The Masters 100 Fund (MOFQX)
Performance & Portfolio Discussion
Dear Shareholder:
After losing 37.00% in 2008, the S&P 500 fell 18.18% in the first two months of this year before turning around to close the first quarter with a loss of 11.01%. The rally that began in March, continued in the second quarter with a gain of 15.93%. Even after this rally, the S&P 500 is now in negative territory for the past 10 years!
In 2008, when the S&P 500 dropped 37.00%, the Masters 100 Fund fell a little deeper into the same hole. In our last report, I outlined the reasons for the Fund’s underperformance in the 2nd half of 2008. I’d like to tell you now what we did about it. Instead of “staying the course,” we assessed the market situation to identify the type of investment skill we would need to recover.
The market has shown us that it can be much more volatile than many can stomach, and that even long-term investors (10 years) can still lose money. Going forward, there are clearly going to be times not to be fully invested. But, knowing when to take protective action is a type of investment skill few have.
The characteristics of the analysts I think we need now are as follows:
1) A 5+ year track record that shows an ability to generate returns that make a difference.
2) Protecting the downside is more important than minimizing taxes so I want analysts whose track record shows they know when to move to cash, change sector allocations, and use inverse ETFs.
3) A track record of consistent and steady outperformance relative to the market.
In January, we started to use the m100 analysts who best matched this profile, and they have done a great job.
At the end of the first 6 months of 2009, the Fund is up 10.94% – well ahead of the S&P 500 index that is up 3.16%. But you need to look at the Fund’s performance by quarter during this period to see the skill that these analysts put to work for us.
In the first quarter when the S&P 500 was down 11.01%, the Fund was down 2.45%. That’s protecting the downside!
Yet, when the S&P 500 gained 15.93% in the second quarter, the Fund gained 13.72% capturing nearly all of the market’s gains.
These analysts delivered good performance when the S&P 500 was rising and good protection when the S&P 500 was falling. It’s a hard combination to achieve, and it is making a difference!
The one thing we know for certain about the market is that it will change. The more the market changes, the bigger the advantage we believe our flexible team will have over mutual funds, index funds, and ETFs that are going to “stay the course” no matter what, even if that course leads to another cliff.
Sincerely,
Ken Kam
Portfolio Manager
Marketocracy Masters 100 Fund
Performance & Portfolio Discussion
Dear Shareholder:
After losing 37.00% in 2008, the S&P 500 fell 18.18% in the first two months of this year before turning around to close the first quarter with a loss of 11.01%. The rally that began in March, continued in the second quarter with a gain of 15.93%. Even after this rally, the S&P 500 is now in negative territory for the past 10 years!
In 2008, when the S&P 500 dropped 37.00%, the Masters 100 Fund fell a little deeper into the same hole. In our last report, I outlined the reasons for the Fund’s underperformance in the 2nd half of 2008. I’d like to tell you now what we did about it. Instead of “staying the course,” we assessed the market situation to identify the type of investment skill we would need to recover.
The market has shown us that it can be much more volatile than many can stomach, and that even long-term investors (10 years) can still lose money. Going forward, there are clearly going to be times not to be fully invested. But, knowing when to take protective action is a type of investment skill few have.
The characteristics of the analysts I think we need now are as follows:
1) A 5+ year track record that shows an ability to generate returns that make a difference.
2) Protecting the downside is more important than minimizing taxes so I want analysts whose track record shows they know when to move to cash, change sector allocations, and use inverse ETFs.
3) A track record of consistent and steady outperformance relative to the market.
In January, we started to use the m100 analysts who best matched this profile, and they have done a great job.
At the end of the first 6 months of 2009, the Fund is up 10.94% – well ahead of the S&P 500 index that is up 3.16%. But you need to look at the Fund’s performance by quarter during this period to see the skill that these analysts put to work for us.
In the first quarter when the S&P 500 was down 11.01%, the Fund was down 2.45%. That’s protecting the downside!
Yet, when the S&P 500 gained 15.93% in the second quarter, the Fund gained 13.72% capturing nearly all of the market’s gains.
These analysts delivered good performance when the S&P 500 was rising and good protection when the S&P 500 was falling. It’s a hard combination to achieve, and it is making a difference!
The one thing we know for certain about the market is that it will change. The more the market changes, the bigger the advantage we believe our flexible team will have over mutual funds, index funds, and ETFs that are going to “stay the course” no matter what, even if that course leads to another cliff.
