Monthly Archives: June 2018

June 1, 2018

By David Snowball

Dear friends,

Stand back!

Be ready!

Augustana just launched another flight of cheerful, broadly-educated graduates in your direction. Don’t worry too much: it’s the 158th time we’ve done it.

They’re good kids, smart, ambitious, generous and worldly in ways I surely was not. On several occasions they’ve set aside their cellphones and, on many, they listened. I taught a fair number of them, but wish that I’d had more of a chance just to talk with them.

Our commencement speaker withdrew, for reasons both valid and sad, at the last minute. Our president tried valiantly to fill in for her but, well, he’s trained as an accountant and a lawyer; his celebratory oratory sounds a lot like what you’d hear from a lawyerly accountant. As he spoke, I drifted and imagined what I might say had I been pressed into service.

Hi, guys!

You made it.

We knew you could. We watched you grow.

And, we must watch you go. It’s our fate.

Your fate is to enter a world sorely tested, if not quite broken. It’s a parlous place. One by one, civilized nations have surrendered to leadership the like of which we haven’t seen since the desperate years of the Great Depression.  We’ve somehow convinced ourselves that the one valid response to ideas you don’t like is loathing the people who hold them. The safety of two dozen schools has been shattered by gunfire already this year. Our green home is wrought with increasingly violent weather that the fools deny and the humble say, “but what can you do?”

I am a historian by training, an optimist by nature and a conservative by inclination. Together, those lead me to share two happier thoughts with you. First, it has always been so. Any reasonably vigilant person, at any point in the past 3000 years, could easily surrender to the impulse to declare, “it was the worst of times, it was the worst of times.” Rampaging dinosaurs, rampaging Huns, rampaging Vikings, the Black Death, the 40,000,000 deaths in the 1918 influenza epidemic, Hitler, Stalin, Mao, the designated hitter rule … the world always seems one small step from the abyss. Second, you have more allies than you can imagine. It is our nature to notice the noisy few who would divide us, the shriekers spewing their vitriol. It is rather harder to notice the rest of us. We are not nearly as sure of anything as they are of everything but still we try to do right. We welcome our neighbors, more than fear them. We know the climate is changing, look for ways to be good stewards of the land, and good members of the community. We agree on a surprising lot of things – the protection of Dreamers, the value of immigration, the rejection of extremism, respect for all people – but somehow we don’t get around to comparing our views. We’re puzzled by some of our friends’ weird beliefs, but we have them over for hot dogs and beer anyway.

And now, it’s time for you to go.

Go happily, for you are loved.

Go bravely, you carry our hopes with you.

Go boldly, you carry the future of us all with you.

At the very least, it’s just 394 words long. A commencement speech, done in under four minutes. I rock!

Thanks, as ever, for your support.

I’d like to urge you to consider a tax-deductible contribution of the Observer. If you choose to contribute $100 or more, you’ll gain access to MFO Premium. That does two things: (1) it keeps the lights on here and (2) it gives you access to about $10,000 worth of tools and data. You can contribute either through PayPal (that’s the link over on the right side of this page) or you can go directly to MFO Premium. If you’d like to gain MFO Premium access, please use the MFO Premium link rather than PayPal. The reason’s simple: the process of getting you access to MFO Premium is much swifter and more automated if you use that link. Either way works, but there’s a bit more delay if things work through PayPal then we need to manually set up an account.

So, thanks!

Thanks, as ever, to The Shadow for his ceaseless review of the SEC’s entrails. By way of example, here’s the list of fund developments he highlighted from just the past week’s SEC filings.

That’s an amazing service and invaluable resource.

Thanks to the good-spirited crew on the discussion board, and to the folks who’ve joined the board just this month: dczaplicki, DavidK44, Jimbo, Bobby, young, john N, rabockma1 and georgelively. I hope your stay is a good one.

Take care! Track us down at Morningstar if you’re able, peer in at the mid-conference posts on the discussion board if you’re not. Regardless, we’ll be back soon.

Active Value versus Indexation – Godzilla versus the Smog Monster

By Edward A. Studzinski

The surest way to corrupt a youth is to instruct him to hold in higher esteem those who think alike than those who think differently.


Some years back my colleague Clyde McGregor and I used to have philosophical discussions about the market positioning of our fund, the Oakmark Equity and Income Fund (OAKBX), vis-à-vis our competitors. And while some of our focus was on fees, most of the discussions would center on either security selection or, alternatively, asset allocation. Neither one of us had any interest in pretending to be active managers while running a closet index fund. That was a relatively easy hurdle to clear, as the equity portfolio was built from the bottom up by selecting the most undervalued securities. That might and did on occasion result in portfolios that looked nothing like any of our competitors. If valuation led to us owning five aerospace and defense names, or three real estate operating companies, so be it. And we were not averse to owning large positions relative to the outstanding float of the capitalization of a company. Illiquidity for us was an opportunity, which we were able to take advantage of by having a large fixed income portfolio of extremely liquid government securities. And lastly, the consultants and intermediaries (are they the real clients) had not as yet become such a potent influence in tangentially impacting both marketing and investment decisions as they appear to today.

Oakmark Equity and Income (blue) and its peers, in The Age of Ed (and Clyde)

Put succinctly, I would be hard-pressed to achieve the kind of performance record that we did in those days. Another of my former colleagues put it somewhat differently to me this week. The quantitative inputs into security selection are better than they ever have been, but that has not necessarily led to better qualitative decisions and performance. Outperforming a benchmark or index has become increasingly difficult, perhaps more difficult than anticipated even just a few years ago.

But what really has changed? Well, one thing that has changed has been the shift of assets from active management into passive, in effect locking up large portions of the market into portfolios that generally do not move about. So should Clyde and most other active managers today, especially in the value camp, go out and slit their wrists? Probably not.

I commend to you all a talk given by Steven Bregman of Horizon Kinetics entitled “Active Value Managers, Stay the Course!” (click on the “download the PowerPoint” link). Bregman raises the question as to whether over the last several years, given the underperformance of most value managers (and he includes data for nine of them), the active value manager is the anomaly. OR, is it the market, namely the S&P 500. He makes the point that, based on the 10-year average earnings measure, in May 2018 the S&P 500 trades at 33X earnings, which has been exceeded only one time before, in 2000 at the Internet Bubble peak. Bregman also makes the point that for the first time in 50 years stock and bond yields are converging. Artificially low interest rates (thank you, Janet Yellen) have pushed people to seek yield (income) at any cost, without truly understanding the risk they are taking on. To compare valuations and, by extension risks, on stocks to those on bonds, you would divide 1 by the percentage yield. So, a 3% yield on a real estate investment trust (REIT) index is equal to 1 divided by 0.03 or a p/e of 33X. And in a table, Bregman compares a number of fixed income investments, such as the Netflix B1 9-year note yielding 5.3% as opposed to the KazMunay Gaz 9-year note in Kazakhstan yielding 5%. What is the risky investment for which you are truly being compensated?

This is however not the meat of the presentation (nor the scariest part). Arguably, people would buy the iShares U.S. Energy ETF for diversification, and to avoid manager risk. Yet in seeking what they thought was diversification, investors (and/or advisors) have taken on more risk, since the top four holdings (Exxon, Chevron, Schlumberger, and ConocoPhillips) in that ETF are 48.5% of the fund.

ExxonMobil is one of the most liquid stocks out there. Indeed, as of the time Bregman prepared his talk, XOM could be found in 206 ETF’s. You could find it in Low Beta portfolios, Low Volatility portfolios, momentum portfolios, value portfolios, quality portfolios, strategic portfolios, or as the line goes in “The King and I” – etc., etc., etc.

An underappreciated corollary of all of this – in search of diversification, investment moneys have been channeled into the most liquid of securities. Bregman’s conclusion is that this alters correlation statistics as well as risk statistics. Bregman believes that the returns smooth out over time. Differences in returns on ETF’s are the result of differences in starting dates for a fund or ETF, rather than in the nature and differences in the company components going into the fund.

Bregman would say that the price discovery mechanism has been eliminated (what I would call the market inefficiencies in discovering an undervalued equity situation). Specifically, “The result of indexation over the long term is that large cap liquid shares, and even small cap liquid shares, especially those that pay substantive dividends, primarily reflect central bank policies, rather than fundamental business conditions, even over the long term.” Bregman then goes on to highlight the problem of the “automatic bid” in basket case investing by contrasting the Coca Cola of 1975 at 18.3X earnings and 21.95% eps growth versus the Coca Cola of 2015 at 20.98X earnings and a growth rate of -1.96% eps and -3.81% in revenues.

So how to keep from becoming a lemming? What’s the solution to avoid going off the cliff? Small capitalization stocks (less than $2B market cap) used to be an alternative, but at only 4.6% of the total market, they are not an investable alternative for institutions. Likewise, real estate in the U.S. should also be an alternative, but with publicly-traded real estate near all-time highs, at roughly 4% of the stock market, it is not an investable option either.

Step away from things that can be indexed, which means step away from highly liquid assets.

If you want to outperform the index, your investing must take place away from indexation. One must be prepared to be in the small minority of those thinking outside the box. Said differently, trading liquidity now drives the stock selection process. And there is a direct correlation between liquidity, demand, and resulting valuation. And a willingness to take on more illiquidity can give you access to more undervaluation and hence optionality. Alternatively, if you are happy with equity returns as represented by a particular index or set of indices, invest accordingly and, given a sufficient time-horizon, leave your investments on auto-pilot.

I strongly recommend that you spend some time on the Horizon Kinetics website. Make your way through their presentations and talks. They also have a series of mutual funds – read the annual and semi-annual reports and see how they execute their strategies. Besides the Steven Bregman talk I refer to above, I also commend to you Murray Stahl’s presentation/talk to the CFA Society of New York at their Peak Passive Conference entitled “The Hidden Costs of Passive Investing.”

There are those of you who will be skeptical about this approach involving illiquidity and the difficulties in replication. For a live example, I suggest you also go to the American Association of Individual Investors and look at the historical data surrounding their Shadow Stock Portfolio.

Centaur Total Return Fund (TILDX), June 2018

By David Snowball

This profile is no longer valid and remains purely for historical reasons. The fund has a new manager and a new strategy.


The fund seeks “maximum total return” through a combination of capital appreciation and income. The fund invests in undervalued securities, mostly mid- to large-cap dividend paying stocks. The manager has the option of investing in REITs, master limited partnerships, royalty trusts, preferred shares, convertibles, bonds and cash. The manager invests in companies “that he understands well.” The manager also generates income by selling covered calls on some of his stocks. As of February 28, 2018, the fund held 21 different investments, which included 15 common stock positions, three covered calls, and three closed end funds. Cash was just over 60% of the fund’s AUM at the end of 2017, and is down a bit by mid-2018.


Centaur Capital Partners, L.P., headquartered in Southlake, TX, has been the investment advisor for the fund since September 3, 2013. The fund was originally launched as the Tilson Dividend Fund in March 2005. Until September 2013, T2 Partners provided branding and marketing for the fund in its role as advisor and Centaur Capital managed the portfolio investments in its role as the sub-advisor to the fund. When T2 Partners closed its mutual fund advisory business in 2013, Centaur Capital became the advisor to the fund and changed the name to the Centaur Total Return Fund. Centaur is a three person shop with about $100 million in AUM. It also advises the Centaur Value Fund LP.


