July 2015 Inside Information

A year ago, I wrote that I had been using a new online tool called

YCharts (www.ycharts.com), which seemed to fit somewhere between the ultra-costly Bloomberg terminal and the more limited Yahoo! Finance website. At the time, it was limited to screening individual stocks, but other datasets provided a very useful way to to

.sdnert cimonoce fo pot no yatsYou can use YCharts to track and graph industrial production, labor statistics, changes in one currency’s value relative to other currencies, scan the GDP

numbers for a wide variety of countries, compare household price indices, track commodities and bond rates, housing starts and oil prices, inflation and expenditures. The screening capabilities for individual stocks, blended with these various economic indicators and a lot of balance sheet data, plus the ability to throw everything up onto comparison graphs and charts,

Portfolio Management

Plug-In and Play

were a boon to advisors who primarily recommend stock portfolios to clients. The detail is impressive. You can specify minimum or maximum market cap, book value per share, PE 10, capital expenditures, cash dividend payout ratio, dividend yield, EBITDA, quarterly

retained earnings, return on invested capital, diluted earnings per share, gross profit, free cash flow, long-term debt and interest expenses, quarterly stock buybacks, moving averages over various periods—and, of course, performance. All of it could be sorted and ranked by any variable, and any set of stocks could be graphed over time against each other or indices, if you want to look for positive or negative business momentum. Many advisors were using YCharts simply as a way to evaluate the legacy equity positions that new clients were holding in their portfolios. If they were unusually sophisticated, advisors could also stay on top of macroeconomic

Synopsis: YCharts now lets you screen mutual funds— making it suddenly relevant to mainstream advisor practices.

Takeaways: The best features come with a tight integration with Excel, allowing you to create customized spreadsheets for detailed analysis—or simply to track the performance

Portfolio Management: The new version of YCharts offers some impressive mutual fund selection tools--and even more interesting Excel plug-ins. – page 15

of your model portfolios.

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- www.bobveres.com

VOLUME 25, NUMBER 7 JULY 2015

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inflation hedge to their clients or reading audience. (The two actually tracked kind of similarly until suddenly they went their separate ways since the end of 2012.) But of course, all of this is peripheral to the core investment activities of advisors who primarily put client assets in mutual funds and ETFs. Over the last five months, all these exotic tools that YCharts provides have suddenly become far more

.rosivda egareva eht ot tnavelerThey can now be applied to the mutual fund and ETF universes. How does it work? Start with the dashboard. You can log into YCharts and customize the front page by inputting the components of your model portfolios. This allows you to watch your ETFs, funds, indices and individual stocks by a variety of metrics: today’s performance,

of which are familiar only to people who read tea leaves and make reallocations based on conditions on the ground. You can also have a watch list of funds that might replace the funds in current portfolios, and keep an eye on them as well. The fund screening tool,

.scirtem esoht fo lla setaroprocniTake the equity fund universe and filter out any fund with an expense ratio greater than 50 basis points, a beta higher than 0.75 and 10-year returns lower than 10%. Then add a bunch of other metrics, like the historical 5-year Sortino Ratio, or the Expected 10-year Traynor Measure, effective duration (for bond funds), percent of total assets in each fund’s top 10 holdings, the weighted average median return on equity of the fund’s holdings, and a bewildering variety of moving

averages. You can sort the funds that make it through your screens based on the highest or lowest of any of these metrics, including performance. Of course, YCharts lets you graph any and all funds against any index or economic data you can think of and more than a few

.detsixe detcepsus reven uoy“Some advisors are looking at the mutual funds they’re holding and comparing them to ETFs,” says YCharts director of account management Caleb Eplett. But increasingly, the most valuable feature that YCharts offers is its Excel plug-ins, which expands the utility of the YCharts database in a hundred different ways. You can find the plug-in at the very bottom of the “tools” menu, which asks you to download an Excel add-in that will be your dynamic connection between YCharts data and the spreadsheets you create. Then, when you build a simple spreadsheet, find the data you want and click “export to Excel” to pull the fund names and information (Beta, Treynor

.strahCY morf pu ).cte ,oitaRThe spreadsheet can include the percentage allocations in this particular model, which lets you calculate the aggregated performance of the model and monitor it in real time. “Dynamically linked” means that when you hit “refresh,” the data automatically updates in your spreadsheet from Excel. You can see the total return for that combination of funds in

Over the last five months, the exotic tools that YCharts provides have

suddenly become far more relevantto the average advisor.

trends with an eye toward making their portfolios less susceptible

.stnempoleved emosirrow otSome advisors, and a surprising number of journalists, signed on because they could create charts that show movements of, say, the price of gold compared to the U.S. Consumer Price Index, and illustrate gold’s value as an

one- and 3-year returns, expense ratio, dividend yield, Sharpe Ratio, Sortino Ratio, all listed in columns along the side of each fund. For fixed income funds, you can see, in real time, any changes in the yield, discounted premium, the average maturity of the fund’s holdings, and about 20 other metrics, some

July 2015 Inside Information

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those percentages over any time period—and you can change the time period from one particular day to another particular day

.sraey ro shtnom fo daerps a revoThis is one of the features that Michael Beck, senior manager at Gerald L. Ray & Associates in Dallas, has used often with clients. “With Morningstar, we get end-of-the-month or end-

.syas eh ”,srebmun retrauq-fo“YCharts gives us up-to-the-day pricing, and even during-the-day pricing, so we can use current information and evaluate it as we choose to.” Such as, for example,

