Monthly Archives: July 2020

July 1, 2020

By David Snowball

Dear friends,

Welcome to the summer of our discontent.

I admit to being a bit distracted this month. My son, Will, was exposed last week to an individual who subsequently tested posted for the coronavirus. Neither she nor he was… uh, optimally cautious during their interaction and she’s subsequently fallen ill. We promptly sought a test from the State of Iowa’s preferred provider, only to learn that they couldn’t see him for four days and weren’t sure how quickly they’d have results. We turned, instead, to our local hospital which administered the test immediately, promising the results “in two to three days.” Four days later, we’ve been told that actually means seven to ten days (or, perhaps, five to seven days) … probably, but really no one has control over the timing and no one knows for sure, though they’ll call us ASAP.

(sigh) Meanwhile, he’s restricted to his bedroom or study for about 23 hours a day while we fret and wait.

A remarkable number of folks have asserted their “right” to undertake behaviors that threaten the health, livelihood, and (potentially) lives of others. There seems relatively little recollection that every assertion of “right” is accompanied by a reciprocal acceptance of “responsibility.” My “right” to health care is married to another’s responsibility to provide it. My right to unfettered political speech comes with a responsibility for speaking in a way that seeks to advance the public good.

I find it curious how rarely people demand their responsibilities these days.

Making serious money

There are 3103 US, global, and international equity funds. Of those, 721 have returns above zero for the first six months of 2020. In some cases, way way way above zero.

GMO Special Opportunities, a long/short fund with a $300 million minimum investment Large Growth 83.47%
Morgan Stanley Inst Discovery Mid-Cap Growth 64.75
Morgan Stanley Insight Large Growth 57.54
Matthews China Small Companies China Region 57.32
Zevenbergen Growth Large Growth 57.02
Morgan Stanley Inst Growth Large Growth 56.83
Transamerica Capital Growth Large Growth 55.86
Zevenbergen Genea Large Growth 55.72
Virtus Zevenbergen Innovative Large Growth 53.05
Baillie Gifford US Equity Growth Large Growth 49.59

As I searched for value-oriented funds in this list, I received a disturbing note from the screener:

While that literally meant that none of the 700 winners had “Value” in its name, it also reflected the wider reality that value investing continues to suffer under the weight of market distortions triggered by what my colleague Charles Boccadoro, among others, refers to as “QE Infinite.” The dogged insistence of the US central banks and Treasury to keep the stock market from collapsing – by supplying hundreds of billions in overnight liquidity when no one else saw fit to put their capital at risk, buying fixed-income ETFs, providing loans in exchange for equity, and maintaining an effectively zero interest rate environment – also keeps the market from clearing away an accumulation of excesses.

Only five of the 721 funds above zero have portfolios that fall anywhere in Morningstar’s “value” style box. They are:

Kopernik Global All-Cap (KGGAX), David Iben’s billion-dollar flagship, up 12.7%. It has trailed 95-100% of its peers in four of the past seven calendar years … and beaten 98-100% of them in the other three.

Palm Valley Capital (PVCMX), absolute value investors Eric Cinnamond and Jayme Wiggins, abetted by the venerable value investor Frank Martin, are up 11.2% despite having a small-cap portfolio and still holding 40% cash.

Upright Growth & Income (UPDDX), a tiny and expensive (2.87%) fund having its day in the sun in Year Three of its existence after trailing 100% of its peers in Years One and Two.

Kopernik International (KGIIX), the purely international version of Mr. Iben’s strategy.

EuroPac International Dividend (EPDIX), a tiny fund that uses a top-down strategy to identify the most fundamentally sound markets, then a bottom-up strategy to find high-quality, undervalued stocks within those markets. As with Mr. Iben, the fund’s relative performance is a bit … streaky.

One evidence of the effect of government market intervention policies is the steady increase in the number of zombie companies. It’s a term used by the Leuthold Group to describe “firms that have a five-year cumulative net loss but simply refuse to die.” To be clear, Leuthold is calculating the numbers before the onset of the COVID crisis. By their calculation, “even during the wonderfully strong economic environment of 2018-2019, nearly 40% of small-cap companies posted losses.” The comparable figure for mid-caps is something in the low-30s and, for large caps, upper teens.

The case for quality. As it turns out, due to the negative earnings posted by the cadre of zombies, the market’s valuation metrics are artificially inflated. Because the losses of the zombies negate part of the earnings of the live companies, the market’s price-to-earnings ratio gets inflated.

Scott Opsal, Leuthold’s director of research, calculated the valuations of the overall market then, separately, the valuations of the market’s profitable companies (Small Cap Valuations: Zombies and Ragamuffins, 6/4/2020). If all companies are used in the calculation, the stock market is more expensive than 97-100% of markets in “the modern era,” since 1986. That changes dramatically for mid- and small-cap companies if you strip out the effect of the zombies.

  Imputed p/e ratio Which makes it more overvalued than … percent of markets since 1986
Top 1000 24.4 98%
Second 1000 17.2 24
Third 1000 13.5 5

Mr. Opsal actually calculated the earnings yield for each sector, which is the inverse of the sector’s p/e ratio. For the sake of convention, I converted his numbers back to a p/e ratio.

That raises two prospects. First, simply avoiding losers makes an enormous difference in how much you’re paying. Second, the largely unloved small and mid-cap sectors make a lot more sense in terms of valuation than the substantially overpriced (though beloved) large-cap growth universe.

Watching your tail (risk)

Nassim Taleb, author of the acclaimed Black Swan: The Impact of the Highly Improbable (2010), made a striking claim in the last week of June, 2020:

If you don’t have a tail hedge, I suggest not being in the market [as] we’re facing a huge amount of uncertainty.

“Tail risks” are highly improbable but potentially catastrophe events; getting hit by an asteroid or having a respiratory virus set off a chain of events leading to a 20-year global depression would be examples. Mr. Taleb serves as adviser to Mark Spitznagel’s Universa tail-risk hedge fund which gained 4,000% during the spring panic.

At base, he argues that we are facing so many simultaneous, essentially unprecedented circumstances – a global pandemic, May unemployment rates over 20% in three states, multi-trillion-dollar budget deficits, untried market intervention strategies, erratic political leadership, a quick 40% risk in the stock market – that the prospect of a fairly dramatic negative outcome can’t be dismissed.

Heck: must be anticipated.

I recently moved a chunk of my (all-too-imminent) retirement funds from equity and balanced funds into T. Rowe Price Multi-Strategy Total Return (TMSRX), which we profile this month. Price anticipates making about 4% more than cash, regardless of the direction of the stock and bond markets. The fund is up about 4.5% this year. Fans of absolute value investing might consider Palm Valley Capital (PVCMX) which is up 11% this year and is driven by two remarkably disciplined managers. Folks willing to consider more financial engineering might consider Cambria Tail Risk (TAIL) or Direxion Flight to Quality (FLYT) ETFs, with TAIL up 15% YTD and FLYT up 4%. In both cases, the managers are looking for security blankets for tough times. Ed Studzinski and other senior investors have gone a bit further, arguing that you should be holding an extra-ordinary cash reserve for the year ahead.

None of which is offered to spark anxiety. Instead, we repeat the advice which we’ve been offering throughout the decade: (1) know what risks you’re taking and (2) take no more risk than is essential. You’re far better off leaving money on the table than watching it go up in smoke (or down in flames, metaphors are tricky creatures).


To Chip and The Shadow, for their exceptional work in tracking down the industry news that lies at the heart of “Briefly Noted.” I had 28 pages of their notes and leads to work through this month. Much of that research pointed to a historic purge going on in the industry which over 80 funds and ETFs being killed off, sometimes a half dozen at a time from a single fund family.

To the folks on the MFO Discussion Board, who’ve kept it lively and (all things considered) remarkably civil in trying times.

To our kind contributors: Wilson, the good folks at S&F Investment Advisors, Quang, and Alex. You all make a difference. And to our faithful subscribers, Greg, Doug, David, Brian, Matthew, William, and the other William.

Wishing you all good health, relative sanity and a bit of time in nature,


Rebound, What Rebound?

By Edward A. Studzinski

“Historian: an unsuccessful novelist.” 

H.L. Mencken, A Mencken Chrestomathy (1949)

The S&P 500 just had the best quarter in terms of returns in more than twenty years.

