Monthly Archives: October 2020

October 1, 2020

By David Snowball

Dear friends,

Welcome to autumn. It’s a season of such russet-gold glory that even Albert Camus (remember him from The Stranger and The Plague?) was forced to surrender: “Autumn is a second spring when every leaf is a flower.” It’s the time of apples and cinnamon, of drives through the Wisconsin countryside, and of gardens turning slowly to their rest.

Well, short drives through the Wisconsin countryside, anyway. Rather than the leisurely two-day circuit of western Wisconsin’s creameries, breweries (a nod to New Glarus), and orchards, I’ll mask-up and dart north to Gays Mills where I’ll try not to surrender entirely to the call of the orchards. You’d be amazed at the variety of flavors found in apples; there are about 200 varieties grown in the US, with the average grocery store stocking just a half dozen (including that flavorless favorite, Red Delicious). October is the month for Haralson and King David, Jersey Sweet and Sansa, Burgundy, and Dick’s Delicious. Heck, you might find a few Lura Red or Wolf Rivers left if you’re lucky. Me, I’m praying for Golden Russet.

All of which I will buy in excess, and haul back as a source of good cheer for family, friends, colleagues, and students. (Perhaps even a stray dean or two.)

So open the windows, unpack the flannel, raise high the cup of cider. Summon the children, light the bonfires, deploy the marshmallows!

The Matthews Migration Mystery – half solved

We reported in September on the departure of managers Tiffany Hsiao, YuanYuan Ji, Beini Zhou, and Anand Vasagiri for “parts unknown.” We are pleased to report that their parts are now known: all decamped to positions with Artisan Partners. We only sort of know what they’ll be doing there. Messrs. Zhou and Vasagiri will be managing the forthcoming Artisan International Small Cap Value Strategy. Sadly, they will not be managing it for you. Folks at Artisan confirm that “we do not expect to offer a publicly offered fund at this time.”

Ms. Hsiao’s plan is less clear. Citywire USA reports that “a spokesman for Artisan declin[ed] to give any more detail on what her role will involve and what funds she may manage.” (Margaryta Kirakosian, “Former Matthews star PM Tiffany Hsiao joins Artisan Partners,” 9/24/2020).

Artisan is a remarkable organization, marked by high levels of professionalism and strategic thinking. That’s allowed them to thrive when other worthies have withered. A graphic from a July 29, 2020 conference call with investors gives some hint of their hopes for Ms. Hsiao. Eric Colson, Artisan CEO, shares this snapshot of how Artisan’s AUM is divided.

His gloss on that graphic explains what’s happening the leading edge of Artisan’s business.

I want to return to the subject of thoughtful growth.

Over the years, our business expansion has occurred when we matched our talent-based, high value-added model with secular change in the industry.

We usually talk about these expansions by reference to our investment strategies. But there is much more to it than that. We align investment strategies with asset allocation trends, distribution resources, the right investment vehicles, and operational support. For example, with our Second Generation business, we expanded into global oriented strategies, leveraging global institutional consultants, and using UCITS pooled vehicles. More recently, with our Third Generation business, we have built out operational support for greater degrees of investment freedom, tapped further into the high net worth channel, and used private fund structures.

Today, similar to the interesting investment opportunities our investment teams are finding, we are seeing interesting opportunities to partner with new talent, launch new strategies, and further develop our business.

So we have the confluence of the conversations that surely must have occurred by then – the Matthews folks left less than five weeks later – and the recognition that the firm needed to strengthen its ties to high net worth individuals and to “private fund structures.”

The federal government continues to speak with two voices on climate change

The Trump administration continues to pursue rule changes that would make it harder for employers to offer ESG- or sustainable fund options as part of their retirement portfolios.

At the same time, yet another federal report highlighted the risk that climate change poses to lives (and investment portfolios). The US Commodity Futures Trading Commission released “Managing Climate Risk in the U.S. Financial System” in early September, 2o2o. It’s the first federal report on the effects of climate change on Wall Street. Their conclusion echoes concerns expressed by a variety of other federal bodies:

Climate change is already impacting or is anticipated to impact nearly every facet of the economy, including infrastructure, agriculture, residential and commercial property, as well as human health and labor productivity. Over time, if significant action is not taken to check rising global average temperatures, climate change impacts could impair the productive capacity of the economy and undermine its ability to generate employment, income, and opportunity.

They argue that we need to set a market price on carbon and that “financial innovations, in the form of new financial products, services, and technologies, can help the U.S. economy better manage climate risk and help channel more capital into technologies essential for the transition.”

It’s striking that the report was written “by dozens of analysts from investment firms including Morgan Stanley, S&P Global and Vanguard; the oil companies BP and ConocoPhillips; and the agricultural trader Cargill, as well as academic experts and environmental groups” (“Federal Report Warns of Financial Havoc From Climate Change,” New York Times, 9/8/2020). The Commissioners, all of whom were appointed by Mr. Trump, unanimously endorsed the report.

We’ll continue to try to keep you apprised on the best research we find, and of the investment options that may help you address these challenges.

Grand Peak celebrates a one-year anniversary

September 17, 2020, marked the one-year anniversary of the launch of Grandeur Peak’s Global Contrarian fund. It represents Grandeur Peak’s take on value investing. Founder Robert Gardiner noted that “We waited eight years to launch Global Contrarian, the timing feels right to us. While much has changed over the last year, we believe the pandemic is giving us significant contrarian opportunities for long-term investors looking beyond the next 12 months.” If the first year’s performance is any indicator, they’ve done a good job of pursuing those opportunities: Contrarian is up 10% in its first 12 months, while the MSCI All-Country World Small Cap Value Index had declined -7.26%. It’s pretty remarkable to post an 1800 bps advantage over your benchmark. Manager Mark Madsen modestly suggests that it’s “a solid place to hide out in an expensive market.”

The fund has $13 million in assets and remains open to new investors. We’ll inquire further for you in the months ahead.

Thanks for the MFO Premium stalwarts

We try, each month, to thank the folks whose support makes the Observer (and MFO Premium) possible. We’d like to give special recognition this month to the folks who have faithfully supported MFO Premium since its launch in 2015. And so, huzzahs, mugs and the offer of really good apples if they drop by the house, to Stephen Acciani, Dennis Baran, Brian Boehler, James Fleming, Radey Johnson, Mike Marston, Sigrid McAfee, William Murray, William Neel, Fitz Pannill, Nancy Parkinson, Vadim Pertsov, Michelle Pogrebin, Joseph Schunk, Floyd Tuler, Leah Williams, William Williams, and Frederick Wuenschel.

Thanks to Wilson from Massachusetts and the folks at S&F Investment Advisors for their ongoing support, and to our faithful monthly contributors Gregory, William, the other William (had I mentioned that my first name is William? As is my son’s and was my father’s, grandfather’s and other grandfather’s? Pop-pop was the original other William), Matthew, Brian, David, and Doug.

And finally, to folks who reached out this month: Benjamin, Mark, and Michael (if you’d share an address, good sir, we’d share thanks!).

You make a difference.

Speaking of MFO Premium …

In his latest blog post at MFO Premium, our colleague Charles Boccadoro celebrates … or mourns … a new milestone: our screener has now passed the 10,000 mark for the number of funds, CEFs, and ETFs it screens for. Passed by a little, anyway: 10,007. Charles shares details in his latest blog post An Overkill of Funds. While most of MFO Premium is available only to folks who make a tax-deductible contribution of $120 or more, several tools on the premium site remain available without donation or subscription, including Great Owls, Three Alarm (and Honor Roll) Funds, QuickSearch, and Risk Profiles.

For now, with a fresh COVID-negative test in hand, Charles is visiting family in New England then will settle back into the task of crunching the September data drop Saturday, which he hopes to post later this weekend.

SPAC Fest

Readers who are also professional investors might consider attending David Sherman’s SPAC Teach-in, October 15th at 2:00 Eastern. SPACs, Special Purpose Acquisition Companies, are a vehicle used to raise money through an IPO to buy another company. CNN dubbed 2020, “The Year of the SPAC” for their dramatic rise in popularity. Collectively, SPACs raised over $20 billion in funding through August.

In any case, David recently talked to the Global Value Investing class at NYU’s Stern School of Business on SPACs and their significance. He’ll reprise the talk for an online audience and invites you to drop him a note if you’d like to join in.

Better days are coming

Just keep reminding yourself of that. Elections end. Shouting quiets. Pandemics fade.

Friendships endure. Curiosity blossoms. Hope returns. Life feels normal.

The road between here and there is rocky. Our weariness from the journey has left so many of us feeling fragile and tired, subject to bouts of mania and depression. October has never been a kind month for investors, and yet Bank of America reported October 1 that our (manic) colleagues on Wall Street just recorded the highest level of optimism since the start of the pandemic. That was just ahead of news of Mr. Trump’s positive COVID test and a sudden reversal of sentiment. Somewhere in there comes the hourly “will they / won’t they” news on additional federal action to support the economy, always illustrated with spectacularly unflattering pictures of one congressional leader or another.

The road between here and there is rocky. Travel it carefully. If you’ve made a plan, this is probably not the time to cast it aside and rush one way or another. If you haven’t and you share MFO’s bias toward caution, feel free to browse our recent issues. We continue to try to offer both perspectives and suggestions for strategies that have worked and managers who have weathered the storm.

