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Patton’s Fund Picks, Pt. 7: Currency, Long-Short Funds

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Over the past several weeks we’ve been discussing my favorite mutual funds. These funds were selected based on an in-depth, in-house analysis; last week I shared my favorite picks in global and emerging market funds.

Starting with this post, we’ll turn our attention to alternative mutual funds. There are seven additional categories to cover. Let’s begin with currency and equity long-short. 

Currency Funds

For several years I used ETFs to play the currency markets. The task was to get in and out as market conditions warranted. Although I was able to do this, to do it well, and stay abreast of all the other material information an advisor must monitor, it did increase my burden. To simplify matters, I sought a fund (or ETF) that would make those tactical decisions for me. My journey led me straight to the Franklin Templeton Hard Currency Adv fund (ICHHX). This fund has been in the top performance quartile in eight of the past 11 years. During 2006-08 it fell into the second quartile. To be fair, from 2001 to 2005 when it was in the first percentile, there were only two other currency funds. Today there are 79 and ICHHX still ranks near the top. The current management team has been in place for 6.5 years. This fund has had a high correlation with the S&P 500 over the past three years at 0.81, but it has been lower over the trailing five-year period at 0.65. My typical allocation for this fund is normally less than 5% of a portfolio. 

Equity Long-Short Funds

I have used several different long-short funds over the years and I was often disappointed. However, late in 2011, I found a great fund. In fact, if you look at a chart with this fund and the DJIA, you’ll notice times when the Dow and this fund rises, times when they both fall, and many times when the Dow falls and this fund gains. Over the years, this fund has outperformed the DJIA for most trailing periods. The fund is Marketfield (MFLDX) and it began in July 2007. Since then, it has spent much of its existence in the very top of its peer group. Marketfield uses a wide array of strategies including: long, short, options, futures, stocks, bonds, etc. MFLDX has beaten at least 85% of its peers since 2009. Manager Michael Aronstein has done a terrific job making macro-level bets here. Moreover, I have read his periodic commentaries and find his musings to be among the best available. Very pragmatic and filled with wisdom. A somewhat rare commodity today. 

Next week, we’ll continue with the alternative asset category. To view all my mutual fund picks, I invite you to peruse my 2012 Fund Picks home page.

Thanks for reading and have a great week!


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