Dear friends,

April started well, with the super-rich losing more money in a week than I can even conceive of.  Bloomberg reports that the 20 wealthiest people on Earth lost a combined $9.1 billion in the first week of April as renewed concerns that Europe’s debt crisis might worsen drove the Standard & Poor’s 500 Index to its largest decline of 2012.  Bill Gates, a year older than me, lost $558.1 million on the week. (World’s Richest Lose $9 Billion as Global Markets Decline).

I wonder if he even noticed?

Return of the Giants

Mark Jewell, writing for the AP, celebrated the resurgence of the superstar managers (Star Fund Managers Recover Quickly from Tough 2011).  He writes, “A half dozen renowned managers are again beating their peers by big margins, after trailing the vast majority last year. Each is a past winner of Morningstar’s manager of the year award in his fund category, and four have been honored as top manager of the decade.”  Quick snapshots of Berkowitz, Miller and Bill Gross follow, along with passing mention of Brent Lynn of Janus Overseas Fund (JDIAX), Michael Hasenstab of Templeton Global Bond (TPINX) and David Herro of Oakmark International (OAKIX).

A number of funds with very good long-term records were either out-of-step with the market or made bad calls in 2011, ending them in the basement.  There are 54 four- or five-star rated funds that tanked in 2011; that is, that trailed at least 90% of their peers.  Of those, 23 – 43% of the group – rebounded sharply this year and ended up with 10% returns for the year, through 4/30/11.  The rest of the worst-to-first roster:

American Century Zero Coupon 2015 and 2020

Fairholme

Federated International Leader

Jones Villalta Opportunity

SEI Tax-Exempt Tax-Advantaged

Fidelity Advisor Income Replacement 2038, 2040 and 2042

JHancock3 Leveraged Companies

Templeton Global Total Return CRM International Opportunity

Fidelity Capital & Income

REMS Real Estate Value Opportu

Templeton Global Bond and Maxim Templeton Global Bond

Catalyst/SMH Total Return Income

Fidelity Leveraged Company Stock

ING Pioneer High Yield

Templeton International Bond

API Efficient Frontier Income

Hartford Capital Appreciation

PIMCO Total Return III

Before we become too comfortable with the implied “return to normal, we really can trust The Great Men again,” we might also look at the roster of great funds that got hammered in 2011 and are getting hammered again in 2012.  Brian Barash at Cambiar Aggressive Value, Leupp and Ronco (no, not the TV gadgets guy) at Lazard U.S. Realty Income Open, The “A” team at Manning & Napier Pro-Blend Maximum Term and Whitney George & company at Royce Micro-Cap range from the bottom 2 – 25% of their peer groups.

Other former titans – Ariel (ARGFX), Clipper (CFIMX, a rare two-star “Gold” fund), Muhlenkamp Fund (MUHLX), White Oak Growth (WOGSX) – seem merely stuck in the mud.

“A Giant Sucking Sound,” Investor Interest in Mutual Funds . . .

and a lackadaisical response from the mutual fund community.

Apropos my recent (and ongoing) bout with the flu, we’re returning to the odd confluence of the Google Flu tracker and the fate of the fund industry.  In October 2011, we posted our first story using the Google Trends data, the same data that allows Google to track incidence of the flu by looking at the frequency and location of flu-related Google searches.  In that article, we included a graph, much like the one below, of public interest in mutual funds.  Here was our original explanation:

That trend line reflects an industry that has lost the public’s attention.  If you’ve wondered how alienated the public is, you could look at fund flows – much of which is captive money – or you could look at a direct measure of public engagement.   The combination of scandal, cupidity, ineptitude and turmoil – some abetted by the industry – may have punched an irreparable hole in industry’s prospects.

This is a static image of searches in the U.S. for “mutual funds,” from January 2004 to April 2012.

And it isn’t just a retreat from investing and concerns about money.  We can separately track the frequency of “mutual funds” against all finance-related searches, which is shown on this live chart:

In brief, the industry seems to have lost about 75% of its mindshare (sorry, it’s an ugly marketing neologism for “how frequently potential buyers think about you”).

That strikes me as “regrettable” for Fidelity and “potentially fatal” for small firms whose assets haven’t yet reached a sustainable level.

I visit a lot of small fund websites every month, read more shareholder communications than I care to recall and interview a fair number of managers.  Here’s my quick take: a lot of firms materially impair their prospects for survival by making their relationship with their shareholders an afterthought.  These are the folks who take “my returns speak for themselves” as a modern version of “Build a better mousetrap, and the world will beat a path to your door” (looks like Emerson actually did say it, but in a San Francisco speech rather than one of his published works).

In reality, your returns mumble.  You’re one of 20,000 datapoints and if you’re not a household name, folks aren’t listening all that closely.

According to Google, the most popular mutual-fund searches invoke “best, Vanguard (three variants), Fidelity (three variants), top, American.”

On whole, how many equity managers do you suppose would invest in a company that had no articulated marketing strategy or, at best, mumbled about the quality of their mousetraps?

And yet, this month alone, in the course of my normal research, I dealt with four fund companies that don’t even have working email links on their websites and several more whose websites are akin to a bunch of handouts left on a table (one or two pages, links to mandatory documents and a four-year-old press release).  And it’s regrettably common for a fund’s annual report to devote no more than a paragraph or two to the fund itself.

There are small operations which have spectacularly rich and well-designed sites.  I like the Observer’s design, all credit for which goes to Anya Zolotusky of Darn Good Web Design.  (Anya’s more interesting than you or me; you should read her bio highlights on the “about us” page.)  I’ve been especially taken by Seafarer Funds new site.  Three factors stand out:

• The design itself is clear, intuitive and easily navigated;
• There’s fresh, thoughtful content including manager Andrew Foster’s responses to investor questions; and,
• Their portfolio data is incredibly rich, which implies a respect for the active intelligence and interest of their readers.

Increasingly, there are folks who are trying to make life easier for small to mid-sized firms.  In addition to long established media relations firms like Nadler & Mounts or Kanter & Company, there are some small firms that seem to be seeking out small funds.  I’ve had a nice exchange with Nina Eisenman of FundSites about her experience at the Mutual Fund Education Alliance’s eCommerce show.  Apparently some of the big companies are designing intriguing iPad apps and other mobile manifestations of their web presence while representatives of some of the smaller companies expressed frustration at knowing they needed to do better but lacking the resources.

“What we’re trying to do with FundSites is level the playing field so that a small or mid-sized fund company with limited resources can produce a website that provides investors and advisors with the kind of relevant, timely, compliant information the big firms publish. Seems like there is a need for that out there.”

I agree but it really has to start at the top, with managers who are passionate about what they’re doing and about sharing what they’ve discovered.

Barron’s on FundReveal: Meh

Speaking of mousetraps, Barron’s e-investing writer Theresa Carey dismissed FundReveal as “a lesser mousetrap” (04/21/12). She made two arguments: that the site is clunky and that she didn’t locate any commodity funds that she couldn’t locate elsewhere.  Her passage on one of the commodity funds simultaneously revealed both the weakness in her own research and the challenge of using the FundReveal system.  She writes:

The top-ranked fund from Fidelity over the past three years is the Direxion Monthly Commodity Bull 2X (DXCLX). While it gets only two Morningstar stars, FundReveal generally likes it, awarding a “B” risk-return rating, second only to “A.” Scouring its 20,000-fund database, FundReveal finds just 61 funds that performed better than the Fidelity pick. (emphasis mine)

Here’s the problem with Theresa’s research: FundReveal does not rank funds on a descending scale of A, B, C, and D. Each of the four quadrants in their system gets a letter designation: “A” is “higher return, lower risk” and “B” is higher return, higher risk.”  Plotted in the “B” quadrant are many funds, some noticeably riskier than the others.  Treating “B” as if it were a grade on a junior high report card is careless and misleading.

And I’m not even sure what she means by “just 61 funds … performed better” since she’s looking at simple absolute returns over three years or FundReveal’s competing ADR calculation.  In either case, we’d need to know why that’s a criticism.  Okay, they found 61 superior funds.  And so … ?

Her article does simultaneously highlight a challenge in using the FundReveal system.  For whatever its analytic merits, the site is more designed for folks who love spreadsheets than for the average investor and the decision to label the quadrants with A through D does carry the risk of misleading casual users.

The Greatest Fund that’s not quite a Fund Anymore

In researching the impending merger of two Firsthand Technology funds (recounted in our “In Brief” section), I came across something that had to be a typo: a fund that had returned over 170% through early April.  As in, 14 weeks, 170% returns.

No typo, just a familiar name on a new product.  Firsthand Technology Value Fund, despite having 75% of their portfolio in cash (only $15.5 of $68.4 million was invested), peaked at a 175% gain.

What gives?  At base, irrational exuberance.  Firsthand Technology Value was famous in the 1990s for its premise – hire the guys who work in Silicon Valley and who have firsthand knowledge of it to manage your investments – and its performance.  In long-ago portfolio contests, the winner routinely was whoever had the most stashed in Tech Value.

