Monthly Archives: July 2017

July 1, 2017

By David Snowball

Dear friends,

It’s summer time, an especially blessed and cursed interval for those of us who teach. On the one hand, we’re mostly freed from the day-to-day obligation to be in the classroom. Some of us write, some travel, some undertake “such other duties as may from time to time be assigned” by our colleges. On the other hand, we hear the clock ticking. All year long, as we try to face down a stack of 32 variably-literate essays at 11 p.m. Sunday night, we think “if I can just make it to summer, I’ll recharge and it’ll be great!” About the first thing we notice when summer does arrive, is that summer is almost spent.

Nuts.

To The Wall Street Journal: I get it now! I promise never to display another illicit barber pole.

Now will you stop?

Mayhap the editors of the WSJ.com have Calvin Coolidge (one of my predecessors as director of debate at the University of Massachusetts, by the way) tattooed upon their heinies?

Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan Press On! has solved and always will solve the problems of the human race.

Calvin Coolidge. The quotation appears on the cover of his 1933 memorial service but archivists can’t find evidence of him actually saying it.

Admittedly that would be an awfully painful experience but there are few better explanations for their incredible persistence in sharing the same damned story with me, three times a week, every week for months. What story? Here’s a snip from my inbox:

Conversations

WSJ.com Editors Careers Update: Barber Poles Have Their Own Police Force, With Badges and Everything Jun 30
WSJ.com Editors Careers Update: Barber Poles Have Their Own Police Force, With Badges and Everything Jun 27
WSJ.com Editors Careers Update: Barber Poles Have Their Own Police Force, With Badges and Everything Jun 23
WSJ.com Editors Careers Update: Barber Poles Have Their Own Police Force, With Badges and Everything Jun 20
WSJ.com Editors Careers Update: Barber Poles Have Their Own Police Force, With Badges and Everything Jun 16
WSJ.com Editors Careers Update: Barber Poles Have Their Own Police Force, With Badges and Everything Jun 9
WSJ.com Editors Careers Update: Barber Poles Have Their Own Police Force, With Badges and Everything Jun 6
WSJ.com Editors Careers Update: Barber Poles Have Their Own Police Force, With Badges and Everything Jun 2
WSJ.com Editors Careers Update: Barber Poles Have Their Own Police Force, With Badges and Everything May 30
WSJ.com Editors Careers Update: Barber Poles Have Their Own Police Force, With Badges and Everything May 26

That story first ran at the beginning of May. The gist of it is, if you own a hair salon or similar establishment, you can’t simply plunk a red, white and blue striped pole in front of your establishment. Without a licensed barber on staff, you can’t even have a picture of a striped pole in your window. Barbers are ratting-out hairdressers at an incredible rate over these violations.

Got it. The illicit pole has been taken down from the Observer’s world headquarters. (Actually we have neither pole nor headquarters, but I’m getting desperate for some peace, so I’ll play along.) We promise not to reproduce its tri-color likeness in these pages again.

To the New York Post: No. He’s not saying stocks will go up 50%.

The headline is certainly eye-catching:

If only it were true.

The esteemed economist in question is Robert Shiller, creator of the Shiller CAPE index which tries to generate more-reliable estimates of stock market valuations by factoring the economic cycle into earnings estimates; that’s the Cyclically Adjusted part of the Cyclically Adjusted Price-to-Earnings (CAPE) index.

The quotation from Shiller is this: “I would say, have some stocks in your portfolio. It could go up 50 percent from here. That’s what it did around 2000 — after it reached this level, it went up another 50 percent.”

Have some stocks in your portfolio?  That is, don’t abandon the market completely. Does that sound like a guy saying the stock market will rise 50%?  Uhhh … no. That’s a guy saying “I’m not in the business of calling market tops. The market’s expensive but it could still go up before the final blow-off.” In a late June interview, he said, “People should be cautious now. We have a high market. That doesn’t mean I would avoid it altogether.”

You get a better sense of the esteemed economist’s current thought if you simply follow him on Twitter. His current passion is the role of narrative in economics; that is, the stories we tell ourselves – and the stories others suck us with – are far more powerful forces than rational calculus and data. He noted, for example,

Trump’s example and admonition to “think big and live large” (Trump and McIver, 2004) appears to provide inspiration to many of his admirers, and that might well be expected, along with his stimulative tax policy, to boost consumption demand as well as entrepreneurial zeal. Many people might take the Trump story as a script for themselves, and thus spend freely and raise their risk tolerance.

He lays it out in his newest book Phishing for Phools: The Economics of Manipulation and Deception (2016) and his 2017 presidential address to the American Economic Association.

To the Quad City Times: Really, a subscription is a contract.

In our March issue, I warned folks about an apparently widespread scam perpetrated by cash-strapped newspapers. In pursuit of a bit of additional revenue, the papers were turning 52 week subscriptions into 46 week subscriptions after the fact, then looking for an early renewal at a new, higher rate. Chip and I found several newspapers pursuing such “accelerated” terms, and urged you to check your own subscriptions to be safe.

I wrote the editor, publisher and circulation director of the Times, but received no reply. So, I filed a complaint with the Iowa Attorney General’s office.

Three days later, the publisher of the Times called me at home to apologize for the three month delay in responding and to promise that my original expiration date would be restored. She did allow that they’d received a call from the Attorney General’s office but wouldn’t commit to restoring the terms of other subscribers who were in the same position as me. Their reasoning is that a paid subscription isn’t a contract, hence they’re not bound by the dictates of contract law.

Since these agreements are often referred-to as “individual subscription contracts,” this seems like a novel legal position.

To the Wall Street Journal: Thanks!

In an era when much financial journalism is reduced to pandering for clicks and the sort of press release journalism that takes everything they hear at face value, the work of the folks at The Wall Street Journal really stands out. I’ve been endlessly impressed with the thorough, thoughtful and quiet way in which their financial reporters have kept the issues of risk, valuation and market stability at the forefront. They haven’t been screaming about it, but they have very faithfully found and explained news (whether about the occasional deceptiveness of the VIX or implications of tightening spreads in the face of loosening monetary policy) that strikes me as important for another not willing to assume we’ve reached some sort of “permanently high plateau” or a “new normal” where riskless 10% returns are baked in. To Jason, Justin, Chris & Co., sincere thanks. You’re good.

In particular, Jason Zweig continues to do really important, thoughtful work. His recent two-part report on the shrinking number of stocks (the small- and micro-cap universe is contracting sharply, which greatly increases the challenges that managers face) was surprising and interesting. And I was delighted by his column looking at our friend and too-occasional contributor Sam Lee’s take on being both a prudent investor and a bold speculator. I’m slightly stunned with Sam’s grasp of the implications of cryptocurrencies (Ethereum, in particular) and with Jason’s ability to walk us through the tale. It’s well worth reading.

Etherium prices

Now if only they could find an editorial staff that wasn’t so firmly stuck in the 16th century, I might even be willing to read those last four pages of the front section again.

And to you all: Thanks!

The Observer’s audience continues to be large, cheerful and growing. We’re up about 22% in readership over last June, for example, and the early months of the year saw about 34,000 readers a month drop by. Those numbers always drift down in summer as folks, sensibly enough, find better ways to spend their time.

We remain dedicated to helping folks, investors and managers alike, as best we can as often as we can. If you’d like to support that effort, we’d be grateful. You’d got three options: direct support through a tax-deductible cash gift (at $100 or more, we’d be happy to express our thanks by sharing access to MFO Premium with you), indirectly by using MFO’s link to Amazon (we receive a rebate of something like 5% of the value of anything you buy), or psychically by sharing your thoughts, kudos, questions, leads and suggestions with us. It’s always good to know that folks find something we’ve written useful enough to respond to.

Details about the first two options are laid out under the Support Us tab at the top of the page.

Thanks, especially, to the folks who’ve already committed and who, in several cases, have set up recurring monthly donations through PayPal; Brian, Greg, Deb, and Jonathan – You’re the best! Many thanks also, to those who sent donations this month, Hjalmar, Marc and John. We appreciate your help more than you know.

Enjoy the sum- sum- summertime, and we’ll see you again in August!

Autonomous vehicles, huge gaping sinkholes and your portfolio

By David Snowball

I wonder, occasionally, about a world dominated by self-driving cars, sometimes called “autonomous vehicles.” GM announced in June that they’ve piloted 180 autonomous vehicles and that they’ve got the capability to begin mass production of them. For now, they’re committing $600,000,000 a year to the development.

Last year, Goldman Sachs projected that, between driver-assistance technology and autonomous vehicles, the market will grow from about $3 billion in 2015 to $96 billion in 2025 and $290 billion in 2035. One key is convincing regulators to allow vehicles that are designed with no driver controls at all, basically it would just be a comfortable chair and a computer screen in a rolling box, and to convince people to get into them.

There are three likely advantages to such devices: they would simplify our lives, they would save money and they would save lives.

Nonetheless, for many of us, the loss of control would give real pause. Few are entirely comfortable with the prospect that a machine would make and execute potentially life-and-death decisions for us.  Experts foresee two particularly vexing, perhaps fatal, problems:

  1. The vehicles cannot react well to circumstances their programmers couldn’t foresee. Tests in Australia, for instance, show that autonomous vehicles are entirely flummoxed by kangaroos. In India drivers have so little regard for the rules of the road that the test vehicles are virtually paralyzed. I’m perversely curious, given the number of huge gaping sinkhole stories of late, of whether programmers will take “sudden conversion of the road into an abyss” into account.
  2. Vehicles from different manufacturers must have coordinated responses, otherwise one vehicle might “misunderstand” the likely response of the other (your Ford thinks “surely it will brake” while their Chevy thinks “oh God, accelerate!”), triggering an avoidable crash.

