Monthly Archives: March 2019

March 1, 2019

By David Snowball

Dear friends,

It’s spring and it’s about 10 degrees above zero here which means it’s Spring Break at Augustana College! Winter term on Augie’s singularly bizarre academic calendar runs from roughly Halloween to Valentine’s Day, gulping down Thanksgiving, Christmas, and New Year’s along the way. We offer, I suppose, the antithesis of the old MTV spring break beach parties with raucous guys dancing with girlfriends clad only in whipped cream. Nope, Swedish-Lutherans we, we hand the kids their parkas and urge them to go off and have a good time, but just be back before too late!

The break gives me occasion to read, some of which (a friend’s novel) was deeply engaging and some of which (virtually every online “news” story) was deeply disturbing. Not that the news was disturbing so much as the lunacy of the folks they allow near keyboards. It appeared at times as if the financial analyses were being offered up by the folks from Monty Python’s Flying Circus.

I mourned the passing of Jack Bogle, who was sometimes wrong but never anybody’s fool. I pondered the disclosure that Bill Gross has Asperger’s Syndrome, an autism spectrum condition, and that he attributed part of his long string of successful investments to it. And I thought a bit about the different sets of tales coming from Fidelity: the parent company spinning gold out of straw while even their best managers can’t hold investors.

Three Tales of the Faithful

Fidelity first appears in English in the 15th century, from Middle French fidélité, from Latin fidēlitās, from fidēlis (“faithful”).

Tale the First: Shearing the sheep

I had the opportunity to read the 2018 annual report of FMR, Fidelity Investment’s parent company. The company has much to celebrate. First, they’re giving away money like holiday candy. Their funds have zero minimums. Expense ratios are down. New index funds that charge nothing, nothing, nothing! are drawing billions. And Fidelity has launched no-commission, low expense ETFs including sector ETFs charging just 0.084%. That is $0.84 for every $1,000 invested. It’s like Mother Teresa is running the place.

And yet, somehow Fidelity is miraculously raking in record piles of cash. Revenue was up 11.5% and income was up 18.6%. Expenses were up 8.6%. And yet, the number of customers was up just 6-7%. Assets under management were down as were assets under advisement.

If the amount of money Fidelity takes in grows faster than the number of accounts, and it grows even when the value of those accounts fall, one begins to suspect that somehow Fidelity – despite record largesse – has arranged things so as to extract greater amounts of money from their investors than ever before.

Which, by the way, is the fundamental imperative of the financial services industry.

Tale the Second: The Losing Bet

I have never made money betting against Joel Tillinghast.

Mr. T. manages Fidelity Low-Priced Stock Fund. He is, by all accounts, a genius. Peter Lynch, famed manager of Fidelity Magellan, explains in the Foreword to Mr. T’s book Big Money Thinks Small, how he came to be at Fidelity. Lynch writes that his secretary eventually put Tillinghast through, saying there was a “sweet guy” from the Midwest who kept calling. She thought he might be a farmer. Lynch said he’d give him five minutes. An hour later, he said, “We’ve got to hire this guy.”

Good call. In the 1980s, Mr. Tillinghast discovered a stock market anomaly – low-priced stocks, those priced at $5.00 a share or less – were substantially mis-priced, perhaps because managers were squeamish about something that felt so … flimsy. He convinced Fidelity that he could make a lot of money investing in these low-priced stocks if only they’d give him a fund to do it with. And they did: Peter Lynch and Fidelity chairman Ned Johnson seeded the 31-year-old’s new Low-Priced Stock Fund with their own money.

A quick scan of the fund’s performance in the MFO Premium database shows:

Inception – 2019: Low Priced Stock beats its peers by 3.2% annually. $10,000 invested alongside Lynch and Johnson in 1989 would have grown to $379,000 today. The same money in one of its peers? $158,000-167,000, depending on the group. That’s a … ummm, $220,000 premium.

Over the past 20 years: Low-Priced wins by 1.9% annually.

Over the full market cycle: Low-Priced wins by 0.8% annually. Likewise it won over the entire preceding market cycle.

During the 2007-09 crash: Low-Priced wins by 2.7% annually.

It also wins during the subsequent up-cycle, and over the past year and the past five years and in three of the past four years and in every year when the peer group has lost money, it beats indexes, benchmarks, peer groups and ETFs …and …and …and ….

And the management is stable and deeply invested in the fund. The expenses (0.62%) are low and falling. Turnover is low and the fund is tax-efficient. Morningstar celebrates it. MFO celebrates it.

All of which, understandably enough, convinced investors to flee in droves.

This is a pretty powerful picture. It depicts monthly outflows from Low Priced Stock in 59 of the past 60 months, despite offering everything that an equity investor might reasonably (or unreasonably) hope for: discipline, low-cost and winning performance.

As investors, we need to ask “is it me, Lord?” Am I the one dumb enough to ignore all of the available evidence and invest based on fad rather than fact? As fund advisors, we need to ask, “if cheap and successful doesn’t work for Mr. T., what does it say about how we should approach our investors and our approach to creating a sustainable business?” Many fund companies continue to pursue the same doomed approach: “Let’s cut our expense ratio by a few basis points, let go an analyst or two, and talk about our market-beating performance.” Dear friends, you can’t nibble your way out of this problem and you can’t win by trumpeting fleeting returns. You need to listen much more seriously to your investors and ask the hard question, what purpose do we serve?

Tale the Third: Passing in Silence

Fidelity announced this month the impending retirement of the long-time manager of Fidelity Magellan (FMAGX), once more of a starship than a flagship in the galaxy of funds. The announcement of the departure of The Great Man – whether Johnson, Smith, Lynch or Vinik – would have been front page news and fodder for a breaking story on CNBC.

Today? Listen to the sound of the crickets. Morningstar just ran Russ Kinnel’s story, “7 Funds with Big Manager Changes” (2/25/2019). Westwood Income Opportunity (WHGIX) made the list, Fidelity Magellan did not.

Perhaps that’s not surprising. Magellan, once the largest actively-managed equity fund in existence, is not even one of Fidelity’s 20 largest funds anyone. At $16 billion, it sits 25th on the list … and you couldn’t name even a handful of the 24 ahead of it. Nor, I suspect, could you name the manager who, after eight years at the helm, is about to go.

Jeff Feingold. He’s been replaced by Sammy Simnegar, Fidelity’s very successful emerging markets manager.  It might worry Fidelity that we’re able to identify at a glance a manager who’s been gone for 29 years far more easily and naturally than the guy who’s actually been running the show this century.

Before you point, in celebration or condemnation, to ETFs

You really should read a singularly thoughtful, well-written and well-researched piece by Elizabeth Kashner at ETF.com. It’s entitled “Tough Times for New ETFs” (2/21/2019). She makes two interesting points: ETF liquidations are rising steadily and almost no new ETF launches lead to sustainable asset levels. In general, the only ETFs that make serious money are the ETFs that are used in the portfolios of other funds. Beyond that, for all the hype and pageantry, it looks like the market has peaked. It’s worth both reading and thinking about.

Thanks!

To your all, and welcome to Roberto Plaja, our first international (much less first Swiss) subscriber! Thanks, as ever, to our subscribers – the folks who’ve set up modest recurring monthly contributions through PayPal — Greg, William, Brian, David, Doug, and Deb. Wow! We can’t thank you enough for your help. Finally, thanks and welcome to Trev, Martin and John. We really do appreciate the help!

We’re beginning to plan for the warmer months to come. MFO will be at the Morningstar Investment Conference in Chicago again this year, but we’ll be less present than usual. The conference runs from Wednesday, May 8 to Friday, May 10. Chip and I are both still in session at our colleges then, so she won’t be able to attend at all and I will be around only on Wednesday, May 8. We expect that our colleague Charles Boccadoro, master of MFO Premium, will be around throughout the conference. If you’d like a chance to chat with me, check your Wednesday schedule and drop me a note. Likewise, reach out to Charles if you’d like to talk MFO Premium, data, analytics, AI for funds or a hundred other topics.

And, if you’re trying to find us in June, you’ll have to look for the happy Americans walking the beaches of the Dingle Peninsula, County Kerry, Ireland.

Take great care!

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The Investor’s Guide to the End of the World

By David Snowball

Human actions are causing our planet’s climate to become increasingly unstable. We are beyond the point where that fact is open to debate. Most Americans, Republicans and Democrats both, now accept the reality of climate change. That’s based on fascinating data visualizations provided by the Yale Program on Climate Change Communication. Republicans, far more than Democrats and others, are unsure that there’s a human role or that scientists have reached agreement on what is happening.

The short version is that every serious inquiry reaches the same conclusion: the climate is becoming unstable, human activity is driving the change, the instability is immediate and the effects are potentially catastrophic. For folks who would like to learn more about the subject from a source that’s expert, unbiased, and accessible, NASA’s Global Climate Change is quite informative and easy to follow.

Why NASA? Because NASA and  National Oceanic and Atmospheric Administration (NOAA) are  the federal government’s lead climate and weather agencies, often working in partnership to gather, test and analyze data. (Thanks, Leah!)

The rising levels of heat-trapping gases in the atmosphere – not just CO2, but also methane, nitrous oxide and others – have both physical and biological effects. There is very good evidence of the physical risks – temperature rise, sea level rise, greater intensity of storms, greater frequency of extreme weather events – and somewhat more question on the biological risks. There’s some evidence, for example, that plants like rice will carry one-third less nutrients and that some plant species (coffee!!!! cacao!) might be pushed toward extinction, but that stuff strikes me as muddier than the physical effects.

At this point, we’ll offer two different paths. The section which immediately follows, The Climate Consensus, is a quick guide to some of the latest reports on climate destabilization, for those interested in learning a bit more. Folks with no such interest might skip to the following section, Climate Conscious Investing Options.