Zeke Ashton, founder, managing partner, and a portfolio manager of Centaur Capital Partners L.P., has managed the fund since inception. Before founding Centaur in 2002, he spent three years working for The Motley Fool where he developed and produced investing seminars, subscription investing newsletters and stock research reports in addition to writing online investing articles. He graduated from Austin College, a good liberal arts college, in 1995 with degrees in Economics and German.

Management’s Stake in the Fund

Mr. Ashton has over $1,000,000 invested in the fund. The fund’s two trustees both have a modest investment in it.

Strategy capacity

That’s dependent on market conditions. Mr. Ashton speculates that he could have quickly and profitably deployed $25 billion in March, 2009.

Opening date

March 16, 2005

Minimum investment

$1,500 for regular and tax-advantaged accounts, reduced to $1000 for accounts with an automatic investing plan.

Expense ratio

1.95% after waivers on an asset base of $25 million.


You’d think that a fund that had squashed the S&P 500 over the course of the current market cycle, and had done so with vastly less risk, would be swamped with potential investors. Indeed, you’d even hope so.

Comparison of Full Cycle 5 Performance (200711 – 201804, 126 months)

Here’s how to read that chart: over the course of the full market cycle that began in October 2007, Centaur has outperformed its peers and the S&P 500 by 1.9 and 0.7 percent annually, respectively. In normal times, it’s about 20% less volatile while in bear market months it’s about 25% less volatile. In the worst-case – the 2007-09 meltdown – it lost 34% less than the S&P and recovered 30 months sooner.

It’s impressive that Morningstar designates it as a five star fund, with a history of always being a four- or five-star fund. It’s more impressive that Morningstar’s new “machine learning” algorithm has awarded it a Silver analyst rating with “positive” scores for everything except price.

It’s exceptionally impressive that, over the course of the current market cycle, it’s one of the top four funds in its 86 fund Lipper peer group in pretty much every measure of risk and risk-adjusted performance: maximum drawdown (2nd), recovery period from its maximum drawdown (1st), Ulcer Index (2nd), Sharpe ratio (4th), Martin ratio (3rd), downside deviation (3rd), bear market deviation (3rd) and so on.

And you’d be disappointed. Centaur, with a spotless 13-year record, ranks 84th of 86 funds when measured by assets under management.

Centaur Total Return has evolved over time. It originally presented itself as an income-oriented equity fund, which is reflected in Lipper’s assignment to the Equity Income peer group. The argument for that orientation is simple: income stabilizes returns in bad times and adds to them in good. The manager imagines two sources of income: (1) dividends paid by the companies whose stock they own and (2) fees generated by selling covered calls on portfolio investments. Mr. Ashton reports that “the Fund’s strategy has become less income-oriented over time as our ability to sell covered calls for acceptable premiums has declined with lower market volatility over the years; in the last couple of years, we have purchased far more options than we’ve sold. Also, the number of stocks that meet our criteria for dividend securities has eroded due to the popularity of dividend-related strategies. As a result, the fund has become more capital gain oriented, though we try to position the portfolio to remain true to the underlying goals that we had hoped to achieve with the fund’s formative income-emphasis: lower volatility, better reliability, etc.” 

The core of the portfolio is a limited number (currently about 15) of high quality stocks, supplemented by three closed-end funds and three covered calls. In bad markets, such stocks benefit from the dividend income – which helps support their share price – and from a sort of “flight to quality” effect, where investors prefer (and, to an extent, bid up) steady firms in preference to volatile ones. Almost all of those are domestic firms, though he’s had significant direct foreign exposure when market conditions permit. Mr. Ashton reports becoming “a bit less dogmatic” on valuations over time, but he remains one of the industry’s most disciplined managers.

The manager also sells covered calls on a portion of the portfolio. At base, he’s offering to sell a stock to another investor at a guaranteed price. “If Cisco hits $50 a share within the next six months, we’ll sell it to you at that price.” Investors buying those options pay a small upfront price, which generates income for the fund. As long as the agreed-to price is approximately the manager’s estimate of fair value, the fund doesn’t lose much upside (since they’d sell anyway) and gains a bit of income. The profitability of that strategy depends on market conditions; in a calm market, the manager might place only 0.5% of his assets in covered calls but, in volatile markets, it might be ten times as much.

Mr. Ashton brings a hedge fund manager’s ethos to this fund. That’s natural since he also runs a hedge fund in parallel to this. Long before he launched Centaur, he became convinced that a good hedge fund manager needs to have “an absolute value mentality,” in part because a fund’s decline hits the manager’s finances personally. The goal is to “avoid significant drawdowns which bring the prospect of catastrophic or permanent capital loss. That made so much sense. I asked myself, what if somebody tried to help the average investor out – took away the moments of deep fear and wild exuberance? They could engineer a relatively easy ride. And so I designed a fund for folks like my parents who can’t live on no-risk bonds but would be badly tempted to pull out of the stock market at the bottom. And so I decided to try to create a home for those people.”

And he’s done precisely that: a big part of his assets are from family and friends, people who know him and whose fates are visible to him almost daily.

Mr. Ashton has served his investors well, though in many ways they’ve served him – and themselves – poorly. Centaur’s excellence in both the 2007-09 and the 2009 rebound brought in droves of investors. As the market moved steadily from undervalued to fairly valued to overvalued, the number of securities meeting his quality and valuation criteria dwindled. When he found attractive opportunities, they rose in value too quickly to be long-term holdings. While he found some international names attractive, they couldn’t fill the portfolio. Cash now comprises 53% of his holdings. Unhappy with reasonable returns (13.5% in 2017, for example, which meant that the stock portion of the portfolio returned about 40%) and excellent risk management, investors have been steadily drifting away. Mr. Ashton is intensely aware of, and pained by, the consequences: a higher expense ratio and lower tax efficiency as he manages the outflows.

This profile is no longer valid and remains purely for historical reasons. The fund has a new manager and a new strategy.

Bottom Line

Mr. Ashton makes a fascinating point:

Stocks have been going mostly up for nine years now, and it feels like they will never – and maybe even can never – come back down. When thinking about it in the abstract (if they think about it at all) most people naturally believe that in times of stress that they will behave rationally, and that they won’t be among those who panic and sell at the worst possible time. The reality, of course, is that most investors aren’t so rational when the time comes, because when stocks are going down they feel like they might never go back up.

In short, the same psychological anchor that causes us to over-commit to stocks when they are riskiest (because they’ll never fall again) causes us to under-commit to stocks when they are safest (because they’ll never rise again). It takes an act of conscious discipline to invest today in ways that will serve to preserve your wealth, and your family’s prosperity, during the inevitable crisis. As the US market reaches historic highs and political rationality reaches record lows, that might be uncomfortably close. For folks looking to maintain their stock exposure, but cautiously, and be ready when richer opportunities present themselves, this is an awfully compelling little fund.

Fund website

Centaur Total Return Fund

No country for old men

By David Snowball

With a summertime nod to William Butler Yeats, “Sailing to Byzantium,” and not so much to the movie that cribbed a line from him.


That is no country for old men. The young
In one another’s arms, birds in the trees,
—Those dying generations—at their song,
The salmon-falls, the mackerel-crowded seas,
Fish, flesh, or fowl, commend all summer long
Whatever is begotten, born, and dies.
Caught in that sensual music all neglect
Monuments of unageing intellect.


An aged man is but a paltry thing,
A tattered coat upon a stick, unless
Soul clap its hands and sing, and louder sing
For every tatter in its mortal dress,
Nor is there singing school but studying
Monuments of its own magnificence;
And therefore I have sailed the seas and come
To the holy city of Byzantium.

We noted, with great sadness, the death of Marty Whitman on April 16, 2018, at age 93. Mr. Whitman was one of a small group of utterly iconic figures. Much like Ralph “The Big Squirrel” Wanger, Warren “I’ve been semi-retired for decades” Buffett or Michael “The Meanest S.O.B. on Wall Street” Price, Mr. Whitman was resolutely, fiercely independent, a facile writer and greatly admired.

We are less saddened by the fact that he passed away – it’s an experience we’ll all share, and he led a long and consequential life – than by the shambles around him. The same drive, confidence in his judgment and unabashed independence that made his reputation and his empire also unmade them. Flagship Third Avenue Value Fund (TAVFX) which he managed until he was 88 now receives a “negative” assessment by Morningstar on each of the five characteristics they assess.

His fate is shared by two other legends. Few of us get a gold watch (or a pension) as a going away present from our employers, fewer are given a mutual fund to manage. That, as it turns out, is a good thing.

Bill Miller had a titanic career at Legg Mason, and I mean that in both senses of the world. Morningstar’s Bridget Hughes wrote the capstone in 2011, at the announcement of his imminent departure:

The fund’s performance record is so remarkable that it’s hard to believe the same manager has been in place for the whole of it. Bill Miller, who has been on board since its 1982 inception … led the fund to a record-setting 15-consecutive calendar years of beating the S&P 500 Index. Between 1991 and 2005, the fund was up an annualized 16.44%, compared with the S&P 500 Index’s 11.52% gain.

Since then, the fund’s performance has been awful. Between January 2006 and October 2011, the fund has suffered a huge setback, losing 36.13% (7.4% annualized), which compares with the S&P 500 Index’s 13.45% gain (2.19%).

As a sort of parting gift, Mr. Miller (and his son, also Bill Miller) received the Miller Income Opportunity Fund (LMCJX). Our 2014 profile of the fund was not enthused: “If you believe that Mr. Miller’s range of investment competence knows no limits, this is the fund for you.” At base, the fund permits Mr. Miller to exercise his genius across an unlimited array of asset classes. The results, to date, have been … mixed. Morningstar gives it a one star rating in the odd “70-85% equity” group, noting high risks, high expenses and low returns. Against its Lipper “flexible portfolio” peer group, it’s shown higher volatility, more ulcers and lower returns than its peers.

The Tale of Two Bills

At the very least, I never suspected that Mr. Miller was crazy. Bill Gross, on the other hand, raised that possibility. (His wife, in a 2016 divorce filing, echoes concerns about “irrational and frightening behavior.”) After an exceedingly messy breakup with PIMCO, which he co-founded and for which he’d managed hundreds of billions of dollars, Janus hastily cooked up the Janus Global Unconstrained Bond Fund (JUCAX) for him to manage. That fund charges him with finding “maximum total return” and frees  him to invest in virtually any income-producing security. The fund has attracted billions in assets, quite possibly including more than a billion of Mr. Gross’s own money.

Here’s Morningstar’s picture of the fund’s lifetime performance:

That’s sort of hurt in a relative performance way. The fraction of its peers with better performance than JUCAX (as of 5/31/18):

YTD 100%
Three month 100%
One year 99%
Three years 91%

Our 2014 profile of the fund reflected on Mr. Gross’s turbulent final years at PIMCO and asked “what risk are you assuming in pursuit of those very modest gains over the relatively modest period in which he’s likely to run the fund? Shorn of his vast analyst corps and his place on the world stage, the answer is not clear.” We concluded that it wasn’t a prudent investment.

