s17-ga,
Hello again, and thank you for directing this question to my attention.
I have reviewed almost 200 articles that appeared prior to September
1993, and that made reference to timing as a strategy for investing in
mutual funds. The great majority of these were quite generic in
nature, but a number of them -- included in my answer, below --
focused specifically on the type of market timing I believe your
question focuses on.
As I mentioned earlier, I cannot reproduce the articles in full here,
due to copyright protections, but I have provided selected excerpts to
give you the gist of each article.
Undoubtedly, there are other articles yet to be uncovered. If there
is a particular topic, or theme, or company, or investment guru on
which you would like me to do further research, just let me know by
posting a Request for Clarification, and I'll be more than happy to
continue working on this one for you.
All the best.
pafalafa-ga
==========
The Financial Post (Toronto, Canada)
February 16, 1985
Computers guide mutual funds' timing
A new fund using market timing techniques is the Guardian Computer
Trend Fund, managed by Guardian Capital Investment Council Ltd.,
Toronto. Awaiting approval of the Ontario Securities Commission,
Guardian hopes to launch it in March.
This fund uses a computer program which tells the fund manager when to
buy or sell equities. The fund is the only one in Canada which invests
its assets either entirely in Treasury Bills (Canadian) or entirely in
stocks (in this case, U.S. transportation company shares). Most funds
keep varying portions of their portfolio in stocks and fixed income
securities to protect the initial capital investment.
''It's for the sophisticated investor who wants above-average return
on a long-term investment and who doesn't want to get involved in the
timing of when to buy or sell,'' says Bruce Walters, vice-president,
marketing, Guardian Capital Investment Council Ltd.
Essentially, the fund feeds hourly information on the trading
performance of 30 major transportation companies, traded on the New
York Stock Exchange, into its computer. Based on historical and
current data, the computer gives a buy signal in a rising market, and
a sell in a falling one.
==========
St. Petersburg Times
June 5, 1987
Cost of market-timing service could outweigh potential benefits
Q. I've read a number of articles dealing with market timing and
switching of mutual funds, either by subscribing to newsletters or by
paying fees for managed accounts. I doubt there is any merit to claims
that market timing will outperform an investment in mutual fund shares
held through the ups and downs of market cycles. I can't see paying
an annual fee equal to 2 percent of the value of my mutual fund
holdings to have a timer switch my investments in a managed account.
Don't mutual funds charge substantially less and provide good
performance?
A timing service moves investments from one type of mutual fund to
another, with the idea of being in the right fund at the right time,
such as into a common stock mutual fund when the stock market is
headed up, then switching into a money market fund when the opposite
happens....
...The timers' big pitch is that most mutual funds are too big to sell
all the securities they hold when the market goes against them and if
funds do sell they depress the market further. Timers claim they can
move their clients' accounts efficiently, beating the market and the
funds...
==========
The Financial Post
January 31, 1990
Managers focusing on market timing in turbulent world
Market timing has mutual fund owners concerned in view of recent
turbulence and uncertainty on the world's stock markets....At least
one fund manager does time the market for his clients. Jean-Pierre
Fruchet, president of Guardian Timing Services Inc., has the ability
to go 100% long or short on the market and switches from equity mutual
funds into cash mutual funds in his Canadian Protected fund. By going
long, the fund manager is betting the market will rise in the coming
months.
Two-and-a-half weeks ago Fruchet sold 98% of the equity exposure in
his Canadian fund and went 35% short on the market in his U.S.
fund....
==========
St. Louis Post-Dispatch
November 9, 1992
IS THE TIME RIGHT OR WRONG FOR TIMING THE MARKET?
The recent volatility in the stock market creates a prime opportunity
for investors who use a strategy known as market timing. But they face
greater risk, too. These investors buy and sell stocks or mutual funds
frequently, sometimes even daily, based on an array of technical
factors like trading volume, economic data and stock-price movements.
And in a market moving sharply up and down, the frequent trader has
more of a chance for sharp gains - or losses.
Today there are six mutual funds that rely on market timing to manage
their investments and several more designed for people who use market
timing on their own. In addition, some newsletters tell investors when
to buy and sell shares of mainstream funds - those that do not use
timing....Only one of the three funds in existence for five years, the
Righttime Blue Chip Fund, beat the stock fund average....Perhaps more
telling are the two funds that shut their doors last year. The
Monitrend Value Fund lost 0.5 percent a year for the five years ended
April 30, 1991, when it finally died...Another victim was the Lowry
Market Timing Fund. Lowry rose 6.5 percent a year for the five years
ended July 31, 1991, when it shut down.
