Before funds and ETFs can be offered to the public, they’ve got to be submitted to the SEC which has 70 days to review the application. In general, advisers try to launch just before year’s end because that allows them to have clean “year to date” and calendar year results to share. The funds on-file this month will be eligible to launch in September, though not required to do so. A surprising number of advisors filed virtual “red herring” prospectuses: substantially incomplete documents that were pushed through to meet some self-imposed deadline but that fail to stipulate strategy, manager and costs.
There are a series of intriguing and potentially outstanding funds in this month’s collection: BBH Large Cap which shares its manager with BBH Core Select, DoubleLine Income which is the latest variation on DoubleLine’s asset-backed theme, Frontier Caravan Emerging Markets Fund which features the return of a former Eaton Vance star manager, Grandeur Peak Global Contrarian Fund which seems like a sort of “special situations” fund for the global micro-cap crowd, and Wasatch Global Select which seems like a “best ideas without constraints” fund for the firm’s successful, younger generation of managers.
Aperture Endeavour Equity Fund
Aperture Endeavour Equity Fund will seek “return in excess of the MSCI ACWI hedged to USD Net Total Return Index.” (sigh) The plan is to establish a global long/short portfolio of misunderstood stocks. The fund will be managed by Thomas Tully of Aperture Investments, formerly an analyst for a small hedge fund provider, Kingdon Capital Management. Its opening expense ratio is 2.09% for “X” shares, and the minimum initial investment will be $500.
Avantis Emerging Markets Equity ETF
Avantis Emerging Markets Equity ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to invest a diverse group of companies related to emerging markets across market sectors, industry groups and countries but the prospectus admits to a small cap and value bias. The fund will be managed by someone as yet unnamed. Its opening expense ratio has not been disclosed.
BBH Select Series-Large Cap Fund
BBH Select Series-Large Cap Fund will seek “to provide investors with long-term growth of capital.” Okay, “investor-focused” is good. The plan is to buy US large cap stocks “based on fundamental business analysis and a long-term orientation that blends aspects of growth and value investing.” The fund will be managed by Michael R. Keller. Mr. Keller has been co-manager of the very solid BBH Core Select Fund since 2008 and sole manager since July 2018. He’s supported by 11 analysts. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $5,000 or $10,000, depending on share class.
DoubleLine Income Fund
DoubleLine Income Fund will seek to maximize total return through investment principally in income-producing securities. The plan is to create “a portfolio of income-producing instruments of varying characteristics selected by the Adviser for their potential to provide a high level of current income, capital appreciation or both.” Mostly asset-backed securities, which are sort of a DoubleLine specialty. They promise “a controlled risk approach” and have the ability to short in order to further that goal. That said, it’s not clear to me what the fund’s distinctive niche among DoubleLine products is. I had that same problem with the Royce Funds and their penchant for 100 flavors of small cap value investing. The fund will be managed by Morris Chen, Andrew Hsu and Ken Shinoda. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $2,000, reduced to $500 for IRAs and HSAs.
ETF Opportunities Strategy One Fund
ETF Opportunities Strategy One Fund, apparently an actively-managed ETF though they don’t exactly say that, will seek long-term capital appreciation with capital preservation as a secondary objective. (I’ve also wondered what the prospects are for long term gains when capital protection is secondary.) The plan is to invest in stocks with the proviso [Additional description of investment strategy of Fund to be included in a subsequent pre-effective amendment.]. The fund will be managed by an as-yet unnamed person, possibly affiliated with RidgeLine Research, LLC. Ridgeline is a newly-formed advisor with no assets under management. Its opening expense ratio has not been disclosed. There is an identical companion filing for ETF Opportunities Strategy Two Fund.
Federated Hermes SDG Engagement High Yield Credit Fund
Federated Hermes SDG Engagement High Yield Credit Fund will seek current income and long-term capital appreciation alongside positive societal impact. That seems awfully wholesome. The plan is to invest globally in the high-yield securities the advisor believes have attractive risk-return characteristics as well as alignment with at least one of the UN Sustainable Development Goals. They exclude companies “that manufacture tobacco and/or controversial weapons.” The fund will be managed by Mitch Reznick and Fraser Lundie of Hermes Investment Management, Ltd. Hermes has about $44 billion in AUM but provides stewardship advisory services to folks with another $587 billion in assets. Its opening expense ratio is 0.90%, and the minimum initial investment will be $1500.
Fiera Capital U.S. Equity Long-Term Quality Fund
Fiera Capital U.S. Equity Long-Term Quality Fund will seek long-term capital appreciation. The plan is to build a portfolio of 20-45 high quality US stocks. On face, there’s nothing terribly novel about their view of what qualifies as “quality” or how to find it (stock-by-stock) though “our unique approach to investing is rooted in the firm’s deep Canadian heritage.” The fund will be managed by Nadim Rizk and Andrew Chan of Fiera Capital. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $1,000.
Frontier Caravan Emerging Markets Fund
Frontier Caravan Emerging Markets Fund will seek long-term capital appreciation. The prospectus reveals virtually nothing about the proposed strategy, other than “invest in EM stocks with 25% or more in the banking sector.” The fund will be managed by Cliff Quisenberry who founded Caravan Capital Management LLC, a small boutique investor, in 2008. Mr. Q’s online bio reports that “As the portfolio manager of the Eaton Vance Tax-Managed Emerging Markets Fund (EITEX), his fund achieved a consistent, top-decile ranking, obtained a 5-star Morningstar rating and outperformed the MSCI Emerging Markets Index by over 500 basis points per annum since the fund’s inception in July of 1998 and until his departure in April 2007.” At the time, he favored smaller markets and quant investing. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $10,000.