The Climate Consensus

By “consensus,” we mean “a general agreement” and, in particular, “a general agreement among those whose qualifications have earned them the right to a professional judgment.” Yes, I know that sounds vague. At base, there have been seven studies of the beliefs of scientists who actively research the world’s climate; depending on the particular study, you find between 91-100% of climate scientists in agreement. Against that, there are several online petitions you can sign where you simply type your name and your academic background and hit “submit.” The largest such petition claims 31,000 signees, of whom 39 (0.01%) claim to be climate scientists.  It appears as if some of the signatures might date to the late 1990s, when the evidence available was much more limited, and it appears that a number of the signatories are … well, long dead. (I searched 10 random names from among the PhDs whose last names started with “A.” Two were dead, in 2007 and 2009, respectively; two exist nowhere on the internet except on this survey; and six were non-climate folks with specialties from pulmonology to mathematics.)

The breadth of the consensus is illustrated by important, authoritative reports released in the last few months.

Lawrence Livermore National Laboratory (2019): less than one chance in a million

Researchers from the Lawrence Livermore National Laboratory have concluded that there’s less than one chance in a million that the changes we’re seeing are natural. Technically, the “five sigma” level of statistical significance. The lead author says, “The narrative out there that scientists don’t know the cause of climate change is wrong. We do.”

U.S. Department of Defense (2019): almost all military installations threatened

The U.S. Department of Defense issued their Report on the Effects of a Changing Climate (2019) which tracks “the significant vulnerabilities from climate-related events in order to identify high risks to mission effectiveness on installations and to operations.” This report focused only on the vulnerability of individual military bases to climate-related threats such as fires and floods, but it follows in a long-line of DOD studies which highlight the broad national security implications of rising sea levels and changing weather patterns. One of the earlier reports was National Security Implications of Climate-Related Risks and a Changing Climate (2015). It begins, “DoD recognizes the reality of climate change and the significant risk it poses to U.S. interests globally.”

U.S. Director of National Intelligence (2019): hazards are intensifying

The Worldwide Threat Assessment of the US Intelligence Community (2019), released by the Director of National Intelligence, identified climate change as a “global threat.”

Global environmental and ecological degradation, as well as climate change, are likely to fuel competition for resources, economic distress, and social discontent through 2019 and beyond. Climate hazards such as extreme weather, higher temperatures, droughts, floods, wildfires, storms, sea level rise, soil degradation, and acidifying oceans are intensifying, threatening infrastructure, health, and water and food security.

U.S. National Climate Assessment (2017, 2018): no convincing alternative explanation

The federal government’s National Climate Assessment includes separate reports on the science of climate change (2017) and the effects of climate change (2018). The science report is pretty definitive:

This assessment concludes, based on extensive evidence, that it is extremely likely that human activities, especially emissions of greenhouse gases, are the dominant cause of the observed warming since the mid-20th century. For the warming over the last century, there is no convincing alternative explanation supported by the extent of the observational evidence.

In addition to warming, many other aspects of global climate are changing, primarily in response to human activities. Thousands of studies conducted by researchers around the world have documented changes in surface, atmospheric, and oceanic temperatures; melting glaciers; diminishing snow cover; shrinking sea ice; rising sea levels; ocean acidification; and increasing atmospheric water vapor.

Intergovernmental Panel on Climate Change (2018):  as much as possible, as fast as possible

The most broad-ranging assessments come from the Intergovernmental Panel on Climate Change (IPCC), a UN agency whose “scientists volunteer their time to assess the thousands of scientific papers published each year to provide a comprehensive summary of what is known about the drivers of climate change, its impacts and future risks, and how adaptation and mitigation can reduce those risks.” After a review of over 6000 published scientific reports on climate, the IPCC concluded in October 2018 that “we need to cut carbon pollution as much as possible, as fast as possible.” The Guardian’s ongoing climate change coverage occurs in a feature called Climate Consensus – the 97%, which refers to the finding that 97% of all peer-reviewed climate papers and publications point toward a human role in climate change.

On the impulse to obscure the information

To date, the executive branch’s response to report after report produced by folks charged with protecting our national security has not be exemplary. The Department of Defense report, quoted above, has been removed from the DoD website which is a typical response; the Columbia University Center for Climate Change Law has documented 194 (and climbing) cases of the political wing of the executive branch censoring its own scientists’ or suspending their work, with a fair amount of that work being misquoted by members of Congress. The interface is a tiny bit clunky, you’ll have to select “agency” then scroll down to the letter “D” where you’ll see actions involving the Department of Defense, Department of the Interior and so on. The administration’s most-recent initiative is to create a Presidential Committee on Climate Security led by a guy who (a) is not a climate scientist but nonetheless (b) has dismissed the thousands of climate researchers as “a cult movement” and who (c) endorses what’s sometimes called “the greening of Planet Earth,” a vision of a sort of New Eden propounded by the National Coal Association in the 1992 video of the same name.

Fossil fuels will either run out, destroy the planet, or both. The only possible way to avoid this outcome is rapid and complete decarbonization of our economy. Needless to say, this is an extremely difficult thing to pull off. It needs the best of our talents and innovation, which almost miraculously, it may be getting. It also needs much better than normal long-term planning and leadership, which it most decidedly is not getting yet. Homo sapiens can easily handle this problem, in practice; it will be a closely run race, the race of our lives.

Jeremy Grantham, investor and founder of Grantham, Mayo, van Otterloo (GMO), “The Race of Our Lives,” keynote address at the Morningstar Investment Conference (2018)

Climate Conscious Investing Options

Our individual actions, whether it’s buying LED bulbs or not buying fossil fuel stocks, will neither save nor doom the planet. Too much of our energy consumption is determined by factors beyond our control: if it’s a two-hour commute to work (welcome to Chicago!) and there’s no plausible alternative to driving, then we drive and our choice of a Corolla versus a Sequoia makes a marginal difference to the planet. At base, collective action, that is, public policy, determines whether the $30 trillion in needed infrastructure gets built or not.

Worldwide, though, recognition of climate destabilization is not a partisan issue. With relatively minor differences, conservatives and liberals elsewhere both look at the evidence, gulp and nod. Below are those results from a survey of citizens in 18 developed nations outside the US.

Folks on the left and right often disagree on how to address the problem, but they tend to agree that there is a real problem. As a result, there’s broad support (outside the US) for vigorous regulatory action.

One popular proposal is setting a price on, and charge for, carbon emissions. Homeowners pay now to have their waste, whether trash or sewage, disposed of. The city’s charge reflects of cost of neutralizing with a pollutant in which raw sewage full of pathogens leaves homes and businesses, it’s collected through several processes, resulting in water that can be safely discharged and, here in Iowa anyway, in bio-solids that can be turned into finished compost that’s sold at a profit. At base, it’s possible to treat waste released into the air in about the same way we treat solid waste or sewage.

The popularity of those ideas is important, because they introduce regulatory risk into the mix of factors for investors to consider. If BP is suddenly paying (pick a number) $50 billion a year for the carbon pollution their product creates, the value of their stock might require dramatic adjustment.

Finally, the popularity of ESG-screened investments is soaring. Morningstar recently reported that the number of ESG funds and ETFs rose 50% (from 235 to 351) in just one year while flows are 30 times greater than they were just a few years ago. Jon Hale, their director of sustainable investing, reports that

…the average inflow per year for [ESG] funds was about $135 million [each year from 2009-2012] –very, very small, tiny. Now, for the past six years the average flow has been about $4.5 billion and $5.5 billion just in the last year.

This reflects the fact that investors, institutional and retail alike, are expressing steadily rising levels of concern about investing in unsustainable or seemingly irresponsible businesses. As Millennials enter their peak earning (and investing) years, the movement of capital away from “irresponsible” businesses and toward “responsible” ones, will increasingly burden corporations. That’s sometimes referred to as reputational risk.

To recap: four sorts of risks, physical, biological, regulatory and reputational. While the big picture narratives about the state of the planet in 2050 or 2100 seem reassuringly distant and abstract, these risks can impact your portfolio in the short term. That’s evidenced by the recent bankruptcy of Pacific Gas & Electric (PG&E) triggered by two years of raging wildfires in California; PCG stock made up 3% of the portfolios of bunches of mutual funds.

Your options as an investor: (1) divest yourself of the stocks most exposed to carbon and related risks; (2) invest in stocks – and, though this is harder, bonds – of firms that might benefit from new regulatory regimes and public demands, (3) invest in stocks of resilient firms; those that are adept at adapting and re-allocating capital and (4) speaking up.

Divest: the good news is that indexes which exclude carbon polluters slightly outperform indexes with include them. For example, the S&P 500 has about the same returns whether energy companies are included or excluded, so a low-carbon strategy costs little. The bad news is that some of the firms central to fossil fuel extraction and refinement are also central to renewable energy development and battery tech.

The website fossilfreefunds.org tracks the carbon footprints of hundreds of funds by analyzing the exposures in their portfolios. They list a number of funds, often growth-oriented, with zero exposure to the extraction, processing or combustion of fossil fuels. Attractive options include Brown Advisory Sustainable Growth Fund (BIAWX) and Green Century Balanced (GCBLX). Brown is an MFO Great Owl fund, meaning that it has posted risk-adjusted returns in the top 20% of its peer group for every tracked period greater than one year. My colleague Dennis Baran recently profiled BIAWX.

Green Century got a new management team 11 years ago, and that team has modestly but consistently outperformed its peers.

  Annual returns Max drawdown Standard dev. Downside dev. Ulcer Index Bear market dev. Bear rating Sharpe ratio
Green Century Balanced 5.1% -34.2 10.6 7.5 9.3 7.0 2 0.43
Lipper peer group 4.7 -40.7 12.0 8.6 11.5 8.1 5 0.36

Green cells highlight places where the fund has outperformed its peer group over the 11+ years of the current market cycle.

