November 2018 IssueLong scroll reading

Briefly Noted

By David Snowball

Each month we round up the bits and pieces of industry news, from name changes to fund liquidations, that strike us as consequential but not consequential enough to warrant a stand-alone story. Perhaps distracted by the market’s recent turmoil, advisers have authorized far fewer changes this month than in most over the past five years.


On October 18, 2018, the HFM US Hedge Fund Performance Awards conference presented its ’40 Act Equity Fund of the Year award to Cognios Market Neutral Large Cap Fund (COGMX). Cognios reports:

The HFM U.S. Performance Awards are judged by a panel of leading institutional and private investors and investment consultants who make their decisions based on both quantitative and qualitative factors. Quantitative measures include returns and risk-adjusted performance of the fund over the last 12 months ending June 2018, potentially reviewing performance over a longer time period as well. Manager pedigree and firm reputation with investors was also a consideration of the judges. Cost was not a factor in the selection process.

The award is warranted. MFO has both profiled the fund and recognized that it’s virtually the only market neutral fund worth considering if your two criteria are (1) actually being market neutral and (2) outperforming 60/40 funds over time (“Nowhere to Run To,” 10/2018).

The Cook and Bynum Fund (COBYX) is, for the first time in a decade, fully invested. They announced the position in the Q3 investor letter. That reflects their ability to finally find investors with an acceptable, if not immense, margin of safety.

While some of the individual positions have a larger margin of safety than others, the Fund’s portfolio is in aggregate more attractively priced than it has been in several years. Since the Fund is almost fully invested, we now compare our expected return from a new investment with the opportunity cost of our expected return from one of our existing positions – rather than comparing it to holding cash. We are delighted to face this higher hurdle.

The fund, which has had a 30-50% cash stake for the past five years as equities priced themselves outside the managers’ comfort zone (and, they’d argued, outside the bounds of rationality), has paid dearly for its absolute value discipline. Its equity holdings have performed quite well and its investors have largely remained loyal, but its relative performance ranking is now in the 100th percentile for the past 1, 3, and 5 year periods (per Morningstar, 11/1/18). It might well be that the return of volatility is a prelude to the return of more normal valuations, in which case we’d expect a dramatic pickup in performance.

David M. Poppe has announced that he plans to retire from Ruane, Cunniff & Goldfarb L.P., effective December 31, 2018. That removes him from a position of responsibility for the one-star Sequoia Fund (SEQUX). Who ever would have imagined seeing these performance numbers for Sequoia?

Three year Five year Ten year Fifteen year
99th percentile 99th percentile 96th percentile 87th percentile

Hmmm … maybe Magellan investors in the Age of Stansky?

Briefly Noted . . .

For folks interested in learning more about ways to profitably use the MFO Premium screener, Charles Bolin wrote a nice piece in Seeking Alpha entitled “The Great Owl Portfolio” (10/21/2018). He combined our Great Owl funds list, which have by definition been bear-resistant funds, with the Portfolio Visualizer to create what he believes to be an optimized portfolio. (You may need to register for Seeking Alpha to read past the first screen.)

Trump wins: In this month’s SEC filings, I came across a bunch of nearly-identical announcements. “All references to Class T shares in each statement of additional information are hereby deleted.” “Class T shares” were the so-called “clean shares,” championed as part of the former Obama administration’s fiduciary rule governing retirement plans. Mr. Trump’s administration opposed the rule on principle and revoked it.


On October 15, 2018, Artisan International Small Cap Fund (ARTJXX) re-opened to new investors under new management with a new name. Mark Yockey has managed the fund since inception (2001) while Charles-Henri Hamker has co-managed since 2002. They will be replaced by Rezo Kanovich. Mr. Kanovich and his analyst team, all of whom resigned on rather short notice, have guided Oppenheimer International Small-Mid Company (OSMAX) since early 2012. In parallel, the fund will be rechristened Artisan International Small-Mid Fund. OSMAX is a closed, five-star fund. Shareholders should expect substantial portfolio turnover, with a potentially large tax hit. The OSMAX portfolio is substantially more Asia-focused than Artisan’s current one, it has a substantially higher stake in large cap stocks and higher overall market cap, and it typically holds about three times as many names in its portfolio.

There was a spirited discussion about the change on our discussion board. Some expressed the opinion that the Artisan brand is not so sterling as it once was, while others noted the steadily rising charge for Mr. Kanovich’s services. “msf,” for example, pondered a question that Ed Studzinski raises frequently.

Unfortunately, Kanovich’s fund keeps getting more expensive. OSMAX charged 1.2% in 2015. Oppenheimer then closed the fund in 2016 and raised its ER to 1.3% (the increase came entirely from a higher management fee). Then in 2017 the ER went up to 1.4%.

Now in 2018 Kanovich is moving to a fund with an ER approaching 1.6%. His returns have been great, but at what point does one say “enough”?

Effective October 1, 2018, the Loomis Sayles Small Cap Growth Fund reopened to new investors.

CLOSINGS (and related inconveniences)

Great-West SecureFoundation Balanced ETF Fund (SFBPX) will close to new investors on December 14, 2018. With $38 million in assets and a securely middling record, I suspect that the closing isn’t to protect existing investors from the flood of new money.

Effective as of the close of business on October 5, 2018, Service Class shares of Royce Micro-Cap Opportunity Fund (RMCFX) are closed to all purchases and exchanges. On that same date, the W Class shares of Royce Premier Fund and Royce Total Return Fund closed


On December 16, 2018, Angel Oak Flexible Income Fund (ANFLX) becomes Angel Oak Financials Income Fund. The fund’s principal investment strategy will be to invest in “debt issued by financial institutions.”