But is it real? Although consumer sentiment is up, unemployment is at levels not seen since the Great Depression. Depending on whether another stimulus/support bill can make it through Congress, many Americans face a cash crunch by the end of July. Every day new bankruptcy filings are announced in those industries most immediately affected by the shutdown and pandemic. This is true even in those states that have been staging in phases their economic re-openings. Business models that worked, especially in the hospitality and restaurant industries, no longer do. Operating at twenty-five or fifty percent of capacity just does not work in restaurants.

Two years back we were looking at overbuilding in the hotel business. With little business travel, rooms are not being rented. Will the financing be in default shortly? The same question can be asked about Class A office space. As one person indicated to me, the most problematic part of returning to work in a city like New York or Chicago is the elevator. A friend in the investment management business in New York said that his firm reopened their office for business on June 23rd, knowing from a survey, that only ten percent of the workforce felt comfortable returning to the downtown office. Cities like Boston, Chicago, New York, and Washington, DC that have underinvested in their mass transit infrastructure find themselves with a working population that thinks that if they return to their urban office locations, they will drive. Surprise – the roads cannot handle the increased traffic. And not all passengers on mass transit seem to think that they need to wear masks, even where it is mandated.

Let me raise the dreaded phrase – “a second wave.” It is hard to have a second wave when we have not had the first wave. That appears to be one of the misconceptions. The purpose of sheltering in place was to give the medical systems in various states the time to prepare in terms of equipment, space, and personnel to deal with a major increase in cases. Somewhere along the line, the message became: when the economies have reopened, the virus has gone away. Wrong. The spread of the virus was suppressed. It is still there and will continue to be there until there is either a truly effective treatment, a vaccine that is at least 50% effective, some degree of herd immunity has built up in the populace, or some combination thereof.

“Chancellor Angela Merkel on March 10 announced that 60% to 70% of Germans should expect to be infected. The idea seems to have permeated her own people’s consciousness that the virus was a fact that must be accepted. Germany has its own vociferous anti-lockdown lobby but tempered by a realistic understanding that the virus is a problem that must be managed. And Germans have been managing well: Their mask-wearing and other daily precautions have kept cases substantially below what their well-equipped hospital system can handle.”
Holman Jenkins. 6/30/20

Expectations were not realistically set, again politicians being politicians. I would point to Angela Merkel of Germany (see Holman Jenkins, “Angela Merkel’s Viral Moment,” Wall Street Journal, 6/30/2020) as the gold standard of the political class – what we should have expected and gotten. On March 10th, Ms. Merkel, trained as a scientist, announced that sixty to seventy percent of Germans should expect to be infected. That statement resonated with Germans. They understood that the virus was real and was going to have to be accepted. They were going to have to learn to deal with it. There was no sugar-coating of expectations. Which led people to understand what needed to be done in terms of testing, facial coverings, and distancing, and resolve to follow through on the same.

But What About My Investments

Once again, we see passive investing and some quantitative methodologies of investing outperforming active managers. Now think about this. If you are an active manager, generally that involves visiting companies, going to trade shows, traveling to see plants, and meeting management, either at their home office or at a conference. It is hard to do that if no one is on the road and no one is seeing people. Video conferencing just does not cut it in that regard.

The problem is exacerbated if you are an international or emerging market manager who does not have offices and staff sited overseas. If your analysts were expected to be overseas fifty percent of the time, and they cannot travel? It should not be a surprise that your returns are going down the sewer and your clients leaving, once they figure out that you are overcharging for what you are delivering. The silver lining here? Analyst days attended by hundreds of people or investment conferences hosted by brokerage firms may be a thing of the past, as no one will want to get their information that way.  

Thoughts of a Legend

The other day I decided to look and see if Bob Rodriguez, the now-retired CEO of First Pacific Advisors had given any interviews recently. As I mentioned a few years ago, I had spoken with him in 2009 when he attended the Morningstar Conference in Chicago and later spoke to the Investment Analysts Society of Chicago. Bob had forecast the dot-com debacle and predicted the financial crisis of 2008-2009.

In an interview given to ThinkAdvisor (Bob Rodriguez: Welcome to the ‘End of the Capital Markets as We Know Them’, 3/27/2020), Rodriquez is predicting a small v-shaped recovery, as opposed to a V-Rocket Ship recovery. Among other things, he reasons that share repurchase will be banned for companies that took the financial stimulus money (as we saw last week with the big banks).

He thinks that given the magnitude of the drawdowns that investors saw in their equity investments in the first and second quarters, some as large as 50%, that they will be reluctant to return to the same degree to equities. Increased volatility and the absence of any business continuity and transparency in a multitude of industries adds a level of uncertainty that even professionals are having trouble comprehending.

… that means gold and silver closed-end funds, cash, some short-term bonds, rare commodities, and collectibles and equities only if they were to get crushed again.

Rodriguez’s conclusion – the capital markets as we knew them are gone. The central banks with their zero or negative rates, as well as unlimited quantitative easing, are changing the economic system. Ultimately, he sees monetary inflation coming as the only way out since the central banks will not have the will to eliminate the socialization of risk. That thinking has led him to concentrate his investments in areas with minimal governmental interference. In practical terms that means gold and silver closed-end funds, cash, some short-term bonds, rare commodities, and collectibles such as rare coins. He would consider going back into equities if they were to get crushed again.

While I find it difficult to do some of the things he is doing, especially as I lack the expertise in collectibles, philosophically I agree with much of what he says. And I remember him as someone who always put his investors’ interests above the business interests of his firm, very much a rarity in today’s world. I would also agree that we can expect to see the equity markets in a downdraft again as the paucity of earnings and slowness of recovery becomes apparent, there will be opportunities in unlevered situations with real cash flow. Things to be avoided will be most real estate, and what had been viewed as “hot” collectibles, to wit, the contemporary art market. In many respects contemporary art will be an area for the foreseeable future best thought of as a marketplace of tchotchkes.

Road Trip In The Age of COVID-19

By Charles Boccadoro

“If you want to really know something you have to observe or experience it in person; if you claim to know something on the basis of hearsay, or on happening to see it in a book, you’ll be a laughingstock to those who really know.”

Jonathan D. Spence, “Emperor of China”

Sensational headlines bombard us.

Each one is an attempt to get readers, listeners, and viewers to click, tune-in or subscribe. Embedded ads populate each article … and it does not matter whether you’re a subscriber or not.

A fierce competitive landscape vies for our attention. New York Times, Wall Street Journal, Washington Post, and The Atlantic meet Apple News, Buzz Feed, Facebook, and Twitter.

One can find passionate arguments across the political spectrum by intelligent and well-meaning people. Same applies to financial advice. Maybe more so, since at some level it’s often about predicting the future, which is very hard to do.

I remember living in Belgium in 1983 during Harrod’s bombing. I received letters and postcards from family and friends expressing alarm and concern. Life just outside Brussels, in a community called Rhode-St-Genese, seemed unfazed. I got a sense then of how your perspectives are shaped by media, instead of seeing first-hand.

During GFC, entire shopping centers and housing developments in up-and-coming communities like Camarillo, CA were halted. On frequent drives to the central coast, where I now live, I would see bare concrete foundations and empty scaffolding. Construction crews were long gone. Parking lots empty. Desolate really.

As the years went by, activity slowly started to pick-up and a decade later, all those centers filled with stores, parking lots filled … all those homes built and occupied … and much, much more. Older shopping centers were bulldozed for modern townhomes and other housing developments and even during CV-19, still rising … for now anyway.

Traveling to cities across the country like Washington, New York, and Chicago throughout the last decade, I saw construction cranes increasingly dot the skylines. Planes were full. People crowded the tables of upscale sidewalk cafes. Stadiums and concerts crowded. At AirBnB, the best properties needed to be reserved months in advance. Places on Orcas Island that were once affordable, now untouchable, or snatched-up by the likes of Oprah Winfrey. All signs, first hand, of a booming economy.

While traveling is always hard, it was probably never easier to travel than in 2019, given the proliferation of AirBnB, Yelp, TripAdvisor, Google Maps, HotelTonight, and SeatGeek.

