Monthly Archives: December 2020

December 1, 2020

By David Snowball

Dear friends,

The waiting is, mostly, done. The American people have spoken, though I suspect that activists in both major political parties are disappointed and frustrated by what they heard. For better and worse, Republicans did not receive a second term in the White House. For better and worse, Democrats did not enjoy “the blue wave” that they anticipated.

And so we are left where we so often are: in a muddle. The control of the senate, once “the world’s greatest deliberative body” (reputedly President James Buchanan’s judgment), lies in two impending elections in Georgia. Politicians of all stripes woke on the morning of November 4th to ask the all-important question, “how’s our fund-raising for 2022 coming? Are we on track?” At least one candidate is openly mulling the timing of his announcement of his 2024 presidential bid. Miscellaneous state legislators continue to indulge in minor political fantasies.

And yet …

And yet a surprising array of officials agree that it’s time to move on. As I write, there’s a report of a bipartisan coalition of senators and representatives attempting to advance a massive relief bill before year’s end. “Leadership” will surely move to obscure progress, a painful irony, but increasingly voices on both sides are saying it’s time.

Charitable giving has risen this year, most especially to food banks, local housing groups, and mutual aid groups (in my case, to the RiverBend Foodbank and the Quad Cities Community Foundation), projects that feel like neighbors helping neighbors. One of the directors of the National Council of Non-profits surveyed everything from cash contributions to affirming messages chalked on sidewalks as evidence that “People are finding generosity as an antidote to fear, uncertainty, division” (“Generosity, an ‘antidote’ to fear, division’: How to help those in need on Giving Tuesday,” USA Today, 12/1/2020).

Pfizer has dispatched the western world’s first mass shipment of a Covid-19 vaccine to Belgium and a friend associated with two local health systems believes that frontline workers might receive vaccination before Christmas.  (Bless them all. I’ve seen some incredibly wan and frazzled folks soldiering on.)

Increasingly Americans of all political persuasions, in numbers unimaginable a decade ago, have recognized the imminence and severity of the global climate crisis (“The politics of climate change have undergone a radical shift. The press should take note,”, 12/1/2020). Scientists have been incredibly clear about two things: if we don’t act decisively, we’re screwed but we still have the time and knowledge to spare ourselves from calamity (“Climate change: Temperature analysis shows UN goals ‘within reach,’” BBC News, 11/30/2020). As investors, we have an unprecedented array of first-rate options for our portfolios. As citizens, we have stronger and clearer evidence of what individual contributions actually make a difference (the findings are surprising: some of the greatest impacts come from improving cookstoves and capturing refrigerant gases) and which are window-dressing (“The Best Way to Donate to Fight Climate Change (Probably),” The Atlantic, 12/2020).

The winter will be dark, both in ways that winters always are and in ways that will be different and trying this year. You’d be forgiven for imagining that the darkness of the days would seep into our hearts, leaving us alone, sad and timid in what one virologist warned, “could be the darkest winter in modern history.”

And yet it is not so. The counsel of despair holds no power, save what we give it. Every culture and every religion, across millennia, has found occasion to defy the darkness and celebrate community in its midst. The twinkling lights on a Christmas tree, the growing light of a menorah, the flicker of a Kwanzaa candelabrum, the roar in a yuletide hearth all speak to the same impulse: seek the light, seek each other, rejoice in each other’s company, give gifts, give thanks. Remember that the neighbor who had up the wrong lawn sign last month is, at base, a really good person who would run into a burning house to save you if it came right down to it.  

Wear a festive mask. Give a gift. Thank a hero (by wearing the danged mask!). Phone a friend. Says thanks. It’s good for your heart. It’s good for your community. It’s good.

Thanksgiving leftovers

There’s a real chance that Bill Gross is … umm, a little volatile.

According to The Orange County Register (11/30/2020),

[Former software executive Mark] Towfiq is suing Gross and his girlfriend Amy Schwartz over claims the couple started playing loud music at all hours of the day in July. That was after Towfiq complained to the city that a net Gross installed over a glass sculpture in his backyard blocked his view.

Gross and Schwartz countersued, claiming Towfiq was the one harassing them by having cameras installed in his backyard that he used to spy on them.

Both sides have requested Judge Kimberly A. Knill grant restraining orders against each other.

At some point, the spat escalated to the point that Mr. Gross (allegedly) was blasting “The Gilligan’s Island Theme” throughout the night at levels high enough to drown out the sound from a nearby highway.

100% winners!

Most folks think of MFO Premium as MFO’s “pay site.” That’s not correct, for a couple of reasons. First, folks receive access to MFO Premium for a year in thanks for making a tax-deductible contribution of $120 or more to help support MFO’s work. Second, a bunch of MFO Premium content is available for free. The Great Owl Funds offers a quick snapshot of every fund that has earned the Great Owl designation, which requires top 20% risk-adjusted returns for the past 3, 5, 10, and 20 year periods.

The Fund Dashboard, contrarily, gives a snapshot of every fund MFO has ever profiled.

That said, much of the data is reserved for folks with premium access. The Fund Family Scorecard, for example, lets you see the Big Picture – from AUM to the number of funds to the percentage of funds beating their peers since inception – of every fund advisor at a glance.

Are there any advisers where 100% of the funds beat their peers? Well, yes. Yes, there are 23 of them. The largest collection of winners is held by Grandeur Peak which is nine-for-nine, with Blackstone, Flaherty & Crumrine (no, me neither) and Polen tied for second at five-for-five.

The Oh-fers list is a bit longer with Saratoga having the sad distinction of the largest pack of sub-par performers: o for 17.

Rondure Global upguns

We reported, in spring, the departure of manager Lydia So from Matthews Asia. Ms. So led Matthews Asia Small Companies (MSMLX) for 13 years, from its inception in September 2008 through early 2020. It’s a bit hard to find funds to compare it with,  given the dual niches of Asia and small, but it has outpaced the MSCI All Country Asia ex Japan Small Cap Index, its benchmark index,  both consistently and substantially over the trailing one-, three-, five-, 10-year and since-inception periods through October 2020.

She has now joined the investment management team at Rondure Global, with primary responsibility for the emerging markets strategy embodied in Rondure New World (RNWOX  / RNWIX).

CEO Laura Geritz explained the hire in a mid-November conversation:

We had been looking for more talent last year but weren’t finding the perfect fit. Everyone we’ve hired came from a referral from people we trust or was someone we knew from the past. In this case, I knew of Lydia, but we’d never met. We started talking (a lot), discovered that we think similarly but with different circles of competence and got along really well.

Asia is a big part of what we already do, and we’re working hard to build a team that’s stronger and more diverse each year. We are very fortunate that she was willing to come on.  I think we can build something special together.

This is definitely not about product proliferation. While we’ve both been investing in emerging markets small caps, we didn’t hire Lydia with the plan of launching such a strategy.  For now, she’ll focus on managing our New World strategy with me. We think we have complementary strengths (innovation, health care, Asia versus consumer and finance) which will benefit our investors.

In a move that might be less visible for equally consequential for the firm, Rondure Global also added Karl Engelmann, as a Senior Vice President of Client Service and Business Development. Mr. Engelmann spent the past 18 years with Cambiar Investors. He will be responsible for helping to build new relationships “in the institutional, bank trust, and retail channels” for Rondure.

In our call, Ms. Geritz teased one other prospective hire, an investor with a couple decades of experience and special expertise in Europe, but that remains undercover.

Blaine Rollins offers surprisingly good reading

Blaine Rollins (CFA) is … mysterious. If you click on his name at his firm’s site, you discover that

As we dig a bit more, 361 Capital does admit that Mr. Rollins is the firm’s chief market strategist, the former manager of four very strong Janus funds, and the current co-manager of 361 Global Managed Futures Strategy Fund (AGFQX / AGFZX). He appears to have taken the whole “social distancing” thing a bit further than the rest of us.

He’s also a pretty engaging writer. I’d meant, last month, to mention his Weekly Research Briefs, available by email. I enjoy them for a couple of reasons. One is that he has useful and important stuff to say. The November 30th issue covered leadership change in the markets (international, small and value were decisively ahead, the global market response to the prospect of a Covid vaccine, and the near-term impact of global heating on the India economy. The other reason is that he’s not stuffy (“Your Thanksgiving turkey may have been replaced by a Cornish game hen last week, but your portfolio grew by a pterodactyl during November”) and has a good eye for stories that I’ve missed (changing the composition of cattle feed to include 0.2% seaweed reduced methane emissions by 98%, which would be incredibly consequential).

I sort of think of him as Tadas Viskanta with pictures. Tadas, we hasten to add, is a star and oh so much more than the Fark of the finance world!

Happy 30th

December marks the 30th anniversary of Dan Wiener’s very fine Independent Adviser for Vanguard Investors newsletter. There are very few teams who have kept close and more thoughtful tabs on one of the world’s largest and most important investors. Barely an adolescent ourselves (MFO is nine-and-a-half years old), we celebrate the grown-ups!

And share the teaser than Dan has made the call “to SELL Vanguard’s actively-managed Health Care Fund after almost 30 years of recommending it.” Yikes.

Speaking of buying and selling, I suspect Dan might want you to consider putting well-reviewed memoir Uncanny Valley by his daughter, Anna Wiener, on the holiday gift lift for someone special. Sarah Gelman’s review of the work begins, “In her mid-twenties, Anna Wiener left her low-paying but rewarding-ish job in New York publishing and sold her soul to Silicon Valley start-up culture.” Spoiler alert: she has since redeemed it.

Speaking of thanks …


To those who read us and those who’ve provided support to us. Thanks to John from Pensacola, Altaf of Naperville (a lovely place with a vibrant, walkable downtown – and our CCIW foe, North Central College), Wilson, Marty (I share your hope that 2021 will be better for us all, though my ability to identify best bets in almost anything is pretty near zero), Rae, Sharon, Richard from Phoenix, the good folks at S & F Investments, Paul, Ira, Rad, Carlyn, Alfred, and Kevin. And, as always, to our faithful subscribers: Gregory, William, Matthew, William, Brian, David, and Doug.

MFO is reader-supported, and we’re deeply grateful for both the financial support and the vote of confidence that it represents. In a normal year, the majority of our revenue arrives as end-of-year contributions. In the past several years, we’ve been blessed with challenge grants from generous readers: the “your contribution will be matched dollar-for-dollar” thing.