(A separate, fascinating question would be how autonomous vehicles will react in a no-win emergency; if you’re going to either hit and kill a single pedestrian or slam into a school bus, potentially injuring many children, which will your car choose?)

My shortest summary of the self-driving future is this: things will be smoother and more efficient so long as nothing unforeseeable happens; at that point, all bets may be off.

Which raises this question:

Are we already in a self-driving stock market?

Three quick thoughts.

  1. There’s reason for concern.

    Economic growth is sluggish. The stock market has been driven higher for a decade by ultra-low interest rates that discouraged investing in “risk-free” bonds and made it irresistible to borrow money to leverage a stock portfolio; that policy is now being reversed. As the Wall Street Journal recently noted, the Fed has a terrible record for managing such tightening cycles; overshoot and overreaction are far more common than a quiet drop in pressure. And stock valuations are high. If you squint just right you can claim that they’re only at 15 year highs, otherwise you describe it as one of the three highest levels in a century.

    Bill Gross, bright though eccentric, argues this is “the second most crisis-laden” period since 1971 as much because there’s no plausible upside story as because of the downside risk. (Okay, if you want to be skeptical about Gross’s judgment, go to the 1:25 mark of the embedded video interview. He makes his claim then appears to have an “absence seizure” where he freezes for four seconds with his eyes bulging out; his neck moves a tiny bit so I don’t think the video froze, I think Gross did. I’d see a doctor.) In the same week, the chair of the San Francisco Federal Reserve Bank described the stock market as “running on fumes.” BofA Merrill Lynch’s “multi-asset fragility indicator” has been flashing red for months; Joe Ciolli of Business Insider quotes a BAML note to investors: “Markets today are prone to ‘flash crashes’ and tantrums …Rising fragility shows cracks emerging.”

  2. There’s precious little evidence of concern.

    The markets set, then broke, three record highs in June and did so with record low levels of volatility. (“Volatility has disappeared from the stock market,” notes the WSJ’s Justin Lahart, “If you think stocks are dull, look at the economy,” 6/27/2017.). Record numbers of fund managers now describe stocks as overvalued and 80% of them recognize that the US market is the world’s most overvalued.

    And still it rises. Why?

  3. Perhaps because robots don’t feel concern.

    More money is entrusted to self-driving vehicles than ever before.

    Quant hedge funds are approaching a trillion in assets, which is multiplied by the funds’ ability to use leverage to multiply their bets. John Detrixhe, who has the painfully trendy “Future of Finance”, beat at Quartz.com reports:

    the buzz around quants is so intense that investment managers may feel pressured to adopt some sort of algorithmic strategy, or else risk raising less money, [Michael DePalma of Phase Capital] said. Computer-driven hedge funds have doubled their assets under management, to $932 billion, following eight straight years of inflows since 2009, according to data-tracking firm HFR. (“Even the most cutting-edge quant funds rely on old-school human intuition,” 6/28/2017)

    Passive ETFs contribute another $3 trillion, and rising. Since most are indiscriminate buyers, that is, they buy both the best and the worst components of their indexes with equal aplomb, they tend to provide an increasingly important prop to the market. The Wall Street Journal’s Chris Dietrich writes:

    Booming demand for passive investments is making ETFs an increasingly crucial driver of share prices, helping to extend the long US stock rally even as valuations become richer and other large buyers pare back. ETFs bought $98 billion in US stocks during the first three months of this year, on pace to surpass their total purchases for 2015 and 2016 combined…surging demand for ETFs this year had to an unprecedented extent helped fuel the latest leg higher for the eight-year stock-market rally. (“ETF buyers propel stock market’s surge,” 6/29/2017)

    “The risk,” according to Michael O’Rourke, chief market strategist at Jones Trading Institutional Services, is that when the wind changes direction, “the blind buyers [might] turn to blind sellers.” Cliff Asness, pointing to the market experience in 2007, allows that “a quant quake” could happen again.

As with self-driving cars, the question isn’t whether these things will help precipitate a crash, it’s what you should do about it.

  1. Remember that the bull could end with a whimper, not a bang. Optimists, such as Fed chair Janet Yellen believe we won’t see another financial crisis in our lifetime:

    Will I say there will never, ever be another financial crisis? No, probably that would be going too far. But I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will.

    The alternative to a sudden release of pressure might be a slow release: years, perhaps decades, where stocks produce formerly bond-like returns and bonds produce cash-like returns. Jim Masturzo, senior vice president for asset allocation at Rob Arnott’s Research Affiliates, a firm responsible for $200 billion in assets, says that the firm’s asset allocation research shows that a traditional 60/40 balance portfolio is likely to return about one-half of one percent a year, once inflation is accounted for, over the next decade. That estimate assume economic growth of about 2% and a dividend yield of about 2% but also a slow decline in stock market valuations.

    Jonathan Clements is both more optimistic and more pessimistic: a slow return to valuations common in the 20th century, coupled with those same growth and dividend assumptions, could yield a market return of 3-4% for a half century.

  2. Try to understand the magnitude of the risk your portfolio faces.

    In the last couple issues, we’ve walked folks through the mechanics of calculating your likely maximum portfolio drawdown, using your current portfolio and the maximum drawdown data based on funds’ performance during the 2007-09 crash. In the case of my own non-retirement portfolio, for example, I might anticipate a fall 30% and a recovery time in the range of 3-5 years.

  3. Adjust your portfolio if you don’t like what you see.

    If nothing else, rebalance your stock/bond/cash allocation if you haven’t done so in the past year or so. If you’re more ambitious and have access to MFO Premium or another database that allows you to construct a correlation matrix for your portfolio; that will tell you whether your attempt at diversification is more apparent than real. That is, if several of your funds have turned out to be highly correlated during downturns or across the entire market cycle, you might ask whether you’re better served by dropping a fund or two. That would give you a simpler portfolio that’s easier to track and assess. Your most ambitious move might be to adjust your asset allocation; our occasional essays on the charms of a stock-light portfolio show that going from 60/40 stocks-to-bonds down to 40/60 reduces your maximum drawdown by about 45% while costing you about a percent a year in returns. Slightly overweighting Europe and the emerging markets, both of which are better-valued today than the US, might offset that.

  4. Consider hiring an experienced chauffeur.

    Passive products excel in the sorts of steadily rising markets we’ve seen in this long bull market: with little discrimination between good and bad firms, everything rises and ETFs capture those rises efficiently. At best, they’ll capture any fall with equal efficiency. At worst, some oddity in their construction will cause them to become unhinged (as they did during the “flash crash”) or the purity of their decline will cause you to become unhinged. In either case, you’d be better served by an experienced manager who’s profited from crises before and who currently has the cash on hand to take advantage of any cracks in the system. We call those folks The Dry Powder Gang and we’ve written about them frequently.

There is, as many have noted, no such thing as passive investing. You make active decisions about what slice(s) of the market to pursue, index designers make active decisions about which companies qualify, fund issuers make active decisions about which indexes (there are now literally millions available) to track.

This might be a particularly opportune moment to assert control over your portfolio and to review the easy assumptions bred by a long bull market. If you think now about how you judge the market’s remaining upside prospects against its downside ones and how you can best preserve the gains you’ve already made, you’ll enter the fall with much better prospects.

Summer Musings

By Edward A. Studzinski

“Change is the law of life. And those who look only to the past or the present, are certain to miss the future.”

      John Fitzgerald Kennedy. Speech, Frankfurt, 25 June 1963.

The first six months of 2017 are gone, and most global markets have surged during that period. So those like me who thought valuations were starting to look extreme at the beginning of the year, once again cried “wolf” too soon. For those six months, Vanguard’s S&P 500 Admiral Fund achieved a total return of 9.3%, with an expense ratio of four basis points. Many actively managed funds, alas, did not perform quite as well for their investors, although their managers continued to do quite well, purchasing apartments in Paris or London, or jetting to their Georgia coastal estates.

Jason Zweig had an interesting column in The Wall Street Journal a week ago, pointing out that over the last twenty years, the number of publicly-traded stocks in the U.S. has been cut in half. This has happened as a result of takeovers, being taken private, etc., etc. My friend Michael Mauboussin, a strategist at Credit Suisse earlier this year highlighted the trend in a report titled “The Incredible Shrinking Universe of Stocks” that also pointed out that it made for a much more competitive environment for active managers. Mauboussin’s point was that active managers had a smaller number of issues to select from if they deviated from the index, notwithstanding that that was where the best opportunities, resulting from inefficiencies, might lie. Let us leave aside the issue that many so-called, or perhaps more aptly, so-marketed, active managers are really closet indexers.

This week, Mr. Zweig, in response to a number of letters from individuals at various asset-gatherers, backed off somewhat from the import of the shrinking number of stocks as pertains to small cap stocks. After all, that is a tiny part of the overall market. The action is all in the large caps and mega-cap securities. I think that raises a different issue. The increase in the shift from active managers to passive managers is resulting in a far larger part of the capitalization of issues being effectively “locked away” from the market unless the index funds start having negative flows. It also explains why valuations continue to rise. More money is chasing a smaller set of outstanding shares. Effectively, the universe of active managers has become the hamsters turning the wheel, having to run ever faster to mirror, let alone catch, the relevant benchmark index.