The New York Times observed, approaching his 70s and worth $2 billion, Mr. Gross might have taken his separation from PIMCO as an opportunity to step away and pursue new passions. “Instead he chose revenge,” with would occur as his new fund trounced his former PIMCO charge. Umm, it hasn’t and the ill-timed bet on Italian bonds, which cost JUCAX 3% in a single day, hasn’t helped (“Bill Gross, Revered Fund Manager, Is Having a Year to Forget,” NYT, 5/30/2018, though this article might be subject to a paywall).

That all makes me a bit anxious of the impending launch of the Seven Canyons Funds, Strategic Income and World Innovators. The force behind Seven Canyons is Samuel S. Stewart, who founded the Wasatch Funds in 1975. Mr. Stewart recently turned 75 and reached an agreement with Wasatch which allowed him to take two of their funds (he manages Strategic Income (WASIX), he and son Josh Stewart co-manage World Innovators (WAGTX)) with him. Seven Canyons was founded in 2017 by Spencer Stewart, another of Mr. Stewart’s sons who was previously a portfolio manager of Grandeur Peak Emerging Markets Opportunities Fund (GPEOX). In announcing Spencer Stewart’s departure, Grandeur Peak’s CEO Blake Walker reported that “Spencer Stewart has decided to follow his heart and pursue a new path.”

Unlike the Miller and Gross departures, Dr. Stewart’s move to Seven Canyons seems – so far as I can determine from the public record – entirely amicable and long-planned. Their funds will be officially Seven Canyons offerings sometime in the third quarter of this year.

Bottom line:

Index Funds S&P 500® Equal Weight NoLoad (formerly Index Funds S&P 500® Equal Weight), (INDEX), June 2018

By David Snowball

At the time of publication, this fund was named Index Funds S&P 500® Equal Weight.

Objective and strategy

The fund equally weights all of the stocks in the S&P 500 index and rebalances its portfolio quarterly.


The Index Group, headquartered in Colorado Springs, Colorado. While they are legally permitted to provide other advisory services, managing their mutual fund is their only current activity.


Michael Willis. Mr. Willis has been president of Index Funds since 2006. His earlier stints included serving as a senior vice president of UBS Financial Services (2003 to 2004), senior vice president-investment of PaineWebber (1999-2003) and first vice president of Smith Barney (1994-1999).

Strategy capacity and closure

$200-300 billion. Capacity constraints are normally imposed by starting with (1) the desired size of the lowest market cap fund in the portfolio or (2) by the need to be able to unwind positions with limited liquidity quickly and quietly. Neither of those is a meaningful constraint here: their tiniest firm has a $2 billion market cap and it will never get more than 0.22% of the portfolio and positions would change only as the composition of the underlying index does.

Management’s stake in the fund

Nothing or everything, depending on what counts. In the narrow “reporting to the SEC” sense, neither the manager nor the trustees have anything invested in the fund. That would normally be a bad sign. In this case, it’s not. Manager Michael Willis explains that the advisor is underwriting the fund to the tune of several hundred thousand dollars a year; at base, the money they’d normally invest in the fund is getting sunk into operations. The trustees’ commitment seems reflected in their willingness to accept $16/year for their service to the fund.

Opening date

April 30, 2015.

Minimum investment


Expense ratio

0.25%, after waivers, on assets of $34 million. The fund has experienced very steady, consistent inflows. The expense before waivers is 1.98%.


The attractiveness of any index fund comes down to two elements: the appeal of the underlying index and the efficiency with which the manager executes the strategy. INDEX has much to offer on both fronts.

We’ll start with the underlying index.

The S&P 500 is not the 500 largest stocks in the U.S. market, nor is it the stocks of the 500 largest corporations. It is a collection of stocks chosen by a secretive committee at Standard & Poor’s. There are currently 505 stocks in the S&P 500, chosen by the committee from among a universe of qualifying stocks. The qualification screens for inclusion are:

  • They must be U.S. firms
  • With a market capitalization of $6.1 billion or more
  • At least 50% of the outstanding shares of stock must be available for public trading
  • As a measure of financial viability, the firms must have positive earnings over the past quarter and year, which excludes Tesla despite its $80 billion market cap, and
  • They must be “highly tradable common stocks with active and deep markets.” That criterion excluded Berkshire Hathaway, whose “A” shares rarely traded, for years.

About one company gets chucked out of the S&P 500 about every two weeks.

The amount of “space” in the index that a company occupies is determined purely by its market capitalization; Apple, with a near trillion-dollar stock valuation, carries more weight in the index than the index’s 100 smallest firms combined.

The argument for investing in the S&P 500 Equal Weight Index is simple: you’re troubled by the fundamental flaw in the original S&P 500, which is its cap-weighting. It rewards, and becomes dependent on, the market’s largest and most overvalued stocks. And the sheer popularity of S&P 500 indexing (there are $3.4 trillion in S&P 500 index funds) means that more money is automatically poured into those stocks, driving them to even higher valuations.

Here’s what it means for the index to be top heavy. Just 15 firms comprise more than 25% of the total capitalization of the S&P 500; as of mid-May 2018, those firms traded at more than three times the valuation of the index as a whole.

  Percentage of the index YTD returns, through May 17, 2018 P/E ratio
Top 15 firms 26.37 5.74% 52.69
S&P 500 100 -0.42 17

A cap-weighted index, then, is a momentum play driven, up or down, by the fates of a handful of behemoth stocks drawn mostly from the tech and financial sectors. If investors bid those stocks up to unsustainable levels, the index automatically increases your exposure to them.

There is, however, a viable alternative with a long track record. That alternative is the equal-weight version of the S&P 500. In this version, every stock simply receives the exact same weight. Standard & Poor’s designates the cap-weighted index as SPX and the equal-weighted index as EWI. For the purposes of our discussion below, we’ll use those same symbols.

Equal-weighting introduces three important tilts into EWI:

  1. The EWI is contrarian; at its quarterly rebalancing, the managers sell down the stocks that have risen most sharply and buy more of those that have fallen.
  2. The EWI is modestly value-oriented; the price/earnings, price/book, price/sales and price/cash flow ratios are all slightly lower for EWI than for SPX.
  3. The EWI offers a modestly lower market cap; the average market cap is $25 billion for EWI, compared to SPX’s $96 billion.

Both indexes offer exposure to the same vetted, financially viable mid- to large-cap US stocks. The only difference is how much exposure you receive to each.

The combination of contrarian, value and size leads to two outcomes:

  1. EWI has higher returns than SPX. Michael Willis, portfolio manager for Index Funds S&P 500 Equal Weight (INDEX) notes “Since the inception of the S&P 500® Equal Weight Index on 01/08/2003 through 12/31/2017, the S&P 500 Equal Weight Index beat the S&P 500 Index 10 out of 15 years, and produced higher 3-year, 5-year, and 10-year returns.” Over that period, $10,000 in SPX would have grown to $40,000 while the same amount in EWI would have grown to $53,000. With those returns, SPX would have beaten 92% of all large cap funds; EWI would have beaten 100% of them.
  2. EWI has higher volatility than SPX. Over the past 10 years, the standard deviation for SPX is 15% while EWI clocked in at 17.6%. Similarly, the maximum 10-year drawdown for EWI is 54.3% against 50.9% for the SPX.

The notion that higher gains come at the price of higher volatility should neither scare nor surprise.

If you would like to reap those higher rewards, INDEX has proven to be a worthy option. With expenses of just 0.25%, it’s among the cheapest index funds especially when you combine it with a low $1000 minimum investment. Mr. Willis has been managing the fund for three years and he’s signaled his commitment to his investors by pouring substantial amounts of his own money into creating and maintaining an accessible, low-cost vehicle.

Bottom Line

In the long-term, biases toward value, smallness and diversification pay off handsomely. One attempt to calculate the returns of the equal-weight and cap-weight versions of the S&P 500 back to 1926 estimate that the equal-weight version outperforms the cap weighted version by 281 basis points per year. Skeptics of this approach, including our colleague Sam Lee, note that “there’s no such thing as a free lunch.” The higher returns come at the price of higher volatility, higher taxes as a result of more frequent portfolio rebalancing and the prospect of lagging badly during periods where mega-caps soar. All of which is true, though modestly so. For investors looking to de-FAANG their portfolios while maintaining exposure to the S&P 500 companies, INDEX offers a sensible, affordable option.

Fund website

The Index Fund

If you were a manager, you’d be running a managed futures fund

By David Snowball

You may not know it. You may not want to admit it. But you’d certainly be running one.

How do I know? Because managed futures funds operate exactly the way you do. Managed futures funds are momentum investors; they choose some number of asset classes (US stocks, currencies, EM bonds, commodities, whatever) to include in their portfolios. They then invest in the asset classes that show the greatest upward momentum, avoid assets that are drifting, and short those that are falling. You could also imagine a control panel with eight toggle switches, one for each asset class, and three positions for each switch (positive, neutral, negative). Managers look at relative strength data and might flip three switches up and three switches down.

Voila! You bet on the winners and against the losers, and rake in the profits. You also block out the gloomy Guses who ask questions like, “wouldn’t you call that a ‘buy high and pray you can sell even higher’ game? They’re old and spend entirely too much time worrying about state of their bowel movements.

In a 2014 interview with Morningstar, Mike Harris, a hedge fund manager whose firm launched Equinox Campbell Strategy (EBSAX) explains the appeal of the strategy.

A managed futures fund is a liquid alternative investment that really helps to smooth the ride in the portfolio because of the uncorrelated nature of the returns, particularly to traditional assets like stocks and bonds.

Oftentimes we tell people that some of the benefits of managed futures is that it’s actively managed, which means it doesn’t have a bias to be long-only like many products in investors’ portfolios. It can effectively make money in both rising and falling markets from its ability to be both long and short. Oftentimes it’s traded in a systematic fashion. So, we’re using models to trade the markets, and we’re using science and data to back-test those returns.

It’s clear that most investors buy into the logic. As the global political climate becomes ever more unhinged, investors steadily migrate toward the market’s riskier segments. Domestic small cap growth funds, for example, saw over $7 billion in inflows YTD. Meanwhile, the market’s few remaining grown-ups have seen steady, nearly unrelenting outflows. Those affected range from small but excellent absolute value guys like Zeke Ashton at the $25 million Centaur Total Return Fund (TILDX) to huge and still excellent absolute value guys like Steve Romick at the $16-billion-but-formerly-$21-billion FPA Crescent (FPACX).

That movement is reflected in Morningstar’s judgments of market valuation. By their assessment, the highest quality (i.e., wide moat) firms are undervalued and becoming more so, while the lowest quality (i.e., no moat) firms are overvalued, though less so that at the start of the year. Similarly, the most stable firms (i.e., those with low “fair value” volatility) are undervalued and becoming more so, while the opposite is true for firms with high uncertainty.

To conventional investors, people who think high prices and high instability are bad, it hardly seems prudent to have many switches set to “risk on.” It is, however, behavior we’ve see before … mostly notably in 2007. Back then, the institutional investor Grantham, Mayo, van Otterloo graphed the unconventional risk-reward tradeoff:

They point out the obvious: “The slope of the line should be positive – riskier assets should be priced to deliver higher returns. But the Great Moderation changed investor perceptions of risk such that the slope went strongly negative.” (Is Investing Starting to Get Difficult Again?, 2018)

The pre-crisis complacency seems to be reasserting itself. The team at PIMCO, which manages $1.8 trillion in assets, wrote in May 2018:

Ten years after the financial crisis, the global economy and financial markets could be entering a new era of potentially radical change that will make the next decade look very different from the last. Investors who assume that the future will resemble the post-crisis past could be in for a series of rude awakenings. (Joachim Fels, Andrew Balls, Daniel J. Ivascyn, Rude Awakenings)

The core question: how well does a disciplined “buy high, sell low (or short low)” strategy work for investors?