This year we did not solicit a challenge grant and we did not play up the fact that our December issue coincided with “Giving Tuesday.” The reason in each case is the same: when I say that your contributions “help keep the lights on at MFO,” I mean it figuratively. This year, for millions of folks in our communities, it’s painfully literal. Food insecurity has risen almost as fast as the stock market. People are selling their work tools and personal possessions to cover rent. Hundreds of local newsrooms have closed as advertising revenue has collapsed.

We can make a difference in a lot of lives. There are way smarter people than me who’ve tracked down charities that do amazing work with each penny they receive. (See, for example, Irving Kristol’s column at the New York Times or the Washington Post’s Giving Tuesday guide. Look into, which helps channel contributions to support local journalism. Check out one of the Top Ten lists at Charity Navigator, itself a charitable non-profit.) I give monthly to six or eight groups, local and national, because they speak to me. You should find the ones that speak to you and use your passions to make a difference in the lives of people you’ll never even meet.

At base, we didn’t do our normal year-end rally because we didn’t want to distract you at all from addressing the incredibly pressing needs in your own community.

And thanks for doing that. You shine brighter than you know.

Best regards,

david's signature

An Improved MFO Portfolio Analysis Tool

By Charles Boccadoro

We introduced our Portfolio Analysis tool to MFO Premium subscribers in September last year, which sadly seems like decades ago. The intro piece, appropriately titled “Introducing MFO’s Portfolio Analysis Tool,” was in response to David’s May 2017 article “Time to put on your big-boy pants and check your investments.” In it he demonstrated a simple method to answer the “how bad could it get?” question. Based on the current funds held in your portfolio, how much pain (aka drawdown, aka Ulcer Index) might you experience in the next downturn?

The Portfolio Analysis tool does this automatically. It enables you to assign allocation weightings to each fund in your portfolio, so that risk and return metrics can be evaluated at the rolled-up portfolio level. Users can define up to 10 portfolios with each portfolio holding up to 25 funds. The portfolios can be saved to the user’s profile. Rolled-up risk and return metrics can be evaluated across 42 different evaluations periods.

This month we’ve added two big enhancements requested by our subscribers. First, users now have option to enter allocation weightings by either percentage or by dollar value. Second, users now have the option to substitute category average returns when a portfolio fund is too young for the desired evaluation period. This second enhancement is invaluable when trying to get a sense of how a fund just a few years old might have behaved during say the Great Financial Crisis (GFC).

David’s portfolio from May 2017 included 11 funds, the youngest being 60 months through October 2020. Below is the resulting risk and return table from the Portfolio Analysis tool. Over that 60 months, markets experienced the full spectrum of volatility: from nearly zero in 2017 to unprecedented extreme in 2020. But while March 2020 was awful, drawdowns for most funds were not as bad as experienced in GFC through March 2009. At the rolled-up level, David’s moderate risk portfolio experienced about 19% drawdown.

By clicking the “Substitute” button in the enhanced tool, David can now retrieve an estimate of what this portfolio might return and, more importantly for many investors, “how bad might it get” during a GFC like downturn. Below shows the updated results for the GFC evaluation period. Note that six funds were substituted with category average returns, since they were not around last decade. The estimate indicates this same portfolio might be down about 34% and its risk (aka volatility) a notch higher than first appears.

It’s worth noting that the tool uses the actual category averages of the monthly returns to compute correlation sensitive metrics like MAXDD. Trying to average MAXDD at the portfolio level can be misleading when the funds are uncorrelated.

In addition to these enhancements to the Portfolio Analysis tool, we’ve also added five new evaluation periods to the main MultiSearch tool, bringing the total to 64, including lifetime, year-to-date, multi-year and multi-month, plus full, down, and up market cycles for all risk and performance metrics.

Please enjoy the new features!

Preparing for a new world

By David Snowball

The scariest line of the election season appeared on the front page of The Wall Street Journal:

The U.S. stock boom has its roots in tactics that fund managers, small savers and Robinhood traders alike have applied over the past decade:  Don’t hide from markets by hoarding cash.

The Dow Jones Industrial Average closed above 30000 on Tuesday for the first time, extending an eight-month rebound that has taken many analysts by surprise … The run has put the Dow up 62% from its March low, when the U.S. Federal Reserve ended a panic that wiped out trillions of dollars in investments by outlining a plan to counter the pandemic’s economic stress.

The market appears to be in a self-perpetuating upward spiral, defying the pandemic and accompanying economic woes. (“Behind Dow 30000: A Self-Perpetuating Upward Spiral,” Wall Street Journal, 11/25/2020, pg 1).

That sounds only one step removed from the “permanent high plateau” that Yale economist Irving Fischer knew that US stocks have reached … two weeks before the stock market crash of 1929.

The fact that we’ve been driven there by “small savers and Robinhood traders alike” is not a source of comfort for us and shouldn’t be for them. Their enthusiasm for the market is substantial. James Mackintosh reports that since the start of October, there’s been a complete reversal of bullish and bearish sentiment.

At the start of October 43% of those taking part in the self-selecting AAII survey were bearish and 26% bullish. Now, 47% are bullish and 27% bearish. Investor newsletters are reflecting the zeitgeist with Investor Intelligence’s long-running survey finding almost two-thirds are bullish, the most since January 2018 – just before volatility exploded and stocks fell sharply. (“Market expects everything will be super,” 12/1/2020)

Those enthused souls are embracing financial engineering to manage their returns. The folks at Knowledge Leaders Capital note that short interest is at a 15 year low and “Activity in the options market is just downright euphoric in our view and a huge source of potential dislocation. Call volumes are 4x normal, while the put/call ratio is at multi-year lows” (“Extreme Euphoria … What’s an Investor to Do?” 12/2020).

Likewise, Morningstar reports near-record inflows into leveraged ETFs and funds: vehicles that promise 200% to 300% of the market’s daily returns. Such funds have attracted over $16 billion this year. One wonders how many of those investors have actually thought about the “principal risks” enumerated in their prospectuses? Here, for example, is the chart of potential gains and losses one might expect from holding any Direxion 2X Bull Fund for a year under a variety of market conditions.

You might think “hmmm, the market goes up 20% so I go up 40%.” Not so. Depending on the degree of market volatility, you might book anything from a gain of 42.6% to a loss of 47%. Similarly, a 20% market decline could translate into losses ranging from 36.6% to 76.5%.

That effect is dramatically compounded with any of the 80 or so ETFs that have 300% leveraged positions. ProShares warns, “The Fund will lose money if the Index’s performance is flat over time, and the Fund can lose money regardless of the performance of the Index, as a result of daily rebalancing, the Index’s volatility, compounding of each day’s return and other factors.” How much money could you possibly lose if your index was flat for the year? With a 3X fund, effectively 100% of your money.

You might note the dismaying frequency with which losses of 90% or more appear regardless of whether the market is going up or down over time. The key is the compounding effects of losses triggered by market volatility.

And that’s where a bunch of the bored young investors seem to have flocked.

And, oh yeah … Biden. China. Covid. Gridlock. Housing bubble. Got it.

What if you not a wildly overconfident, bored young investor?

A modest list of possibilities to guide your year-end portfolio refresh.

  1. Allow your equity managers to hold cash

    The simplest possible hedge against overvalued markets and high equity volatility isn’t the use of complex hedges or shorts. It’s a simple willingness to wait until reasonable values reappear, which often occurs when markets are crashing and panicked people are willing to sell at any price. (At any price? Really? Yes, in sharp corrections we see closed-end funds selling at 40% discounts to the value of their portfolios.)

    Folks who do that well include funds such as AMG Yacktman Focused, AMG Yacktman, FPA Queens Road Small Cap Value, Royce Special Equity, Intrepid Endurance, Pinnacle Value, Frank Value, Marshfield Concentrated Opportunity and Provident Trust, many of which we’ve profiled.

    In my own portfolio, Palm Valley Capital Fund, up 18% YTD, fills that niche.

  2. If you don’t like cash, insist on quality.

    As we note in the month’s profile of Rondure Overseas, high quality stocks participate in but don’t lead the frothiest phases of a bull market. They make their money by steadily compounding year and after, losing less in down markets which more than makes up for modest lags in the late phases of bull markets.

    Rondure Overseas, Seven Canyons World Innovators, Harbor Global Leaders, KL Allocation and Osterweis Emerging Opportunities are all profiled funds with a commitment to investing in the world’s top companies.

  3. Keep skating to where the puck is going to be, not to where it is.

    The market drivers are a handful of large, fast-growing beneficiaries of the Covid-on / work-from-home economy. You should consider not only the astronomic valuations that many of those firms hold and their stranglehold on the performance of passive index funds, but also who’s going to benefit in a world … where people leave their homes, employment picks up, climate stabilization becomes a multi-trillion dollar investment and small countries are no longer crushed by the dual burdens of pandemic and being cut off from the financial flows out of the developed world.

    A surprising number of serious investors continue to push for larger international, and particularly emerging markets, allocations. Here are some of their arguments.

    T. Rowe Price: “Our Asset Allocation Committee is overweight emerging markets stocks, as risks—such as the coronavirus pandemic and unresolved trade issues — are more than fairly priced-in at the moment. We are entering extreme valuation territory, where emerging markets stocks have become quite attractive, all else being equal, by historical standards. Also, a weaker U.S. dollar should favor emerging markets.” Why Our Asset Allocation Committee Favors Emerging Markets Stocks

    Jonathan Wheatley., 11/24/2020: “This month’s breakthroughs in the hunt for an effective Covid-19 vaccine have fed optimism over the global economy, rekindling interest in some riskier investments. Emerging market currencies and stocks have been big winners, rallying hard for the past two weeks, while bonds have also made up lost ground. The broad-based rally took MSCI’s benchmark EM stock index into positive territory for the year, up more than 50 per cent since its March low. And as Wall Street sets out its big ideas for 2021, EM is top of the list.” Vaccine hopes set off rush for emerging markets

    Steve Johnson,, 11/1/2020: “Big investors might be reluctant to publicly express their forecasts for Tuesday’s poll, but the prevailing view is that a Joe Biden victory would be good for most developing countries and offer opportunities that have not yet been priced in. “Emerging markets are going to do better out of a Biden presidency,” said Charles Robertson, chief economist at Renaissance Capital, an EM investment bank.