I had lunch this past week with my friend who is a very senior executive at a large, Chicago-based, financial services firm. Both of us see the demise of the mutual fund as preferred vehicle for investment somewhere out on the horizon (in fairness, one of us sees it on the horizon, and the other just over the horizon). Part of the issue is the impact of fees and fund flows on performance. Both factors in tandem destroy performance and serve to place funds at a competitive disadvantage to index products. One solution is the commingled equity trusts, which have come into vogue for 401(K) and other retirement accounts, slicing out a heavy layer of fees. Another solution is the return of separate account management, which will make use of individually-managed stock portfolios or ETF’s. The graveyard humor here is that many investment counseling firms were already ideally positioned for the new world. Unfortunately, their senior executives got greedy and focused on where the money and profit margins were, which was in the mutual fund business. They pushed out the portfolio managers and counselors with experience and brains, and replaced them with client-servicing personnel. Both of us see the demise of the “star” manager. Indeed, some firms face the problem of insurance firms with commission-driven sales forces in a world of internet purchasing and activity. They would love to go from point A to point C, but don’t know how to get there having sold the mystique of the star. Some cope of course by announcing teams of co-managers to present the image of a collegial decision-making process with sustainability and consistency as there are personnel changes. Sadly that assumes that the brand of yesteryear is the same as the brand today. If you buy a package of a Kraft product today, is it made by Kraft or distributed by Kraft, with the ingredients a function of a manufacturing contract to provide the greatest margins at lowest cost. In the investment world, I am thinking of an energy analyst in New England who retired some years ago, with a lifetime of contacts in the energy industry and a valuation methodology tied to valuing reserves in the ground in relation to the current futures strip. If the replacement does none of those things, merely trying to guestimate earnings based on an estimated production number, the brand is not the same.

Everybody Can’t Be David Swensen

As we have mentioned in the past, David Swensen of Yale University is justifiably famous for his multi-asset approach to running Yale’s endowment, which has allowed it to outperform most college endowments. Other endowments, egged on by their rather expensive consultants (there primarily to provide cover – the consultant made me do it), have tried to emulate that approach, slicing and dicing their investment portfolios into a multiple of asset classes, adding real estate, private equity, and venture capital to the traditional mix of global stocks and bonds.

Here I must point out that Mr. Swensen, having written a book on personal investing for the individual, basically said his approach could not be replicated easily, as he had access to a range of managers at prices others would not be able to obtain. And, although he was writing for individuals I think his advice was meant as well to apply to smaller endowments. He said that individuals (and the smaller endowments) would be better served by investing in a mix of passive, low-cost funds.

In recent years, from my own experience, I had noticed an uptick in the percentage of assets recommended and committed to private equity investments. The recommendations emanated from the consultants as well as the members of private equity and venture capital firms serving on endowment investment committees. They argued that the higher returns available from private equity (versus equities) justified a greater commitment of funds to that area. Let us ignore the multiple apparent conflicts of interest that exist in the scenario I have just presented. What’s the attraction to private equity?

Well, in the last two weeks I have twice had that question answered. Allegedly when private equity funds, which have limited-lives of usually five to seven years, are liquidating, some sixty per cent of the companies invested in are sold to new private equity funds being raised by competitors. Tulip mania? Let’s call this what it is – “greater fool investing.” But why still the attraction to illiquid investments? Answer – they don’t have to be marked to market, so the reported returns appear to be smoother. As we all know, today the enemy is “volatility.” Even though volatility is usually an opportunity for value investors, for rating agencies, donors, trustees – volatility is a curse.

Technology Strikes Again

The May/June 2017 issue of MIT Technology Review has a fascinating article on page 22 entitled, “Goldman Sachs Embraces Automation, Leaving Many Behind.” The article points out that in 2000, Goldman had six hundred equity traders at headquarters, buying and selling stocks for clients. Today there are just two equity traders left. Automated trading programs have taken over the work, with the support of some two hundred computer engineers.

This is another area where what you don’t see, may result in what you don’t get. Technology, especially in trading platforms, is an area that has been ripe for underspending by asset gathering firms. I still remember some ten years ago when the CEO of such a firm told me that automated trading and algorithms would never amount to more than ten per cent of trading volume. That mentality allowed the deferral of hundreds of thousands of dollars on equipment, software, and technically-literate personnel. Of course, having individual traders as opposed to programs allowed for some degree of control. Now, best execution may now actually turn out to be best execution. And compliance may now be subject to automated audit programs to confirm the elimination of “friction” on trading costs.

Requiescat

On a sadder note, we note the closing and liquidation of the Oakseed Opportunity Fund as of 30 June 2017. It points out the difficulty of a fund getting traction without a major start-up marketing effort to garner assets. It is also reflects the difficulty good managers have in overcoming sub-par performance. For in today’s world long-term really isn’t, even when you have what is a differentiated product in terms of security selection and portfolio composition. And most value investors have been forced to become value-oriented investors, whatever that term may mean. I wish my former colleague Greg Jackson, and his partner John Park, well in the future.

UK Governance

This week the financial regulator in the UK announced an effort to eliminate conflicts of interest while restoring investors trust in the UK’s approximately 7 trillion pounds sterling investment market. Fee structures are to be overhauled and made more transparent. Governance standards are to be toughened. Fund boards are to now have two independent directors (in response to those who say trustees here are independent, I say you are joking, when asset managers hand-pick trustees who are thought to be willing to be “flexible” in return for being allowed to set their own compensation). The Financial Competition Authority also turned its guns on the hedge funds and private equity funds for lack of transparency over fees and expenses. Fees received by the managers when investors buy and sell funds are to be curtailed. The FCA has also taken the position that the government should allow it to regulate the investment consultants who determine the allocation of pension and endowment funds in the UK.

It will be interesting to watch the fallout from the above. The rest of Europe is watching, given that similar issues exist in many EU jurisdictions. In this country of course, notwithstanding the effort to derail the implementation of the fiduciary requirement, it has gone into effect. While there will be a review of that rule, I expect, like the banning of restrictions on pre-existing conditions for health insurance as a result of the Affordable Care Act, the fiduciary standard is out of the box for good.

Inside Smart Beta Conference – New York 2017

By Charles Boccadoro

Matt Hougan of Inside ETFs and Dave Nadig of ETF.com hosted an Inside Smart Beta Conference this past month in New York City. Their career paths overlapped at ETF.com, which promotes itself, arguably so, as the “world’s leading authority on exchange-traded funds.” I find both Matt and Dave articulate thought leaders on ETFs and investing generally. They co-authored CFA’s A Comprehensive Guide to ETFs.

The venue in midtown Manhattan just off 6th Avenue drew some 330 attendees, including financial advisors and money managers. The event’s agenda comprised two dozen talks and panels, including Research Affiliates’ Rob Arnott and Shark Tank’s Kevin O’Leary. Vanguard was one of several key sponsors, along with JP Morgan and John Hancock.

If, like me, you’ve not been to NYC in a while, the former Pan Am Building is the Met Life Building, Trump Tower on 5th Avenue remains surrounded by police barricades playing havoc with nearby businesses and traffic, the marvelous One World Trade Center now dominates lower Manhattan skyline, construction is everywhere, Central Park is a jewel, and pizza-by-the-slice at places like Bleecker in Greenwich Village remains a whole other food group … amazing!

What is Smart Beta exactly?

Here’s one definition, by Nadig: “Going by many different names (strategic beta, fundamental indexing, factor investing and more), smart beta is a catchall term for rules-based strategies that aim to deliver better risk-adjusted returns than traditional market-cap-weighted indexes.”

Here’s another, by AQR’s Cliff Asness and John Liew: “Let’s be blunt. Smart Beta is mostly re-packaged, re-branded quantitative management… It takes well-established, quantitative investing styles, or factors, and implements them in a simple, transparent manner often, though not always, at lower fees than what we’ve seen in the past.”

Some of the better known “factors” are quality, value, momentum, size, and volatility. Smart beta ETFs target one or more such factors. In the opening keynote, Hougan and Nadig reported that 160 new smart beta ETFs have been introduced in the past three years. But while historically portfolios built on these factors outperform the market, they don’t work all the time, as depicted here:

The chart represents a cautionary tale for investor expectations. It occurred to me that like maximum drawdown, min and max rolling period returns should be including in all fund performance history, not just last 1, 3, 5, and 10 year look-back, as applicable.

The case for some ETFs over traditional mutual funds, but especially over actively managed ones, involves being cheaper, more transparent, rules-based, and more tax efficient. Perhaps no better example of a smart beta ETF strategy is defined in Wes Gray’s book Quantitative Value, A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors. We profiled QVAL in late 2014.

The case against some ETFs? See our David’s Certificate in ETF Punditry.

In a sense, factors are the new active. Factor-based indexes and trading rules can be automated. With automation, coupled with under-performance of traditional actively managed funds, follows elimination of money manager and trading roles, as evidenced by recent layoffs and skill reshuffling at firms like Goldman Sachs and Blackrock.

The following chart utilizes AlphaArchitect’s Visual Active Share Tool to illustrate factor tilts, specifically volatility with iShares Min Vol (USMV) versus All Country Index (ACWI), and value with ValueShares Quantitative Value (QVAL) and iShares Russell 1000 Value versus (IWD) versus Russell 1000 (IWB):

Here’s how iShares describes its Min Vol ETF (USMV) in the prospectus:

The Underlying Index is designed by selecting securities from the MSCI All Country World Index (the “Parent Index”), which is a capitalization weighted index, and then follows a rules-based methodology to optimize the Underlying Index and determine weights for securities in the index having the lowest total risk.

During one of several lively discussions, Bloomberg’s Eric Balchunas noted that closet-indexing is one of the industry’s dirty secrets: “Most smart beta ETFs are counterfeits with too much beta.” The visualizer above reveals that while IWD has a value tilt, it is not nearly as value oriented as QVAL. While touting the benefits of ETFs like QVAL, Eric argued: “Go big, or go Vanguard!”

A review of our Lipper Data Feed Service for month ending May 2017 reveals just over 2000 US ETFs versus about 7500 traditional open-ended funds. Assets under management (AUM) are $2.9 trillion for the former versus $17.4 trillion for the latter, excluding money market funds, or about 15%.

There are now 320 ETFs with AUM of $1 billion or more.

