It’s been an unusually busy month in the industry, with nearly three dozen funds liquidated or slated for liquidation, as well as a surprising number of open funds closing to new investors and closed funds opening to them. And, as ever, the “smoke and marketing” crowd has re-branded a bunch of funds; most, not surprisingly, aren’t very good.
Fritz Kaegi, formerly co-CIO at Columbia Acorn and manager of Columbia Acorn Emerging Markets (CEFXZ) and, more briefly, Columbia Acorn (ACRNX), has left Columbia. In a gesture of civic responsibility, the Chicago native is “exploring” a run for the post of Cook County assessor. We’re hoping to chat with Fritz (whose exploratory committee, Friends of Fritz, might be tapping into the pool of hard-core Fritz Mondale fans, an octogenarian dragon waiting to be awakened) in the month ahead.
Nadine Youssef, formerly a director of media relations (and continuingly a very good person to work with) has left Morningstar. At last check, she’s still searching for new opportunities.
Lebenthal Lisanti Capital Growth, LLC, advisor to Lebenthal Lisanti Small Cap Growth Fund (ASCGX), is undergoing a change of ownership. It looks like Lebenthal became a 51% owner instead of a 49% owner. It’s worth noting primarily because the “Lisanti” of “Lebenthal Lisanti,” is Mary Lisanti, a particularly distinguished SCG manager.
It’s been a year since the housecleaning at Sequoia (SEQUX). Mr. Goldfarb left in late March 2016 and four co-managers were added in mid-May. David Poppe, a prime architect of the disastrous decision to place a third of the fund’s assets in Valeant Pharmaceuticals, remains in charge. So far, the changes haven’t borne fruit: the fund has a healthy absolute return of 13.6% over the past 12 months but trails 88% of its peers. It also trails the returns of their single largest holding, Berkshire Hathaway. That’s partly attributable to an above-average cash stake of 9% and to one large, underperforming position (O’Reilly Auto Parts). Morningstar, which maintained the fund’s Gold rating through much of the disaster and eventually re-rated it as Bronze, continues to be supportive: better risk controls are in place and “the team, led by David Poppe, remains exceptional … As dark as things were over the past 18 months, this fund looks well-positioned for the future.”
Briefly Noted . . .
SMALL WINS FOR INVESTORS
Around June 28, 2017, Class A Shares of the 1789 Growth and Income Fund (PSEAX) will be converted into Class P Shares; in consequence, the expense ratio will fall from 1.33% to 1.08%.
Effective on or about June 1, 2017, the management fee for AMG Managers Cadence Emerging Companies Fund (MECAX) was reduced from 1.25% to 0.69% and the contractual expense limitation amount was reduced from 1.42% to 0.89%. It’s a really solid microcap growth fund with just $68 million in assets. I’m hopeful that the lower expense ratio earns it a bit more attention.
Effective as of May 9, 2017, Causeway Capital has agreed to revise its expense limit agreement on the Causeway Global Absolute Return Fund (CGAVX) to reduce the fund’s expense ratio by 0.40 percentage points. It’s a high volatility market neutral strategy that has handily beaten its woebegone peer group in the long run, but has been subject to sharp swings. It’s down more than 10% year-to-date.
Effective May 24, 2017, the JPMorgan U.S. Large Cap Core Plus Fund (JLCAX) “will no longer be subject to a limited offering.” That’s their coy way of saying it’s open to new investors. High risk, high return, large asset base. Meh.
Effective May 6, 2017, the minimum initial investment amount for the Institutional Class of Nuance Concentrated Value Long-Short Fund (NCLSX) was reduced from $1,000,000 to $10,000.
Palmer Square Ultra-Short Duration Investment Grade Fund (PSDSX) reduced its investment minimum, though more modestly, from $1,000,000 to $250,000. Palmer Square Opportunistic Income Fund (PSOIX) dropped at the same time, from $5,000,000 to $250,000.
Wasatch Emerging Small Countries Fund (WAMFX) has reopened after three years. In the year since Laura Geritz’s departure as lead manager, the fund has trailed 99% of its peers, which likely explains both the re-opening and our suggestion that you consider Ms. Geritz’s new Rondure New World Fund (RNWOX) instead.