    Historically, the valuation of emerging market assets has often been driven by the strength of the US dollar. When the greenback is weak, investors typically pull money out of the US and put it into areas such as EMs, where the returns of local currency-denominated equities and bonds look better in dollar terms. “EM is a proxy for global growth and a Biden win means more global growth and trade,” he added. What the US election could mean for EM investing

    Craig Mellow, Barrons, 11/20/2020: “Rotation from growth into value stocks is the talk of the financial world, as light starts to gleam at the end of the Covid-19 tunnel. Emerging markets may be following the trend. The MSCI Emerging Markets Value Index jumped 5% in the week after Nov. 9, when Pfizer unveiled encouraging vaccine results. “That rally can continue for the next several quarters,” says Louis Lau, director of investments at Brandes Investment Partners. 

    The arithmetic for a value catch-up is compelling enough, after a 2020 rally driven by a handful of Chinese tech champions. The emerging markets value asset class trades at a 60% price/earnings discount to growth, says Alejo Czerwonko, chief investment officer for Americas emerging markets at UBS Global Wealth Management.” It May Be Time to Invest in Emerging Market Value Stocks. Here’s Where to Look.

    My own exposure to emerging markets comes from Grandeur Peaks Emerging Markets Opportunities, Seafarer Overseas Growth & Income, and T. Rowe Price Emerging Discovery, which have first-rate managers and reflect the spectrum of styles from small growth to large value. We’ve also profiled Driehaus Emerging Markets Small Cap Growth, Fidelity Total Emerging Markets (a stock/bond hybrid) and Touchstone Sands Capital Emerging Markets Growth. Given our review of Rondure Overseas, Rondure New World would have strong appeal for quality-conscious long-term investors.

  4. Do Good while you’re doing well.

    Sustainable investing has dropped way down on the to-do list for many Covid-shocked investors, professionals and otherwise. That simple distraction does not change the increasingly powerful case for creating a sustainability tilt in your portfolio. As the number of impact-oriented funds rise and spread across all asset classes, your opportunity set is rich.

    I’ve been more than satisfied with my investment in Brown Advisory Sustainable Growth, up 35% YTD, which we profiled last year. In the months ahead, we’ll add to our collection of profiled funds by looking at top tier funds that combine a commitment to sustainability with specialties in quality stocks, emerging markets and income-oriented funds.

Bottom line

The markets might crash sometime in the next three to six months. Don’t know. Alternately, the markets might correct and rotate, with former leaders falling sharply and unloved sectors surging. Don’t know. The key for all of us remains this: take no more risk than you need to and diversify your exposure so that the realization of outsized risks in one area does not do irreparable harm to your entire portfolio.

Holiday Reading List

By Edward A. Studzinski

“Imagine the Creator as a low comedian, and at once the world becomes explicable.”

        H.L. Mencken

We have come into December with November having been one of the best performing stock market months ever. S&P 500 Index products have generated a total return of approximately 14%. Active-managed funds have had returns all over the lot, with value-oriented funds having crept into the positive return range, generally single digit, as a result of strong monthly performance. Growth funds, depending on their holdings generally performed better, with some such as Harbor’s Capital Appreciation Institutional Class Fund having a total return of 47% year-to-date. International funds are all over the lot as well, with the value-oriented ones generally performing positively but with single-digit or teens total returns. The growthier ones, especially those with exposure to Asia in general and China in particular, generally did much better. And if you owned the Matthews China Small Companies Fund, your year-to-date total return was in excess of 66%.

Now one month, one quarter, one year, or even three years of performance numbers does not make for the ability to discern a good investment from a mediocre or bad investment. To get a sense as to where the asset management industry is now, I commend to you the section that was a Special Report in the November 14th, 2020 issue of The Economist entitled “The money doctors.” Much of this you will know, such as the quality of the business (high operating margins) and competition in what is a commodity product driven by marketing, new product development, and security selection driving outperformance. Unfortunately, the asset management industry does not operate in Lake Wobegon. It is impossible for all investors to have an above average return.

One of the more interesting questions is why investors put up with subpar performance (at least relative to passive products) over a long period of time. The article makes the point that much medical advice given by physicians is generic and self-serving. Yet it is valued by patients. Likewise, asset managers also often give generic and self-serving advice whose purpose is to inspire in individuals the confidence to take on investment risk.

More on the piece I will not say, other than to strongly suggest it is worth the time to plow through it. Among other things, salvation for the industry, at least in the short to intermediate-term, may come from the growing pool of investments and investors that is China. As with all things involving the Chinese, where things go in the future is not easy to predict at this point. But, ignoring China and along with it, its capital markets would prove to be a rather short-sighted mistake with serious consequences.

A second book which I commend to all of you for your Christmas reading is The Psychology of Money by Morgan Housel, which was recommended by my friend Jason Zweig at The Wall Street Journal. Housel does a great job of explaining hard things in an understandable manner. If I were still at an investment firm, this is the book that I would be recommending that the firm sends to all its clients.

Among other things, he closes out by making it clear (at least to me) how we got to the point that we find ourselves in American society now. Specifically, “expectations move slower than reality on the ground. ….. And even if a middle-class boom began today, expectations that the odds are stacked against everyone but those at the top may stick around.” The era of things not working and needing radical change may also stick around. And the important part of his conclusion is that this was the starter’s pistol for many similar events that in turn led to things like World War II. Hmmmm.


As I watch the concern about vaccine approval and distribution, I want to relate the information that I received from a friend involved with The Fred Hutchinson Institute in Seattle. They have been following the data from Pfizer and Moderna. One, they feel it astonishing that you had two large scale efficacy trials enrolled and completed independently. Two, the “spike” part of the RNA transcript is essentially identical, allowing a certain level of confidence about the veracity of the efficacy data. The relative similarity of the efficacy data means that either vaccine can do the job, making the logistics of distribution somewhat easier.  Finally, the U.S. Government (this administration, Operation Warp Speed) has contracted for 100 million doses of vaccine from each company. Although the timeline is not definitive, you should see those doses by April/May 2021. That means approximately 100 million people in this country should be able to be vaccinated by the end of the 2nd quarter. Depending on whom you talk to, herd immunity should be conferred when somewhere between 40 – 70% of the population has been vaccinated.

Voting Fraud

I had a talk with a cybersecurity expert about the stories one keeps hearing about fraud in the software programs sold to and used by various jurisdictions in this country. This individual thought that the likelihood of massive fraud to the degree that has been alleged was unlikely, if not impossible. That said, he indicated that there was a rather easy and elegant solution. And it is a solution that is apparently used in Estonia. Each person registering to vote, with the appropriate identification, would be given a digital cryptographic key, unique to that individual. For those for whom I am speaking in tongues, think “Bitcoin” and blockchains. You would be able to vote as many times as you wanted, but each time you voted in a particular election, the prior vote would be wiped out. Of course, in issuing that cryptographic key, each jurisdiction would have to set its own criteria for registering a voter and handing out the keys. And there would be other issues that would have to be worked out. But, there exists technology to make voting and other citizenship issues relatively fraud-proof.


I noticed not too long ago a discussion thread with Charles and others about whether Berkshire Hathaway should be considered the equivalent of a mutual fund or ETF. For my two cents, the major difference is that as pertains to Berkshire or Markel or Brookfield Asset Management, they are vehicles with permanent capital. With the mutual fund, in theory, all your investors could redeem and be out the door in a week (although laziness goes a long way to explaining the survival of investment mediocrities).

Best wishes for 2021,

Edward A. Studzinski

Enough…in the Coming Lost Decade

By Charles Lynn Bolin

How much is “enough” to retire when there are likely to be multiple decades of low returns due to high starting valuations with low yields and dividends?

  • Section 1 of this article summarizes the investment philosophies of John Bogle, Warren Buffett, Ed Easterling, Charles Ellis, Benjamin Graham, and Howard Marks.
  • Section 2 looks at the benefits of combining actively and passively managed funds to reduce risk.
  • Section 3 shows the impact of high valuations and inflation for over 120 years.
  • Section 4 covers stock and bond performance during secular bear markets with rising inflation and interest rates.
  • Section 5 looks at nearly two dozen lower risk funds for investors seeking “all-weather” funds or safer yield.
  • Section 6 provides estimates of “enough” for retirement in the coming decades.

Readers can skip to sections that interest them. Key points are added at the beginning of each section for those who want to skip ahead.

John Bogle, Founder of the Vanguard Group, wrote Enough: True Measures of Money, Business, and Life, where he talks about integrity and the high fees associated with investing. He says that if you carry nothing else away from the book, remember:

The great game of life is not about money; it is about doing your best to join the battle to build anew ourselves, our communities, our nation, and our world.

1. Philosophy of Wise Investors

Key Point: Set expectations and strategies according to the investment environment, especially valuations.

In 1999, Mr. Bogle was “concerned about the (obviously) speculative level of stock prices.” Mr. Bogle reduced his equity exposure to about 35 percent of assets, which he held through the time of writing Enough in 2010. The following quote is applicable about market conditions twenty years later:

Clearly, investors would have been wise to set their expectation for future returns on the basis of the current sources of returns rather than fall into the trap of looking to past returns to set course. That dividend yield as 2000 began was at an all-time low of just 1 percent and the P/E at a near record high of 32 times earnings together explain why the average return on stocks in the current decade is at present running at an annual rate of less than 1 percent.”

Similarly, Benjamin Graham, Warren Buffett’s mentor, described in The Intelligent Investor that allocations should never be less than 25% to stocks, nor more than 75% based on market conditions. Warren Buffet closed Buffett Partnership in 1969 because of valuations:

However, I just don’t see anything available that gives any reasonable hope of delivering such a good year and I have no desire to grope around, hoping to “get lucky” with other people’s money. I am not attuned to this market environment and I don’t want to spoil a decent record by trying to play a game I don’t understand just so I can go out a hero.

In Mastering the Market Cycle: Getting the Odds on your Side, Howard Marks, co-founder of Oaktree Capital Management, expresses his investment philosophy:

In my view, the greatest way to optimize the positioning of a portfolio at a given point in time is through deciding what balance it should strike between aggressiveness/defensiveness. And I believe the aggressiveness/defensiveness should be adjusted over time in response to changes in the state of the investment environment and where a number of elements stand in their cycles.

Ed Easterling at Crestmont Research does an excellent job writing about secular markets that can extend for decades. Below is an excerpt from Destitute At 80: Retiring In Secular Cycles which he wrote in 2007.

Although history provides an average outcome across a wide variety of market conditions, it is only relevant today to consider periods with characteristics similar to today. Given the significant impact of valuation on returns, that factor will be a major driver for today’s investors and retirees… As we are now in the upper quartile (i.e. top 25%) of valuations, our expected results are well below average. So much so that realistic expectations or portfolio management is needed for potential success… If you can live off of a 3%, or maybe 4%, withdrawal rate, then today’s financial markets should provide you with retirement success. If you need 4% to 5%, then you will need a more consistent and higher return profile for your portfolio than simply passive investments in today’s stock market.

