Monthly Archives: January 2018

January 1, 2018

By David Snowball

Dear friends,

Welcome to the New Year!

And to an odd question: why is it a New Year? That is, why January 1? Most calendrical events correspond to something: cycles of the moon and stars, movement of the seasons, conclusions of wars or deaths of Great Men.

But why January 1? It corresponds with nothing.

The short version of the answer is that the ancient Roman calendar was a holy mess. Literally: the new year started on the day that the high priest, the pontifex, said it started. Understandably, the pontifex was open to … uhh, reason when it came to choosing the date on which the year began. He might shorten the rule of one leader by moving up the date of New Year’s or delaying the inauguration of another ruler by lengthening the preceding year.

In 45 B.C., Julius Caesar had had enough and, with the help of the astronomer Sosigenes, moved Rome from a 10 month calendar with a floating start day and lots of days that didn’t fall in any month to a version of the calendar we use today.

Except that it had a bit of trouble accommodating the fact that the solar year, which isn’t precisely 365 days long. We got far enough out of sync that they had to add seven days to the year 1000 and 10 more days in the mid 15th century. In 1582, Pope Gregory had had enough and, with the help of Vatican astronomers, created today’s calendar.

Which, by the way, still didn’t have a New Year’s Day and required eliminating 10 entire days from the calendar that year. New Year’s was the solstice in some spots, December 25th in others and March 25th, the spring equinox, in others. The pope finally put his foot down and we got January 1st.

So, why exactly does it make sense for you to gloat, or worry, about how your portfolio did in 2017? The end date of the year is arbitrary. It corresponds neither to the market’s annual flux nor to the longer seven(ish) year cycles in which the market normally rises and falls, much less your own financial needs and resources.

In short, it’s time to look forward with hope and renewed resolve, rather than back with glee or regret.

And so, on to 2018!

It’s deceptively easy to believe that our world is going to hell in a handbasket because the only thing we hear each day is that day’s horrors. Someone got shot. Somewhere got poisoned. Something blew up. Someone betrayed us.

Why all the bad news? Two reasons:

  1. News media report on what’s new; that is, they tell us what happened today that was different from what happened yesterday. They’re looking at individual occurrences, especially if they come with striking visual images. We’re not asked to think about the big picture, because the big picture didn’t happen today. And so we fixate on all the little things that did transpire.
  2. Bad news sells; more particular, bad news delivered in a howling tone generates outrage and clicks. For political parties, it also generates revenue and delivers votes.

But that’s not the actual story of our lives, is it?

Things are getting better.

At the most superficial level, everything made money in 2017. The only fund categories in the red were bear market funds and energy funds. Once you got into the world of straightforward, diversified investing, everything worked. Every category of US diversified equity fund made money, and every category of international diversified equity fund made more money. The top performing domestic category was large growth, up 27% and paced by funds from Quantified STF, Kinetics and Zevenbergen, all of which topped 50% gains. And even that category gain trailed nine international fund categories. The handful of India funds, for example, averaged 48% gains last year. Emerging markets bonds posted double digit returns, while all other bonds make gains in the single digits. On whole, it wasn’t rational but it was profitable.

Not everything is getting better. Not every day and not every year. But the important things are, year after year, decade after decade, century after century, getting better. They’re getting better because it’s in our nature to seek better, rather than to surrender to worse. For every idiot in the news, ten thousand of us work – quietly and without expectation of attention – to make things better. That’s a great ratio. And greater still if you make it 10,001.

Next steps, part one

Our challenges are very real (and terrifying). But they’ve been very real (and terrifying) for centuries. The question is not “will things get better?” so much as “what’s your plan to make it better in 2018?” With off-year elections impending, will you finally decide it’s worth your while to be heard? Will you plant a rain garden or volunteer in your schools? Will you walk more, be consciously grateful, notice others more? Will you spend less time with your portfolio and more with your neighbors? Will you fuss less about this quarter’s returns and more about the pattern of intentional consumption (see “Life After,” below) and serious savings (as a nation, we hit a decade-low in our savings rate last year) that will support your most important goals?

Will you put down your phone, leave tweeting to the birds and step away from an Amazon-induced impulse to buy? Jonathan Clement shared the link to a really thoughtful piece entitled “Life After Amazon,” chronicling nine discoveries one gentleman made after he shut down his Amazon account and returned to buying real things from real people in the real world. It’s worth reading.

I have faith in you.

Next steps, part two

Charles, our endlessly energetic colleague and major domo of MFO Premium, is offering two online seminars, both on January 4th, to help acquaint users – new and old – with its offerings and use. There are details in New Year, New Tools in this issue.

Coming in February: new profiles, a discussion of two strategies for hedging your portfolio for the inevitable change of direction in the market, an Elevator Talk with a cool multi-alts manager, my annual portfolio disclosure, word of Chip’s first equity fund (at least in her non-retirement account) and more!

See you then!


New Year, New Tools

By David Snowball

Charles wanted to both thank you and help you discover some of the stuff that our Premium screener can do for you.

It has two features that most screeners lack, and both of them are Charles! Charles has been thinking about what’s really important for investors to know in order to make the best decisions for themselves and their families. As a result, (1) he’s built in tools – from uncommon risk measures to correlation matrices and rolling return screens – that give you information that’s meaningful. And (2) he revises the site almost monthly to accommodate your needs and interests. Literally: if you write with a concern, you get a prompt answer that actually comes from one or both of us. Quite frequently, you also get new or clarified options added to MFO Premium as a result.

All of which works best if you understand which buttons to push. Charles would like to walk you through that process via a live webinar using Zoom. It’s free and easy.

Here are the details:

Date: January 4, 2018
Time: 11:00 a.m. Eastern and again at 5:00 p.m. Eastern

What you have to do:

  1. Select the time that works best for you
  2. Click on the corresponding registration link below
  3. Join in, listen, talk and enjoy!

Morning Session: 11 a.m. Eastern, Jan. 4

Welcome! You are invited to join a meeting: MFO Premium Update

Overview of site background and demo highlighting newest features.

After registering, you will receive a confirmation email about joining the meeting.

Afternoon Session: 5:00 p.m. Eastern, Jan 4.

Welcome! You are invited to join a meeting: MFO Premium Update

Overview of site background and demo highlighting newest features.

After registering, you will receive a confirmation email about joining the meeting.

Even if you’ve used MFO Premium in the past, you need to consider attending. We’ve done a lot of work in the past couple months to make the interface cleaner and easier, while still adding features. Unless you’re a fan of discovery by clicking randomly around, you’ll find the conversation useful.

If you have questions or concerns ahead of the webinar, drop Charles a line.

Rolling toward the one fund you can trust

By David Snowball

The knock on mutual fund performance numbers is that they’re static and arbitrary snapshots that give the illusion of being meaningful. What do you learn from looking at a fund’s five-year performance number? Mostly, you learn that the fund, through skill or luck, did well in the market conditions that obtained between December 2012 and December 2017. Sadly, we don’t have any reason to think those two dates are particularly important (why December 2012? ‘cause it was five years ago, duh!) and we don’t have any reason to believe they’ll tell us about performance in December 2018.

One way of creating a richer portrait of a fund’s risks and returns is by using rolling averages. A fund’s rolling five-year average reflects how it did in every 60 month period as far back as we’ve got data. A six year old fund has one five-year average but 12 rolling five year periods to assess; a ten year old fund has five five-year periods (2012-17, 2011-16) but 60 rolling five year periods.

Karen Wallace at Morningstar recently celebrated “Rolling Returns: A Powerful Analytical Tool That Anyone Can Use”(11/29/17). She notes that “they’re an extremely valuable tool for analyzing fund performance.”

Rolling period returns can provide a more in-depth view into a fund’s performance history than you can get by looking at a single-period trailing return. In a way it’s like comparing a panoramic photo of a forest to a snapshot of a small group of trees.