On drives back-and-forth to SFO or LAX, north and south of me, not too long ago I noticed truckloads of brand new Teslas destined for somewhere. Always! Not to mention the number of occupied Teslas powering quietly past me. This observation came at a time when David Einhorn and others were actively shorting the stock and many on Fin Twit were denouncing the company as a Ponzi scheme. Today, it became the largest carmaker by market cap. Surpassing Toyota. Can you believe that?

Last March, just before the CV-19 devastation swept the county, I was supposed to attend another Democratizing Quant conference at Drexel University, sponsored again by Wesley Gray, CEO of Alpha Architect, who I have covered often. (Ref: US Quantitative Value and Democratizing Quant.) Recently, I decided to fly east for the first time since the national lockdown to visit family and friends, including an “in-person” chat with Wes.

Jet Blue Flight 124 LAX to JFK was filled to about 2/3 capacity since the airline’s policy was to keep the middle sits empty. The one-way flight cost about $400, or twice as much as normal. Everybody wore masks. No drinks, including coffee, or food was available on the flight. Instead, passengers received a clear plastic bag with a bottle of water and a bag of pretzels upon boarding.

Under the circumstances, all went smoothly … hotel, parking, shuttle to the airport, security.

Dinner in old El Segundo the night before, at a place called Deluca Pasta, was delicious. The restaurant was at 50% seating capacity inside, lots of outdoor tables mostly full, and very lively. Employees wore masks and gloves. Patrons, when not seated, also wore masks. Everybody, including me, was enjoying the summer night out. I had spaghetti and meatballs along with Vermentino.

It seemed to me that people were adjusting. Maybe everybody had big hair, like the 1980s, but they were adjusting.

Upon arrival at JFK, the terminals were sparsely populated and food courts remained eerily closed. I took the AirTrain to Avis, as I normally do. I was soon crossing the Whitestone Bridge on my way to the Merritt Parkway to visit family in Connecticut, including my year-old great-nephew, for a celebratory Father’s Day picnic.

During the visits, I tried to distance as much as possible, wore a mask, and sanitized my hands often. Extra masks and sanitizer dispensers populated every airport queue line, rest stop entry, hostess station, and hotel lobby.

That said: The barbecued hotdogs tasted as good as ever.

Both my brother-in-law and nephew work for major beverage and food providers. Both have been able to work from home and each company seems well prepared to handle the CV-19 crisis.

My nephew’s firm competes for sponsorship in sports arenas. When I asked him his opinion of Las Vegas, which has been hit by two catastrophic events this past decade, he surprised me by being extremely bullish: “Vegas is the last place I’m worried about. With the NHL Golden Knights in 2017 and the incoming NFL Raiders, the sky is the limit.”

After three days in Connecticut, I was back on the road down the Hutchinson River Parkway through the Lincoln Tunnel and onto the harried New Jersey Turnpike. Most of the rest stops were crowded with travelers; despite fewer services open … Starbucks was generally closed, while McDonald’s and Dunkin’ Donuts generally open.

I arrived at Wes’ place mid-afternoon. He lives in the beautiful Haverford area of eastern Pennsylvania. He was kind enough to share his time and views on markets generally, while the Alpha Architect team prepared for a camping trip in a just-opened nearby park … tents and all.

With Wes’ usual directness, here are some of his thoughts, fears, and hopes:

  • “High yield is always a sucker bet. It’s uncorrelated with the market. Gives a nice steady return. Until you need it … and then it always [expletive] the bed.”
  • The pricing of open-ended bond funds is going to change, likely through litigation. During March, too many OEFs were trading with stale NAVs. The situation was exploited by advisers and traders selling OEFs and buying discounted ETFs. These folks were generally front-running OEF shareholders out the door, leaving those remaining holding the bag.
  • The situation was aggravated by funds holding more illiquid assets that don’t trade often. “For these assets, all pricing is judgment, even by the pricing agencies.” Trading or holding restrictions or penalties are inevitable, he believes.
  • The apparent lack of volatility in some of these bond OEFs is an artifact of stale pricing. “The volatility is just hidden. Trust me,” Wes explains, “if you had to price your house each day based on comps or tender offers like ETFs do, you would not like it.”  
  • What about alternative wrappers like closed-end funds (CEFs) or interval funds? Where fund managers do not have to sell assets to meet redemptions or redemption windows are restricted. Wes feels they just lead to a lack of transparency and extra fees … and the attendant temptation of fund manager mismanagement and shareholder exploitation.
  • The future for most active bond funds is bleak, especially those from boutique firms with high overhead. “If the 10-year is paying 75 bps and the fund company is charging 75 bps, who’s going to buy them?”
  • On fund managers in general, Wes believes to stay in the business you’re going to need to really love what you do. “Because the days of raking in big bucks on AUM are over.”
  • He worries that in recurring zero interest rate periods, bond companies will need to up risk to be attractive. “It’s just not going to end well. I can write the ending to this movie right now. We all can.”
  • He cited Andrew Miller’s recent study on Crisis Alpha that extracted the yield component of bond funds and suddenly the traditional 60/40 allocation did not look so good. “Now that scares me!”
  • Alpha Architect recently started using its experience and infrastructure to help other entrepreneurs launch so-called “white label” ETFs. Perth Tolle’s Freedom 100 Emerging Market ETF (FRDM) is one such fund. My sense is that, if Wes is amendable to bringing you onboard, there’s no better deal in the industry.
  • As for Alpha Architect proper, there are only five funds and that’s how it will stay. “There’s value, momentum, and trend. What else is there?”
  • He’s stopped trying to make sense of market movements, except this: “It’s all based on confidence.”
  • He also shared that the SEC recently ruled that they can be called an “actively managed fund” once again versus an “index provider” without imposing non-value-added steps.
  • Our discussion ended on a note of hope. He believes that if the nation can learn to get past its polarization, which has even hindered responses to CV-19, and continue to avoid violence between citizens, the technological advances embodied in things like the iPhone, the world will be a better place. “I’m optimistic about that!”

Through the lush Pennsylvania countryside, I continued west to visit with an ex-Air Force colleague in Yellow Springs, Ohio. I stayed in their guest bedroom, as the local hotels in the heart of downtown had yet to re-open. (They opened today.)

My thoughtful friend, who turned 70 this year, believes that the market is rigged, unfortunately, echoing author Michael Lewis’ observation. “Charles,” he asked, “how is the average person supposed to have a chance?”

He personally felt the market was overvalued and moved all his retirement savings to money market a couple of years back. During March, the market rebounded too quickly and he remains skeptical. “I’m willing to miss the recent upswing because of all the unknowns out there. At this point, I have much more to lose than gain.”

In the morning, we enjoyed a 4-mile walk through horse country. Lots of folks were out walking. The area is filled with covered bridges, food stands, beautiful farms, and pastures.

My last stop was Chicago. I took as a good sign the large number of trucks through Ohio, West Virginia, and Indiana and the heavy traffic in Chicago proper. Taking the Blue Line from O’Hare to The Loop downtown, however, was pretty sparse.

I stayed at the Kimpton Gray on West Monroe. The staff, all wearing masks, were extremely friendly. Refreshments normally available in your room were now at the front deck … for cheap. Their rooftop bar opened the night I arrived.

The city had just experienced “Black Lives Matter” protest marches where some vandalism occurred, and unfortunately, several stores and businesses remained boarded up. A favorite bread and cheese shop, called Pastoral, on Walker was out of business: “Thank you for 15 delicious years.” But Millennial Park was busy, with entry and exit restrictions, and Giordano’s was open for take-out and delivery. Still, the normally vibrant city was just a shadow of its normal self.

My last night, I enjoyed dinner with colleague Sam Lee. It was Thursday night and we had a hard time getting a reservation, except before 5 or after 8. We chose The Gage, after 8. All outdoor tables were filled and a line formed at the entrance. A perfect meal. For a couple of delightful hours outside on Michigan Avenue, the world seemed normal again.

Sam’s advisory business SVRN Asset Management continues to grow. He shared that March was indeed scary because it had “all the volatility of GFC compressed into two weeks.” With Fed intervention, he believes the liquidity crisis is no longer pressing. And, like Wes, he was hopeful about technology. He mentioned Elon Musk’s Space X effort in particular: “They seem to have accelerated innovation by an order of magnitude.”  

I used Uber for the first time in months to ride to O’Hare. Scheduled a 5:30 am pick-up. The driver was there on time. The American Flight 1163 to LAX was actually more crowded than outbound. No in-flight food service. Just a bag with bottled water and chips handed to you at the door.

