|Share on Facebook Facebook||Share on StumbleUpon StumbleUpon|
|Share on LinkedIn LinkedIn||Submit on Reddit reddit|
|Tweet Twitter||Pin it Pinterest|
|Share on Google+ Google+||Share on Digg Digg|
|Post to Tumblr Tumblr||Share on Delicious Delicious|
Welcome to VanEck
VanEck is a global investment manager with offices around the world. To help you find content that is suitable for your investment needs, please select your country and investor type.
VanEck NDR Managed Allocation Fund (NDRMX) tactically adjusts its asset class exposures each month across global stocks, U.S. fixed income, and cash. It utilizes an objective, data-driven process driven by macroeconomic, fundamental, and technical indicators developed by Ned Davis Research ("NDR"). The Fund invests based on the weight-of-the-evidence of its objective indicators, removing human emotion and decision making from the investment process. The expanded PDF version of this commentary can be downloaded here.
Weight-of-the-evidence turns bearish on stocks.
In October, the VanEck NDR Managed Allocation Fund (the “Fund”) returned -6.29% versus -4.80% for its 60% global stocks (MSCI All Country World Index) and 40% bonds (Bloomberg Barclays US Aggregate Bond Index) benchmark.*
Global stocks and U.S. bonds returned -7.49% and -0.79%, respectively.2The Fund’s 18% overweight exposure to stocks led to underperformance. The stock market selloff was broad. All of the major equity regions were down similarly. Therefore, the Fund’s overweight exposure to U.S. stocks provided minimal downside protection. Within the U.S., there was a notable difference in performance between both value and growth, and large-cap and small-cap equities. Value (Russell 3000 Value Index) outperformed growth (Russell 3000 Growth Index) by 3.77% and large-cap (Russell 1000 Index) outperformed small-cap (Russell 2000 Index) by 3.78%.2The Fund held a meaningful overweight exposure to large-cap, and that allocation was split evenly between value and growth.
The Fund reacted to the heightened risk regime by significantly reducing its equity exposure for November. The global equity allocation was reduced from 78% to 40%, bonds were increased from 20% to 58%, and cash remains around 2%. The Fund still prefers the U.S. over the other equity regions, and within the U.S., large-cap over small-cap stocks.
|Total Returns (%) as of October 31, 2018|
|1 Mo†||YTD†||1 Year||Since Inception|
|Class A: NAV
|Class A: Maximum 5.75% load||-11.67||-10.93||-9.10||3.15|
|60% MSCI ACWI/
40% BbgBarc US Agg.
|Morningstar Tactical Allocation
|Total Returns (%) as of Sep. 30, 2018|
|1 Mo†||YTD†||1 Year||Since Inception|
|Class A: NAV
|Class A: Maximum 5.75% load||-5.86||-4.95||-1.12||6.12|
|60% MSCI ACWI/
40% BbgBarc US Agg.
|Morningstar Tactical Allocation
The tables present past performance which is no guarantee of future results and which may be lower or higher than current performance. Returns reflect applicable fee waivers and/or expense reimbursements. Had the Fund incurred all expenses and fees, investment returns would have been reduced. Investment returns and Fund share values will fluctuate so that investor’s shares, when redeemed, may be worth more or less than their original cost. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value (NAV). An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made. Index returns assume that dividends of the Index constituents in the Index have been reinvested.
†Returns less than a year are not annualized.
Expenses: Class A: Gross 2.33%; Net 1.39%. Expenses are capped contractually until 05/01/19 at 1.15% for Class A. Caps excluding acquired fund fees and expenses, interest, trading, dividends, and interest payment of securities sold short, taxes, and extraordinary expenses.
The Fund’s recent shift from moderately bullish to bearish is notable for a couple of reasons. Firstly, this marks the first time the Fund has become bearish since launching in May of 2016. Secondly, this demonstrates how quickly the Fund can turn bearish, reducing exposure from 78% to 40%, once the evidence changes. The goal of this Fund is to participate in the upside, and just as importantly, protect against severe market corrections. It protects by measuring market risks using its objective, data-driven indicators, and adjusting its allocations based on that risk assessment. Right now, a plethora of evidence from the indicators points to lower stock prices. These include negative stock price momentum and market breadth, defensive sector leadership, changing investor sentiment, and continued global economic weakness and stretched valuations.
Tim Hayes, Chief Global Investment Strategist at Ned Davis Research, recently used the below chart to provide context to the newly established underweight positon. It uses history to highlight some interesting statistics. Foremost, market dips of 5% to 9% occur often. This is typical stock market volatility. However, corrections of 10% or more are infrequent. Market dips have historically progressed to moderate corrections (10% decline or more) only 27% of the time. But the math changes significantly as the drawdown intensifies. Historically, moderate corrections have advanced to severe corrections (15% decline or more) 55% of the time, and severe corrections have advanced to bear markets (20% decline or more) 65% of the time. As of the end of October, global stocks were down just over 10% from the peak reached in late January.