ETF investors have choices like SPDR MSCI ACWI Low Carbon Target ETF (LOWC) and SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX).

Invest: there is compelling evidence at a broad ESG-screened fund can form the core of a long-term portfolio, with no loss of returns or escalation of risk. As a broad generalization, any of the Parnassus Funds. Parnassus Core (PRBLX) and Parnassus Mid-Cap (PARMX) both earned Great Owl designations, while Parnassus Endeavor (PARWX) has somewhat above-average volatility but vastly above-average returns for pretty much every meaningful trailing period. Fans of smart-beta ESG investing might look to the work of Northern Trust Asset Management who, we noted in writing about Northern US Quality ESG (NUESX), “has made a major commitment to responsible investing.” That includes active funds, indexes and smart beta ETFs.

Finally, with most future growth in greenhouse gas emissions coming from Asia, it makes a lot of sense to consider investing in innovators in that half of the world. The cleanest option is Matthews Asia ESG (MASGX), which has substantially outperformed its Pacific stock peers since inception and which benefits from Matthews’ unparalleled depth in the Asia arena. More broadly, a handful of exceedingly solid EM equity funds – Morningstar medalists – also receive Morningstar’s highest sustainability rating: Harding Loevner Emerging Markets (HLEMX), Seafarer Overseas Growth & Income (SFGIX) and Virtus Vontobel Emerging Markets Opportunities (HEMZX, still highly regarded despite the loss of star manager Rajiv Jain two years ago).

Innovate: some managers look for funds that are, in a way, resilient. They have a structural and cultural commitment to innovation. Two outstanding funds with such a focus are Guinness Atkinson Global Innovators (IWIRX) and Seven Canyons World Innovators (WAGTX, formerly Wasatch World Innovators).

  Annual returns Max drawdown Standard dev. Downside dev. Ulcer Index Bear market dev. Bear rating Sharpe ratio
Guinness Atkinson Global 6.9 -56.1 18.8 12.8 17.5 12.2 8 .034
Seven Canyons World 6.4 -59.2 17/9 13.0 18.7 12.5 4 .033

Green cells indicate places where the funds have outperformed their respective peer groups over the 11+ years of the current market cycle.

The two funds have earned four- and five-star ratings, respectively, from Morningstar. Both are flexible, global funds run by small, stable management teams. Both have outperformed their peers over the 11+ years of the current market cycle. Guinness Atkinson has a purely large cap portfolio while Seven Canyons invests the vast majority of its portfolio in micro- to mid-cap stocks.

Speak up:  in my day job, I’m a communication studies professor. My doctorate is in rhetorical theory and practice. For a quarter century I was a debater, then a debate coach. You had to see this coming, right?

If you invest directly in equities, contact the management of corporations in which you invest and express your views to them. You can find out how your managers think about, and respond to, the environmental risks around their activities by reading their annual Form 10-K, which is available from both the corporation and the SEC. The 10-K will list all of the risks that the corporation faces and how it’s responding to them. By way of illustration, General Motors (2018) writes:

To mitigate the effects of our worldwide operations on the environment, we are converting as many of our worldwide operations as possible to landfill-free operations which reduces greenhouse gas emissions associated with waste disposal. … approximately 50% of our manufacturing operations were landfill-free.

We continue to search for ways to increase our use of renewable energy and improve our energy efficiency … We have committed to meeting the electricity needs of our operations worldwide with renewable energy by 2050 … We continue to seek opportunities for a diversified renewable energy portfolio including wind, solar, and landfill gas.

And so on, in some detail. Like what you read? Congratulate them. Don’t like it? Chastise them.

If you invest indirectly through funds or ETFs, contact the adviser of the fund. Really. I do this all the time. They’re people. They answer the phone. Morningstar publishes a sustainability grade for every domestic equity fund and FossilFreeFunds.org does a similar five-star sort of rating.

and

Check your holdings’ rating. Like what you see? Congratulate the advisors. Don’t like it? Chastise them.

If you live in a democracy, contact the people you elected to represent you. The League of Conservation Voters publishes an environmental voting record for every member of the US Congress. Check out your representative. If you like what you see … well, you know the rest.

Bottom Line: Individual responsibility can’t save the planet. And yet, it’s still the right thing to do. My home is over-insulated and all of the lights are LEDs. My car gets 40 MPG highway, and still I walk rather than drive whenever I can. I eat no red meat and only sustainably-harvested seafood. None of which will save the planet, and yet all of which saves me. Collectively, such actions are good for my health, physical, mental and spiritual. And, for all of us, should be quite enough reason to do them.

Vanguard – Going, Going, Gone!

By Ira Artman

January 2019 will be remembered by mutual fund and Vanguard investors for a few things.  Besides the stock market recovery that largely reversed the year-end 2018 selloff, the following two things occurred:

  • On January 16th, John Bogle, age 89, died in his home in Pennsylvania. Mr. Bogle’s efforts on behalf of indexing and individual investors were widely honored and remembered.
  • On January 22nd, Vanguard created the PDF for the Wellington Fund Annual Report, dated November 30, 2018.  The US Postal Service distributed paper copies of this report during the first week of February.

Compare, for example, the Fund Profile for Wellington Fund that was included with the May 31 2018 Semi-Annual Report, with the information included in the November 30 2018 Annual Report. 

FIGURE 1: Fund Profile Wellington Fund Semi-Annual Report – 05-31-2018

FIGURE 2: Fund Info Wellington Fund Annual Report – 11-30-2018

You will notice something peculiar – Vanguard  has eliminated virtually all of the Fund Profile information from the Annual Report.

Gone, for example, are the Wellington Fund’s stock market symbols (VWELX or VWENX, for Investor and Admiral share classes, respectively),  numerous stock portfolio metrics, including: number of stocks held, market cap, P/E and P/B ratios, return-on-equity, dividend yield, foreign holdings percentage, ten largest stocks, fund R2 and beta.

Gone as well are fixed income metrics including the number of bonds held, yield-to-maturity, average coupon, duration, and average effective maturity.  Also missing are summary statistics on the bonds’ credit quality.

Long-time Vanguard experts and observers have remarked upon other recent changes in Vanguard’s disclosures and statements.

Daniel P. Wiener, editor of The Independent Adviser for Vanguard Investors and co-founder of Adviser Investments in Newton, MA, believes the changes may be related to Vanguard’s efforts to push folks to the web, in Vanguard’s continuing effort to cut costs. He notes that the second page of the new Wellington Fund annual report includes the following message:

Important information about access to shareholder reports

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

Wiener states that  “the idea, of course, is that if folks don’t receive dead-tree [paper] reports, or they find them inadequate, they’ll go to the web… Vanguard, having shaved costs to the bone, and with service issues continuing to plague them, needs to find ways to continue to cut costs and at the same time redirect spending to the web. They’re well behind the competition in that regard so now they’ve gotta catch up.”

David Snowball points to Joseph DiStefano’s February 7  2019 column on Philly.com –

Vanguard SEC filings drop ‘at-cost,’ ‘no profit’ claims that were dear to late founder John Bogle.

DiStefano writes that Vanguard’s most recent statements to the Security and Exchange Commision (SEC) and investors no longer claim, as they once did, that:

The Vanguard Group is truly a mutual mutual fund company. It is owned jointly by the funds it oversees and thus indirectly by the shareholders in those funds. Most other mutual funds are operated by management companies that may be owned by one person, by a private group of individuals, or by public investors.

Nor do Vanguard’s recent statements claim (as they once did) that:

 Vanguard operates “on an at-cost basis,” as if the funds charge the affiliated management company only what it costs for fund services, without the usual business overhead and profit margins.

As far as I can tell, Mr. Bogle never said “Know what you own, and know why you own it.”  Those wise words were written by former Magellan Fund manager Peter Lynch, in his 1989 book One Up On Wall Street.

But it is not 1989 anymore, it is 30 years later – it is 2019.  The year that John Bogle died. The year that Vanguard decided that you did not need to know what you own.

FIGURE 3: Going, Going, Gone!

Ketchup is Ketchup, Mustard is Mustard

By Edward A. Studzinski

The typical American of today has lost all the love of liberty that his forefathers had, and all their disgust of emotion, and pride in self-reliance. He is led no longer by Davy Crocketts; he is led by cheer leaders, press agents, word-mongers, uplifters.

         H.L. Mencken, “On Being an American” (1922)

As we move forward, now more than half-way through the first quarter of 2019, it has been interesting to watch the change in psychology among investors, both individual and institutional. We have gone from fear of a bear market with all that that might entail in terms of wiping out permanent capital to fear of missing the train perhaps leaving the station as we either start the next leg up of a bull market, or perhaps start a new bull market. Some of that is a mindset of trying to make back some of the losses that, in a panic mode, investors might have realized. Some of it is a recognition that, with the Federal Reserve is less willing to continue raising rates as originally laid out under a new chair in 2018, the only game in town may be a return to equities.

In that vein, one of the most interesting disclosures was the write-down of assets by both Berkshire Hathaway, as well as investor group 3G Capital from Brazil. This reflected their assessment of the current value of the Kraft-Heinz brands, as impaired by changes in tastes and habits of the food shopping public. That is the rationale as to why Mr. Buffett has had a rare toe stub.

The reality is somewhat more complex than that. The argument in favor of investing in consumer branded food companies has been that the brands had a cachet. They often related to the childhood memories of the consumer, which allowed for pricing power over alternatives in the marketplace such as private label. And under that umbrella, from a capital allocation view point such companies would be able to dedicate a large part of the cash flows to REINVESTMENT in the brands, providing for a constantly growing annuity from those investments.