==========
The Financial Post
April 4, 1997
Market timers reject the buy-and-hold approach
The Toronto Society of Technical Analysts last week invited one of the
more respected fund switchers, Harland Hendrickson, to reveal some of
his secrets.
TSTA members normally apply technical analysis in order to trade
stocks or futures directly, and sometimes indexes. Hendrickson takes a
similar tack, but switches between mutual funds rather than stocks.
His credo is that ''sometimes the best fund is no fund at all.''
Hendrickson, who has a PhD in biochemistry, sells load funds from
Edmonton and publishes an insightful newsletter, Market Trend
Follower. He believes funds are better market-timing vehicles than
securities held directly because of the instant diversification funds
provide, the ability to switch at little or no cost, the lower risk
that comes with picking multiple fund managers, and the fact funds
provide exposure to more than 25 different sectors....Hendrickson uses
a momentum strategy to move in and out of major sectors. His approach
resembles technical analysis as applied to stock charting, but is
applied instead to mutual funds.
==========
National Post
August 28, 1999
The case for market timing: Many fund managers go short term despite long-term hype
Market timing generally gets a bad rap with financial advisors and
mutual fund salespeople. In theory, the pot of gold at the end of the
market-timing rainbow is found by selling stocks or equity funds near
a market top, remaining in cash in a bear market and reinvesting the
cash in stocks and equity funds at the end of the bear market, before
the next bull roars.
In the real world, this is impossible, many investment professionals
insist. That's because market timing requires getting two decisions
right: when to get out of the market and when to get back in
again..But once a bear market actually sets in, it can be a disaster
to ride it to the bottom. The case for market timing is made in a just
published book called Timing the Stock Market: When to Buy, Sell, and
Sell Short, by Colin Alexander...
==========
Investment News
March 27, 2000
For funds, it's a case of 'Let the good timers roll'; Market-timing
woes pull a vanishing act
Some mutual fund companies that had been concerned about market timers
wreaking havoc on their portfolios are seeing fewer problems two years
after fair-practice guidelines were established...The guidelines were
established by the Society of Asset Allocators and Fund Timers, or
Saafti, after mutual fund companies complained that market timers were
disrupting funds by making excessive transactions, thus increasing
costs for long-term investors.
The organization's policy includes clearing timer investments with the
fund beforehand, limiting to 5% the amount of a fund's assets that one
timer can control, and when possible, giving funds advance notice of
withdrawals. "Timing really hasn't been an issue here. We're not sure
if it has anything to do with the fair-practices policy of Saafti or
not," says a spokeswoman for Strong Capital Management, which manages
$25 billion. That's a far cry from Strong's stance two years ago, when
the Menomonee Falls, Wis., firm was an outspoken opponent of market
timing...even with the guidelines, moving money out of funds and
stocks when performance drops can still hurt specific funds..."Right
now it's not a systemic problem, but it can be harmful to a specific
fund and the wealth of its other shareholders," says Burton Greenwald,
a mutual fund consultant in Philadelphia. "Any fund worth its salt
would be against timing."
==========
HedgeWorld Daily News
August 9, 2000
New Sapourn Fund of Funds Uses Mutual-Fund Timing Strategy
One of the best-kept secrets of hedge fund investing is mutual-fund
timing, according to manager Michael Sapourn who in July launched a
fund of funds employing that strategy....The fund of funds is the
first for Sapourn, which has been running single-manager
mutual-fund-timing products since 1997 ...It's a strategy that really
hasn't been on the radar screen for many institutional investors, but
they are definitely starting to take notice, Mr. Sapourn said.
With mutual-fund timing, a hedge fund manager is typically either 100%
invested or fully in cash....Generally, with mutual-fund market
timing, you're either in the market or you're out, Mr. Sapourn
said...The directional strategy relies on market momentum and managers
are in a position to make money regardless of whether the market is
climbing or falling.
...even investors who normally don't care to use complex derivative
instruments in their portfolio like that the strategy deals in
exchange-listed public securities....Despite their strong performance,
managers of mutual-fund timing hedge funds have kept a low profile.
That's because hedge fund managers want to avoid drawing the ire of
mutual fund companies that don't like to see what they view as
disruptive inflows and outflows of capital by hedgers.