And we’ll look for you again next month.

david's signature

Narrowing the Shopping List to DRSK, GAVAX, HSTRX, and TMSRX

By Charles Lynn Bolin

One of the questions that I am sometimes asked is why do I own so many funds? The answer is that I have a dual-income family with different employer sponsors, different types of tax-advantaged accounts, brokerage accounts, and that I like to set aside a portion of my assets to invest according to the business cycle and trends. With Mutual Fund Observer, computers, and the internet, it is no more difficult or costly to manage 20 or more funds than it is 5.

I identified in Flexible Portfolio Funds With High Risk-Adjusted Returns that KL Allocation (GAVAX), a Flexible Portfolio Fund, is one that I may be interested in purchasing. In this article, I look at the fund performance of 17 funds over the past 25 years to enhance a strategy of how I want to invest over the coming decade with stock valuations so high, and interest rates so low. The focus is on Flexible Portfolio Funds but includes Alternative Multi-Strategy Funds and Absolute Return Funds among others. I have narrowed the list of funds to consider to 15. The four finalist funds are T. Rowe Price Multi-Strategy Total Return (TMSRX), an Alternative Multi-Strategy fund, and KL Allocation Fund (GAVAX/GAVIX), which are described by David Snowball, Aptus Defined Risk ETF (DRSK) described by Alpha Gen Capital in Fund Spotlight: Aptus Defined Risk Strategy ETF, and Hussman Strategic Total Return (HSTRX). These are shown in Table #1 and Figure #1. The difference for GAVAX between the return in the table and price in the figure is that it paid an annual dividend of 7.5% TTM. All four funds had low drawdowns during the COVID bear market.

Table #1: September Finalist Funds (Two Years)

Source: MFO Premium fund screener and Lipper Global Datafeed

Figure #1: September Finalist Funds (Two and a Half Years)

Source: Yahoo Finance

Table #2 contains funds that I own or am interested in purchasing plus benchmark funds such as Vanguard Wellesley Income (VWINX), Wellington (VWELX), and Short-Term Treasury (VFISX). The metrics are for the past two years, sorted by the lowest Risk, highest Risk-Adjusted Return to more tactical funds with higher risk and lower risk-adjusted returns. My preference in this environment is to have a majority of assets in Conservative (MFO Risk =2) and Moderate (MFO Risk =3) funds.

Table #2: Funds Evaluated – Two Year Metrics

Source: MFO Premium fund screener and Lipper Global Datafeed

The 25 Year Funds and View

For this article, I used the MFO Premium fund screener to select the funds by age group, and Portfolio Visualizer (PV) to create three portfolios: 1) Equal Weight, 2) Maximum Return with volatility equal to the Vanguard Balanced Index Fund, and 3) Maximum Sharpe Ratio. I limited allocations per fund to 20%. Table #3 contains the MFO metrics for 20 Years, and Table #4 contains the PV results. The three portfolios performed as well as the Vanguard Balanced Fund, but the advantage is that they follow a bucket approach with short term funds in safer buckets for withdrawals. FPA Crescent (FPACX) is the standout fund. Notice that Loomis Sayles Global Allocation Fund remains a fund selected by Portfolio Visualizer to maximize return at the same volatility as the Vanguard Balanced Fund throughout the following time periods. Notice that the portfolios outperformed the Vanguard Balanced Fund until the past 8 years which may be a distortion of quantitative easing. The link to Portfolio Visualizer is here.

Table #3: Funds Metrics (20 Years)

Source: MFO Premium fund screener and Lipper Global Datafeed

Table #4: Portfolios for the Past 25 Years

Ticker Name Allocation Max Rtn @ 9.5% Vol Max Sharpe VBINX
VFISX Vanguard Short-Term Treasury 17.0% 9.5% 20.0%  
VBINX Vanguard Balanced Index 17.0% 20.0% 20.0%  
VFINX Vanguard 500 Index Investor 17.0% 10.5%    
LCORX Leuthold Core Investment 17.0% 20.0% 20.0%  
LSWWX Loomis Sayles Global Alloc 16.0% 20.0% 20.0%  
FPACX FPA Crescent 16.0% 20.0% 20.0%  
  Return 8.1% 8.4% 7.9% 7.9%
  Maximum Drawdown -31.4% -32.9% -27.9% -32.6%

Figure #2: Portfolios for the Past 25 Years

Source: Portfolio Visualizer

The 18 Year Funds and View

Columbia Thermostat (COTZX) and Hussman Strategic Total Return (HSTRX) are added to the option of funds to evaluate funds for the past 18 years. These funds replace LCORX as optimized funds in Portfolio Visualizer. The standout fund is HSTRX, and FPA Crescent continues to be a top performer. Again, the only advantage is the bucket approach. The link to Portfolio Visualizer is here.

Table #5: Funds Metrics (15 Years)

Source: MFO Premium fund screener and Lipper Global Datafeed

Table #6: Portfolios for the Past 18 Years

Ticker Name Provided Max Rtn @ 9% Vol Max Sharpe VBINX
VFISX Vanguard Short-Term Treasury Inv 13.0%   20.0%  
VBINX Vanguard Balanced Index Inv 13.0% 20.0% 20.0%  
VFINX Vanguard 500 Index Investor 13.0% 17.1%    
COTZX Columbia Thermostat Inst 13.0% 12.7% 15.0%  
HSTRX Hussman Strategic Total Return 12.0% 20.0% 20.0%  
LCORX Leuthold Core Investment Retail 12.0%      
LSWWX Loomis Sayles Global Allocation Y 12.0% 20.0% 10.2%  
FPACX FPA Crescent 12.0% 10.1% 14.8%  
  Return 8.0% 8.8% 6.9% 8.5%
  Maximum Drawdown -29.5% -33.1% -21.9 -32.6%

Source: Portfolio Visualizer

Figure #3: Portfolios for the Past 18 Years

Source: Portfolio Visualizer

The 10 Year Funds and View

The KL Allocation Fund (GAVIX/GAVAX) is added to the funds to be considered for the 10-year analysis. This time period covers the QE driven bull market with no major dips. Columbia Thermostat (COTZX) is the outstanding fund. GAVIX and HSTRX are lower risk, but with lower performance. Portfolio Visualizer favors COTZX, GAVIX/GAVAX, and to a lesser extent HSTRX. The link to Portfolio Visualizer is here.

Table #7: Funds Metrics (9 Years)

Source: MFO Premium fund screener and Lipper Global Datafeed

Table #8: Portfolios for past 10 Years

Ticker Name Provided Max Rtn @ 8.2% Vol Max Sharpe VBINX
VFISX Vanguard Short-Term Treasury Inv 13.0%   20.0%  
VBINX Vanguard Balanced Index Inv 13.0% 20.0% 20.0%  
VFINX Vanguard 500 Index Investor 13.0% 20.0% 2.2%  
COTZX Columbia Thermostat Inst 13.0% 20.0% 20.0%  
HSTRX Hussman Strategic Total Return 12.0% 2.4% 17.8%  
GAVAX KL Allocation Advisor 12.0% 20.0% 20.0%  
LSWWX Loomis Sayles Global Allocation Y 12.0% 17.6%    
FPACX FPA Crescent 12.0%      
  Return 7.9% 10.0% 6.5% 9.9%
  Maximum Drawdown -8.3 -10.1 -4.0 -12.3

Source: Portfolio Visualizer

Figure #4: Portfolios for past 10 Years

Source: Portfolio Visualizer

The 2 Year View

For the 2 Year View, I gave Portfolio Visualizer the ability to select all funds, but limited allocations to most alternative funds to 20% of the portfolio. The portfolio with the Maximum Sharpe ratio (highest return for the volatility) continues to select COTZX, HSTRX, and GAVAX. It adds T. Rowe Price Multi-Strategy Total Return (TMSRX), and several of the alternative ETFs. The Maximum Sharpe Ratio separates itself from the equal weight and Max Return Portfolios, and VBINX by having a very low maximum drawdown. Cambria Tail Risk (TAIL) is a defensive fund that moves in has moved up when the S&P500 goes down but holds its value fairly well when the S&P 500 goes up. and AGFiQ US Market Neutral Anti-Beta (BTAL) does well when low beta funds outperform high beta such as during market downturns. The link to Portfolio Visualizer is here.

Table #7: Funds Metrics (2 Years)

Ticker Name Allocation Max Rtn @ 13% Vol Max Sharpe VBINX
VFISX Vanguard Short-Term Treasury 8.0%   20.0%  
VBINX Vanguard Balanced Index Inv 8.0%      
VFINX Vanguard 500 Index Investor 8.0% 20.0%    
COTZX Columbia Thermostat Inst 8.0% 20.0% 20.0%  
HSTRX Hussman Strategic Total Return 8.0%   11.0%  
GAVAX KL Allocation Advisor 8.0% 10.1% 11.8%  
LSWWX Loomis Sayles Global Allocation 8.0% 20.0%    
FPACX FPA Crescent 8.0%      
TAIL Cambria Tail Risk ETF 3.0%   5.0%  
DRSK Aptus Defined Risk ETF 3.0%      
HNDL Strategy Shares Nasdaq 7 Handl ETF 3.0%      
FMSDX Fidelity Multi-Asset Income 8.0% 20.0%    
SWAN Amplify BlackSwan Gr&Trsry Cor 3.0% 5.0% 5.0%  
ATACX ATAC Rotation Investor 3.0% 5.0%    
BTAL AGFiQ US Market Neutral Anti-Beta 3.0%   5.0%  
PHDG Invesco S&P 500 Downside Hedged 2.0%   5.0%  
TMSRX T. Rowe Price Multi-Strategy Ttl Ret 8.0%   17.2%  
  Return 14.3 18.7 12.5 14.2
  Maximum Drawdown -5.6% -8.8% -0.7% -12.3%

Source: Portfolio Visualizer

Figure #5: Portfolios for past 2 Years

Source: Portfolio Visualizer

Closing

The best funds for an investor depends upon many factors including philosophy, risk tolerance, funds available at their broker, and what they already own. I own six of the funds covered in this article including TMSRX and HSTRX, and others. I like to own more funds to limit the risk of the poor performance of any asset. I believe markets during the next decade will be more volatile and a more active approach is warranted by investors willing and able to do the research. My preference is to invest in funds that manage the risk. For these reasons, I plan to add GAVAX as a long term holding to my portfolio. I will add DRSK as more of a tactical fund.