What changed? Well, first, the nature of the competition. If you go back some twenty-odd years, private label was a matter of horrible packaging (black and white cheap cardboard), often placed in a separate aisle from the rest of the store, and often less clean than the rest of the store. And that was before one got to the ingredients used, and the resulting taste of the product. The intent was pretty much to provide a product that no consumer would want to purchase or consume. The consumer would hopefully run screaming to other parts of the store to purchase the traditional branded items.

Fast forward five to ten years, and one of the things that happened was Walmart. They pushed constantly on the branded manufacturers to cut their wholesale product prices to Walmart. The end result was that Walmart’s margins would be superior while providing a lower price point for the consumer. And to win and keep Walmart’s business and maintain their own margins, the branded companies found themselves searching for ways to take out costs. We started seeing product reformulations, changes in packaging, and outsourcing of product manufacturing to contract manufacturers to reduce labor costs. We saw the arrival of the investment bankers, with their ideas of synergies that could be obtained by merging companies with complementary product lines. Savings would come from the scale of raw materials purchasing for ingredients, packaging, and manufacturing costs. They would also look for savings in the marketing and advertising costs that were a large factor in the price the consumer saw in the supermarket.

Fast forward another five years. We see a world where pricing power has shifted from the manufacturers to the retailers – the Costco and Kroger companies of the world. First, private label products became brands in and of themselves. No need for advertising and marketing budgets required to support a brand. Kroger is the largest private label manufacturer in this country. Its own plants and sourcing, allow it to control quality while making a margin equal to or superior to the branded companies manufacturing similar products.

The same story applies with Costco – why purchase Hellman’s Mayonnaise when for substantially less you can purchase the Kirkland Costco brand, and it tastes better! And all of this is before we address the question of food inflation. That is a subject not talked about by either political party over the last ten years. As I have mentioned in previous months, it is obvious to anyone who does the food shopping, and sees the dollar purchasing power shrinkage resulting from the packaging shrinkage. And that is before you apply the taste test to the various reformulations.

These trends did not happen overnight. The millennials do shop and eat differently. But by the same token, prior generations also have been forced as a matter of survival to also shop and eat differently. Clearly the Great Recession forced many families to change their food and consumer item shopping habits. And once they switched to, for instance, the Kroger or Safeway private label products in such things as pasta or cereal, there would be no going back when happy days returned.

Now, we do not need to have a tag day for either Mr. Buffett or the people at 3G. They have profited handsomely over time. This should be a wake-up call to them to rethink where appropriate their allocation of capital. But one does wonder about the extent to which these pricing pressures will spread to other areas.

Automobile insurance is a regulated product and a commodity product at the end of the day. Cell phones likewise have the potential to morph into being viewed as a commodity product. What this really means is that we do face, in the investment world, the continuing potential of not just technological disruption, but also brand disintermediation in areas where we never thought we would see intense price and product competition arising.

The Ten-Year Bull

By Charles Boccadoro

“Happy days are here again! The skies above are clear again. Let us

sing a song of cheer again, Happy days are here again!”

Jack Yellen

February marked the tenth full year of the current bull market, which began in March of 2009. For those of you that held steady through the great recession or have just been lucky or wise enough be invested over this period, you’ve been well rewarded.

Through much of its first years, this bull market had little love, especially in late 2011 when it looked like we were headed back into bear territory. There have been a couple modest retractions since: the taper tantrum of 2013, January 2016, and this past December.

But for the most part, it’s been a fairly steady upward ride, including periods of extremely low volatility and many consecutive months of positive returns (eg., Historically Low Volatility).

Examining fund performance across full, down, and up market cycles, is one of the principal reasons we established the MFO Premium screening tools. There have been five market cycles since 1960, as described in Mediocrity and Frustration. Here is a sampling of outputs of risk and performance metrics since March of 2009.

The five basic indices … 90-day T-Bill, US aggregate bond, US 60/40 equity/bond, SP500, and all-country x-US:

That’s right! More than 16.5% annualized for the S&P. About 6.5% more than its long-term average. It translates to a 367% increase since inception. The rolling 3-year average never dropped below 8.8% annualized.

You suffered through the 16% “correction” in late 2011, being underwater for 10 (more) months, but traditional alternatives offered little: cash paid nothing, bonds only half what you’ve gotten used to since 1980 … on an absolute basis, and foreign equities have received little love in comparison. Fortunately, for those with a more tempered risk appetite, the US 60/40 balanced index rose nearly 200%.

Has it made up for the preceding bear?

Below find the same indices over the full cycle and a look back at the calendar-year returns:

The  answer is? Likely yes. The annualized return over the cycle is more than 7.5%, still below the long-term average, but excess return (APER), which is return above cash, is 7.1% annualized, about 2% above the long-term average. Excess returns for bonds is also about 50 basis points over its long-term average. Investors in all-country ex-US based funds lost another decade plus, unfortunately.

The top five sector equity funds, based on top-quintile absolute and risk-adjusted return versus peers, during the bull are presented below … tech and retail funds like T Rowe Price Global Technology PRGTX and Fidelity Select Retailing Portfolio FSRPX delivered eye-watering annualized returns of 25%, nominally, or a whopping 800% total. (Names highlighted in dark blue are MFO Great Owl funds.)

Here are the full-cycle (thank you VintageFreak) and calendar-year returns for those same five funds:

Similarly, below please find the top actively managed mutual funds … among them, T Rowe Price New Horizons PRNHX rewarded with 700% return … more than 6% per year above peers.

The top performing ETFs included funds by Invesco (3!), State Street, and WisdomTree, including two “value” ETFs (in name at least) … delivering upwards of 600%:

Finally, setting the MFO Risk metric to 3 (“moderate”), below are the best performers during this bull run. The venerable T Rowe Price Capital Appreciation PRWCX takes top honors, tripling its investors’ returns … it now exceeds $31B in assets under management (AUM). The list includes much smaller but just as seasoned Bruce BRUFX , which delivered more than 13% annualized.

While this bull is still modest compared with either of the two bull markets in the ’80s and ’90s, both of which racked-up 800% absolute return, it may no longer be “mediocre.” In any case, as David often reminds us, now seems like a good time to be sure you’ve allocated consistent with your risk tolerance and investment horizon … better now than when the market falls.

This article has been revised from original to reflect performance through February 2019 and to include more full-cycle comparisons.

Launch Alert – DoubleLine Colony Real Estate and Income Fund (DBRIX/DLREX)

By Dennis Baran

On December 17, 2018, DoubleLine launched the DoubleLine Colony Real Estate and Income Fund. It seeks capital appreciation and income with returns in excess of its benchmark, the Dow Jones U.S. Select REIT Index over a full market cycle. The managers will use derivatives to create investment returns that approximate the returns of the newly-launch Colony Capital Fundamental US Real Estate Index. To the extent that there’s additional capital available, they will also invest in an actively managed portfolio of short-to-intermediate term fixed income securities. It’s an open-ended, index overlay fund — not a balanced fund, structured product, or a K-1 offering.

There are three arguments for considering an investment in the fund.

First, real estate adds substantial value to a traditional stock-bond portfolio. So what are some benefits of REIT ownership?

According to Jeffrey Sherman, president of DoubleLine Alternatives LP, the DJ U.S. Select REIT Index outperformed the S&P 500 by > 4% per year over the last 20 years, has a correlation to stocks of .57 and .18 to bonds, have tended to perform positively during rising rates over the long term, and tended to outperform stocks during periods of declining rates over the long term.

That’s evidence of a differentiation benefit.

Second, Colony’s “fundamental index” approach addresses serious problems that traditional fixed-income indexes embody. While investors and commentators are generally worshipful of equity indexes, many professionals are deeply worried about intrinsic flaws in fixed-income investing. Most fixed-income indexes, REIT indexes included, are issuer-weighted; that is, they automatically give the greatest weight to the larger debt issuers who are, by definition, the most indebted companies.  Fundamental indexes seek to target the most attractive issues by analyzing underlying financial metrics.

The DoubleLine managers like the Colony Capital Index because it avoids the riskiest segments within any single market and takes a different approach than do traditional REIT strategies.

The Colony Capital REIT Index implements fundamental real estate investing principles from its 27 years of managing real estate assets for institutional investors across private and public markets.

It emphasizes a quality over value approach and seeks to deliver superior risk-adjusted returns, relative to other REIT indices, from publicly traded real estate equities.

That means it emphasizes exclusion by omitting

  • Financial mortgage REITS
  • The least-profitable and the highest-yielding REITs
  • The most leveraged REITs and
  • The most expensive REITs, measured by an enterprise value to operating profits ratio

The remaining REITs are then weighted by market capitalization, subject to concentration and diversification limits, to derive the Index’s composition.

If REITs and bonds go down, your portfolio will be down. The volatility of the fund will be similar to the REIT market and the standard deviation will come primarily from exposure to the Colony Index. On the flip side, however, higher volatility has been accompanied by a higher Sharpe ratio and a higher return profile over the long term.

For example, while it may sound strange to mention “Active Share” about an index fund, the fund’s active share is 40.41% as of January 31, 2019. (The top four to five REIT indices have a .99 correlation.) That independence is important because too many REIT indexes, and even supposedly smart-beta REIT indexes, are over-concentrated by sector, over-exposed to financial risk and prone to value old REITs merely because they’re old.

Third, DoubleLine is really, really good. 87% of DoubleLine funds are in the top half of their peer groups over the past year, 77% over the past three years and 100% over the past five years. Jeffrey Gundlach, CEO and CIO of DoubleLine Capital LP, and Jeffrey Sherman, deputy CIO of the firm and president of DoubleLine Alternatives LP, serve as portfolio managers of the Fund. With the contributions of DoubleLine’s fixed income investment teams (including mortgage-backed securities, Treasuries, corporate securities and international debt and the firm’s Fixed Income Asset Allocation Committee), Mr. Gundlach and Mr. Sherman actively manage the fixed income portfolio.