==========
Investment News
April 16, 2001
Volatility sparks new look at market timing; New program gives
planners access to timing strategies
Market timing for the masses - that is the general concept behind a
program , to debut as early as this week, that will give financial
advisers access to a screened universe of market-timing
strategies...Schreiner Capital Management in New York is launching the
Select Advisors program, which packages nearly 500 market-timing
strategies from 230 active mutual fund traders in a unique, wraplike
format...Roger Schreiner, president of Schreiner Capital and
co-founder of Select Advisors, says the program, which completely
rebuffs any notion of buy-and-hold investing, gives advisers a tool
for investing regardless of market conditions.
...the concept will enable financial planners to allocate client
assets with advisers that actively trade mutual funds using a variety
of market-timing strategies...Select Advisors will offer exposure in
such strategies as short-selling, leveraged long-selling and bonds
through active allocators with turnover rates that could range from
200% to 2,000% annually. Clients pay a 2.5% asset-based fee, of which
1% goes to the adviser bringing the assets to the program...Mr.
Schreiner, a longtime member of the Society of Asset Allocators and
Fund Timers Inc., is from the school that boldly challenges the notion
of buy-and-hold investing...As an adviser with $125 million under
supervision and first-quarter 2001 performance in excess of 30%, Mr.
Schreiner believes market timing is the most responsible way to
oversee a client's portfolio.
''Passive investing doesn't work,'' he says, taking a shot at some of
the mutual fund industry's proudest sons. ''What the Peter Lynches and
John Bogles of the world are telling you is not true. I don't think
buy-and-hold investing is good for any point in time. I think passive
investing is a guarantee that you're going to get hurt.''..In the
Select Advisors model, the underlying managers that will trade mutual
funds in a handful of fund companies which allow and encourage such
activity will do all the timing. The fund companies will primarily
include Rydex, ProFunds and Potomac, but the idea is to expand to more
exotic instruments that will include some individual securities...
==========
Pensions and Investments
January 6, 2003
Volatility equals opportunity: DC participants timing global
investments; A little bit has big impact on funds' performance,
transaction costs
Some sophisticated defined contribution plan participants, and some
retail investors, are using global equity and bond funds to time the
markets...Even though the number of investors doing so is relatively
small, their efforts are complicating the lives of mutual fund
managers and increasing costs for other investors...The investors are
using market information published after foreign markets have closed,
and the different closing times of the markets around the world, to
time their buy and sell decisions.
For example, if U.S. equity prices fall after the foreign exchanges
close, investors may anticipate foreign markets will follow and can
make a tidy profit by selling their international mutual fund shares
in the U.S. market before the fund's share prices fully adjust...If
the U.S. market rises after foreign markets close, investors could buy
more international fund shares, anticipating that stock prices in
foreign markets will also rise when those markets open and taking
advantage of the fact the fund share prices will not yet reflect that
anticipated rise.
A large percentage of total fund assets do not have to be moved in and
out quickly to wreak havoc on mutual funds, said Ananth Madhavan,
managing director in charge of research for ITG Inc., a New York-based
equity trading service...At the Oregon Investment Council, Salem,
officials discovered that market timing by investors in one of the
international index funds in the state's $530 million 457 plan created
a tracking error of more than 150 basis points for the index fund,
said Linda Haglund, Oregon's deputy state treasurer...The fund,
Barclay Global Investors' MSCI EAFE Index Fund, was one of four
comprising the plan's international investment option.
Effective Dec. 30, the plan closed that portion of the multimanager
fund and distributed BGI's $17.5 million in assets equally among the
remaining money managers...''It's a market problem in that there is a
different (market) closing cycle because of our time zone,'' Ms.
Haglund explained. ''As a result of that, investors across the board
are starting to look at the movement in one market, and playing that
off the future close of the other market.''
==========
AFX News
July 11, 2003
Prepare for a 'nasty correction,' says Norman Fosback
Veteran newsletter editor Norman Fosback is probably best known as the
founding editor in chief of the now defunct Mutual Funds Magazine, but
it was his classic text, "Stock Market Logic," that brought his
research to serious investors...In 1971, he teamed with partner Glen
King Parker to form the Institute for Econometric Research, where he
researched and refined his mutual fund rating and timing systems. This
led to the launch of nine successful investment newsletters, including
the very popular Mutual Fund Forecaster.
==========
Again, let me know if there is anything more I can do for you here.
pafalafa-ga
P.S. I'm still working on the books!
P.P.S Markj-ga -- Thanks...anything you can add would be much
appreciated, I'm sure.
search strategy: searched several full-text article databases for
articles on [ mutual fund timing ] dated earlier than September 2003. |