Figure #6: Finalist Funds

Source: Yahoo Finance

Disclaimer

I am not an economist nor an investment professional. I became interested in economic forecasting and modeling in 2007 when a mortgage loan officer told me that there was a huge financial crisis coming. There were signs of financial stress if you knew where to look. I have read dozens of books on business cycles since then. Discovering the rich database at the St. Louis Federal Reserve (FRED) provides most of the data to create an Investment Model. The tools at Mutual Fund Observer provide the means for implementing and validating the Investment Model. 

Seven Canyons World Innovators Fund (WAGTX)

By David Snowball

Objective and strategy

The fund invests primarily in non-US growth companies that they believe are innovators in their sectors or industries. Nominally the managers can invest in “domestic and foreign … companies of any size.” As a practical matter, they invest in international small-cap companies. That’s reflected in the first four words atop their homepage:

While retaining the flexibility of investing in the US, as well as non-US, small caps, the team’s understanding of the opportunity set has convinced them that they can add more value by focusing on the non-US slice of their universe. As of August 2020, three-quarters of the fund’s portfolio was invested in small-cap growth stocks, an area to which they are far more committed than their Morningstar peers. By Morningstar’s calculation, they have 16-times the exposure to microcap stocks as their peers and their average market cap is one-sixth of their peers. Virtually all of that is non-US: Morningstar reports 91% non-US equity, 2.5% US equity, and the remainder in cash reserves.

The managers use a combination of quantitative screens and fundamental research.

Adviser

Seven Canyons Advisors, LLC. Seven Canyons (SCA), headquartered in Salt Lake City, Utah, was founded in 2017 by Sam Stewart and his sons, Josh and Spencer. The elder Mr. Stewart founded Wasatch Advisors, which is primarily a global small-cap investor, in 1975, and helped it grow to about $17 billion in assets. When he and son Josh left Wasatch, they took responsibility for two the Wasatch funds that they’d overseen: World Innovators and Strategic Income. SCA advises the two Seven Canyons funds and Ark Global Emerging Companies, L.P. As of August 31, 2020, the firm had $207 million in assets under management (per Morningstar).

Manager

Sam Stewart, Josh Stewart, and Spencer Stewart.

Sam was the founder of Wasatch Advisors and long-time manager of both World Innovators (since 2008) and Strategic Income (since inception, 2006). Prior to that, he was a university professor.

Josh Stewart worked at Wasatch Advisors for 12 years and was Lead Portfolio Manager of the Wasatch World Innovators Fund. In 2019 the fund received the 10-year Lipper Award for best Global Small/Mid-Cap Fund.

Spencer Stewart was a Portfolio Manager at Grandeur Peak Funds. He managed Grandeur Peak Emerging Markets Opportunities Fund (GPEIX), the top fund in its category during his three-year tenure, and co-managed Grandeur Peak International Opportunities (GPIOX) and their flagship Grandeur Peak Global Reach (GPROX) funds.

The Stewarts are supported by Andrey Kutuzov, a former Wasatch manager, and Justin Bodily, a former Goldman Sachs Analyst.

Strategy capacity and closure

SCA plans to close the fund when it reaches $500 million in assets. Seven Canyons is founded upon the conviction that the key to success in small-cap investing is having a small and elite team managing limited AUM. We believe there is a tipping point where growth in team and AUM size becomes an impediment to successful investing in true small and micro-cap stocks.

Management’s stake in the fund

Samuel Stewart has invested over $1 million in the fund (per the 2020 SAI, he owns 25% of the fund’s shares), Josh Stewart has invested between $100,000 – 500,000, and Spencer Stewart, added to the team a year ago, began investing in the fund in January 2020. No member of the Board of Trustees has invested in the fund.

Opening date

December 19, 2000.

Minimum investment

$2,000

Expense ratio

1.79% on assets of $201 million (as of 10/20/2020).

Comments

Understanding Seven Canyons World Innovators requires understanding a bit about the global small-cap universe in which they invest, the importance of innovation as an investment characteristic, and the record of the Seven Canyons team. We’ll take those in order.

Seven Canyons invests in non-US small caps. It is a remarkable and underutilized asset class. There are a huge number of international small-cap stocks; depending on the exact cutoff for “small-cap,” there are about twice as many non-US small caps as US ones. ISC tend to outperform their large-cap brethren on both an absolute-returns and risk-adjusted basis. For many measurement periods this century (for example, 2000-17), they also outperformed the S&P 500 on both absolute and risk-adjusted returns. They tend to have high diversification value (based on factors such as dispersion of returns and inter-stock correlations) because their performance is more often driven by country-specific or market-specific factors than by greater international tides. Because of their sheer numbers and cutbacks in the investment industry, international small-cap stocks have little analyst coverage: the average international small-cap firm is covered by five analysts and the average microcap firm, by one. Collectively, that makes this one of the strongest bastions of active management.

The Seven Canyons team targets, in particular, highly innovative companies. Their argument is that, in the long-term, earnings growth drives stock prices, and innovation drives earnings growth. The managers use quantitative screens to reduce the universe to a manageable core, then undertakes rigorous fundamental analysis (in a time of pandemic, that translates to lots of time on Zoom) to select their portfolio. Their ideal company controls innovative technologies or products, is financially solid, gaining market share, and run by an experienced team.

The team is particularly cognizant of the world’s new economic reality: enormous public and corporate debt, which can only be serviced if interest rates remain at or near zero for a long while. It’s an ugly reality but not, they posit, a new one:

The foundational characteristic of most economies today (that locks them in a vicious cycle) is record levels of indebtedness. This forces central banks to keep interest rates low so that borrowers can repay debts and make lenders whole. An economy focused on loan repayment leads to underinvestment in innovation and productive assets, and slower GDP growth. Prior to 2020, the global economy was already on this slippery slope of indebtedness, and COVID-19 just gave it a shove in the back, accelerating the slide. 

Japan started down this path of extreme indebtedness … over three decades ago and remains on that path today–which means we’ve seen this movie before and we can learn from it. From an investment standpoint, we have been doing bottom-up stock picking in the country for nearly two decades and the recipe for success is clear–find, buy and hold high-quality growth companies. [In Japan] a small cohort of well managed, progressive companies exist that consistently grow 10%, 20%, or even 30% a year. Japanese growth companies cannot rely on a booming economy to lift outcomes, they must innovate and offer customers dramatically better solutions to convince them to change old habits. In other words, they take market share, lots of it, in order to grow sales double-digits. Investors in Japanese growth companies have been handsomely rewarded with stock prices lifted by compounding sales and earnings growth with an added benefit: because growth companies are scarce, market participants tend to crowd into them, leading to valuation multiple expansion that endures over time. 

They believe that their portfolio is positioned to weather, and quite likely thrive in, the globalization of the Japan malaise.

The Seven Canyons team has had sustained, phenomenal success in building winning portfolios. A series of highlights:

  • The fund is the top-performing international or global small-cap fund over the past 10- and 15-year periods, based on both total returns and risk-adjusted returns. It is one of the top five (of 99) funds, based on those same metrics, over the shorter three- and five-year windows.
  • WAGTX has outperformed the S&P 500 over the past 10 years (through 9/30/2020).
  • It has earned a Great Owl designation from MFO, which is awarded only to funds that place in the top 20% of their peer groups for risk-adjusted returns for the past 3, 5, 10, and 20 year periods, as applicable.
  • It earned a five-star rating from Morningstar and a Silver analyst rating.
  • The fund has pretty much stuffed its Lipper global small-cap peer by every measure.

Comparison of Lifetime Performance (Since 200101)

  APR MAXDD
%
Recvry
mo
STDEV
%/yr
DSDEV
%/yr
Ulcer
Index
Sharpe
Ratio
Sortino
Ratio
Martin
Ratio
Seven Canyons World Innovators 9.6 -59.2 42 23.6 15.6 17.5 0.35 0.53 0.47
Global Small-Mid Cap 6.9 -60.7 62 20.0 14.3 19.0 0.28 0.39 0.30

Here’s how to read that. Seven Canyons has returned 9.6% annualized since inception; its peer group has returned under 7%. The price of substantially higher returns has been modestly higher volatility. That combination leaves the fund with substantially higher risk-return metrics than its peers; indeed, for the past 10 and 15 years, higher than any of its peers.

That success is not terribly surprising. Mr. Stewart, the senior, has a remarkable record as both an individual manager and as a teacher of managers. He helped build a remarkably successful record at Wasatch, whose managers then went on to found two other remarkable, global small-cap firms: Grandeur Peak and Seven Canyons. Rondure Global, with an emphasis on slightly larger firms, is led by another manager who trained under Mr. Stewart.

What about the passive / ETF option?