Rolling returns offer a wider-angle lens into a fund’s full return history. In addition to looking at a fund’s most recent five-year return you could also look at how it performed over many overlapping 60-month periods as far back as your performance data goes, or as far back as the current manager has been in charge, which can help you gain a fuller understanding of its historical performance trends throughout five-year holding periods in a variety of market environments. 

The little complication is that for users wanting to screen the funds or do a side-by-side comparison, the “anyone” in the title translates to “anyone with a Morningstar Direct subscription.” Wikinvest reports the pricing for that service:

Morningstar Direct: Pricing for Morningstar Direct is based on the number of licenses purchased. We charge $16,000 for the first user, $10,500 for the second user, and $8,000 for each additional user.

Speaking on behalf of small investors everywhere: yikes!

Fortunately, those of us who are what Pittsburgh National Bank called “thousandaires” have two affordable and complementary ways to get some of that data.

Morningstar offers a picture of a fund’s rolling averages in their fund profiles. From a fund’s profile page, click on “chart” and, on the upper left corner of the chart click the “growth” pulldown menu and select “rolling returns.” You’ll see a chart with a bunch of bars on it. Now under “rolling period” select 36 months. Using Fidelity Low-Priced Stock as our test subject, here’s what you’ll see:

What does that chart tell you? Over the past 10 years, the fund’s worst-ever 36 month stretch saw an annualized loss of 14.5%, March of 2006 to February 2009. That’s the depths of the 2007-09 financial crisis. That’s better than its peers, represented by the orange line. Conclusion: great in bad times, competitive in good times, pretty steady overall.

MFO offers the data in a single, easy to read table. Here’s our version of the Fidelity Low-Priced Stock story.

What does that say? If you’re willing to hold FLPSX for three years (and there are 205 rolling three-year periods in the data), your worst-ever experience was an annualized loss of 14.6% and your best-ever experience would have been a gain of 30.1% annually. Over the long term, investors have received about 11.8% annually in the average three-year period. Solid! You can also see how much it pays to hold on through bad times: the worst-ever single year was a loss of 42.3% and the worst-ever five year stretch was a loss of 3.7% but the fund’s worst-ever decade still paid its investors 6.8% annually. If you compare the average returns, you see a striking stability: 11.8% annually if you’re willing to hold for three years, 11.6% if you’re willing to hold for five years, and 9.8% if you hold a decade. Why does the longest holding period have the lowest return? Because bear markets tend to show up every seven years or so, as a result many five year periods dodge any bear exposure while some 10 year periods contain at least bits of two bear cycles.

Those single-fund charts show you different angles of the same data. MFO Premium adds one additional tool that retail investors can’t access through Morningstar: our fund screener allows you to screen for funds based on their lowest 1, 3, 5, 10 and 20 year rolling averages.

Want a fund that’s never had a losing 12 month period in the past decade? No problem, there are 306 of them. Small problem, they’re all short-term, ultra-short term bond or money market funds.

Here’s a more interesting challenge: can we find a stock-oriented mutual fund that we can trust? We know stocks are volatile, so it’s not reasonable to hope for a fund that has never had a losing three-year run so let’s set reasonable criteria in hopes of finding a fund that has never disappointed. On our screener, I first set four rolling average requirements:

  • 3 year rolling average: never worse than -2% / year
  • 5 year rolling average: never worse than 0% / year
  • 10 year rolling average: never worse than 6% / year
  • 20 year rolling average: never worse than 8% / year

What does that mean? I ignored one-year averages because they’re so volatile and you should be ashamed of yourself if you invest with a one-year time horizon. I start with no more than minimal losses over 3 years, no worse than breaking even over five, with solid gains for long-term investors. And, just to placate folks who do freak out about the risk of short, severe downturns, I added a maximum drawdown screen of category 1 or 2; that is, below average to much below average maximum losses. Then I hit “go.”

Out of an 8000 fund universe, only one fund passed our screen. That fund is Oakmark Equity and Income (OAKBX), which our colleague Ed Studzinski co-managed with Clyde McGregor from 2000-early 2012. Here’s Morningstar’s picture of the fund rolling along:

See all those periods where the green line (their peers) was below zero while their blue bars were way above zero? That’s where they’re being smart and risk-conscious, over and over again, while their peers foundered.

MFO’s screener output gives you a more precise slice of the data: over 229 three-year rolling periods, the worst stretch was -2.0/year, the best was 20.1%/year with an average of 9.8% annually for someone holding for 3 years. And 9.7% for 5-year periods, 9.1% for 10 year periods and 9.8% for 20 year ones. Do you get some sense of stunning consistency here? We do.

It has been a superb performer, though its future requires some tempering of expectations. With Ed gone, some of the sparkle is off the prose in their letters to investors. Honestly, I used to look forward to every one of Ed & Clyde’s letters for their insight and sharp writing. That experience makes me grateful that Ed agreed to join MFO’s merry band. And Clyde McGregor expects to retire by age 70; he’s 65 now, so investors need to anticipate some transition beginning in the next three years or so. Mr. McGregor has two co-managers, Colin Hudson and Edward J. Wojciechowski, both of whom joined Harris Associates in 2005 and were named to the fund’s management in 2013. I have no doubt that they’re both bright and industrious souls, but I also have no proof that they’ll meet the ridiculously high standard set by Messrs. McGregor and Studzinski.

But, for now and for the past 30 years, Oakmark Equity and Income has qualified as “the one fund you can trust.”

Conflicts and Contradictions

By Edward A. Studzinski

“Success is never final. Failure is never fatal. It is courage that counts.”

        Winston S. Churchill

Some time ago, I was surprised by a conversation with my colleague Charles, finding him quite incensed about a visit he had made to a money manager, one of a series of such encounters that began at the Morningstar conference this year. It appears to have been a disconcerting discovery to Charles that the firm in question, rather than lowering their fees, which fell somewhat on the high side, preferred to keep the fees high so as to support the high life. Charles would define the high life as expensive office space in the high-rent district, along with a propensity for displays of conspicuous hospitality that would have caught Jay Gatsby’s attention. As David notes, separately, Ron Baron plays that game better than most. Lowering the fees would most likely have, as Charles argued, garnered enough in the way of assets to make up for the decreased expense ratio.

In that vein, I am reminded of the quote attributed to the Roman Emperor Caligula, “Money has no smell.” There is in the money management business, especially among active managers a sense of entitlement without par. And as the money rolls in, sometimes things change that impact the investors (the other people’s money that builds franchises) but receive little or no press. I am reminded of the situation of my former colleagues from Harris Associates, David Samra and Dan O’Keefe, both of whom departed Harris due to a disagreement about the timing of their becoming partners. Samra and O’Keefe went on to an enviable record of success launching the Artisan International Value Fund and the Artisan Global Value Fund. Both funds enjoyed periods of stellar investment performance, achieving five star ratings from Morningstar. They also managed to regularly outperform Herro’s funds with less risk.

We then had the March 7, 2013 initial public offering of the stock of Artisan Partners Asset Management, Inc. As a result of that IPO, Messrs. Samra and O’Keefe had valuations on their stock in Artisan worth in excess of $100M apiece. Subsequently, Mr. O’Keefe moved from San Francisco back to Illinois where his family and friends are, and now operates out of a satellite office there. Mr. Samra remains in San Francisco, in the financial district. Performance on both funds, while still good, has declined from being top decile. Why? That is probably a question worthy of a Harvard Business School case study. And my suspicion is that at the end of it, you will still not know the answer.

I recently had a dinner companion who is the individual responsible for selecting the Chief Investment Officer for one of the largest endowments in the world. As we discussed the investment world, and the performance of other endowment funds, it suddenly dawned on me that this person was frustrated that there was not some replicable formula or process that would ensure the success, first of the investment personnel selections, and then, of their respective investment performance. Probably the hardest thing for many to deal with in investment manager selections is that often the person or persons are one-offs. This stems from the fact that in many instances, especially as pertains to value investors, besides discipline, we see something that, as practiced, is as much an art as science. And in many instances, the human computers that we are seeing are indeed one-offs. Indeed, there is sometimes something about a time and place that produces a particular intellectual chemistry.

