Reviewing One Fund: The Fund Of Funds

Imagine being able to maintain a broad-based global stock portfolio of 5000 large medium and small companies in the United States, Europe and Japan as well as other developed and emerging markets covering over 95% of the world’s stock market through a single security for a long term investment growth? Sounds too good to be true but that’s exactly what One Fund (NYSE Ticker: ONEF), a US based investment company is offering to subscribers through an indexed investment approach at the lowest possible cost. U.S. One, Inc. serves as the investment adviser to the Fund while Paul Hrabal, President of U.S. One, Inc. is the Fund’s portfolio manager is managing the Fund since its inception on 11th May 2010. The One Fund ETF could be ideal for an investor considering the highs and lows and seeking a balanced ETF that tracks the world markets, with lesser noticeable gyrations of focused ETFs.

One Fund buys and holds stocks long term through ETFs that track various stock market indices as holdings are weighted based on their contribution to global stock market capitalization, adjusted for fund management’s view of the relative long-term economic prospects, competitive advantage and potential return of each target market. The One Fund offers investors a way to achieve the entirety of their equity exposure through a single security; the ETF’s fact sheet notes that investors can achieve access to more than 5,000 companies in the US and around the world through ONEF.

One Fund began trading on the New York Stock Exchange under ticker symbol ONEF on 11th May 2010. The Fund shares are listed for secondary trading on the NYSE Arca. One Fund’s fact sheet states that its investment approach is based on its three beliefs that 1) stocks outperform, 2) market timing does not work, and 3) stock selection does not work. Sounds like a passive indexed product one would say, but ONEF is an actively managed fund and not a tracking index.

Overview Of One Fund

Ticker Symbol ONEF
Investment Category Global Stock Fund
Investment Objective Long Term Growth
Total Expense Ratio 0.51%
Inception Date 05/11/2010

One Fund Holdings (By Investment As Of 7/8/2010)

Ticker Exchange-Traded Fund Weight

VV VANGUARD LARGE-CAP ETF 49.09%
VEA VANGUARD EUROPE PACIFIC ETF 21.05%
VB VANGUARD SMALL CAP ETF 19.33%
VWO VANGUARD EMERGING MARKETS ETF 5.34%
SCZ ISHARES MSCI EAFE SMALL CAP INDEX 5.20%

U.S. Large Cap Equity

Vanguard Large Cap ETF: The Fund employs a “passive management” or indexing investment approach designed to track the performance of the MSCI® US Prime Market 750 Index, a broadly diversified index predominantly made up of stocks of large U.S. companies. For more information about this Fund, including its prospectus and shareholder reports, go to www.vanguard.com.

U.S. Small Cap Equity

Vanguard Small Cap ETF

International Equity

Vanguard Europe Pacific ETF: The Fund purchases stocks included in the Morgan Stanley Capital International Europe, Australasia, Far East (MSCI® EAFE®) Index, which is made up of common stocks of companies located in countries in Europe, Australia, Asia, and the Far East.


Advantages Of Choosing One Fund ETFs

One Fund owns, through the underlying ETFs, nearly 5,000 companies around the world but it owns these through other ETFs instead of owning those companies directly. One Fund pays nearly 16 basis points in underlying fund fees but benefit on the cost and liquidity front by not having to manage an extremely large basket of stocks, including some in emerging markets and international small cap stocks that are thinly traded.

Main Disadvantages Of One-Fund ETFs

Underlying ETF Risk: The Fund is subject to the same risks as the Underlying ETFs in which it invests.

Costs of Investing in Underlying ETFs: When the Fund invests in Underlying ETFs, in addition to directly bearing the expenses associated with its own operations, it will bear a pro rata portion of the Underlying ETFs’ expenses (including operating costs and management fees). Consequently, an investment in the Fund entails more direct and indirect expenses than a direct investment in the Underlying ETF. An investor who puts money in these products is paying two layers of fees – the first layer goes to the manager of the ETF of ETFs and the second layer goes to meet the expense ratio of the underlying ETFs. Hence, the advisor should weigh these costs against their promise of performance.

Some traders feel its not worth to have an expense ratio of .51% to buy 5 ETFs and you are better off buying them individually while some feel that ETFs of ETFs is a good idea and definitely worth a try. No matter which part of the fence you sit in it would be interesting to watch the market trend of this fund of funds.

Although ETFs initially appealed to cost-conscious investors not known for high turnover in their portfolios, these vehicles have since been embraced by more active investors. ETFs will undoubtedly continue to evolve as new innovative strategies. As with all ETF products, it pays for the advisor or end investor to do some homework and learn what is "inside" their given ETF.

Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus. Please read the prospectus carefully before you invest.