There are now 15 firms managing ETFs with AUM totaling $10 billion or more and 60 firms with ETFs totaling $100 million or more, including Meb Faber’s Cambria at $422 million.

Here is a summary of top fifteen US ETFs by AUM:

Hougan and Nadig both believe AUM in ETFs will surpass that of traditional mutual funds in 6 to 8 years. A trend supporting this belief is that ETFs are the vehicle of choice of increasingly popular robo-advisors, like Wealthfront and Betterment. Hougan, in fact, tracks his own portfolio called The World’s Cheapest ETF Portfolio. “It’s one of the greatest deals in financial history,” shown here:

During another session, entitled “Smart-Beta Hot Seat,” Hougan asked Vanguard’s Dan Reyes “Why are you even here?” Vanguard actually offers 70 ETFs with $722 billion in AUM (second only to Blackrock), but most are vanilla-index, long-only funds with no leverage or derivatives. The implication of its strong showing at this conference is that Vanguard likely plans to launch actively managed ETFs and with lower fees.

Another notable presence was Dimensional Fund Advisors (DFA), historically the investment choice of Nobel Laureates, often offering funds with very high minimums and then only through financial advisors trained in DFA’s quantitative philosophy. They have now teamed with John Hancock to offer 12 multifactor ETFs utilizing John Hancock Dimensional “indexes designed by DFA, a company regarded as one of the pioneers in strategic beta investing.”

In the session entitled “Best Factor ETFs,” four speakers debated the merits of …

JPMorgan Diversified Return Global Equity ETF (JPGE) won the contest with the audience as it offered a “smoother ride” for investors, making it a more likely candidate to stick with versus the other more volatile offerings.

Rob Arnott’s talk was entitled Pitfalls in Smart Beta: Data Mining, Selection Bias & Performance Chasing.

Some key messages: “Most investors are trend chasers! Most academics are trend chasers! Most product providers are trend chasers! Trend chasing is costly!”

But, contrarian investing adds value, as depicted here:

Kevin O’Leary shared how he tried all sorts of investments with proceeds from his sale of The Learning Company … hedge funds, hot managers, private equity. One thing he learned was that even the strongest managers “go flat or blow-up every 7-10 years.” The lesson led him to develop investment rules for stocks he owned: 1) no cashless sales, 2) no debt financed dividends, 3) no slowing of return on assets, and 4) no more than 80% of market volatility. These rules guided the creation of a series of indexes that support six O’Shares ETFs, which are the backbone of his family trust.

Matthews Asia Credit Opportunities (MCRDX / MICPX)

By David Snowball

Objective and strategy

The managers seek total return over the long term. They invest in debt issued by Asian corporations, governments and supranatural institutions. The managers invest, primarily, in high-yield, dollar-denominated debt though they define that term broadly enough to incorporate both high-yield bonds and debt-related instruments such as convertible bonds, hybrids and derivatives with fixed income characteristics.  Around 20-25% of the portfolio has been in convertible bonds since inception, and that percentage is been pretty stable from year to year. 

Adviser

Matthews International Capital Management, LLC, the Investment Advisor to the Matthews Asia Funds, was founded in 1991 by Paul Matthews. Since then they’ve been the only U.S. fund complex devoted to Asia. They have about $27.5 billion in fund assets and advise18 funds. Of those, two focus on Asian credit markets: Strategic Income (MAINX) and Credit Opportunities.

Managers

Teresa Kong and Satya Patel. Before joining Matthews in 2010, Ms. Kong was Head of Emerging Market Investments at Barclays Global Investors (now BlackRock) and responsible for managing the firm’s investment strategies in Emerging Asia, Eastern Europe, Africa and Latin America. In addition to founding the Fixed Income Emerging Markets Group at BlackRock, she was also Senior Portfolio Manager and Credit Strategist on the Fixed Income credit team. She’s also served as an analyst for Oppenheimer Funds and JP Morgan Securities, where she worked in the Structured Products Group and Latin America Capital Markets Group.

Mr. Patel joined Matthews in 2011. Before that, he was an Investment Analyst with Concerto Asset Management. He earned an M.B.A. from the University of Chicago Booth School of Business, an M.A. in Accounting and Finance from the London School of Economics and a B.A. in Business Administration and Public Health from Georgia.

Kong and Patel co-manage Matthews Asia Strategic Income (MAINX). Both are remarkably sharp, thoughtful and personable.

Strategy capacity and closure

These aren’t yet considerations, and aren’t likely to become concerns for years. That said, Matthews has frequently closed their funds when they’ve deemed it in their shareholders best interests to do so.

Management’s stake in the fund

As of December 30, 2016 (the latest Statement of Additional Information), neither of the managers has invested in the fund. Two of eight trustees have chosen to do so, though all of the trustees have investments in Matthews funds, with the two smallest stakes being held by the two newest trustees.

Opening date

April 29, 2016.

Minimum investment

$2,500 for Investor class shares, $100,000 for Institutional shares.

Expense ratio

1.10%, after waivers, for Investor shares and 0.90% for Institutional ones, on combined assets of $19.5 million (as of June, 2017). Matthews does not impose 12(b)1 fees.

Comments

Donald Trump isn’t the argument for investing in Asian fixed income, but he appears intent on accelerating the argument.

It is inevitably the case that most of the world’s financial market in the 21st century will be centered in, and driven by, Asia. Just as economic developments in the late 19th century led to the migration of the world’s markets from London to New York, so the economic developments in the early 21st century will engender a similar transition toward Asia. The rise of New York did not make London irrelevant, it merely meant that London was no longer running the show. Something similar is underway now as Asia credit markets quickly expand and deepen.

The policies pursued by Mr. Trump seem likely to accelerate that evolution. His nationalist agenda implicitly, and sometimes explicitly, withdraws the U.S. from international leadership leaving an opening for China to assume what they believe to be their rightful place on the world stage. That’s exemplified by his withdrawal from the Paris climate accord. European Commission President Jean-Claude Juncker “explained to Mr. Trump … that it would not be good for the world or the United States if America was to literally step off the world’s stage. Because the vacuum will be filled, and the Chinese are in prime position to take on a leadership role.”

President Xi’s “One Belt, One Road” project – a $1.7 trillion infrastructure program to tie all of Asia, most of Europe and parts of Africa to China – is another step in that assertion. The consulting firm McKinsey described it this way, “One Belt and One Road (OBOR) … aims to create the world’s largest platform for economic cooperation, including policy coordination, trade and financing collaboration, and social and cultural cooperation.” The Trump administration’s decision to send a senior representative to the May OBOR Summit was played in the Chinese press as evidence of America’s tacit support, “Washington’s participation … [will] help win Beijing and its infrastructure projects more international understanding and influence.”

Here’s the argument: Asia is not, and cannot be treated as, some backwater region in the global financial system or in investors’ portfolios. Its capital markets are already large, they’re maturing quickly and seem destined to play a major role in global finance.

Nonetheless, most American investors have minimal exposure to it. There are two reasons for that underweight. First, bond indexes tend to be issuance-weighted. That is, they place the greatest weight on the largest (i.e., most indebted) issuers, not on the most credit-worthy. Asia has, traditionally, been a modest user of such markets. Second, investors are stumped by “the jumbo shrimp conundrum.” As with “jumbo shrimp,” the phrase “Asian fixed income” seems to have a built-in contradiction: “Asian” means “emerging markets” and “scary” but “fixed income” means “safe and reliable.” Our antiquated view of the Asian markets leads us to look elsewhere, even in a yield-starved world.

Matthews is trying to change that by offering small investors access to the Asian fixed income markets. Four things you need to know:

The managers are really good. In our conversations, Ms. Kong and Mr. Patel have been consistently sharp, clear and thoughtful. They evidence profound understanding of their portfolio, which they can comfortably explain to non-specialists, and of the markets within which they operate. Their Strategic Income Fund has returned 5.0% annually since inception, trailing its EM Hard Currency Debt peer group by 0.4% annually but with a far lower standard deviation, maximum drawdown and downside deviation, and substantially higher Sharpe ratio.

The fund’s targets are reasonable and clearly expressed. “The objective of the strategy,” Ms. Kong reports, “is to deliver 6-9% return with 6-9% volatility over the long term.” In its first year, the fund returned 8.8% and a standard deviation of 3.4%.

Their opportunity set is substantial and attractive. The Asia credit market is over $600 billion and the sub-investment grade slice which they’ll target is $130 billion. For a variety of reasons, “about a quarter of Asian bonds are not rated by one of the Big Three US rating agencies anymore,” which limits competition for the bonds since many U.S. investors can only invest in rated bonds. That also increases the prospect for mispricing, which adds to the Matthews’ advantage. “Over the past 15 years,” they report, “Asia high yield has a cumulative return double that of European, LATAM and US high yield, with less risk than Europe and LATAM.” Here’s the picture of it all:

The best investments lie in the upper-left corner of that graph, representing the highest possible returns and the lowest possible volatility. You might draw a line between Asia Credit and Asia HY (the two gold points) then assume that the fund will fall on that line rather nearer to Asia HY.

The fund’s returns are independent of the Fed. U.S. investors are rightly concerned about the effect of the Fed’s next couple tightening moves. The correlation between the Asia HY market and the Barclays US Aggregate is only 0.39. Beyond that, the managers have the ability to use U.S. interest rate futures to hedge U.S. interest rate risk.

As Asian credit markets and economies mature, that independence grows. Teresa and Satya write:

More than ever, Asian economies are marching to the beat of their own drums rather than hinging on the US to drive business cycles. A decade ago, Asia needed to export to the U.S. and Europe to drive growth, and so Asian business cycles were closely linked to the U.S. Today, growth in Asia is driven by trade within Asia and domestic consumption of goods and services and has much less to do with exports to the U.S.