Grandeur Peak Global Contrarian Fund
Grandeur Peak Global Contrarian Fund will seek long-term growth of capital. The plan is to invest primarily in foreign and domestic small- and micro-cap companies with the stipulations that a “significant” portion might be in micro-caps and a “meaningful” slice in mid-caps and larger. In general they target three themes:
- “Core Contrarian”—what the Adviser believes to be best-in-class growth companies, but which are part of a currently out-of-favor industry, sector, or geography.
- “Fallen Angels”—high quality growth companies that the Adviser believes have hit a temporary setback relative to their long-term growth potential.
- “Undiscovered Gems”—smaller growth companies that the Adviser believes are undervalued because they are lesser known, have high product or client concentration, or are otherwise not well understood yet by the market.
And maybe some other stuff that looks good but doesn’t quite fit into one of those categories. The fund will be managed by Mark Madsen. Mr. Madsen is on the management teams for Grandeur Park Global Reach and International Opportunities and, like most of the GP professionals, spent time as an analyst at Wasatch. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $2,000, reduced to $1,000 for accounts opened with an automatic investing plan.
iM DBi Long Short Hedge Strategy ETF
iM DBi Long Short Hedge Strategy ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to fire up the Dynamic Beta Engine and have it “invest in an optimized portfolio of long and short positions in U.S. exchange-traded futures contracts.” Since futures are cheap, the rest of the portfolio will be invested in investment grade, short-term bonds. The manager has been studying hedge funds and has concluded that they can be beaten at their own game. The fund will be managed by Andrew Beer and Mathias Mamou-Mani of Dynamic Beta investments (note the small “i” as a dynamic marketing gesture.) Its opening expense ratio is 0.85%.
Karner Blue Animal Welfare Fund
Karner Blue Animal Welfare Fund will seek achieve long-term total returns by investing in companies that lead their industries in animal welfare performance. The plan is to invest, mostly, in mid- to mega-cap stocks of firms that are nicer-than-average to animals, either in their R&D (testing on animals), production or impact on wildlife habitat. Curiously the prospectus highlights “leaders in their industries with respect to animal welfare performance” but says hardly a word about the investment characteristics that they target. The fund will be managed by three folks from Karner Blue Capital, “a pioneer in compassionate investing.” Its opening expense ratio is 1.25%, and the minimum initial investment will be $2,000 for Investor class and $2,000,000 for Butterfly class shares. I scanned the prospectus to see if the “Butterfly” class was anything other than a silly marketing gimmick; I had imagined, incorrectly, that investments in that share class might trigger some eco-friendly activity on the advisor’s part. Not so much.
Overlay Shares Large Cap Equity ETF
Overlay Shares Large Cap Equity ETF, an actively-managed ETF, seeks long-term capital gain. The plan is to invest in other ETFs to get US market exposure and buying or selling short-term put options to generate income and hedge the portfolio. The hope is that the fund will manage positive returns in rising, flat or modestly falling equity markets, and will buffer losses in major declines. The manager is not named, nor is the expense ratio disclosed. The advisor is launching four other active ETFs with it: Overlay Shares Small Cap ETF, Overlay Shares Foreign Equity ETF, Overlay Shares Core Bond ETF and Overlay Shares Municipal Bond ETF. Their strategies (and missing info) are parallel.
Pzena International Value Fund
Pzena International Value Fund will seek long-term capital appreciation. The plan is to buy stocks, mostly in developed foreign markets, using “a classic value strategy.” That said, the prospectus also allows up to 15% in emerging markets, 15% in illiquid securities, 15% in derivatives and 10% in limited partnerships. The fund will be managed by Caroline Cai, John P. Goetz and Allison Fisch, all of Pzena Investment Management. The team began running Ivy Pzena International Value in July 2018; results to date have been weak. They’ve managed Pzena EM Value for five years with no great distinction. Its opening expense ratio is 1.04%, and the minimum initial investment will be $5,000 for regular accounts and $1000 for tax-advantaged ones.
Sierra Tactical Bond Fund
Sierra Tactical Bond Fund will seek total return. The plan is to tactically trade high-yield bond mutual funds and ETFs. The fund will be managed by Kenneth L. Sleeper, David C. Wright, and Terri Spath. The team’s multi-sector bond fund, Sierra Tactical All Asset, trails 97% of its Morningstar peer group over the past five years with low returns, below-average risk but high expenses. This fund’s opening expense ratio is 1.84%, and the minimum initial investment will be $10,000.
Wasatch Global Select Fund
Wasatch Global Select Fund will seek long-term growth of capital. The plan is a bit unclear to me; it’s global, all-cap, and concentrated with managers who will “travel extensively outside the U.S. to visit companies and expect to meet with senior management.” The fund will be managed by five people who manage other Wasatch funds (International Opportunities, International Growth, Micro-cap …) which largely bear four- or five-star ratings. So maybe this is Wasatch’s “best ideas” fund: young, successful managers largely unconstrained by size, geography, industry or style able to buy whatever is most compelling? Its opening expense ratio has not been disclosed, and the minimum initial investment will be $2,000, reduced to $1,000 for accounts established with an automatic investing plan.
Wasatch International Select Fund
Wasatch International Select Fund will seek long-term growth of capital. The plan is a bit unclear to me; it’s global, all-cap, and concentrated with managers who will “travel extensively outside the U.S. to visit companies and expect to meet with senior management.” The fund will be managed by Ken Applegate and Linda Lasater, who are also members of the Global Select team. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $2,000, reduced to $1,000 for accounts established with an automatic investing plan.
William Blair Small-Mid Cap Core Fund
William Blair Small-Mid Cap Core Fund will seek long-term capital appreciation. The plan is to build a diversified portfolio of “high quality but undervalued” stocks. The fund will be managed by Daniel Crowe, Robert C. Lanphier IV, and Ward D. Sexton. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $500,000.