CLOSINGS (and related inconveniences)
AQR is closing two more funds at month’s end. Here’s their complete roster of closed funds and the dates of their closing.
|Closed Fund||Closing Date|
|AQR Diversified Arbitrage Fund||June 29, 2012|
|AQR Multi-Strategy Alternative Fund||September 30, 2013|
|AQR Style Premia Alternative Fund||March 31, 2016|
|AQR Style Premia Alternative LV Fund||March 31, 2016|
|AQR Long-Short Equity Fund||June 30, 2017|
|AQR Equity Market Neutral Fund||June 30, 2017|
Invesco Developing Markets Fund (GTDDX) will close to new investors on June 8, 2017. Interesting fund: about 20% cash, $3.1 billion in AUM, and a Morningstar analyst rating of Silver. Given that it’s primarily a large-cap fund, capacity shouldn’t be greatly strained right now. Given the vagaries of standard reporting periods (the 1-, 3-, 5-year windows which are arbitrary and often misleading), the fund looks unimpressive. Viewed from the more meaningful perspective of the entire market cycle, it’s clearly on the A-list.
Longleaf Partners Fund (LLPFX) will close to new investors on June 9, 2017, the fourth such closure in the fund’s history. The other three were in 1995, 1999 and 2004. Morningstar’s Russ Kinnel notes that while this is “kind of” a sign of an over-valued market, Longleaf’s past closures have not consistently occurred near market tops. Mostly Longleaf, already at 24% cash, can’t find new investment opportunities that would warrant keeping the fund open. They expect that “patience and discipline” now will “pay off handsomely” in the future. In the interim, they’re finding lots of international investment opportunities so their International and Global funds remain open.
Effective as of the close of business on June 15, 2017, the Meridian Growth Fund (MRAGX) “will no longer accept offers to purchase” Investor Class, Class A and Class C shares of the Fund, though the Institutional share class will remain open for now.
Vanguard Dividend Growth Fund (VDIGX) has closed to all new investors “with the exception of investors who are added and invest in the Fund only through technology-driven model portfolios” and some retirement plans.
Effective July 31, 2017, Wells Fargo Small Company Growth Fund (WFSAX) will be closed to most new investors.
OLD WINE, NEW BOTTLES
Effective on May 24, 2017, CG Core Balanced Fund became CG Core Total Return Fund (CGBNX), the greatest significance of which is that it used to hold at least 25% bonds. The new fund can hold as little as 10% in fixed income.
Effective May 8, 2017, Deutsche Global Equity Fund changed its investment strategy, management team and name; it’s now Deutsche Global Macro Fund (DBISX). While the fund hasn’t been horrible in the past five years, it’s certainly been no better than mediocre so the changes should be welcomed.
Gavekal KL Allocation Fund (GAVAX/GAVIX) has changed its name to KL Allocation Fund. The “KL” stands for “Knowledge Leaders.”
In a move with limited (little, no apparent) significance for investors Horizon Spin-off and Corporate Restructuring Fund (LSHAX) is being restructured so that its sub-adviser becomes its adviser. In the 10 years of the management team’s tenure, the fund has trailed 98% of its peers. For reasons unknown, neither manager nor any trustee has invested in the fund.
In July, shareholders will vote on a plan to reorganize Nomura High Yield Fund (NPHIX) into a new American Century fund, American Century High Income Fund. Under this arrangement, Nomura will go from advising to sub-advising (i.e., managing) the new fund. If shareholders approve the reorganization “and other closing conditions are met,” the reorganization will close around October 2, 2017.
On June 30, 2017, the name and principal investment strategies of the Oak Ridge Large Cap Growth Fund (ORILX) will be changed. The name will be Oak Ridge Multi Strategy Fund and the game will be investing in the four other Oak Ridge funds.
Effective July 18, 2017, Oppenheimer Main Street Select Fund (OMSOX) becomes Oppenheimer Main Street All Cap Fund.
Royce Heritage Fund has been renamed Royce Small/Mid-Cap Premier Fund (RGFAX) which means it is now required to have 80% of its net assets invested in small- and mid-cap stocks. Hmmm … the fund already has 95% in small- and mid-cap stocks, and has trailed 92% of its Morningstar mid-cap blend peers over the past five years, so the benefit of the change isn’t immediately clear. Steven McBoyle remains as the Fund’s portfolio manager.
On or around July 31, 2017, Westwood Strategic Global Convertibles Fund (WSGCX) will become Westwood Strategic Convertibles Fund; the Fund’s principal investment strategies will be revised to eliminate the “at least 40% outside the U.S.” proviso, in anticipation of which the managers will be selling some of their non-U.S. holdings.