Charles Ellis, Author of Winning the Loser’s Game, has the following to say about beating the market and the difficulty that individuals have in general.

Unhappily, the basic assumption that most institutional investors can outperform the market is false. Today, the institutions are the market. Institutions do over 95 percent of all exchange trades and an even higher percentage of off-board and derivatives trades. It is precisely because investing institutions are so numerous and capable and determined to do well for their clients that investment has become a loser’s game. Talented and hardworking as they are, professional investors cannot, as a group, outperform themselves. In fact, given the cost of active management—fees, commissions, market impact of big transactions, and so forth—investment managers have and will continue to underperform the overall market…

Holding onto a sound policy through thick and thin is both extraordinarily difficult and extraordinarily important work. This is why investors can benefit from developing and sticking with sound investment policies and practices. The cost of infidelity to your own commitments can be very high.

The philosophies of Bogle, Buffett, Graham, Howards, and Easterling have strong similarities, although it may be surprising to many that Mr. Bogle adjusted his allocations due to high valuations since he is famous for passive indexing. The next section reconciles the passive indexing philosophy of Mr. Ellis to explain the strategy to mix actively and passively managed funds in order to reduce risk.

2. Combining Passively and Actively Managed Funds to Reduce Risk

Key Point: Investors can benefit from indexing for lower costs and from actively managed funds to better manage risk. The majority of the funds covered in Section 5 are actively managed.

Figure #1 and the following explanation reconciles the philosophy of Mr. Ellis with actively managed funds. I extracted all Fidelity mutual funds and calculated the average return for the past five years per Lipper Category of passively and actively managed funds, as well as for draw down, risk (Ulcer Index), risk-adjusted return (Martin Ratio). The conclusion is that for funds in similar Lipper Categories, there is no significant advantage nor disadvantage for being actively or passively managed (other than possibly tax costs which were not evaluated). Mr. Ellis is correct that the benefits of being actively managed are offset by the higher costs, which in the case of Fidelity, actively managed funds cost an additional 0.59% over the passively managed funds. There are 85 actively managed and 22 passively managed funds for a total of 107 funds in 19 Lipper Categories. There are another 173 actively managed funds in 73 Lipper Categories for which there is not a passively managed equivalent.

Figure #1: Passively vs. Actively Managed Funds by Lipper Category – Five Years

Source: Created by the Author Based on Mutual Fund Observer

The benefit of these actively managed funds is to provide diversification across asset classes and/or allow investors to segment the market. These two categories can be further subdivided into risk management such as mixed-asset funds or timing business and investment cycles. Table #1 contains some of the Lipper Categories with the lowest risk and highest risk-adjusted returns of actively managed funds over the past five years.

Table #1: Actively Managed Funds with Low Risk and High Risk-Adjusted Returns

Source: Created by the Author Based on Mutual Fund Observer

3. Impact of High Valuations on Retirement Savings

Key Point: Long periods of strong performance often result in high valuations and are followed by long periods of low performance. Valuations are now at extreme levels and we should expect lower returns over the next decade or two.

Jill Mislinski provides a current update on secular bull and bear markets in Figure #2. A secular bear market occurs when equity returns are less than inflation. Each secular bear market has different characteristics. For example, Government 10 year yields rose from 3% in 1961 to 15% in 1981, while they fell from 6% in 1999 to 3% in 2009. Currently stock prices are 135% of the long term trend which is a historical high.

Figure #2: Secular Markets

Ms. Mislinski also provides an update on several different measures of valuation in Figure #3. Most valuation methods are near the extremes of the Technology Bubble (2000). The current environment with low yields has some similarities to the 1960’s secular bear market, and with high valuations some similarities to the secular bear market that began in 2000.

Figure #3: Valuations are Currently High

4. Stock and Bond Performance During Secular Bear Markets

Key Point: During secular bear markets which usually begin with high valuations, conservative portfolios typically outperform more aggressive portfolios. Even in bond bear markets caused by rising interest rates, bonds have positive returns over long time periods and reduce risk in a portfolio.

This section looks at successful investing strategies for secular bear markets during which interest rates and/or inflation may rise. Fidelity produced the following table which shows how different allocations have performed from 1926 to 2019 during their worst 20 year time periods. These returns are not adjusted for inflation. All four hypothetical portfolios made annual returns of about 3% during their worst 20 year periods which often is offset by inflation. Being more aggressive during a secular bear market does not result in higher returns for the market as a whole. Inflation has eaten half of the purchasing power of a dollar over the past twenty years.

Table #2: Performance of Model Portfolios in Best and Worst 20 Year Periods

1960’s Secular Bear Market

The 1960’s and 1970’s covered the Vietnam War and suffered from the oil embargo followed by high inflation and low growth, known as stagflation. President Nixon ended the convertibility of the dollar to gold in 1971, allowing the gold price to float. Yields on 10 year government bonds rose from 3% in 1962 to 8% in 1977 and on to 15% in 1981. Stock prices more than doubled in nominal terms while falling in half when adjusted for inflation. Including stock dividends, inflation adjusted returns on equities were slightly positive for the twenty year period. Average dividends during these two decades were 3.8% compared to less than 2% now. With rising rates, bonds still had positive returns. During the 1973 to 1974 bear market, bonds lost money, but less so than stocks. Bonds performed relatively well over this period, but higher inflation favors stocks over bonds. Gold was a good hedge “at times” against uncertainty.

Figure #4: Inflation, Bond Yields, Gold, and Stocks 1961 – 1981

Source: Created by the Author Based on the St. Louis Federal Reserve (FRED)

In nominal terms, stocks and bonds performed in a seemingly normal manner during the 1960’s secular bear market in spite of the “bond bear market” resulting from rising rates. Note that stocks do outperform bonds in high inflation periods (1976 to 1981). Moderate allocation funds did about as well as equity funds during the 1961 to 1981 secular bear market and with less draw down.

Figure #5: Fund Performance Including Dividends and Excluding Inflation

Source: Created by the Author Based on Mutual Fund Observer

2000’s Secular Bear Market

Figure #6 shows it took the S&P 500 17 years to catch up to the Vanguard LifeStrategy Conservative Growth (VSCGX) fund following the bursting of the Technology Bubble in 2000.

Figure #6: Tech Bubble Secular Bear Market Conservative Outperforms Aggressive

Source: Created by the Author Using Portfolio Visualizer (link)

5. Searching for Absolute Return

Key Point: Fees in many actively managed funds have come down and the funds covered in this section may reduce risk by adjusting exposures according to changes in the environment or using options. The S&P 500 had a drawdown of 20% on a monthly basis compared to those in this article that had less than half of that.

Mr. Easterling explains absolute return investing in Rowing vs. The Roller Coaster in January 2007 prior to the bursting of the housing bubble and subsequent financial crisis.

A key value of the hedge fund style of investing—so called “absolute return” investing—is its focus on controlling downside losses and capturing a reasonable share of the upside. As the analysis and studies have shown, as downside risk is controlled, not only does it provide investors with a reduced risk profile and more comfortable ride, but also it requires much less of the market’s upside to deliver the same level of return.

As a quick update on funds, ATAC Rotation Fund Investor Class (ATACX) absolute return fund is now available as ATAC US Rotation ETF (RORO). Columbia Thermostat Fund (CTFAX) is also available as a no-load, no transaction fee fund at Charles Schwab as well as Fidelity, and (COTZX) is available through Vanguard. KL Allocation (GAVIX) is lowering the minimum required investment next year.

This article is the basis for my investing strategy for the coming decade to continue to invest in a conservative, balanced portfolio using a bucket approach and to look for ways to add downside protection. The following tables focus on funds with low to moderate risk (as measured by Ulcer Index) that have high risk-adjusted returns (as measured by the Martin Ratio). The funds are generally listed from lowest risk to highest. All funds have a lower risk (Ulcer Index) than the S&P 500, which is 6.1 for comparison. Fund Family Rating, expenses, assets under management, and three-month performance were among the other factors used to select the funds. While not part of the selection criteria, all but three of the funds are actively managed funds befitting a low risk, versatile strategy. The Symbols highlighted in green are some of the funds that I own. The Names highlighted in blue are either MFO’s Great Owl Funds or on the MFO Honor Roll. The funds are intended to be those available to most small investors. Table 3 contains the Risk and Return Metrics, Table 4 covers short term and bear market returns, and Table 5 has basic information.

Table #3: Low Risk Funds for the Coming Decade – Risk and Risk Adjusted Returns (1.5 Years)

Source: Created by the Author Based on Mutual Fund Observer

Table #4 shows the short term performance of the funds and how they have performed during bear markets. The three month performance is shown to reflect how sensitive the fund might be to low or rising interest rates.

Table #4: Low Risk Funds for the Coming Decade – Performance (1.5 Years)

Source: Created by the Author Based on Mutual Fund Observer

Table #5 contains basic information. All funds have more than $100M in assets under management. Flow is the percent of flows into or out of the fund.

Table #5: Low Risk Funds for the Coming Decade – Basic Information

Source: Created by the Author Based on Mutual Fund Observer

As a final check, I ran created three portfolios in Portfolio Visualizer as shown in Figure #7 for the past seven years compared to the Vanguard LifeStrategy Conservative Growth Portfolio. Minimum and maximum constraints were applied. The link is provided here. No, the next seven years are not likely to be the same as the past seven years. There will probably be another large correction and bonds won’t benefit from falling rates. The funds were selected to perform well in down markets. And history? It doesn’t repeat itself, but it rhymes.

Figure #7: Three Optimized Portfolios vs LifeStrategy Conservative Growth – 7 Years

Source: Created by the Author Using Portfolio Visualizer

During the past seven years, these portfolios averaged 5% to 7% returns with maximum drawdowns of 3% to 9%.

Table #6: Metrics

Source: Created by the Author Using Portfolio Visualizer

Table #7: Allocations

Source: Created by the Author Using Portfolio Visualizer

How did I use this information? I traded another Vanguard fund for the Vanguard LifeStrategy Conservative Growth Fund because it is less risky and I don’t want to lower my equity ratio. Secondly, I am looking to buy an Absolute Return fund and decided on the new ATAC US Rotation ETF (RORO) instead of PHDG. Another fund that I like is the T. Rowe Price Multi-Strat Total Return Fund (TMRSX).

