The $246 million fund has returned 34%% during the past year, trailing the 42% advance of the
S&P 500 Index
but outperforming the 0.9% gain of the
Barclays Capital Aggregate Bond Index
. The two-year-old Sierra Core portfolio holds shares of mutual funds run by outside companies, including
Fund Manager Five Spot, where America's top mutual fund managers give their investment views through five fast and furious questions.
Are you a bull or a bear?
Sorry to say, but we are bearish. The economy is suffering from deflation and the Federal Reserve and Obama administration are trying hard to revive it, but so far, there are no signs of a self-sustaining recovery. Sentiment has gotten back to the dangerous levels we saw in summer and fall 2007. The next large move in the
Dow Jones Industrial Average
is likely to be down.
What is your favorite fund?
We like the
ProFunds Rising U.S. Dollar Fund
very much. We took a significant position in this asset class in early December, when there were only 3% dollar bulls. If we are correct that the coming months will be scary in the stock market, that will be one factor pushing global investors into the dollar. If we are correct that the cyclical global shift into risk-taking and complacency peaked in December, then that will also push global money into the U.S. dollar.
What is your top sleeper fund?
We think "floating income" funds like
PIMCO Floating Income Fund
will allow conservative investors to sleep well, and will be surprisingly productive for a few more months. Long-term, the
First Eagle Global Fund
is a great fund most people don't know about.
What is your favorite sector?
Definitely the long U.S. dollar trade. Aside from the reasons we already talked about, the recent worries about sovereign -- and by extension, corporate -- debt in the PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) and Dubai are also pushing money into the dollar as a safe haven.
What is your least favorite sector?
We are not fans of domestic and emerging markets equities. We're likely looking at another cyclical downturn, perhaps as severe as the two very extended and painful ones earlier this decade.
Also, this is the riskiest year in the four-year presidential cycle. The presidential cycle has operated "on schedule" with the second-year bringing a major decline in 15 of the last 17 cycles since World War II. The exceptions were 1996 and 2006, where in each case the market sustained an uptrend into the following year before turning down into very severe declines.
Reported by Gregg Greenberg in New York
Before joining TheStreet.com, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.