Measured by the performance of the managed futures group, the core answer is “poorly.”

It’s dangerous to generalize about the performance of the managed futures group because so many of its members have liquidated: Wakefield, State Street/Ramius, Forward, AlphaCentric/IMFC, Equinox Crable, Equinox Systematic, Mariner and others have all shuffled off to the Graveyard of Good Ideas At The Time.

There is only one managed futures mutual fund that has survived this entire market cycle, Rydex Managed Futures Strategy (RYMFX) which was recently rechristened Guggenheim Managed Futures Strategy. We wrote a short profile of the fund in November 2008 in which I observed, “I have an intrinsic distrust of complex strategies whose success has occurred largely on paper but folks committed to finding a market neutral component for their portfolio might put this on the same due-diligence list as Nakoma Absolute Return (NARFX) and Hussman Strategic Growth (HSGFX).” I might have been more right than I knew, since those other two funds are extinct and awful, respectively.

RYMFX, meanwhile, has managed to book an annual loss of 1.2% since the start of this market cycle in late 2007. Uhhh … it has booked an annualized loss of 2.7% over the past 10 years and that places it in the top 1% of all managed futures funds. (Oh, right, the liquidation thing. There are only three managed futures funds with a 10 year record and a loss of 2.7% is as good as it gets.)

To broaden the comparison, I pulled the three-year performance record for all managed futures funds from the MFO Premium fund screener. The simplified results, with two possible benchmarks, are below.

  Symbol Annual return Maximum drawdown
361 Global Managed Futures Strategy I AGFZX 5.5% -8.2
Arrow Managed Futures Strategy A MFTFX 2.1 -19.8
LoCorr Macro Strategies I LFMIX 2.0 -8.0
Altegris Futures Evolution Strategy I EVOIX 1.5 -9.7
Goldman Sachs Managed Futures Strategy Inst GMSSX 1.3 -7.5
Equinox MutualHedge Futures Strategy A MHFAX 0.4 -9.6
3-month T-bills   0.3 0.0
Longboard Managed Futures Strategy I WAVIX 0.1 -14.0
Change kept in a mayonnaise jar   0.0 0.0
Altegris Managed Futures Strategy A MFTAX -0.2 -10.3
361 Managed Futures Strategy I AMFZX -0.6 -12.7
American Beacon AHL Managed Futures Strategy Inst AHLIX -0.8 -9.9
Steben Managed Futures Strategy I SKLIX -0.9 -9.8
Equinox Chesapeake Strategy I EQCHX -1.6 -15.9
First Trust Morningstar Managed Futures Strategy FMF -1.6 -11.8
PIMCO TRENDS Managed Futures Strategy Inst PQTIX -2.0 -9.0
SFG Futures Strategy I EFSIX -2.5 -10.5
Abbey Capital Futures Strategy I ABYIX -2.8 -12.7
WisdomTree Managed Futures Strategy WTMF -2.9 -11.8
Credit Suisse Managed Futures Strategy I CSAIX -3.0 -13.1
Campbell Dynamic Trend Inst CDRTX -4.0 -14.5
ASG Managed Futures Strategy Y ASFYX -4.4 -15.6
Rydex Managed Futures Strategy P RYMFX -4.4 -21.5
LoCorr Market Trend I LOTIX -4.8 -18.1
Aspen Managed Futures Strategy I MFBTX -5.2 -15.4
AQR Managed Futures Strategy I AQMIX -5.4 -17.2
Catalyst Hedged Futures Strategy I HFXIX -5.7 -28.1
Transamerica Managed Futures Strategy I2 GLFZ -5.8 -17.8
Equinox Campbell Strategy I EBSIX -6.2 -20.4
Salient Trend I SPTIX -6.9 -26.9
AQR Managed Futures Strategy HV I QMHIX -8.6 -25.0

To the clear: we are not criticizing these managers, or suggesting that they’re anything less than disciplined, well-trained and diligent. We’re arguing that the record of these attempts show that, even with years of experience, advanced credentials, swamps of data and so much computing power that Google calls them for the answers to questions, trusting your ability to move between asset categories in pursuit of exceptional returns is essentially futile.

Don’t try this at home.

Try this instead:

Our recommendations for fund investors remains the same: make your plans before panic strikes, work backward from an understanding of the risks you face and the extent of losses you can bear, build an asset allocation that creates a margin of safety for you and your family, and execute the plan with experienced managers who are shielding you from unjustified risk now in pursuit of exceptional returns in the future.

Over the summer months, we’ll try to introduce you (or re-introduce you) to managers and strategies that might contribute to that outcome. This month we provide an updated profile of Centaur Total Return (TILDX) with profiles of Zeo Strategic Income (ZEOIX), LS Opportunity (LSOFX), 361 Global Long/Short (AGAZX), Holbrook Income (HOBEX), Camelot Event Driven and others on the way.

Morningstar Minute

By David Snowball

The Mutual Fund Observer is the product of a virtual team and, when our colleagues from England and Trinidad were working with us, a virtual global team. Chip and I reside in Iowa, Ed and Sam in Illinois, Charles in California, Bob C in Ohio and Dennis in Montana. One of the great attractions of the Morningstar conference is that it gives us a chance to work side-by-side on interviews and stories, and to share quick and personal reactions to the ideas and personalities we encounter.

As ever, we’ll try to offer some quick responses in the form of end-of-day posts to the MFO Discussion Board and to the MFO Premium commentary.

Our agendas vary. Sam Lee is slated to contribute to Tuesday’s panel, “Crypto, Blockchain, and Lamborghinis, Oh My!” Charles and I will be in attendance, intent on photobombing Sam. The only real question is whether our “Blockchain Blockheads” and “Sam I Am” t-shirts arrive in time for the occasion.

Ed won’t be officially in attendance, but will be available to confabulate at local taverns and in our retreat after the conference. Chip might well be splitting time between tech-centered panels and giving her niece a tour of Chicago.

Charles and I split time between listening in on panels, meeting managers, chatting with MFO readers and looking for interesting leads among the 100 fund firms showing in the Exhibit Hall. So far I have time set for conversations with a series of managers:

  • Venk Reddy, Zeo
  • Jon Angrist, Cognios
  • Tom Stringfellow, Frost Investment
  • Tom Florence, 361 Capital
  • Arun David and (possibly “and/or”) Vince Rivers of JOHCM
  • Beini Zhou, Matthews Asia and particular Matthews Asia Value Fund

I’ll also report on the comments of two really smart guys: Jeremy Grantham of GMO and behavioral economist (also Nobel Prize winner) Daniel Kahneman.

Charles’s list overlaps mine just a bit:

  • Darin Leone, Portfolio Strategist, Manning & Napier,
  • Anne-Laurence Roucher, Portfolio Manager, Natixis ESG Funds
  • Venkatesh Reddy, Portfolio Manager, ZEOIX
  • David Lafferty, Chief Marketing Strategist, Natixis
  • Tom Stringfellow, CIO Frost
  • Kip Meadows, CEO Nottingham
  • Phil Bak, CEO Exponential ETFs

We will, with luck, have a chance to add to that list over the next 10 days. If you’d like to say “hi” to either of us, just drop us a note!


To the shareholders of Quaker Event Arbitrage Fund: open your danged mail!

By David Snowball

Quaker Funds, based in Berwyn PA, are a small family at tactical allocation funds. As they imagine a transition which will include an ESG focus, it became clear that Thomas Kirchner’s event-driven fund would be something of an anomaly. Event arbitrage funds aim to profit from predictable but short-lived market anomalies when, for example, a firm announces a change of control or reorganization. Limiting himself to relatively rare events in a relatively limited slice of the equity universe makes very little sense, so QEAAX/QEAIX is trying to join the Camelot fund family.

But that’s been delayed because the fund’s shareholders won’t open – or answer – their mail. The move to Camelot requires shareholder approval with at least 50.1% of shareholders voting yea or nay. After months of effort, only 41% of shareholders had weighed in. Why? One obstacle is investor privacy safeguards; when you click the “don’t allow third parties to contact me” option on your account set-up, you make it impossible for proxy solicitors to find you. Another obstacle is the fear of scams: during one recent contact attempt, a young voice shouted out from the background, “it’s a scam, mom! Don’t tell them anything, hang up!” And, as ever, people are lazy: we delete emails and trash paper mail, rather than going to the trouble to respond.

Here’s a plea from the fund’s managers: vote! (Please.) The solicitation process is expensive and is delaying what they believe to be an essential step for the fund.

Apparently Morningstar endorses the move. Their website has already renamed the fund, despite the fact that the vote hasn’t yet closed.

QEAAX is rated by Morningstar as a four-star fund. It began life in November 2003 as Pennsylvania Avenue Event-Driven (PAEDX) then, in June 2010, became Quaker Event Arbitrage (QEAAX) as part of Mr. Kirchner’s attempt to broaden the fund’s investor base. The fund (blue line) has handily outperformed its Morningstar peer group over its lifetime.

Bottom line: if you’re associated with the fund and haven’t voted, please do so. The same goes for shareholders of T. Rowe Price funds who, likewise, have been receiving proxy notices in the mail this month.

The most famous struggle for proxy votes may have been with the Steadman funds. Charles Steadman was in the running for the worst investor in history. Steadman took over the family’s investment business in the 1960s and began focusing on growth areas like ocean bed mining and undersea communities. (He’d have been so into bitcoin.) He lost money with breathtaking consistency, then died. His daughter ran the four funds, renamed them “Ameritor” then passed them over to Steadman’s long-time treasurer.

Chuck Jaffe picked up the narrative: “When Charles Steadman died in the late 1990s, his daughter took over. The funds had no prospect for growth, but she had no reason to shut them; the double-digit management fee was like a personal annuity, up to the point where it bled the fund to death. When the Securities and Exchange Commission finally filed paperwork stating that the fund ‘had ceased to be an investment,’ the loss over the last 10 years was 98.98 percent, turning a $10,000 investment into $102. It took about four decades for the losses to drive shares down to less than a penny, but Ameritor got the job done, and then kicked the bucket.”

98.98% losses. NAV under $0.01. Why weren’t they liquidated decades before? In part because the shareholders were either dead or in denial about ever having invested with Steadman.  The Baltimore Sun estimated that 40% of the firm’s accounts were legally “abandoned” and their final manager lamented that so many of the shareholders were dead that he couldn’t generate the quorum necessary to liquidate them.

If you want a real rush of schadenfreude, you should read Jack El Hai’s “The Dead Man Fund,” a 2017 history of the decline and decline and decline and fall of the House of Steadman. It’s a quick read, ironically hosted by the site

Update on MFO Premium

By David Snowball

Charles sends his regrets for being unable to join us this issue, but he’s retreated deep underground to the MFO Premium command center.

