AXA Rosenberg Value Long/Short (BMNIX) began life as the "Barr Rosenberg Market Neutral Fund" (and is so-called in graph headings below). Fund objective is to meet or beat the 90 day T-Bill rate. The fund carries long and short positions, closely paired by sector and industry mix.
At its website, BMNIX recently reported 5-year annualized returns (June 30) of 2.83%, vs 3.80% for T-Bills. So the objective is not being met. That's OK (not good of course, but OK in itself), as every portfolio will sometimes exceed or fall short of objective.
But there is a deeper problem, not apparent in the raw returns. The problem is a net effective short position prevailing almost continuously over the years. The graph of moving beta, immediately below, shows how market sensitivity has varied between zero (neutral) and -.80 (80% effective short) over the past five years. Even though the short behavior was in fact deepest in the midst of the steepest market drops in 2000 and 2001, the persistent downside bias has still proven costly. The negative bias was in place for about two full years before the bull market top. And recently BMNIX lost about 10% while the DJI gained more than 21% from early April to early October 2003...largely from about a -.25 average net equity exposure.
Note: Net short portfolio behavior does not necessarily indicate net short book position. Longs and shorts may be equal on on the books but have net short effect if the shorts are more volatile, for instance.
The BMNIX moving alpha follows below, plotted with the Fund's NAV. Alpha is a residual portion of returns, after removing the market-sensitivity component. Alpha is taken as a measure of stock selection. This interpretation is especially apropos for a fund with paired sector hedges, as offsetting positions pose more specific value oppositions than in less structured situations.
Alas, the BMNIX alpha has been negative for most of its life. Aside from the years 2001 and 2002 the "contribution" from selective differences has remained almost entirely downside.
Why bother with alphas and betas (moving or otherwise) for a fund that can't keep up with T-Bills over five years? Because the deficiency is recognized and identified sooner and clearer. A "Market Neutral" intention was almost never in effect, and persistent negative alpha showed selective pairings weren't working right from mid-1998.