This is a little bit the problem one sees with what a friend of mine labels the “Buffett clones” who are the people who model themselves and their investment process on the way Warren Buffett invests. And yet, they rarely if ever even come close to, let alone replicate, Warren Buffett’s investments or performance. My friend would say that that is because the way that people think Buffett invests is not really the way he does invest, and I will defer to her in that regard.

But I do think that we underestimate, to our great loss, the extent to which the Buffetts, the Druckenmillers, the Millers, the Mungers, are all outliers more than two standard deviations removed, who have going on in their heads processes which are not easily replicated by a group of analysts and an investment committee sitting around a table. The latter, often more concerned with job security and the gathering of assets under management, are increasingly doomed to failure under the twin pressures of increased transparency and fee pressure.


2018 will be a very interesting year for investors. We are in a period of great innovation. We are also in a period when normalized investment returns have been distorted by ongoing central bank interventions, which have resulted in unintended consequences. An individual involved in the private equity world recently asked me how I was positioning my investments. My answer was that I was looking for uncorrelated investments whose market capitalizations were generally too small (and illiquid) for institutional investors to invest in (the ability to handle illiquidity being a competitive advantage for individuals). That is not an approach for everyone, especially since illiquidity can be a problem for those not prepared to deal with it. But it should be understood that illiquidity can be an opportunity. I also have a preference for businesses without a lot of debt that provide goods or services for which there is a regular and consistent demand, in meeting basic and ongoing needs. And for the very good business, be prepared to pay a fair price.


For those who are movie goers at this time of year, I highly recommend “Darkest Hour” and “Molly’s Game.” And for those with the patience to make your way through a long but worthwhile book, I highly recommend Ron Chernow’s new biography, Grant.

Alfred E. Baron: What, me worry?

By David Snowball

I wonder, sometimes, if I’m more irked by high fund fees because they degrade my returns or because they reflect an annoying sense of entitlement on the part of managers who think we owe them a lifestyle far more opulent than our own. At base, is my objection practical or moral?

Landon Thomas’s long article in the New York Times looks at Ron Baron’s comp and pushes me hard in the direction of the latter: Mr. Baron seems to have an almost superhuman sense of his own worth (“Why Are Mutual Fund Fees So High? This Billionaire Knows,” 12/30/17). For those who don’t subscribe to the Times, CNBC published a good excerpt of the piece.

Here’s a precis of the article:

  1. The Baron funds charge a lot, even after their assets hit the multi-billion dollar range. Mr. Thomas reports that Baron’s fees are about 50% above the industry average.
  2. Founder Ron Baron is perfectly happy with that arrangement, “We have made $23.6 billion for our clients,” he says. We’ll note two flaws in this argument: (1) the vast bulk of those returns are simple growth in the stock market, not Mr. Baron’s brilliance and (2) the bulk of the outperformance is ancient history. Mr. Baron cites the record since inception (a 30 year span) for his two oldest funds, while neglecting to mention the fact that Baron Asset has trailed both its peer group and low-cost competitors such as Vanguard Mid Cap Growth (VMGRX) over the past 20 years.
  3. Baron is living high, and loves it. He’s worth $2 billion, his family has $670 million invested in the funds, he owns a $150 million home and his annual shareholder meetings are platforms on which to display, and through which to validate, his vast wealth.
  4. The system is rigged to keep it that way. Many members of his board of trustees, nominally his investors’ representatives, have been in that role for 30 years, a well compensated (the firm’s 2017 Statement of Additional Information reports compensation of $115,000 – 143,750 for the independent trustees) for a distinctly part-time job and have absolutely no incentive to rock the boat. The board has agreed to a contract that compensates Mr. Baron and other key players based on the firm’s assets under management, which creates an incentive to vacuum up money whenever the opportunity permits. That helps explain the 0.25% 12(b)1 marketing fee he imposes.

Investors have noticed. Assets at Baron Growth (BGRFX) have fallen from $6.9 billion in 2007 to $2.7 billion today and his flagship Baron Asset (BARAX) fund has dropped from $4.3 billion to $2.0 billion.

Mr. Baron, unworried, smiles and maintains both funds’ high fees. With a management fee of 1.0%, those two funds alone generate $47 million a year in revenue for his management company.

The sense of entitlement is regrettably common. Our colleague, Charles Boccadoro, has been visiting fund advisers over the past few months, and he’s coming away repeatedly frustrated by the simple fact that managers charge as much as they can get away with. Investopedia reports the industry-wide averages:

A survey conducted by Russell Reynolds Associates revealed that fund managers at banks make an average of $140,000, while mutual fund managers at insurance companies make $175,000. Fund managers at brokerage firms make $222,000, and mutual fund companies’ mutual fund managers make an average of $436,500. Managers working for larger funds make significantly more …

We’ll note that the $436,500 isn’t the average for excellent managers, entrepreneurial managers or large-fund managers. No, no, it’s what the average schmoo pockets. And there’s a 95% chance that the schmoo in question offers less value than keeping the money yourself and buying an index fund.

There are managers who earn their fees and more. Indeed, some managers simultaneously over-earn their fees and reduce them to offer greater benefit to their investors; Andrew Foster and the folks at Seafarer are a case in point. Many managers of small funds make nothing, regardless of what the prospectus says. By way of example, on behalf of an MFO reader (hi, Judith!) who had questions about prospectus provisions concerning a performance bonus for the manager and other expenses, we reached out to Rondure Global. They confirmed what we told our reader: the manager is underwriting the firm’s existence, rather than vice versa. As a brand new operation, Rondure depends on a line of credit from its partner Grandeur Peak

…and from Laura Gertiz herself to keep the firm afloat for quite some time. Laura may take a very small amount of compensation this year (only enough to allow her to participate in our 401k program), however most of the expenses are coming out of her own pocket at this juncture so it doesn’t make sense for her to be paid any significant amount. That will obviously change in the future, however, you should be aware that if Laura does earn a bonus after profitability is reached, 100% of it will be plowed back into the funds on a long-term vesting schedule in order to align her incentives with those of our investors.

For investors, there are two dangerous questions: (1) how much am I paying? And (2) am I beating the market? They’re dangerous because they encourage you to judge your manager on irrelevant criteria. In place of the first question, we’d suggest asking “am I getting full value for what I’m paying?” Managers can add significant value by moderating risk, offering access to intriguing and otherwise inaccessible asset classes or by giving you the confidence to hold on through tough times. Your worst enemy is you, and your best friend can be a manager who makes you a better investor.

In place of the second question, we’d suggest asking, “is this manager helping me achieve my life goals?” Unless you are a terribly sad and lonely person, you’re really not going to want “he outperformed the Dow by 0.25% annually over his long life” to be the first line in your eulogy. Market-beating means nothing! Losing 19% when the market loses 20% is nothing to cheer. Suffering vertigo and anxiety as your manager charges into, and beats, a foam-filled market is nothing to cheer. Beating the market steadily, whether by 1 basis point or 1000, tells us nothing about whether you’ve been able to lead the life you’ve aspired to. Focus, instead, on what’s meaningful: are you making steady gains of the sort that will allow you to enjoy life, to make a difference in the world, and be rich with friends and family? If so, you’re winning. Celebrate.

BUT if you’re one of the millions of investors whose investments serve mainly to underwrite the lifestyle of an unimaginative member of the herd, act now! MFO Premium offers one very fine suite of tools for assessing whether you’re being treated reasonably (check your manager’s five- and ten-year rolling averages to see whether you might reasonably expect the sorts of returns you need to meet your goals) while ActiveShare.Info offers another.