The fund ran into performance problems in the 2000s (duh) and legal problems in recent years (related to the presence of too many illiquid securities in the portfolio).  As a result, it transformed into a closed-end fund investing solely in private securities in early 2011.  It’s now a publicly-traded venture capital fund that invests in technology and cleantech companies that just completed a follow-on stock offering. The fund, at last report, held stakes in just six companies.  But when one of those companies turned out to be Facebook, a bidding frenzy ensued and SVVC’s market price lost all relationship to the fund’s own estimated net asset value.  The fund is only required to disclose its NAV quarterly.  At the end of 2011, it was $23.92.  At the end of the first quarter of 2012, it was $24.56 per share.

Right: NAV up 3%, market price up 175%.

In April, the fund dropped from $46.50 to its May 1 market price, $26.27.  Anyone who held on pocketed a gain of less than 10% on the year, while folks shorting the stock in April report gains of 70% (and folks who sold and ran away, even more).

It’s a fascinating story of mutual fund managers returning to their roots and investors following their instincts; which is to say, to rush off another cliff.

Four Funds and Why They’re Really Worth Your While

Each month, the Observer profiles between two and four mutual funds that you likely have not heard about, but really should have.  Our “Most intriguing new funds: good ideas, great managers” do not yet have a long track record, but have other virtues which warrant your attention.  They might come from a great boutique or be offered by a top-tier manager who has struck out on his own.  The “most intriguing new funds” aren’t all worthy of your “gotta buy” list, but all of them are going to be fundamentally intriguing possibilities that warrant some thought. Two intriguing newer funds are:

Amana Developing World Fund (AMDWX): Amana, which everyone knew was going to be cautious, strikes some as near-comatose.  We’ve talked with manager Nick Kaiser about his huge cash stake and his recent decision to begin deploying it.  This is an update on our May 2011 profile.

FMI International (FMIJX): For 30 years, FMI has been getting domestic stock investing right.  With the launch of FMI International, they’ve attempted to “extend their brand” to international stocks.  So far it’s been performing about as expected, which is to say, excellently

The “stars in the shadows” are all time-tested funds, many of which have everything except shareholders.

Artisan Global Value (ARTGX): can you say, “it’s about time”?  While institutional money has long been attracted to this successful, disciplined value strategy, retail investors began to take notice just in the past year. Happily, the strategy has plenty of capacity remaining.  This is an update on our May 2011 profile.

LKCM Balanced (LKBAX): LKCM Balanced (with Tributary Balanced, Vanguard Balanced Index and Villere Balanced) is one of a small handful of consistently, reliably excellent balanced funds.  The good news for prospective shareholders is that LKCM slashed the minimum investment this year, from $10,000 to $2,000, while continuing its record of great, risk-conscious performance.

The Best of the Web: Curated Financial News Aggregators

Our third “Best of the Web” feature focuses on human-curated financial news aggregators.  News aggregators such as Yahoo! News and Google News are wildly popular.  About a third of news users turn to them and Google reports about 100,000 clicks per minute at the Google News site.

The problem with aggregators such as Google is that they’re purely mechanical; the page content is generated by search algorithms driven by popularity more than the significance of the story or the seriousness of the analysis.

In this month’s “Best of the Web,” Junior and I test drove a dozen financial news aggregators, but identified only two that had consistently excellent, diverse and current content.  They are:

Abnormal Returns: Tadas Viskanta’s six year old venture, with its daily linkfests and frequent blog posts, is for good reason the web’s most widely-celebrated financial news aggregator.

Counterparties: curated by Felix Salman and Ryan McCarthy, this young Reuter’s experiment offers an even more eclectic mix than AR and does so with an exceptionally polished presentation.

As a sort of mental snack, we also identified two cites that couldn’t quite qualify here but that offered distinctive, fascinating resources: Smart Briefs, a sort of curated newsletter aggregator and Fark, an irreverent and occasionally scatological collection of “real news, real funny.”  You can access Junior’s column from “The Best” tab or here.  Columns in the offing include coolest fund-related tools, periodic tables (a surprising number), and blogs run by private investors.

We think we’ve done a good and honest job but Junior, especially, would like to hear back from readers about how the feature works for you and how to make it better, about sites we’re missing and sites we really shouldn’t miss.  Drop us a line. We read and appreciate everything and respond to as much as we can.

A “Best of” Update: MoneyLife with Chuck Jaffe Launches

Chuck Jaffe’s first episode of the new MoneyLife show aired April 30^th. The good news: it was a fine debut, including a cheesy theme song and interviews with Bill O’Neil, founder of Investor’s Business Daily and originator of the CAN-SLIM investing system, and Tom McIntyre.  The bad news: “our Twitter account was hijacked within the 48 hours leading up to the show, which is one of many adventures you don’t plan for as you start something like this.”  Assuming that Chuck survives the excitement of his show’s first month, Junior will offer a more-complete update on June 1.  For now, Chuck’s show can be found here.

Briefly noted …

Steward Capital Mid-Cap Fund (SCMFX), in a nod to fee-only financial planners, dropped its sales load on April 2.  Morningstar rates it as a five-star fund (as of 4/30/12) and its returns over the past 1-, 3- and 5-year periods are among the best of any mid-cap core fund.  The investment minimum is $1000 and the expense ratio is 1.5% on $35 million in assets.

Grandeur Peak Global Advisors recently passed $200 million in assets under management.  Roughly $140M is in Global Opportunities (GPGOX/GPGIX) and $60M is in International Opportunities (GPIOX/GPIIX).  That’s a remarkable start for funds that launched just six months ago.

Calamos is changing the name of its high-yield fixed-income fund to Calamos High Income from Calamos High Yield (CHYDX) on May 15, 2012 because, without “income” in the name investors might think the fund focused on high-yielding corn hybrids (popular here in Iowa).

T. Rowe Price High Yield (PRHYX) and its various doppelgangers closed to new investors on April 30, 2012.

Old Mutual Heitman REIT is in the process of becoming the Heitman REIT Fund, but I’m not sure why I’d care.

ING’s board of directors approved merging ING Index Plus SmallCap (AISAX) into ING Index Plus MidCap (AIMAX) on or about July 21, 2012. The combined funds will be renamed ING SMID Cap Equity. In addition, ING Index Plus LargeCap (AELAX) was approved to merge into ING Corporate Leaders 100 (IACLX) on or about June 28, 2012.  Let’s note that ING Corporate Leaders 100 is a different, and distinctly inferior fund, than ING Corporate Leaders Trust “B”.

Huntington New Economy Fund (HNEAX), which spent most of the last decade in the bottom 5-10% of mid cap growth funds, is being merged into Huntington Mid Corp America Fund (HUMIX) in May 2012.  HUMIX is less expensive than HNEAX, though still grievously overpriced (1.57%) for its size ($139 million in assets) and performance (pretty consistently below average).

The Firsthand Funds are moving to merge Firsthand Technology Leaders Fund (TLFQX) into Firsthand Technology Opportunities Fund TEFQX). The investment objective of TLF is identical to that of TOF and the investment risks of TLF are substantially similar to those of TOF.  TLF is currently managed solely by Kevin Landis (TLF was co-managed by Kevin Landis and Nick Schwartzman from April 30, 2010 to December 13, 2011).

The $750 million Delaware Large Cap Value Fund is being merged into the $750 million Delaware Value® Fund, which “does not require shareholder approval, and you are not being asked to vote.”

The reorganization has been carefully reviewed by the Trust’s Board of Trustees. The Trustees, most of whom are not affiliated with Delaware Investments®, are responsible for protecting your interests as a shareholder. The Trustees believe the reorganization is in the best interests of the Funds based upon, among other things, the following factors:

Shareholders of both Funds could benefit from the combination of the Funds through a larger pool of assets, including realizing possible economies of scale . . .

Uhhh . . . notes to the “Board of Trustees [who] are responsible for protecting [my] interests”: (1) it’s “who,” not “whom.”  (2) If Delaware Value’s asset base is doubling and you’re anticipating “possible economies of scale,” why didn’t you negotiate a decrease in the fund’s expense ratio?

Snow Capital All Cap Value Fund (SNVAX) is being closed and liquidated as of the close of business on May 14, 2012.  The fund, plagued by high expenses and weak performance, had attracted only $3.7 million despite the fact that the lead manager (Richard Snow) oversees $2.6 billion.

Likewise,  Dreyfus Dynamic Alternatives Fund and Dreyfus Global Sustainability Fund were both liquidated in mid-April.

Forward seems to be actively repositioning itself away from “vanilla” products and into more-esoteric, higher cost funds.  In March, Forward Banking and Finance Fund and Forward Growth Fund were sold to Emerald Advisers, who had been running the funds for Forward, rebranded as Emerald funds.  Forward’s board added International Equity to the dustbin of history on April 30, 2012 and Mortgage Securities in early 2011.  Balancing off those departures, Forward also launched four new funds in the past 12 months: Global Credit Long/Short, Select Emerging Markets Dividend, Endurance Long/Short, Managed Futures and Commodity Long/Long.

On April 17, 2012, the Board of Trustees of the ALPS ETF Trust authorized an orderly liquidation of the Jefferies|TR/J CRB Wildcatters Exploration & Production Equity Fund (WCAT), which will be completed by mid-May.  The fund drew fewer than $10 million in assets and managed, since inception, to lose a modest amount for its (few) investors.