The CEO of Colony Capital is Tom Barrack. He and Jeffrey Gundlach know each other. Mr. Barrack’s offices are located 2 ½ blocks from those at DoubleLine. Mr. Barrack was looking for a partner and came to DoubleLine to discuss starting a fund together. Colony Capital is not a sub-advisor to the fund, and no money goes to it. Colony Capital is simply the index provider. DoubleLine didn’t pick Colony to create an index. Colony created its own index, and DoubleLine chose to have exposure to it.

Fund Facts

Class I (Institutional Class) DBRIX $1M, IRA $5.000; ER 0.66%. The fund is available for purchase through 14 brokerages, including major platforms such as JP Morgan, Fidelity, TD Ameritrade, and Vanguard.

Class N (Investor Class) DLREX $2,000, IRA $500; ER 0.91%. The fund is available for purchase through 12 brokerages, including major platforms such as Fidelity, Vanguard, TD Ameritrade, and Schwab.

Bottom Line

Given its emphasis on creating a quality over value portfolio based on its differentiated methodology discussed here, DBRIX/DLREX invites serious interest from investors. DoubleLine begins posting performance for newly launched funds three months after inception. Consult Morningstar if you need information before then.

 

15/15 funds, one year on

By David Snowball

Roller coaster? What roller coaster? After an anguished fall, the worst December market since the Great Depression, the Christmas Eve Massacre and a million howling headlines, we are pretty much back where we were in September with index values (and stock valuations) near historic highs.

As of the end of February, 2019, the Vanguard Total Stock Market Index Fund (VTSMX) was sitting just 3.66% below its September, 2019 level … and it was still rallying, picking up 0.69% on March 1, 2019.

In a singularly prescient moment, we reminded folks a year ago that “holding 15% cash is good. The stock market is teetering. Its valuations are at or near all-time highs by a variety of measures. Washington is somewhat unhinged. People, and machines, are primed for a panic. And the best way to survive a panic is to have a clear plan and cash on hand to move in when others are giving away their shares.”

Most of those same conditions exist today, though the Federal Reserve may well choose not to stir the pot nearly so much as many expected.

The 15/15 formula

We searched, a year ago, for equity funds that had two characteristics: in 2017, they held at least 15% cash and had a positive return of 15% or more.

It was ridiculously easy to make 15% total returns in 2017. 3406 funds managed the feat.

And it was not particularly hard to hold 15% cash in 2017, though it was certainly unpopular with investors. 970 funds held that level of cash, either as collateral on derivative purchases, as a defensive move or from the inability to find suitable investors.

Making 15% is good. It’s about 50% above the stock market’s historic rate of return and is a bit better than most balanced funds.

Holding 15% cash and still finding a way to make 15% in 2017 – that is, having both dry powder to profit in a crash while not sitting out the market’s rise – was rare, difficult and desirable. We celebrated the 15 funds that held cash in reserve, posted really solid absolute returns and were available to retail investors.

How did the 15/15 funds do subsequently? Relatively well, really. 75% of them outperformed their peer group during 2018’s turbulent market. Many enter 2019 with considerable dry powder still available for when the next shoe drops.

Here’s the two-year snapshot.

15/15 fund   2017 return 2017 Cash 2018 return 2018 cash
AMG Yacktman Focused Large Core 20.0% 23% 2.9% 20%
Port Street Quality Growth Large Blend 15.0 44 (0.7) 42
Hillman Large Value 16.4 15 (2.8) 5
Meeder Muirfield Tactical Allocation 20.3 30 (3.7) 72
Leuthold Core Investment Tactical Allocation 15.8 18 (6.2) 42
Tweedy, Browne Value Global Large Cap 16.5 33 (6.4) 40
Longleaf Partners International Int’l Large Core 24.2 22 (7.8) 5
Monongahela All Cap Value Mid-Cap Value 20.8 20 (8.1) 4
Meeder Dynamic Allocation Aggressive Allocation 21.2 20 (8.7) 24
Seven Canyons World Innovators (formerly Wasatch World Innovators) Global Small/Mid Cap 33.0 24 (10.4) 8
T. Rowe Price Intl Concentrated Equity Int’l Large Core 21.1 21 (10.7) 11
FPA International Value Int’l Small/Mid Blend 27.1 29 (10.8) 22
The Cook & Bynum Large Core 15.1 39 (13.4) 22
Quantified Market Leaders Mid-Cap Growth 16.9 20 (13.5) 17
US Global Investors Emerging Europe Emerging Europe 22.7 21 (17.0) 4
Segall Bryant & Hamill Fundamental Int’l Small Cap (formerly Westcore International Small-Cap) Int’l Small/Mid Growth 33.6 31 (23.0) 2

Green cells indicate performance in the top half of their respective peer groups.

We re-ran our screen in February 2019, looking for funds which came out of 2018 with both strong performance and a considerable commitment to cash. Only seven retail funds posted winning records last year (green cells under 2018 return), but we’re also including 16 other funds with exceptionally strong relative performances in 2018 paired, in almost all cases, with exceptional three-year records as well.

    Cash 2018 return 2018 %ile 3 year return 3 year %ile Risk
Artisan Thematic Investor Lg Gr 30 11.23 1
Biondo Focus Lg Gr 23 6.34 4 23.35 4 High
Federated Kaufmann Mid Gr 20 3.63 5 23.14 5 Average
AMG Yacktman Focused Lg core 24 2.88 1 14.72 35 Below Average
Marshfield Concentrated Opportunity Lg Gr 15 1.92 15 20.77 9 Low
Rational Dynamic Brands Lg Gr 30 0.63 22 12.65 Above Average
Kinetics Small Cap Opportunity Small Core 31 0.29 1 25.49 1 Average
Frontier MFG Global Plus Lg Gr 23 -0.12 28 13.04 88 Low
Meridian Enhanced Equity Large Gr 25 -0.64 34 21.98 5 High
Port Street Quality Growth Lg Core 42 -0.68 5 8.69 96 Low
Provident Trust Strategy Lg Gr 17 -1.22 39 14.71 73 Low
Sims Total Return Lg Value 21 -1.31 3 6.65 98 Low
Chesapeake Growth Lg Gr 15 -1.74 47 15.77 60 Above Average
Convergence Core Plus Lg Core 26 -1.92 9 13.35 62 Average
Yorktown Capital Income Global 24 -2.74 6 9.95 77 Below Average
Aspiriant Risk-Managed Equity Global 16 -3.52 10 10.98 62 Low
JHancock Technical Opportunities Lg Gr 22 -4.65 75 12.69 89 Above Average
Nuance Concentrated Value Lg Value 22 -4.72 14 12.15 54 Below Average
Catalyst/Lyons Tactical Allocation Lg Core 15 -4.96 39 7.89 97 Average
Kopernik International Intl Lg Val 35 -6.25 1 8.89 41 Above average
Tweedy Browne Global Value Intl Lg Val 42 -6.67 1 8.76 43 Low
FMI International Intl Lg Core 59 -9.46 8 8.05 67 Low
FPA International Value Intl SMID 22 -10.81 5 11.99 13 Low

The green cells represent particularly noteworthy values:

  • 2018 returns greater than zero
  • 2018 returns in the top half of their peer group
  • 3-year returns of 10% or more
  • 3-year returns in the top half of their peer group
  • Morningstar risk scores that were below average or low

Bottom line: Cash works. Portfolio hedges can be complex, expensive and iffy. Or they can be simple, cheap and reliable. Of all of the ways to guard your wealth, investing with professionals who are willing to hold cash in frothy markets and invest it in bloody ones has worked for a long while. Investors looking for a portfolio hedge, but who aren’t immediately drawn to complicated and costly hedging strategies, might want to start here.

Funds in Registration

By David Snowball

Before funds 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 years end because that allows them to have clean “year to date” and calendar year results to share. These launches will likely occur in late April or May.

Palm Valley Capital Fund is sort of a stand-out here, despite the name that vaguely calls a retirement community (with golf!) to mind. It will be a small cap stock fund managed by two experienced absolute value managers: Eric Cinnamond (formerly of Intrepid Endurance and ASTON/RiverRoad Independent Value) and Jayme Wiggins (Mr. Cinnamond’s successor at Intrepid Endurance). Both of the guys have excellent stock-picking records, but also a steely resolve to hold cash when there are no compelling values available. Mr. Cinnamond stepped away from management several years ago, liquidating his fund, because the market’s valuations remained so irrational for so long that he felt he was not serving his shareholders well by sitting on a vast cash stash. He resolved to return when he thought markets had the prospect of offering low-priced options. Mr. Wiggins maintained a similar resolve at Endurance until his (rather sudden) departure in September. Their reunion and return might signal their conclusion that a substantial reset in small cap valuations is now imaginable.

Alpha Architect Freedom 100 Emerging Markets ETF

Alpha Architect Freedom 100 Emerging Markets ETF, an passively-managed ETF, seeks to track the (custom, could you tell?) Life + Liberty Freedom 100 Emerging Markets Index. The plan is to build a portfolio that is weighted toward stocks in EM nations which protect life (e.g., control human trafficking), liberty (e.g., follow due process of law) and property (e.g., have transparent business regulations). The fund will be managed by Tao Wang of Empowered Funds and Alpha Architect. Its opening expense ratio has not been disclosed.