ActiveShare, underwritten by the folks at Touchstone Investments and guided by the research of Martijn Cremers of Notre Dame, offers another. For domestic equity funds, Active Shares measures the proportion of a fund’s portfolio that simply mimics an index’s; the “different from the index” proportion is called the active share and it’s where the manager can add value. Funds with high active share – 70% or more, depending on the asset class – have the greatest potential to justify their “active” expenses. The site even allows you to calculate what you’re actually paying for the manager’s skill by factoring the size of the active share into an expense ratio calculation: a 1% fee on a fund with 100% active share means all of your money pays for independence from the index, so your active share costs you 1%. Contrarily, a 1% fee on a fund with 10% active shares means the expense ratio on the active part of the account is nearly 10%! Avoid such funds.

Bottom line: for investors in the Baron funds, the same questions apply. Are you so heartened by Mr. Baron’s showmanship and reassuring visage that you’re willing to pay a 50% upcharge for his funds? If so, you’re being charged fairly. If not, check out Nicholas II Fund (NNTWX) which has been around longer, charges less, returns more and has a smaller asset base.

Shukran jazīlan! Trugarez! Xièxie! Go raibh maith agaibh! E molte grazie!

By David Snowball

Likewise merci, danke and, more than all, thanks!

On December 17th, I wrote a note to the 7,000 or so folks on our mailing list. The sad part of the note was reminding folks of the end of our associate’s relationship with Amazon which had so long provided our ability to cover our “hard” bills such as webhosting and email. The glad part was announcing a challenge gift of $2000, offered by three MFO readers who wanted to do the best they could to support us. Their offer was straightforward: we’ll put in a dollar of our own money for every dollar contributed by others, up to a total match of $2000.

That seemed hopeful, as well as very generous. We wrote, hoping that perhaps 20 of you might make $100 contributions, an amount which would trigger your access to MFO Premium (Charles has been streamlining the site and adding features again), allow us to access the full challenge amount and cover more than a third of our Amazon loss.

Ummm … you were magnificent overachievers. Rather than 20 contributions, we received about 200. They ranged from $7.11 to $500, in addition to the original challenge gifts. Tadas Viskanta, master of Abnormal Returns, helped by tweeting out to appeal for his followers to consider chipping in $10 each. Several long-time friends in the industry helped out, as did a huge number of new folks. About 40 people contributed $100 or more and gained MFO Premium (some folks sent letters without sharing email addresses, please write Charles if you’re among them so he can get you set up). Our correspondents ranged from Alaska to Florida (both of which are currently warmer than the Quad Cities).

And not a few tacked on 2.5% to offset PayPal’s cut. Thanks for the extra, it was a very sweet gesture.

It is, by the way, intensely satisfying to have members who feel so strongly about the value this site offers. We’re deeply grateful, both for our own sakes and for the sake of the 24,000 other readers you’ve just helped out.

And so, thanks to …

John R. John M.
Walter C. Benjamin P.
David F. Altaf K.
Richard G. Jonathan P.
R M. Brett A., Happy Holidays to you and yours.
Kapil K. Donald P.
Richard B. Rick C.
Scott O. Ian H.
Philip A. Rand H.
Joe C. Brian R.
Poody M., we target ‘thought provoking’. James L.
John M., good fortune to you. Jeroen B., indeed every bit does help – thank you!
Harlen C. William S.
Victoria O., with waves and a hope to see you at Morningstar! Michelle P.
Craig W. Edward B.
Matthew S. Elie T.
Stephan S. Larry C.
Vera & Alfred H. Thomas A.
Lee S. Bret S.
Allen H. Sunil A.
Ben L., we appreciate you, too. Joel K.
Adam E., you folks are very close to becoming Chip’s first equity fund! William D.
Dan S. – thank you James H.
George H. Jeffrey B., thank you – we’re feeling good.
Bary M. William N.
Kevin P. Leah W. – it’s always good to hear from you.
Duc L. Curtis R.
Nancy J. Jonathan L., dude – we cover them, and we’re gonna cover more.
Nick & Debbie, as soon as you promise to stop having statewide conflagrations, we’re there! Kevin S.
Brett B. Elizabeth S.
William W. Kirk L.
Steven L. Paul E.
Jim McM, all 10,000 pennies make a difference. Eric G., thanks for the extra!
Jack G. Tom S.
Poetry P. Ann S.
Nancy P., the extra makes a big difference! Wilson D.
Jerald R. Thomas K., we’re so glad you find value with us.
Sigrid M. William M.
Francis G. Lloyd T.
Don & Toni. James P..
Mary C. Joe B.
Richard & Linda G. Ryan T.
Neil D. John D. – the curmudgeonly Ed nods and waves.
Silina T. – we’re always happy to help. Edward M.
Michael K. Joan K.
Tim K., thank you – made me think of the $64,000 question! Hjalmar T., thanks as ever, sir!
RJ D. Rae S.
JW M. Lawrence R.
Everett W. Jimmy V.
Mark D. Charles L.
Sara M. Radey J.
Joseph M. from IL, thanks for the support. Raymond K.
Stuart B. Joseph A.
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Funds in registration

By David Snowball

Fund advisers are required to file prospectuses for proposed funds with the SEC; the SEC has 75 days to review the filing. If the SEC doesn’t object, then the adviser is free to launch – or to not launch, which is more common than you think – the proposed fund. Funds placed in registration in December will “go live” in February or March 2018. This month’s filings include three actively-managed ETFs, two conversions of existing funds and one mystery: how Thrivent can offer a no-load / no minimum fund for 7 basis points in expenses.

Amplify YieldShares High Yield ETF

Amplify YieldShares High Yield ETF, an actively managed ETF, will seek high current income with a secondary goal of capital appreciation. The plan is to assemble a portfolio primarily comprised of high-yield debt, with some room for high-dividend equities. The adviser claims a “deep value contrarian approach to the credit markets, focusing on absolute value.” The fund will be managed by Peritus Asset Management, LLC. This fund is a reorganization of an unnamed “predecessor fund,” presumably Peritus High Yield ETF (HYLD) with a spectacularly bad track record. The initial expense ratio is 1.25% and there is no minimum initial investment requirement.

BTS Managed Income Fund

BTS Managed Income Fund will seek total return. The plan is to pursue two strategies: an unconstrained fixed-income strategy and a risk management strategy that actively trades in order to hedge the first strategy. In general, the fixed income strategy will occupy 60-70% of the portfolio. The fund will be managed by Vilis Pasts, Matthew Pasts, and Isaac Braley. The initial expense ratio has not been disclosed and the minimum initial investment will be.

Davis Select International ETF (DINT)

Davis Select International ETF (DINT), an actively managed ETF, will seek long-term capital growth . The plan is to create an all-cap global equity portfolio. Notwithstanding the word “international” in the name, the fund is required to hold only 30% non-U.S., including U.S. firms with substantial international exposure. The fund will be managed by Danton Goei of Davis Selected Advisers. The initial expense ratio  is 0.75% and there is, of course, no minimum initial investment requirement. The launch is set for March 2018.

LHA Market State Tactical U.S. Equity ETF

LHA Market State Tactical U.S. Equity ETF, an actively-managed ETF, will seek to beat the US stock market on a risk-adjusted basis. The plan is to use ETFs and futures contracts to achieve a market exposure of between 0-160% of the portfolio. The fund will be managed by Jeffrey C. Landle of Little Harbor Advisors. The initial expense ratio has not been disclosed and there is no minimum initial investment requirement.

Miller/Howard Infrastructure Fund

Miller/Howard Infrastructure Fund will seek current income and long-term capital appreciation. The plan is to invest in a portfolio of exchange listed infrastructure companies including water, gas, and electric utilities, waste, communication and telecom, internet, energy infrastructure, transportation and logistics, and renewable energy. No word about size or geographic location. There is, however, an ESG screen. The fund will be managed by a team led by Lowell G. Miller, Miller-Howard’s CIO. The initial expense ratio will be 1.20% and the minimum initial investment will be $2,500.