Effective on June 5, 2012, the equity mix in Manning & Napier Pro-Blend Conservative Term will include a greater emphasis on dividend-paying common stocks and a larger allocation to REITs and REOCs. Their other target date funds are shifting to a modestly more conservative asset allocation.

Nice work if you can get it.  Emily Alejos and Andrew Thelen were promoted to become the managers of Nuveen Tradewinds Global All-Cap Plus Fund of April 13.  The fund,  after the close of business on May 23, 2012, is being liquidated with the proceeds sent to the remaining shareholders.  Nice resume line and nothing they can do to goof up the fund’s performance.

News Flash: on April 27, 2012 Wilmington Multi-Manager International Fund (GVIEX), a fund typified by above average risks and expenses married with below average returns, trimmed its management team from 27 managers down to a lean and mean 26 with the departure of Amanda Cogar.

In closing . . .

Thanks to all the folks who supported the Observer in the months just passed.  While the bulk of our income is generated by our (stunningly convenient!) link to Amazon, two or three people each month have made direct financial contributions to the site.  They are, regardless of the amount, exceedingly generous.  We’re deeply grateful, as much as anything, for the affirmation those gestures represent.  It’s good to know that we’re worth your time.

In June we’ll continuing updating profiles including Osterweis Strategic Investment (OSTVX – gone from “quietly confident” to “thoughtful”) and Fidelity Global Strategies (FDYSX – skeptical then, skeptical now).  We’ll profile a new “star in the shadows,” Huber Small Cap Value (HUSIX) and greet the turbulent summer months by beginning a series of profiles on long/short funds that might be worth the money.  June’s profile will be ASTON/River Road Long-Short Fund (ARLSX).

As ever,

Mutual Fund Observer - ... a site in the tradition of Fund Alarm

Objective

The fund seeks long-term capital growth by investing exclusively in stocks of companies with significant exposure (50% or more of assets or revenues) to countries with developing economies and/or markets.  That investment can occur through ADRs and ADSs.  Investment decisions are made in accordance with Islamic principles. The fund diversifies its investments across the countries of the developing world, industries, and companies, and generally follows a value investment style.

Adviser

Saturna Capital, of Bellingham, Washington.  Saturna oversees six Sextant funds, the Idaho Tax-Free fund and four Amana funds.  They have about $4 billion in assets under management, the great bulk of which are in the Amana funds.  The Amana funds invest in accord with Islamic investing principles. The Income Fund commenced operations in June 1986 and the Growth Fund in February, 1994. Mr. Kaiser was recognized as the best Islamic fund manager for 2005.

Manager

Nicholas Kaiser with the assistance of Monem Salam.  Mr. Kaiser is president and founder of Saturna Capital. He manages five funds (two at Saturna, three here) and oversees 26 separately managed accounts.  He has degrees from Chicago and Yale. In the mid 1970s and 1980s, he ran a mid-sized investment management firm (Unified Management Company) in Indianapolis.  In 1989 he sold Unified and subsequently bought control of Saturna.  As an officer of the Investment Company Institute, the CFA Institute, the Financial Planning Association and the No-Load Mutual Fund Association, he has been a significant force in the money management world.  He’s also a philanthropist and is deeply involved in his community.  By all accounts, a good guy all around. Mr. Monem Salam, vice president and director of Islamic investing at Saturna Capital Corporation, is the deputy portfolio manager for the fund.

Inception

September 28, 2009.

Management’s Stake in the Fund

As of May 2011, Mr. Kaiser directly owned $500,000 to $1,000,000 of Developing World Fund shares and indirectly owned more than $1,000,000 of it. Mr. Salam has something between $50,000 to $100,000 in Developing World Fund. As of August, 2011, officers and trustees, as a group, owned nearly 10% of the Developing World Fund.

Minimum investment

$250 for all accounts, with a $25 subsequent investment minimum.  That’s blessedly low.

Expense ratio

1.61% on an asset base of about $19 million (as of March 31, 2012).  That’s up about $4 million since March 2011. There’s also a 2% redemption fee on shares held fewer than 90 days.

Comments

Our 2011 profile of AMDWX recognized the fund’s relatively poor performance.  From launch to the end of 2011, a 10% cumulative gain against a 34% gain for its average peer over the same period.  I pointed out that money was pouring into emerging market stock funds at the rate of $2 billion a week and that many very talented managers (including the Artisan International Value team) were heading for the exits. The question, I suggested, was “will Amana’s underperformance be an ongoing issue?   No.”

Over the following 12 months (through April 2012), Amana validated that conclusion by finishing in the top 5% of all emerging markets stock funds.

Our conclusion in May 2011 was, “if you’re looking for a potential great entree into the developing markets, and especially if you’re a small investors looking for an affordable, conservative fund, you’ve found it!”

That confidence, which Mr. Kaiser earned over years of cautious, highly-successful investing, has been put to the test with this fund.  It has trailed the average emerging markets equities fund in eight of its 10 quarters of operation and finished at the bottom of the emerging markets rankings in 2010 and 2012 (through April 29).

What should you make of that pattern: bottom 1% (2010), top 5% (2011), bottom 3% (2012)?

Cash and crash.

For a long while, the majority of the fund’s portfolio has been in cash: over 50% at the end of March 2011 and 47% at the end of March 2012.  That has severely retarded returns during rising markets but substantially softened the blow of falling ones.  Here is AMDWX, compared with Vanguard Emerging Markets Stock Index Fund (VEIEX):

The index leads Amana by a bit, cumulatively, but that lead comes at a tremendous cost.  The volatility of the VEIEX chart helps explain why, over the past five years, its investors have managed to pocket only about one-third of the fund’s nominal gains.  The average investor arrives late, leaves early and leaves poor.

How should investors think about the fund as a future investment?  Manager Nick Kaiser made a couple important points in a late April 2012 interview.

1. This fund is inherently more conservative than most. Part of that comes from its Islamic investing principles which keep it from investing in highly-indebted firms and financial companies, but which also prohibit speculation.  That latter mandate moves the fund toward a long-term ownership model with very low turnover (about 2% per year) and it keeps the fund away from younger companies whose prospects are mostly speculative.In addition to the sharia requirements, the management also defines “emerging markets companies” as those which derive half of their earnings or conduct half of their operations in emerging markets.  That allows it to invest in firms domiciled in the US.  Apple (AAPL), not a fund holding, first qualified as an emerging markets stock in April 2012.  The fund’s largest holding, as of March 2012, was VF Corporation (VFC) which owns the Lee, Wrangler, Timberland, North Face brands, among others.  Mead Johnson (MJN), which makes infant nutrition products such as Enfamil, was fourth.  Those companies operate with considerably greater regulatory and product safety scrutiny than might operate in many developing nations.  They’re also less volatile than the typical e.m. stock.
2. The managers are beginning to deploy their cash.  At the end of April 2012, cash was down to 41% (from 47% a month earlier).  Mr. Kaiser notes that valuations, overall, are “a bit more attractive” and, he suspects, “the time to be invested is approaching.”

Bottom line

Mr. Kaiser is a patient investor, and would prefer shareholders who are likewise patient.  His generally-cautious equity selections have performed well (the average stock in the portfolio is up 12% as of late April 2012, matching the performance of the more-speculative stocks in the Vanguard index) and he’s now deploying cash into both U.S. and emerging markets-domiciled firms.  If markets turn choppy, this is likely to remain an island of comfortable sanity.  If, contrarily, emerging markets somehow soar in the face of slowing growth in China (often their largest market), this fund will continue to lag.  Much of the question in determining whether the fund makes sense for you is whether you’re willing to surrender the dramatic upside in order to have a better shot at capital preservation in the longer term.

Company link

Amana Developing World

Mutual Fund Observer - ... a site in the tradition of Fund Alarm

Objective and Strategy

The fund pursues long-term growth by investing in 30-50 undervalued global stocks.  The managers look for four characteristics in their investments:

1. A high quality business
2. A strong balance sheet
3. Shareholder-focused management and
4. The stock selling for less than it’s worth.

Generally it avoids small cap caps.  It can invest in emerging markets, but rarely does so though many of its multinational holdings derived significant earnings from emerging market operations.   The managers can hedge their currency exposure, though they did not do so until the nuclear disaster in, and fiscal stance of, Japan forced them to hedge yen exposure in 2011.

Adviser

Artisan Partners of Milwaukee, Wisconsin.   Artisan has five autonomous investment teams that oversee twelve distinct U.S., non-U.S. and global investment strategies. Artisan has been around since 1994.  As of 3/31/2012, Artisan Partners managed $66.5 billion of which $35.8 billion was in funds and $30.7 billion is in separate accounts.  That’s up from $10 billion in 2000. They advise the 12 Artisan funds, but only 6% of their assets come from retail investors

Managers

Daniel J. O’Keefe and David Samra, who have worked together since the late 1990s.  Mr. O’Keefe co-manages this fund, Artisan International Value (ARTKX) and Artisan’s global value separate account portfolios.  Before joining Artisan, he served as a research analyst for the Oakmark international funds and, earlier still, was a Morningstar analyst.  Mr. Samra has the same responsibilities as Mr. O’Keefe and also came from Oakmark.  Before Oakmark, he was a portfolio manager with Montgomery Asset Management, Global Equities Division (1993 – 1997).  Messrs O’Keefe, Samra and their five analysts are headquartered in San Francisco.  ARTKX earns Morningstar’s highest accolade: it’s a Five Star star with a “Gold” rating assigned by Morningstar’s analysts (as of 04/12).