The flight arrived LAX ahead of schedule, allowing me to beat the traffic out of LA for the perfect drive up the 101, through Ventura, Santa Barbara, Lompoc, and San Luis Obispo. I noticed the hills burned last year from fires were all green. And, construction continues in Camarillo. I arrived home just in time for the first hair cut I’ve had in months.

On September 11, 2002, I was flying from LAX to Toronto (YYZ). LAX was empty. The only other person on my flight was the air marshal. The next day I was to present a paper at the World Aviation Conference.

A lot changed after 9/11, particularly for air travel. But, we learned to adapt and the skies became safer and busier than ever.

Behind the Curtains – Building A Ranking System

By Charles Lynn Bolin

It has taken me nearly two decades to unlearn what I thought I had learned during my first two decades of investing. I started studying business cycles about 15 years ago which helps me determine how aggressive or defensive I want to be based on risks and trends in the economy and investment environment. This month, I describe how to create a Ranking System that requires about one or two hours per month to update and evaluate funds. The May results and composition of the Model Portfolios can be found in my last Seeking Alpha article, “Low Risk Fund Portfolios In A High Risk Environment” for interested readers.

I have traditionally controlled risk by considering relative valuations of stocks and other assets, the likelihood of a recession, financial stress, and quantifiable factors not picked up on the regular indicators.  Here is what I see:

      • Valuations are very high on a forward earnings basis
      • Recession odds are 100%.
      • Outside risks are extremely high.
      • Stock market strength has provided a false sense of security.
      • Additional restrictions may be coming.

Weighing The Week Ahead: Sustaining A Fragile Recovery, Jeff Miller

Portfolios and Changes

Because we are in a recession with COVID-19 and its unknown effects, I choose to be defensive.  I follow four model portfolios that I track in Mutual Fund Observer and Seeking Alpha. Each month, I extract about a thousand mutual funds, exchange-traded funds, and closed-end funds using the Mutual Fund Observer screens to access the Lipper Global Database. I only include funds available at Charles Schwab, Fidelity, and/or Vanguard as no-load, with minimal transaction fees, and low investment minimums. Funds available at Charles Schwab or Fidelity are listed as either “Charles Schwab” or “Fidelity” rather than “Other” as I did in earlier articles.

The performance of baseline funds and the model portfolios are shown below. Ulcer Index is a measure of risk and is the depth and duration of drawdowns. Martin Ratio is the risk-adjusted return and is the risk-free return divided by the Ulcer Index. The data shows that conservative funds are outperforming aggressive funds year to date.

Table #1:  Baseline Funds and Model Portfolios – As of the end of May, Metrics are for 2.5 Years

Source:  Created by the Author Using Lipper Global Datafeed and the MFO Premium screener

Below is my personal allocation with 26 percent in stocks, 53 percent in bonds, 15 percent in Short-Term investments (including money market funds and certificates of deposit), and 6 percent in gold (Other). 

Figure #1:  Personal Allocation

Source:  Created by the Author Using Fidelity

This month, I exchanged the Fidelity International Real Estate Fund in the Model Fidelity Moderate Portfolio (because it had the highest Ulcer Index in the Portfolios) and replaced it with the more conservative Fidelity Freedom Index Income Fund (FIKFX) while the market is up. I also exchanged money market funds in the “Very Conservative Portfolio” with the Sit US Government Securities (SNGVX) and Schwab Short-Term Bond Fund (SWSBX). The funds are shown in Table #2 below.

Table #2:  Funds Traded or Considered in June

Source:  Created by the Author Using MFO Premium screener

The Ranking System

Charles Boccadoro does an incredible job of improving the MFO data and screens available. As someone who prefers to use spreadsheets to select funds rather than screens, this causes problems when the spreadsheet columns are changing. The “Calculations Section” at the end of this article describes how to set up a spreadsheet to be independent of the data format.

Ranking Systems reflect the personal beliefs of the investor. I use the following six Factors: Return, Risk, Momentum, Valuation, Quality, and Income. I use the Excel formula PERCENTRANK to assign a value of 0 to 1 for each of the thousand funds each month for the components of the six factors as shown below. The advantage of the Ranking System is that each fund gets a final value of 0 to 100 with 100 being the “best” fund. (NOTE:  the PERCENTRANK value is multiplied by 100 to be on a scale of 0 to 100).

Return:   MartinRatio, SortinoRatio, APR%/yr, MFORank %
Risk:  AlarmRating, UlcerIndex, MFORisk, Average of DownCycle 4, 5, and 6
Momentum: Trend3 mo, Trend10 mo, 3Months, Fund Flow%AUM, MFORating
Valuation:  P/C, P/S, P/E, PremDiscHigh %, PremDiscLow %
Quality: FamilyRating, ERRating, Ageyr, CompositeMFO Rating, Junk, %, Cash %/yrGrowth, Quality
Income: Yield%/yr

The devil is in the details:

  • PERCENTRANK assigns a 1 to the fund with highest value and 0 to the lowest. If the metric is set up where the lowest value is best then “1-PERCENTRANK” can be used.
  • MFORisk and MFORating have values from 1 to 5. PERCENTRANK may only assign a value of 0.8 to a value of 5 so I apply a multiplier to normalize the highest value to 1.
  • NULL Values “-“ can present problems, such as a Money Market fund has a Martin Ratio of “-“ which causes an error when averaging. I write formulas to either replace the “-“ or ignore it.
  • The components of the Factors are averaged to get a temporary factor value which may range of 0.1 to 0.8 as an example so I use PERCENTRANK to convert the temporary average to a value from 0 to 1.
  • I use a time period that starts close to January 2018 to reflect the start of the late stage of the business cycle.

Table #3 shows the author’s ranking system for baseline funds.  The funds shaded green are the highest ranked funds and suitable for most conservative investors.  The funds that are shaded red are ranked very low and should be avoided, in my opinion.

Table #3:  Author’s Rank for Baseline Funds

Source:  Created by the Author Using MFO Premium

The Bucket System

Investors use the Bucket approach to match market risk with withdrawal needs. I use a four Bucket Approach based on the Ulcer Index with “1” having the risk of money markets and short term treasuries and “4” having the risk of the S&P 500 or higher.  For diversification purposes, I have a bucket set up for International/Global Bonds and one for International/Global stocks.  I have a separate bucket for Income because high-income funds usually come with their own set risks.  Finally, I have two buckets set up to track the business cycle as “Inflation” and “Defensive”. The following table shows the automated results for the top Lipper Category for each of the buckets. By comparison, the Ulcer Index of the S&P 500 is 6.2 and the Martin Ratio is 1. As a general observation, the top-rated funds have an Ulcer Index less than the S&P 500 and a Martin Ratio close to 1.0 or higher.

Table #4:  Top Ranked Lipper Categories

Source:  Created by the Author Using MFO Premium

To determine the Top Lipper Category, I put each of the Lipper Categories into one of the nine buckets and sort them by average rank.  The Lipper Categories in Bucket #1 (Safety) are shown below.  Count is whether Charles Schwab, Fidelity, Vanguard, Exchange Traded Funds or Closed End Funds have a fund in that category.  As an example, my Ranking System assigns a rank of 94 (on a scale of 0 to 100) to “U.S. Government General Bonds” and 49 to “Municipal Intermediate Debt”.  Only the top three categories are shown in the table for each bucket.

Table #5:  Lipper Categories in the Safety Bucket

Source:  Created by the Author Using MFO Premium

There can be cross over between the buckets as shown in the INCOME Bucket.  I use the INCOME Bucket to identify funds with higher yield which is usually associated with higher risk.

Table #6:  Lipper Categories in the Income Bucket

Source:  Created by the Author Using MFO Premium


These are not rosy scenarios. The International Monetary Fund projects that global growth will contract 4.9 percent in 2020 and grow at 5.4 percent in 2021.  The Organisation for Economic Cooperation and Development (OECD) describes the uncertainty in the world economy.  They describe that the world economy may contract 7.6 percent in 2020 and recover 2.8 percent in 2021.  Global GDP will most likely be lower at the end of 2021 than at the end of 2019.  This will most likely result in high volatility for the next two years. Volatile times have higher risk and more opportunity for the investor who adjusts portfolios according to the investment cycles.

