An article from The Wall Street Journal describes a new wave of “tactical allocation” mutual funds:

There are 41 mutual funds with “tactical” in their names that are tracked by investment-research firm Morningstar Inc., including 18 that were launched since the beginning of 2012. Total assets in this fund category have risen to $4.92 billion from $1.10 billion in December 2007, according to Morningstar.

Successors to the so-called market-timing funds of the past, tactical allocation funds attempt to shift between asset classes

…with the idea of exploiting the stock market’s strong points and dodging its weaker corners over time.

One of such funds mentioned in the article is Leuthold Core Investment Fund (LCORX):

Douglas Ramsey, one of the managers of the Leuthold Core Investment Fund, says the fund’s goal is to match the performance of the stock market over the full cycle with substantially less risk, which it has done.

The fund can shift its stock exposure from 30% to 70%, and now holds 60%, Mr. Ramsey says. While it was originally conceived as a core portfolio holding, it’s now often used by registered investment advisers as a part of their alternatives allocation, Mr. Ramsey says.

Let’s take a look at the fund’s performance from the Alpholio™ perspective. The cumulative RealAlpha™ chart shows that the fund did not add value on a truly risk-adjusted basis, i.e. vs. a dynamic reference portfolio of exchange-traded products (ETPs):

Cumulative RealAlpha™ for LCORX

The fund’s statistics demonstrate that despite a low TrueBeta™, the volatility of the fund’s returns was higher than that of the reference portfolio, and the annualized RealAlpha™ was negative:

LCORX Statistics

The reference weights chart depicts how the fund’s asset allocation changed over time:

Reference Weights for LCORX

An equivalent fixed-income position of the fund is represented by the iShares 1-3 Year Treasury Bond ETF (SHY). In 2008, this position was insufficient to cushion equity declines and, as a result, the fund returned about -27.4%. From mid-2009 to mid-2010, in an attempt to capitalize on the stock market’s rebound, the fund started to decrease this position. However, the decrease was too gradual and ultimately reversed in the second half of 2010. Consequently, in 2010 the fund returned only 3.5% compared to about 12% of its peers. This illustrates the difficulties tactical allocation managers have with market timing.

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