Management’s Stake in the Fund

Each of the managers has over $1 million here and over $1 million in Artisan International Value.

Opening date

December 10, 2007.

Minimum investment

$1000 for regular accounts, reduced to $50 for accounts with automatic investing plans.  Artisan is one of the few firms who trust their investors enough to keep their investment minimums low and to waive them for folks willing to commit to the discipline of regular monthly or quarterly investments.

Expense ratio

1.5%, after waivers, on assets of $149 million (as of March 31, 2012).

Comments

Can you say “it’s about time”?

I have long been a fan of Artisan Global Value.  It was the first “new” fund to earn the “star in the shadows” designation.  Its management team won Morningstar’s International-Stock Manager of the Year honors in 2008 and was a finalist for the award in 2011. In announcing the 2011 nomination, Morningstar’s senior international fund analyst, William Samuel Rocco, observed:

Artisan Global Value has . . .  outpaced more than 95% of its rivals since opening in December 2007.  There’s a distinctive strategy behind these distinguished results. Samra and O’Keefe favor companies that are selling well below their estimates of intrinsic value, consider companies of all sizes, and let country and sector weightings fall where they may. They typically own just 40 to 50 names. Thus, both funds consistently stand out from their category peers and have what it takes to continue to outperform. And the fact that both managers have more than $1 million invested in each fund is another plus.

We attributed that success to a handful of factors:

First, the [managers] are as interested in the quality of the business as in the cost of the stock.  O’Keefe and Samra work to escape the typical value trap by looking at the future of the business – which also implies understanding the firm’s exposure to various currencies and national politics – and at the strength of its management team.

Second, the fund is sector agnostic. . .  ARTGX is staffed by “research generalists,” able to look at options across a range of sectors (often within a particular geographic region) and come up with the best ideas regardless of industry.  That independence is reflected in . . . the fund’s excellent performance during the 2008 debacle. During the third quarter of 2008, the fund’s peers dropped 18% and the international benchmark plummeted 20%.  Artisan, in contrast, lost 3.5% because the fund avoided highly-leveraged companies, almost all banks among them.

In designated ARTGX a “Star in the Shadows,” we concluded:

On whole, Artisan Global Value offers a management team that is as deep, disciplined and consistent as any around.  They bring an enormous amount of experience and an admirable track record stretching back to 1997.  Like all of the Artisan funds, it is risk-conscious and embedded in a shareholder-friendly culture.  There are few better offerings in the global fund realm.

In the past year, ARTGX has continued to shine.  In the twelve months since that review was posted, the fund finished in the top 6% of its global fund peer group.  Since inception (through April 2012), the fund has turned $10,000 into $11,700 while its average peer has lost $1200.  Much of that success is driven by its risk consciousness.  ARTGX has outperformed its peers in 75% of the months in which the global stock group lost money.  Morningstar reports that its “downside capture” is barely half as great as its peers.  Lipper designates it as a “Lipper Leader” in preserving its investors’ money.

Bottom Line

While money is beginning to flow into the fund (it has grown from $57 million in April 2011 to $150 million a year later), retail investors have lagged institutional ones in appreciating the strategy.  Mike Roos, one of Artisan’s managing directors, reports that “the Fund currently sits at roughly $150 million and the overall strategy is at $5.4 billion (reflecting meaningful institutional interest).”  With 90% of the portfolio invested in large and mega-cap firms, the managers could easily accommodate a far larger asset base than they now have.  We reiterate our conclusion from 2008 and 2011: “there are few better offerings in the global fund realm.”

Fund website

Artisan Global Value Fund

RMS (a/k/a FundReveal) provides a discussion of the fund’s risk/return profile, based on their messages of daily volatility, at http://www.fundreveal.com/mutual-fund-blog/2012/05/artgx-analysis-complementing-mutual-fund-observer-may-1-2012/

Mutual Fund Observer - ... a site in the tradition of Fund Alarm

Objective and strategy

FMI International seeks long-term capital appreciation by investing, mainly, in a focused portfolio of large cap, non-US stocks. The Fund may invest in common and preferred stocks, convertibles, warrants, ADRs and ETFs. It targets firms with global, rather than national, footprints. They describe themselves as looking “for stocks of good businesses that are selling at value prices in an effort to achieve above average performance with below average risk.”

Adviser

Fiduciary Management, Inc., of Milwaukee, Wisconsin. FMI was founded in 1980 and is employee owned.  They manage over $14.5 billion in assets for domestic and international institutions, individual investors and RIAs through separately managed accounts and the five FMI funds.

Managers

A nine-person management team, directed by CEO Ted Kellner and Patrick English.  Mr. Kellner has been with the firm since 1980, Mr. English since 1986.  Kellner and English also co-manage FMI Common Stock (FMIMX), a solid, risk-conscious small- to mid-value fund which is closed to new investors and FMI Large Cap (FMIHX).  The team manages three other funds and nearly 900 separate accounts, valued at about $5.3 billion.

Inception

December 31, 2010.

Management’s Stake in the Fund

As of December 2011, all nine managers were invested in the fund, with substantial investments by the three senior members (in excess of $100,000) and fair-sized investments ($10,000 – $100,000) by most of the younger members.  In addition, five of the fund’s six directors had substantial investments ($50,000 and up) in the fund.  Collectively, the fund’s board and officers owned 55% of the fund’s shares.

Minimum investment

$2500 for all accounts.

Expense ratio

1.0% after waivers on an asset base of $22 million.  The expenses before waivers are close to 3%.

Comments

You would expect a lot from a new FMI fund. The other two FMI-managed funds are both outstanding.  FMI Common Stock (FMIMX), a small- to mid-cap core fund launched in 1981, has been outstanding: it has earned Morningstar’s highest designations (Five Stars and a Gold analyst rating), it’s earned Lipper’s highest designations for Total Returns and Preservation of Capital, and it has top tier returns for the past 5, 10 and 15 years.  FMI Large Cap (FMIHX), a large cap core fund launched in 2001, has been outstanding: it has earned Morningstar’s highest designations (Five Stars and a Gold analyst rating), it’s earned Lipper’s highest designations for Total Returns, Consistency and Preservation of Capital, and it has top tier returns for the past 5 and 10 years. Both are more concentrated (30-40 stocks), more conservative (both have “below average” to “low” risk scores from Morningstar), and more deliberate (turnover is less than half their peers’).

Consistent, cautious discipline is their mantra: “While past performance may not be indicative of the future, we can assure our shareholders that FMI’s investment process will remain the same as it has for over 30 years, with a steadfast focus on fundamental research and an emphasis on avoiding permanent impairment of capital.”

Since FMI International is run by the same team, using the same investment discipline, you’d have reason to expect a lot of it.  And, so far, your expectations would have been more than met.

Like its siblings, International has posted top-tier returns.  $10,000 invested at the fund’s lunch at the end of 2010 would now be worth $10,000 by the end of April 2012.  In that same period, its average peer would have lost $500.  Like its siblings, International has excelled in turbulent markets and been competitive in quickly rising ones.  At the end of March, FMI’s managers noted “Since inception, the performance of the Fund has been consistent with FMI’s long-term track record in domestic equities, generally outperforming in periods of distress, while lagging during sharp market rallies.”

It’s important to note that the FMI funds post strong absolute returns in the years in which the markets turn froth and they lag their peers.  Common Stock badly trailed its peers in four of the past 11 years (2003, 07, 10 and YTD 12) but posted an average 15.4% return in those years.  Large Cap lagged three times (2007, 10, and YTD 12) but posted 10.6% returns in those years.  For both funds, their performance in these “bad” years is better than their own overall long-term records.