Sincerely,
Ken Kam
Portfolio Manager
Marketocracy Masters 100 Fund
Performance Summary as of June 30, 2009
Cumulative
Returns |
Masters
100 Fund |
S&P 500
with Dividends |
Difference
|
||
|---|---|---|---|---|---|
Year to date
|
10.94%
|
3.16%
|
7.78%
|
||
Q2-2009
|
13.72%
|
15.93%
|
-2.21%
|
||
Q1-2009
|
-2.45%
|
-11.01%
|
8.56%
|
||
Average Annual
Returns |
Masters
100 Fund |
S&P 500
with Dividends |
Difference
|
||
|---|---|---|---|---|---|
1-Year
|
-39.99%
|
-26.21%
|
-13.78%
|
||
3-Year
|
-11.19%
|
-8.22%
|
-2.97%
|
||
5-Year
|
-3.78%
|
-2.24%
|
-1.54%
|
||
Since Inception - 11/5/01
|
1.29%
|
-0.45%
|
1.74%
|
||
The Standard & Poors 500 Index is comprised of 500 selected common stocks most of which are listed on the NYSE.
The above indices are unmanaged and cannot be invested in directly. Returns for the above indices and the Fund assume reinvestment of dividends and distributions. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Returns assume reinvestment of dividends and distributions. Performance data quoted represents past performance. Past performance is not a guarantee of future results. Investment returns and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, click here. The Fund’s total expense ratio was 2.10% (including 1.95% paid to the adviser, and 0.15% for acquired fund fees and expenses) as of October 28, 2008.
Principal risks associated with an investment in the Fund include Stock Selection risk, Small and Medium Companies risk, Foreign Investment risk, and Internet Reliance risk. The Fund can invest in small and medium sized companies, which are often more volatile and less liquid than larger, more established companies and therefore increase the volatility of the Fund’s portfolio. The strategies
used by the Fund’s investment adviser in selecting Fund’s portfolio may not always be successful.
The investments may decline in value or not increase in value when the stock market in general is rising. Investments in foreign securities entail risks not present in domestic investments including, among others, risks related to political or economic instability, currency exchange, and taxation. Operation of Marketocracy.com’s website depends on the continued availability of the Internet, both short- and long-term. Significant failures of the Internet could lead to interruptions or delays in the Fund’s investment adviser’s ability to manage the Fund’s portfolio.
The m100 group, upon whose research the Masters 100 Fund’s portfolio manager relies in managing the Fund, is comprised of individuals who may be amateur investors, not investment professionals, and are not employees of the Fund or its adviser. Their track records are based on the performance of a simulated stock portfolio on the website www.marketocracy.com.
Marketocracy Funds advises investors to carefully consider the investment objectives, risks, and charges and expenses associated with the Fund prior to investing. The Fund’s prospectus contains this and other information about the Fund. To obtain a prospectus containing more complete information about the Fund, including fees and expenses, click here. Please read the prospectus carefully before investing.
Distributor: Rafferty Capital Markets, LLC
Date of first use: August 28, 2009
The above indices are unmanaged and cannot be invested in directly. Returns for the above indices and the Fund assume reinvestment of dividends and distributions. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Returns assume reinvestment of dividends and distributions. Performance data quoted represents past performance. Past performance is not a guarantee of future results. Investment returns and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month-end, click here. The Fund’s total expense ratio was 2.10% (including 1.95% paid to the adviser, and 0.15% for acquired fund fees and expenses) as of October 28, 2008.
Principal risks associated with an investment in the Fund include Stock Selection risk, Small and Medium Companies risk, Foreign Investment risk, and Internet Reliance risk. The Fund can invest in small and medium sized companies, which are often more volatile and less liquid than larger, more established companies and therefore increase the volatility of the Fund’s portfolio. The strategies
used by the Fund’s investment adviser in selecting Fund’s portfolio may not always be successful.
The investments may decline in value or not increase in value when the stock market in general is rising. Investments in foreign securities entail risks not present in domestic investments including, among others, risks related to political or economic instability, currency exchange, and taxation. Operation of Marketocracy.com’s website depends on the continued availability of the Internet, both short- and long-term. Significant failures of the Internet could lead to interruptions or delays in the Fund’s investment adviser’s ability to manage the Fund’s portfolio.
The m100 group, upon whose research the Masters 100 Fund’s portfolio manager relies in managing the Fund, is comprised of individuals who may be amateur investors, not investment professionals, and are not employees of the Fund or its adviser. Their track records are based on the performance of a simulated stock portfolio on the website www.marketocracy.com.
Marketocracy Funds advises investors to carefully consider the investment objectives, risks, and charges and expenses associated with the Fund prior to investing. The Fund’s prospectus contains this and other information about the Fund. To obtain a prospectus containing more complete information about the Fund, including fees and expenses, click here. Please read the prospectus carefully before investing.
Distributor: Rafferty Capital Markets, LLC
Date of first use: August 28, 2009