Northpointe Small Cap Opportunities Fund

Northpointe Small Cap Opportunities Fund will seek long-term capital appreciation. The plan is to invest in domestic small cap value stocks. The fund will be managed by Jeffrey C. Petherick, CFA, and Mary C. Champagne. This is a conversion of an unnamed predecessor fund and an unspecified record; the previous record in the prospectus is [xx%]. I’m guessing it’s their tiny, under-performing NorthPointe Small Cap Value (NPSVX) fund. The initial expense ratio will be 1.10% and the minimum initial investment will be.

Old Westbury All Cap ESG Fund

Old Westbury All Cap ESG Fund will seek long-term capital appreciation. The plan is pretty vague: “the Adviser’s investment process combines ESG scores, as provided by a third party vendor, with a proprietary quantitative process that measures equity securities’ attractiveness.” The fund will be managed by Dr. Qiang Jiang, Y. Gregory Sivin, and Anna E. White. The initial expense ratio has not been disclosed and the minimum initial investment will be $1,000.

Thrivent Core Low Volatility Equity Fund

Thrivent Core Low Volatility Equity Fund will seek long-term capital appreciation with lower volatility relative to the domestic equity market. The plan is to use quant models to buy low volatility stocks. The fund will be managed by Noah J. Monsen, CFA and Brian W. Bomgren, CQF.. Okay, here are the two elements of the filing that I simply don’t understand. The initial expense ratio is 0.07% and there is no minimum initial investment. I’ve got to call these folks. I’ll update you next month if they’re willing to talk.

Manager changes, December 2017

By Chip

Sixty funds saw complete or partial manager changes, which is right in line with our long-term average. Most months see between 50-70 changes. Just as was the case in September, the most consequential changes are coming from the Third Avenue funds. Michael Winer, manager of Third Avenue Real Estate Value and the firm’s sole remaining star, is retiring after 20 years. His co-managers will need to step up. Just a bit later, the merger of Third Avenue International Value will narrow things further.