Asia and the U.S. will always be linked because of the global nature of companies and capital flows, but correlations between Asia and the U.S. – whether we look at interest rate cycles or asset class returns – are relatively low.

We’re in a rising rate environment in the U.S., and history has shown us that Asian bonds are relatively well insulated against rising U.S. rates. Whether you look at the local currency market, or even more so at the Asian high yield market, Asian bonds have a low beta to U.S. interest rates, and give you protection in a rising interest rate environment.

Bottom Line

If U.S. high yield bonds make sense for your portfolio, so might Matthews Asia Credit Opportunities. Asian high-yield and credit opportunity investments have a long track record and, in particular, a long record of offering higher returns with lower volatility than US high-yield. The same thing is true when compared to EM bonds; the Asian products simply and consistently outperform the global EM bond markets.

Even investors in Matthews Asia Strategic Income (MAINX) would get some diversification value from MCRDX. MAINX, they noted, “is an unconstrained bond fund with the full flexibility to pursue return opportunities in Asian credit, currencies or interest rates. MCRDX is more focused, deriving most of its returns from credit and most often in high yield.” MCRDX is also largely buffered from the effects of currency fluctuation which helped it substantially in the immediate aftermath of the US election.

If you want exposure to Asian markets, Matthews is the best, deepest and more experienced option available to most U.S. investors. Both of these funds are worth serious examination by investors who are interested in income but concerned about the parlous state of Western credit markets.

Disclosure: while the Observer has no financial or other ties to Matthews Asia or its funds, I do own shares of MAINX in my personal account and have recently added to them.

Fund website

Matthews Asia Credit Opportunities. Special plaudits to Matthews for two features of their website. First, they offer frequent analyses of developments affecting Asian finance. Second, they offer biographies of every member of their funds’ board of trustees. The board serves as investors’ agents; that is, they’re elected by the investors and are charged with pursuing your best interests in all dealings involving the fund. In reality, most firms barely acknowledge that they exist.

© Mutual Fund Observer, 2017. All rights reserved. The information here reflects publicly available information current at the time of publication. For reprint/e-rights contact us.

Launch Alert: Artisan Thematic Fund (ARTTX)

By David Snowball

On April 24, 2017, Artisan Partners launched Artisan Thematic Fund (ARTTX). The managers seek to identify secular themes that will have an enduring impact on business, ideally identifying those themes sooner and more clearly than their competitors. There’s a point at which a development transitions from being geeky-cool to being a driver of corporate profits; Artisan refers to that as an inflection point.

Here’s their text: “Initial screen for large, inflecting total addressable market (TAM) through changes in secular, structural and cyclical trends driven by technology, adoption of new business models, changes in societal behavior, market conditions or regulation.”

Once they find The Next Big Thing and are convinced that it’s reached an inflection point, they use fundamental analysis to identify the firms most likely to profit from the thematic trend, then construct a risk-aware portfolio of 20 – 35 names across 4–7 themes. Up to 50% of the fund’s portfolio might be international, including investments in the emerging markets. The most heavily weighted sectors are likely to be consumer, tech/telecomm and industrials.

The Fund is managed by Christopher Smith. He joined Artisan Partners in October 2016. Prior to joining Artisan Partners in 2016, Mr. Smith was a senior analyst at Kingdon Capital from October 2014 to October 2016. From September 2013 to October 2014, he was the founder and portfolio manager at Centerline Investment Partners and prior thereto, he was a managing director with Karsch Capital Management. He’s supported by four analysts and other Artisan professionals. Together they form Artisan’s eighth autonomous management team.

I am deeply ambivalent about the fund. In the normal course of things, there are few safer bets than a new Artisan fund. A fund representative once noted that the senior partners might interview dozens of prospective management teams in a year, yet choose to launch a new fund every two or three years. The reason is that they’re not merely looking for really good managers; they’re looking for potential “category killers” (their words).

With very few exceptions, they’ve found them. Artisan’s three newest funds illustrate the point. Artisan Developing World (ARTYX) has substantially outpaced its peers in its first two years of operation, Artisan High Income (ARTFX) is in the top 1% of its Morningstar category over its first three years and Artisan Global Equity (ARTHX) bested its peers in each of its first five years of operation. Charles’s analysis of firm-wide performance places Artisan as one of the industry’s top tier firms.

And yet, caution is warranted. The key reservation is that we know who employed Mr. Smith but nothing about how he performed, how his discipline evolved, how robust his risk management skills were or why he tended to move from firm to firm. Mike Roos, one of the Managing Directors, allows “We don’t delve into his prior record.” That’s likely because the “investor protection” rules at FINRA would make disclosure of his hedge fund work so insanely complicated that it’s simply not worth the effort. Nonetheless, it leaves investors to act purely on the industry’s two most dangerous words: Trust us.

It doesn’t help that the name sounds a bit gimmicky and that the text surrounding the fund is not a model of clarity and precision. The fund will probably do well and, quite possibly, much better than “well.” That’s the indisputable track record. And still, I’d hesitate to act without clearer evidence.

For now, the fund has a single share class. The expense ratio is 1.50% and the minimum initial investment is $1,000.

The Artisan Thematic homepage is, as yet, a bit thin on content but it does offer the essential information and Artisan managers tend to be pretty good about keeping their investors updated.

Funds in Registration

By David Snowball

Before fund companies are allowed to offer mutual funds to the public, they need to submit them to SEC review. The SEC has 75 days to ponder the fate of the newly-registered funds before allowing them to proceed. The registration period is also called “the quiet period” because fund companies are not allowed to talk about their funds in registration. This month’s good news is that most of the mutual funds in registration are sensible strategies from respected shops: Artisan, AQR, Brown Advisory, T. Rowe Price and others. The other part of the news is that the ETF industry continues to crank out a freakish mishmash. That includes the Quincy Jones Streaming Music, Media & Entertainment ETF, the Republican Policies Fund (GOP), the Democratic Policies Fund (DEMS) and the European Union Breakup Fund (EUXT).

Artisan Global Discovery Fund

Artisan Global Discovery Fund will seek maximum long-term capital growth. The plan is to build an all-cap global portfolio of “companies that it believes possess franchise characteristics, are benefiting from an accelerating profit cycle and are trading at a discount to its estimate of private market value.” The fund will be managed by Jason L. White, James D. Hamel, Matthew H. Kamm and Craigh A. Cepukenas. Various members of the team manage the five-star Global Opportunities, four-star Mid Cap and three-star Small Cap funds. The initial expense ratio has not yet been released. The minimum initial investment will be $1,000.

AQR Alternative Risk Premia Fund

AQR Alternative Risk Premia Fund will seek positive absolute returns. Here’s the official text describing the strategy: “The Fund pursues its investment objective by aiming to provide exposure to six separate investment styles: value, momentum, carry, defensive, trend and volatility using both long and short positions within the following asset groups: stocks, equity indices, bonds, interest rates and currencies.” The random italics are theirs.The fund will be managed by the usual AQR team. The initial expense ratio hasn’t been disclosed. The minimum initial investment will be $1,000,000 or $5,000,000, depending on share class.

Brown AdvisoryMid-Cap Growth Fund

Brown Advisory Mid-Cap Growth Fund will seek to achieve capital appreciation. The plan is to invest in US midcaps which exhibit “durable growth, sound governance, and scalable go-to-market strategies.” The fund will be managed by Christopher A. Berrier and George Sakellaris. Mr. Berrier leads Brown Advisory’s small cap growth team and co-manages their four-star Small Cap Growth Fund (BIASX). For now, only the Institutional share class is moving ahead though the prospectus clearly indicates that there will be Investor and Advisor shares as well. The initial expense ratio will be 0.71%. The minimum initial investment will be $1,000,000.

Epsilon Sector-Balanced Fund

Epsilon Sector-Balanced Fund will seek capital appreciation. The plan is to invest in large cap stocks which are favored by hedge fund managers; they’ll determine that by reading the funds’ 13F filings. They remind us that “The Fund is not a hedge fund and does not invest in hedge funds,” just in case you suspected that reading about a hedge fund made you a hedge fund. The fund will be managed by team from Epsilon Asset Management. The initial expense ratio will be 1.25%. The minimum initial investment will be $1,000.

Essex Environmental Opportunities Fund

Essex Environmental Opportunities Fund will seek long term capital appreciation. The plan is to construct a more-or-less all cap portfolio of 35-45 stocks. They’re targeting firms whose activities are positive for the global environment and which derive at least 25% of earnings from one of nine focuses: 1) Agricultural Productivity & Clean Fuels; 2) Clean Technology & Efficiency; 3) Efficient Transport; 4) Environmental Finance; 5) Power Technology; 6) Power Merchants & Generation; 7) Renewable Energy; 8) Low Carbon Commerce; and 9) Water. The fund will be managed by William H. Page and Robert J. Uek Senior Vice President and Portfolio Manager, has been a portfolio manager of the Fund since its inception in September 2017. The initial expense ratio has not yet been disclosed. The minimum initial investment will be $2,000 for Investor shares.

NWM Momentum Bond Fund

NWM Momentum Bond Fund will seek long-term capital appreciation, an exceedingly rare goal for a bond fund. The plan is to invest in fixed-income ETFs. When their model dictates a “risk-on” environment, they’ll invest in junk bonds, convertibles, EM bonds and so on. During “risk-off” environments, they’ll toggle to higher-quality fare. The fund will be managed by Timothy L. Ayles and George P. McCuen of NWM. The prospectus demurely notes, “The Adviser is a newly registered investment adviser and does not have assets under management.” The initial expense ratio will be 1.68% after waivers. The minimum initial investment will be $5,000, reduced to $1000 for tax sheltered accounts and those with automatic investing plans.