A number of factors distinguish FMI from the average large cap international fund:

1. It’s noticeably more concentrated.  The fund holds 26 stocks.80-120 would be far more typical.
2. It has a large stake in North American stocks.  The US and Canada consume 30% of the portfolio (as of March 2012), with U.S. multinationals occupying as much space in the portfolio (19%) as SEC rules permit.  A 4% stake would be more common.
3. It has a long holding period, about seven years, which is reflected in a 12% portfolio turnover.  60% turnover is about average.
4. It avoids direct exposure to emerging markets.  There are no traditionally “emerging markets” stocks in the portfolio, though all of the companies in the portfolio derive earnings from the emerging markets.  It is unlikely that investors here will ever see the sort of emerging markets stake that’s typical of such funds. The managers explain that
   • the lack of good data, transparency and trust with respect to accounting, management, return on invested capital, governance, and several other factors makes it impossible for us to look at many international companies in a way that is comparable to how we operate domestically. China is an example of a country where we simply do not have enough trust and confidence in the companies or the government to invest our shareholders’ money.
   • In China there is little respect for intellectual property, and we are not surprised to see massive fraud allegations in the news with regard to Chinese equities. Investors have lost fortunes in companies such as Sino-Forest, MediaExpress, China Agritech, Rino International, and others. While there are sure to be high-quality, reliable mainland China or other emerging market businesses, for now we plan to focus on companies domiciled in developed countries, with accounting, management, and governance we can trust. As we look to invest in multinational companies that generally have a global footprint, we will get exposure to emerging markets without direct investment in the countries themselves. This will allow our shareholders to get the benefits of global diversification, but with a much greater margin of safety.
5. The fund actively manages its currency exposure.  The managers are deeply skeptical that the euro-zone will survive and are fairly certain that the yen is “dramatically overvalued.”  As a result, they own only two stocks denominated in euros (Henkel and TNT Express) and have hedged both their euro and yen exposure.  As the managers at Tweedy, Browne have noted, the cost of those hedges reduces long-term returns by a little but short-term volatility by a lot.

On top of the manager’s stock selection skills and the fund’s distinctive portfolio, I’d commend them for a very shareholder friendly environment – from the very low expenses for such a small fund to their willingness to close Common Stock – and for really thoughtful writing.  Their shareholder letters are frequently, detailed, thoughtful and literate.  They’re a far cut above the marketing pap generated by many larger companies.  They also update the information on their website (holdings, commentaries, performance comparisons) quite frequently.

Bottom line

All the evidence available suggests that FMI International is a star in the making.  It’s headed by a cautious and consistent team that’s been together for a long while.  Expenses are low, the minimum is low, and FMI’s portfolio of high-quality multinational stocks is likely to produce a smoother, more profitable ride than the vast majority of its competitors.  Investors, and not just conservative ones, who are looking for a risk-conscious approach to international equities owe it to themselves to review this fund.

Company link

FMI International

RMS (a/k/a FundReveal) provides a discussion of the fund’s risk/return profile, based on their messages of daily volatility, at http://www.fundreveal.com/mutual-fund-blog/2012/05/fmjix-analysis-complementing-mutual-fund-observer-may-1-2012/

Mutual Fund Observer - ... a site in the tradition of Fund Alarm

Objective

The fund seeks current income and long-term capital appreciation. The managers invest in a combination of blue chip stocks, investment grade intermediate-term bonds, convertible securities and cash. In general, at least 25% of the portfolio will be bonds. In practice, the fund is generally 70% equities, though it dropped to 60% in 2008. The portfolio turnover rate is modest. Over the past five calendar years, it has ranged between 12 – 38%.

Adviser

Founded in 1979 Luther King Capital Management provides investment management services to investment companies, foundations, endowments, pension and profit sharing plans, trusts, estates, and high net worth individuals. Luther King Capital Management has seven shareholders, all of whom are employed by the firm, and 29 investment professionals on staff. As of December, 2011, the firm had about $9 billion in assets. They advise the five LKCM funds and the three LKCM Aquinas funds, which invest in ways consistent with Catholic values.

Manager

Scot Hollmann, J. Luther King and Mark Johnson. Mr. Hollman and Mr. King have managed the fund since its inception, while Mr. Johnson joined the team in 2010.

Management’s Stake in the Fund

Hollman has between $500,000 and $1,000,000 in the fund, Mr. King has over $1 million, and Mr. Johnson continues to have a pittance in the fund

Opening date

December 30, 1997.

Minimum investment

$2,000 across the board, down from $10,000 prior to October 2011.

Expense ratio

0.80%, after waivers, on an asset base of $21 million (as of December 31, 2011).

Comments

Our original, May 2011 profile of LKCM Balanced made two arguments.  First, for individual investors, simple “balanced” fund make a lot more sense than we’re willing to admit.  We like to think that we’re indifferent to the stock market’s volatility (we aren’t) and that we’ll reallocate our assets to maximize our prospects (we won’t).  By capturing more of the stock market’s upside than its downside, balanced funds make it easier for us to hold on through rough patches.  Morningstar’s analysis of investor return data substantiated the argument.

Second, there are no balanced funds with consistently better risk/return profiles than LKCM Balanced.  We examined Morningstar data in April 2011, looking for balanced funds which could at least match LKBSX’s returns over the past three, five and ten years while taking on no more risk.  There were three very fine no-load funds that could make its returns (Northern Income Equity, Price Capital Appreciation, Villere Balanced, and LKCM) but none that could do so with as little volatility.

We attributed that success to a handful of factors:

Quiet discipline, it seems. Portfolio turnover is quite low, in the mid-teens to mid-20s each year. Expenses, at 0.8%, are low, period, and remarkably low for such a small fund. The portfolio is filled with well-run global corporations (U.S. based multinationals) and shorter-duration, investment grade bonds.

In designating LKBAX a “Star in the Shadows,” we concluded:

This is a singularly fine fund for investors seeking equity exposure without the thrills and chills of a stock fund. The management team has been stable, both in tenure and in discipline. Their objective remains absolutely sensible: “Our investment strategy continues to focus on managing the overall risk level of the portfolio by emphasizing diversification and quality in a blend of asset classes.”

The developments of the past year are all positive.  First, the fund yet again outperformed the vast majority of its peers.  Its twelve month return, as of the end of April 2012, placed it in the top 5% of its peer group and its five year return is in the top 4%.  Second, it was again less volatile than its peers – it held up about 25% better in downturns than did its peer group.  Third, the advisor reduced the minimum initial purchase requirement by 80% – from $10,000 to $2,000. And the expense ratio dropped by one basis point.

We commissioned an analysis of the fund by the folks at Investment Risk Management Systems (a/k/a FundReveal), who looked at daily volatility and returns, and concluded :

LKBAX is a well managed Moderate Allocation fund. It has maintained “A-Best” rating over the last 5 and 1 years, and has recently moved to a “C-Less Risky” rating over the last 63 days. Its volatility is well below that of S&P 500 over these time periods.

Its Persistence Rating is 50, indicating that it has reasonable chance of producing higher than S&P 500 Average Daily Returns at lower risk. Over the last 20 rolling quarters it has moved between “A-Best” and “C-Less Risky” ratings.

Amongst the Moderate Allocation sector it stands out as a one of the best managed funds over the last year

Despite that, assets have barely budged – up from about $19 million at the end of 2010 to $21 million at the end of 2011.  That’s attributable, at least in part, to the advisor’s modest marketing efforts. Their website is static and rudimentary, they don’t advertise, they’re not located in a financial center (Fort Worth), and even their annual reports offer one scant paragraph about each fund:

The LKCM Balanced Fund’s blend of equity and fixed income securities, along with stock selection, benefited the Fund during the year ended December 31, 2011. Our stock selection decisions in the Energy, Consumer Discretionary, Information Technology and Materials sectors benefited the Fund’s returns, while stock selection decisions in the Healthcare and Consumer Staples sectors detracted from the Fund’s returns. The Fund continued to focus its holdings of fixed income securities on investment grade corporate bonds, which generated income for the Fund and dampened the overall volatility of the Fund’s returns during the year.

Bottom Line

LKCM Balanced (with Tributary Balanced, Vanguard Balanced Index and Villere Balanced) is one of a small handful of consistently, reliably excellent balanced funds. Its conservative portfolio will lag its peers in some years, especially those favoring speculative securities.  Even in those years, it has served its investors well: in the three years since 2001 where it ended up in the bottom quarter of its peer group, it still averaged an 11.3% annual return.  This is really a first –rate choice.

Fund website

LKCM Balanced

IRMS (a/k/a FundReveal) provides a discussion of the fund’s risk/return profile, based on their messages of daily volatility, at http://www.fundreveal.com/mutual-fund-blog/2012/05/lkbax-analysis-complementing-mutual-fund-observer-may-1-2012/

Mutual Fund Observer - ... a site in the tradition of Fund Alarm

Because bond fund managers, traditionally, had made relatively modest impacts of their funds’ absolute returns, Manager Changes typically highlights changes in equity and hybrid funds.

Mutual Fund Observer - ... a site in the tradition of Fund Alarm

Bernzott U.S. Small Cap Value Fund

Bernzott U.S. Small Cap Value Fund will pursue long-term capital appreciation, primarily by investing in common stock of small cap US companies. They will target companies with a market capitalization of between $500 million and $5 billion. The Fund may also invest (a maximum of 20 % of assets) in real estate investment trusts (REITs) . The portfolio will be managed by Kevin Bernzott, CEO of Bernzott Capital Advisors, Scott T. Larson, CFA, CIO, and Thomas A. Derse, Senior Vice President. The team has no experience managing mutual funds but they have managed separate accounts using the same discipline since 1995.  The good news: over the past 3, 5 and 10 years, their separate accounts have beaten the Russell 2000 Value by 1-2% per year.  Bad news: the separate accounts beat their benchmark only about half the time, the number of separate accounts is down 80% from its peak, assets are down by 50%.  All of which might help explain the decision to launch this fund  The minimum investment for regular accounts is $25,000. IRA’s, Gift Accounts for minors and Automatic Investment Plans carry a minimum investment of $10,000.  The expense ratio is 0.95% after waivers.  There’s a 2% fee for redemptions before 30 days.

