Tuesday, September 16, 2008

Update on Mutual Fund Market Timing

The TFS Market Neutral Fund Annual Report arrived, allowing me to update my analysis of the market timing abilities of fund investors. The previous report was for the second half of 2007, while this report is for the full year from 1st July 2007 till 30th June 2008. By subtracting the data for the second half of 2007 from the annual report data we can produce a report for the first half of 2008:

The average investor did better in this period than in the previous six months buying shares at an average price of $14.82 and redeeming shares at $14.41 a 2.8% loss vs. the average 6.9% loss in the previous six months. As you can see they still lost from market timing, though not as badly. Additionally, the fund saw massive inflows of a net $100 million vs. outflows of $50 million in the previous six months. Far less money was collected for early redemptions. Only 7% of redemptions were of purchases within the last six months.

On the other hand, not only were redemptions at prices below purchases, it also looks like that they were below average prices for the period, while purchases were at above average prices:

So, shareholder behavior was better in this six month period than the previous six months, but far from optimal.

Since June 30th the fund has not done well at all, but neither has the market. The fund underperformed the market in July and has about matched market performance in August and September so far:

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