6. How Much is Enough?

Key Point: “Enough” is dependent upon living expenses, home equity, pensions, future market returns, and inflation among other factors. A good rule of thumb is to have ten times your salary saved up by retirement age excluding home value and pensions.

Mr. Easterling estimates that in the worst 30 year periods for returns, a million dollar portfolio with a 4% withdrawal rate (plus inflation adjustments) had a 21% probability of being depleted. The Net Worth by Age Calculator for the United States in 2020 can be used to estimate that a person with $1M (including home equity and private pensions) near retirement age fits in at the upper 20% of savers, and $2M to be in the top 10%.

A survey of Charles Schwab customers shows that participants estimate that they will need nearly $2M to retire comfortably, and that nearly 15% say that they are unlikely to save this amount. Credit Suisse estimates that there are 20M millionaires in the United States including the value of the home and private pensions.

How much is “enough” for a retiree depends on many factors including health, home equity, lifestyle, pensions, and unknown future market returns. People planning on retirement should include a margin of safety because in addition to low probable returns, pensions including social security benefits can be reduced, inflation reduces purchasing power, and taxes can go up. As a guideline for target savings, Fidelity’s rule of thumb is to save at least 1x your salary by age 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. This does not take into account specifics such as home equity and pensions. The median household annual income is approximately $70,000, making the $1M retirement savings goal a realistic starting point. As can be seen from these sources, $2M may make a better target.

If an investor has not saved enough, including a margin of safety, they should start with creating a lifetime budget and/or seeing a financial adviser. There may be several options to prepare for retirement: 1) save more, 2) cut expenses, 3) pay off debt, 4) work longer if possible, 5) defer social security, 6) get insurance, 7) downsize the home, 8) refinance the home, 9) annuitize enough to pay expenses, withdraw less early on, and educate ourselves on investing.


Several readers have expressed an interest in the topic of “As I Age,” and it sounds like a good next article. The funds in this article are intended for someone who wants to keep it simple and manage risk. I will continue my research on managed accounts and gradually shift more assets to the right ones.

True story, Word of Honor: Joseph Heller, an important and funny writer now dead, and I were at a party given by a billionaire on Shelter Island. I said, “Joe, how does it make you feel to know that our host only yesterday may have made more money than your novel ‘Catch-22’ has earned in its entire history?” And Joe said, “I’ve got something he can never have.” And I said, “What on earth could that be, Joe?” And Joe said, “The knowledge that I’ve got enough.” Not bad! Rest in peace!”

Kurt Vonnegut

Stay Safe and Enjoy the Holidays!


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.

Rondure Overseas Fund (ROSOX/ROSIX), December 2020

By David Snowball

Objective and strategy

Rondure Overseas invests, primarily, in the stocks of corporations located in developed markets outside of the US. The managers pursue a benchmark-agnostic, active style that allows them to invest in stocks of any size. In general, they aspire to invest in great companies at good prices. They have the freedom to invest in good companies at great prices, but the wisdom to play that game rarely.

The quantitative markers of being a great company include strong balance sheets, stable free cash flows, and high returns on capital. The qualitative markers are “compelling competitive advantages,” which might include elements of the business niche and strong, responsible leadership.

The portfolio currently holds 95 names, with 25% of assets concentrated in its top 10 holdings. Its largest sector is consumer stocks (49%), which it overweights by 2:1 relative to its benchmark. It earns exceptionally high grades on sustainability and for the carbon footprint of its holdings.


Rondure Global Advisors. Rondure Global Advisors, LLC is a woman-owned investment adviser founded in 2016 and headquartered in Salt Lake City, Utah. The firm advises the two Rondure funds, Overseas and New World, and has over $200 million in assets.


Laura Geritz, CFA and Blake Clayton, DPhil. Ms. Geritz is Rondure’s founder, co-CIO, and CEO. She began her career at American Century as a bilingual investor relations representative, a position that continues to shape her thinking about her investors, their needs, and her obligations to them. She moved to the investing side in 1999 at American Century and eventually joined Wasatch Funds in 2006, where she spent a decade. Her portfolio included managing Wasatch Frontier Emerging Small Countries Fund (2012 – 2016), Wasatch International Opportunities Fund (2011 – 2016), and Wasatch Emerging Markets Small Cap Fund (2009 – 2015). Her Master of Arts is in East Asian Languages and Culture, she’s lived in Japan and speaks Japanese.

Dr. Clayton, a serial underachiever, has a Master of Philosophy from Cambridge, a Master of Arts from Chicago, a Ph.D. from Oxford, and served nine years at the Council on Foreign Relations.  He’s written two books, Commodity Markets and the Global Economy (2015) and Market Madness: A Century of Oil Panics, Crises, and Crashes (2015). The only negative Amazon review I found of the latter starts with the word “disssapointing.” Enough said. He joined Rondure as a research analyst in 2017 after a stint as a senior equity analyst at Citigroup and was appointed Rondure’s co-CIO in 2020.

Strategy capacity and closure

Rondure reports that the asset capacity for the strategy is roughly $5 billion. They will evaluate a soft close at $2.5 to $3 billion, as determined by their ability to remain all cap and still purchase some of their smaller opportunities.

Management’s stake in the fund

Ms. Geritz has invested over $1 million in the fund. Dr. Clayton has invested between $10,000 – 50,000.

Opening date

May 1, 2017

Minimum investment

$1,000 for both Investor and Institutional shares. The fund is available for purchase directly and through Vanguard, TD Ameritrade, Schwab, and Commonwealth, among others. If you choose to buy the Investor shares, the higher expense ratio pays for no-transaction-fee purchases. If you plan to invest directly with Rondure, the Institutional class is the sensible option.

Expense ratio

1.1%, after waivers, for Investor shares and 0.85% for Institutional ones.


Investing is hard. Professionals and amateurs alike struggle to sort through thousands of options while being buffeted by their own primal emotions and the endless roar of mostly-irrelevant noise from the media. Both sorting things out and keeping faith become difficult.

Investing can be easier. The Observer’s credo is simple: think through what you’re really trying to accomplish, find a high-quality partner to help, stay the course, get on with life.

Rondure Global would be an exceptionally high-quality partner for you, in part because they seem to practice what we preach. That conclusion is supported by long conversations with the firm’s founder, by a careful reading of the fairly rich literature they produce, and by an analysis of what they do and how they’ve done.

Rondure looks to invest in high-quality companies. The underlying argument is simple: quality succeeds. “Quality” is a debatable notion that might be embodied in a dozen different ways. The cool thing is that regardless of your precise definition, it succeeds over time across markets (it’s been tested in Hong Kong, Japan, Korea, Singapore, India, Australia, Taiwan, Central and Eastern Europe, as well as the US and other developed markets) and across market cycles, and it succeeds by a variety of return and risk-return measures.

Rondure’s efforts to find quality companies in which to invest comes in three ways. First, they look for firms with strong balance sheets, stable free cash flow, and high returns on capital. Those are all pretty conventional markers of corporate quality.

Second, they look at the business universe within which the corporation operates in order to find firms whose attractive metrics might endure. They’ve identified three characteristics that give a firm staying power in the market and aspire to invest in fairly-priced firms that show all three. Here’s their picture:

The goal isn’t to find the firms (hello, Tesla) that “won” in 2020. The goal is to find the firms that will still be winning in 2030 (take care, Elon!). The folks at Rondure argue that the combination of “moats,” captive customers, and a network effect allows a firm’s success to persist year after year. They are “quality compounders.”

Third, they look for firms that are managed responsibly. The quality of a firm’s governance has always mattered to its success; it is only recently that investors have also recognized that corporations operate within social structures and physical environments whose health also profoundly affects the firm’s long-term prospects. Put bluntly, starving neighbors and raging storms benefit no one.

Rondure approaches their assessment of a firm’s level of responsibility with a spirit of grace: given the culture within which they operate and the constraints of their industry, are they doing the best they can? Are they getting better? Are they willing to listen to informed and sympathetic critics who are looking to partner with them? If so, they are quality people.

Ms. Geritz, in her 2020 white paper on quality investing, expresses her firm’s bottom line this way:

Our aim at Rondure Global is to deliver clients excellent long‐term compounded returns and mitigate loss of capital from large drawdowns. We think that owning companies with exceptional profitability, strong balance sheets, and wide competitive moats is the best way to accomplish that. As we see it, holding companies of this profile raises the odds of outsized long‐term returns without the downside risks of owning lesser‐quality firms. It’s a relatively simple way to approach the market—which is partly why we think it works—if applied in a disciplined way over many years. Everything we do at Rondure in terms of our research and investment process is designed to work toward that goal.

They are, she concludes, “companies to whom we feel comfortable entrusting our clients’ capital, confident that they can do extraordinary things with it….”

By Morningstar’s calculation, the fund’s portfolio is substantially higher quality than its peers: far fewer “no moat” companies, higher grades on financial health and profitability, higher returns on invested capital, higher free cash flow and so on. Similarly, by Rondure’s calculation, it is substantially higher quality than its benchmark MSCI EAFE Index based on return on assets, return on equity, net debt and EV/EBIT.

All of which has led to very satisfying performance.

Since its inception, Rondure Overseas has produced solid returns pared with absolutely first-rate risk management. That’s less a matter of individual genius, she might argue, than an intrinsic characteristic of getting quality investing right.

The fund screener at MFO Premium offers a snapshot of Rondure Overseas’ performance since inception against its Lipper peer group.

Comparison of Lifetime Performance (201706-202010)

Rondure Overseas 5.3 -17.6 7 11.5 8.5 5.3 0.33 0.45 0.73
International Multi-Cap Growth Category Average 5.5 -22.7 19 16.0 11.7 8.8 0.25 0.37 0.54

Here’s how you read that.

APR, the fund’s annualized percentage returns, is 5.3%, which is a touch below its peers.

The fund’s maximum drawdown (17.6%) is far smaller than its peers, and its recovery from that drawdown (seven months) was far quicker.

The fund’s standard deviation (the most common measure of a portfolio’s volatility) is far lower than its peers, as is its measurement of downside (or “bad”) volatility.

In consequence, all four measures of risk-adjusted performance – the Ulcer Index (which factors together how far a fund falls and how long it stays down, with lower values signaling fewer ulcers on your part) and the Sharpe, Sortino and Martin ratios – are substantially better than their peers.

In most cases, those risk measures are not just a little better: they’re absolutely top-notch. Over the past three years, Rondure Overseas has the second-best bear market deviation among 141 funds, the best downside deviation, the best down market deviation, and the second-best downside capture (relative to the MSCI All Country World minus US Gross Dividends Reinvested Index, which gets shortened in the MFO data tables to ACIxUS index). It shows an admirable asymmetry over the same period, capturing 70% of the index’s upside and only 57% of its downside.