Contravisory Strategic Equity Fund (CSEFX)

Contravisory Strategic Equity Fund (CSEFX) seeks long-term capital appreciation. The Fund will invest at least 80% of its net assets in common stocks of companies of any market capitalization and other equity securities, including shares of exchange-traded funds (“ETFs”). Up to 20% of its net assets may also be invested in the stocks of foreign companies which are U.S. dollar denominated and traded on a domestic national securities exchange, including American Depositary Receipts (“ADRs”). The strategy is based on a proprietary quantitative/technical model, which uses internally generated research. A private database tracks over 2000 stocks, industry groups, and market sectors.  The goal is to create a portfolio which seeks capital appreciation primarily through the purchase of domestic equity securities.  The approach is designed to separate strong performing stocks from weak performing stocks within the equity markets. The Advisor will consider selling a security if it believes the security is no longer consistent with the Fund’s objective or no longer meets its valuation criteria. The fund’s management team will be headed by William M Noonan who is the president and CEO.  The minimum investment for regular and retirement accounts is $2500. There is a fee of 2.00% for redemptions within 60 days of purchase. The expense ratio is 1.51%.

The DF Dent Small Cap Growth Fund

The DF Dent Small Cap Growth Fund will seek long-term capital appreciation. To achieve this the fund will normally invest at least 80% of its net assets (plus borrowings for investment purposes) in equity securities of companies with small market capitalizations. The Fund will target U.S.-listed equity securities, including common stocks, preferred stocks, securities convertible into U.S. common stocks, real estate investment trusts (“REITs”), American Depositary Receipts (“ADRs”) and exchange-traded funds (“ETFs”). While the fund will target companies that in the Adviser’s view possess superior long-term growth characteristics and have strong, sustainable earnings prospects and reasonably valued stock prices, it   may invest in companies that do not have particularly strong earnings histories but do have other attributes that in the Adviser’s view may contribute to accelerated growth in the foreseeable future.

The Fund’s portfolio will be managed by Matthew F. Dent and Bruce L. Kennedy, II, each a Vice President of D.F. Dent who are jointly responsible for the day-to-day management of the Fund.The minimum investment for both standard and retirement account is $2500.00. The redemption Fee ( within 60 days of purchase ) is 2.00%. There is an expense ratio of 1.10%

Jacobs Broel Value Fund

Jacobs  Broel Value Fund seeks long-term capital appreciation, and will invest in securities of companies of any market capitalization that the “Adviser” believes are undervalued. The Fund may invest in publicly traded equity securities, including common stocks, preferred stocks, convertible securities, and similar instruments of various issuers. The Adviser will focus on identifying companies that have good long-term fundamentals (e.g., financial condition, capabilities of management, earnings, new products and services) yet whose securities are currently out of favor with the majority of investors. The Fund will typically hold between 15-30 securities. The number of securities held by the Fund may occasionally exceed this range depending on market conditions. The Fund may, at times, hold up to 25% of its assets in cash. Up to a total of 25% of its assets may be invested in other investment companies, including exchange-traded funds and closed-end funds.  The fund is managed by Peter S. Jacobs and Jesse M. Broel. Mr. Jacobs is President and Chief Investment Officer of the Adviser and Mr. Broel is Portfolio Manager and Chief Operating Officer of the Adviser. The minimum investment is $5000.00 for regular accounts and $1000.00 for IRAs. There is a redemption fee of 2.99% ( funds held 90 days or less) and the expense ratio is 1.48%

Kellner Merger Fund

Kellner Merger Fund will seek positive risk-adjusted absolute returns with low volatility.  The Fund invests primarily  in equity securities of U.S. and foreign companies that are involved in publicly announced mergers, takeovers, tender offers, leveraged buyouts, spin-offs, liquidations and other corporate reorganizations.  The types of equity securities in which the Fund may invest include common stocks, preferred stocks, limited partnerships, and master limited partnerships  of any size market capitalization. George A. Kellner (Founder & Chief Executive Officer) and Christopher Pultz (Managing Director) are the portfolio managers.  The minimum initial investment is $2000 for regular accounts, reduced to $100 for retirement accounts or those set up with automatic investment plans.  The expense ratio, after a fee waiver, will be 2.00%.

Logan Capital International Fund

Logan Capital International Fund will pursue long-term growth of capital and income.  They’ll invest primarily in dividend-paying, large-cap stocks (or ADRs) in developed foreign markets.  Among their other tools: up to 20% emerging markets, up to 15% in ETFs, up to 10% in options and up to 10% short.  Marvin I. Kline and Richard E. Buchwald of Logan Capital will manage the fund.  The team manages about a quarter billion in separately managed accounts, but there is no public report of their composite performance.  The minimum initial investment is $5000, reduced to $1000 for IRAs.  The expense ratio is 1.5%.  There’s a 1% redemption fee on shares held less than six months.

Logan Capital Large Cap Core Fund

Logan Capital Large Cap Core Fund will pursue long-term capital appreciation.  They’ll invest primarily in US stocks, with permissible capitalizations between $500 million and about $500 billion.  The anticipate 50-60% growth and 40-50% value, which they define as financially stable, high dividend yielding companies.  The managers combine macroeconomic projections with fundamental and technical analysis. Among their other tools: up to 20% international, up to 15% in ETFs, up to 10% in options and up to 10% short.  Al Besse, Stephen S. Lee and Dana H. Stewardson of Logan Capital will manage the fund.  The team manages almost two billion in separately managed accounts, but there is no public report of their composite performance. The minimum initial investment is $5000, reduced to $1000 for IRAs.  The expense ratio is 1.5%.  There’s a 1% redemption fee on shares held less than six months.

Logan Capital Large Cap Growth Fund

Logan Capital Large Cap Growth Fund will pursue long-term capital appreciation.  They’ll invest primarily in US stocks, with permissible capitalizations between $500 million and about $500 billion. The managers combine macroeconomic projections with fundamental and technical analysis. Among their other tools: up to 20% international, up to 15% in ETFs, up to 10% in options and up to 10% short.  Al Besse, Stephen S. Lee and Dana H. Stewardson of Logan Capital will manage the fund. The team manages almost two billion in separately managed accounts, but there is no public report of their composite performance.  The minimum initial investment is $5000, reduced to $1000 for IRAs.  The expense ratio is 1.5%.  There’s a 1% redemption fee on shares held less than six months.

Logan Capital Small Cap Growth Fund

Logan Capital Small Cap Growth Fund will pursue long-term capital appreciation.  They’ll invest primarily in US stocks, with permissible capitalizations between $20 million and about $4 billion. The managers combine macroeconomic projections with fundamental and technical analysis. Among their other tools: up to 20% international, up to 15% in ETFs, up to 10% in options and up to 10% short.  Al Besse, Stephen S. Lee and Dana H. Stewardson of Logan Capital will manage the fund. The team manages almost two billion in separately managed accounts, but there is no public report of their composite performance.  The minimum initial investment is $5000, reduced to $1000 for IRAs.  The expense ratio is 1.5%.  There’s a 1% redemption fee on shares held less than six months.

Longboard Managed Futures Strategy Fund

Longboard Managed Futures Strategy Fund, Class N shares, will seek positive absolute returns.  The Fund will hold a mix of fixed-income securities and futures and forward contracts.  Like other managed futures funds, it will invest globally in equities, energies, interest rates, grains, meats, soft commodities (such as sugar, coffee, and cocoa), currencies, and metals sector.  It may offer some emerging markets exposure. The fund will be managed by a team headed by Longboard’s CEO, Cole Wilcox.  Mr. Wilcox ran a managed futures hedge fund for Blackstar Funds, LLC, for eight years.  There’s no publicly-available record of that fund’s performance.  The minimum initial investment is $2500.  Expenses will start at 3.24% plus a 1% fee of shares held for fewer than 30 days.  The fund expects to launch in June, 2012.

Manning & Napier Strategic Income, Conservative

Manning & Napier Strategic Income, Conservative (“S” class shares) will be managed against capital risk and its secondary objective is to generate income and pursue capital growth. This will be a fund of Manning and Napier funds, with a flexible but conservative asset allocation.  It targets 15%-45% in equities (via Dividend Focus and Real Estate) and 55%-85% in bonds (through Core Bond and High Yield Bond).  The allocation will be adjusted based on the team’s reading of market conditions and valuations of the different asset classes.   It will be managed by the same large team that handles Manning’s other funds.  The expense ratio is set at 1.06% and the minimum initial investment is $2000.  The minimum is waived for accounts set up with an automatic investing plan.

Manning & Napier Strategic Income, Moderate

Manning & Napier Strategic Income, Moderate (“S” class shares) will pursue capital growth with the secondary objectives of generating income and managing capital risk. . This will be a fund of Manning and Napier funds, with a flexible asset allocation in the same range as most “moderate target” funds.  It targets 45%-75% in equities (via Dividend Focus and Real Estate) and 25%-55% in bonds (through Core Bond and High Yield Bond). The allocation will be adjusted based on the team’s reading of market conditions and valuations of the different asset classes.  It will be managed by the same large team that handles Manning’s other funds.  The expense ratio is set at 1.03% and the minimum initial investment is $2000.  The minimum is waived for accounts set up with an automatic investing plan.

