California Dreaming

January 20, 2011

Barron’s points out that CALPERS, the state pension system could have done better last year owning SPY. CALPERS made 12.5% last year. The state teacher retirement system, CALSTRS, did slightly better, earning 12.7%. But SPY returned more than 14.4%.

This neglects the fact that SPY is all equity and CALPERS is a balanced fund. The S&P balanced ETF that Barron’s mentioned, AOR, returned 11.1%.

I have a modest proposal. Maybe CALPERS should just put their $228 billion into the Arrow DWA Balanced Fund (DWAFX). It has bonds for stability, domestic and international equities for growth, and alternatives for diversification. And the return last year was 16.08%, beating CALPERS, CALSTRS, SPY, and AOR.

Is anyone is Sacramento listening? Heck, we could make do with even $5 billion. We can dream, can’t we?

Click to enlarge. Source: Yahoo! Finance

Click here to visit ArrowFunds.com for a prospectus & disclosures. Click here for disclosures from Dorsey Wright Money Management.

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Wanted: Uncorrelated Returns

January 20, 2011

What is one of the primary reasons that more that 54% of investors surveyed by SEI said they planned to increase their contributions to hedge funds over the next 12 months?

One prominent focus of investors this year is gaining access to returns disconnected from broader market trends, typically referred to as noncorrelated investments. In other words, why pay the typical hedge fund fees — 2 percent of assets and 20 percent of profits — for an investment that mirrors the Standard & Poor’s 500-stock index? [Emphasis added]

Furthermore, the wealthier the client, the more optimistic the outlook for hedge fund growth.

But the big guys are the most optimistic. Among those with more than $5 billion in assets, 70 percent think that hedge fund investing will grow. By contrast, just 37 percent of those with less than $500 million in assets feel that way.

By the way, investors don’t necessarily need to pay 2 percent and 20 percent of profits to get access to returns disconnected from broader market trends. Click here to view a presentation on our Global Macro separate account strategy.

HT: Dealbook

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Fund Flows

January 20, 2011

The Investment Company Institute is the national association of U.S. investment companies, including mutual funds, closed-end funds, exchange-traded funds (ETFs), and unit investment trusts (UITs). Members of ICI manage total assets of $11.82 trillion and serve nearly 90 million shareholders. Flow estimates are derived from data collected covering more than 95 percent of industry assets and are adjusted to represent industry totals.

This is a first in a long, long time-domestic equity funds attracted the most new money last week. Municipal bond funds continue to bleed.

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