As Drawdown Intensifies, Chance of Severe Market Loss Increases
Anatomy of Declines in MSCI World Index (12/31/1969 to 10/31/2018)
(5% decline or more)
(10% decline or more)
(15% decline or more)
(20% decline or more)
|Number of Occurences||-0.10||0.85||4.90||8.77|
|Mean Number of Occurrences Per Year||-5.86||-4.95||-1.12||6.12|
|Chances of Decline Moving to Next Stage(%)*||-0.25||1.76||5.57||8.01|
* = e.g. The chance of a 10% decline turning into a 15% decline, etc. N/A = Not Applicable
Source: MSCI; Ned Davis Research. Data as of October 31, 2018. Past performance is no guarantee of future results. Chart is for illustrative purposes only. Copyright 2018. Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers, refer to www.ndr.com/vendorinfo/.
What’s interesting is that U.S. stocks are just joining the correction party that international developed and emerging markets stocks have been at for most of this year. Year-to-date, the U.S. market (Russell 3000 Index) is up 2.43%.2 By comparison, international (MSCI EAFE Index) and emerging markets (MSCI Emerging Markets Index) are down 8.86% and 15.45%, respectively.2 This risk is being measured in the model by a global breadth indicator. It measures market participation through the technical strength or weakness of individual countries. Global market indices typically trade poorly when country breadth is weak. As you can see from the chart below, only 17% of countries are trading above their intermediate-term levels.
With U.S. Correcting Now, Only Small Number of Countries Demonstrating Technical Strength
Percentage of MSCI ACWI Countries above 50-day Moving Average
Source: Ned Davis Research. Data as of October 31, 2018. Past performance is no guarantee of future results. Chart is for illustrative purposes only. Copyright 2018. Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers, refer to www.ndr.com/vendorinfo/.
Over the past few months we have been actively explaining this risk to investors. Weak market breadth was evident not only at the country level, but also within certain sectors and stocks in the U.S. As Tim Hayes points out in his research, we can expect the correction in the U.S. markets to have a disproportionate effect on global stocks given that the U.S. accounts for approximately 57% of the world market. As always, we remain loyal to the indicators and will adjust exposures as the data changes. In the meantime, we will remain defensive until the risk abates.
NDR Indicator Summary, November 2018
|Stocks, Bonds, or Cash|
|Stocks (vs. Bonds)||Bearish||Neutral||Bearish|
|Bonds (vs. Cash)||Neutral||Bearish||Neutral|
|Global Regional Equity|
|Europe ex. U.K.||Bearish||Bullish||Bearish|
|Pacific ex. Japan||Bearish||Bearish||Bearish|
|U.S. Cap & Style|
Asset Class Positioning vs. Neutral Allocation, November 2018
The neutral allocation, which is provided by Ned Davis Research, Inc., represents the starting point of the Fund’s model absent an alternative recommendation once the model takes into consideration the indicators that yield the global tactical allocation model. These are not recommendations to buy or sell any security.
IMPORTANT DEFINITIONS AND DISCLOSURES
*All weighting comparisons are relative to the blended benchmark (60% MSCI ACWI/ 40% Bloomberg Barclays US Agg.) or neutral allocation. This represents the starting allocation point absent an alternative recommendation once the model takes into consideration the indicators that yield the global tactical allocation model.
1Morningstar category averages are equal-weighted category (total) returns. The calculation is the average of the total returns for all funds in a given category. The standard category average calculation is based on constituents of the category at the end of the period. Total return reflects performance without adjusting for sales charges or the effects of taxation, but is adjusted to reflect all actual ongoing fund expenses and assumes reinvestment of dividends and capital gains. If adjusted, sales charges would reduce the performance quoted.
The Morningstar Tactical Allocation category includes portfolios that seek to provide capital appreciation and income by actively shifting allocations across investments. These portfolios have material shifts across equity regions, and bond sectors on a frequent basis. To qualify for the tactical allocation category, the Fund must have minimum exposures of 10% in bonds and 20% in equity. Next, the Fund must historically demonstrate material shifts in sector or regional allocations either through a gradual shift over three years or through a series of material shifts on a quarterly basis. Within a three-year period, typically the average quarterly changes between equity regions and bond sectors exceeds 15% or the difference between the maximum and minimum exposure to a single equity region or bond sector exceeds 50%. As of September 30, 2018, the Fund ranked 141 out of 310 funds for the 1 month period; 168 out of 310 funds for the YTD period; 153 out of 308 funds for the 1 Year period; and 96 out of 293 funds since inception. As of October 31, 2018, the Fund ranked 184 out of 297 funds for the 1 month period; 205 out of 297 funds for the YTD period; 203 out of 296 funds for the 1 Year period; and 119 out of 280 funds since inception. The Fund’s benchmark is a blended unmanaged index created by the Van Eck Associates Corporation (the “Adviser”) consisting of 60% MSCI All Country World Index (ACWI) and 40% Bloomberg Barclays US Aggregate Bond Index. The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 24 emerging markets (EM) countries and covers approximately 85% of the global investable equity opportunity set. The Bloomberg Barclays US Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. This includes treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and collateralized mortgage-backed securities.