For visual learners, here’s a picture of Rondure’s MFO ratings since inception. Funds in the top 20% for each metric get highlighted in blue with funds in the middle of the pack get highlighted in yellow.

Rondure’s advantage over its peers was particularly striking during the Covid Bear at the beginning of 2020 when it posted a top 10% performance, losing 17.6% which was 3.5% better than its average peer.

In short, Rondure has succeeded.

In addition, Rondure strikes us as a quality partner for you. In a long and thoughtful shareholder letter, Ms. Geritz talks a bit about her own life and its movement from a young woman in rural Kansas to an investor on a world stage. She has been phenomenally successful as a professional investor. Lewis Braham, writing in Barron’s of her work at Wasatch International Opportunities, concluded that she “crushed” her peers (“Should You Follow a Star Money Manager?” Barron’s, 9/10/2016). Her signal charge, Wasatch Frontier Emerging Small Countries, returned 15-times what her competitors did. But as she traveled those challenged and striving countries, she came to a poignant and powerful conclusion:

Somewhere along the path of making money, I got too busy to do as much good as I aspired to.

Rondure works to change that with three core principles: make money for our clients, Do Good and be great partners. To that end, she’s constructed a diverse and brilliant staff, has invested enormously in her own funds and has yet to receive a dollar in salary. She writes and speaks sensibly. She’s earned the respect her peers have richly accorded her. She’s earned ours. She would earn yours.

Bottom Line

As you’re pondering your interest in the funds, you really need to read Ms. Geritz’s letter to her investors. It’s intelligent, heartfelt, reassuring, and literate. Of her modest beginnings in the industry, she writes:

I started in this industry as a client relations representative. I have and never will forget my time on the phones dialoguing with all levels of clients. The lesson is and always will be that this is not our/my money; it’s yours. It is your dreams and goals we need to deliver. You deserve the utmost transparency from us. It is our goal to provide this. Our beliefs are simple. We are here for you, not for us.

It’s not a fund for everybody. None are. It is, it seems to us, a fund for people who prefer to get rich slowly and steadily, rather than those looking for “moonshots” in their portfolios. You might benefit from learning now, most especially if you imagine that the slow recovery from Covid and the weakening US dollar might begin to move the pendulum away from the narrow, manic rally that has recently dominated the US market.

Fund website

Rondure Global. Their shareholder letters and white paper on quality investing live under the “resources – literature” tab. The “people” tab has been updated to reflect the recent additions of former Matthews Asia manager Lydia So, CFA to the investment team and former Cambiar Investors partner Karl R.S. Engelmann on the business development side.

Funds in Registration

By David Snowball

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 the third week in October at the latest. And, my goodness, a lot of folks did find time to file with 50 new funds and active ETFs listed in our November issue.

This month brings a far more sedate pace of launches with 19 new products in the pipeline. They continue the trends we identified last month: socially-responsible funds, funds with options strategies, and dumb ideas.

The most notable change is the shift from a passive approach in ESG investing toward an active or “impact” approach. Historically, most socially-responsible funds had a “first, do no harm” mandate: avoid tobacco, weapons, alcohol, porn, or whatever. Impact investors seek out the opportunity to actively advance good: allocate capital to firms seeking to address the global climate crisis, to advance social equity, or whatever. Goldman Sachs, Guidestone, and T. Rowe Price all placed environmental impact funds in the pipeline this month, and all bear watching.

Ballast Small/Mid Cap ETF

Ballast Small/Mid Cap ETF, an actively-managed ETF, seeks to generate positive risk-adjusted returns. The plan is to invest in high quality, financially sound small- and mid-cap companies. A substantial move to cash is a defensive possibility. The fund will be managed by Ragen Steinke, who had, for a decade, been a manager with the Westwood Funds. The separately managed accounts he’s responsible for have market-like returns. Its opening expense ratio is 1.10%.

Cambria Bond Tail Risk ETF

Cambria Bond Tail Risk ETF, an actively-managed ETF, seeks income and capital appreciation. The plan is to invest in a combination of government bonds and put options in order to “hedge against sharp declines in the US Treasury bond market.” The fund will be managed by Mebane Faber. Its opening expense ratio has not been disclosed.

Cambria Global Tobacco ETF

Cambria Global Tobacco ETF, an actively-managed ETF, seeks capital appreciation and income. The plan is to build a global portfolio of 20-50 tobacco companies. The fund will be managed by Mebane Faber. Its opening expense ratio has not been disclosed.

Cambria Junk Tail Risk ETF

Cambria Junk Tail Risk ETF, an actively-managed ETF, seeks income and capital. The plan is to invest in cash and US government bonds and then use a put option strategy to manage the risk of a significant negative movement in the value of US high yield (or “junk”) corporate bonds. The fund will be managed by Mebane Faber. Its opening expense ratio has not been disclosed.

First Trust TCW Emerging Markets Debt ETF

First Trust TCW Emerging Markets Debt ETF, an actively-managed ETF, seeks high total return from current income and capital appreciation. The plan is to buy sovereign, quasi-sovereign, and corporate EM debt. The fund will be managed by a three-person team from TCW. Its opening expense ratio has not been disclosed.

Global X China Disruption ETF

Global X China Disruption ETF, an actively-managed ETF, seeks long-term growth of capital. (You almost would have guessed that the right answer was “China disruption.”) The plan is to invest in firms that fall within “disruptive themes relevant to the economy in China using its proprietary thematic identification process.” The list of what qualifies as a potential disruptor is long enough and vague enough that there’s no sharp focus. The fund will be managed by Phil Lee and Wei Wei Chua. Its opening expense ratio has not been disclosed.

Goldman Sachs Global Environmental Impact Equity Fund 

Goldman Sachs Global Environmental Impact Equity Fund will seek long-term capital appreciation. The plan is to invest in firms which aligned to the key themes associated with seeking to solve environmental problems, which include clean energy, resource efficiency, sustainable consumption and production, the circular economy, and water sustainability. The fund will be managed by Alexis Deladerrière. Its opening expense ratio has not been disclosed and the minimum initial investment will be $1,000.

GuideStone Funds Global Impact Fund 

GuideStone Funds Global Impact Fund will seek capital appreciation with modest current income. The plan is to generate positive, measurable social impact in accordance with the Adviser’s Christian values, alongside financial returns. The fund will be managed by teams representing three sub-advisers. Its opening expense ratio is 1.24%, and the minimum initial investment will be $1,000.

Krane UBS China A Share Fund

Krane UBS China A Share Fund seeks to maximize capital appreciation. The plan is to buy shares of domestic Chinese firms that have limited foreign investment, which is the significance of the A-shares designation. The target is firms whose shares are mispriced “due to market behavior and market structure.” (Uhh… dudes, that’s all of them.) The fund will be managed by Bin Shi, a member of UBS’s Global Emerging Market and Asia Pacific Equities teams. Its opening expense ratio is 1.74%, and the minimum investment is $2,500.

Morgan Creek Exos SPAC Strategy ETF

Morgan Creek Exos SPAC Strategy ETF, an actively-managed ETF, seeks capital appreciation. The plan is to invest in the trendiest of 2020’s trendy investment baubles: SPACs or “special acquisition corporations” (sometimes called “blank check companies”). SPACs are vehicles that allow managers to raise capital with which to buy target companies. The fund’s management team has not yet been named. Its opening expense ratio has not been disclosed.

Navigator Tactical Investment Grade Bond Fund

Navigator Tactical Investment Grade Bond Fund will seek total return with a secondary goal of current income. The plan is to use a momentum-based process to determine the fund’s allocation among investment-grade securities, intermediate to long-term Treasuries, and T-bills. The fund will be managed by a team from Clark Capital. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $5,000.

Navigator Tactical US Allocation Fund

Navigator Tactical US Allocation Fund will seek long-term capital appreciation. The plan is to allocate between stocks and bonds primarily driven by a modeling process that measures the relative strength or momentum of various asset classes against one another. The fund will be managed by a team from Clark Capital. Its opening expense ratio is “1.[ ]%,” and the minimum initial investment will be $5,000.

North Square Tactical Growth Fund

North Square Tactical Growth Fund will seek long-term capital appreciation. The plan is to invest in a combination of fixed income and equity funds and ETFs, cash, and options. The fund will be managed by Paul M. Frank, Brad A. Thompson and Clayton Wilkin. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $1,000. The same prospectus covers two other funds managed by the same sub-adviser using variations of the fund-of-funds-plus strategy: North Square Tactical Defensive Fund and North Square Trilogy Alternative Return.

Roundhill Streaming Services & Technology ETF 

Roundhill Streaming Services & Technology ETF, an actively-managed ETF, seeks capital growth. The plan is to build a non-diversified, global portfolio (a rare combination, by the way) of companies that contribute a variety of streaming-related products and services. That might include SPACs and IPOs. The fund will be managed by Will Hershey, Timothy Maloney, and Mario Stefanidis of Exchange Traded Concepts, LLC. Its opening expense ratio is 0.75%.

Stance Equity ESG Large Cap Core ETF

Stance Equity ESG Large Cap Core ETF, an actively-managed and non-transparent ETF, seeks long-term capital appreciation. The plan is to invest in 30 or so large-cap companies that pass sustainability, financial, risk, and other screens. The fund will be managed by Bill Davis and Kyle Balkisson of Stance Capital. Mr. Davis was a portfolio manager on EAM Sustainable Equity, and Mr. Balkisson is a data geek who led IBM’s cognitive forecasting division. Its opening expense ratio has not been disclosed.

T. Rowe Price Global Impact Equity Fund

T. Rowe Price Global Impact Equity Fund will seek long-term growth of capital. The plan is to generate a positive, measurable environmental and/or social impact (while beating the market). The fund will be managed by Harishankar Balkrishna. Mr. Balkrishna has been at T. Rowe Price for a decade and is an associate portfolio manager for the Global Growth Equity Strategy. Its opening expense ratio is 0.94%, and the minimum initial investment will be $2,500.

TrueShares Low Volatility Equity Income ETF 

TrueShares Low Volatility Equity Income ETF, an actively-managed ETF, seeks “capital appreciation [with lower volatility and a higher dividend yield compared to the S&P 500 Index].” I’m not sure whether they’re being shy or uncertain about their objective in brackets. The plan is to buy 25-35 stocks of companies that pay dividends and expect to grow the dividends over time and are trading at attractive valuations. The fund will be managed by Jordan Waldrep of Titleist Asset Management. Previously he’d managed the Vice Fund (VICEX) and Navigator Fund (UNAVX) for USA Mutuals. Its opening expense ratio has not been disclosed.