In general, passive funds efficiently harvest the gains in a steadily rising market. Few analysts believe that the next five years will see such gains, which might give any investor in a passive vehicle cause to double-check their understanding of their investments. Beyond that, the challenge to passive funds is substantially greater in some markets than folk wisdom suggests.

Small-cap growth – domestic, international, and global – is not a place to count on passive funds. If we screen the Lipper Global database for the 25 investment vehicles with the highest total returns in the combined international and global small-cap growth category over the past 10 years (through 8/2020), no ETF landing in the top 25. None made the top 25 based on the Sharpe ratio, the most common measure of risk-adjusted returns. The same thing is true over the past three and five years: one in the top 25 for total returns, one in the top 25 for risk-adjusted returns.

Bottom Line

It’s hard getting it right. It’s incredibly hard getting it right over and over again. The team at Seven Canyons has. World Innovators is not a mild-mannered fund, but it’s a highly successful one with a clear, repeatable discipline that has served its investors well for a long time. Investors looking to the next market (to the markets beyond the late 2020 manic-depressive one) really ought to put Seven Canyons on their due-diligence list.

Fund website

Seven Canyons World Innovators.

For those interesting in learning more about the dynamics of the international small-cap market, we would commend white papers by Artisan Partners (“The Case for International Small Caps,” 2020) and AMG (“The Case for International Small Cap,” June 2019) to you. Both offer a lot of the detail that substantiates the observations we made above in the section on Seven Canyons’ investment universe. While many other comparable white papers are available, you’ll quickly discover that all of them offer slightly different takes on the same four or five themes.

Harbor Global Leaders Investor HGGIX

By David Snowball

Objective and strategy

Harbor Global Leaders targets firms, worldwide, that are capable of generating sustainable, above-average, and relatively stable rates of earnings per share growth and strong free cash flows. The manager looks for companies that are leaders in their country, industry, or globally in terms of products, services, or execution. 

Their ideal business has six characteristics:

  1. Sustainable above-average earnings growth;
  2. Leadership position in a promising business space;
  3. Significant competitive advantages;
  4. Clear mission and value-added focus;
  5. Financial strength; and
  6. Rational valuation relative to the market and business prospects.

In general, the discipline leads them to large-cap companies, though about 10% of the portfolio is currently invested in mid-caps.

Their investment discipline uses both qualitative and quantitative research and integrates environmental, social, and governance factors into its investment process. They will generally hold 30-50 companies and aspire to hold them for five years or more. The managers have the authority to invest 30-35% of the portfolio in emerging markets stocks, though currently, they’re closer to 5%.

Adviser

Harbor Capital Advisors is responsible for all of the 27 Harbor Funds. Collectively, they have $56 billion in assets. Harbors’ business model centers on hiring sub-advisors, frequently institutional investors who are otherwise inaccessible to average people, to manage their funds.

Sands Capital Management, LLC, is responsible for the day-to-day management of the Global Leaders fund. Sands was founded in 1992 by Frank Sands, is headquartered in Arlington, Virginia, and manages $51 billion for clients worldwide. They are staff-owned and do long-only growth equity investing. They exist to add value and enhance the wealth of their clients with prudence over time. Sands Capital’s investment strategies (and those of their affiliates) employ a fundamental, bottom-up research approach that aims to identify high-quality public and private growth businesses globally.

Manager

Sunil H. Thakor and Michael Raab.

Mr. Thakor joined Sands Capital as a research intern, became a full-time Research Analyst in 2006, co-manager of the Global Growth strategy in 2007, and manager of the Global Leaders strategy when it launched in 2017. Before joining Sands Capital, he was an analyst and as an Associate at Charles River Associates, a strategic consulting firm.

Mr. Raab, CFA joined Sands Capital in 2007 as a research analyst and became Associate Director of Research in 2009. He was promoted to Portfolio Manager in 2019.

Strategy capacity and closure

Well above $15 billion. In general, managers avoid owning more than 5% of the outstanding shares of any company. We estimate the lowest possible cap by assuming the improbable: if the managers moved the entire portfolio into mid-cap stocks, now about 10% of the portfolio and the smallest type of stocks they own, and chose to own only 30 names, they could easily manage $15 billion without violating the 5% rule. As a practical matter, the capacity is unlimited.

Management’s stake in the fund

Mr. Thakor has invested over $1 million in the fund, and Mr. Raab has been $100,000 and $500,000 invested. Two of the fund’s eight independent trustees have also invested in it.

Opening date

March 31, 2010. In March 2017, responsibility for the fund moved from Marsico Capital and Sands Capital. Investors assessing the fund should limit themselves to its last three years.

Minimum investment

$2,500

Expense ratio

1.23% on assets of $131 million.

Comments

A singular odd profile in Business Insider assures us that “Sunil Thakor’s Harbor Global Leaders Fund is blowing away its benchmark in 2020 and has returned 516% to investors since March 2009” (9/25/2020). That sentence is wrong in two important ways:

  1. The fund is not “blowing away” its competition though it is handily outperforming its index over the first nine months of 2020. The fund’s 12.8% is in the top 20% of Morningstar’s category, which is great but is also below the fund’s longer-term record.
  2. All data prior to March 2017 is utterly irrelevant. The article is celebrating a record that is almost entirely the product of a now-departed team from Marsico Capital. Disregard it.

Mr. Thakor’s record is fine and requires neither hyperbole nor misrepresentation to celebrate it.

On March 1, 2017, Marsico-led Harbor Global Growth became Sands-led Harbor Global Leaders “to reflect Sands Capital’s investment strategy for the Fund.”

Three things to know about Sands Capital:

  1. They mostly target rich people. The investment minimums for Sands Capital Global Growth are $100,000 in the US and 500,000 USD/GBP/EUR in Europe.
  2. They are not primarily a mutual fund company. When we talk about the “global leaders strategy,” we’re not referring to an individual fund. Instead, the strategy manifests itself in a US fund, funds designed for European investors, separate accounts for high net worth investors, and so on. US funds are about one-fifth of the firm’s assets.
  3. They are really quite good. Morningstar rates both their funds for European investors and the ones for domestic investors as either four- or five-stars. The quantitative version of the Morningstar analyst rating makes the funds some version of bronze, silver, and gold.

And this fund is really quite good. By Morningstar’s assessment, its 17.7% annualized returns over the past three years put it in the top 7% of global large-cap funds. Both its peer group and benchmark trail Harbor by about 1000 bps annually, which is huge but not quite the full story. Global Leaders is a five-star / Gold-rated fund.

Morningstar places Harbor Global Leaders in a peer group that includes all large-cap global funds, including value-oriented funds whose style has been deeply out-of-favor. That makes the comparison automatically positive for any growth-oriented fund. Lipper offers a better peer group in this case: global large-cap growth. Harbor also leads that peer group but by a more-modest 390 bps.

It is, based on either raw returns or risk-adjusted returns, one of the top 10 funds in its Lipper peer group. It has much in common with the other top-tier global large-cap growth funds.

It is relatively concentrated, typically investing in between 30-50 names, currently 37. Only two of the top ten funds fall dramatically outside that range.

It has a relatively low turnover ratio, between 26-47% depending on the time period you look at. Again only two of the top ten funds are dramatically different.

It invests in companies with an above-average sustainability profile. On a scale of zero to fifty, where zero is best, Morningstar gives the portfolio a score of 19.95. Lipper gives the portfolio a B- ESG score, with all of the top-ten funds falling somewhere in the “B” range.

The manager’s distinction comes in two forms.

He focuses on global leaders, firms with best-in-class products, services, or execution. He describes them as “dominators, disruptors, and scale leaders.”

He focuses on two types of firms, those which thrive on innovation and disruption, and those which cater to needs over wants.

Mr. Thakor’s argument strikes me as fundamentally sound: growth might be hard to come by, the gap between winner and also-rans is likely to widen, but even stagnant markets will have some outstanding opportunities. The key to success to having a portfolio which is very selective by design, so that you’ve minimized the risk of incorporating also-rans, and which focuses on firms that can “make their own weather.” That is, consistently dominate across markets.

Executed well, such a portfolio should be relatively low-turnover, should have some of the stability characteristics of blue-chips with the return characteristics of growth stocks, and should hold up well in rocky markets.

Those are high and admirable expectations. Over his three-plus-year tenure, Mr. Thakor has largely but not wholly met them. Returns have been top tier. Volatility has been neither noticeably higher nor noticeably lower, than either his Lipper peer group or the composite to the 10 top-performing Lipper peers. During the three-month COVID bear market at the start of 2020, HGGIX had a maximum drawdown of 18.8%, worse than his peer group’s 17.6% drop. Turnover has signaled a holding period of two to four years, a bit short of the five years he aspires to.

Bottom Line

There’s much to like with Harbor Global Leaders. The fund has earned top tier returns every year since Mr. Thakor assumed management of it, which is a welcome contrast to the somewhat erratic performance in its final years under the previous team. He’s generated those high returns with no more than average volatility. Mr. Thakor believes that he should be judged on his fund’s performance across an entire market cycle; historically, such cycles have averaged 5-7 years in duration. Performance at about the halfway point has been exceptional, and investors should have the patience to ride out any short-term disruptions.

With a low investment minimum, small asset base, uniformly successful sub-advisor, and reasonable expenses, investors looking for a long-term growth strategy should have it on their due-diligence list.