At Charles’s request, the good folks at Thomson Reuters have substantially (vastly, enormously) expanded the amount of data they provide each month. The new datafeed will not only allow MFO Premium users to access a new level of detail about the composition and performance of mutual funds and ETFs, but it will also allow us to expand our coverage to closed-end funds and insurance products. At the end of the conversion, you’ll be able to screen for and analyze something like 36,000 investment products.

Charles describes the new monthly data drop this way:

35575 total entries

27042 mutual funds (all share classes)

4023 insurance funds

2188 ETFs

1515 indices

614 CEFs

168 categories (averages)

Delivered in …

14,383 data XML files for the performance data 


6,769,238,777 bytes (6.8 gigabytes)


14,117 data XML files for the holdings data 


99,313,147,272 bytes (99.3 gigabytes).

All that takes hours upon hours of time just to download, distill, crunch even with multiple 8th gen Intel core i7 processors.

That is not, as it turns out, a plug-and-play operation and Charles has sunk hundreds of hours in May to making the conversion. We’re really, really close; Charles can generate ratings using the new data but he’s not yet satisfied about its complete integrity. He grabbed a handful of MREs and headed underground, intent on discovering whether he can break the system, so that it won’t happen to you!

Charles will resurface next month, bright-eyed and happy to share tales from the conference, word on the new database and analyses of the two funds he’s been profiling.

Until then, you might consider joining MFO Premium. It’s a phenomenal resource for tax-deductible $100. We’re perpetually amazed that the number of subscribers is low in the hundreds rather than high in the thousands. You can change that, and should!

Elevator Talk: Alan Norton, Crow Point Growth Fund (GAMIX)

By David Snowball

Since the number of funds we can cover in-depth is smaller than the number of funds worthy of in-depth coverage, we’ve decided to offer one or two managers each month the opportunity to make a 200 word pitch to you. That’s about the number of words a slightly-manic elevator companion could share in a minute and a half. In each case, I’ve promised to offer a quick capsule of the fund and a link back to the fund’s site. Other than that, they’ve got 200 words and precisely as much of your time and attention as you’re willing to share. These aren’t endorsements; they’re opportunities to learn more.

There’s something almost Biblical about this fund’s lineage. Caritas All-Cap Growth Fund (CTSAX, 2009-13) begat Goodwood SMID Cap Discovery (2013-16), which begat Goodwood SMID Long/Short (2016-18), which begat Crow Point Growth (May 2018) which, in the fullness of time, will beget Crow Point Small Cap Growth (summer 2018).

Shhh … don’t tell Morningstar. They’re currently two years and two name changes behind the times on the fund’s name.

The newest iteration of the fund will be managed by Alan Norton, CFA and Thomas Norton, CFA. The Messrs. Norton co-founded the sub-advisor, Cold Creek Capital, in 2014; while they are not related, they are former colleagues at John Hancock Advisors. They have been managing small- and mid-cap money since 1999. Their Cold Creek Small Cap Growth Strategy, which will be manifested in the rechristened fund, just reached its three-year anniversary and received a three-star rating from Morningstar. They currently manage about $33 million in assets.

The guys’ investment strategy strikes me as entirely reasonable.

We believe in constructing well diversified portfolios of high quality companies with solid financials, strong management teams and sustainable competitive advantages. We believe in a bottom up, fundamental research effort aimed at identifying companies with attractive and durable growth prospects. We construct portfolios with a blended earnings growth rate that is above the benchmark and general market averages. We believe that superior long term earnings growth will drive better relative performance and be captured in stock appreciation.

The new fund will benefit from a three-part partnership. Cold Creek Partners will be free to manage the fund’s investment portfolio; Goodwood will maintain and deepen client relations and outreach, while Crow Point handles the administrative responsibilities.

That said, the team is walking a well-trodden trail. Morningstar lists 206 domestic small cap growth funds already, 18 of which are five-star funds. Lipper puts 174 funds in the category, nine of which MFO designates “Great Owls” for their consistently top tier risk-adjusted returns. Yet, despite inflows of $7.2 billion YTD into domestic small caps, even the best of these funds have had only modest success in attracting asset inflows.

Here are the guys’ 300 (or so) words on why they thought launching fund #207 was a good idea and why you should add GAMIX to your due-diligence list.

Launching our own small cap fund has been in the works for some time. We’ve been managing Small and Mid-Cap Growth portfolios within large asset management firms for 20 years. We began incubating our Small Cap Growth Composite in July 2014, while searching for the right partners to accelerate our own growth. We partnered with Crow Point last year in order to realize economies of scale by accessing their institutional caliber back-office, trading and compliance, allowing us to focus on what we do best – picking stocks.

We are simply two guys from Boston with the same last name and an insatiable appetite for discovering new ideas. At Cold Creek Capital, we build relatively concentrated portfolios holding 40-60 stocks and target active share greater than 90%. 

Tom and I scour our investable universe to identify long term secular growth companies and focus our portfolios around our best ideas. We quite literally meet with close to 500 companies a year. Since we spend so much time with boots on the ground, we aren’t as distracted by the daily volatility of the markets. Our portfolio companies tend to have sustainable competitive advantages, large addressable markets and market shares that allow for significant future growth, which also allows us to take a longer-term view.

Tom and I have been around long enough to see two full market cycles within both Small Caps vs Large Caps and Growth vs Value, and one thing has remained constant – concentrated, high conviction stock pickers are the only consistent source of alpha.

Our core philosophy is that an experienced team focused on their best ideas can outperform in a market where many peers tend to over diversify and essentially hug the broader benchmarks. This view will be reflected in the GAMIX portfolio (#207!).

Crow Point Growth (GAMIX) has a $100,000 minimum initial investment. The new management fee will be decreased to 0.84% with an expense cap of 1.35%, from 1.25% and 1.70% currently. For reasons unclear, the Crow Point Partners website doesn’t yet mention the fund. Ryan Thibodeaux, one of the Goodwood team, says they’re targeting a substantial website revamp for Labor Day. In the meanwhile there’s a press release which gives a pretty clean explanation of the change and the blog on the advisor’s website offers some interesting provocations (they don’t like ETFs) though limited information on their own performance.

Funds in Registration

By David Snowball

Lately, new fund and active ETF launches have been rare – only seven new retail funds launched in the first five months of 2018 – and occasionally silly. Last month saw a registration filing for an active “pet parents” fund; this month saw a filing for a passive “pet care” ETF. You need neither (and should avoid both), so we’ll say no more about them. While this is a slow month for new fund registrations, at least it’s not a silly one. In the main, these funds will be available for purchase by August 1.

Adler Value Fund

Adler Value Fund, will seek long-term growth of capital. The plan is to buy “fundamentally sound companies that are out-of-favor with the market” and construct a portfolio which is “industry, sector and market capitalization agnostic and typically involves the securities of fewer than thirty issuers.” The fund will be managed by David Adler of Adler Asset Management, who has spent most of his career in investment banking. Its opening expense ratio is 1.50%, and the minimum initial investment will be $2,500.

Aptus Defined Risk ETF

Aptus Defined Risk ETF, an actively-managed ETF, seeks current income and capital appreciation. The plan is to place 90-95% of the portfolio in a laddered bond portfolio with an intermediate duration. That will be executed by buying ETFs, not individual bonds. The remainder of the portfolio will be in “at-the-money, exchange-listed call options on approximately ten to twenty individual stocks selected based primarily on their momentum (i.e., how close a stock is to its 52-week high) and potential for growth.” (I nod.) The fund will be managed by John D. (“JD”) Gardner and Beckham D. Wyrick (cool names) of Aptus Capital Advisors. Its opening expense ratio has not been released.

Dreyfus Japan Equity Womenomics Fund

Dreyfus Japan Equity Womenomics Fund will seek long-term capital growth. The plan is to build an all-cap Japanese equity portfolio around firms likely to benefit from “womenomics.” At base, women are becoming a more powerful force in the Japanese business community, a move embraced by some firms and ignored by others. The advisors, understandably, believe that the former are more likely to thrive than are the latter. (And still the word “womenomics” – a nod to “Abenomics” which, frankly, is floundering – grates on me.) The fund will be managed by Makiko Togari, Miyuki Kashima, Masafumi Oshiden, Kazuya Kurosawa and Takashi Shimoyanagita. Ms. Togari is the lead portfolio manager of the fund and the Japan Equity Womenomics Strategy at BNYM Japan. Its opening expense ratio has not been disclosed, and the minimum initial investment for no-load “I” shares will be $1,000.

Eventide Limited-Term Bond Fund

Eventide Limited-Term Bond Fund will seek income. The plan is to invest in income producing securities with a focus on U.S. corporate bonds, government bonds, agency bonds, adjustable and fixed rate mortgage bonds, muni bonds, convertible securities, and debt instruments issued by foreign governments, including those in emerging markets. The fund may invest up to 20% of its assets in preferred stocks and dividend-paying common stocks and may invest in high-yield bonds. The fund’s average effective maturity will not exceed five years. The portfolio will be screened to select issuers with a record of “good corporate behavior.” The fund will be managed by Martin A. Wildy, CFA, and Samuel J. Saladino. This fund began life as Epiphany FFV Strategic Income Fund and is in the course of being adopted by Eventide, which will result in a somewhat different set of ethical screens. Its opening expense ratio for “N” class shares is 0.79%, and the minimum initial investment will be $1,000.

Oppenheimer Ultra-Short Duration ETF

Oppenheimer Ultra-Short Duration ETF, an actively-managed ETF, seeks to maximize current income consistent with preservation of capital. The plan is to invest, primarily, U.S. dollar-denominated investment-grade fixed-income securities with a portfolio duration under three years. The fund will be managed by Christopher Proctor, CFA, head of Oppenheimer’s Cash Strategies Team and Adam Wilde, CFA. Its opening expense ratio has not been released.

Parametric Systematic Alternative Risk Premia Fund

Parametric Systematic Alternative Risk Premia Fund, will seek total return. The plan is to provide exposure to risk premia by taking long and short positions using derivative instruments to gain market exposure across equities, fixed income, commodities and currencies. The fund will be managed by Christopher Haskamp and Thomas Lee of Parametric Portfolio Associates. The duo has managed a separate account using this strategy since April 2017. In its first 12 months of operation, the $135 million account returned 18.95%.  Its opening expense ratio for Investor shares is 1.35%, and the minimum initial investment will be $1,000.


Manager Changes

By Chip

At first glance, it appears that about 61 funds saw partial or substantial manager changes this year but more than 40 other funds are masked by our designation “various” in the ticker column. It’s the total Chip uses when she encounters one manager departure that resonates across, say, 20 target date funds or a half dozen funds all calibrated to slightly different levels of risk (Isolde Very Very Conservative Fund, Isolde Very Conservative Fund, Isolde Conservative …).

The most consequential of the changes comes to Ivy Cundill Global Value (ICDAX) where the change of sub-adviser will change the fund’s team, name and strategy; the least consequential change is apt to be at MainStay Absolute Return Multi-Strategy Fund (MSAKX) which sees the departure of one of its 25 managers.