Manager Changes

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.

November was a relatively quiet month with 48 funds seeing partial or complete manager changes. By far, the highest visibility changes come to Parnassus Endeavor (PFPWX), where Jerome Dodson, the firm’s founder, has decided that full of years and honors, it’s time to step aside. The fund’s long-term returns pretty much crush its peers: 12.8% per year over 15 years versus the peers’ 8.6% returns.

In addition, two star managers – Rajiv Rain and John Walthausen – have added co-managers this month.

Ticker Fund Out with the old In with the new Dt
GIGAX Aberdeen Emerging Markets Sustainable Leaders Fund Bruce Stout, Jamie Cumming, Samantha Fitzpatrick, Martin Connaghan, and Dominic Byrne are no longer listed as portfolio managers for the fund. Peter Taylor, David Smith, William Scholes, Danie Ng, and Fiona Manning will now manage the fund. 11/20
CWS AdvisorShares Focused Equity ETF Edward Elfenbein is no longer listed as a portfolio manager for the fund. Dan Ahrens will now manage the fund. 11/20
AMPAX American Beacon Mid-Cap Value Fund Effective November 6, 2020, Brian Pratt of WEDGE Capital Management, L.L.P. no longer serves as a portfolio manager for the fund. Andrew Rosenberg joins the other dozen managers on the team. 11/20
AVFIX American Beacon Small Cap Value Fund Effective December 31, 2020, John Harloe will no longer serve as a portfolio manager for the fund. The other 19 managers remain. 11/20
CCAPX Chiron Capital Allocation Fund Effective on or around December 31, 2020, Grant Sarris will no longer serve as a portfolio manager for the fund. Scott Sullivan, Brian Cho, and Ryan Caldwell will remain on the management team. 11/20
CSMOX Chiron SMid Opportunities Fund Effective on or around December 31, 2020, Grant Sarris will no longer serve as a portfolio manager for the fund. Effective immediately, Pat Srinivas joins Scott Sullivan and Brian Cho on the management team. 11/20
DSCIX Dana Epiphany ESG Small Cap Equity Fund No one, but . . . Ann Roberts joins David Stamm, Duane Roberts, and Michael Honkamp on the management team. 11/20
FIUTX Delaware Equity Income Fund Kristen Bartholdson, Nikhil Lalvani, and Robert Vogel are no longer listed as portfolio managers for the fund. Scot Thompson and Benjamin Leung will now manage the fund. 11/20
DVEAX Delaware Select Growth Fund Jackson Square Partners is out as subadvisor, along with their ten-person management team. W. Alexander Ely will now manage the fund. 11/20
DEUIX Delaware U.S. Growth Fund Christopher Bonavico will no longer serve as a portfolio manager for the fund. Daniel Prislin has announced his retirement at the end of 2021. William Montana, Christopher Ericksen, and Jeffrey Van Harte will continue to manage the fund. 11/20
FWAFX Fidelity Advisor Worldwide Fund No one, but . . . Andrew Sergeant joins Stephen DuFour and William Kennedy in managing the fund. 11/20
FWWFX Fidelity Worldwide No one, but . . . Andrew Sergeant joins Stephen DuFour and William Kennedy in managing the fund. 11/20
FFIOX FormulaFolios US Equity Fund Derek Prusa is no longer listed as a portfolio manager for the fund. Mark DiOrio joins Jason Wenk in managing the fund. 11/20
Various Global X Funds (33 of them) Chang Kim is no longer listed as a portfolio manager for the fund. John Belanger and Vanessa Yang join Nam To, Wayne Xie, and Kimberly Chan on the management team. 11/20
GJRTX Goldman Sachs Absolute Return Tracker Fund Effective immediately, Matthew Schwab will no longer serve as a portfolio manager for the fund. Oliver Bunn and Federico Gilly will continue to manage the fund. 11/20
GDAFX Goldman Sachs Alternative Premia Fund Effective immediately, Matthew Schwab will no longer serve as a portfolio manager for the fund. Federico Gilly and James Park continue to serve as portfolio managers for the fund. 11/20
GDEAX Goldman Sachs Defensive Equity Fund Effective immediately, Matthew Schwab will no longer serve as a portfolio manager for the fund. Federico Gilly and Jorge Murillo continue to serve as portfolio managers for the fund. 11/20
GSYAX Goldman Sachs Imprint Emerging Markets Opportunity Fund Jamieson Odell and Lee Gao are no longer listed as portfolio managers for the fund. Hiren Dasani and Basak Yavus will now manage the fund. 11/20
SFAFX Goldman Sachs Strategic Factor Allocation Fund Effective immediately, Matthew Schwab will no longer serve as a portfolio manager for the fund. Federico Gilly, John Landers, and Nishank Modi will now manage the fund. 11/20
GQRPX GQG Partners Global Quality Equity Fund No one, but . . . James Anders joins Rajiv Jain in managing the fund. 11/20
MXLSX Great-West Loomis Sayles Small Cap Value No one, but . . . Ryan Thomes and Judd Peters join Jeffrey Schwartz and Joseph Gatz on the management team. 11/20
various Harbor Target Retirement Income Fund, Harbor Target Retirement 2020 Fund, Harbor Target Retirement 2025 Fund, Harbor Target Retirement 2030 Fund, Harbor Target Retirement 2035 Fund, Harbor Target Retirement 2040 Fund, Harbor Target Retirement 2045 Fund, Harbor Target Retirement 2050 Fund, Harbor Target Retirement 2055 Fund and Harbor Target Retirement 2060 Fund Brian L. Collins and Linda M. Molenda will no longer serve as portfolio managers of the Target Retirement Funds effective at the close of business on November 13, 2020 and December 31, 2020, respectively. Matthew Pallai joins Paul Herbert in managing the funds. 11/20
HLDIX Hartford Emerging Markets Local Debt Fund James Valone announced his plan to retire, and effective December 31, 2021, he will no longer serve as a portfolio manager to the fund. Michael Henry and Kevin Murphy will continue to manage the fund. 11/20
OPGIX Invesco Global Opportunity Fund No one, but . . . Maire Lane joins Frank Jennings in managing the fund. 11/20
VSQAX Invesco MSCI World SRI Index Fund Glen Murphy will no longer serve as a portfolio manager for the fund. Daniel Tsai joins Ahmadreza Vafaeimehr, Su-Jin Fabian, Nils Huter, and Robert Nakouzi on the management team. 11/20
JOCIX JOHCM Credit Income Fund Lale Topcuoglu is no longer listed as a portfolio manager for the fund. Adam Gittes joins Giorgio Caputo in managing the fund. 11/20
JOFIX JOHCM Global Income Builder Fund Lale Topcuoglu is no longer listed as a portfolio manager for the fund. Adam Gittes joins Giorgio Caputo and Robert Hordon in managing the fund. 11/20
GAOAX JPMorgan Global Allocation Fund No one, but . . . Michael Feser and Philip Camporeale join Eric Bernbaum, Grace Koo, and Jeffrey Geller on the management team. 11/20
JIHAX JPMorgan International Hedged Equity Fund Demetris Georghiou will no longer serve as a portfolio manager for the fund. Piera Grassi, Nicholas Farserotu, and Winnie Cheung join Hamilton Reiner in managing the fund. 11/20
JPEAX JPMorgan Tax Aware Equity Fund No one, but . . . Laura Huang joins Susan Bao in managing the fund. 11/20
MFCPX M Capital Appreciation Fund Effective December 31, 2020, Michael Cavarretta will be retiring as a portfolio manager for the fund. Andrew Bennett and Peter Kuechle will continue to manage the fund. 11/20
MMAAX MassMutual Select Growth Opportunities Fund Christopher Bonavico will no longer serve as a portfolio manager for the fund. Daniel Prislin has announced his retirement at the end of 2021. The other eight managers remain. 11/20
MEMQX Mercer Emerging Markets Equity Fund John Birkhold will no longer serve as a portfolio manager for the fund. The other 14 managers remain. 11/20
FOOLX Motley Fool Global Opportunities Fund Charles Travers and David Meier will no longer serve as portfolio managers to the fund. Michael Olsen joins Nathan Weisshaar, William Barker, Bryan Hinmon, and Anthony Arsta on the management team. 11/20
TMFGX Motley Fool Mid-Cap Growth Fund Charles Travers and David Meier will no longer serve as portfolio managers to the fund. Nathan Weisshaar, William Barker, Bryan Hinmon, and Anthony Arsta remain on the management team, with Mr. Hinmon becoming the lead portfolio manager. 11/20
PFPWX Parnassus Endeavor Fund Effective as of December 31, 2020, Jerome Dodson will no longer serve as a portfolio manager of the fund. Mr. Dodson will continue as the Chairman of Parnassus Investments. As of January 1, 2021, Billy Hwan will be the sole portfolio manager of the fund. 11/20
SPGEX Symmetry Panoramic Global Equity Fund Dana D’Auria is no longer listed as a portfolio manager for the fund. Lukax Smart, Jed Fogdall, and Joel Schneider join Patrick Sweeny, Philip McDonald, John McDermott, David Connelly, and Rebecca Cioban on the management team. 11/20
SPUSX Symmetry Panoramic US Equit Fund Dana D’Auria is no longer listed as a portfolio manager for the fund. Lukax Smart, Jed Fogdall, and Joel Schneider join Patrick Sweeny, Philip McDonald, John McDermott, David Connelly, and Rebecca Cioban on the management team. 11/20
TEDMX Templeton Developing Markets No one, but . . . Andrew Ness joins Chetan Sehgal in managing the fund. 11/20
TSALX TIAA-CREF Lifestyle Aggressive Growth Fund No one, but . . . Steve Sedmak joins Hans Erickson and John Cunniff in managing the fund. 11/20
TSCLX TIAA-CREF Lifestyle Conservative Fund No one, but . . . Steve Sedmak joins Hans Erickson and John Cunniff in managing the fund. 11/20
TSGLX TIAA-CREF Lifestyle Growth Fund No one, but . . . Steve Sedmak joins Hans Erickson and John Cunniff in managing the fund. 11/20
TSILX TIAA-CREF Lifestyle Income Fund No one, but . . . Steve Sedmak joins Hans Erickson and John Cunniff in managing the fund. 11/20
TSMLX TIAA-CREF Lifestyle Moderate Fund No one, but . . . Steve Sedmak joins Hans Erickson and John Cunniff in managing the fund. 11/20
TIMRX TIAA-CREF Managed Allocation Fund No one, but . . . Steve Sedmak joins Hans Erickson and John Cunniff in managing the fund. 11/20
TLISX TIAA-CREF Quant International Small-Cap Equity Fund Steven Rossiello and Antonio Ramos will no longer serve as portfolio managers for the fund. Max Kozlov now manages the fund. 11/20
WSCVX Walthausen Small Cap Value Fund No one, but . . . DeForest Hinman joins John Walthausen and Gerard Heffernan in managing the fund. 11/20
WBSIX William Blair Small Cap Growth I No one, but . . . Mark Thompson joins Ward Sexton and Michael Balkin in managing the fund. 11/20


Briefly Noted

By David Snowball


Guinness Atkinson’s groundbreaking OEF-to-ETF conversion is surging ahead. In early summer, GA filed a plan to convert two of their current funds – the four-star Dividend Builder GAINX and Alternative Energy GAAEX – directly into ETFs. Other firms have launched ETF clones of their funds, and a bunch of strategies that would normally have been launched as funds have instead followed the non-transparent, active ETF route. Guinness was the only firm bold enough to try a switchover mid-flight.