CLS Strategic Global Equity Fund

CLS Strategic Global Equity Fund (SGEFX) will seek long-term growth of capital. The plan is to create a global equity portfolio using other funds and ETFs. Typically 40% of the investments will be non-US. They’re going to try to maintain a risk exposure comparable to that of their benchmark, which is 60% Russell 3000 and 40% MSCI All-World ex US; it will also try to keep other portfolio characteristics (size, sector, style, region) comparable to that benchmark. The fund will be managed by a team from CLS Investments. Its opening expense ratio is 1.82%, and the minimum initial investment will be $2,500.

Conductor International Equity Value Fund

Conductor International Equity Value Fund will seek long-term risk-adjusted total return. The plan is to invest in the equity securities of international companies that are believed to exhibit strong fundamental attributes. The manager “prioritizes managing risk exposures,” so the manager might use cash, stocks on index ETFs or index options to hedge the portfolio when market risk seems excessive. The portfolio will normally range between 50-100% net long. The fund will be managed by Charles Albert Cunningham, III. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $2,500 for “A” shares with nominally carry a 5.75% sales load.

Fidelity Women’s Leadership Fund

Fidelity Women’s Leadership Fund will seek long-term growth of capital. The plan is to “invest primarily in equity securities of companies that prioritize and advance women’s leadership and development.” One woman on the senior management team qualifies a stock for inclusion, as does having one-third of the board be women or, more generally, having policies designed to attract, retain and promote women. It might be a global, all-cap portfolio. The fund will be managed by Nicole Connolly. Its opening expense ratio has not been disclosed, and there is no minimum initial investment requirement.

Global Tactical Fund

Global Tactical Fund will seek long-term capital appreciation. The plan is to buy both stocks and equity ETFs, with 40% of the portfolio typically invested in international stocks. The manager has the ability to short, otherwise there’s no particular explanation of what’s “tactical” about it. The fund will be managed by Chetan Jindal of Greenwich Ivy Capital LLC. He was “formerly partner at a global asset management firm.” A quick Google suggests Altrinsic Global Advisors, for what interest that holds. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $1,000.

iShares Edge MSCI Multifactor USA Mid-Cap ETF

iShares Edge MSCI Multifactor USA Mid-Cap ETF, an passively-managed ETF, seeks to track an index composed of U.S. mid-capitalization stocks that have “favorable exposure to target style factors subject to constraints.” We don’t normally cover passive ETFs but a passive fund tracking an active index seemed close enough. The plan is to invest in (the currently 88) mid-cap stocks which (a) are components of the MSCI USA Mid Cap Index and (b) have high exposure to value, quality, momentum and low size. The fund will be managed by a team from BlackRock Fund Advisors. Its opening expense ratio has not been disclosed.

iShares ESG MSCI USA Leaders ETF

iShares ESG MSCI USA Leaders ETF, an index ETF, seeks to track the investment results of an index composed of U.S. large- and mid-cap stocks of companies with high environmental, social, and governance performance relative to their sector peers. The fund will be managed by a team from BlackRock Fund Advisors. Its opening expense ratio has not been disclosed.

LKCM International Equity Fund

LKCM International Equity Fund will seek to maximize long-term capital appreciation. The plan is to invest in an all-cap international portfolio of companies that show high profitability levels, strong balance sheet quality, competitive advantages, ability to generate excess cash flows, meaningful management ownership stakes, attractive reinvestment opportunities, strong market share positions, and/or attractive relative valuation. The fund will be managed by Mason and J. Luther King of Luther King Capital Management. Its opening expense ratio is 1.0%, and the minimum initial investment will be $2,000.

Palm Valley Capital Fund

Palm Valley Capital Fund will seek long-term total return. The plan is to invest in high‑quality small companies that the managers believe can be valued accurately using its valuation methodology, are more likely to grow consistently, and are less likely to experience a permanent loss in value. Up to 30% of the fund might be invested internationally. The fund’s cash position, which might be very substantial, is determined by the availability of securities which meet the managers’ criteria. In the absence of suitable opportunities, the fund will hold cash. The fund will be managed by Eric Cinnamond and Jayme Wiggins, both former managers of Intrepid Endurance. Its opening expense ratio is 1.25%, and the minimum initial investment will be $2,500.

Manager changes, February 2019

By Chip

In most months, most manager changes are pretty much inconsequential (except to the managers themselves, I guess). This month, there are a collection of fairly epochal changes.

A star manager, Henry Ellenbogen, is leaving T. Rowe Price and T. Rowe Price New Horizons. It’s really rare for folks to leave Price and rarer still for one of their few high-profile folks to do so. No word on his next stop.

The Bond King, Bill Gross, is giving up. After helping to run hundreds of billions at PIMCO, Mr. Gross had a sudden, stormy departure and was promptly picked up by Janus which gave him the keys to a go-anywhere, do-anything, trust-me-I’m-Bill-Gross fund. Over a 4.5 year stint, Mr. Gross managed to turn an initial $10,000 investment to $10,080 while subjecting investors to lurching performance. His former fund is now being renamed and repurposed.

Jeffrey Feingold, the manager of Fidelity Magellan, has announced his decision to retire at year’s end. Fidelity is moving their star emerging markets manager (wow) into position to take over their former starship. Sammy Simnegar’s departure from the EM side then triggered a series of changes in other funds.

On the smaller fund front, Brad Cook is leaving Zeo and Zeo Short Duration Income; our colleague Charles Boccadoro has substantial admiration for the quality of Brad’s work. Similarly, Mark Travis, president of Intrepid Capital, is stepping away from Intrepid Endurance where he was a sort of bridge manager between Jayme Wiggins (who left in September) and a young team (that takes over now).

