Doesn't sphinx still have the high-income and millionaire net worth
restrictions? And isn't gatex approach too timid to make reasonable
returns? There are many hedge-like alternative funds that fall in
between these extremes, but it's unclear how to allocate percentages.

Normally you might like 2/3 SP500 and 1/3 bonds as the simplest rule.
But now the longer bonds are risky and the short ones offer little
return. So is it within that third that you want to substitute some
hedges, like long/short funds or arbitrage?

On the other hand, some hedge approaches like perhaps REIT, aren't
that independant from stock cycles and should be considered part
of the 2/3 bin. Or a little in both, or a whole new breakdown.

Another irritation from the typical balanced fund approach is not
only longer bonds dragging you down, but the SP500 index has been
the sick man of most of the indexes (vs. midcap, etc). One cute
remedy is also offered by rydex with their non-cap-weighted-SP500
etf RSP which you could pair together SHY for better performance
I would think than the typical VWELX kind of balanced fund.

Well, I have had good experience with some hedge-like funds that
for instance go hard-charging short or long based on conditions,
and have a good all-weather track records (most of them don't).
But I won't start naming ticker names unless someone helps me
understand asset allocation issues. The normal analysis for
bonds mixes together their properties of steady returns and
low volatility, which may not remain the case. Hedges also
may have one or the other, but not both...

mgorund[at]yahoo.com (Mike Gorund) wrote in message news:<e2a2dbe1.0311071332.6d2253cd[at]posting.google.com> ...
- quote -

Sorry, got it wrong. They write calls against the SP500 index, not the stocks.

Mike

Mike Gorund wrote:
- quote -

I hear you, but that's also why I think they've been misrepresented. The
S&P hedge fund index, the basis of the Rydex fund you mentioned,
includes funds using nine categories of strategies, only a couple of
which I consider true hedges. To me you end up with a pretty arbitrary
index when you include things like distressed securities, merger
arbitrage, market timing models, & the like. So it has an unknown effect
on your portfolio and you're back to an active management piece in the
mix, only it's illiquid, is a bit of an unknown, & has higher costs than
anything else you invest in.

More fundamentally I think there are easier ways to provide protection
against a falling market, if that's what's wanted - basic
diversification. If 2000-2002 was terrible then the portfolio didn't
include value stocks, bonds or REITs, all of which can be held at
extremely low cost. I'd look to that kind of addition first, and
consider most HF investments to be in the speculative layer of a
portfolio. And remember '98-'00 returns would have been leaned out if
your stock investments had been hedged so it's a mixed blessing.

Another alternative to look at is the Gatway mutual fund
- quote -

That's a bit different, when you focus on a specific fund/strategy - and
I guess there are plenty of ways to skin a cat. I do the risk reduction
by mixing in other asset classes, but you can do the covered call kind
of approach too. Either has a similar effect. Something like GATEX does
have costs that wouldn't be there with a simple balanced allocation (eg
VBINX or some mix of the S&P and cash/short bonds).

-Tad

Tad Borek <borekfm[at]pacbell.net> wrote in message news:<SGdqb.24156$Wh4.2297[at]newssvr27.news.prodigy.com> ...

- quote -

Because of the hedge aspect. Most mutual funds hope to make money in a
rising market but offer zero protection (hedging) in a falling market.
I'm also interested in the Rydex product (called Sphinx, btw) after
being burned in regular stock mutual funds during the 2000-2002 bear
market. Another alternative to look at is the Gatway mutual fund
[GATEX] (no affiliation with Gateway computer.) The fund buys stocks
to match the SP500 index then writes covered calls against the
individual stocks. They also buy puts. The steady cash flow from sales
of calls and the puts buffer losses if the equities should fall in
value. It's a conservative approach that gives some upside potential
in a bull market but limits losses in a bear market. Expenses are
reasonable. There was an article in last week's Barrons on this fund.
YTD it's up about 9 or 10%. See also
http://moneycentral.msn.com/articles...funds/8094.asp

Mike

FranksPlace2 wrote:
- quote -

Also the statement lumps together a funds that are doing very different
things. And of course "reduce risk" depends on what's already in your
portolio.

These things are getting way too much airtime IMO. The term sounds jazzy
but when you strip away the hype you're down to a short list of
investing strategies, active management done in ways mutual funds can't
(meaning just like any actively managed mutual fund, they rely on the
guesses of the managers, so you need to evaluate how good a guesser the
manager is). The strategies are implemented at a very high cost, with
limited information available to the investors, and limits on getting
your hands on your money. Why bother?

- quote -

From your broker, who will provide some kind of documentation about
what exactly the fund(s) do, or might attempt to do if they convince
enough people to hand over some cash. These vary from one to the next so
you really need to look specifically at the ones being presented to you.

-Tad

I recently read that Rydex Funds (www.rydexfunds.com) has now "come out with
a fund of hedge funds based on an S&P created investable hedge fund index
contained within a mutual fund. You can only get it through an investment
advisor, but it is available to the public. It is the camel's nose under the
tent." (quoted from John Mauldin).


"FranksPlace2" <franksplace2[at]email.com> wrote in message
news:d6bbed5b.0311041020.78972a87[at]posting.google.com...
| A broker recently told me that hedge funds are now available for more
| investors. Also they are a way to reduce risk. That seems strange to
| me since they have less investment restriction.
|
| Wher can I find out more info?
|
| Frank
|

A broker recently told me that hedge funds are now available for more
investors. Also they are a way to reduce risk. That seems strange to
me since they have less investment restriction.

Wher can I find out more info?

Frank