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Harry Dent's ETF Turns One

One year ago today, the Dent Demographic ETF (DENT) began trading. This AdvisorShares active ETF of ETFs started trading with an opening price of $20.30 per share. One year later, DENT is down 2.2 percent at $19.78 per share. I evaluated its performance in year one vs. other asset classes and, after interviewing DENT's portfolio co-manager, give this ETF a grade.

What is DENT?

According to the advisorShare's fact sheet, the DENT objective is long term growth "through proprietary economic and demographic analysis, the overall trend of the U.S. and global economies and how consumer spending patterns may change based on this analysis." It's based on Harry Dent's analysis written in such best-selling books as The Great Depression Ahead.

Delving a little deeper, the recent allocation of this fund was roughly 50 percent in a Goldman Sachs money market account, 40 percent in four emerging market countries (Chile, Malaysia, Singapore, and India) and 10 percent in preferred stocks. The DENT annual expense ratio is 1.56 percent, with the total assets under management currently at about $24 million.

In looking at the performance since its opening price, DENT clocked in this loss during a time that stock and bond markets rallied. Not exactly setting the world on fire with this "proprietary economic and demographic analysis."

The manager defends the fund

I tried to reach Harry Dent, whom I had interviewed before, but instead heard back from his fund co-manager, Rodney Johnson. Johnson noted that the fund's inception date was actually September 15, rather than the September 16 date on the fund's own fact sheet. He stated that the proper start price should be its initial NAV of $20.00, though he conceded the public did not have access at that price on that date.

Regarding the fund's first year, Johnson assured me that the fund and its underlying model did exactly what it was suppose to do. He called it successful. When I mentioned the loss to the investor, he did reveal that he would have liked better performance.

I asked Johnson how much he was earning on the half of his assets in a money market fund, and he replied that it was nothing. I confirmed that the investor was paying 1.56 percentage points to have half their assets earn nothing. He wasn't sure whether the 1.56 percentage points covered the expense ratios of the five underlying ETFs for the other half of the portfolio.

Johnson noted that it was hard to select a benchmark for this fund, as the fund has been as high as 70 percent in cash and as low as two percent. In the discussion, he used the S&P 500 frequently though none of the investments were actually comprised of S&P 500 common stocks. I asked him if he knew of any benchmarks that lost money during this time frame, and he admitted that he couldn't think of any. He stated "Our ability to shine is when US equities do poorly compared to other asset classes or foreign securities"

My assessment of DENT

In my view, this is just another one of Mr. Dent's predictions that end up costing investors tons of money. Others were:

  • During the up markets between 2004 and 2006, Dent said the Dow would rise as high as 40,000.
  • Later, he lowered that forecast and suggested the Dow would trade between 15,500 and 16,000 in 2008. It actually closed at 8,776.
  • A mutual fund known as the AIM Dent Demographic Trends Fund once had $2 billion in assets, and then was merged into another now extinct mutual fund after 80 percent of the assets were gone. Dent told me that the poor performance was due to the fund not taking all of his advice.

The DENT Demographic ETF lagged any imaginable index by much more than its expense ratio. Perhaps it bet on Dent's prediction in his book of the DOW hitting 12,000 to 13,200 by the summer of 2009, and then falling to 3,800 by late 2010.

Not to toot my own horn, but I'll soon be celebrating a one year anniversary of my own. Last October, I launched five new imaginary ETFs, with INDENT being my flagship. This fund would have taken Mr. Dent's advice into account, except the objective would have been to reverse it. Too bad it was only imaginary, because by doing the opposite of the DENT ETF, we could have made some real money.

I was wrong

Allow me to confess that I actually thought this ETF was going to be far more successful in gathering assets. At $24 million in assets, this fund has garnered only about one percent of the assets that the predecessor, AIM Dent Demographic fund, grew to. Considering how short the memories of investors can be, I firmly believed it would grow to a hundred million dollars or more.

My final grades

Putting on my professor hat, I'm ready to confer the end of the year grades related to this fund.

  • First year performance F
  • Investor performance A

I set the curve low for this fund and it still failed to deliver. Investors, however, wowed me by staying away.

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