Ticker Fund Out with the old In with the new Dt
BGIOX Baillie Gifford International Stock Portfolio On or about April 30, 2019, Jonathan Bates is expected to retire and will no longer serve as a portfolio manager for the fund. Jenny Tabberer and Tom Walsh will join current manager, Angus Franklin. 2/19
BIAQX Brown Advisory Emerging Markets Select Fund, formerly Brown Advisory Somerset Emerging Markets Fund Edward Lam and Edward Robertson will no longer serve as a portfolio manager for the fund and Somerset Capital Management LLP will be terminated as the subadvisor to the fund. Niraj Bhagwat, Rakesh Bordia, Caroline Cai, Allison Fisch, and John Goetz will now manage the fund. Wellington Management Company LLP and Pzena Investment Management will serve as subadvisors to the fund. 2/19
SOPAX Clearbridge Dividend Strategy Fund No one, but … John Baldi joins Scott Glasser, Michael Clarfeld, and Peter Vanderlee on the management team. 2/19
DHSCX Diamond Hill Small Cap Fund Thomas Schindler will no longer serve as a portfolio manager for the fund. Christopher Welch and Aaron Monroe will continue to manage the fund. 2/19
DHMAX Diamond Hill Small-Mid Cap Fund Thomas Schindler will no longer serve as a portfolio manager for the fund. Christopher Welch and Jeannette “Jenny” Hubbard will continue to run the show. 2/19
SZGAX DWS High Conviction Global Bond Fund, which will become DWS ESG Global Bond Fund on or about May 1, 2019. Ramhila Nadi and Bernhard Falk will no longer manage the renamed and refocused fund. Thomas Farina will manage the fund. 2/19
MIDVX DWS Mid Cap Value Fund Richard Hanlon is no longer listed as a portfolio manager for the fund. Pankaj Bhatnagar and Arno Puskar will now manage the fund. 2/19
FAMKX Fidelity Advisor Emerging Markets Fund No one, right now, but Sammy Simnegar is expected to transition off the fund at the end of September, 2019. Sam Polyak has joined Sammy Simnegar in managing the fund, and will continue after Mssr. Simnegar’s departure. 2/19
FDEQX Fidelity Disciplined Equity Fund No one, right now, but Alex Devereaux is expected to transition off the fund at the end of September, 2019. Kwasi Dadzie-Yeboah has joined Alex Devereaux in managing the fund, and will continue after Mssr. Devereaux’s departure. 2/19
FEMKX Fidelity Emerging Markets Fund No one, right now, but Sammy Simnegar is expected to transition off the fund at the end of September, 2019. John Dance has joined Sammy Simnegar in managing the fund, and will continue after Mssr. Simnegar’s departure. 2/19
FDFFX Fidelity Independence Fund No one, right now, but Jeffrey Feingold is expected to retire from the fund at the end of December, 2019. Sammy Simnegar has joined Jeffrey Feingold in managing the fund, and will continue after Mssr. Feingold’s departure. 2/19
FMAGX Fidelity Magellan Fund No one, right now, but Jeffrey Feingold is expected to retire from the fund at the end of December, 2019. Sammy Simnegar has joined Jeffrey Feingold in managing the fund, and will continue after Mssr. Feingold’s departure. 2/19
FRIFX Fidelity Real Estate Income Fund No one, but … Bill Maclay joins Mark Snyderman in managing the fund. 2/19
FTIEX Fidelity Total International Equity Fund No one, right now, but Sammy Simnegar is expected to transition off the fund at the end of September, 2019. Sam Polyak has joined Sammy Simnegar, Jed Weiss, and Alexander Zavratsky in managing the fund, and will continue after Mssr. Simnegar’s departure. 2/19
FTCIX Franklin Conservative Allocation Fund T. Anthony Coffey is no longer listed as a portfolio manager for the fund. May Tong joins Thomas Nelson in managing the fund. 2/19
FCAZX Franklin Corefolio Allocation Fund T. Anthony Coffey is no longer listed as a portfolio manager for the fund. May Tong and Thomas Nelson will now manage the fund. 2/19
FFAAX Franklin Founding Funds Allocation Fund T. Anthony Coffey is no longer listed as a portfolio manager for the fund. May Tong and Thomas Nelson will now manage the fund. 2/19
FRRAX Franklin Real Return Fund T. Anthony Coffey is no longer listed as a portfolio manager for the fund. David Yuen joins Kent Burns in managing the fund. 2/19
FAKSX Frost Mid Cap Equity Fund Bob Bambace will no longer serve as a portfolio manager for the fund. Alan Adelman and Tom Stringfellow will now manage the fund. 2/19
SRIGX Gabelli ESG No one, but … Ian Lapey and Melody Bryant have been added as managers. They join Christopher Desmarais, Kevin Dreyer and Christopher Marangi at the helm of a badly underperforming fund. 2/19
PGEOX George Putnam Balanced Fund Aaron Cooper will no longer serve as a portfolio manager for the fund. Emily Shanks and Kathryn Lakin join Paul Scanlon in managing the fund. 2/19
GSMAX Goldman Sachs Small/Mid Cap Growth Fund Michael DeSantis will no longer serve as a portfolio manager for the fund. Jessica Katz joins Steven Barry in managing the fund. 2/19
GTKIX Goldman Sachs Tactical Exposure Fund Joshua Sheldon will no longer serve as a portfolio manager for the fund. Neill Nuttall, Raymond Chan and Robert Surgent will continue to serve as portfolio managers for the fund. 2/19
Various Goldman Sachs Target Date Funds Raymond Chan will no longer serve as a portfolio manager for the fund. Scott de Haai joins Christopher Lvoff in managing the funds. 2/19
GITAX Goldman Sachs Technology Opportunities Fund Michael DeSantis will no longer serve as a portfolio manager for the fund. Steven Barry, Sung Cho and Charles “Brook” Dane will continue to serve as portfolio managers for the fund. 2/19
HIIDX Harbor Diversified International All Cap Fund Simon Todd will no longer serve as a portfolio manager for the fund. Neil Ostrer, Charles Carter, Nick Longhurst, William Arah, Simon Somerville, Michael Nickson, Michael Godfrey, David Cull, and Robert Antsey,continue to serve as co-portfolio managers for the fund. 2/19
HIINX Harbor International Fund Simon Todd will no longer serve as a portfolio manager for the fund. Neil Ostrer, Charles Carter, Nick Longhurst, William Arah, Simon Somerville, Michael Nickson,  Michael Godfrey, and David Cull, continue to serve as co-portfolio managers for the fund. 2/19
ICMAX Intrepid Endurance Fund Mark Travis is no longer listed as a portfolio manager for the fund. Hunter Hays, Matt Parker, and Joe Van Cavage will now manage the fund. 2/19
JUCAX Janus Henderson Global Unconstrained Bond Fund, which is now the Janus Henderson Absolute Return Income Opportunities Fund Bill Gross has retired. Nick Maroutsos will become the new manager. 2/19
JHKAX John Hancock ESG All Cap Core Fund Effective June 30, 2019, Stephanie Leighton will no longer serve as portfolio manager of the fund. Elizabeth Levy and Cheryl Smith will continue to serve as lead portfolio manager and portfolio manager of the fund. 2/19
JEIAX JPMorgan International Equity Income Fund Jeroen Huysinga has decided to retire from the asset management industry. Sam Witherow will be joining Rajesh Tanna and Helge Skibeli on the management team. 2/19
MFOCX Marsico Focus Fund No one, but … Brandon Geisler joins Thomas Marsico in managing the fund. 2/19
MGRIX Marsico Growth Fund No one, but … Brandon Geisler joins Thomas Marsico in managing the fund. 2/19
PEVAX PACE Small/Medium Co Value Equity Investments Systematic Financial Management will no longer subadvise the fund. Aman Patel, D. Kevin McCreesh, and Ronald Mushock are no longer listed as portfolio managers for the fund. Mabel Lung, Fred Lee, Julie Kutasov, Craig Stone, Vincent Russo, Mayoor Joshi, Samir Sikka, and Joseph Huber will continue to manage the fund. 2/19
POLRX Polen Growth Fund No one, but … Brandon Ladoff joins Daniel Davidowitz and Damon Ficklin on the management team. 2/19
POIRX Polen International Growth Fund No one, but … Daniel Fields joins Todd Morris in managing the fund. 2/19
PPGAX Putnam Global Sector Fund Aaron Cooper will no longer serve as a portfolio manager for the fund. Kathryn Lakin will continue to manage the fund. 2/19
PSLAX Putnam Small Cap Value Fund David Diamond is no longer listed as a portfolio manager for the fund. Michael Petro will now manage the fund. 2/19
SHPAX Saratoga Health & Biotechnology Portfolio Fund Mark Oelschlager is no longer listed as a portfolio manager for the fund. Robert Stimpson will now manage the fund. 2/19
WTIFX Segall Bryant & Hamill Fundamental International Small Cap Fund Jeremy Duhon is no longer listed as a portfolio manager for the fund. John Fenley will continue to manage the fund. 2/19
GAL SPDR SSGA Global Allocation ETF Timothy Furbush will no longer serve as a portfolio manager for the fund. Jeremiah Holly and Michael Martel will manage the fund. 2/19
INKM SPDR SSGA Income Allocation ETF Timothy Furbush will no longer serve as a portfolio manager for the fund. Jeremiah Holly and Michael Martel will manage the fund. 2/19
SIESX State Street Institutional International Equity Fund Makoto Sumino will no longer serve as a portfolio manager for the fund. Michael Solecki will continue to manage the fund. 2/19
PRGTX T. Rowe Price Global Technology Fund Effective March 31, 2019, Joshua Spencer will no longer manage the fund. Alan Tu will take over the management of the fund. 2/19
PRNHX T. Rowe Price New Horizons Fund Effective March 31, 2019, Henry Ellenbogen will no longer manage the fund. Joshua Spencer will take over the management of the fund. 2/19
TAAAX Thrivent Aggressive Allocation Fund David Francis will no longer be a portfolio manager for the fund. David Spangler will join Mark Simestad, Darren Bagwell, Stephen Lowe, and David Royal on the management team. 2/19
THMAX Thrivent Moderate Allocation Fund David Francis will no longer be a portfolio manager for the fund. David Spangler will join Mark Simestad, Darren Bagwell, Stephen Lowe, and David Royal on the management team. 2/19
TMAAX Thrivent Moderately Aggressive Allocation Fund David Francis will no longer be a portfolio manager for the fund. David Spangler will join Mark Simestad, Darren Bagwell, Stephen Lowe, and David Royal on the management team. 2/19
TCAAX Thrivent Moderately Conservative Allocation Fund David Francis will no longer be a portfolio manager for the fund. David Spangler will join Mark Simestad, Darren Bagwell, Stephen Lowe, and David Royal on the management team. 2/19
TWAAX Thrivent Partner Worldwide Allocation Fund, which will become Thrivent International Allocation Fund, effective April 30, 2019. Aberdeen Asset Managers Limited will no longer serve as subadvisers to the fund. Goldman Sachs Asset Management, L.P. will continue to subadvise the fund. 2/19
INGBX Voya Global Bond Fund No one at the moment, but Mustafa Chowdhury will retire effective August 31, 2019. Sean Banai joins the management team, now. He and Brian Timerlake will remain after Mr. Chowdhury’s departure. 2/19
ZEOIX Zeo Short Duration Income Fund Brandford Cook will no longer serve as a portfolio manager for the fund. Venkatesh Reddy will continue to manage the fund. 2/19

 

Briefly Noted

By David Snowball

Updates

The Ghost Ship sails every onward. Voya Corporate Leaders (LEXCX, once Lexington Corporate Leaders) continues its skipperless voyage. The fund was launched in 1935 with a simple strategy (buy an equal number of shares of what were then America’s best companies, and never sell) and no manager. Right: no manager changes in more than 83 years ‘cause it’s had no manager in more than 83 years. How’s that working for you?

It’s turned an initial investment of $10,000 (admittedly, a nearly inconceivable amount in 1935 when a new car might be had for $600 and a new home for $6000, a lot less if you’d bought the high-end Vallonia from the Sears catalog) into $43.4 million while the average large cap value portfolio would have generated $23.9 million. The fund has outpaced 99% of its peers over the past 15 years and 97% in the tumultuous past 12 months.

Briefly Noted . . .

SMALL WINS FOR INVESTORS

Effective immediately, the minimum initial investment amount for iM Dolan McEniry Corporate Bond Fund (IDMIX) Institutional Shares has been lowered to $10,000. The fund launched in September 2018 and is performing well; it just hasn’t drawn investors.

The minimum initial investment for the institutional share class of Leader Total Return Fund (LCTIX) has dropped from $2 million to $100,000.

Effective March 29, 2019, the RMB Mendon Financial Services Fund (RMBKX) is open to investment by new investors.

The folks at Symons Value (SAVIX) want to reduce their fund’s expense ratio. Rather than, I don’t know, just reducing their fund’s expense ratio, they are creating a new share class (Class II) and moving all current investors into it. The net effect will be a drop of 0.25% in the expense ratio.

Vanguard FTSE All-World ex-US Small-Cap Index Fund, Vanguard FTSE Social Index Fund, Vanguard High Dividend Yield Index Fund, Vanguard Long-Term Bond Index Fund and Vanguard Total World Stock Index Fund now all offer low-cost Admiral Shares with an investment minimum of $3,000. Those trim a couple basis points off the comparable Investor shares. Vanguard has closed all of the Investor class shares to new investors and will begin moving their current investors automatically into the Admiral shares in April.

CLOSINGS (and related inconveniences)

Had you folks noticed anything? Other than funds liquidating, I hadn’t.

OLD WINE, NEW BOTTLES

Brown Advisory – Somerset Emerging Markets Fund (BIAQX) became Brown Advisory Emerging Markets Select Fund on February 22, 2019. The absence of “Somerset” in the name is consequent to the removal of “Somerset” (Capital Management) as the sub-adviser. Wellington and Pzena have replaced it. The Somerset managers were offering a fair trade: below average returns for much below-average risk.