.stneilc htiw gnitacinummoc“Our clients are asking for custom information all the time,” says Beck. “When you evaluate accounts and returns and performance, it’s rare that we just get end-of-the-year requests,” he adds. “A lot of time we need custom dates.” With YCharts, he can show a client the date that a certain stock or ETF was added his portfolio, so he can know exactly how it impacted the performance. The same feature appealed to Jake Erlendson, portfolio manager with Dowling & Yahnke in San Diego. “What was really appealing about the program was that you could look up total returns for any combination of mutual funds for any period of time,” he says. “That allows us to compare different investments over very different economic environments.” Although Dowling & Yahnke takes a generally passive

a growing library of Excel templates which have been created by the YCharts staff for other advisory firms. “We’ve built tons of templates over the last several months, since we launched the fund data,” says Eplett. He adds that some advisors are using customized spreadsheets to explore attribution issues, looking at where their holdings differed from the benchmark and what

.ecnamrofrep-rednu ro -tuo ot del“I stack the different funds vertically, and you can see the stock sector exposure and other

.snialpxe eh ”,atad erusopxeVoila! You can see each fund’s exposure to basic materials, communication services, consumer cyclical, consumer defensive, energy, financial services, health care, industrials,

.seitilitu dna hcet ,etatse laerYou can then calculate composite

ETFs with financial exposure, downloaded the data into Excel and sorted by sector and country exposure. “We focused on the ten ETFs that had the most concentrated exposure that we’re looking for,” Beck adds. “Then we pulled in their top holdings, did a cross-reference, narrowed it down to a handful that we liked, and then went back into YCharts to do a deeper analysis. One was too much like a regional banking index. Another had too many insurance companies. We kicked out all the ones with heavy U.S. exposure, and focused on the ones that were invested in banks vs. insurance companies, vs. financial services, and those that were international rather than domestic, and then the mix of developed vs. emerging, and what countries or regions they were exposed to.”

For attribution analysis, you can dig down and see each fund's

exposure to a variety of industry categories, or to different stocks, and compare

that with the benchmark index.

investment approach, Erlendson has found that his team likes to evaluate the funds they’re using vs. alternatives in the fund and ETF world. “You can look at, suppose we had these funds

syas eh ”?srehto esoht fo daetsni“How would we have done? How well do the funds play together?” The program now includes

exposure, and compare that with the benchmark index. Or you can drill into fund exposure to different stocks. “We were looking at our exposure to U.S. financials,” says Beck, “and were wondering about migrating

”.seman lanoitanretni emos otniHe used the YCharts equity screener to, first, search for

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The typical YCharts onboarding processwill involve Eplett's staff

building or adapting customizedspreadsheets that will link to

YCharts data in specific ways.

There are similar capabilities in the bond arena: if 40% of a portfolio is in fixed income, you can check to see that 30% overall is in Treasuries, another 15% in munis, and then drill down to the percentage that is rated AAA, AA, A, BBB, BB, B or Below B, respectively. Erin Neece, a wealth management association with

portfolio with the right indices that relate directly to their accounts,” Neece adds. “We show charts almost every time we sit down with clients.” Eplett says that the typical onboarding process, when advisors first come to YCharts, will involve his staff building (or adapting) customized spreadsheets that will link to

over to using YCharts at a small fraction of the cost.” Erlendson confirms that YCharts was responsive to his spreadsheet requests. “We just said, you know, it would be really nice if we could do this—and they went back and built it in Excel and delivered it to us,” he says. “Now, when we have a project, they’re very responsive in helping us build those templates.” Beck says that most of the time, in his experience, the tool

.metsys eht ni ereht ydaerla si“We tell them how we’re trying to download and organize this information, and they’ve already got it,” he says. “Instead of us spending a day designing it, they can tweak these tables for us, and that lets us get a lot of information quickly. We haven’t,” he adds, “seen that level of service from a lot of providers.” Right now, YCharts is being adopted more rapidly around the profession than any program I know of. With the new mutual fund screen tools, and especially the enormous flexibility the program gains with its symbiotic relationship with Excel, it has shifted from a really interesting niche program to a mainstream product, relevant to pretty much any practice. You can try it for free and see if the program justifies its $3,600 annual cost; just go to www.ycharts.com and see what you think. Maybe you can also help me understand what a Treynor Ratio is.

Gerald L. Ray & Associates, says that her firm is also using the moving average tools and charting functions, to get a sense of whether individual stocks in the portfolio may be over- or undervalued. “That's not our number one buy indicator,” she says. “But at the click of a button, you can see all of those things on one page, which helps your evaluation.” The company is also using YCharts to provide general market information for its client newsletter. Meanwhile, the firm also manages 401(k) plans, and can now show plan participants how their accounts are tracking versus the S&P 500, world indexes and an aggregate bond index. “If we were meeting with an individual participant, we might compare their customized

.syaw cificeps ni atad strahCY“We find out how they run their businesses and what templates they need,” he says, “and then we have literally created hundreds of different customized spreadsheets that will make their job as easy as possible.” Of those hundreds, the

.52 sedulcni won yrarbil“We don’t make public the personalized custom templates that are proprietary to an

.snialpxe ttelpE ”,mrif yrosivda“But a lot of times, they’ll have a need, and we’ll say, there’s a template in the library that’s pretty close, and we can make a few changes for you. Other advisors already have models that pull in data from FactSet, CapitalIQ or Bloomberg,” he adds, “and we can convert them into our syntax and flip them

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