Fund website

Harbor Global Leaders

 

Launch Alert: Vanguard ESG U.S. Corporate Bond ETF

By David Snowball

On September 24, 2020, Vanguard launched Vanguard ESG U.S. Corporate Bond ETF (VCEB) which tracks the Bloomberg Barclays MSCI U.S. Corporate SRI Select Index. The expense ratio is 0.12%. The ETF does not advertise a target maturity, other than to say that the maturities on portfolio securities will be “more than one year.” It also excludes small (under $750 million) bond issues.

There are about a dozen ESG-screened, fixed-income ETFs already in operation from BlackRock, DWS, Inspire, Nuveen, and PIMCO. Between them, assets are low in the billions … basically a rounding error on Vanguard’s books.

There are two sorts of “green” bond funds: impact funds, which actively seek out the opportunity to supply funds for desirable projects (for example, buying the bonds that support urban housing renewal) and exclusionary funds, which simply avoid giving your money to undesirable projects. Vanguard’s new ETF is of the latter variety. It excludes investments in:

  • Genetically modified organisms
  • Gas
  • Oil
  • Thermal coal (metallurgical is, presumably, different though small)
  • Adult entertainment
  • Alcohol
  • Gambling
  • Tobacco
  • Weaponry/Warfare:
  • Civilian firearms
  • Nuclear, controversial, and conventional weapons
  • Nuclear power

It also excludes firms that do not have at least one woman on their board of directors, or that get involved in high visibility controversies.

“Investors are increasingly seeking opportunities to better align their investment objectives with their personal values,” said Kaitlyn Caughlin, head of Vanguard’s Portfolio Review Department. Vanguard reports that  U.S. investor assets in ESG fixed income mutual funds and ETFs doubled in 2019 to $850 million, and today, stands at $1.8 billion. That demand notwithstanding, some Vanguard insiders (or former insiders) argue that the strategy does not make great investing sense. Dan Wiener, the premier commentary on Vanguard funds, notes in his October 2020 newsletter:

While it’s socially acceptable to wrap uncritical arms around the whole notion of ESG investing, former Vanguard board member Burt Malkiel has done the socially unacceptable and denounced the concept’s execution. In a September op-ed in The Wall Street Journal, Malkiel makes many of the same arguments against the wholesale acceptance of ESG dogma that Jeff and I have for some time now.

Mr. Malkiel’s essay, “‘Sustainable’ Investing Is a Self-Defeating Strategy” appeared in the Journal on September 18th. He argues that there’s no universal standard for what’s “sustainable,” that sustainable investing might be a distraction from the pursuit of policies that might actually make a difference and that “no credible studies show that ESG investing offers consistently higher long-term returns.” In general, his arguments address equity investing. Ten days later the Journal published a letter in response from Tensie Whelan, director of the  NYU Stern Center for Sustainable Business. The article’s title sort of captures the content: “ESG Funds Are Competitive and Doing Good” (9/28/2010). Both MFO and Morningstar tend in that direction.

Josh Barrickman will manage the fund, though the importance of a manager of an index funds has always been a bit fuzzy. In any case, Mr. Barrickman has been with Vanguard for 22 years.

Website: Vanguard ESG US Corporate Bond ETF.

Launch Alert: Evolutionary Tree Innovators Fund

By David Snowball

On September 9, 2020, Evolutionary Tree Capital Management launched the Evolutionary Tree Innovators Fund (INVNX).  The plan is to invest in 25-35 domestic growth-oriented companies that qualify as “leading innovative businesses” (hence the ticker symbol).  The fund will be managed by Thomas M. Ricketts, formerly a senior portfolio manager on Sands Capital’s flagship Select Growth US Large-Cap Growth strategy, a $20+ billion concentrated-growth strategy.

Mr. Ricketts began his career as an assistant to Frank Sands (1994-97), founder of Sands Capital Management. Over the course of the following two decades, he progressed from being a research analyst to portfolio manager and, from 2011-15, Executive Managing Director of the firm. Over the course of his career, the fund grew from managing $100 million to managing $40 billion. About half of that was in the strategy to which he contributed. Today it’s at $51 billion.

Three things to know about Sands Capital:

  1. They mostly target rich people. Their investment minimums start at $100,000 and range sharply upward.
  2. They are not primarily a mutual fund company. When we talk about the “large-cap growth strategy,” we’re not referring to an individual fund. Instead, the strategy manifests itself in a US fund, funds designed for European investors, separate accounts for high net worth investors, and so on. US funds are about one-fifth of the firm’s assets.
  3. They are really quite good. Morningstar rates both their funds for European investors and the ones for domestic investors as either four- or five-stars. The quantitative version of the Morningstar analyst rating makes the funds some version of bronze, silver, and gold.

Which is to say, Mr. Ricketts brings a pretty distinguished background to his new position. He is supported by one of his former research analysts at Sands, Jonathon Ansley, and Dan Ayre, who served as an analyst for the Ricketts Family Office.

His emphasis at Sands Select Growth was on finding high-quality, sustainable growth businesses. Evolutionary Tree represents either an explicit articulation of that discipline or, to borrow the phrase, an evolution of it:

We believe wealth creation is driven by profound innovations that power the evolution of technology, business models, industries, and the economy as a whole.

Evolutionary Tree Capital Management is an investment manager that specializes in innovation-focused, concentrated-growth investing using a long-term approach we call Evolutionary Investing.

This unique evolutionary lens is the key to building innovation-focused, concentrated-growth portfolios for high-net-worth and institutional investors.

Its opening expense ratio is 0.97% and the minimum initial investment will be $50,000. While high, the minimum is one-tenth of the entry charge for the Sands and the expense ratio is competitive.

Website: Evolutionary Tree Capital Management

The Leader Board: Top Global Large-Cap Growth funds

By David Snowball

This month’s profile of Harbor Global Leaders (HGGIX) mentions “the top 10” global large-cap funds on several occasions. The argument for such funds is simple: in steady rising markets, almost – but not quite – everyone gets to win. In stagnant or declining markets, almost – but not quite – everyone suffers. Index funds work best when they can cheaply and efficiently capture the gains offered by rising markets. Concentrated growth funds hold out the prospect of identifying the small fraction of companies that can grow even when the world doesn’t. Those are companies that can:

  • take market share from competitors,
  • disrupt established industries (channeling Joseph Schumpeter’s famous celebration of “the gale of creative destruction … that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”), or
  • charge premium prices because they offer something essential and irreplaceable.

Because the Harbor team came on board in March 2017, roughly 3.6 years ago, we focused on the funds in the Lipper global large-growth category with the highest risk-adjusted returns. For this screen, we sort by Sharpe ratio, the most common measure of risk-adjusted-performance.  Here’s the list we constructed.

  Annual returns Maximum drawdown Standard deviation Sharpe ratio MFO rating M-star rating Great Owl FundAlarm rating Minimum invest.
Artisan Focus ARTTX 24.0 -14.5 14.5 1.55 5 4 star Yes   $1000
Baillie Gifford Long Term Global Growth 2 BGLTX 35.1 -18.3 23.2 1.45 5 5 star Yes Honor Roll institutional
Fidelity Flex Large Cap Growth FLCLX 29.0 -17.6 21.2 1.29 5 5 star Yes   Not available
PGIM Jennison Global Opportunities PRJAX 27.5 -15.6 21.1 1.23 5 5 star Yes Honor Roll $1000
Polen Global Growth PGIRX 20.4 -14.1 15.5 1.22 5 5 star Yes   $3000
Virtus SGA Global Growth SGARX 19.5 -14.9 16.2 1.10 5 5 year Yes   $2500
Gabelli Global Growth AAA GGGAX 19.1 -14.6 16.4 1.07 4 5 star No   Closed?
Columbia Select Global CGEZX 17.9 -14.5 15.4 1.06 5 5 star No   $2000
Fidelity Flex Opportunistic Insights FFPIX 21.7 -16.2 19.0 1.06 5 3 star Yes   Not available
Harbor Global Leaders HGGAX 19.1 -18.8 16.8 1.04 5 5 star No   $2500
Category average 15.2 -18.4 17.2 0.80 3 n/a n/a n/a n/a

Highlights from the list

The MFO rating column reflects risk-adjusted returns only for the three years in question. MFO ratings are calculated using a more-conservative measure than Morningstar ratings. In particular, they target a Martin ratio – which is much more sensitive to downside performance – than the usual Sharpe ratio. For a fund to receive a “five” rating from MFO means it was in the top 20% of its peers based on a very risk-sensitive measure.

The Morningstar rating assesses a fund’s performance based on a weighted average of its 3-, 5-, and 10-year records. That becomes a bit sticky for the fund has been around for 10 or more years, but the management team has not. That the case with Harbor.

The MFO Great Owl rating reflects consistently excellent risk-adjusted returns for the entire life of the fund. If a fund has been designated a Great Owl and it has been around for 20 years, then it had to be in the top 20% for the past three years and the past five years and the past 10 years and the past 20 years!

The FundAlarm rating asks a simpler question: were your total returns (not risk-adjusted) in the top 20% of your peer group for the past 1, 3 and 5 year periods? If the answer is “yes, yes, yes!” then you make the Honor Roll. FundAlarm ratings are only assigned if a fund is at least five years old.

Four of the top ten funds are not available to ordinary mortals. The two Fidelity funds are used with clients of Fido’s managed portfolio service, the Baillie Gifford fund is for institutional investors and Gabelli is flagged as “limited” (aka “closed”) by Morningstar but not on the Gabelli site. Sadly, live Gabelli representatives are not available by phone.