OFF TO THE DUSTBIN OF HISTORY
AMG Managers Cadence Capital Appreciation Fund (MPAFX) will be merged into AMG Renaissance Large Cap Growth Fund (MRTLX) on July 30, 2017. In justifying the change, AMG reassures investors that the funds … uhhh, both have AMG in their names and have the same trustees. The funds have a correlation of about 0.94 with Renaissance having a lower market cap and a less pronounced growth tilt.
BlackRock Advantage International Fund (formerly BDIIX) liquidated, on four days’ notice, on May 5, 2017.
Bradesco Latin American Equity Fund (BDERX) and Bradesco Latin American Hard Currency Bond Fund (BHCRX) will both liquidate on or about June 14, 2017.
Destra Dividend Total Return Fund (DHDAX) closed on May 9, 2017 and liquidated on May 31, 2017.
Deutsche Global Inflation Fund (TIPAX) will liquidate on November 3, 2017.
Deutsche Select Alternative Allocation Fund (SELAX) and Deutsche Gold & Precious Metals Fund (SGDAX) will merge into Deutsche Real Assets Fund (AAAAX) on or about October 30, 2017.
Dreyfus Opportunistic U.S. Stock Fund (DOSAX) will liquidate on July 26, 2017 but remains open to new accounts through June 16, 2017. On face, that strikes me as stupid (“let’s have you open an account in a stock fund that’s transitioning to cash and will liquidate in five weeks!”) but I’m sure there must be some sensible “relationship with advisors” sort of logic behind it.
E.I.I. Realty Securities Fund (EIIIX), E.I.I. International Property Fund (EIIPX) and E.I.I. Global Property Fund (EIIGX) will be liquidated on or about June 9, 2017.
Federated Emerging Markets Equity Fund (FGLEX) will be liquidated on or about July 7, 2017. Not at all a bad fund, in an index-hugging kind of way.
Federated InterContinental Fund (RIMAX) will merge into Federated International Leaders Fund (FGFAX) on or about August 25, 2017.
Federated Managed Volatility Fund (FVOAX) will be liquidated on or about June 23, 2017.
The investment adviser for the GKE Asian Opportunities Fund (GKEAX) has determined to close and liquidate the fund on June 26, 2017.
Goldman Sachs Focused Growth Fund (GFGAX) will merge into the Goldman Sachs Concentrated Growth Fund (GCGAX) on July 28, 2017. As it turns out, Focused is noticeably more focused than Concentrated is concentrated, by about two to one.
The Hartford Unconstrained Bond Fund (HTIAX) will merge into Hartford Strategic Income Fund (HSNAX) around September 25, 2017.
Monte Chesapeake Macro Strategies Fund (MHBAX) has terminated the public offering of its shares and will discontinue its operations effective June 26, 2017.
Northern Large Cap Equity Fund (NOGEX) melts into Northern Large Cap Core Fund (NOLCX) around July 21, 2017
Northern Technology Fund (NTCHX), on the other hand, simply melts. The fund will be liquidated one week later, July 28, 2017.
Nuveen NWQ Japan Fund (NTJAX) will be liquidated after the close of business on July 24, 2017.
Oakseed Opportunity Fund (SEEDX/SEDEX) has closed and will liquidate on June 30, 2017.
RiverPark Structural Alpha Fund (RSAFX) will be liquidated on or about June 30, 2017.
Upon the recommendation of Scout Investments, Inc., the Scout Funds Board of Trustees authorized liquidation of the Scout Emerging Markets Fund (SEMFX), Scout Global Equity Fund (SCGLX) and Scout Equity Opportunity Fund (SEOFX) on or about June 29, 2017. The first two funds are perfectly respectable and the last, SEOFX, is outstanding. Between them, they have under $50 million in assets. The manager, Brant Olson, had a similarly strong record during his three year run as manager of Aquila Three Peaks Opportunity Growth (ATGAX). If I were in the mutual fund acquisition (or talent acquisition) business, I’d be intrigued.
State Street Institutional U.S. Large-Cap Core Equity Fund (SILCX) will liquidate on June 30, 2017.
In a not-quite death, T. Rowe Price decided to pull the plug on a fund they’re never launched. Effective May, 19, 2017, the T. Rowe Price Tax-Free Ultra Short-Term Bond Fund (Fund) will be terminated.
Effective May 10, 2017, the Virtus Strategic Income Fund and the Virtus Emerging Markets Debt Fund were liquidated.
Weitz Research Fund (WRESX) will cease operations and be liquidated on or about June 30, 2017.