The Ranking System is built upon the foundation that past trends and behaviors over the recent history and during past market downturns are representative of future behavior.  Since history does not repeat itself, but it does rhyme, the Bucket approach is a guideline to diversification.  The Ranking System is revised as I have time to review the Mutual Fund Observer metrics.

APPENDIX:  The Calculations

In the screenshot below, these funds are pasted into the range starting with CE6.  The green cells are metrics that I include in the Return Factor:  Martin Ratio, Sortino Ratio, Return during the period, and MFO Rank.  Note that the name of the metric is on line 5, while the column titles of the data are on line 6.  Cell Z4 contains the equation MATCH which finds “MartinRatio” in line 6 and returns that “MartinRatio” is found in the 92nd column just like “MFORank%” is found in the 134th column. 

The equation below then gets the Martin Ratio for VASIX by creating an Excel address for the current row (found by Row “$CE7”) and the 92nd column as described above. 


In this way, the data that I am interested in is put into known columns independent of the format of the data.  Average (Column Y) is the average PERCENTRANK of the metrics.  Return Factor (Column X) applies PERCENTRANK to the Average Column.  Rank Temp is the average of all six Factors, and Rank (Column M) is my final Rank. 

Table #7:  Creating a Table Independent of Formatting


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.

T. Rowe Price Multi-Strategy Total Return (TMSRX), July 2020

By David Snowball

Objective and strategy

The fund seeks “strong long-term risk adjusted returns.” The managers may employ a wide variety of strategies in pursuit of gains that are independent of the movement of the global stock and bond markets.


T. Rowe Price. Founded in 1937 by Thomas Rowe Price and headquartered in Baltimore, Price manages more than $1 trillion in assets for investors in 51 countries. The firm advises, or sub-advises, 117 US mutual funds, none of which are negatively rated by Morningstar and 60% of which carry “Gold” or “Silver” designations. The firm’s culture is renowned for its stability, innovation, risk-consciousness, and team focus. It’s always had the antithesis of the “star manager” culture. Morningstar and MFO both give the firm their highest overall rating, “high” and “top tier,” respectively. Morningstar also presented Price with its 2020 U.S. Morningstar Exemplary Stewardship Award. The firm’s AUM has grown from $400 billion in 2009 making it, according to Bloomberg, “one of the rare winners” among active managers.


Richard de los Reyes and Stefan Hubrich. Mr. de los Reyes spent 10 years as an investment analyst following metals and mining companies prior to joining the Multi-Asset Division in 2016. Before working at T. Rowe Price, he was an analyst for Soros Fund Management.

Mr. Hubrich is a Director of Research in the Multi-Asset Division. He began working at Price as an equity analyst in 2005. Prior to that, he was employed by McKinsey & Company, Inc. He earned both his M.A. and Ph.D. in economics from the University of Maryland, College Park.

Both managers also have some responsibility for underlying components. Mr. de los Reyes ovesees Macro and Absolute Return Strategies (MARS), and Mr. Hubrich oversees the Style Premia and Equity Long/Short Strategies. This is the sole fund that either manages though they serve as members of the Investment Advisory Committee for a large number of funds.

Strategy capacity and closure

“Ample.” Mr. Hubrich notes that T. Rowe Price is a trillion-dollar firm, so they needed to design a strategy liquid enough that it could have an impact on the firm’s ability to serve its investors. While understandably reluctant to pin a dollar amount, he allows that it’s certainly in the billions, that the portfolio is highly liquid, and that they have the ability to add new strategies to the portfolio which has the effect of extending its capacity.

Management’s stake in the fund

Mr. Reyes has invested in excess of $1 million in the fund, and Mr. Hubrich has invested between $500,000-1,000,000. There is a vast amount of inside ownership, with T Rowe Price or its employees holding 80% of the Investor shares and 60% of the Institutional shares, as of the last SAI.

Opening date

February 23, 2018

Minimum investment

$2,500 for Investor shares

Expense ratio

1.19%, after waivers, for Investor shares on assets of $340 million (as of July 2023).


In normal times, the average investor’s best friend is the predictable advance – the “rising tide” – of the equity and fixed income markets. Even ardent fans of active management discover that 70-99% of their returns – captured by their funds’ r-squared value – are driven by the market’s movement.

These are not normal times. Most analysts seem to think one of two conditions will predominate in the years ahead: (1) sub-par returns with unsettling volatility or (2) wretched returns with unsettling volatility. (Some, admittedly, foresee the same “permanently high plateau” that economist Irving Fisher discovered in October 1929.) For prudent investors, the question becomes: if not “the market,” what?

T. Rowe Price attempts to answer that question with their Multi-Strategy Total Return Fund, which they refer to as MSTR. MSTR seeks to invest in “non-market sources of return,” that is, returns that can be delivered whether the market rises or not. That’s possible by choosing investments that are intrinsically uncorrelated with the market or by using hedges to offset market exposure. If, for example, you have a stock investor who is capable of using good security selection to produce returns 4% higher than the market’s, you would then hedge your market exposure so that you could harvest the 4%. When the market rises or falls by 10%, you would still earn 4%.

The strategies currently available to the managers include Macro and Absolute Return; Fixed Income Absolute Return; Equity Research Long/Short; Quantitative Equity Long/Short; Volatility Relative Value; Style Premia; Dynamic Global FX; Dynamic Credit; and Global Stock. Mr. Hubrich explains that “there is a spectrum, where on one end you have strategies (like Style Premia) that are ‘born’ as absolute return strategies and require no additional hedging at all, while on the other end you have strategies (like global stock) where a traditional long-only investment is paired with an explicit, meaningful hedge.” While the constellation of strategies included in the portfolio changes with evolving market conditions, the goal remains to provide an absolute return portfolio throughout.  

What does such a strategy give you? In the long-term, ultra-safe short-term Treasury bills yield about the same as the rate of inflation, barely 1% now but about 3.4% over the past century.  In the long run, the managers anticipate being able to return on average about 5% more than cash before fund expenses, which means about 4% “real” returns. If short-term T-bills are earning 1%, the managers anticipate being about to return 5% after expenses. If interest rates, which follow inflation, spike, and T-bills are returning 3.5%, the fund might return 7.5%.

That’s paired with a similar annualized volatility (i.e., 5%) over a market cycle which translates to an expected long-run Sharpe Ratio of 0.8 to 1.0.

Price is not the first firm to assay a multi-strategy fund, but they are one of the firms best positioned to succeed with one. As a group, multi-strategy funds are a failure: the 34 funds with a five-year track record have returned, on average, negative 1.1% annually with a maximum drawdown in the 14-16% range. Only three funds managed annual returns over 3%.

Price has two substantial advantages:

  1. Price has a vast research and strategy capability. With over a trillion in assets, over 650 investment professionals, and a global presence, Price brings an analytic arsenal to bear that very few other firms can match. While Price’s stock selectors are very talented, they’re really distinguished by their ability to think differently about the ways in which various assets can be combined or targeted, which they’ve parlayed into a suite of highly-successful multi-asset funds. Mr. Hubrich’s assessment is that success in a strategy like this requires one of two conditions: (1) either a very small, capacity-constrained niche strategy or (2) a global firm with huge “alpha generation” capacity. Price meets that second condition.
  2. Price uses a “closed architecture” approach. Many multi-asset strategies are executed by creating an asset allocation strategy in-house then executing the strategy by buying ETFs or mutual funds, or by assigning parts of the portfolio to outside investors. That separation between the people choosing the strategies and the people executing them creates a problem: the decisions made by the outsiders are somewhat opaque so that the strategy manager doesn’t necessarily know what exactly is going on in each piece of the portfolio. By using only in-house strategies, the MSTR managers have nearly instant access to the people running each of the fund’s components; if their quant screens show something odd happening with the global focused equity component, they’re able to walk down the hall to portfolio manager David Eiswert’s office and ask him.

To date, the fund has performed well. The fund returned 4.14% in the first six months of 2020, while the average multi-strategy fund fell by 5.4% – a 958 bps advantage for Price over just six turbulent months.