Northern Multi-Manager Global Listed Infrastructure Fund

Northern Multi-Manager Global Listed Infrastructure Fund will seek total return through both income and capital appreciation. To achieve its objectives the Fund will invest, under normal circumstances, at least 80% of its net assets in securities of infrastructure companies listed on a domestic or foreign exchange. The Fund invests primarily in equity securities, including common stock and preferred stock, of infrastructure companies. The Fund will invest at least 40%, and may invest up to 100%, of its net assets in the securities of infrastructure companies economically tied to a foreign (non-U.S.) country, including emerging and frontier market countries. The Fund may invest in  infrastructure companies of all capitalizations. For a company to be considered it must derive at least 50% of its revenues or earnings from, or devotes at least 50% of its assets to, infrastructure-related activities. The Fund defines “infrastructure” as the systems and networks of energy.  The fund will be managed by Christopher E. Vella, CFA, who is a Senior Vice President and Chief Investment Officer. The management team also includes Senior Vice President Jessica K. Hart. The minimum initial investment is $2,500 in the Fund ($500 for an IRA; $250 under the Automatic Investment Plan; and $500 for employees of Northern Trust and its affiliates). There is a redemption fee of 2.00% (within 30 days of purchase), and the expense ratio is 1.10%

RiverNorth / Manning & Napier Equity Income Fund

RiverNorth / Manning & Napier Equity Income Fund (“R” class shares) will pursue overall total return consisting of long term capital appreciation and income. The advisor will allocate the fund’s assets between two distinct strategies, either one of which might hypothetically receive 100% of the fund’s assets.  One strategy is a Tactical Closed-End Fund Equity (managed by RiverNorth)  and the other is a Dividend Focus (managed by Manning & Napier). The amount allocated to each of the principal strategies may change depending on the adviser’s assessment of market risk, security valuations, market volatility, and the prospects for earning income and total return.   At base, you’re buying two very good funds,  RiverNorth Core Opportunity (RNCOX) and Manning & Napier Dividend Focus (MNDFX), in a single package and allowing the managers to decide how much go place in each strategy.  The RiverNorth sleeve and the fund’s asset allocation decisions are handled by Patrick Galley and Stephen O’Neill who also run RiverNorth Core Opportunity, and the M&N sleever is run by the team that runs all of the M&N funds. The expense ratio is not yet set.  The minimum initial investment is $5000 for regular accounts and $1000 for retirement accounts.

Swan Defined Risk Fund

Swan Defined Risk Fund seeks income and growth of capital. To achieve this the fund will invest primarily in: exchange-traded funds (“ETFs”) that invest in equity securities that are represented in the S&P 500 Index and/or individual sectors of the S&P 500 Index, exchange-traded long-term put options on the S&P 500 Index for hedging purposes, and buying and selling exchange-traded put and call options on various equity indices to generate additional returns. The fund will target equity securities of large capitalization (over $5 billion) US companies through ETFs, but it may also have small investments in equity securities of smaller and foreign companies through sector-based or S&P 500 Index ETFs. The adviser employs a proprietary “Defined Risk Strategy” (“DRS”) to select Fund investments.  Randy Swan, CPA, President of the adviser (and the creator of the DRS system back in 1997 ) serves as the portfolio manager. The minimum investment is $5000.00 and there is a redemption fee of 1.00% ( 30 days). The expense ratio is 1.80%.

Mutual Fund Observer - ... a site in the tradition of Fund Alarm

Counterparties.com is a new Reuters website that is edited by Felix Salmon and Ryan McCarthy. Ryan McCarthy is also a deputy editor at Reuters.com. Prior to working at Reuters he held the position of business editor at the Huffington Post. Felix Salmon is a UK native with a knack for getting attention, as with recent suggestion that The New York Times might choose to sell some of their information, before publishing it, to hedge funds.  In addition to blogging for Thomson Reuters, he’s written for Euromoney magazine and the Bridge News Service, created the Economonitor blog for Roubini Global and the Market Movers blog for Portfolio.com.  Like me, they both Tweet: @felixsalmon and @ mccarthyryanj.

Counterparties.com is part of the Reuters network, and that connection is reflected in the site’s slick design and corporate feel.   The design and layout is crisp, smooth and professional. I particularly liked the background color choices. The top and bottom zones are done in a muted red while the main body is in plain white. It has the effect of clearly demarcating the main body of content from the secondary zones. It is a simple design choice that has a big effect, and shows the importance of a good design team.

Content is presented in four distinct segments.  The top row contains four featured stories. Each contains a prominently displayed picture, a rewritten headline of the story, a link to the website and another link to a discussion board.

There are two columns in the main body.  The main body of the website is divided into two parts the right side is a narrow column that is divided into three sections. The wide left hand column contains what the editors’ describe as the day’s best stories. The presentation is information-rich:

Each story has a clickable tag (“deals”).  Click and you get an index of all stories in that category.  There’s a linked title (“Twitter made”) and source (venturebeat.com).  There are links to discuss or Tweet the article.  Each entry ends with a Tweet about the article or with a link to a related story.   The second story is presented with a small favicon or avatar and a one sentence headline that you can click to get the full story. The articles are divided into sections that are clearly separated and easy to differentiate.

The narrower right hand column contains The River and The Browser.  The River contains “stories we love,” and are sometimes presented in a lighthearted manner.  The teaser to one River story declares, “It’s about more than underwear, it’s about redefining what it means to be made in America (4/26).” Unlike the main stories, The River’s presentation is understated: source, category, and teaser. Below The River there are links to “stuff we’re not linking to” and a tally of the sites they most frequently link to (New York Times, Bloomberg, Wall Street Journal, Reuters) and then a feed from a website called The Browser.  Its editors note, “The Browser is not a news website. Our priority is to curate writing of lasting value – whatever its length or form.”  During my visit, the feed highlighted stories on intolerance in Saudi textbooks, Gerard Mercator’s 500^th birthday and why thinking in a foreign language makes for better decisions.

The site suffers from three small design weaknesses:

• There is no clear pattern of story assignment, so there’s no quick way to find stories on a particular subject (e.g., breaking news).  It’s not clear if the stories on the top bar are simply the most recent.
• Of greater concern was the fact that clicking a link (in both Firefox and Chrome) did not cause a new tab to open, instead the link caused the page to open in the existing tab. That may not be of any concern to some but be prepared to hit the back button often if you don’t have a preview plug-in installed in your browser. You can, of course, right-click and choose new tab but that’s unnecessarily clunky.
• “Stuff We’re Not Linking To” seems to  add a bit more clutter than value.  The “links we’re not linking to” are undefined.  It’s not immediately clear how relevant the section is.

The overall presentation and layout is excellent and navigation is simple and quick.  The editors inform us that the website is still evolving and they are working  towards improving the overall experience.

Counterparties contains links to content that has been chosen by its editors. The curated links represent a subset of a larger pool of articles. Seventy five percent of this larger set are links that have been manually chosen by the editors and twenty five percent have been suggested by Percolate which is a customizable recommendation engine. In addition to links to current news articles, readers have access to an extensive archive of previous content. There are also links to content from The Browser which is a separate website. The website is updated daily

Selection Criteria

The editors Ryan McCarthy and Felix Salmon choose the links that they recommend on the site. Here is what they say about their selection process. “Counterparties combines our own judgment — what we find interesting, overlooked and important — with the recommendation engine created by our friends at Percolate. That engine regularly monitors all the blogs and Twitter feeds that Felix follows, and keeps an eye out for stories it thinks we’ll find most interesting. The stories we love go into The River, on the right of the page; we’ll move the best to the site’s main section, on the left.”

Quality of Sources

Most of the links that are featured in the main section to the left come from the major players in the industry. In fact the entire top five top sources linked to are industry heavyweights. They also occasionally feature stories from smaller sources and also financial blogs. The fact that the majority of their links are from long standing and well respected sources means that the quality of the content is high. What is refreshing is that the quality of the lessor known sources generally matches that of the major players. A good case in point was a blog entry by one of the investors of Instagram who was responding to criticisms levied against him and his group. Never mind that they are set to make some $78,000,000 from their initial investment of $250,000.

The Human Touch

While  an automatically recommended list of links that is generated by Percolate account for a quarter of the links available to them, the editors manually choose the ones that make it to the site. This best of both worlds approach seems to work well but as is shown by the prevalence of links from major entities, it may have the effect of eliminating content from lesser known sources.

With the might of Reuters and the talent of Felix Salmon and Ryan McCarthy behind it Counterparties is the closest thing to curated news nirvana that I have come across so far. Slick professional presentation coupled with a fresh feel, eclectic coverage and great quality adds up to a winner. They may be the new kids on the block, but if they keep their standards to the level they are at now and continue to improve they should be here for a long, long time.