Artisan Focus (formerly Artisan Thematic) is an outlier because it is not a “global” fund, despite Lipper’s assignment to that box. Over 90% of the current portfolio is invested in US-domiciled firms.

Bottom Line

The appeal of concentrated, global growth funds is that they offer the prospect for finding Investors looking for a global growth fund should target funds that have clearly articulated philosophies about managing risk, and a record of success across different market conditions.

Funds in Registration

By David Snowball

We are beginning of the annual insanity. The Securities and Exchange Commission, by law, gets between 60 and 75 days to review proposed new funds before they can be offered for sale to the public. Fund companies anxious to have a new fund up and running by December 31st need to have it in the hopper by mid-October at the latest. The late September filings – we found 34 active funds and ETFs in registration – are the beginning of the annual flood.

Every month the ETF industry breathlessly trots out a few ideas designed to seize the moment. Think: “Virtual Work and Life ETF.” This month’s leading candidate is the Direxion World Without Waste ETF that seeks to invest in companies that do not use virgin materials.

The other illustrative filing is for Amplify CrowdBureau® Online Lending and Digital Banking ETF, which was formerly Amplify CrowdBureau® Peer-to-Peer Lending & Crowdfunding ETF. Two things stand out as worth note. First, Amplify is basically liquidating a very bad fund. The original CrowdBureau® P2P ETF turned $10,000 invested at its inception in May 2019 into $5,000 in September 2020. Second, the fund is not being “liquidated,” it’s being “repurposed.” The ability to repurpose an existing fund to a sometimes dramatically different objective (think “water resources” to “cloud computing”) without the endorsement of fund’s investors and without reporting a liquidation. That latter factor has long allowed the ETF industry to celebrate its vibrancy.

We have long noted that the apparent vibrancy of the ETF industry is somewhat illusory: the huge bulk of the industry’s assets are controlled by a tiny handful of mutual fund companies (BlackRock Vanguard, Invesco, State Street…) while most independent ETFs hover on the verge of insolvency. The challenges to those economics are likely to be accelerated as fund companies use the new non-transparent / active ETF wrappers to allow themselves to launch clones of their most successful mutual funds in new, lower cost, no-minimum investment ETF wrappers. This month sees just such a movement with the launch of the ETF version of four Fidelity funds, including the once-iconic Fidelity Magellan (FMAGX) fund.

[Upholdings] ETF

[Upholdings] ETF, an actively-managed ETF, seeks long-term capital growth. And yes, the brackets around the name appear to be part of the name. The plan is to buy the stocks which “offer the most attractive risk and return potential.” This is the conversion of a hedge fund with a fine, but only an 18 month long, track record. The fund will be managed by Upholdings Group LLC. Its opening expense ratio is 0.60%.

AdvisorShares Q Portfolio Blended Allocation ETF

AdvisorShares Q Portfolio Blended Allocation ETF, an actively-managed ETF, seeks to maximize total return. The plan is to use the Q Methodology (Star Trek fans perk up, hoping of tapping the power of the Q Continuum) to create an all asset class ETF of ETFs. “Q Methodology™ generates a set of optimal portfolios that offer the highest expected return for a defined level of tail risk (which is the risk that an investment’s return will move significantly beyond expectations, i.e., more than three standard deviations from its mean) and expected drawdown.” The fund will be managed by Ron Piccinini, Ph.D. He holds a doctorate in finance from the University of Nebraska-Lincoln. Its opening expense ratio has not been released.

American Beacon AHL TargetRisk Core Fund

American Beacon AHL TargetRisk Core Fund will seek capital growth. The plan is to gain exposure to global equities and bonds through futures contracts and to use computers to manage the fund’s volatility; they’re looking to make as much money as they can with a volatility level of 10%. At base, they try to invest more in stable markets and less in volatile ones. The fund will be managed by AHL Partners LLP. Its opening expense ratio is 1.39% with a nominal front-load of 5.75%, and the minimum initial investment will be $2,500 for “A” shares.

American Century Quality Preferred ETF

American Century Quality Preferred ETF (QPFF), an actively-managed ETF, seeks total return. The plan is to buy and frequently trade, preferred stock, hybrid preferred securities that have characteristics similar to both preferred stock and debt securities, floating-rate preferred securities, corporate debt securities, and convertible securities. The managers have not been named and its opening expense ratio has not been disclosed.

American Century Low Volatility ETF

American Century Low Volatility ETF (LVOL), an actively-managed ETF, seeks capital appreciation. The plan is to use quantitative models to select securities with attractive fundamentals that they expect will provide returns that will reasonably track the market over the long term while realizing less volatility. The managers have not been named and its opening expense ratio has not been disclosed.

American Century Quality Convertible Securities ETF

American Century Quality Convertible Securities ETF (QCON), an actively-managed ETF, seeks total return. The plan is to buy and frequently trade, convertible securities using a combination of fundamental research and quantitative screens. The managers have not been named and its opening expense ratio has not been disclosed.

ATAC US Rotation ETF

ATAC US Rotation ETF (RORO), an actively-managed ETF, seeks total return. The plan is to have a portfolio that switches between risk-on and risk-off postures. During the risk-on phase, the managers will seek 130% exposure to US small-cap stocks and US large-cap cyclical stocks. They’ll do that by investing in leveraged ETFs. During the risk-off phase, they will invest in long-duration US Treasury securities, also through ETFs. The fund will be managed by Michael Venuto and Michael Gayed who also manage ATAC Rotation Fund which is up 50% YTD but charges 1.95%. The ETF’s opening expense ratio has not been disclosed.

Ballast Small/Mid Cap ETF

Ballast Small/Mid Cap ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to invest in high quality, financially sound companies that have the ability to execute their business plans in both favorable and unfavorable environments. The upper size limit is $15 billion. The fund will be managed by Ragen Stienke, a former Westwood manager. His $10 million separate account composite has a five-year record that just about matches its benchmark. Its opening expense ratio is 1.10%.

BlackRock Defensive Advantage U.S. Fund

BlackRock Defensive Advantage U.S. Fund will seek long-term capital appreciation. The plan is to buy US mid- to large-cap stocks using  a “defensive investment style, seeking to provide downside protection with upside potential through active stock selection, risk management, and diversification.” There’s very little explanation for what that means, and the prospectus still contains a bunch of blank spaces. They can also use options to hedge the portfolio. The fund will be managed by a four-person BlackRock team. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $1,000. The same prospectus includes its Defensive International and Defensive Emerging Markets siblings.

Fidelity Magellan ETF

Fidelity Magellan ETF, an actively-managed, non-transparent ETF, seeks capital appreciation. The plan is to do the same thing the Magellan Fund has been doing: invest in a mix of larger-cap growth and value stocks. The fund will be managed by Tim Gannon and Sammy Simnegar. Its opening expense ratio has not been released. The same prospectus announces the launch of Growth Opportunities, Real Estate Investment, and Small-Mid Cap Opportunities ETFs.

Inspire Faithward Mid Cap Momentum ESG ETF

Inspire Faithward Mid Cap Momentum ESG ETF, an actively-managed ETF, seeks to outperform the broader US midcap stock market. The plan is to buy “the most inspiring biblically aligned” mid-cap growth companies whose stocks have price momentum. The fund will be managed by SevenOneSeven Capital Management, LTD. Its opening expense ratio is 0.85%. The same prospectus covers a sibling large-cap fund.

Invesco Focused Discovery Growth ETF

Invesco Focused Discovery Growth ETF, an actively-managed, non-transparent ETF, seeks capital appreciation. The plan is to invest, primarily, in 50 domestic mid-cap growth stocks. The fund will be managed by Ronald J. Zibelli, Jr., and Justin Livengood. Its opening expense ratio has not been released.

Invesco Real Assets ESG ETF

Invesco Real Assets ESG ETF, an actively-managed, non-transparent ETF, seeks capital appreciation. The plan is to invest, primarily, in real estate, infrastructure, natural resources, and timber which are domiciled in North America and which meet “high ESG standards.” The fund will be managed by a four-person team. Its opening expense ratio has not been released.

Invesco Select Growth ETF

Invesco Select Growth ETF, an actively-managed, non-transparent ETF, seeks capital appreciation. The plan is to invest, primarily, in 25-30 companies whose “earnings or revenue growth driven by long-term secular trends and themes.” The fund will be managed by Erik Voss and Ido Cohen. Its opening expense ratio has not been released.

Invesco US Large Cap Core ESG ETF

Invesco US Large Cap Core ESG ETF, an actively-managed, non-transparent ETF, seeks capital appreciation. The plan is to buy high quality, ESG-screened large-cap US stocks. The fund will be managed by Mani Govil, Belinda Cavazos, and Paul Larson. Its opening expense ratio has not been disclosed. Ms. Cavazos was formerly a manager at Boston Trust Walden Company; her colleagues worked for OppenheimerFunds.

Harding Loevner Chinese Equity Portfolio

Harding Loevner Chinese Equity Portfolio will seek long-term capital appreciation. The plan is to buy stock in Chinese firms that are “well managed, financially sound, fast-growing, and strongly competitive.” (Duh. I mean, really, how many people target poorly managed, nearly bankrupt …) The fund will be managed by Pradipta Chakrabortty, Jingyi Li, and Wenting Shen. With a $100,000 minimum, its charms are available only to the affluent. The expense ratio has not been released.