In the fund’s last two years, it has been a top 10 performer in its Lipper alternative multi-strategy peer group. The screener at MFO Premium shows:

Annualized total return: 4.1%, 8 of 57

Maximum drawdown: 4.7%, 7th best

Standard deviation: 5.5%, 12th best

Sharpe ratio: 0.41, 8th best

Bottom Line

The purpose of MSTR is to diversify your portfolio, not be your portfolio. Many investors over-diversify, adding one stock (or bond) fund after another with each new addition adding less and less to the robustness of the entire portfolio. At base, investors just add more exposure to the same sets of risks and the same return drivers. MSTR diversifies by tapping into other sources of alpha which is reflected in its relatively low correlation to the S&P 500 (0.58), very low correlation to the bond market (0.16), and low downside capture ratio (0.12) against the S&P 500.

Investors looking for a way out of high levels of volatility and inconsistent returns should add T. Rowe Price Multi-Strategy Total Return to their due-diligence list, just as many investment professionals at Price itself seem to have done.

By way of full disclosure: I reallocated a substantial fraction of my retirement investments to TMSRX in May 2020 and disclosed that allocation in our June 2020 issue. The core of my retirement account at T Rowe Price is T Rowe Price Retirement 2025 (TRRHX), supplemented by T. Rowe Price Emerging Markets Discovery (PRIJX, an EM value fund) and T. Rowe Price Multi-Strategy Total Return.

Fund website

T. Rowe Price Multi-Strategy Fund

MFO Premium Webinar

By Charles Boccadoro

On Wednesday July 22st, we will host a webinar discussing latest features of the MFO Premium search tool site. Topics will focus on improvements made to the main MultiSearch tool, including:

  • Searchable Holdings Data (Company, Country, Industry)
  • Expanded Equity Portfolio Metrics
  • Multi-Year and Ferguson Ratings
  • Yearly Return and Fixed Periods Ratings
  • Bond Credit and Duration Breakout
  • Current Month Inflow and Outflow Estimation
  • Searchable Exchange Traded Notes (ETNs)
  • Nine New Evaluation Period (e.g., Trump Bump, CV-19 Bear)
  • Larger Watchlists with Customizable Names

There will be two sessions, one at 11 am Pacific time (2pm Eastern) and one at 2pm Pacific time (5pm Eastern). The webinar will be enabled by Zoom. Please use the following links to register for the morning session or afternoon session. Each will last nominally 1 hour, including questions.

Here are links to previous webinar charts and video recording.

Hope to you can join us again on the call. If you have any questions, happy to answer promptly via email ([email protected]) or scheduled call.

Launch Alert: Driehaus Small/Mid Cap Growth Fund

By David Snowball

On May 1, 2020, Driehaus Capital Management launched Driehaus Small/Mid Cap Growth Fund (DSMDX).

The Fund is managed by Jeff James and Michael Buck, along with assistant portfolio manager Prakash Vijayan. The fund uses the same strategy used since 2012 for Driehaus Small/Mid Cap Growth separately managed account clients. Messrs. James, Buck, and Vijayan also manage the Driehaus Micro Cap Growth (DMCRX, four stars at Morningstar) and Driehaus Small Cap Growth (DVSMX, not yet rated) funds.

The managers pursue the same characteristics regardless of the market cap targeted by the fund. Mr. James says,

Across our growth equity strategies, we have successfully identified and invested in companies experiencing positive fundamental change in addition to exposure to positive growth inflections, earnings surprises and earnings revisions, factors that are positively correlated to alpha generation.

Every Driehaus equity strategy has outperformed its peers, often dramatically, since inception though that outperformance comes at the price of higher volatility. The Small/Mid Cap Growth strategy which has been available through separately managed accounts since 2012 has returned 16.19% annually since inception, beating its benchmark by 367 bps. The strategy has outperformed over the first five months of 2020 (with a 7.8% gain against its benchmark’s 1.6% loss – a 940 bps difference), the past year, three years and five years.

The managers are experienced, both with the strategy and with each other. Driehaus does a good job of aligning the managers’ interests with their investors: bonuses are directly linked to one-, three-, and five-year performance relative to benchmarks and peer group rankings (for equity managers), and volatility targets (for credit managers). And Driehaus has been willing to close strategies in the past, the micro-cap growth fund in particular, in order to preserve performance.

By adding mid-cap exposure, the fund is apt to be a slightly-less volatile version of its small- and micro-cap siblings. Aggressive investors might well find it useful.

The opening expense ratio is 0.95% and the minimum initial investment is $10,000. Driehaus funds are available through major brokerages including TD Ameritrade, Fidelity and Schwab.

The fund’s homepage is, understandably, just one page of quickly sketched information.  Fortunately, the strategy has a far longer track record than the fund, which is summarized on its fact sheet. The Driehaus Funds site itself is only modestly informative.

FPA Queens Road Value (formerly Queens Road Value), (QRVLX), July 2020

By David Snowball

At the time of publication, this fund was named Queens Road Value.

Objective and strategy

The fund seeks capital appreciation by investing in the stocks or preferred shares of U.S. companies. They look for companies with strong balance sheets and experienced management, and stocks selling at discounted price/earnings and price-to-cash flow ratios. It used to be called Queens Road Large Cap Value but changed its name to widen the range of allowable investments. Nonetheless, it continues to put the vast majority of its portfolio into large cap value stocks.

The manager pursues a sort of “quality value” strategy: he seeks high-quality firms (strong balance sheets and strong management teams) whose stocks are undervalued (based, initially, on price/earnings and price-to-cash flow metrics). They sell very rarely which is reflected in a 1% turnover ratio. Factors that encourage a sale include excess stock valuation, the need to harvest tax losses to offset taxable gain, or for cash to meet redemptions. The fund’s cash level, which the manager describes as “elevated for an extended period,” quickly dropped to about 2%  as the March 2020 crisis produced “very attractive opportunities.”


Bragg Financial Advisors, headquartered in Charlotte, NC. Bragg has been around since the early 1970s, provides investment services to institutions and individuals, and has about $1.7 billion in assets under management. They advise the two Queens Road funds and 1200 or so separately managed accounts. The firm is now run by the second generation of the Bragg family.


Steven Scruggs, CFA. Mr. Scruggs has worked for BFA since 2000 and manages this fund and Queens Road Small Cap Value (QRSVX). That’s about it. No separate accounts, hedge funds, or other distractions. He is supported by Matt Devries, CFA.

Strategy capacity and closure

Essentially unconstrained, given their focus on large, highly-liquid firms. With $30 million in fund assets, closure remains a distant threat.

Management’s stake in the fund

As of the most recent Statement of Additional Information, Mr. Scruggs has invested between $50,000 and $100,000 in his fund. The officers of Bragg Financial, including Mr. Scruggs, collectively own 1.7% of the fund’s shares.

Opening date

June 13, 2002.

Minimum investment

$2,500 for regular accounts with a surprisingly high subsequent investment minimum of $1,000; the minimum is $1,000 for tax-advantaged accounts

Expense ratio

0.65% on assets of $34 million.


Queens Road Value was the first fund profiled in the first issue of Mutual Fund Observer, April 2011. We wanted to highlight a fund that offered the prospect of long-term stability and success. We were drawn to Queens Road because it offered a sensible strategy that had been well-executed for years. We wrote:

[Mr. Scruggs is] being cautious in his attempts to find high-quality companies with earnings growth potential. All of this has produced a steady ride for the fund’s investors. The fund outperformed its peer group in every quarter of the 2007-09 meltdown and performed particularly well during the market drops in June and August 2010. And it tends to post competitive returns in rising markets. Its ability to handle poor weather places the fund near the top of its large-value cohort for the past one, three, and five-year periods, as well as the eight-year period since inception.

We concluded, “Mr. Scruggs ongoing skepticism about the market and economy, his attention to financially solid firms, and willingness to hold cash likely will serve [conservative equity] investors well.” Morningstar recently affirmed our judgment by assigning Queens Road its forward-looking Morningstar Gold Q  analyst rating.

Queens Road has more than met our expectations for competitive returns with top tier risk management.

  5 year 10 year 15 year
Annual returns 6.9%, beats by 2.6% 9.8%, beats by 0.4% 6.4%, beats by 0.2%
# peer funds / ETFs 101 87 73
Sharpe Top 7% Top 10% Top 16%
Maximum drawdown Top 4% Top 5% Top 12%
Standard dev Top 6% Top 5% Top 5%
Downside dev Top 5% Top 6% Top 5%
Down market dev Top 5% Top 6% Top 8%
Bear market dev Top 4% Top 5% Top 8%
Downside capture / Sp500 Top 7% Top 7% Top 8%

Data from Lipper Global Data Feed, calculations from MFO Premium, as of 5/30/2020

How do you read that table?