Ticker Fund Out with the old In with the new Dt
AGFZX 361 Global Managed Futures Strategy Fund No one, but . . . John Riddle joins Blaine Rollins, Jeremy Frank, Clifford Stanton, Aditya Bhave, and Jason Leupold on the management team. 5/18
AMFQX 361 Managed Futures Strategy Fund No one, but . . . John Riddle joins Blaine Rollins, Jeremy Frank, Clifford Stanton, Aditya Bhave, and Jason Leupold on the management team. 5/18
RAGHX AllianzGI Health Sciences Fund John Schroer will no longer serve as a portfolio manager for the fund. Bret Jones joins Peter Pirsch, who himself only joined in March 2018, on the management team. 5/18
PNEAX AllianzGI NFJ Dividend Value Fund Morley Campbell is no longer listed as a portfolio manager for the fund. John Mowrey, Jeff Reed, L. Baxter Hines, R. Burns McKinney, Thomas Oliver, and Benno Fischer will continue to manage the fund. 5/18
AFJAX AllianzGI NFJ International Value Fund Morley Campbell is no longer listed as a portfolio manager for the fund. Garth Reilly joins John Mowrey, Paul Magnuson, L. Baxter Hines, R. Burns McKinney, Thomas Oliver, and Benno Fischer on the management team. 5/18
PQNAX AllianzGI NFJ Mid-Cap Value Fund Morley Campbell is no longer listed as a portfolio manager for the fund. John Mowrey, Jeff Reed, and Paul Magnuson will continue to manage the fund. 5/18
PCVAX AllianzGI NFJ Small-Cap Value Fund Morley Campbell is no longer listed as a portfolio manager for the fund. Jeff Reed joins John Mowrey and Paul Magnuson on the management team. 5/18
AZBAX AllianzGI Small-Cap Fund Effective June 15, 2018, Yu Wang will no longer manage the fund. Stephen Lyford, Robert Marren, and Kunal Ghosh will continue to manage the fund. 5/18
BRDAX B. Riley Diversified Equity Fund No one, but . . . William Charters joins Charles Hastings in managing the fund. 5/18
BXEAX Barings Emerging Markets Debt Blended Total Return Fund Brigitte Posch is no longer listed as a portfolio manager for the fund. Ricardo Adrogué and Cem Karacadag will continue to manage the fund. 5/18
IIXAX Catalyst Insider Income Fund, which will become the Catalyst Enhanced Income Strategy Fund on or about July 3, 2018. David Miller and Charles Ashley will no longer serve as a portfolio manager for the fund. Leland Abrams and Brandon Jundt will manage the fund. 5/18
OCIO ClearShares OCIO ETF Kevin O’Connor will no longer serve as a portfolio manager for the fund. Mark Hong, Jonathan Chesshire, and Eric Blasberg will continue to manage the fund. 5/18
Various Columbia Capital Allocation Funds Jeffrey Knight and Joshua Kutin have left the management team. Anwiti Bahuguna and Dan Boncarosky will continue to manage the fund. 5/18
INUTX Columbia Dividend Opportunity Fund Dean Ramos, Paul Stocking, and Steven Schroll will no longer serve as portfolio managers for the fund. David King, Harrison Chan, and Yan Jin will now manage the fund. 5/18
CPASX Columbia Multi-Manager Alternative Strategies Fund No one, but . . . Robert Sinnott, Robert Rickard, John Perry, Philippe Lüdi, Kathryn Kaminski, and Alexander Healy join the rest of the management team. 5/18
CTFAX Columbia Thermostat Fund Jeffrey Knight will no longer serve as a portfolio manager for the fund. With the exception of Charles McQuaid (2002-16), none of the fund’s six previous managers served more than three years. Anwiti Bahuguna and Joshua Kutin will now manage the fund. 5/18
GAMIX Crow Point Growth Fund, formerly Goodwood SMID Long/Short Fund Joshua Pesses and Ryan Thibodeaux will no longer serve as portfolio managers for the fund. Alan Norton and Thomas Norton of Crow Point Partners will now manage the fund. 5/18
SZEAX Deutsche Emerging Markets Fixed Income Fund Rhamila Nadi is no longer listed as a portfolio manager for the fund. Roland Gabert and Joergen Hartmann join Nicolas Schlotthauer on the management team. 5/18
DIAMX Diamond Hill Long-Short Fund Ric Dillon will retire from Diamond Capital effective June 30, 2018. Nathan Palmer will join Jason Downey, Chris Bingaman, and Charles Bath on the management team. 5/18
EADDX Eaton Multi-Strategy Absolute Return Fund Thomas Shively is no longer listed as a portfolio manager for the fund. Dan Strelow and Justin Bourgette will now manage the fund. 5/18
EAAMX Eaton Vance Multi-Strategy All Market Fund Thomas Shively is no longer listed as a portfolio manager for the fund. Dan Strelow and Justin Bourgette will now manage the fund. 5/18
FMFIX Free Market Fixed Income Fund Steven Miller no longer serves as a portfolio manager for the fund. Founding manager Mark Matson and Sean Babin, who replaced Kenneth Gatliff on the team in late April 2018, remain. 5/18
FMNEX Free Market International Equity Fund Steven Miller no longer serves as a portfolio manager for the fund. Founding manager Mark Matson and Sean Babin, who replaced Kenneth Gatliff on the team in late April 2018, remain. 5/18
FMUEX Free Market U.S. Equity Fund Steven Miller no longer serves as a portfolio manager for the fund. Founding manager Mark Matson and Sean Babin, who replaced Kenneth Gatliff on the team in late April 2018, remain. 5/18
GMAMX Goldman Sachs Multi-Manager Alternatives Fund Graham Capital Management will no longer subadvise the fund. Robert Mullane will transfer to another group at Goldman Sachs and will no longer serve as a portfolio manager for the fund. GQG Partners, LLC will now serve as an additional subadvisor. Kent Clark and Betsy Gorton will join the management team. 5/18
GPMFX GuidePath Managed Futures Strategy Fund No one, but . . . Kathryn Kaminski joined the portfolio management team of Robert Rickard, Robert Sinnott, Alexander Healy, John Perry, and Phillippe Ludi. 5/18
HIIDX Harbor Diversified International All Cap Fund No one, but . . . Simon Todd, Michael Nickson, and William MacLeod join Simon Somerville, Neil Ostrer, Nick Longhurst, Michael Godfrey, David Cull, Charles Carter, William Arah, and Robert Anstey on the management team. 5/18
ITTAX Hartford Balanced Fund Karen Grimes announced her plan to retire as of December 31, 2018. Michael Stack, Adam Illfelder, and Loren Moran will continue to manage the fund. 5/18
HBLAX Hartford Balanced Income Fund Karen Grimes announced her plan to retire as of December 31, 2018. W. Michael Reckmeyer, Ian Link, and Scott St. John will continue to manage the fund. 5/18
HQIAX Hartford Equity Income Fund Karen Grimes announced her plan to retire as of December 31, 2018. W. Michael Reckmeyer and Ian Link will continue to manage the fund. 5/18
RMRGX Highland Resolute Fund Effective July 13, 2018, Logan Circle Partners will no longer serve as an investment sub-adviser to the fund. Incline Global Management, LLC and Chatham Asset Management, LLC will remain as investment sub-advisers to the fund. 5/18
ICDAX Ivy Cundill Global Value Fund, which is changing its name to Ivy Pzena International Value Fund Mackenzie Financial Corporation will no longer subadvise the fund. Pzena Investment Management will become the subadvisor to the fund. 5/18
IECAX Ivy Pictet Emerging Markets Local Currency Debt Fund Simon Lue-Fong will no longer serve as a portfolio manager for the fund. Mary-Therese Barton, Wee-Ming Ting, Philippe Petit, Guido Chamorro, and Carrie Liaw are joined by Alper Gocer on the management team. 5/18
IMAAX Ivy Pictet Targeted Return Bond Fund Sarah Hargreaves will no longer serve as a portfolio manager for the fund. Christopher Parker joins Andres Balcazar, Thomas Hansen, and David Bopp in managing the fund. 5/18
IVSAX Ivy Small Cap Core Fund Scott Sullivan will no longer serve as a portfolio manager for the fund. Kenneth Gau will continue to manage the fund. 5/18
LONAX Longboard Alternative Growth Fund No one, but . . . Sarah Baldwin joins Cole Wilcox, Eric Crittenden, and Michael Striano on the management team. 5/18
WAVEX Longboard Managed Futures Strategy Fund No one, but . . . Sarah Baldwin joins Eric Crittenden, Cole Wilcox, and Michael Striano on the management team. 5/18
LSCAX Loomis Sayles Dividend Income Fund No one, but . . . David Waldman joins Arthur Barry in managing the fund. 5/18
LSVRX Loomis Sayles Value Fund No one, but . . . David Waldman joins Arthur Barry in managing the fund. 5/18
MSAKX MainStay Absolute Return Multi-Strategy Fund Effective immediately, Myriam Guervin will no longer serve as a portfolio manager of the fund. Don’t worry. The other two dozen managers remain. 5/18
MBNAX MainStay Balanced Fund Donald Serek will no longer serve as a portfolio manager for the fund. AJ Rzad joins Kenneth Sommer, Johnathan Swaney, Migene Kim, Andrew Ver Planck, Jae Yoon, and Thomas Girard on the management team. 5/18
ICELX MainStay Epoch International Choice J. Christian Kirtly is no longer listed as a portfolio manager for the fund, effective immediately. Glen Petraglia joins William Booth and Michael Welhoelter on the management team. 5/18
MBPIX Morgan Stanley Global Insight Fund Burak Alici is no longer listed as a portfolio manager for the fund. Jason Yeung, Alexander Norton, Armistead Nash, Dennis Lynch, David Cohen, and Sandeep Chainani will now manage the fund. 5/18
MFPIX Morgan Stanley Institutional Insight Fund Burak Alici is no longer listed as a portfolio manager for the fund. Jason Yeung, Alexander Norton, Armistead Nash, Dennis Lynch, David Cohen, and Sandeep Chainani will now manage the fund. 5/18
Various Natixis Sustainable Future Target Date Funds Elizabeth Yakes is no longer listed as a portfolio manager for the fund. Anthony Wicklund has joined the team. 5/18
FAIIX Nuveen Core Bond Fund Chris Neuharth will retire on June 1, 2018. Jeffrey Ebert, Wan-Chong Kung, and Jason O’Brien will continue to serve as portfolio managers for the fund. 5/18
FAFIX Nuveen Core Plus Bond Fund Chris Neuharth will retire on June 1, 2018. Douglas Baker, Jeffrey Ebert, Wan-Chong Kung, and Timothy Palmer will continue to serve as portfolio managers for the fund. 5/18
NGVAX Nuveen Gresham Diversified Commodity Strategy Fund Chris Neuharth has announced his retirement from the fund. John Clarke, Chad Kemper, Wan-Chong Kung, Randy Migdal and Susan Wager will continue to serve as portfolio managers for the fund. 5/18
FALTX Nuveen Short-Term Bond Fund Chris Neuharth will retire on June 1, 2018. Peter Agrimson, Mackenzie Meyer, and Jason O’Brien will continue to serve as portfolio managers for the fund. 5/18
OARDX Oppenheimer Rising Dividends Fund Josh Peters will no longer serve as a portfolio manager for the fund. Raman Vardharaj jons Manind Govil in managing the fund. 5/18
OSTVX Osterweis Strategic Investment Fund Scott Ulaszek will no longer serve as a portfolio manager for the fund. John Sheehan and Daniel Oh will join Eddy Vataru, Craig Manchuck, Nael Fakhry, Bradley Kane, Gregory Hermanski, John Osterweis, and Carl Kaufman on the management team. 5/18
OSTRX Osterweis Total Return Fund Scott Ulaszek will no longer serve as a portfolio manager for the fund. John Sheehan and Daniel Oh will join Eddy Vataru on the management team. 5/18
RENIX Shelton Real Estate Income Fund Christopher Pike and Stephen Rogers are no longer listed as portfolio managers for the fund. John Harnisch and William Mock will now run the fund. 5/18
PRGMX T. Rowe Price GNMA Fund Andrew McCormick will leave the fund, effective January 1, 2019. Keir Joyce will take over running the fund. 5/18
PTTFX T. Rowe Price Total Return Fund Andrew McCormick will leave the fund, effective January 1, 2019. Christopher Brown, Jr. will become the fund’s sole portfolio manager. 5/18
TFMAX Templeton Frontier Markets Fund No one, but . . . Bassel Khatoun joins Tom Wu in managing the fund. 5/18
BPEKX The Positive Change Equity Fund Tom Coutts will no longer serve as a portfolio manager for the fund as of June 30th. The rest of the team remains. 5/18
IMUAX Transamerica Multi-Manager Alternative Strategies Portfolio Lucy Xin is no longer listed as a portfolio manager for the fund. Raymond Chan and Christopher Lvoff will continue to manage the fund. 5/18
Various Voya Index Solution Income Portfolio, Voya Index Solution Target Date Funds, Voya Solution Aggressive Portfolio, Voya Solution Balanced Portfolio, Voya Solution Conservative Portfolio, Voya Solution Income Portfolio, Voya Solution Moderately Aggressive Portfolio, Voya Solution Moderately Conservative Portfolio, Voya Solution Target Date Funds, and Voya Target Retirement Funds. Jody Hrazanek will no longer serve as a portfolio manager for the fund. Paul Zemsky and Harlvard Kvaale continue to run the funds. 5/18
Various Voya Multi-Manager Emerging Markets Fund, Voya Multi-Manager International Equity Fund, Voya Multi-Manager International Factors Fund, Voya Multi-Manager International Small Cap Fund, Voya Multi-Manager Mid Cap Value Fund, and Voya Multi-Manager Large Cap Core Portfolio Jody Hrazanek will no longer serve as a portfolio manager for the fund. Paul Zemsky joins Halvard Kvaale in managing the funds. 5/18
SCVIX Wells Fargo Small Company Value Fund Jason Ballsrud, Tasso Coin, and Douglas Pugh are no longer listed as portfolio managers for the fund. Jeff Goverman, Garth Nisbet, and Craig Pieringer will now run the fund. 5/18


