Thursday, August 21, 2008

'Rising Tide Growth' Performance vs Peers July Update

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Aside from measuring Rising Tide Growth versus market indexes, the past few months we have begun new measures to track performance versus it's peer group, the "mid cap growth" category of mutual funds.

Apr 23: 'Rising Tide Growth' v Mid Cap Growth Mutual Fund Peers
May 9: 'Rising Tide Growth' Performance vs Peers April Update
Jun 23: 'Rising Tide Growth' Performance vs Peers May Update
Jul 26: 'Rising Tide Growth' Performance vs Peers June Update

Note: For newer readers, the Apr 23 post has a detailed methodology breakdown, and is worth the quick read.

We now finally have a true apples to apples comparison as our first year completed as of July 31st. Our general big picture goals once live is to try to finish in the top 10% of our category most years - that would place us at the very top over 3 year, 5 year, 10 year time frames. Of course that goal won't be reached every year, but have to aim high. There are about 1870 funds in this category so any finish near the top 200 or so would place you in the top 10%. Finishing in the top 25 in any 1 year would be an extraordinary year in my eyes.

July was a horrid month for us as we lost just over 8% - however my hunch would be that it would be horrid for most of the other funds in the "top tier" for the past year since the stocks rallying in July (and the first part of August) were the "junk sectors" - the beaten down stuff that no one wanted except deep value fund managers who have been decimated the past year. I, we, all of us tend to focus on the short term performance so sometimes it is good to take a step back and analyze the longer term (and in reality 1 year is not that long of a time either)

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As of the previous month we had been the #1 fund (out of 1860) in our category by a whopping 3%. But our return was 21.1% (19.4% after fees). We dropped a long way in July so I was curious how we would stack up when the final results came in. As of July 31, Rising Tide Growth NAV was $11.09, creating a 10.9% return (we started at NAV $10.00). As always my results are kept by third party, which I link to in the left margin of the blog.

RTG Return: +10.9% (9.2% after fees)
Top 25 peer range (1 year as of July): +7.2% (1st place) to +0.0% (25th place)
Average of all peers: -7.8%

Here are the top 25 performers in the category for July 31, 2008.

I love looking at this to keep things in perspective because the harshest critic of myself is... myself. We are going to have bad months and bad quarters along the way. But our lead (over the #1 fund) only fell 1% from a 3% lead to a 2% lead, and we still finished as the #1 fund in our category after a 8% loss in July. As I envisioned, the funds we were competing with for the top spot over the past year, had similar types of stocks and were decimated in July, even worse then we were. Again we at least carry cash and some short hedges, whereas 99% of mutual funds have 0-2% cash and no short exposure. I walked away from July in complete dismay but "relatively speaking" we still outperformed the pack, and on a yearly basis we did fantastic. To put in perspective how bad a year this was, in our category if you made 0% you finished as the 25th best performing mutual fund in mid cap growth (remember, out of 1860 peers). Keep in mind the S&P 500 was down 14% during a similar time frame [Bookkeeping: 'Rising Tide' Performance Year 1] so even a 0% return outperformed the market by 14 points.

In summary - we'd be the best fund in America in our category by 3.7%. We'd be beating the 25th best fund in our category by +10.9%. We'd be beating the average of our peer group by +18.7%.

Looking around the landscape - as I scroll through all the non sector funds - the #1 fund in mid cap value returned -1.7%. Only 7 funds in mid cap blend had a positive return, none over 5%. So no matter the style in mid cap there was no one close. In the small cap categories of value, growth, or blend only 2 funds were ahead of us. In the large cap areas of value, growth, or blend only 7 funds beat us. So in the entire non sector specific category we would of been the 10th best performing fund. (I believe there are roughly 6000-6500 non sector specific equity funds) And the top performer in all of mid cap funds. I'll take that for a rookie year. But the results demonstrate just how tough a year it has been for the mutual fund industry and investors overall (Hedge funds had the worst 1st half of the year in 20 years)

As always, our long term goals are to be near the top of this list in the 3 year, 5 year, and 10 year categories. Since I did this to see how we compared to peers on 1 year basis, it won't change much month for month, but now that we have 1 year under our belt as an apples to apples comparison I'll check back every quarter since the "standings" won't change much month to month.

[Legal Disclaimer: Rising Tide Growth fund is a hypothetical fund and in no way, shape, or form can we guarantee similar results in a similarly structured product when launched]

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