Thanks for the info on preferred equity.TokyoWart wrote: ↑Sun Aug 18, 2024 5:00 amThat 5% total return over 5 years is because it is unhedged. An investor in a currency that had not weakened as much as the yen has in the past 3 years is likely seeing a negative return. The Vanguard total bond ETF BND has returned under 1% total in the past 5 years which will mean a negative return for any US dollar investor who had to pay taxes on the coupon distributions.Yeah BNDX and BNDW include corporate bonds, and mortgage-backed securities, I think, which I probably want to avoid in retirement.
I am not sure about negative returns on government bond funds though. Over the last five years eMaxis SLIM Developed Bonds returned 5.22% including distributions https://site0.sbisec.co.jp/marble/fund/ ... =20331A172 I doubt inflation and taxes turned that negative. And it has returned 37% since it started in 2017, which is pitiful compared to stocks, but good compared to cash in a Japanese bank account
These are the private equity funds from the "shadow banking sector." Most of the larger private equity and REIT platforms (e.g. Fundrise, Origin, DLP, Equity Multiple, etc.) have these for accredited investors. They currently get returns around 10% and the first lien position makes them relatively safe even for fixed income funds. As an example, the DLP lending fund has never written down a dollar, delivers a monthly distribution of its pref 8% yearly return and has total annualized returns of over 12% with 90 day liquidity. These funds benefit from the difficulty banks have right now in addressing this part of the real estate market.Just curious: why do you like "preferred equity funds and senior lien US real estate lending funds" and how do you get hold of them?
https://go.dlpcapital.com/hubfs/Fund%20 ... _campaign=
That explanation for the eMaxis SLIM Developed Bonds occurred to me after posting but the website wouldn't let me add an "edit" to my post. Yes, the weak yen makes the returns on the bonds funds look better.
Hedged vs Unhedged
eMaxis SLIM Developed HEDGED has a total return of -18.32% since 7 January 2016
https://site0.sbisec.co.jp/marble/fund/ ... =103312167
eMaxis SLIM Developed UNHEDGED has a total return of 37% since 27 February 2017
https://site0.sbisec.co.jp/marble/fund/ ... =20331A172
So essentially all the gains came from yen weakening from about 115 yen/dollar to about 150 yen/dollar as of today.
Performance versus inflation
The benchmark for the eMaxis SLIM bond fund is FTSE/Citigroup WGBI Non-JPY (JPY)
It had a total return, including dividends, of 5% to 6% over 3, 5, 10, 15, 20 and 30 year periods since 1985
(look at 期間別リターン in the graph section)
https://myindex.jp/data_i.php?q=CI1020JPY
Japan has had cumulative inflation of 30% since 1985 and 14% since 2009
https://www.in2013dollars.com/japan/inflation
https://www.in2013dollars.com/japan/inflation
So we would have received 5 to 6 % returns versus 14% inflation over the last 15 years or 30% inflation since 1985.
I had accepted that international bond funds deliver worse returns than equity funds in return for reduced volatility and risk of panic-selling etc, but I didn’t expect them to lose money in currency-adjusted and inflation-adjusted terms, i.e. perform worse than cash sitting in my bank!!!
I think the yen will ultimately remain weak but crucially, I cannot be sure it will weaken further, and it seems pointless to make an investment that is basically a reverse bet on the yen.
I may still buy hedged short-term bond funds to complement cash when I retire, but researching the above has made me consider reducing my current weighting for international bond funds down to almost zero!