Effective on or about May 1, 2019, DWS High Conviction Global Bond Fund (SZGAX) will be renamed DWS ESG Global Bond Fund. Thomas M. Farina will take over as manager for Ramhila Nadi and Bernhard Falk. SZGAX is amiably mediocre while Mr. Farina’s main charge is also amiably mediocre, so it’s hard to view the manager change as significant. The shift to an ESG focus feels like it’s marketing driven.

Effective as of February 15, 2019, EntrepreneurShares Global FundTM became ERShares Global FundTM (ENTRX). The same renaming occurred with the US Small Cap (IMPAX) and US Large Cap (IMPLX) funds.

Effective March 1, 2019, William H. Gross, the Portfolio Manager for Janus Henderson Global Unconstrained Bond Fund (JUCAX) intends to retire. Here’s the tail of the tape on Mr. Gross’s adventure, from the date of his ascension to the fund:

  Annual return Maximum drawdown Volatility Sharpe ratio
JUCAX 0.1% -7.7% 3.4% -0.19
Lipper peer group 1.9 -5.9 3.2 0.47
3 month T-bills, aka “cash” 0.7 0.0 0.2 0.00

Which is to say, you could have had seven times Mr. Gross’s returns, with none of his fund’s volatility, by sticking your money in a credit union’s savings account.

In connection with Mr. Gross’ retirement, effective on or about February 15, 2019, Nick Maroutsos will become the new Portfolio Manager of the Fund, and the Fund will change its name to Janus Henderson Absolute Return Income Opportunities Fund.

Effective April 30, 2019, Thrivent Large Cap Stock Fund will change its name to Thrivent Global Stock Fund (AALGX).

Effective April 1, 2019, Wells Fargo Intrinsic Value Fund (EIVAX) becomes Wells Fargo Classic Value Fund.

Effective February 22, 2019, Xtrackers MSCI Asia Pacific ex Japan Hedged Equity ETF has changed its investment strategy and its name to Xtrackers International Real Estate ETF (HAUZ).

OFF TO THE DUSTBIN OF HISTORY

The Board of Trustees of the Trust approved a plan to liquidate and terminate the AMG Managers Value Partners Asia Dividend Fund (AVADX) which is expected to occur on or about April 12, 2019.

Summary execution: On February 7, 2019, the Aspen board of trustees announced their decision to immediately close to Aspen funds and to have them liquidated within three days. Aspen Managed Futures Strategy Fund and Aspen Portfolio Strategy Fund were thus dispatched on February 10, 2019.

Baron Energy and Resources Fund (BENFX) will liquidate on or before April 29, 2019. $10,000 invested at inception, December 2011, is now $6,200 which is substantially worse than its peers, who would have burned only 20% of your money.

BlackRock Emerging Markets Local Currency Bond Fund (BECIX) should have remembered the old warning: beware the Ides of March. Instead they, like Caesar, perish that day.

On February 6, 2019, the Board of Directors of BMO Funds approved a Plan of Liquidation for each of the ten funds in their BMO Target Retirement (Date) series. If the Plan is approved by shareholders, the Funds will be liquidated on June 28, 2019.

On February 4, 2019, the Board of Trustees of the ALPS ETF Trust authorized an orderly liquidation of the BUZZ US Sentiment Leaders ETF (BUZ). See what they did there … “investor sentiment” “buzz”. Except, ironically, after three years they were able to create no buzz of their own: $8 million in assets with comparable volatility but 30% lower returns than its Lipper science & tech peer group.

Cortina Small Cap Growth Fund (CRSGX) and the Cortina Small Cap Value Fund (CISVX) closed to new investments effective at the close of business on February 5, 2019 and will be liquidated effective as of the close of business on March 22, 2019.

Eaton Vance Focused International Opportunities Fund (EFIIX) will be liquidated around March 11, 2019. One star, no assets, trailed 75% of its peers …

“The Board of Trustees of the Funds has approved a Plan of Liquidation for [Gabelli Food of All Nations NextShares and Gabelli RBI Nextshares], pursuant to which each Fund will be liquidated on or about March 28, 2019.” We described these funds as “Gimmicky niche funds that seem more at home in the world of the Westcott Nothing But Net fund, the Golf Fund, the Chicken Little Growth fund, the StockCar Stocks Index fund or even … Gabelli Global Interactive Couch Potato Fund (GICPX, 1994-2000).” Two more remain.

Highmore Sustainable All-Cap Equity Fund (HMSQX) was liquidated on February 27, 2019. That was one day short of the fund’s first birthday.

Sometimes these filings speak for themselves: “The Board of Trustees has determined that it is in the best interest of shareholders to liquidate the Iron Equity Premium Income Fund (CALIX) as a result of receiving notice from the Fund’s adviser that it does not want to continue to manage the Fund. As of the date of this supplement, the Fund is no longer accepting purchase orders for its shares and it will close effective March 26, 2019.” It’s a four-star options-based fund with just $11 million in assets. The adviser had dropped its management fee from 1.0% to 0.65%, which looks great for investors until you realize that $71,500 isn’t nearly enough income to justify running the fund.

Legg Mason Developed ex-US Diversified Core ETF (DDBI), Legg Mason Emerging Markets Diversified Core ETF (EDBI) and Legg Mason US Diversified Core ETF (UDBI) will all be liquidated on March 22, 2019.

Miscalibrated? Lord Abbett Calibrated Mid Cap Value Fund merged into Lord Abbett Mid Cap Stock Fund (LAVLX) and Lord Abbett Calibrated Large Cap Value Fund was absorbed by Lord Abbett Fundamental Equity Fund (LDFVX), both on February 22, 2019. Each of the “surviving funds” carries a two-star rating from Morningstar and each has trailed 80% of its peers over the past decade.

Matthews Asia Focus Fund (MIFSX) will be liquidated on or about March 29, 2019. Tiny fund, mediocre record, no compelling focus.

Patriot Balanced Fund (ATBAX) will be liquidated on March 29, 2019. “Patriotism” meant not investing in companies that did business with Iran, Sudan and Syria. The fund lagged about 80% of its peers, though it’s hard to imagine that the difference is driven by the non-patriotic companies that everyone else chose to buy.

Principal Contrarian Value Index ETF and Principal International Multi-Factor Index ETF are at risk of extinction, following a NASDAQ compliance finding that they had too few shareholders (under 50) to remain as listed securities. Principal’s been given time to track down some additional shareholders but, really, why would they?

Spouting Rock Small Cap Growth Fund (SRSCX) has closed to new investments and will liquidate on March 20, 2019. Hmmm … if you got shares as a Christmas present this year, you’d be alternately delighted (by outperforming your peers by 3:1) and saddened (that you now own a liquidating investment).

State Funds Enhanced Ultra Short Duration Mutual Fund (STATX) will liquidate on March 6, 2019. Uh-huh. That’s freakish. The fund has $90 million in assets, a 0.40% expense ratio, $100 minimum and a record so strong that it defied explanation. It outperformed its peers and its three best competitors, and did so with zero volatility.

A lively discussion of the fund alternated between excitement and deep suspicion of anything that smacked of “too good to be true.” And now it’s liquidating? Uh-huh. The Shadow, who is a senior member of our discussion board and remarkable observer of the developments in the industry, offers this passage as the only reason given: “Based on the recommendation of the adviser and given the Fund’s anticipated future expense, the Board has determined that liquidating the Fund would be in the best interests of the Fund and its shareholders.”

“Due to the Fund’s low asset levels, the high expense levels,” Stringer Moderate Growth Fund (SRQAX) is expected to liquidate at the close of business on March 31, 2019. That’s much more delicate than saying, “Due to the Fund’s high expenses, high sales load, bottom 5% returns, and tax inefficiency, investors have rationally chosen to avoid it and we have rationally chosen to terminate it.”

TETON Westwood Mid-Cap Equity Fund (WMCEX) will be liquidated on or about April 26, 2019.

Touchstone International Value Fund (FSIEX) is expected to be closed and liquidated on or about March 28, 2019.

Touchstone Merger Arbitrage Fund (TMGAX) is merging into Touchstone Arbitrage Fund (TMARX) around May 10, 2019. The funds have a correlation of 0.96 and identical (minimal) returns of 1.1% annually, so investors aren’t apt to notice the change.

Touchstone Controlled Growth with Income Fund (TSAAX) merges into the Touchstone Dynamic Diversified Income Fund (TBAAX) on about April 26, 2019. Similarly high five-year correlation, but the returns have been noticeably stronger for the surviving fund, so that’s good.

USCF Commodity Strategy Fund (USCFX) will liquidate on or around March 21, 2019.

USCF SummerHaven SHPEN Index Fund (BUYN) is in trouble ‘cause investors aren’t buyin’. NYSE’s compliance group has informed them that they’re at risk of de-listing because they don’t have at least 50 shareholders.

Western Asset Short Term Yield Fund (LGSTX), a $50,000 fund, all of whose shares are owned by a single person, will “terminate and wind up” on or about March 29, 2019.

On March 15, 2019, Wisdom will liquidate WisdomTree Australia Dividend Fund (AUSE), WisdomTree Japan Hedged Financials Fund (DXJF), WisdomTree Japan Hedged Quality Dividend Growth Fund (JHDG). WisdomTree Global SmallCap Dividend Fund (GSD), WisdomTree Global Hedged SmallCap Dividend Fund (HGSD), WisdomTree Europe Domestic Economy Fund (EDOM), WisdomTree Asia Local Debt Fund (ALD), and WisdomTree Brazilian Real Strategy Fund (BZF).