TCW Global Artificial Intelligence Equity Fund

TCW Global Artificial Intelligence Equity Fund will seek long-term capital appreciation. The plan is to invest in 25-60 funds that might “benefit from advances in the use of artificial intelligence … [typically in] information technology, consumer discretionary, industrial and health care sectors.” Frankly, I’m a bit fuzzy on what industries mightn’t claim a benefit from the evolution of our robot overlords. The minimum market cap will be $300 million. The fund will be managed by Jeffrey Linn and Thomas Lee. The initial expense ratio has not yet been disclosed. The minimum initial investment will be $2,000.

T. Rowe Price Multi-Strategy Total Return Fund

T.  Rowe Price Multi-Strategy Total Return Fund will seek strong long-term risk adjusted returns. The plan is to act like a multi-alternative hedge fund, seeking positive returns in all sorts of markets by rotating through nine different alternative strategies. The fund will be managed by Richard de los Reyes and Stefan Hubrich. Both guys work with their global allocation strategy team but not, so far as I can tell, with their very fine Global Allocation Fund (RPGAX). The initial expense ratio will be 1.48%. The minimum initial investment will be $2,500.

Manager changes, June 2017

By Chip

It’s been a relatively unexciting month on the manager change front, perhaps with folks regrouping over the quiet summer months. Five of the departures were triggered by announced retirements, which is a bit higher than usual. FPA got bounced off the team at Litman Gregory Masters Smaller Companies (MSSFX). On the one hand, that’s not terribly surprising: the managers’ main charge, FPA Capital (FPPTX), has trailed 94% of its Morningstar peers over the decade that lead manager Dennis Bryan has been in place. On the other hand, it is surprising that they lasted so long: FPA has been managing a portion of the portfolio for a decade, while the average tenure of managers at MSSFX is two to three years. It’s worth pondering the implications of that turnover: Litman Gregory’s specialty is manager selection and they have a lot of resources to deploy in finding the best managers and still, within a very few years, the majority of them are no longer contributing enough to remain. It does highlight the challenge that the rest of us face.

Ticker Fund Out with the old In with the new Dt
ACDJX AC Alternatives Disciplined Long Short Fund Scott Wittman will no longer serve as a portfolio manager for the fund. Yulin Long will continue to manage the fund. 6/17
ALEVX AC Alternatives Long Short Fund Effective June 22, 2017, Passport Capital, LLC will no longer serve as a subadvisor for the fund. Columbia Management Investment Advisers, Sirios Capital Management, Three Bridges Capital, and PWP remain. 6/17
AVMNX Advantus Dynamic Managed Volatility Fund No one, but . . . Jeremy Gogos has joined David Kuplic and Craig Stapleton on the management team 6/17
AMENX Advantus Managed Volatility Equity Fund No one, but . . . Jeremy Gogos has joined David Kuplic and Craig Stapleton on the management team 6/17
ACPVX American Century Core Equity Plus Fund Scott Wittman will no longer serve as a portfolio manager for the fund. Claudia Musat and Steven Rossi will continue to manage the fund. 6/17
AECHX American Century Emerging Markets Small Cap Fund Anthony Han has departed. The remaining managers are Patricia Ribeiro and Sherwin Soo, both of whom joined in 2016. 6/17
AGAEX American Century Global Allocation Fund Scott Wittman has announced his plans to leave American Century Investments. As a result, he will no longer manage the funds as of June 30, 2017. Richard Weiss, Scott Wilson, Radu Gabudean, and G. David MacEwen will continue to manage the fund. 6/17
AGBVX American Century Global Bond Fund Edward Boyle is leaving after 4 years on the funds. The remaining team members are John Lovito, Simon Chester, Robert Gahagan, and Abdelak Adjriou. 6/17
BEGBX American Century International Bond Fund Edward Boyle is leaving after 4 years on the funds. John Lovito, Brian Howell, Simon Chester and Abdelak Adjriou will continue to manage the fund. 6/17
ACNKX American Century NT Core Equity Plus Scott Wittman will no longer serve as a portfolio manager for the fund. Claudia Musat and Steven Rossi will continue to manage the fund. 6/17
Various American Century One Choice Funds Scott Wittman has announced his plans to leave American Century Investments. As a result, he will no longer manage the funds as of June 30, 2017. The rest of the team remains, though Richard Weiss has been promoted to Chief Investment Officer. Congrats to Mr. Weiss. 6/17
BROAX  BlackRock Advantage International Fund Simon McGeough, Ian Jamieson, and Thomas Callan are no longer listed as portfolio managers for the fund. Kevin Franklin, Richard Mathieson, and Raffaele Savi will now manage the fund. 6/17
MDLRX BlackRock Advantage Large Cap Core Fund Todd Burnside and Peter Stournaras are no longer listed as portfolio managers for the fund. Travis Cooke, Raffaele Savi and Richard Mathieson will manage the fund. 6/17
BMCAX BlackRock Advantage Large Cap Growth Fund Todd Burnside and Peter Stournaras are no longer listed as portfolio managers for the fund. Travis Cooke, Raffaele Savi and Richard Mathieson will manage the fund. 6/17
MDLVX BlackRock Advantage Large Cap Value Todd Burnside and Peter Stournaras are no longer listed as portfolio managers for the fund. Travis Cooke, Raffaele Savi and Richard Mathieson will manage the fund. 6/17
MDCPX BlackRock Balanced Capital Fund Todd Burnside, David Rogal, Bob Miller, Rick Rieder, Philip Green, and Peter Stournaras are no longer listed as portfolio managers for the fund. Travis Cooke, Raffaele Savi and Richard Mathieson will manage the fund. 6/17
MDEFX BlackRock EuroFund Zehrid Osmani is no longer listed as a portfolio manager for the fund. Brian Hall joins Nigel Bolton in managing the fund. 6/17
BMEAX BlackRock High Equity Income Fund Simon McGeough, Ian Jamieson, and Thomas Callan are no longer listed as portfolio managers for the fund. Tony DeSiprito, Kyle McClements, Franco Tapia, and David Zhao will manage the fund. 6/17
BREAX BlackRock International Dividend Fund Simon McGeough, Ian Jamieson, and Thomas Callan are no longer listed as portfolio managers for the fund. Stuart Reeve and Andrew Wheatley-Hubbard will now manage the fund. 6/17
BPMAX BP Capital TwinLine MLP Fund No one, but . . . Benton Cook joins Toby Loftin and Anthony Riley in managing the fund. 6/17
BBTBX Bridge Builder Core Bond Fund William Stevens has retired and will no longer serve as a portfolio manager for the fund. The other managers will remain on the fund. 6/17
DVFAX Cohen & Steers Dividend Value Fund Richard Helm intends to step down from portfolio management at the end of September and to retire at the end of the year. Anatoliy Cherevach, Jamelah Leddy, and Christopher Rhine will continue to manage the fund, with Mssr. Rhine assuming lead manager responsibilities. 6/17
INDZX Columbia Diversified Equity Income Russell Bloomfield is no longer listed as a portfolio manager for the fund. Hugh Mullin will continue to manage the fund. 6/17
EENAX Columbia Global Energy and Natural Resources Fund Jonathan Mogil is no longer listed as a portfolio manager for the fund. Josh Kapp continues to manage the fund. 6/17
DEVDX Driehaus Event Driven Fund Effective May 25, 2017, Matthew Schoenfeld no longer serves as an assistant portfolio manager of the fund. Thomas McCauley joins Michael Caldwell, K.C. Nelson, and Yoav Sharon in managing the fund. 6/17
FDSVX Fidelity Growth Discovery Fund No one, but . . . Asher Anolic joins Jason Weiner in managing the fund. 6/17
FSMVX Fidelity Mid Cap Value Fund Court Dignan has left the building after a four year stint. Keven Walenta will now manage the fund. 6/17
FPHAX Fidelity Select Pharmaceuticals Portfolio No one, but . . . Karim Suwwan de Felipe has joined Asher Anolic in managing the fund. 6/17
FSLCX Fidelity Small Cap Stock Fund No one immediately, but Lionel Harris intends to step away from portfolio management in June 2018. Kip Johann-Berkel joins Mr. Harris in managing the fund and will continue to manage the fund when Mr. Harris steps down. 6/17
FNSYX Frontier Netols Small Cap Value Fund Netols Asset Management will no longer subadvise the fund, due to the pending retirement of portfolio manager Jeffrey Netols. Michael Groblewski will also no longer manage the fund. Phocas Financial Corporation will manage the fund as an interim subadvisor while the Board evaluates alternatives, which include a likely reorganization into the Phocas Fund. In the meantime, William Schaff and Steve Block will manage the fund, using the Phocas strategy. This could have a significant tax consequence for investors. 6/17
FADVX Frost Value Equity Fund Craig Leighton is no longer listed as a portfolio manager for the fund. Tom Bergeron and Tom Stringfellow return to manage the fund. 6/17
GARTX Goldman Sachs Absolute Return Tracker Fund Alex Chung is no longer listed as a portfolio manager for the fund. Oliver Bunn will join Gary Chropuvka and Stephan Kessler in managing the fund. 6/17
GMAMX Goldman Sachs Multi-Manager Alternatives Corsair Capital Management, L.P. will no longer be an investment subadvisor for the fund. The other subadvisors remain. 6/17
RYSRX Guggenheim Long Short Equity Fund Ryan Harder and Michael Byrum are no longer listed as portfolio managers for the fund. Burak Harmeydan and Samir Sanghani will now manage the fund. 6/17
GGEZX Guidestone Growth Equity Fund Effective May 24, 2017, Jackson Square Partners was terminated as a sub-adviser. ClearBridge Investments joined the subadvisory team, with Peter Bourbeau and Margaret Vitrano added as portfolio managers. 6/17
HFRAX Highland Floating Rate Opportunities Fund Chris Mawn will no longer serve as a portfolio manager for the fund. Mark Okada and Jon Poglitsch will continue to manage the fund. 6/17
GTNDX Invesco Global Low Volatility Equity Yield Fund Jens Langewand will no longer serve as a portfolio manager for the fund. Michael Abata, Uwe Draeger, Nils Huter, and Donna Chapman Wilson will continue to manage the fund. 6/17
MKNAX Invesco Global Market Neutral Fund Jens Langewand will no longer serve as a portfolio manager for the fund. Michael Abata, Uwe Draeger, Nils Huter, and Donna Chapman Wilson will continue to manage the fund. 6/17
JAQAX Janus Henderson Asia Equity Fund Hiroshi Yoh is no longer listed as a portfolio manager for the fund. Andrew Gillan and Mervyn Koh will now manage the fund. 6/17
JSVAX Janus Henderson Contrarian Fund, formerly Janus Contrarian Fund. Daniel Kozlowski is no longer listed as a portfolio manager for the fund. Nick Schommer is now managing the fund. 6/17
JERAX Janus Henderson Global Real Estate Fund Patrick Brophy is no longer listed as a portfolio manager for the fund. Guy Barnard and Tim Gibson will now manage the fund. 6/17
MASNX Litman Gregory Masters Alternative Strategies Fund No one, but . . . DCI, LLC is added as a sub-advisor, and Stephen Kealhofer, Tim Kasta, Richard Donick, Paul Harrison, Bin Zeng and Adam Dwinells are added as portfolio managers. They join DoubleLine, First Pacific, Loomis Sayles, Passport Capital and Water Island Capital. 6/17
MSSFX Litman Gregory Masters Smaller Companies Fund First Pacific Advisors is being removed as a sub-advisor and Dennis Bryan and Arik Ahitov will be removed as the portfolio managers. Segall Bryant & Hamill, is added as a sub-advisor, and Mark Dickherber and Shaun Nicholson are added as portfolio managers. The management teams will then represent Cove Street Capital, Segall Bryant & Hamill, and Wells Capital Management. 6/17
LSABX Loomis Sayles Core Disciplined Alpha Bond Fund Effective immediately, William Stevens no longer serves as a portfolio manager of the fund. Lynne Royers, heretofore co-manager, takes over as planned. 6/17
MGCSX Managed Account Series (BlackRock) Advantage Global SmallCap Fund Murali Balaraman and John Coyle are no longer listed as portfolio managers for the fund. Kevin Franklin, Richard Mathieson, and Raffaele Savi will now manage the fund. 6/17
MMCVX Managed Account Series Mid Cap Dividend Fund Murali Balaraman and John Coyle are no longer listed as portfolio managers for the fund. Tony DeSprito, Franco Tapia, and David Zhao will manage the fund. 6/17
MEAPX Morgan Stanley Institutional Emerging Markets Fixed Income Opportunities Jens Nystedt no longer serves as a portfolio manager to the fund. Eric Baurmeister, Warren Mar and Sahil Tandon remain. 6/17
NABAX Neuberger Berman Absolute Return Multi-Manager Fund Effective immediately, GSA Capital Partners LLP will no longer act as a subadviser to the fund. A cast of thousands, representing Cramer Rosenthal McGlynn, Gamco Asset Management Levin Capital Strategies, Good Hill Partners, TPH Asset Management, Sound Point Capital Management, P/E Global LLC, Blue Jay Capital Management, and Portland Hill Asset Management remain to oversee this small, expensive underperformer. 6/17
FREAX Nuveen Real Estate Securities Fund No one, but . . . Sarah Wade is added as a portfolio manager, joining Jay Rosenberg and Scott Sedlak. 6/17
TQSMX T. Rowe Price QM U.S. Small & Mid-Cap Core Equity Fund Boyko Atanassov is no longer listed as a portfolio manager for the fund. The new management team is Vinit Agrawal, Prashant Jeyaganesh, and Sudhir Nanda. 6/17
TMPFX Tactical Multi-Purpose Fund No one, but . . . Michael Hanson has been added as the fifth manager, joining Kenneth L. Fisher, Jeffery Silk, William Glaser, and Aaron Anderson. Ummm … the fund has just under $25,000 in assets. 6/17
TAAAX Thrivent Aggressive Allocation Fund Russell Swansen has announced his retirement from Thrivent Financial, effective June 30, 2017. David Francis, Mark Simenstad, Darren Bagwell, and Stephen Lowe will continue to serve as portfolio managers of the fund. 6/17
THMAX Thrivent Moderate Allocation Fund Russell Swansen has announced his retirement from Thrivent Financial, effective June 30, 2017. David Francis, Mark Simenstad, Darren Bagwell, and Stephen Lowe will continue to serve as portfolio managers of the fund. 6/17
TMAAX Thrivent Moderately Aggressive Allocation Fund Russell Swansen has announced his retirement from Thrivent Financial, effective June 30, 2017. David Francis, Mark Simenstad, Darren Bagwell, and Stephen Lowe will continue to serve as portfolio managers of the fund. 6/17
TCAAX Thrivent Moderately Conservative Allocation Fund Russell Swansen has announced his retirement from Thrivent Financial, effective June 30, 2017. David Francis, Mark Simenstad, Darren Bagwell, and Stephen Lowe will continue to serve as portfolio managers of the fund. 6/17
VAMGX VALIC Company II Mid Cap Growth Fund Michael Smith and Christopher Warner are no longer listed as portfolio managers for the fund. Philip Ruedi and Mark Whitaker will manage the fund. 6/17
EIVAX Wells Fargo Intrinsic Value Fund Jeffery Peck has announced his intention to retire from Wells Capital Management Incorporated by July 31, 2017. Miguel Giaconi and Jean-Baptiste Nadal will continue as portfolio managers of the fund. 6/17
EWEAX Wells Fargo Intrinsic World Equity Fund Jeffery Peck has announced his intention to retire from Wells Capital Management Incorporated by July 31, 2017. Jen Robertson and Amit Kumar have been added as portfolio managers. Jean-Baptiste Nadal will continue to be a portfolio manager of the fund. 6/17