Briefly Noted

By David Snowball


In October 2016, Dennis Baran profiled City National Rochdale Emerging Markets (RIMIX/CNRYX). His bottom line on the fund,

CNRYX offers an investor exposure to emerging markets by its concentrated strategy in Asia. Since inception, the fund has adhered to its six-country Asian allocation and not included other EM Asian countries or EM countries outside of that region in any meaningful way. The manager believes that the long-term positives of the region discussed here can become a virtuous cycle that could last for decades and lead to fund outperformance. The results thus far support that thesis: the fund has earned a five-star designation from Morningstar, is ranked highest by Lipper in total return, consistent return, tax efficiency, expense, and is a MFO Great Owl.

Since that publication, CNRYX has continued to outperform its Morningstar peer group, has maintained its five-star and Great Owl designations (though Morningstar’s “machine learning” analyst program is officially “neutral” on the fund) and now has $1.7 billion in assets under management.

Reader Dan Quisenberry wrote in April with a question about one statement in the profile.

In the October 2016 issue of MFO you wrote about CNRYX, City National Rochdale EM Fund.  I have owned RIMIX for a few years and I remember this sentence specifically…

Currently, all assets are being moved into CNRYX, which now has $853M, and RIMIX $143M. The remaining assets of RIMIX will be moved in the next six months. All shareholders will then have a class without a 12b-1 fee and a lower expense ratio.

Was this cancelled?  I still own RIMIX and it hasn’t been converted into CNRYX.  RIMIX is available at third party brokerage houses.  

Dennis reached out repeatedly to the adviser for confirmation over an 11 day period. Just when he was about to abandon the effort, he received a 10 word reply from CNR’s chief compliance officer, “I can confirm that the assets were indeed moved over.” Dennis eventually concluded, “It was not a conversion of RIMIX shares into CNRYX, and that is why both funds remain available.”

We do try to follow up when you have questions about funds or about things we’ve written, and you should do likewise. Most advisors, admittedly not all, are surprisingly forthcoming and informative. If you act respectfully but are not treated with respect in turn, take your money, go elsewhere then share a short explanation of your decision with your former fund company (see “contact us” on any website). You’re helping neither yourself nor the advisor by empowering poor behavior.

Briefly Noted . . .

Causeway Global Absolute Return Fund (CGAVX) is relying a bit more on machines now. Traditionally, the fund’s long portfolio has been generated through fundamental analysis and the short portfolio has been quantitatively driven:

The Investment Adviser uses its fundamental global value equity strategy to manage the Fund’s long exposures (the “long portfolio” of the Fund). The Investment Adviser uses its quantitative investment strategy designed to identify short exposures that it expects to underperform the World Index to manage the Fund’s short exposures (the “short portfolio” of the Fund).

New language signals a change to just the long portfolio strategy: “The Investment Adviser integrates fundamental and quantitative investment research to manage the Fund’s long exposures.” The new prospectus substantially rewrites and expands their discussion on the nature and creation of the fund’s long portfolio.

Morningstar’s “machine learning” process, designed to assign medalist ratings to funds not actively covered by human analysts, is positive about everything except the fund’s expenses (1.77%) and assigns it a Silver medal. That might well be justified, but investors interested in a market neutral fund might find Causeway (the blue line) a bit more than they’d bargained for.

Leuthold’s Grizzly Short Fund (GRZZX) underwent a 4:1 reverse split on May 18, 2018 because … well, being short is grizzly just now. The net effect is that investors received one “new” share for every four “old” shares, with the new shares worth precisely four times as much as the old ones.

If you’re invested in one of the Oppenheimer muni bond funds, you’re going to see much leaner management teams. Effective June 29, 2018, each fund will transition from having a management team to have a single specialized portfolio manager.


As of May 21, 2018, American Century Equity Income (TWEIX) was reopened to all investors.

Delaware Value Fund (DDVAX) reopened to new investors on May 14, 2018. The fund had been closed since October 10, 2016.

Driehaus International Small Cap Growth Fund (DRIOX) will experience a substantial drop in its management fee, from 1.50% down to 1.00% as of July 1, 2018.

Marsico Focus Fund (MFOCX), Marsico Growth Fund (MGRIX), and Marsico 21st Century Fund (MXXIX) reduced their 12(b)1 fees “to a rate of 0% per annum,” effective on June 1, 2018.

CLOSINGS (and related inconveniences)

Effective July 1, 2018, through at least January 31, 2019, shares of Conestoga Small Cap Fund (CCASX) will no longer be available to new accounts through financial intermediaries without existing client relationships with the Fund or the Adviser. In addition, shareholders of the Conestoga SMid Cap Fund (CCSMX) will no longer be able to exchange their SMid Cap Fund shares for shares of the fund.

Effective as of the close of business on May 31, 2018, CrossingBridge Long/Short Credit Fund (CLCAX/CLCIX) closed the Class A shares of the Fund to all new purchases. David Sherman described the retail accounts as few in number and expensive to maintain, in part because of the cost of having a “share class” active.

With a few exceptions, Meridian Small Cap Growth Fund (MISGX) will close to new retail investors – those investing under $100,000 – on June 30, 2018.

On May 29, 2015, MFS International Value (MGIAX) was closed to new investors subject to certain exceptions. A not particularly clear SEC filing suggests that the fund remains closed but that, as of mid-June, the closure adds some wiggle room.

Vanguard Dividend Growth Fund is closed to all new investors (with the exception of (1) investors who are added and invest in the Fund only through technology-driven model portfolios and (2) participants who invest in the Fund only through defined contribution plans that offer the Fund as an existing option).


Alger International Growth Fund (ALGAX) is undergoing two changes, one unremarkable and one entirely admirable. The unremarkable change is that, on August 30, 2018, it is changing its name to Alger International Focus Fund. The entirely admirable change is that it’s eliminating babble from the explanation of its investment strategy. The current text begins:

Fred Alger Management, Inc. believes companies undergoing Positive Dynamic Change offer the best investment opportunities. Positive Dynamic Change refers to companies realizing High Unit Volume Growth or companies undergoing Positive Lifecycle Change. High Unit Volume Growth companies are

Two problems stand out. (1) Fred Alger Management, Inc., is not a living thing and, hence, has no beliefs. (2) Capitalized Big Concepts are usually substitutes for clear thought since Capitalized Big Concepts aren’t questioned, they’re marketed. The Alger text has three CBCs in a single sentence.

I’m hopeful that the management team which took over the fund in March 2018 is responsible for the reassertion of clear English in the prospectus:

The Fund invests in Companies which it believes are attractively valued, high quality growth companies with definable strategic advantages/moat and competitive positioning that offer strong earnings visibility and sustainability. The team focuses on analyzing growth trajectories and identifying catalysts for future growth for companies that are in a positive earnings revision cycle. The Fund is an all-cap, all-country, opportunistic focus fund which generally holds less than 50 holdings.

Not flawless (it doesn’t exclude the U.S., the “/moat” is ugly and adds nothing; in general, use “less than” for things that cannot be counted but “fewer than” for things that can), but it’s a lot cleaner.

Similarly, Alger Global Growth Fund (CHUSX) becomes Alger Global Focus Fund, with an identical principal strategy.

American Customer Satisfaction Core Alpha ETF (ACSI) is now American Customer Satisfaction ETF. Not clear whether it was the “core” or the “alpha” part that spooked them.

On or about July 3, 2018, Catalyst Insider Income Fund (IIXAX) will become Catalyst Enhanced Income Strategy Fund. The fund will then seek “current income,” though a proposed fee increase by the advisor suggests that they’ll be the first to see increased income from the change. Former insiders David Miller and Charles Ashley will be replaced as the portfolio managers by Leland Abrams and Brandon Jundt of Wynkoop, LLC.

Sometime in the third quarter of 2018, Epiphany FFV Strategic Income Fund (EPIAX), will be reorganized into the Eventide Limited-Term Bond Fund. The Epiphany fund relies on “Trinity’s FFV Scorecard® screening based on the principles of Biblically Responsible Investing,” the new fund will use Eventide’s ethical values screens. The management team will remain intact.

Effective May 31, 2018, Fidelity Series Emerging Markets Fund (FEMSX) has been renamed Fidelity Series Emerging Markets Opportunities Fund. At the same time, Fidelity Series 1000 Value Index Fund (FIOOX) was renamed Fidelity Series Large Cap Value Index Fund.

Geneva Advisors All Cap Growth Fund has become AT All Cap Growth Fund (AWGIX) while Geneva Advisors Equity Income Fund was reorganized into AT Equity Income Fund (AWYIX). The change took place on February 12, 2018 but the SEC filing noting the change was May 29.

