Earlier this week, the AdvisorShares Dent Tactical ETF (DENT) launched. This fund is co-managed by best-selling author and demographer Harry Dent. According to the fund’s sponsor, “Dent uses economic data such as spending habits and future earnings potential to identify the most appealing companies given specific demographic trends his team has identified…This is a process that starts with Harry’s very non-traditional, top-down approach to looking at the intersection of investing and changing demographics.”
Unfortunately, we’ve been there and done that. In October 1999, Dent published The Roaring 2000s: Building The Wealth And Lifestyle You Desire In The Greatest Boom In History. Its’ main investment theme was both simple and compelling:
- The population is rapidly aging.
- The aging population will boost the demand for certain products and services, benefiting those sectors — specifically health care.
- Investors can benefit from these trends by investing in companies in certain sectors of the economy.
In 1999, the AIM Dent Demographics Trends Fund was launched, based on the demographic economic and lifestyle trends identified by Dent. Unfortunately, the fund’s results were miserable. From 2000 through 2004, the fund lost more than 11 percent per year and underperformed the S&P 500 Index by almost 9 percent per year. In 2005, its sponsor put investors out of their misery by merging it into the AIM Weingarten Fund.
We can only assume that the ETF’s sponsor believes that the disappearance of the Dent Demographic Trends Fund erased it from the memory of investors. Either that or they plan to keep fooling at least some people over and over again. Adding insult to injury, while most ETFs have relatively low expense ratios, DENT carries a fee of 1.56 percent, though management is capping it at 1.5 percent.
Economists, market strategists and demographers should learn that you should never manage a fund if you are going to make an economic or market forecast. If you do, you can be held accountable, and accountability ruins the game. And as I have mentioned before, you would do well to remember the words of legendary investor Bernard Baruch, “Something that everyone knows isn’t worth knowing.”
Dent somehow believes that no one else is aware of the trends he has publicly written about. Either that, or he believes he’s the only one to interpret them correctly and the rest of the market is just plain dumb. Given that most trading is done by institutional investors with access to the same information, it seems hard to believe that proposition. Just where are the victims Dent is going to exploit because they have mispriced assets?
Further reading: For more on Harry Dent, see MoneyWatch colleague Allan Roth’s article on Dent’s latest book, The Great Depression Ahead.
