                                                                                         


The above tells me that in the next downturn and recovery it will not do as well. It may still try to buy low and sell high, but it will be constrained by it's allocation boundaries, although 50-90 gives it more room than 50-70.

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Explorer ○○

Re: CTFAX - automatically adjusted to changing markets

Exactly. I was in a Fidelity fund that changed investment strategy from value to growth in Jan, 2000. Seems like a similar setup here with potentially similar outcome. 

"The good thing about science is that it’s true whether or not you believe in it." Neil DeGrasse Tyson
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Re: CTFAX - automatically adjusted to changing markets

In this recession it shot out the lights, its performance has been stellar and spectacular. So I guess the question is what, if any, of that is part of a repeatable process going forward. I put it on a watch list and will consider it next time I want to add equity exposure.

I checked the 3 Institutional share classes availability at Schwab -

COTZX – Net ER=0.64% - ‘Availability Restricted-Call for information’ – 2.5K min (I didn't call)

CQTRX - 0.60% - Institutional Customers Only – 100K min.

CYYYX - 0.56% - Availability not shown

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Re: CTFAX - automatically adjusted to changing markets


@PN wrote:

In this recession it shot out the lights, its performance has been stellar and spectacular. So I guess the question is what, if any, of that is part of a repeatable process going forward.

 

Since CTFAX's investment process has changed significantly since May, changing its baseline exposure to the S&P 500 Index from 10% to 50%, its performance in the next market downturn will undoubtedly be quite a bit less "stellar and spectacular". Or, is that an open question, @PN?

I was seriously considering adding this fund to my portfolio in the spring, but have removed it from my watch list since the change to its asset allocation algorithm. If I was considering a fund in the 50% - 70% equity allocation category, funds with a proven track record like VLAIX, JABAX, PRWCX, etc. would be my preference.

Good luck,

Fred

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Re: CTFAX - automatically adjusted to changing markets

Interesting to see how CTFAX volatility has changed vs the stock market recently.

https://stockcharts.com/h-perf/ui?s=CTFAX&compare=SPY&id=p20005526318

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Frequent Contributor

Re: CTFAX - automatically adjusted to changing markets


@PN wrote:

In this recession it shot out the lights, its performance has been stellar and spectacular. So I guess the question is what, if any, of that is part of a repeatable process going forward. I put it on a watch list and will consider it next time I want to add equity exposure.

I checked the 3 Institutional share classes availability at Schwab -

COTZX – Net ER=0.64% - ‘Availability Restricted-Call for information’ – 2.5K min (I didn't call)

CQTRX - 0.60% - Institutional Customers Only – 100K min.

CYYYX - 0.56% - Availability not shown


At Schwab, you can only buy CTFAX as a retail investor.

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After Fred post I checked the prospectus and based on that I would not recommend it.  There are several great choices in the 50-70% allocation category.

Why mess with a good thing? 

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Frequent Contributor

Re: CTFAX - automatically adjusted to changing markets

You can create your CTFAX based on the following:

ctfax.PNG

Lower the % by 30%...instead of 50-90...use 20-60%.  Then just use VOO(SP500) for stocks and BIV for bonds.

Suppose SP000 price = 2400.  The chart says 65% in SPY, you should subtract 30 and own 35% in VOO + 65% in BIV.  You ER < 0.05% and you saved at least 0.84%

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