Goodwood no more. On May 18, 2018, Goodwood SMID Long/Short Fund was adopted by Crow Point Partners. That adoption occasioned four changes: the investment strategy shifted from small- and mid-cap long/short to long-only small growth, the management team changed, the fund name changed to Crow Point Growth Fund, and the expense ratio was reduced to 1.35%. Our June 2018 Elevator Talk with the new managers offers more detail. Check it out!

The Guggenheim BulletShares have been rechristened as the PowerShares BulletShares. (Perhaps an eventual line of leveraged funds will earn the PowerShares BulletShares PowerBullets designation?)

Former Fund Current Fund
Guggenheim BulletShares 2025 High Yield Corporate Bond ETF PowerShares BulletShares 2025 High Yield Corporate Bond Portfolio
Guggenheim BRIC ETF PowerShares BRIC Portfolio
Guggenheim Raymond James SB-1 Equity ETF PowerShares Raymond James SB-1 Equity Portfolio
Wilshire US REIT ETF PowerShares Wilshire US REIT Portfolio
Guggenheim Canadian Energy Income ETF PowerShares Canadian Energy Income Portfolio
Guggenheim China Small Cap ETF PowerShares China Small Cap  Portfolio
Guggenheim China Technology ETF PowerShares China Technology Portfolio
Guggenheim S&P High Income Infrastructure ETF PowerShares S&P High Income Infrastructure Portfolio
Guggenheim Solar ETF PowerShares Solar Portfolio

With the departure of Mackenzie Financial (a/k/a “Cundill”) as sub-adviser and the arrival of Pzena, Ivy Cundill Global Value Fund (ICDAX) has been rechristened Ivy Pzena International Value Fund. Principal investment strategies were appropriately revised.

Effective July 31, 2018 JPMorgan Intrepid European Fund (VEUAX) becomes JPMorgan Europe Dynamic Fund and JPMorgan Intrepid International Fund (VFTAX) gets renamed JPMorgan International Advantage Fund.

PIMCO appears to be broadening the investment mandates for many of their funds. Those changes are reflected in a series of name changes that go into effect on July 30, 2018

Current name Impending name
PIMCO GNMA Fund PIMCO GNMA and Government Securities Fund
PIMCO Investment Grade Corporate Bond Fund PIMCO Investment Grade Credit Bond Fund
PIMCO Mortgage Opportunities Fund PIMCO Mortgage Opportunities and Bond Fund
PIMCO Unconstrained Bond Fund PIMCO Dynamic Bond Fund
PIMCO Long-Term Credit Fund PIMCO Long-Term Credit Bond Fund
PIMCO Credit Absolute Return Fund PIMCO Credit Opportunities Bond Fund
PIMCO RAE Fundamental PLUS International Fund PIMCO RAE PLUS International Fund
PIMCO RAE Fundamental PLUS Small Fund PIMCO RAE PLUS Small Fund
PIMCO Foreign Bond Fund (U.S. Dollar-Hedged) PIMCO International Bond Fund (U.S. Dollar-Hedged)
PIMCO Foreign Bond Fund (Unhedged) PIMCO International Bond Fund (Unhedged)
PIMCO Emerging Markets Currency Fund PIMCO Emerging Markets Currency and Short-Term Investments Fund
PIMCO Global Bond Fund (U.S. Dollar-Hedged) PIMCO Global Bond Opportunities Fund (U.S. Dollar-Hedged)
PIMCO Global Bond Fund (Unhedged) PIMCO Global Bond Opportunities Fund (Unhedged)
PIMCO Real Return Asset Fund PIMCO Long-Term Real Return Fund
PIMCO Unconstrained Tax Managed Bond Fund PIMCO Strategic Bond Fund

On June 28, 2018, Snow Capital Opportunity Fund (SNOAX) becomes Snow Capital Long/Short Opportunity Fund. About 11% of the current portfolio is in short positions, and the adviser will change the fund’s investment strategy “to increase the percentage of short sales within the Fund to enhance the hedging strategy.” At the same time,   Snow Capital Dividend Plus Fund (SDPAX) will be rechristened Snow Capital Equity Income Fund. The $3.6 million fund invests in dividend-paying value stocks which, they’re convinced, is better reflected by the phrase “equity income” than by “dividend plus.” By Morningstar’s calculation, the funds have one- and two-star ratings.

Effective July 31, 2018 SPDR Bloomberg Barclays Issuer Scored Corporate Bond ETF (CBND) will change its name (to Bloomberg Barclays Corporate Bond ETF), management fee, benchmark index and principal investment strategy. Thankfully, they respected the fund’s ticker symbol and left it alone.

Effective on or about July 20, 2018, Touchstone Total Return Bond Fund (TCPAX) will be renamed the Touchstone Impact Bond Fund. The fund’s investment strategies will be revised to reflect an ESG focus:

EARNEST also believes that entities that are cognizant of ESG issues tend to be more successful over time. As a result, EARNEST prefers to invest in government programs and companies that have sustainable operating models and seek to achieve positive aggregate societal impact. This inclusive approach views positive impact characteristics as additive to an investment’s risk/return profile. When assessing an issue’s impact profile, EARNEST considers a wide range of factors, including but not limited to support for economic development, home ownership, and job creation.

Vanguard Telecommunication Services Index Fund (VOX) has changed its name to Vanguard Communication Services Index Fund.


The Board of Directors has approved a plan of liquidation for the AC Alternatives Long Short Fund (ALEVX). Under the plan, the liquidation date of the fund will be July 30, 2018. The fund closes to new investments on July 25, 2018, which leads you to wonder who’d be dumb enough to put money into a by-then overpriced money market fund for a period of five days.

Active Alts Contrarian ETF (SQZZ) liquidated on May 30, 2018.

Around July 13, 2018, Carillon Eagle Smaller Company Fund (EGEAX) will be absorbed by Carillon Scout Small Cap Fund (UMBHX) while Carillon Eagle Mid Cap Stock Fund (HMCAX) gets taken in by the four-star Carillon Eagle Mid Cap Growth Fund HAGAX).

Campbell Multi-Asset Carry Fund (CCRYX) will be closed and liquidated effective on or about the close of business on June 22, 2018.

Catalyst Time Value Trading Fund (TVTAX) will liquidate on June 25, 2018.

Pending shareholder approval, Centre Active U.S. Tax Exempt Fund (DHBRX) is merging with Centre Global Infrastructure Fund (DHINX), sometime in the third quarter of 2018. Usually the announcement of such mergers makes some vague attempt to explain what the merged funds have in common: same investment objectives, similar investment strategies, same managers and so on. The decision to merge a $20 million muni bond fund into a $2 million global equity fund is apt to be the occasion for a burst of rhetorical gymnastics.

Clearbridge Global Health Care Innovations Fund will liquidate around July, 2018.

Crawford Dividend Yield Fund (CDYLX) will, “in the best interests of the shareholders,” liquidate on June 27, 2018.

Credit Suisse Commodity ACCESS Strategy Fund (CRCAX) was scheduled to liquidate on May 31, 2018. The execution has been pushed back by a week, to June 6, 2018, in order to give the managers time to finishing liquidating the portfolio.

Day Hagan Hedged Strategy Fund (DHJAX) plans to cease operations on June 25, 2018.

Effective May 21, 2018, Eaton Vance Global Small-Cap Fund was reorganized into the $25 million Eaton Vance Global Small-Cap Equity Fund (ESVAX).

Equinox BH-DG Strategy Fund (EBHIX) will liquidate on June 29, 2018.

Keeley All Cap Value Fund (KACVX) will be reorganized into Keeley Small-Mid Cap Value Fund (KSMVX) on or about July 27, 2018. Both funds currently sport two stars in Morningstar’s ratings system.

First Investors Real Estate Fund (FIRDX) will be FIRED on June 22, 2018.

The liquidations of Nuveen Symphony International Equity Fund, Nuveen Symphony Mid-Cap Core Fund and Nuveen Symphony Small Cap Core Fund are complete. 

Marsico Flexible Capital Fund (MFCFX) will merge into Marsico Global Fund (MGLBX) on or about August 3, 2018. This seems just a part of the larger unwinding of Mr. Marsico’s empire whose AUM has fallen from $5.4 billion ten years ago to $1.4 billion now. The fund had a splendid five-year run (through mid-2012) under Doug Rao, then six not-embarrassing years under his two successors, ending up with a four-star rating from Morningstar. Mr. Marsico took over the fund personally in March 2018 and is merging it into a tiny, five-star fund that Mr. Marsico has managed (or co-managed) since its inception of 2007.

PIMCO Real Return Limited Duration Fund (PPIRX) will be liquidated on or about July 30, 2018. In the meantime, it’s closed to all investors. The fund has a $1 million minimum and $10 million in assets after 2+ years of operation.

T. Rowe Price Institutional Credit Opportunities Fund (TRXPX) originally slated to liquidate in the first quarter of 2018 is now scheduled to merge into T. Rowe Price Credit Opportunities Fund (TCRRX) on June 25, 2018, with TRXPX shareholders received institutional-class shares in exchange.

The $15 million Touchstone International Growth Fund (TIAPX) is closed and will be liquidated on or about July 30, 2018 after about two years of mediocre performance.

Touchstone Small Cap Growth Fund (MCSAX) is disappearing into the Touchstone Small Company Fund (SAGWX) on September 21, 2018. In an interesting side note, Touchstone reports removing the current Fiera management team and bringing into specialists from Russell Implementation Services to begin morphing the Small Cap Growth portfolio. At the same time Touchstone Small Cap Value Opportunities Fund (TSOAX) will merge into Touchstone Small Cap Value Fund (TVOAX). Ahead of the merger, the TVOAX management team will take over TSOAX. The 10 year record of the two funds gives you a sense of the significance of the change. The surviving fund is the blue line.

On May 30, 2018, USAA shareholders approved the merger of the First Start Growth Fund (USFGX) into the Cornerstone Moderately Aggressive Fund (USCRX). Effective June 2, 2018, the First Start Growth Fund is closed to new investors.

FYI, on April 28, 2018, Virtus Duff & Phelps International Equity Fund, Virtus Horizon International Wealth Masters Fund, Virtus Rampart Global Equity Trend Fund and Virtus Rampart Low Volatility Equity Fund were liquidated.

The Really X-Trackers: On May 16, 2018, the Board of Trustees of DBX ETF Trust  unanimously voted to close and liquidate Xtrackers MSCI EAFE Small Cap Hedged Equity ETF, Xtrackers MSCI Brazil Hedged Equity ETF and Xtrackers MSCI Mexico Hedged Equity ETF. The dirty deed will be done in early June.

Wasatch-1st Source Income Fund (FMEQX) is slated to be liquidated “as soon as practicable,” which they translate to July 13, 2018. This might be read as part of a move by Wasatch to reclaim their core business; they’ve merged the long/short fund into a global equity one, liquidated the short term income fund, and they’ve allowed founder Samuel Stewart to leave with their Strategic Income and World Innovators funds. That leaves only the Wasatch-Hoisington Treasury Fund as an anomaly, but with the senior Mr. Hoisington finishing his 44th year as an investor, it might simply be a matter of time before that marriage dissolves as well.