Ticker Fund Out with the old In with the new Dt
NUBAX Neuberger Berman Unconstrained Bond Fund Andrew Johnson has announced his intent to retire on December 31, 2018. Brad Tank and Ashok Bhatia will join Thanos Bardas, David Brown, Jon Jonsson, Nathan Kush, Ugo Lancioni, and Thomas Marthaler on the management team. 12/17
PSEPX 1789 Growth and Income Fund Stephen Fauer is no longer listed as a portfolio manager for the fund. Paul Tryon will now manage the fund. 12/17
RGSAX AllianzGI Global Small-Cap Fund Frank Hansen will no longer serve as a portfolio manager for the fund. Nine other managers remain to keep the lights on. 12/17
AOPAX AllianzGI International Small-Cap Fund Frank Hansen will no longer serve as a portfolio manager for the fund. Nine other managers remain to keep the lights on. 12/17
GVRPX American Beacon Grosvenor Long/Short Fund River Canyon Fund Management is no longer a subadvisor to the fund. The rest of the team remains 12/17
BERWX Berwyn Fund Lee Grout left Chartwell Investment Partners, LLC  on December 29, 2017, at which point he no longer served as portfolio manager David Dalrymple will replace Mr. Grout as portfolio manager of the fund. 12/17
MASPX BlackRock Advantage U.S. Total Market Fund Murali Balaraman and John Coyle are no longer listed as portfolio managers for the fund. Travis Cooke, Raffaele Savi and Richard Mathieson will manage the fund. 12/17
BUFMX Buffalo Mid Cap Fund Scott Moore and Dave Carlsen will no longer serve as portfolio managers for the fund. Chris Carter and Josh West will now manage the fund. 12/17
DHLAX Diamond Hill Large Cap Fund No one, but . . . A promo! References to Austin Hawley as Assistant Portfolio Manager of the Large Cap Fund are removed and replaced with Austin Hawley as Portfolio Manager of the Large Cap Fund. 12/17
EAFVX Eaton Vance Focused Value Opportunities Fund John Crowley is no longer listed as a portfolio manager for the fund. Aaron Dunn joins Edward Perkins in managing the fund. 12/17
EHSTX Eaton Vance Large-Cap Value Fund John Crowley is no longer listed as a portfolio manager for the fund. Aaron Dunn joins Edward Perkins in managing the fund. 12/17
EATVX Eaton Vance Tax-Managed Value Fund John Crowley is no longer listed as a portfolio manager for the fund. Aaron Dunn joins Edward Perkins in managing the fund. 12/17
FSLVX Fidelity Stock Selector Large Cap Value Fund No one immediately but, Katherine Buck is expected to retire effective March 31, 2018. Chip Perrone joined the other eight managers on the team. He is expected to take over Ms. Buck’s co-manager responsibilities at that time. 12/17
FSICX Fidelity Strategic Income Fund William Irving no longer serves as co-manager of the fund. Ford O’Neil, Adam Kramer, Mark Notkin, Jonathan Kelly, David Simner, and Franco Castagliuolo are joined by  Sean Corcoran on the management team. 12/17
FSRRX Fidelity Strategic Real Return Fund William Irving no longer serves as co-manager of the fund. Sean Corcoran joins Ford O’Neil, Adam Kramer, Mark Snyderman, Samuel Wald, and Franco Castagliuolo in managing the fund. 12/17
FCARX Fiera Capital Diversified Alternatives Fund Ellington Management Group will no longer subadvise the fund, and Rasheed Sabar will no longer serve on the management team. Fiera Capital will directly manage that portion of the funds assets. The rest of the management team will remain. 12/17
HHBUX    Hancock Horizon Burkenroad Small Cap Fund  John Portwook will retire on or around January 12, 2018. David Lundgren will continue to manage the fund. 12/17
HHIAX    Hancock Horizon Diversified Income Fund  John Portwook will retire on or around January 12, 2018. Greg Hodlewsky will continue to manage the fund. 12/17
HHQAX     Hancock Horizon Quantitative Long/Short Fund John Portwook will retire on or around January 12, 2018. Paula Chastain and Jacob Hartl will continue to manage the fund. 12/17
HSFAX HSBC Frontier Markets Fund Christopher Turner no longer serves as a portfolio manager of the fund. Ramzi Sidani will continue to manage the fund. 12/17
JORNX Janus Henderson Global Select Fund No one, but . . . George Maris has been joined by Julian McManus and Garth Yettick on the management team. 12/17
JAOSX Janus Henderson Overseas Fund No one, but . . . George Maris has been joined by Julian McManus and Garth Yettick on the management team. 12/17
SGQI Janus Henderson SG Global Quality Income ETF   Edward Tom will no longer serve as a portfolio manager for the fund. Scott Weiner and Benjamin Wang will continue to serve as portfolio managers for the fund. 12/17
JSML Janus Henderson Small Cap Growth Alpha ETF Edward Tom will no longer serve as a portfolio manager for the fund. Scott Weiner and Benjamin Wang will continue to serve as portfolio managers for the fund. 12/17
JSMD Janus Henderson Small/Mid Cap Growth Alpha ETF Edward Tom will no longer serve as a portfolio manager for the fund. Scott Weiner and Benjamin Wang will continue to serve as portfolio managers for the fund. 12/17
TRSK Janus Velocity Tail Risk Hedged Large Cap ETF   Edward Tom will no longer serve as a portfolio manager for the fund. Scott Weiner and Benjamin Wang will continue to serve as portfolio managers for the fund. 12/17
SPXH Janus Velocity Volatility Hedged Large Cap ETF   Edward Tom will no longer serve as a portfolio manager for the fund. Scott Weiner and Benjamin Wang will continue to serve as portfolio managers for the fund. 12/17
MASNX Litman Gregory Masters Alternative Strategies Fund Passport Capital, LLC has been removed as a subadvisor and John Burbank will no longer serve as a portfolio manager for the fund. The rest of the team remains. 12/17
BHBFX Madison Dividend Income Fund Jay Sekelsky has retired. John Brown and Drew Justman will continue to co-manage the fund. 12/17
MNVAX Madison Investors Fund Jay Sekelsky has retired. Matt Hayner and Adam Sweet will continue to co-manage the fund. 12/17
MOSAX MassMutual Select Overseas Fund J.P. Morgan Investment Management was removed as a subadvisor to the fund. Georgina Maxwell, Jeroen Huysinga, and Demetris Georghiou will no longer serve as portfolio managers for the fund. David Herro, Daniel Ling, Felipe Benzinho, and Michael Manelli continue to manage the fund. 12/17
NCRAX Neuberger Berman Core Bond Fund Andrew Johnson has announced his intent to retire on December 31, 2018. Nathan Kush will join Thanos Bardas, David Brown, Thomas Marthaler, and Brad Tank on the management team. 12/17
NCPAX Neuberger Berman Core Plus Fund Andrew Johnson has announced his intent to retire on December 31, 2018. Thanos Bardas, Ashok Bhatia, David Brown, Nathan Kush, Thomas Marthaler, and Brad Tank will continue to manage the fund. 12/17
NSTAX Neuberger Berman Strategic Income Fund Andrew Johnson has announced his intent to retire on December 31, 2018. Ashok Bhatia will join Thanos Bardas, David Brown, Thomas Marthaler, and Brad Tank on the management team. 12/17
NGEAX Nuveen NWQ Global All-Cap Fund Effective immediately, Gregg Tenser is no longer a portfolio manager for the fund. James Stephenson will continue to serve as portfolio manager for the fund until its liquidation after the close of business on January 22, 2018. 12/17
PJMDX Putnam Absolute Return 500 Fund   Robert Kea is no longer listed as a portfolio manager for the fund. Robert Schoen, James Fetch and Jason Vaillancourt will now manage the fund. 12/17
PDMAX Putnam Absolute Return 700 Fund   Robert Kea is no longer listed as a portfolio manager for the fund. Robert Schoen, James Fetch and Jason Vaillancourt will now manage the fund. 12/17
PVSAX Putnam Capital Spectrum Fund No one, but . . . Jacquelyne Cavanaugh joins David Glancy as an assistant portfolio manager 12/17
PCONX Putnam Convertible Securities Fund Eric Harthun is no longer listed as a portfolio manager for the fund. Robert Savin and Anthony Daigle will continue to manage the fund. 12/17
PABAX Putnam Dynamic Asset Allocation Balanced Fund   Robert Kea is no longer listed as a portfolio manager for the fund. Robert Schoen, James Fetch and Jason Vaillancourt will now manage the fund. 12/17
PACAX Putnam Dynamic Asset Allocation Conservative Fund Robert Kea is no longer listed as a portfolio manager for the fund. Robert Schoen, James Fetch and Jason Vaillancourt will now manage the fund. 12/17
PAEAX Putnam Dynamic Asset Allocation Growth Fund Robert Kea is no longer listed as a portfolio manager for the fund. Robert Schoen, James Fetch and Jason Vaillancourt will now manage the fund. 12/17
PDREX Putnam Dynamic Risk Allocation Fund Robert Kea is no longer listed as a portfolio manager for the fund. Robert Schoen, James Fetch and Jason Vaillancourt will now manage the fund. 12/17
PYSAX Putnam Equity Spectrum Fund No one, but . . . Jacquelyne Cavanaugh joins David Glancy as an assistant portfolio manager 12/17
PMVAX Putnam Multi-Cap Value Fund James Polk is no longer listed as a portfolio manager for the fund. Katherine Collins will now manage the fund. 12/17
PSLAX Putnam Small Cap Value Fund Eric Harthun is no longer listed as a portfolio manager for the fund. David Diamond will continue to manage the fund. 12/17
QEAAX Quaker Event Arbitrage Fund Paul Hoffmeister will no longer serve as a portfolio manager for the fund. Thomas Kirchner will continue to manage the fund. 12/17
QTRAX Quaker Global Tactical Allocation Fund Paul Hoffmeister will no longer serve as a portfolio manager for the fund. Thomas Kirchner will continue to manage the fund. 12/17
WMMAX TETON Westwood Mighty Mites Fund Paul Sonkin is no longer a portfolio manager of the fund. Mario Gabelli, Laura Linehan, and Sarah Donnelly will continue to manage the fund. 12/17
OLD The Long-Term Care ETF Edward Tom will no longer serve as a portfolio manager for the fund. Scott Weiner and Benjamin Wang will continue to serve as portfolio managers for the fund. 12/17
SLIM The Obesity ETF (if the ticker for the Long-Term Care ETF is OLD, why isn’t this ticker FAT?) Edward Tom will no longer serve as a portfolio manager for the fund. Scott Weiner and Benjamin Wang will continue to serve as portfolio managers for the fund. 12/17
ORG The Organics ETF Edward Tom will no longer serve as a portfolio manager for the fund. Scott Weiner and Benjamin Wang will continue to serve as portfolio managers for the fund. 12/17
TAREX Third Avenue Real Estate Value Michael Winer intends to retire in early 2018. Mssr. Winer has been at the helm since 1998. Co-lead managers Jason Wolf and Ryan Dobratz will take over. Wolf and Dobratz joined in 2010 and 2013, respectively. The fund currently holds about $2 billion, down a billion from its peak. 12/17
VCVSX Vanguard Convertible Securities Fund No one, but . . . Andrew Watts joins Stuart Spangler, Abe Ofer, Jean-Pierre Latrille, and Petar Raketic on the management team. 12/17
WALTX Wells Fargo Alternative Strategies Fund As of February 15, 2018, Passport Capital, LLC will no longer serve as a subadvisor to the fund. John Burbank will no longer serve as a portfolio manager The rest of the team remains. 12/17
WMLPX Westwood MLP and Strategic Energy Fund Hollis Ghobrial no longer serves as a portfolio manager of the fund. Matthew Na and Todd Williams will continue to manage the fund. 12/17
APIGX Yorktown Capital Income Fund Michael Dixon is no longer listed as a portfolio manager for the fund. David D. Basten, David M. Basten, and Brentz East will continue to manage the fund. 12/17
AFGGX Yorktown Growth Fund Michael Dixon is no longer listed as a portfolio manager for the fund. David D. Basten, David M. Basten, and Brentz East will continue to manage the fund. 12/17
APIMX Yorktown Short Term Bond Fund Brentz East will no longer serve as a portfolio manager for the fund. David D. Basten, David M. Basten, and Michael Dixon will continue to manage the fund. 12/17


Briefly Noted

By David Snowball


In December’s story, “There’s no idea so dumb that it won’t attract a dozen ETFs,” I derided the notion of blockchain ETFs. That’s because they have so few meaningful investments; there just aren’t many publicly traded blockchain-focused firms to build a portfolio around. I described their investment universe as “a small, motley collection of firms that recently changed their names to blockchainify them (360 Capital Financial suddenly became 360 Blockchain), over-the-counter stocks, foreign small caps and recent IPOs.”

Shortly thereafter, Long Island Iced Tea Corporation – literally, guys who make bottled iced tea – changed their name to Long Island Blockchain. They’re still making iced tea and have no demonstrable competence in blockchain. Notwithstanding that, their stock tripled in value in a single day.

Business Insider chronicled the silliness around the IPO for a firm named “Longfin.”

There’s Longfin [LFIN]. The company went public in the US on December 13, 2017. In its SEC filing, it said it had revenues of $298,786 in the year 2017 and was sitting on $75 in cash. What sent the stock soaring 2,700%, from $5 to $142.82 in a few days, and gave it briefly a market capitalization of over $7 billion, was the December 15 announcement – an elegant and apparently very effective mix of gobbledygook, hype, and silliness that started out like this:

Longfin Corp., a leading global FinTech company, announces the acquisition of, a Blockchain-empowered solutions provider that offers Microfinance Lending against Collateralized Warehouse Receipts in the form of Ziddu Coins.