Okay, here’s the text direct from a recent SEC filing: “Columbia Select Large-Cap Value Fund and Columbia Select Smaller Cap Value Fund changed their names to Columbia Select Large Cap Value and Columbia Select Small Cap Value Fund, respectively, and all references to Columbia Select Large-Cap Value Fund and Columbia Select Smaller Cap Value Fund are hereby changed accordingly. In addition, all references to Columbia Mid Cap Value Fund are changed to Columbia Select Mid Cap Value Fund.” I got the “small” to “smaller” change and the not-so-select to “select” change. I can’t discern any change in the Select LCV name and if, indeed, “all references” to it have been changed to an identical name, would I know?

On or around December 24, 2018 (fa-la-la-la-la), iShares North American Tech ETF (IGM) becomes iShares Expanded Tech Sector ETF. The expansion is not “beyond North America,” by the way. The expansion is that the fund will also invest in “select North American equities from communication services and consumer discretionary sectors.”

Effective November 8, 2018, the name of Neuberger Berman Risk Balanced Commodity Strategy Fund (NRBAX) will change to Neuberger Berman Commodity Strategy Fund

The Oak Ridge Funds are in the process of becoming the North Square Funds, pending shareholder approval. In an act of, I don’t know, corporate whimsy, “Oak Ridge” disappears from the names of half the funds and remains buried in the names of the other half.

Oak Ridge Disciplined Growth North Square Oak Ridge Disciplined Growth
Oak Ridge Dividend Growth North Square Oak Ridge Dividend Growth
Oak Ridge Dynamic Small Cap North Square Dynamic Small Cap
Oak Ridge International Small Cap North Square International Small Cap
Oak Ridge Multi Strategy North Square Multi Strategy
Oak Ridge Small Cap Growth North Square Oak Ridge Small Cap Growth
Oak Ridge Global Resources & Infrastructure North Square Global Resources & Infrastructure

On March 1, 2019, RQSI Small Cap Hedged Equity Fund (RQSAX) becomes RQSI Small/Mid Cap Hedged Equity Fund.

Spouting Rock/Convex Global Dynamic Risk Fund (CVXAX) is being rechristened with the less portentious name Spouting Rock Small Cap Growth Fund. It goes from a tactical allocation fund seeking “positive absolute returns” to a small cap growth fund seeking long-term capital appreciation. Since 90% of the current portfolio is held in mid- to mega-cap stocks, its few investors might anticipate almighty turnover between now and year’s end.


We know that investors, over time and especially in times of crisis, have shown consistently poor and remarkably poor judgment in which funds they choose to abandon, and when. It turns out that fund advisors fall victim to the same bad habit: they liquidate funds just before the category is poised for a rebound. John Rekenthaler reviewed the academic research on the question (“3 Academics Take Active Managers’ Side,” 10/23/2018), concluding:

Not only do fund investors mistime their purchases and sales, but fund sponsors also do. They launch funds when those investment styles are fashionable, then shut them down when they are unpopular and due to rebound. That pleases me; stupidity likes company.

That ought to give readers pause, as they note the rampant liquidations among absolute return, hedged and value funds in the past year. Tick, tick, tick.

Northern’s Active M U.S. Equity Fund was liquidated and terminated on October 19, 2018. 

ALPS/Metis Global Micro Cap Value Fund (METAX) left this vale of tears on October 30, 2018.

American Beacon Flexible Bond Fund is merging into American Beacon TwentyFour Strategic Income (TFGPX) on November 16, 2018. Since the change does not require shareholder approval, American Beacon gave the TGFPX management team responsibility for the Flexible Bond portfolio starting in August.

Anchor Tactical Real Estate Fund (ARESX) will close, cease operations and redeem all outstanding shares on November 7, 2018.

Catalyst Insider Long/Short Fund (CIAAX) will liquidate on November 30, 2018.

Cboe Vest Alternative Income Fund (VDDLX) slipped into the crypt on Halloween.

Columbia Absolute Return Currency and Income Fund and Columbia Diversified Absolute Return Fund were both liquidated in October.

The Heartland International Value Fund (HINVX) was liquidated effective October 26, 2018.

Manning & Napier Global Fixed Income Series (MNGSX) and Ohio Tax Exempt Series will close on November 16, 2018 as part of the process of unwinding their portfolios and liquidating.

Rational Risk Managed Emerging Markets Fund (HGSAX) has been closed to new investments and will be liquidated on November 30, 2018.

Redwood AlphaFactor Core Equity Fund (RWANX) was liquidated and dissolved on October 30, 2018.

Snow Capital Focused Value Fund (SFOAX) and Snow Capital Equity Income Fund (SDPAX) both melt away on October 26, 2018.

Virtus Conservative Allocation Strategy Fund (SVCAX) and Virtus Growth Allocation Strategy Fund (SGIAX) will become dis-allocated on November 13, 2018.

This entry was posted in Briefly Noted, Mutual Fund Commentary on by .

About David Snowball

David Snowball, PhD (Massachusetts). Cofounder, lead writer. David is a Professor of Communication Studies at Augustana College, Rock Island, Illinois, a nationally-recognized college of the liberal arts and sciences, founded in 1860. For a quarter century, David competed in academic debate and coached college debate teams to over 1500 individual victories and 50 tournament championships. When he retired from that research-intensive endeavor, his interest turned to researching fund investing and fund communication strategies. He served as the closing moderator of Brill’s Mutual Funds Interactive (a Forbes “Best of the Web” site), was the Senior Fund Analyst at FundAlarm and author of over 120 fund profiles. David lives in Davenport, Iowa, and spends an amazing amount of time ferrying his son, Will, to baseball tryouts, baseball lessons, baseball practices, baseball games … and social gatherings with young ladies who seem unnervingly interested in him.