Morningstar Advisor - April/May 2012 - (Page 56)
Undiscovered Managers
Undiscovered in Plain Sight
By Josh Charney
Michael Aronstein’s long-short equity fund has been around since 2007, but it’s only just starting to pick up assets.
When an investor hears the term “undiscovered manager,” he may think about one whose headquarters is off the beaten path, or one whose strategy is so bizarre that very few investors would consider it. Michael Aronstein, portfolio manager of the Marketfield Fund MFLDX, fits neither of those descriptions. His firm is located next to Grand Central Station in the middle of Manhattan. And his top-down long-short equity strategy, though refreshingly different from most other long-only or long-short equity offerings, is reasonably straightforward. But lying in plain
sight by no means disqualifies Aronstein from being an undiscovered gem (ask any aspiring actor). His fund has been around since mid-2007, longer than most other long-short equity offerings, yet its assets have only begun to grow. Alternative mutual funds are largely unknown to many investors.
An Alternative “Alternative”
Although alternative investments, such as long-short equity strategies, are just now starting to catch on with advisors, they still only represent less than 2% of mutual fund
assets. Long-short equity offerings are some of the oldest and well-known in the realm of alternative mutual funds, but they are also some of the most basic and worst-performing. The average long-short equity fund lost 2.8% last year, for example, when the S&P 500 increased by 2.1%. Aronstein’s long-short strategy is better than average, however. Last year, his fund returned 3.7% by reducing the fund’s net stock exposure to less than 50% and shorting emerging-markets exchange-traded funds. Instead of selecting stocks from the bottom up, Aronstein and his small team
56 Morningstar Advisor April/May 2012
Table of Contents for the Digital Edition of Morningstar Advisor - April/May 2012
Morningstar Advisor - April/May 2012
Contents
Contributors
Letter From the Editor
We’re Too Smart
How Do You Use Alternatives?
Taking the Lead
How to Find Economic Moats
The Beauty of Currencies
No Clarity on Bonds
Four Picks for the Present
Investment Briefs
Performance Chasing, Evaluated
Technology’s Slim Pickings
How Much Is Enough?
The Fear Bubble
Three Traits of a Successful Long-Short Equity Manager
Why Absolute-Return Funds Fail to Deliver
An Economist’s Response to Crises
Undiscovered in Plain Sight
Untangling ETF Tax- Efficiency Myths
Central Banks Driving the Gold Rush
U.S. Industrials Could Add Some Magic to Europe-Weary Portfolios
No-Hesitation Allocation Funds
Our Favorite Mutual Funds
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
The Greatest Story Ever Told
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