RLY Summary
| Fund Family | NA |
| Category | NA |
| Structure | NA |
| Inception Date | NA |
| Expense Ratio | NA |
| Yield | NA |
| Net Assets | NA |
| Avg. Volume | NA |
Report Card
D+
Protect
RLY provides poor risk protection. It generates 4.2% returns above inflation with 10.3% downside volatility and 8.1% Ulcer Index. These downside risk measures rank in the bottom 40% of all funds that generate real returns.
C+
Perform
RLY provides average risk-adjusted returns. It has generated 8.3% annual returns over the last three years which ranks better than 60% of all funds. It has a 0.6 Sortino ratio and 0.7 UPI, ranking in the middle 20% of all competing funds for risk-adjusted returns.
B+
Participate
RLY provides good diversification of the S&P 500. Optimal diversification reduces downside risk by 11.0% while only reducing annual returns by 15.8% compared to SPY alone. Overall RLY diversification improves the risk-adjusted performance of the S&P 500 by -8.6% with a 1.4 UPI, ranking in the top 40% of all competing diversifiers.
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Key Performance Metrics
Protect
We measure a funds ability to protect against stock market declines by comparing various downside specific risk measures. Max drawdown is the largest decline for the security while the Ulcer Index quantifies both the depth and breath of all drawdowns. We also look at downside volatility and beta, both of which are measured relative to the S&P 500.
| Statistic | 1 Year | 3 Years | 5 Years |
|---|
| Max Drawdown | -10.07% | -10.59% | -18.94% |
| Recovery Time | 225 days | 432 days | 847 days |
| Ulcer Index | 2.63% | 4.05% | 6.57% |
| Downside Volatility | 5.60% | 6.63% | 8.16% |
| Downside Beta | -0.68 | -0.33 | 0.38 |
Perform
We measure a securities ability to Perform by comparing net annual returns relative to our benchmarks. To measure absolute performance, we use the well-known Sharpe and Sortino ratios but prefer a risk-adjusted ratio such as Jenson's Alpha. Ultimately, performance is the most critical variable in fund selection so we take a much deeper dive into this measure.
| Statistic | 1 Year | 3 Years | 5 Years |
|---|
| Annual Returns | 10.50% | 10.25% | 12.97% |
| UPI | 2.21 | 1.60 | 1.96 |
| Sortino Ratio | 1.04 | 0.98 | 1.58 |
| Sharpe Ratio | 0.67 | 0.58 | 0.97 |
| Jensen's Alpha | 1.46% | -4.85% | 3.53% |
Participate
Participate measures the ability of a security to improve the effecient frontier of a stock portfolio. If the letter grade for this fund is an F, the fund does not provide any diversification or participation benefit. The Statistics presented are calculated using an either an optimal mix of RLY or, if no participation benefit exists, a 60% S&P 500 and 40% RLY.
| Statistic | 1 Year | 3 Years | 5 Years |
|---|
| Ulcer Index | 2.63% | 6.26% | 7.58% |
| Downside Volatility | 5.45% | 9.62% | 10.85% |
| Annual Returns | 22.64% | 8.57% | 14.58% |
| UPI | 6.53 | 1.36 | 1.63 |
| Sortino Ratio | 3.15 | 0.89 | 1.14 |
Comparison
Returns
Ulcer impact
| Statistic | RLY | VBINX | AOM | MAPSA |
|---|
| Value Per 10K | $18,397 | $15,446 | $13,089 | $15,987 |
| Total Returns | 83.97% | 54.46% | 30.89% | 59.87% |
| Annual Returns | 12.97% | 9.08% | 5.53% | 9.84% |
| Standard Deviation | 13.33% | 11.52% | 8.96% | 10.92% |
| Downside Deviation | 8.16% | 7.26% | 5.77% | 5.70% |
| Max Drawdown | -18.94% | -21.61% | -19.96% | -17.50% |
| Recovery Time | 847 days | 788 days | 956 days | 765 days |
| Ulcer Index | 6.57% | 8.11% | 7.38% | 8.16% |
| Sharpe Ratio | 0.97 | 0.78 | 0.61 | 0.89 |
| Sortino Ratio | 1.58 | 1.24 | 0.94 | 1.71 |
| Ulcer Perf. Index | 1.96 | 1.11 | 0.74 | 1.19 |
| Beta | 0.57 | 0.71 | 0.52 | 0.28 |
| Downside Beta | 0.38 | 0.75 | 0.55 | 0.22 |
| Treynor Ratio | 0.22 | 0.13 | 0.11 | 0.35 |
| Jensen's Alpha | 3.53% | -2.62% | -2.97% | 5.22% |
| Mac's Alpha | 6.66% | -3.16% | -3.59% | 6.14% |
Bottom Line
RLY is a multi-strategy fund that is market agnostic investing in several themes at once and may shift its exposure often. The fund will utilize the manager's proprietary tools for over and under-weighting various sectors or investment themes. The manager may use global/macro analysis as well as tactical investing techniques to decide which markets provide the most advantageous risk/reward opportunity. The fund may also provide some hedging tactics to limit downside risk. This fund is aimed at investors who want an active approach to the stock market. Its imperative an investor keeps close tabs on RLY as it will likely experience significant changes in how it behaves relative to the broad stock market. Some potential disadvantages of this fund are:
- High expense load: This fund carries a significant management fee and may invest in securities or strategies that have additional expenses (i.e. expense layering).
- Misleading Historical Returns: Often times funds such as RLY are the beneficiary of "survivorship bias" or even "performance bias" where fund families only utilize a managed futures approach that has worked well historically but may not work as well going forward. A landmark study conducted by SPIVA concluded that 86% of '40 Act Funds that out-performed over the prior 10 years, underperform in the subsequent 5 years.
- The fund's performance will be highly unpredictable relative to a broad-based benchmark as it is not relegated to a specific investment theme or strategy.
- Free-riding: There is no conclusive means of ensuring the fund manager is not free-riding the fund for his or her own benefit.
- Style drift: There is no guarantee the fund manager will not change the approach that has been responsible for the fund's historic returns.
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