A recent article in The Wall Street Journal describes a “rebound” in the performance of the Third Avenue Value mutual fund. Let’s take a look at this fund from the Alpholio™ perspective. To do so, we will use the institutional (TAVFX) instead of investor (TVFVX) class of shares, which, thanks to a lower expense ratio, should give the fund’s management greater credit for any generated alpha.

First, a cumulative RealAlpha™ chart for the fund:

Cumulative RealAlpha™ for TAVFX

The chart clearly shows that the only rebound the fund had was in a short period of outperformance in the second half of 2008. Otherwise, the fund exhibited a persistent downward trend in the cumulative RealAlpha™.

The following chart illustrates the major equivalent holdings of the fund in the entire analysis period:

Reference Weights for TAVFX

From 2009 to 2012, the fund was predominantly invested in securities driven by the Hong Kong market — see the equivalent position in EWH (iShares MSCI Hong Kong ETF). The weight of this ETF peaked at over 73% in November 2009, and even most recently it was higher than 25%. Investors in this fund effectively had a foreign single-country fund in their portfolios. Such concentration is not something that most investors would expect. Alpholio™ provides a current analysis of all major funds, which gives investors an early warning on major directional bets their fund managers are making.

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