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A Peak into Donald Trump's Mutual Funds

Gourab Das

Estate baron, television personality, author and now Presidential hopeful Donald Trump refuses to stay off headlines. Running for the Republican presidential nomination, he even looks like a bizarre misfit, having entered into a war of words with opponents, media, varied firms and NASCAR in nearly three months of campaigning.

Nonetheless, opinion polls are largely in favor of Trump. The national Republican nomination poll conducted by Gravis Marking for One America News Network had put him as the frontrunner. Donald Trump hit the 40% mark in late August; breaking the 30% ceiling for the first time in this survey. Now, a NBC News/Wall Street Journal poll has shown Trump as up two points since July and leading the race.

We’re not sure if Trump will make it all the way to the White House, but we’re certainly interested in Trump the investor. Decently invested in stocks and mutual funds, Trump has earned millions in dividends and boasts 90% success rate. Today, let’s look at how Trump fares as a fund investor.

Donald Trump the Astute Investor

The super rich man is also a prolific investor. The 92-page Trump financial document released by the Federal Election Commission showed his net worth over $10 billion as of Jun 30. The document and the numbers are as controversial as the man himself. Trump defended, “my net worth fluctuates, and it goes up and down with markets and with attitudes and with feelings—even my own feelings.”

The Wall Street Journal reported that Trump’s disclosure pointed to assets between $1.5 billion and $2.1 billion. However, 23 of his assets were tagged as “over $50 million.” The fluctuations are indeed widespread, but what interest us more are his investments in stocks and mutual funds.

According to CNBC, Trump has at least $78 million invested in stocks, mutual funds and hedge funds. His numerous investments are held at brokerages operated by Deutsche Bank AG, Barclays Bank PLC, Oppenheimer & Co. Inc. and JPMorgan Chase & Co. Trump had entered the stock investment arena in 2011 disappointed by the depressed American real estate market. By virtue of his business acumen, he is said to have profited from 40 of the 45 stocks he purchased, which he sold in 2014. These included Bank of America, Citigroup, Caterpillar Inc., Intel, Johnson & Johnson, Procter & Gamble and Facebook.

Donald Trump the Fund Investor

Donald Trump has a weakness for prominent hedge funds and favors alternative investments. Among the hedge funds, Trump has over $2 million invested in MidOcean Credit Opportunities, $4 million in Paulson Partners, and around $5 million with Angelo Gordon & Co. and Eleven Partners. Trump's campaign reveled that he earned over $22 million with his hedge fund, mutual fund and bank investments.

His liking for alternative investment is perhaps a smart move. The so-called alternative funds have soared in popularity, with $311 billion in assets under management at the end of 2014 against $46 billion in 2008, as per Morningstar.

Also, in August alternative fund was the only category to see fund inflows, which totaled $1,504 million. Also, the 1-year inflow reached $4,979 million.

Coming to open-end mutual funds, Trump has a soft corner for the Baron Funds. He has 11 Baron mutual funds in his portfolio worth $7.6 million. Let’s now look at these funds, and how they have been performing.

Investment Amount: $1 million to $5 million

Baron Asset (BARAX) seeks capital growth by investing mostly in mid-sized firms that have undervalued assets or growth potential. BARAX invests largely in equity securities for the long term. BARAX currently carries a Zacks Mutual Fund Rank #3 (Hold). BARAX has lost 3.2% so far this year, having witnessed intense selling pressure since mid August. In three months, BARAX is down 7.3%. However, BARAX has a decent 1-year return of 4.2% and the 3- and 5-year annualized returns are respectively 14.5% and 13.3%. Though BARAX carries no sales load, the annual expense ratio of 1.31% is higher than the category average of 1.28%.

Baron Small Cap Retail (BSCFX) invests most of its assets in securities of small-cap growth companies. BSCFX carries a Zacks Mutual Fund Rank #4 (Sell) . BSCFX is in the red in year-to-date and 1-year periods. The decline intensified since June end and the fund lost 12.7% in three months. The 3- and 5-year annualized returns are 9.8% and 10.9%, respectively.

Baron Real Estate Retail (BREFX) invests most of its assets for the long term in equity securities of domestic and foreign real estate or real-estate related firms of any size. BREFX also invests in companies that have significant real estate assets. Year to date, BREFX has lost 8.7% and its 1-year gain is a meager 1.4%. BREFX carries a Zacks Mutual Fund Rank #5 (Strong Sell).