Ummm … “sitting on $75 in cash”? I just checked my wallet: that’s rather more than I’m currently sitting on but I do have an extra $30 squirreled away in my desk which would put me over the top.

In any case, my loathing for the ETF industry grew with the registration filings of four bitcoin funds from First Trust, four from ProShares, two from REX and one from Direxion. (And no, I’m not giving you the links to such silliness. If you want them, you’ll need to find them on your own.) These funds, once launched, do represent a pathway through which the insanity of the bitcoin and cryptocurrency markets can infect major financial markets. A long shot, you say? Well, the cryptocurrency market just passed $500 billion value and (2) the 1998 Long Term Capital Management crisis was generated, in large part, by a misplaced bet on the Russian ruble. Wider systemic damage was avoided only through a swift and then-unprecedented bailout.

Briefly Noted . . .

I hardly know where to put the note that Tierra XP Latin America Real Estate ETF (LARE) became the ETFMG Alternative Harvest ETF. The “alternative harvest” at issue is marijuana.


Effective December 18, 2017, 361 Capital, LLC agreed to reduce the limit on the total annual fund operating expenses by 0.15% to 1.79%, 1.54% and 1.39% for the 361 Global Long/Short Equity Fund’s Investor Class, Class I and Class Y shares, respectively.

Effective February 28, 2018, Calamos is going to eliminate the no-load “R” share class for all of its funds. Current “R” shareholders will be transitioned into “A” shares, with the proviso that they will not have to pay the normal “A” share sales load. Given that Calamos “A” shares are typically costly but the “R” shares are noticeably more costly than “A”, it’s a small win.

The Disciplined Growth Investors Fund (DGIFX) is a small, five-star fund that’s normally around 70% domestic equities and 30% bonds or cash. They’ve got low expenses and good risk management; it has pretty much clobbered its Lipper “moderate allocation” peer group since inception. DGIFX has returned 12.4% annually against 7.7% for its peers.  Likewise with its Morningstar “aggressive allocation” peer group.  The fund normally imposes a $10,000 minimum. That’s now been modified to reduce the minimum to “$100 if an automatic monthly investment is established with monthly contributions of at least $100 until the account balance reaches $10,000, and the shareholder agrees to e-delivery of account statements and transaction confirmations.”

Effective immediately after 4:00 pm Eastern Time on January 2, 2018, the Driehaus International Small Cap Growth Fund (DRIOX) will reopen to new investors. The Fund has been closed to most new investors since December 29, 2010. It’s had a very solid run (13.3% annually over the past five years, about 1.8% ahead of its peers) but, like all Driehaus funds, tends to be volatile and costly.

The FX Strategy Fund (FXFAX and FXFIX) has converted their “A” shares into low minimum, no-load “I” shares. That spares shareholders the 5.75% sales charge but, in an unusual arrangement, the “I” shares carry a 0.25% marketing fee while the “A” shares did not. Up until now, the adviser has chosen not to impose the 12(b)1 fee. It looks like that will change and “Class I shares [will] charge a 0.25% Rule 12b-1 Distribution and Shareholder Services fee.”

“Effective December 6, 2017, Vanguard Emerging Markets Bond Fund (VEMBX) will be available for investment.” I admit that I have no idea what that sentence means. The fund has been around since 2016 and returned 13.35% in 2017. But it has only $32 million in investments and, for most of 2017, has been tagged as “not available for purchase.” Which has now changed, it seems.

CLOSINGS (and related inconveniences)

Effective as of the close of business on December 29, 2017, Infinity Q Diversified Alpha Fund (IQDAX) imposes the hardest close on record: it “is closed to all new investment, including through dividend reinvestment, and the Infinity Q Fund’s transfer agent will not accept orders for purchases of shares of the Infinity Q Fund from either current Infinity Q Fund shareholders or new investors.” It’s a multi-alternative hedged fund, under $200 million in assets, five-star rating with a Great Owl designation. The GO signals consistently top-tier risk-adjusted performance against its Lipper Multi-Alternative Strategy peers.


The focus of “Old Wine, New Bottles” is funds that change their names, generally without changing their nature. That is, there’s no corresponding change in mandate. As it turns out, name changes that don’t reflect fundamental management changes – called “superficial name changes” – should be a red flag for investors. Three scholars recently published a study of 6000 such changes. They conclude:

We study how investors respond to ‘superficial’ mutual-fund name changes that occur for no fundamental reasons. We find that such name changes remain widespread [and] are more widespread than previously studied ‘misleading’ changes. Superficial changes appear to be driven by managerial incentives. Investors react to superficial changes with increased fund flows but appear to gain no benefit through improved performance or lower fees. On the contrary, name-change funds underperform as a group. (Susanne Espenlaub, Imtiaz ul Haq and Arif Khurshed, “It’s all in the name: Mutual fund name changes after SEC Rule 35d-1,” Journal of Banking and Finance, July 2017)

By their estimation, 60% of all name changes are marketing gimmicks: sinking funds making desperate attempts to appear trendy, hot, cool, cutting edge or relevant. 20% of name changes occur in funds that have repeatedly renamed themselves. Many changes, City National Rochdale Emerging Markets (RIMIX) fund’s renaming pursuant to new ownership, are pretty valid. Others, for example those stapling “opportunity,” “contrarian” or “dynamic” to their names, are often admissions of failure.

Resist temptation! If there’s no good reason for a name change, then there’s almost certainly a bad reason for it.

As of April 1, 2018, Advisory Research Global Value Fund (ADVWX) becomes Advisory Research Global Dividend Fund.

City National Rochdale Emerging Markets Fund (RIMIX) is becoming Fiera Capital Emerging Markets Fund, with the same management team and mandate. The sale of the fund closed on December 1, 2017 with the team accepting contracts from Fiera. It’s a singularly worthwhile fund. MFO ranks it as a “Great Owl” fund for posting peer-beating risk-adjusted returns in each trailing period we measure. Since inception in 2012, the fund has outperformed its peers by 8.2% annually: 14.2% versus 6.0% with lower downsides by every measure we follow.

Effective on or about February 28, 2018 Columbia Diversified Equity Income Fund (INDZX) becomes Columbia Large Cap Value Fund, Columbia European Equity Fund (AXEAX) becomes Columbia Contrarian Europe Fund and Columbia Asia Pacific ex-Japan (CAJAX) becomes Columbia Contrarian Asia Pacific Fund. “Contrarian” certainly qualifies for the “chic name” label.

Effective February 28, 2018, the Congress All Cap Opportunity Fund (CACOX) will change its name to Congress SMid Core Opportunity Fund.

First Trust Low Beta Income ETF (FTLB) name is changed to First Trust Hedged BuyWrite Income ETF. First Trust High Income ETF (FTHI) name is changed to First Trust BuyWrite Income ETF.

Effective February 28, 2018, MacKay gets the credit. Nineteen of the MainStay funds add “MacKay” to their names. MacKay Shields is a fixed-income specialist affiliated with New York Life Investments, the firm behind Mainstay. No hint about why MacKay is getting hold of the eight equity-oriented funds in this list.

Current Name New Name
MainStay California Tax Free Opportunities MainStay MacKay California Tax Free Opportunities
MainStay Common Stock MainStay MacKay Common Stock
MainStay Convertible MainStay MacKay Convertible
MainStay Cornerstone Growth MainStay MacKay Growth
MainStay Emerging Markets Debt MainStay MacKay Emerging Markets Debt
MainStay Emerging Markets Equity MainStay MacKay Emerging Markets Equity
MainStay Government MainStay MacKay Government
MainStay High Yield Corporate Bond MainStay MacKay High Yield Corporate Bond
MainStay High Yield Municipal Bond MainStay MacKay High Yield Municipal Bond
MainStay International Equity MainStay MacKay International Equity
MainStay International Opportunities MainStay MacKay International Opportunities
MainStay New York Tax Free Opportunities MainStay MacKay New York Tax Free Opportunities
MainStay S&P 500 Index MainStay MacKay S&P 500 Index
MainStay Short Duration High Yield MainStay MacKay Short Duration High Yield
MainStay Tax Advantaged Short Term Bond MainStay MacKay Tax Advantaged Short Term Bond
MainStay Tax Free Bond MainStay MacKay Tax Free Bond
MainStay Total Return Bond MainStay MacKay Total Return Bond
MainStay U.S. Equity Opportunities MainStay MacKay U.S. Equity Opportunities
MainStay Unconstrained Bond MainStay MacKay Unconstrained Bond

Effective December 20, 2017, UBS Emerging Markets Equity Fund became UBS Emerging Markets Equity Opportunity Fund. That, UBS avers, better aligns with the fund’s strategy. You’ll have to imagine me rolling my eyes at that argument since I can’t imagine any strategy which couldn’t claim “opportunity” as an element.