Mutual Fund Observer - ... a site in the tradition of Fund Alarm

We all know the importance of accurate, current and relevant financial news. Even more than the news, we need some perspective on the news, some ability to separate important information from background noise and to place that information in a meaningful context. That responsibility has traditionally fallen to journalists, financial and otherwise.

For anyone attempting to make sense of a day’s (or week’s or year’s) events, the problem is not a shortage of stuff to drawn on. Quite the opposite: the problem is that absolute torrent of information that pummels us. By way of simple example, Google News tracks 25,000 publications (including 4,500 English-language news sites) daily.

One answer is to turn to a trusted, professional source for all your news: Reuters, Dow-Jones, the New York Times, the Financial Times and a few others have long and distinguished records.  But each has its own limits, biases and idiosyncrasies. In response, more and more readers have come to rely on news feeds and news aggregators.

News aggregators do not create news. They collect news from various third party sources, but they “choose to aggregate, to pass along, to recommend, to sort, involves normative evaluation of content,” note long-time journalists, Bill Kovach of The New York Times and Tom Rosenstiel of The Los Angeles Times (Blur: How to Know What’s True in the Age of Information Overload, Bloomsbury: 2010).  Ideally, they then present it in an easily accessible format to readers. That can make them an excellent choice for quickly accessing relevant and important financial information.

The problem is that there are too many news aggregators and too little quality control. Some like Google, automatically pull links from a multitude of online sources and then present those that contain specific keywords and have been read by the largest number of people. They are driven by algorithms that choose sites automatically based on hits, clicks, keywords and trends. These sites process of  millions of data points and use complicated mathematical formulae to decide which stories to present to you. Another approach targets a set of predetermined feeds. For these news aggregators the “source” might be more important than the story.

What we have searched for is what Kovach and Rosenstiel term the “smart aggregator,” a financial news aggregator who understands what its purpose is. These websites understand that investors want a place where they can quickly and easily go through the important financial headlines of the day, and just as easily click through to the stories that they choose.  They understand that what is popular is not always relevant or useful and they take the time to properly separate the wheat from the chaff. Essentially what we sought were financial news aggregators that have an element of human curation.

How did we identify the web’s best financial news aggregators?  Simple: we identified as many as we could and then test drove each one during the week of April 23-27, 2012.  In reviewing each site, we applied the same criteria:

• were the aggregated sources diverse?
• were the aggregated sources reliable?
• did the story coverage and selection represent intelligent priorities?
• was the site efficiently constructed and easy to navigate, and ideally,
• was there a discernible human presence, or voice, in the process?

Two stood out, while a dozen were more trouble than they were worth.

Abnormal Returns

Abnormal Returns is likely the web’s most-celebrated financial news aggregator.  Like the Observer, Abnormal Returns is an independent publication; that is, it’s not part of a larger media entity.  In six years, its daily linkfest and “forecast-free” ethos has made it a daily destination for thousands.

Counterparties

Counterparties are “the other guys” in every financial transaction, the buyer when you’re a seller, the insurer when you’re the insured.  On the web, Counterparties is a young, human-curated news aggregator.  Part of the Thomson Reuters empire, its eclectic, lively and sharply-done.

Sites that made us go “hmmmm.” There were two other sites that offered important, provocative and/or diverting content, but which did not rise to the level of our top two.  Nonetheless we’d like to commend the two of them for your consideration.

Smart Brief

Smart Brief is less a news aggregator than a newsletter aggregator.  The editors write that “[t]he premise behind SmartBrief is simple: there’s too much information out there and too little time in the day to read it all. Our editors hand-pick the most relevant and important news from all over, summarize it, link to the original sources and deliver it — for FREE — in one-stop-shop e-newsletters.”  Some of the newsletters are produced by trade associations (New York Society of Security Analysts) for more-or-less targeted audiences (from “retirement savings community” to “operations and finance professionals”).  The newsletters update between daily and bi-weekly.

Fark

Fark is another of those sites that David, our esteemed publisher, likes and that I just shake my head at.  (But hey, he’s the boss so …) Fark, which advertises “Real News, Real Funny” describes itself as  “a news aggregator and an edited social networking news site. Every day Fark receives 2,000 or so news submissions from its readership, from which we hand-pick the funny and weird notable news — and not-news — of the day. “  The site has been around since 2000 and posts 6-10 business stories a day.  You can get a sense of their editorial sensibilities by looking at two of their top stories from April 27: “New Woolrich designer clothes that conceal firearms will no longer have your wife asking if the Glock makes her butt look big” (CBS News) and a Reuters story on the effect of Amazon’s earnings announcement on the equities market.

As always, not only could we be wrong, we’d be delighted to be proven wrong.  If you’ve found a better aggregator or you’ve found a serious error with one of our choices, write me  If you can show us a better mousetrap, we’ll include it and we’ll highlight that in David’s next column.  We’ll also give you public credit for your find and we’ll offer you a chance to contribute to the rewrite.

As always, I’d love to hear your ideas for “best of” focuses in the months ahead or for particular websites.  Write me! Remember time is money, why not take a few minutes to read this month’s feature? It just might help you avoid the multitude of aggregators who do little more than steal your time, and have more to do with racking up page hits than providing relevant and useful information.

Mutual Fund Observer - ... a site in the tradition of Fund Alarm

Abnormal Returns is a widely-touted finance and investing blog that aggregates news stories from the blogosphere and the mainstream media. The six-year-old website has been celebrated as “the linkfest against which all others should be judged in the financial blogosphere” (Joshua Brown in The Christian Science Monitor) and one of “the best of the blogs” (Minyanville).  Its editor, Tadas Viskanta, is one of “the finance people you have to follow on Twitter” (Business Insider) and “a lot smarter than you are” (The Globe and Mail).  Mr. Viskanta describes himself as “a private investor” with an MBA from The University of Chicago. In the 1990s he co-authored, with colleagues from First Chicago and Duke University, a series of journal articles on global investing.  HIs most widely-cited works deal with international equity correlations and various classes of risk factors.  His most recent work, Abnormal Returns: Winning Strategies from the Frontlines of the Investing Blogosphere (McGraw-Hill, 2012), came out in mid-April.

Abnormal Returns has a clean, content-focused layout. Across the top there’s the site banner, with a search box and rudimentary site navigation.  Below the banner and site navigation links the page is separated into two sections.  The left column contains the current content; the right column has the archives and a smattering of ads.

The content on the left side is presented as a scrollable list of links, grouped into categories. The lists always begin with the quote of the day and the chart of the day and sometimes a video of the day. These are followed by the actual links to the news that you are looking for.  Each link includes a concise summary of the story: “Should investors bother with long/short equity mutual funds? <link>”

The simple layout makes navigation a breeze.  With no unnecessary graphics to distract me I was able to quickly scan the short summaries and decide whether to click through or move on to the next item. Generally I enjoyed the minimalist uncluttered feel.  The site suffers from three small design weaknesses:

• At times it is difficult to identify the different categories when quickly scanning through since they are only separated by a heading that was underlined and in bold font (ETFs). The font type was the same so when quickly scrolling up or down the list at times I missed a heading completely.  That was a minor issue though and only occurred when I sped through the page.
• Of greater concern was the fact that clicking a link (in both Firefox and Chrome) did not cause a new tab to open, instead the link caused the page to open in the existing tab. That may not be of any concern to some but be prepared to hit the back button often if you don’t have a preview plug-in installed in your browser. You can, of course, right-click and choose new tab but that’s unnecessarily clunky.
• The function of “The Latest” is muddy.  It appears to exactly duplicate the “Recent Posts” list in the adjacent column, and therefore add little value to the site.

Abnormal Returns provides links to news, commentary and information that was created by members of the financial blogosphere, as well as financial and investing news, articles, and occasional videos from the mainstream media and commercial websites.  The website is updated daily, and there are also links to archived material and recent posts that you may have missed.

Selection criteria

In a wide ranging interview that was published on Covestor, Mr. Viskanta states that the links he recommends contains elements of commentary and analysis. He also stated that they should have some lasting value. He is clear that the links represents material that he personally finds interesting and useful.

Quality of sources

The links that appear on Abnormal Returns are selected from a wide range of sources. After test driving the site I was impressed by the diversity.  While many (if not most) of the article links were from the financial blogosphere, there were many articles that came from  established and well respected industry heavyweights such as The Wall Street Journal, Bloomberg and The Economist. In the Covestor interview Mr. Viskanta explains that his links are curated from a variety of sources including emailed content, his personal newsfeed, Twitter and StockTwits.

The Human Touch

Every link in the daily updated content is human-selected; there is no element of mechanical aggregation in the selection process.

Technically speaking Abnormal Returns may be better described as a curated financial news blog. We decided to include it on our list because it is one of the best options for any investor looking for a website that provides important, topical and useful news and commentary from a wide cross-section of sources. Also weighing in on the decision was the reputation of the site founder and the generally high quality of the material that the site recommends. Overall we think that Abnormal Returns ranks as one of the best collections useful finance and investing news and commentary. The layout is simple and easy to navigate and its text heavy presentation means that you will spend more time getting useful information and less time being distracted.

Mutual Fund Observer - ... a site in the tradition of Fund Alarm