Baron Growth Retail (BGRFX) also carries a Zacks Mutual Fund Rank #5. Like BSCFX, this fund invests in securities of small-cap growth companies. The year-to-date loss is 6%, while the 1-year gain is just 2.3%. However, the 3- and 5-year annualized returns are 11.5% and 13%, respectively.

Baron Partners Retail (BPTRX) invests mostly in equities of domestic growth companies of all market capitalizations. These companies are believed to have significant growth opportunities, sustainable competitive advantages, efficient management and attractive valuation. BPTRX carries a Zacks Mutual Fund Rank #2 (Buy). However, BPTRX is down 6.5% so far this year. The 3- and 5-year annualized returns are respectively 16% and 14.3%. It carries no sales load, but the annual expense ratio of 1.32% is slightly higher than the category average of 1.28%.

Investment Amount: $500,000 to $1 million

Baron Opportunity Retail (BIOPX) invests in equities of high growth companies of all sizes that have capital growth prospects. These growth companies may benefit from technology advances. Year to date, BIOPX is down 6.2% and the 1-year loss is a modest 0.9%. However, the 3- and 5-year annualized returns are 8% and 8.8%, respectively. BIOPX carries a Zacks Mutual Fund Rank #4. Annual expense ratio of 1.35% is higher than the category average of 1.28%.

Baron International Growth Retail (BIGFX) invests for the long term in equities of foreign growth firms. This diversified fund, invests in several developed countries, with a maximum of 30% invested in developing countries. BIGFX started dipping in May end, but has lately shown a rebound. The 3- and 5-year annualized gains are 5% and 4.8%, respectively. Annual expense ratio of 1.5% is lower than category average of 1.52%. BIGFX carries a Zacks Mutual Fund Rank #1 (Strong Buy).

Investment Amount: $100,000 to $250,000

Baron Energy and Resources Retail (BENFX) has negative year-to-date and 1-year returns of 28.5% and 42%, respectively. The slump in BENFX, which invests in equities of domestic and foreign energy and resources companies, is largely due to the oil price rout. The gains for energy funds in the second quarter were minute, but BENFX managed to feature in thetop 10 gainer’s list. BENFX carries a Zacks Mutual Fund Rank #1 (Strong Buy). Expense ratio of 1.35% is lower than the category average of 1.45%, and it carries no sales load.

Investment Amount: $250,000 and $500,000

Baron Emerging Markets Retail (BEXFX) invests in growth companies headquartered, domiciled, having primary operations or primary trading activities in the developing countries. BEXFX currently carries a Zacks Mutual Fund Rank #4. BEXFX has dismal returns for both the year-to-date and 1-year periods, with 14% and 13% loss, respectively. The 3-year annualized return is just 1.3%.

The institutional class of this fund, Baron Emerging Markets Institutional (BEXIX), is also listed with investment between $250,000 and $500,000.

Our Take

Donald Trump’s portfolio does not exemplify diversity. His investments include international or developing regions, but there is not much variety in terms of sectors. Apart from Real Estate and Energy, we do not see sector-specific funds in his portfolio. This is a disadvantage as we are well aware of the hammering the energy sector has received. Healthcare funds, which until recently were strong gainers, do not feature in his portfolio. Also, we do not find key sectors like Technology, Finance or even utilities.

It also seems that Trump is mostly interested in funds that invest in equity securities. He does not hold funds that concentrate on bonds or Treasuries. The presidential hopeful has no money invested in municipal bond funds either.

Separately, Trump seems to favor growth funds over value picks. A number of these funds invest in growth companies, but none are focused on acquitting companies that may be decent value picks.

However, the billionaire knows the importance of owning funds that come with less cost burden. His holdings do not lug along the sales load, which helps in cutting down the cost of buying or selling funds. Also, Donald Trump’s funds invest in both US and non US companies, including emerging or developing countries. These somewhat helps in dilution of risk.

However, his equity portfolio looks a lot more diversified as also chooses to bet on stocks that are industry heavyweights. In case of mutual funds, Donald Trump could have done better.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Pick the best mutual funds with the Zacks Rank.


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