On December 21, 2017, Alpine Woods Capital Investors, LLC agreed to sell four of their funds to Aberdeen Asset Managers, Ltd. The sale requires formal, if pro forma, approval by the boards of trustees and shareholders. Assuming that, the transfer will occur in the second quarter of 2018. The funds involved are Alpine Realty Income & Growth Fund (AIAGX), Alpine Global Infrastructure Fund (AIAFX), Alpine International Real Estate Equity Fund (EGALX) and Alpine Dynamic Dividend Fund (ADAVX). I am modestly confused about the fact that they list four open-end funds (and discuss Aberdeen’s record with OEFs) but then make the proviso that the agreement requires “the approval of a change in the advisory arrangements of the Alpine-advised closed-end funds.”

A harsher fate awaits Alpine Financial Services (ADAFX) and Alpine Small Cap Fund (ADIAX), both of which will be liquidated on February 14, 2018.

Ashmore Emerging Markets Equity Opportunities Fund (AEOAX), a one year old fund of Ashmore funds, will liquidate on or about January 4, 2018. In general, I think you should avoid firms that close funds within a year or two of launch; it seems to speak to fundamental problems with their business judgment and commitment to their investors.

The Baird LargeCap Fund (BHGSX), a tiny multi-cap fund with decent performance, was liquidated on December 28, 2017.

Carillon, which recently bought the Scout funds, is beginning a housecleaning. Carillon Eagle Smaller Company Fund is being reorganized into Carillon Scout Small Cap Fund (UMBHX); and Carillon Eagle Mid Cap Stock Fund is merging with Carillon Eagle Mid Cap Growth Fund (HAGIX), effective on or about July 13, 2018. Scout is taking over management of the Smaller Company Fund. In addition, Carillon is liquidating Carillon Eagle Investment Grade Bond Fund (EGBAX) and the Carillon Reams Low Duration Bond Fund (SCLDX) on or about February 28, 2018.

In May 2018, Eaton Vance Global Small-Cap Fund (EAVSX) will merge into Eaton Vance Tax-Managed Global Small-Cap Fund (ESVAX), except that by then it won’t be called Tax-Managed Global Small-Cap Fund, it will be called Global Small-Cap Equity Fund andwill no longer be required to employ tax-management techniques or seek after-tax returns.”

Estabrook Investment Grade Fixed Income Fund (EEFAX) will liquidate on January 31, 2018. The fund ends its life with one star and under $500,000 in assets … not one penny of which came from any of its five managers or five trustees.

The $485 million Fidelity Global Balanced Fund (FGBLX) is slated to merge with Fidelity Asset Manager 60% (FSANX) on April 20, 2018. Hmmm … FGBLX shareholders can think of themselves as moving into Fidelity Slightly Less Global Balanced Fund since FSANX devoted 20% of its portfolio to international equities where FGBLX has 30%. FSANX has lower expenses and a modestly better long-term record, boosted by the strong US market of the past three years.

Footprints Discover Value Fund (DAVAX) liquidated on December 29, 2017. Yuh. Footprints is in blue on the chart below.

Frost Conservative Allocation, Moderate Allocation and Aggressive Allocation funds all liquidated on December 22, 2017.

The two year old, $12 million HSBC Global Equity Volatility Focused Fund (HGEAX) will be liquidated on or before January 31, 2018.

 iShares Edge MSCI Min Vol Global Currency Hedged ETF (HACV) continues to hang in the balance. In mid-November they received a regulatory notice threatening them with delisting by their exchange because they had fewer than 50 shareholders. A 12/29/2017 follow-up filing claims that they are in compliance and eligible for continued listing but just in case …

Janus’s Board of Trustees approved a plan to liquidate and terminate Janus Henderson Real Return Fund (JURAX) with such liquidation (and termination!) effective on or about March 2, 2018.

As of January 20, 2017, Kellner Event Fund (KEFAX) had completed its liquidation and returned capital to its investors.

Lyrical U.S. Hedged Value Fund (LYRDX) will discontinue its operations effective January 29, 2018.

On or about the close of business on April 27, 2018, the three star Russell U.S. Large Cap Equity Fund (RLCZX) will merge into the five-star Russell Multifactor U.S. Equity Fund (RTDSX) which, by happy coincidence, is a U.S. large cap equity fund. The acquiring fund also sports a substantially lower expense ratio, so this looks like a pretty clean win for investors.

TCW High Dividend Equities Fund (TGDEX) will be liquidated on or about January 25, 2018.

Templeton Institutional Emerging Markets (TEEMX) will cease to be an institution, emerging or otherwise, on March 16, 2018.

Third Avenue International Value Fund (TAVIX) is slated to merge into Third Avenue Value Fund (TAVFX). Among the enumerated reasons for the change are (1) they’re both global funds with similar styles, (2) a single fund with a larger asset base will allow them to spread expenses over a larger number of accounts; in sum “the combined fund would have improved commercial prospects and asset growth potential.” Absent from that assessment is the fact that both funds have trailed 88% of their Morningstar peers over the past three years; the five year numbers are no better and the firm is in turmoil.

The TIAA-CREF Global Natural Resources Fund (TNRLX) will be liquidated after the close of business on April 13, 2018.

Templeton Foreign Smaller Companies Fund (FINEX) will merge into Templeton Global Smaller Companies Fund on or about June 1, 2018.

The Board of Trustees of Victory Portfolios has approved a Plan of Liquidation for the Victory Expedition Emerging Markets Small Cap Fund (VAEMX). It is anticipated that the Fund will liquidate on or about February 27, 2018. 

On November 15, 2017, the Board of Trustees of Waddell & Reed Advisors (WRA, in the table below) authorizes reorganization of their funds into corresponding Ivy funds. All of the WRA funds have closed to new investors in anticipation of the move. The reorganization is expected to close on or about February 26, 2018, and does not require shareholder approval.

Equity Funds  
WRA Accumulative Ivy Accumulative
WRA New Concepts Ivy Mid Cap Growth
WRA Small Cap Ivy Small Cap Growth
WRA Vanguard Ivy Large Cap Growth
WRA Global Growth Ivy Global Growth
WRA Continental Income Ivy Balanced
WRA Science and Technology Ivy Science and Technology
WRA Wilshire Global Allocation Ivy Wilshire Global Allocation
Fixed Income Funds  
WRA High Income Ivy High Income
WRA Municipal High Income Ivy Municipal High Income
Money Market  
WRA Cash Management Ivy Cash Management

The adviser to the WBI funds has (correctly) concluded that based on their current asset level, the funds are no longer sustainable. WBI Tactical BP Fund (WBPNX), WBI Tactical DG Fund (WBIDX) and WBI Tactical BA Fund (WBADX) will be euthanized on January 26, 2018. The obscure letter designations appear to be Wealth Builders Inc., Dividend Growth and Balanced. No clue on the meaning of BP.

Xtrackers MSCI Emerging Markets High Dividend Yield Hedged Equity ETF (HDEE) and Xtrackers MSCI Eurozone High Dividend Yield Hedged Equity ETF (HDEZ) closed on December 18 and liquidated on December 29.