Briefly Noted

By David Snowball

Updates

Chuck Jaffe has been named editor-in-chief of RagingBull.com. Do I even make jokes about Chuck and a site that highlights “bull”? No. No, I do not. Chuck’s appointment is part of a process to increase the stock-touting site’s journalistic integrity and transparency.

Briefly Noted . . .

In advance of its merger into Century Shares Trust (CENSX), the Congress Large Cap Growth Fund (CAMLX) is changing its investment objective from “long term capital appreciation” to “long-term capital growth.” Given that, as the Investopedia rightly notes, “capital growth … is also known as capital appreciation,” it’s not immediately clear why the adviser had to rush to get the word out.

A note to the Chinese: Your Wall cannot save you!

Vanguard received a “wholly foreign-owned enterprise” license from the China Securities Regulatory Commission last November and has now opened a subsidiary in Shanghai. A company representative says, “We look forward to introducing investors in China to our low-cost philosophy [which] could result in the so-called Vanguard effect – the tendency for our entrance into a market to drive down investment costs by encouraging other companies to lower their fees to compete with Vanguard.”

SMALL WINS FOR INVESTORS

Laudus Mondrian International Equity Fund (LIEIX) and Laudus Mondrian Emerging Markets Fund (LEMNX) have each opted for radical simplification: their Investor and Select share classes have been eliminated and the investment minimum on the remaining, Institutional, share class has been eliminated as well. The International Equity fund is exceptionally solid, run by the same folks who run the five star, really institutional Mondrian International Equity Fund (PIEPX). It’s well worth a look.

Beyond that, the industry continues to make widespread but shallow efforts at self-improvement: lots of minor fee reductions and some other share class simplifications that give more investors access to lower-cost shares.

CLOSINGS (and related inconveniences)

Longleaf Partners Fund (LLPFX) has been closed to new investors.

Effective June 9, 2017, the Oberweis International Opportunities Fund (OBIOX) hard closed for essentially all investors.

OLD WINE, NEW BOTTLES

Effective August 15, 2017, AMG FQ U.S. Equity Fund (FQUAX) becomes AMG FQ Long-Short Equity Fund and, presumably, starts shorting stocks. Since they haven’t been particularly distinguished as long-only investors (they’ve trailed 75% of their peers over the past five years with a 175% annual turnover), the desire to try something new is understandable.

AMG River Road Select Value Fund, formerly ASTON/River Road Select Value Fund, is now also formerly AMG River Road Select Value Fund. On June 30, 2017, the fund was rechristened as AMG River Road Small-Mid Cap Value Fund.

Ascendant Deep Value Convertibles Fund (AEQAX) has transformed into Ascendant Deep Value Bond Fund, with a new mandate to invest in … well, bonds rather than convertibles.

The BlackRock Mid Cap Value Opportunities Fund (MDRFX) has changed its name to BlackRock Mid Cap Dividend Fund.

In one of those moves that just cries out “hey! The marketing team just weighed-in,” Calamos High Income Fund (CHYDX) has been renamed Calamos High Income Opportunities Fund. The management team and strategy are unchanged, there’s a new benchmark index and it looks like expenses are being reduced by 8 bps to a well above-average 1.25%.

On June 29, 2017, the name of the Entrepreneur U.S. All Cap Fund (IMPAX) changed to Entrepreneur U.S. Small Cap Fund, which means that the fund’s mid- and large-cap holdings are getting trimmed away. One month later, July 31, 2017, they’re liquidating the fund’s Investor share class. While many funds, faced with that decision, move their Investors into Institutional shares, the Entrepreneurs are simply popping checks in the mail and bidding their Investors adieu.

