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The Marketfield Saga

Why this prominent fund’s struggles don’t doom the category.

Josh Charlson, 06/13/2017

In May 2014, I wrote an article called “A Red Giant Engulfs the Long-Short Category.” The red giant in question was the MainStay Marketfield fund, whose “supernovalike asset growth” had resulted in $13.4 billion in new assets in 2013 and a peak of more than $20 billion in assets under management, up from a mere $35 million in assets at the end of 2008.

Over the past two and a half years, things have changed radically for the erstwhile liquid alternatives poster child. To put it mildly, the red giant has run into a serious gravitational force.

Performance first hit some rough spots in early 2014 (noted in my article at the time) and has kept running south since then. Marketfield’s trailing three-year return through Dec. 31, of negative 8.06% annualized (I shares), ranks in the bottom of the long-short equity Morningstar Category. Assets gushed out at an astonishing rate, with the fund ending 2016 with $613 million in assets under management, a fraction of its peak size (EXHIBIT 1).

In April 2016, Marketfield Asset Management reacquired the fund from New York Life (the parent to MainStay Funds), added CEO Michael Shaoul as a named portfolio manager alongside since-inception manager Michael Aronstein, and set about the work of restoring the fund’s performance and reputation.

Clearly, serious investing mistakes were made at Marketfield. Equally apparent, MainStay made some egregious missteps in the marketing of the fund.

Less clear to me is the claim that, as many in the media would have it, the problems at Marketfield stand in miniature for the problems experienced in the liquid alts industry at large. That’s a convenient narrative for those seeking attention-grabbing headlines, but it’s not a helpful diagnosis of what ails either Marketfield or liquid alternative funds.

A Brief History of a Rise and Fall
Marketfield MFLDX, while classified as a long-short equity fund by Morningstar, also shares characteristics of global macro funds. The fund allocates long and short globally based on themes generated through the macroeconomic research and views of Aronstein and his team, largely implemented via individual securities (and occasionally baskets of securities or exchangetraded funds).

Josh Charlson is a senior fund analyst with Morningstar.

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