2Global stocks are measured by the MSCI ACWI and U.S. bonds are measured by the Bloomberg Barclays US Aggregate Bond Index. Large-cap stocks are measured by the Russell 1000 Index, an index of the largest 1,000 companies in the Russell 3000 Index. The Russell 1000 Index comprises over 90% of the total market capitalization of all listed U.S. stocks. Small-cap stocks are measured by the Russell 2000 Index, an index which measures the performance of the smallest 2,000 companies within the Russell 3000 Index. Value stocks are measured by the Russell 3000 Value Index, a market-capitalization weighted equity index based on the Russell 3000 Index, which measures how U.S. stocks in the equity value segment perform. Included in the Russell 3000 Value Index are stocks from the Russell 3000 Index with lower price-to-book ratios and lower expected growth rates. Growth stocks are measured by the Russell 3000 Growth Index, a market capitalization weighted index based on the Russell 3000 Index. The Russell 3000 Growth Index includes companies that display signs of above average growth. Companies within the Russell 3000 Index that exhibit higher price-to-book and forecasted earnings are used to form the Russell 3000 Growth Index. U.S. stocks are measured by the Russell 3000 Index which is a capitalization-weighted stock market index that seeks to be a benchmark of the entire U.S stock market. It measures the performance of the 3,000 largest publicly held companies incorporated in America and is based on market capitalization. The MSCI Europe ex UK Index captures large and mid cap representation across 14 Developed Markets (DM) countries in Europe. The MSCI Canada Index is designed to measure the performance of the large and mid cap segments of the Canada market. The MSCI Pacific ex Japan Index captures large and mid cap representation across 4 of 5 developed markets (DM) countries in the Pacific region (excluding Japan). Emerging Market stock are measured by the MSCI Emerging Markets Index which captures large and mid cap representation across 24 Emerging Markets (EM) countries. The MSCI United Kingdom Index is designed to measure the performance of the large and mid cap segments of the UK market. The S&P 500®Index consists of 500 widely held common stocks, covering four broad sectors (industrials, utilities, financial and transportation). International stocks are measured by the MSCI EAFE wcaptures large and mid cap representation across 21 Developed Markets countries around the world, excluding the US and Canada.
Please note that the information herein represents the opinion of the author, but not necessarily those of VanEck, and these opinions may change at any time and from time to time. Non-VanEck proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Historical performance is not indicative of future results. Current data may differ from data quoted. Any graphs shown herein are for illustrative purposes only. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.
All indices are unmanaged and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. Certain indices may take into account withholding taxes. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made. Results reflect past performance and do not guarantee future results.
You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program rather than a complete program. Because the Fund is a “fund-of-funds,” an investor will indirectly bear the principal risks of the exchange-traded products in which it invests, including but not limited to, risks associated with cash and cash equivalents, debt securities, exchange traded products, exchange traded products’ underlying investments, below investment grade securities, commodities and commodity-linked derivatives, commodities and commodity-linked derivatives tax, common stock, concentration, derivatives, emerging markets, investment style, small-, medium- and large-capitalization companies, market, model and data, operational, portfolio turnover and regulatory risks. The Fund will bear its share of the fees and expenses of the exchange-traded products. Consequently, an investment in the Fund entails more direct and indirect expenses than a direct investment in an exchange-traded product. Because the Fund invests in exchange-traded products, it is subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of an exchange-traded product’s shares may be higher or lower than the value of its underlying assets, there may be a lack of liquidity in the shares of the exchange-traded product, or trading may be halted by the exchange on which they trade. Principal risks of investing in foreign securities include changes in currency rates, foreign taxation and differences in auditing and other financial standards. Debt securities may be subject to credit risk and interest rate risk. Investments in debt securities typically decrease in value when interest rates rise.
Please call 800.826.2333 or visit vaneck.com for performance information current to the most recent month end and for a free prospectus and summary prospectus. An investor should consider the Fund’s investment objective, risks, charges and expenses carefully before investing. The prospectus and summary prospectus contain this as well as other information. Please read them carefully before investing.
This website is published in the United States for residents of specified countries. Investors are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this website. Nothing on this website should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.
Investing involves risk, including possible loss of principal. An investor should carefully consider investment objectives, risks, charges and expenses carefully before investing. This and other information can be found in the appropriate regulatory documents made available for a specified country as designated in this website.