At the end of August 2017, Exceed Defined Shield Index Fund (SHIEX) becomes the Catalyst/Exceed Defined Shield Fund. There’s already a Catalyst Exceed Defined Risk Fund (CLPAX), so the transition shouldn’t be jarring.

1st Source Monogram Income Equity Fund (FMIEX) begat Wasatch Large Cap Value Fund and in the third generation Wasatch Large Cap Value begat Wasatch Global Value Fund. The fund has been pretty mediocre since David Powers took over from the original management team in August 2013 and it has no real tradition of global investing (international stocks are a tenth of the portfolio), so it’s hard to get excited.

The one-star Horizon Spin-off & Corporate Restructuring (LSHAX) is being relaunched as Kinetics Spin-off and Corporate Restructuring with the same management team and an additional share class or two.

RidgeWorth Capital Innovations Global Resources and Infrastructure Fund (INNAX) has become the Oak Ridge Global Resources & Infrastructure Fund.

The Rainier funds are reorganizing into Hennessy funds sometime in the third quarter of 2017. Here’s the translation:

Rainier Small/Mid Cap Equity Hennessy Cornerstone Mid Cap 30
Rainier Mid Cap Equity Hennessy Cornerstone Mid Cap 30
Rainier Large Cap Equity Hennessy Cornerstone Large Cap Growth

Similarly, the former Scout funds are all being rebranded as Carillon and Carillon Reams funds, the latter after the name of the long-time sub-adviser to the Scout bond funds. Ecce:

Scout International   Carillon Scout International  
Scout Mid Cap   Carillon Scout Mid Cap  
Scout Small Cap   Carillon Scout Small Cap  
Scout Low Duration Bond   Carillon Reams Low Duration Bond  
Scout Core Bond   Carillon Reams Core Bond  
Scout Core Plus Bond   Carillon Reams Core Plus Bond  
Scout Unconstrained Bond   Carillon Reams Unconstrained Bond  

Somewhere during the 4th quarter, the Sentinel funds will all become Touchstone Funds, some by adoption and others by absorption.

Sentinel Government Securities   Touchstone Active Bond *
Sentinel Low Duration Bond   Touchstone Ultra Short Duration Fixed Income *
Sentinel Multi-Asset Income   Touchstone Flexible Income *
Sentinel Sustainable Core Opportunities Touchstone Sustainability and Impact Equity *
Sentinel Total Return Bond   Touchstone Active Bond *
Sentinel Balanced   Touchstone Balanced  , new
Sentinel Common Stock   Touchstone Large Cap Focused, new
Sentinel International Equity Touchstone International Equity, new
Sentinel Small Company   Touchstone Small Company, new

*Existing Touchstone Fund.

Finally, WisdomTree has decided to add “U.S.” to the names of a bunch of its (presumably domestic) equity funds.

 WisdomTree Total Dividend   WisdomTree U.S. Total Dividend  
WisdomTree LargeCap Dividend   WisdomTree U.S. LargeCap Dividend  
WisdomTree MidCap Dividend   WisdomTree U.S. MidCap Dividend  
WisdomTree SmallCap Dividend   WisdomTree U.S. SmallCap Dividend  
WisdomTree High Dividend   WisdomTree U.S. High Dividend  
WisdomTree Dividend ex-Financials  WisdomTree U.S. Dividend ex-Financials 
WisdomTree Total Earnings   WisdomTree U.S. Total Earnings  
WisdomTree Earnings 500   WisdomTree U.S. Earnings 500  
WisdomTree MidCap Earnings   WisdomTree U.S. MidCap Earnings  
WisdomTree SmallCap Earnings   WisdomTree U.S. SmallCap Earnings  
WisdomTree LargeCap Value   WisdomTree U.S. LargeCap Value  

Effective June 19, 2017, the Tortoise North American Energy Independence Fund (TNPTX) was reorganized into the Tortoise Select Opportunity Fund.

OFF TO THE DUSTBIN OF HISTORY

ALPS/Sterling ETF Tactical Rotation Fund (ETRAX) disappeared at the close of business on June 26, 2017.

On June 22, 2017, the Board of Trustees “determined to terminate and wind up” the Alpine Emerging Markets Real Estate Fund (AEAMX). It’s about impossible to benchmark the fund’s performance since pretty much no one else operated in the space. No word on when that’s going to occur.

One of our weirder liquidations this month also comes from Alpine. I’ll quote without comment: “Effective June 22, 2017, the Board of Trustees of the Alpine Global Realty Growth & Income Fund approved the termination of the Fund. There were no shareholders on that date. As the Fund has ceased operations, shares of the Fund are no longer being offered.” Oooookay then.

AMG Managers High Yield Fund (MHHAX), a modestly above-average fund with a stable management team and manageable expenses (1.15%) will liquidate and terminate on or about August 31, 2017. The portfolio began transitioning to cash in June 12, 2017.

Arrow Commodity Strategy Fund (CSFFX) will liquidate on July 28, 2017.

Cozad Small Cap Value Fund (COZNX) is becoming Oberweis Small Cap Value, pending the (inevitable) approval of shareholders, which will be sought in July.

Credit Suisse Emerging Markets Equity Fund (CSNAX) – which managed to make about 1.2% over the course of 40 months – was liquidated on June 23, 2017.

Dhandho Junoon ETF (JUNE) – which specialized in investing in “Cannibals,” “Spin-off” and “Select Value Manager Holdings” — liquidated on June 30, 2017.

Driehaus Select Credit Fund (DRSLX) will liquidate on July 24, 2017. As you might expect of a Driehaus fund, DRSLX (the blue line) has been … uhhh, bold.

Franklin MidCap Value Fund (the “Fund”) is expected to merge into Franklin Small Cap Value Fund around the beginning of December, 2017.

Frontier Netols Small Cap Value Fund (FNVSX) essentially disappears on July 1, 2017. The principal at Netols is retiring and so Netols Asset Management is getting out of the business; the Board brought in Phocas Financial. The new manager “uses a different investment strategy than Netols … it is expected that most of the Fund’s existing holdings will be sold and replaced by new securities.” That likely signals a noticeable tax bill. On the upside, Phocas has done a nice job with Frontier Phocas Small Cap Value (FPVSX),

Glenmede U.S. Emerging Growth Portfolio (GTGSX) will close on August 31, 2017 and will liquidate on November 17, 2017.

The Grand Prix Investors Fund (no ticker symbol?) will close and liquidate on July 28, 2017. This offering, launched and managed by Autosport Fund Advisors, is bad but not nearly so bad as the other Grand Prix fund, a long-dead reminder of the foolishness of the 1990s and winner of a 2004 Booby Prize from Forbes.

GuideMark Opportunistic Equity Fund (GMOPX) liquidates on July 31, 2017.

JP Morgan is asking its shareholders to authorize the merger of JPMorgan Dynamic Growth Fund (DGAAX) into JPMorgan Large Cap Growth Fund (OLGAX).Both are four star funds with the same manager; OLGAX is about 30-times the size of its sibling. If approved, the merger would go through in the fourth quarter.

Mirae Asset Global Dynamic Bond Fund (MAGDX) will liquidate its assets “as soon as practicable” and will liquidate itself on August 4, 2017. It’s been a singularly strong fund since inception, despite rather higher fees than one might like.

Nationwide Portfolio Completion Fund (NWAAX) will liquidate on or about August 18, 2017, presumably leaving a lot of Nationwide portfolios incomplete.

All four of the New Century funds of funds – Alternative Strategies (NCHPX), Balanced (NCIPX), Capital (NCCPX) and International (NCFPX) – will liquidate, assuming shareholder approval, at the end of August, 2017.

PNC Target-Date Funds (2020-2050 and Retirement Income) will liquidate on or about August 7, 2017.

QS Dynamic Multi-Strategy Fund (LDFAX) “is expected to cease operations on or about August 25, 2017.”

State Street Global Advisors announced plans to liquidate nearly 20 ETFs, almost all of them international equity funds, by the end of July. They are:

  • SPDR Bloomberg Barclays 0-5 Year TIPS ETF (SIPE)
  • SPDR EURO STOXX 50® Currency Hedged ETF (HFEZ)
  • SPDR MSCI Australia StrategicFactorsSM ETF (QAUS)
  • SPDR MSCI Spain StrategicFactorsSM ETF (QESP)
  • SPDR S&P® Emerging Europe ETF (GUR)
  • SPDR S&P Emerging Latin America ETF (GML)
  • SPDR S&P Emerging Middle East & Africa ETF (GAF)
  • SPDR S&P International Consumer Discretionary Sector ETF (IPD)
  • SPDR S&P International Consumer Staples Sector ETF (IPS)
  • SPDR S&P International Dividend Currency Hedged ETF (HDWX)
  • SPDR S&P International Energy Sector ETF (IPW)
  • SPDR S&P International Financial Sector ETF (IPF)
  • SPDR S&P International Health Care Sector ETF (IRY)
  • SPDR S&P International Industrial Sector ETF (IPN)
  • SPDR S&P International Materials Sector ETF (IRV)
  • SPDR S&P International Technology Sector ETF (IPK)
  • SPDR S&P International Telecommunications Sector ETF (IST)
  • SPDR S&P International Utilities Sector ETF (IPU)
  • SPDR S&P Russia ETF (RBL)

TCW International Growth Fund (TGIDX) was liquidated on June 30, 2017.

Triad Small Cap Value Fund (TSCVX) liquidated on June 23, 2017. The adviser laments “its inability to market the Fund.”

WisdomTree Strategic Corporate Bond Fund (CRDT), WisdomTree Western Asset Unconstrained Bond Fund (UBND) and WisdomTree Global Real Return Fund (RRF) will all liquidate on August 16, 2017. The advisor cites “limited future prospects of investor demand for the Funds.”