Annual returns simply measure the fund’s gains which, in every time frame, beat its peer group.

Sharpe ratio weighs the gains against the risks investors were exposed to. QRVLX’s Sharpe is both top tier and rising.

All of the other metrics are different ways of measuring the risks that investors were exposed to: largest decline, day-to-day volatility, downside or “bad” volatility, volatility in months when the market fell even a little, volatility in months when the market fell more than 3% and amount of the S&P 500’s losses that the fund “captured.” In each case, QRLVX is among the elite performers.

What explains the steady outperformance?

Three factors might plausibly explain it.

First, Mr. Scruggs keeps his eye on the long-term drivers of returns and actively screens out the short-term noise. While he recognizes and worried about, the “severe and uncertain crisis” created by the Covid-19 pandemic and the “unprecedented” involvement in markets by central banks, he also acknowledges that we don’t know the near- or long-term economic effects of either, so neither can drive the portfolio. He remains focused on finding individual stocks that “provide a reasonable expected return and an adequate margin of safety.”

Second, he has a less mechanical view of “value” than most. He argues that the appropriate measures of a firm or industry’s valuations evolve with time. That evolution requires some rethinking of the importance of both physical capital (reflected in price-to-book ratios) and intellectual capital in assessing a firm’s value. That’s led him, he reports, to buy some value stocks that purely mechanical metrics might describe as growth stocks.

Third, he maintains a portfolio of higher-quality companies. My Morningstar’s estimation, only 3% of the QRVLX holdings lack an economic “moat.” That’s compared to 10% in his average competitor’s portfolio. Similarly, the QRVLX portfolio has higher grades for financial health, profitability, and growth (measured by growth in long-term earnings, book value, cash flow, and sales).

What about the ETF option?

Passive investing products look best when markets are rising steadily and smoothly; they are designed to capture that rise. Markets, however, cannot permanently deliver steady and smooth gains: they outrun fundamentals, become giddy, overshoot, correct, become panicked, overcorrect. The best managers create long-term value by protecting their investors’ portfolios from the destructive effects of the market’s extremes.

Viewed purely through the lens of capital protection, there is no passive product – either cap-weighted or smart beta – that has offered as much protection as Queens Road. That’s true in all three time periods: 5, 10, and 15 years.

Viewed through the lens of risk-return rewards, as measured by Sharpe ratio, there is precisely one ETF that has a higher 5- and 10-year Sharpe ratio; WisdomTree US LargeCap Dividend (DLN) has provided somewhat higher returns at the price of somewhat higher risks. Beyond that, $40.5 billion is currently invested in ETFs with lower 5-year returns, higher risks, and lower Sharpe ratios than Queens Road. It speaks to the triumph of marketing and herd-like behavior over performance.

Bottom Line

Equity investors wary about high valuations, untested business models and volatile markets have cause to be more vigilant than ever about their portfolios. Queens Road Value has a record that makes it a compelling addition to their due-diligence list.

Fund website

Queens Road Funds. While there are separate fact sheets for each fund, there doesn’t seem to be a page dedicated to each. 

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. Each month, Funds in Registration gives you a peek into the new product pipeline. We found 17 active funds and ETFs in registration, some quite notable. Expect them to launch by the end of September 2020.

The key additions are the three DFA active ETFs, which mimic three DFA funds. DFA, for better or worse, has long marketed its exclusivity. Dimensional Fund Advisors was launched in 1981 by Rex Sinquefeld and David Booth. They were early advocates of what we now call “smart beta.” While endorsing both the efficient markets hypothesis and indexing, they strayed away from simple market cap based portfolios and toward ones that accounted for other important variables such as size and quality. In general, they start with a simple indexed portfolio then make small “tilts” in favor of factors such as size, value, or profitability. Traditionally DFA funds were available only through advisors who had, themselves, completed training offered by DFA.

DFA manages over $500 billion in assets and the founders have done well enough that the University of Chicago School of Business from which the founders both graduated, is now named the Booth School of Business in recognition of Mr. Booth’s $300 million gift.

The firm promises that “the new ETFs, planned for later this year, will be managed in accordance with the same investment philosophy, research, and systematic investing approach as our existing portfolios, but in an actively managed, transparent ETF structure.”

The significance of DFA is magnified by the fact that a team of former DFA professionals, including their co-CEO/CIO, have an active ETF in the pipeline under American Century’s Avantis line (below).

Every month the ETF industry breathlessly trots out a few ideas designed to seize the moment. Last month, it was the Digital Health and Telemedicine ETF which tracks a new index about which no information is available, except that if your annual report includes both the words “digital” and “health,” you’re in! This month brings the iShares Virtual Work and Life Multisector ETF which invests in the companies that “support an increasingly virtual way of life across entertainment, wellness and learning.” Which is to say, almost all of them?

American Beacon NIS Core Plus Bond Fund

American Beacon NIS Core Plus Bond Fund will seek high current income. The plan is to invest in a diversified mix of U.S. dollar-denominated U.S. and foreign investment grade fixed income securities with the proviso that they might engage in active and frequent trading. The fund will be managed by a team from National Investment Services of America, the “NIS” of the name. Its opening expense ratio for “A” shares will be 0.78%, and the minimum initial investment will be $2,500.

American Beacon TwentyFour Short Term Bond Fund

American Beacon TwentyFour Short Term Bond Fund will seek a positive return based on a combination of income and, secondarily, capital growth. The plan is to invest in a global portfolio of fixed income securities; while individual issues might carry any duration, the average duration of the portfolio is expected to be three years. The fund will be managed by a three-person team from TwentyFour Asset Management (US) LP. Its opening expense ratio for “A” shares is 0.87%, and the minimum initial investment will be $2,500.

Avantis Core Fixed Income ETF

Avantis Core Fixed Income ETF, an actively-managed ETF, seeks to maximize total return. The plan is to buy investment-grade quality debt obligations from a diverse group of U.S. and non-U.S. issuers. The fund will be managed by Eduardo Repetto, Mitchell Handa, and Daniel Ong. All three members of the team, plus their analysts, were hired away from Dimensional Fund Advisors where Mr. Repetto was chief investment officer. Its opening expense ratio is 0.15%.

BlackRock Future Health ETF

BlackRock Future Health ETF, an actively-managed ETF, seeks to maximize total return. The plan is to invest in a global portfolio of small- to mid-cap companies whose business centered on human (primarily), animal, or plant health. The fund will be managed by Erin Xie of BlackRock, who also manages their five-star Health Sciences Opportunities Fund (SHSAX). Its opening expense ratio has not been disclosed.

BlackRock Future Innovators ETF

BlackRock Future Innovators ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to invest in a global portfolio of small- and mid-cap companies that are “innovative.” Even they put “innovative” in quotation marks. The fund will be managed by Phil Ruvinsky, who also manages their five-star Mid Cap Growth Fund (CMGIX). Its opening expense ratio has not been announced.

BlackRock Future Tech ETF

BlackRock Future Tech ETF, an actively-managed ETF, seeks to maximize total return. The plan is to create a global, all-cap portfolio of tech stocks, with a particular emphasis on finding “next-gen” tech stocks. The fund will be managed by Tony Kim, who also manages their five-star Technology Opportunities Fund (BGSAX). Its opening expense ratio has not been announced.

Cambria Africa ETF

Cambria Africa ETF (AFKA), an actively-managed ETF, seeks long-term capital appreciation. The plan is to buy “the equities of African companies that exhibit factor characteristics commonly associated with value and quality investments.” The fund will be managed by Mebane Faber. Its opening expense ratio has not been released.

Cambria Endowment Style ETF

Cambria Endowment Style ETF (ENDW), an actively-managed ETF, seeks income and capital appreciation. The plan is to create “diversified exposure to all of the major asset classes in the various regions, countries, and sectors around the globe.” They hope to combine “an aggressive risk profile” with an emphasis on “absolute positive returns.” It will be a fund of ETFs that relies, in part, on leverage. The fund will be managed by Mebane Faber. Its opening expense ratio has not been disclosed.