Lord Abbett Mid Cap Innovation Growth Fund

Lord Abbett Mid Cap Innovation Growth Fund will seek long-term capital appreciation. The plan is to buy mid-cap growth stocks; the team “may consider” ESG factors in their selection. Nary a word about the whole “Innovation” focus. The fund will be managed by a five-person Lord Abbett team. Its opening expense ratio will be 1.06% for “A” shares and its minimum initial investment will be $1500. That’s reduced to $250 for “Invest-a-Matic Accounts.”

Setanta EAFE Equity Fund

Setanta EAFE Equity Fund will seek long-term capital appreciation. The plan is to use a “bottom-up stock selection process that looks for value stocks of well-run and financially sound companies.” They target holding 35-50 stocks. The fund will be managed by Setanta Asset Management Limited. Its opening expense ratio has not been disclosed, nor has its minimum initial investment.

Simplify Growth Equity PLUS Convexity ETF

Simplify Growth Equity PLUS Convexity ETF, an actively-managed ETF, seeks capital appreciation. The plan is to invest in the NASDAQ index with a convexity option overlay. The managers are fairly sure that they can configure their options to both add upside and limit downside. The fund will be managed by Paul Kim and David Berns. Mr. Kim uses to be a portfolio manager for Principal Global Investors and Mr. Berns was a managing director at Nasdaq Dorsey Wright. Its opening expense ratio is 0.45%. The same prospectus covers its two siblings, Simplify Growth Equity Plus Downside Convexity ETF and Simplify Growth Equity Plus Upside Convexity ETF

Simplify Volt Fintech Disruption ETF

Simplify Volt Fintech Disruption ETF, an actively-managed ETF seeks capital appreciation. The plan is to invest in firms that possess technologies that seek to increase the efficiency of providing and delivering financial services. The manager can then use an options overlay to mitigate market volatility. The fund will be managed by Paul Kim and David Berns. Its opening expense ratio has not been released. The same prospectus covers funds seeking to exploit disruptive technologies in pop culture, robocars, and cloud and cybersecurity.

SmartETFs Advertising & Marketing Technology ETF

SmartETFs Advertising & Marketing Technology ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to invest in a global, equal-weight portfolio of 30 advertising and marketing companies. The fund will be managed by Penserra Capital Management, LLC. Its opening expense ratio is 0.68%.

SPAC and New Issue ETF

SPAC and New Issue ETF, an actively-managed ETF, will seek total return. The plan is to buy “shares of newly listed initial public offerings of Special Purpose Acquisitions Corporations (SPACs) that have a minimum capitalization of $100 million. A SPAC is a blank check company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.” Quite trendy. The fund will be managed by Matthew Tuttle of Tuttle Tactical Management, who seems to launch (or at least file for permission to launch) a fair number of funds and ETFs. Its opening expense ratio has not been disclosed.

Sprucegrove International Equity Fund

Sprucegrove International Equity Fund will seek long-term capital appreciation. The plan is to buy stock in firms with a history of above-average financial performance, a secure financial position, reputable management, and a growth opportunity. This is the conversion of an unnamed Master Fund which launched in 1985, changed ownership in 1994, and has a great 35-year record, an okay 10-year record, a soft five-year record, and a poor one-year one. The fund will be managed by Arjun Kumar and Shirley Woo. Its opening expense ratio is 0.95%, and the minimum initial investment will be $100,000 for Investor shares.

Virtus KAR Small-Mid Cap Growth Fund

Virtus KAR Small-Mid Cap Growth Fund will seek long-term capital appreciation. The plan is to invest in 20-35 small- and mid-capitalization stocks with lower overall risk characteristics. The fund will be managed by Julie Biel, Senior Research Analyst at KAR. Its opening expense ratio has not been released, and the minimum initial investment will be $2,500.

Virtus SGA New Leaders Growth Fund

Virtus SGA New Leaders Growth Fund will seek long-term capital appreciation. The plan is to invest in ESG-screened companies that have a high degree of predictability, strong profitability, and above-average earnings and cash flow growth. At least 35% will be invested in the US and up to 40% might be invested in the emerging markets. The managers have the option of hedging the portfolio’s currency exposure. The fund will be managed by Sustainable Growth Advisers, LP. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $2,500, reduced to $100 for tax-advantaged accounts, and those with systematic purchase plans.

Wasatch Greater China Fund  

Wasatch Greater China Fund will seek long-term capital growth. The plan is to construct an all-cap portfolio of companies economically tided to “the Greater China region.” The prospectus helpfully warns us that the fund may invest “greater than 5% in a particular region, including China, Hong Kong, and Taiwan.” One feels a “duh” coming on. The fund will be managed by a five-person team. Its opening expense ratio is 1.50%, and the minimum initial investment will be $2,000, reduced to $1,000 for accounts with an automatic investing plan.

Manager Changes, September 2020

By Chip

Fund managers matter, sometimes more than others. As more teams adopt the mantra “we’re a team,” if only as window-dressing, more than more manager changes are reduced to “one cog out, one cog in.” Nonetheless, we know that losing funds with new managers tend to outperform losing funds that hold onto their teams, while the opposite is true for winning funds. Strong funds with stable teams and stable assets outperform strong funds facing instability (Bessler, et al, 2010). Because of the great volatility of their asset class, equity managers matter rather more than fixed-income investors.

This month, 50 funds saw management turnover, from the departure of some household-name managers from Touchstone funds to the decision by Leigh Baldwin to leave Leigh Baldwin Total Return.

Ticker Fund Out with the old In with the new Dt
AFMCX Acuitas US Microcap James Bitzer and Michael Thomas are no longer listed as portfolio managers for the fund. David Rose, Jennifer Pawloski, Gary Hatton, Jeffrey Harrison, Matthew Dhane, William Dezellem, and Andrew Beja join the remaining seven managers on the management team. 9/20
IMOM Alpha Architect International Quantitative Momentum ETF Tao Wang is no longer listed as a portfolio manager for the fund. Brandon Koepke took over management at the end of June. 9/20
IVAL Alpha Architect International Quantitative Value ETF Tao Wang is no longer listed as a portfolio manager for the fund. Brandon Koepke took over management at the end of June. 9/20
QMOM Alpha Architect U.S. Quantitative Momentum ETF Tao Wang is no longer listed as a portfolio manager for the fund. Brandon Koepke took over management at the end of June. 9/20
QVAL Alpha Architect U.S. Quantitative Value ETF Tao Wang is no longer listed as a portfolio manager for the fund. Brandon Koepke took over management at the end of June. 9/20
VMOT Alpha Architect Value Momentum Trend ETF Tao Wang is no longer listed as a portfolio manager for the fund. Brandon Koepke took over management at the end of June. 9/20
AMADX  American Century Disciplined Core Value Fund Claudia Musat is no longer listed as a portfolio manager for the fund. Yulin Long joins Steven Rossi in managing the fund. 9/20
REDWX Aspiration Redwood Thomas Digenan is no longer listed as a portfolio manager for the fund. Adam Jokich and Joseph Elegante will now run the fund. 9/20
DBOAX BNY Mellon Balanced Opportunity No one, but . . . Matthew Jenkin and Leigh Todd join Torrey Zaches, Vassilis Dagioglu, James Lydotes, John Bailer, David Bowser, and Brian Ferguson on the management team. 9/20
FBSOX Fidelity Select IT Services Portfolio No one, but . . . Becky Baker joins Zachary Turner in managing the fund. 9/20
HGHAX Hartford Healthcare A No one, but . . . Rebecca Sykes joins Robert Deresiewicz, Ann Gallo, and Jean Hynes on the management team. 9/20
IENAX Invesco Energy No one, but . . . Umang Khetan joins Kevin Holt in managing the fund. 9/20
LGILX  Laudus U.S. Large Cap Growth Fund No one, but . . . Phil Ruvinsky joins Lawrence Kemp in managing the fund. 9/20
LEBOX Leigh Baldwin Total Return Leigh Baldwin is no longer listed as a portfolio manager for the fund. Brian Frank will now manage the fund. 9/20
ORDNX North Square Oak Ridge Dividend Growth Fund No one, but . . . Brian King joins David Klaskin in managing the fund. 9/20
OILK ProShares K-1 Free Crude Oil Strategy Ryan Dofflemeyer no longer serves as a portfolio manager of the fund. Alexander Ilyasov joins James Linneman in managing the fund. Mr. Ilyasov was previously listed as a portfolio manager to the fund from 9/2016 to 4/2019 9/20
FUT ProShares Managed Futures Strategy Ryan Dofflemeyer no longer serves as a portfolio manager of the fund. Alexander Ilyasov joins James Linneman in managing the fund. Mr. Ilyasov was previously listed as a portfolio manager to the fund from 9/2016 to 4/2020 9/20
TLISX TIAA-CREF Quant International Small-Cap Equity Fund Antonio Ramos and Steven Rossiello are no longer listed as portfolio managers for the fund. Max Kozlov now manages the fund. 9/20
TDEYX Touchstone Dynamic Equity Megan Miller, Ryan Brown, Harindra de Silva, and Dennis Bein are no longer listed as portfolio managers for the fund. Guillaume Toison, Mara Maccagnan, Ayaaz Allymun, and Tarik Allouache will now manage the fund. 9/20
TACIX Transamerica Asset Allocation Conservative Michael Stout, Daniel McNeela, and Ricky Williamson are no longer listed as portfolio managers for the fund. Neil Nuttall and Christopher Lvoff will now manage the fund. 9/20
IAAAX Transamerica Asset Allocation Growth Michael Stout, Daniel McNeela, and Ricky Williamson are no longer listed as portfolio managers for the fund. Neil Nuttall and Christopher Lvoff will now manage the fund. 9/20
IMOAX Transamerica Asset Allocation Moderate Michael Stout, Daniel McNeela, and Ricky Williamson are no longer listed as portfolio managers for the fund. Neil Nuttall and Christopher Lvoff will now manage the fund. 9/20
IMLAX Transamerica Asset Allocation Moderate Growth Michael Stout, Daniel McNeela, and Ricky Williamson are no longer listed as portfolio managers for the fund. Neil Nuttall and Christopher Lvoff will now manage the fund. 9/20
BPEQX UBS US Sustainable Equity Thomas Digenan is no longer listed as a portfolio manager for the fund. Adam Jokich and Joseph Elegante will now run the fund. 9/20
UNAVX USA Mutuals Navigator Steven Goldman will no longer serve as a portfolio manager for the fund. Paul Strehle and Ben Warwick will now manage the fund. 9/20
VICEX USA Mutuals Vitium Global Jeffrey Helfrich and Charles Norton will no longer manage the fund. Paul Strehle and Ben Warwick will now manage the fund. 9/20
USWGX USAA World Growth Fund No one, but . . . Jeffrey Sullivan, Michael Reynal, Erick Maronak, Joseph Mainelli, Michael Koskuba, Scott Kefer, Robert Harris, Maria Freund, Tyler Dann, Jason Dahl, and Peter Carpenter join the existing team of six in managing the fund. 9/20
VAPIX Virtus FORT Trend Fund Warun Kumar, Michael Davis, Brendan Finneran, and Robert Hofeman are no longer listed as portfolio managers for the fund. Yves Balcer and Sanjiv Kumar will now manage the fund. 9/20
PDIAX Virtus KAR Equity Income Michael Davis, Warun Kumar, Brendan Finneran, and Robert Hofeman are no longer listed as portfolio managers for the fund. Richard Sherry will now manage the fund. 9/20
PDIAX Virtus Rampart Enhanced Core Equity Fund Michael Davis, Warun Kumar, Brendan Finneran, and Robert Hofeman are no longer listed as portfolio managers for the fund. Richard Sherry will now manage the fund. 9/20
WPOIX Weitz Partners III Opportunity Fund No one, but . . . Andrew Weitz joins Wallace Weitz in managing the fund. 9/20
WPVLX Weitz Partners Value Fund No one, but . . . Andrew Weitz joins Bradley Hinton and Wallace Weitz in managing the fund. 9/20