The conversions were slowed by “a thousand thoughtful questions and comments” from the SEC, according to president Jim Atkinson. In the latest round of comments, the agency has asked GA to begin incorporating concrete dates. Mr. Atkinson believes that the GAINX conversion will occur in the second week of December.

The Alternative Energy conversion is now slated to occur in two steps. With GAAEX still in operation, the firm launched the clone Sustainable Energy II ETF (SULR) on November 11, 2020. They now expect to convert GAEEX into Sustainable Energy I ETF early in the new year and will promptly merge the two.

On a parallel track, GA has already launched the Smart Transportation & Technology ETF (MOTO) – with a lot of Tesla under the hood – via their SmartETFs brand and anticipate launching the Marketing Technology ETF in mid-December. The company intends to convert, sooner rather than later, all of its mutual funds to ETFs.

Finally, on November 17, 2020, DFA announced their intention to follow suit by converting six tax-managed mutual funds, with a combined AUM of $26 billion, into active ETFs. Given the generally favorable tax treatment that ETFs receive (and DFA’s need to staunch the $35 billion outflow they experienced this year), the conversion makes sense. It will reduce shareholder expenses by 17-56%. Interestingly, the prospectus for the ETFs does not note the preceding funds’ existence.

Briefly Noted . . .


Diamond Hill is closing and liquidating the “C” share class for all of its funds. The “C” class will close on December 4, 2020, and liquidate on February 19, 2021. Given the clear evidence that “C” shares are a bad idea – they were originally an attempt to mask the sales charge on load-bearing funds by replacing the sales charge with an egregious expense ratio – their demise certainly qualifies as a win.

SGA International Equity Fund (SGLCX) reduces the investment minimum for its Institutional shares from $1,000,000 to $1,000 and is, not surprisingly, doing away with its Investor share class. Morningstar assigns a Bronze rating to the fund, signaling that they are “confident [it] will outperform a relevant index, or most peers, over a market cycle.” Over the three years since launch, the fund has trailed 90% of its peers.

CLOSINGS (and related inconveniences)

As of November 23, 2020, FS Energy Total Return Fund (FSEGX) has closed to new investments, including those from existing investors. Here’s the good news: it’s a four-star fund and has handily outperformed its index. The bad news: even so, it has lost a cumulative 20% since inception and has only $40 million in assets after three years of operation. None of those assets have been contributed by the fund’s seven managers whose collective investment in the fund is zero.

The Administrative Class Shares of the PIMCO CommoditiesPLUS Strategy Fund (PCPSX) will be liquidated on or about March 12, 2021. PIMCO describes them as shares “offered primarily through employee benefit plan alliances, broker/dealers, and other intermediaries.” They’re not one of the share classes offered through Schwab or TD.


On December 1, 2020, the ABR Dynamic Short Volatility Fund was renamed the ABR 50/50 Volatility Fund. The proferred explanation is that they’re seeking “a reduction in the Fund’s short volatility exposure, such as short exposure to VIX Index futures contracts, and a potential increase in the Fund’s long volatility exposure.”

Effective January 19, 2021, Crawford Dividend Growth Fund (CDGIX) becomes Crawford Large Cap Dividend Fund. By Morningstar’s calculation, the fund lags 90% of its large-value peers over the past decade, though with modestly suppressed volatility. On the whole, a name change and strategy tweak might not fully address that.

KraneShares CICC China 5G and Technology Leaders Index ETF (KFVG) has been renamed KraneShares CICC China 5G & Semiconductor Index ETF.

Effective on or about April 1, 2021, Putnam Global Equity Fund (PEQUX) becomes Putnam Focused International Equity Fund. Disposing of the 70% of the portfolio currently invested in US stocks is likely to be a significantly taxable event.

Effective on January 4, 2021, T. Rowe Price Spectrum International Fund (PSILX) becomes the T. Rowe Price Spectrum International Equity Fund. The fund of funds will also restructure its expense ratio from passing along a prorated portion of the underlying funds’ expenses to charging a flat 0.89%. At the same time, T. Rowe Price Spectrum Growth Fund becomes T. Rowe Price Spectrum Diversified Equity Fund.

Effective on January 1, 2021, Touchstone Credit Opportunities II Fund (TMARX) will be renamed the Touchstone Credit Opportunities Fund.

Effective November 18, 2020, TrimTabs All Cap International Free-Cash-Flow ETF (TTAI) became TrimTabs International Free Cash Flow Quality ETF and TrimTabs All Cap U.S. Free-Cash-Flow ETF turned into TrimTabs US Free Cash Flow Quality ETF.


Shareholders of 361 Managed Futures Strategy Fund (AMFQX) will be asked to approve the merger of their fund into 361 Global Managed Futures Strategy Fund (AGFQX).

AllianzGI Emerging Markets Small-Cap Fund was liquidated in mid-November.

AQR Emerging Defensive Style Fund,AQR Multi-Strategy Alternative Fund, AQR Risk Parity II HV Fund, AQR Style Premia Alternative LV Fund and AQR Volatility Risk Premium Fund will all be Former Funds as of December 18, 2020.

By the end of the first quarter of 2021, AQR will also merge away seven of its funds:

Target Funds Acquiring Funds
AQR Emerging Multi-Style Fund AQR TM Emerging Multi-Style Fund*
AQR TM International Momentum Style Fund AQR International Momentum Style Fund
AQR TM International Multi-Style Fund AQR International Multi-Style Fund
AQR TM Large Cap Momentum Style Fund AQR Large Cap Momentum Style Fund
AQR TM Large Cap Multi-Style Fund AQR Large Cap Multi-Style Fund
AQR TM Small Cap Momentum Style Fund AQR Small Cap Momentum Style Fund
AQR TM Small Cap Multi-Style Fund AQR Small Cap Multi-Style Fund

Immediately thereafter, AQR TM Emerging Multi-Style Fund will be renamed AQR Emerging Multi-Style II Fund. So far as I can tell, the “TM” signals “Tax Managed,” a discipline which will no longer be enshrined in the name or, more importantly, mandate.

Delaware U.S. Growth Fund (DUGAX) will merge into Jackson Square Large-Cap Growth Fund at … hmm, some point in 2021.

Federated Hermes Global Strategic Value Dividend Fund (GVDSX) will be liquidated on or about the close of business on January 22, 2021

The $1 billion Fidelity Export and Multinational Fund (FEXPX) will merge into Fidelity Fund (FFIDX) on or about April 16, 2021. Multi-cap value merging into large cap growth? A month later, on May 14, 2021, the $60 million Fidelity Emerging Europe, Middle East, Africa (EMEA) Fund (FEMEX) is served as an hors d’oeuvre to $6 billion Fidelity Emerging Markets Fund (FEMKX) and Fidelity Independence Fund (FDFFX) becomes a dependent of Fidelity Magellan Fund (FMAGX). That latter merger pours about $4 billion into Magellan, increasing its asset base by 20%. The domestic funds have a correlation of between 0.94-0.95 over the long term, which makes their mergers a plausible enough proposition.

Frontier Caravan Emerging Markets Fund (FCEMX/FCESX) will be liquidated on December 15, 2020.

Gotham Master Neutral Fund (GMNFX) will be liquidated on or about December 15, 2020. Nominally it’s a market neutral fund. Practically, it’s lost an average of 2.5% a year since launch.

Intrepid Disciplined Value Fund (ICMCX) will be reorganized into the Intrepid Endurance Fund (ICMAX) on or about January 22, 2021. Arguably Disciplined Value has the better track record, but its value style has been way out of favor and it’s way too small to survive.

The $10 million Mission-Auour Risk-Managed Global Equity Fund (OURAX) is in the process of merging with the $34 million Union Street Partners Value Fund (USPVX).

The four-star Natixis Seeyond International Minimum Volatility ETF (MVIN) ceases to exist on December 16, 2020.

Rational/NuWave Enhanced Market Opportunity Fund (NUXAX) shuts down a week before Christmas: December 18, 2020. A 45% YTD loss likely contributed to the decision.

On December 18, 2020, REMS Real Estate Income 50/50 Fund (RREFX) will merge into REMS Real Estate Value-Opportunity Fund (HLRRX). The survivor has just $36 million in AUM and a one-star rating at Morningstar, making the merger seem like a delay of the inevitable.

Speaking of real estate income, the $4 million Shelton Real Estate Income Fund (RENTX) has closed to new investments as it begins the process of liquidation, which should be completed by December 28, 2020. The fund has a 2.99% yield, which passes for real income these days.

The five star, $2.5 billion Touchstone Sands Capital Institutional Growth Fund (CISGX) will merge into the four-star, $2.5 billion Touchstone Sands Capital Select Growth Fund (TISNX) on December 11, 2020.

Vanguard graciously published their telephone script (“How are you doing today? Do you have a moment to speak?”) used in the process of getting shareholders to support the merger of Vanguard US Value into Vanguard Value Index (VVIAX).

Voya Diversified Emerging Markets Debt Fund (IADEX) will be liquidated on or about January 22, 2021.

After a pretty major asset outflow in 2021, the perfectly okay Wells Fargo International Value Fund (WFFAX) will be merged into Wells Fargo International Equity Fund (WFEAX) in March 2021.