 

Briefly Noted

By David Snowball

Updates

FPA has filed to launch FPA Queens Road Small Cap Value Fund. As we noted a couple of months ago, Bragg Capital, an adviser to the Queens Road Funds, entered into an agreement with FPA to have FPA take responsibility for marketing the funds. That allowed FPA to leverage their marketing group and allowed Bragg to focus on running two really exceptional funds: Value and Small Cap Value. This partnership is likely a substantial win for all involved, investors and advisors alike.

FPA, meanwhile, will no longer be managing the Goldman Sachs Multi-Manager Alternatives Fund (GMAMX).

The industry’s hottest – which is to say, most desperate – trend roars on adding “Sustainable” to names.

Briefly Noted . . .

Effective June 30, 2021, Michael Stack will retire from Wellington Management Company and will no longer serve as a portfolio manager for Vanguard Wellesley Income Fund, Vanguard Global Wellesley, and Vanguard Global Wellington.

The folks at Tweedy Browne really think you should read Nir Kaissar’s article, “Money managers are punished by a runaway S&P 500,” Bloomberg, 1 September 2020. A quick synopsis: the S&P is driven by a half dozen companies, even really, really smart investors who try to get out of the way of that particular train (the endowments at Harvard and Yale, for instance) have been left behind. The question is, have the country’s smartest long-term investors all gone stupid simultaneously, or is there a warning there for those who continue to pile on?

SMALL WINS FOR INVESTORS

Effective October 19, 2020, Goldman Sachs International Small Cap Insights Fund will reopen for investment by new investors. It’s a four-star, $3 billion small-cap growth fund that seems to have had slow but minor outflows over the past two years.

Effective October 19, 2020, Hartford Schroders Emerging Markets Equity Fund will also be reopening to new investors. Four-star, four billion, generally stable asset base. The somewhat less-compelling Hartford International Value and Hartford Small Cap Growth funds reopen the same day.

CLOSINGS (and related inconveniences)

Effective at the close of business on December 31, 2020, Morgan Stanley Global Opportunity Portfolio will close to new investors.

Poplar Forest Cornerstone Fund (PFCFX) has closed its “A” share class. Current “A” holders become “Institutional” holders.

Newfound Risk Managed U.S. Growth Fund (formerly Newfound Risk Managed U.S. Sectors Fund) has done likewise.

OLD WINE, NEW BOTTLES

On December 1, 2020, Aberdeen Select International Equity Fund becomes Aberdeen International Sustainable Leaders Fund. They got a whole new management team in early 2019 and its been a really solid fund since then, with $125 million in assets. Not immediately clear that they have special expertise in sustainable investing but … you know, marketing. At the same time, Aberdeen U.S. Multi-Cap Equity Fund becomes Aberdeen U.S. Sustainable Leaders Fund. Okay, it’s almost mostly large-cap and the portfolio has an okay sustainability profile, though it tends to lag 70% of its peers. The more problematic change is the transformation of the small and bad Aberdeen Focus US Equity – a large-cap fund – into Aberdeen U.S. Sustainable Leaders Smaller Companies Fund. The fund currently has no small-cap exposure, which suggests a complete portfolio rebuild.

On December 14, 2020, Highland Total Return Fund and Highland Fixed Income Fund morph into First Foundation Total Return Fund and First Foundation Fixed Income Fund. No substantial changes which, let’s be honest, is unfortunate. Total Return is a one-star fund with $67 million and Fixed Income is a two-star fund.

Thornburg Low Duration Income Fund has become Thornburg Ultra-Short Income Fund.

Effective October 1, 2020, the USAA World Growth Fund changed its name to the USAA Sustainable World Fund.

Uniformly, the Walden Funds have become the Boston Trust Walden Funds.

Wells Fargo is rechristening all of its “WealthBuilder” funds on November 2.

Current Fund Name New Fund Name
Wells Fargo WealthBuilder Conservative Allocation Fund Wells Fargo Spectrum Income Allocation Fund
Wells Fargo WealthBuilder Equity Fund Wells Fargo Spectrum Aggressive Growth Fund
Wells Fargo WealthBuilder Growth Allocation Fund Wells Fargo Spectrum Growth Fund
Wells Fargo WealthBuilder Growth Balanced Fund Wells Fargo Spectrum Moderate Growth Fund
Wells Fargo WealthBuilder Moderate Balanced Fund Wells Fargo Spectrum Conservative Growth Fund

OFF TO THE DUSTBIN OF HISTORY

Effective on or about November 20, 2020,  AllianzGI Emerging Markets Small Cap Fund will be liquidated and dissolved.

On October 15, 2020, AlphaSimplex Tactical U.S. Market Fund will be liquidated.

BMO LGM Frontier Markets Equity Fund is in the process of liquidating and has begun making payouts to its former shareholders.

On October 14, 2020, Brown Advisory Strategic Bond Fund will be liquidated.

On November 27, 2020, Copeland International Risk Managed Dividend Growth Fund will be liquidated.

The tiny, two-star Frost Value Equity Fund has closed to new investors and will be liquidated on November 27, 2020.

On September 25, 2020, Hartford High Yield HLS Fund was merged into Hartford Total Return Bond HLS Fund, and Hartford U.S. Government Securities HLS Fund was absorbed by Hartford Ultrashort Bond HLS Fund.

On September 25, 2020, the ICON Risk-Managed Balanced Fund was merged into the ICON Equity Income Fund

LMCG International Small Cap Fund will be liquidated on October 12, 2020.

On October 9, 2020, Levin Easterly Value Opportunities Fund will be liquidated.

On October 12, 2020, Newfound Risk Managed Global Growth Fund (formerly Newfound Risk Managed Global Sectors Fund) slides beneath the waves.

At some point or another, Old Westbury Multi-Asset Opportunities Fund will be liquidated. Not quite sure of when that will happen. Might have happened (Morningstar no longer lists them, or sites do).

Orchard Small Cap Value Fund has been liquidated.

Pacific Select Funds plan to liquidate their International Equity Income Portfolio on October 30, 2020.

On October 1, 2020, ProShares Ultra Communication Services Select Sector and ProShares UltraShort Communication Services Select Sector ceased communicating.

On September 25, 2020, the Segall Bryant & Hamill Small Cap Value Dividend Fund was merged into the Segall Bryant & Hamill Small Cap Value Fund.

On December 18, 2020, State Street Dynamic Small Cap Fund becomes, you know, less … dynamic. Or dead.

On December 18, 2020, TIAA-CREF Quant Large-Cap Growth Fund, TIAA-CREF Quant Large-Cap Value Fund, and TIAA-CREF Quant International Equity Fund will be liquidated. So we’ve sort of started the countdown on the quant funds?

USCF Summerhaven SHPEI Index Fund (BUY) becomes a (SELL) on October 14, 2020.

US Global Investors All American Equity Fund is likely to be reorganized in the Global Luxury Goods Fund. All American is a small, underperforming fund that promises you the opportunity to invest “right here at home” and the fund’s homepage is a marketing mash of All American imagery. There’s a cynical irony to imagining replacing the scenes of American flags and cornfields with Chinese yuppies wearing Prada clutching Gucci bags.