Cambria Global Tail Risk ETF

Cambria Global Tail Risk ETF (FAIL, really?), an actively-managed ETF, seeks to provide income and capital appreciation from investments in U.S. and ex-U.S. sovereign bonds while protecting against the significant downside risk of equity markets outside the United States. The fund will be managed by Mebane Faber. Its opening expense ratio has not been disclosed.

CornerCap Fundametrics Large-Cap ETF

CornerCap Fundametrics Large-Cap ETF (FUNL), an actively-managed ETF, seeks long-term capital appreciation. (“Fundametrics.” It’s good to find a new term that displaces “Quantamental” on my oh-dear-lord list.) The plan is to invest in domestic large-cap stocks using the Fundamentrics system, which emphasizes relative valuation, earnings growth rates, and cash flow measurements. The fund will be managed by a team from CornerCap Investment Counsel. Its opening expense ratio is 0.5%.

Dimensional Emerging Markets Core ETF

Dimensional Emerging Markets Core ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to invest in companies in emerging and frontier markets, taking into account a company’s size, value, and/or profitability. The fund will be managed by the team responsible for its Emerging Markets Emerging Markets Core Equity Fund (DFCEX). Its opening expense ratio has not been disclosed.

Dimensional International Core ETF

Dimensional International Core ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to invest in companies in “Approved Markets,” taking into account a company’s size, value, and/or profitability. The fund will be managed by the team responsible for its International Core Equity Fund (DFIEX). Its opening expense ratio has not been disclosed.

Dimensional US Core ETF

Dimensional US Core ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to invest in large cap stocks, taking into account a company’s size, value, and/or profitability. The fund will be managed by the team responsible for its US Core Equity Fund (DFEOX). Its opening expense ratio has not been disclosed.

Drawbridge Dynamic Allocation ETF  

Drawbridge Dynamic Allocation ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to use a rules-based models-driven approach to invest across a diversified universe of ETFs within eight rotation-based sub-strategies. The fund will be managed by Matthew Tuttle, of Tuttle Tactical Management. Its opening expense ratio is 2.02%.

Evolutionary Tree Innovators Fund

Evolutionary Tree Innovators Fund will seek long-term growth of capital. The plan is to invest in 25-35 domestic growth-oriented companies that qualify as “leading innovative businesses.” The fund will be managed by Thomas M. Ricketts, formerly a senior portfolio manager on Sands Capital’s flagship Select Growth US Large-Cap Growth strategy, a $20+ billion concentrated-growth strategy. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $50,000.

RG Gold+ Fund

RG Gold+ Fund will seek long-term capital appreciation. The plan is to buy precious metals, cryptocurrencies, and fixed income securities and to engage in “very frequent trading.” The fund will be managed by Ben McMillan. Its opening expense ratio is 2.45%, and the minimum initial investment is $10,000.

WisdomTree Enhanced Commodity Strategy Fund

WisdomTree Enhanced Commodity Strategy Fund, an actively-managed ETF, seeks to achieve positive total returns in rising or falling markets. The plan is to invest in four commodity sectors (energy, agriculture, industrial metals, and precious metals) and Bitcoin, primarily through investments in futures contracts. The fund will be managed by Vassilis Dagioglu and James Stavena of WisdomTree. Its opening expense ratio has not been disclosed.

Manager changes, June 2020

By Chip

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

And so each month we track the changes in teams, primarily at active, equity-oriented funds and ETFs.

Ticker Fund Out with the old In with the new Dt
AIZAX AB International Sharon Fay is no longer listed as a portfolio manager for the fund. Kent Hargis, Avi Lavi, Nelson Yu, Mark Phelps, and Daniel Charles Roarty will continue to manage the fund. 6/20
RMEAX Aspiriant Risk-Managed Equity Allocation Fund Effective June 10, 2020, Acadian Asset Management LLC no longer serves as a sub-adviser to the fund. Brendan Bradley, Ryan Taliaferro, Mark Birmingham, and Dan Lee will no longer serve as portfolio managers to the fund. John A. Boselli joins Brian Ko, Marc Castellani, John Allen, Robert Tymoczko, and Ran Leshem on the management team. 6/20
BIRAX BlackRock Advantage ESG U.S. Equity Fund No one, but . . . Travis Cooke is joined by Anna Hawley, Richard Mathieson, and Raffaele Savi on the management team. 6/20
SHSAX BlackRock Health Sciences Opportunities Fund No one, but . . . Erin Xie is joined by Jeff Lee and Xiang Liu in managing the fund. 6/20
BGSAX BlackRock Technology Opportunities Fund No one, but . . . Reid Menge joins Tony Kim on the management team. 6/20
AVGAX BNY Mellon Dynamic Total Return Fund Sinead Mary Colton is no longer listed as a portfolio manager for the fund. Dimitri Curtil joins Vassilis Dagioglu, James Stavena, and Torrey Zaches in managing the fund. 6/20
BBVLX Bridge Builder Large Cap Value Fund Greg Savage is no longer listed as a portfolio manager for the fund. Six new managers join the other dozen on the management team. 6/20
BDREX Broadstone Real Estate Access Fund Kate Davis is no longer listed as a portfolio manager for the fund. Michael Comparato and Brian Buffone will now manage the fund. 6/20
CVMAX Calvert Emerging Markets Equity Fund Gary Greenberg will no longer serve as a portfolio manager for the fund, effective September 1, 2020. Elena Tedesco and Kunjal Gala will continue to manage the fund. 6/20
CAFGX Cavalier Fundamental Growth Louis Navellier will no longer serve as a portfolio manager for the fund. In February 2020, the SEC won a judgment against Mr. Navellier’s firm for defrauding clients by misrepresenting returns. His Navellier funds and his ETF are long gone now and his Wikipedia page reports “Navellier currently travels the country hosting seminars for individual investors.” Scott Wetherington will now manage the fund. 6/20
CCGSX Chautauqua Global Growth Fund No one, but . . . Nathaniel Valarde, Haicheng Li, and Jesse Flores joins Brian Beitner in managing the fund. 6/20
CCWSX Chautauqua International Growth Fund No one, but . . . Nathaniel Valarde, Haicheng Li, and Jesse Flores joins Brian Beitner in managing the fund. 6/20
CLOAX Clough Global Long/Short Fund Vincent Lorusso is no longer listed as a portfolio manager for the fund. Robert Zdunczyk has joins Charles Clough in managing the fund. 6/20
DGROX Delaware Global Real Estate Opps, which is expected to liquidate in August Damon Andres, Babak Zenouzi, and Scott Hastings will no longer serve as portfolio managers for the fund. Chris Gowlland will manage the fund. 6/20
FITRX Delaware Total Return Damon Andres and Babak Zenouzi have left the firm and will no longer serve as portfolio managers for the fund. Stefan Löwenthal and Jürgen Wurzer will now manage the fund. 6/20
DDIIX Delaware Wealth Builder Fund Damon Andres and Babak Zenouzi have left the firm and will no longer serve as portfolio managers for the fund. Stefan Löwenthal and Jürgen Wurzer will now manage the fund. 6/20
DHLAX Diamond Hill Large Cap Fund Micah Martin (a name shared by one of Augustana’s nicest basketball players) will no longer serve as a portfolio manager for the fund. Charles Bath and Austin Hawley will continue to manage the fund. 6/20
SLANX DWS Latin America Equity Fund No one, but . . . William Scott Piper joins Marcelo Pinheiro, Danilo Pereira, and Luiz Maria Ribeiro on the management team. 6/20
FADAX Fidelity Advisor Dividend Growth Fund No one, immediately, but Gordon Scott will no longer manage the fund, effective December 31, 2020. Zachary Turner joins Gordon Scott and will continue to manage the fund upon his departure. 6/20
FNIAX Fidelity Advisor New Insights Fund John Roth will be leaving the management team on or about September 30, 2020. Nidhi Gupta joins William Danoff in managing the fund. 6/20
FEXPX Fidelity Export and Multinational Fund Gordon Scott will no longer serve as a portfolio manager for the fund. Jean Park will now manage the fund. 6/20
FCPVX Fidelity Small Cap Value Fund Derek Janssen no longer serves as co-manager of the fund. Clint Lawrence will continue to manage the fund. 6/20
FEFAX First Eagle Fund of America As of August 10, 2020, Iridian Asset Management LLC will no longer serve as a subadviser to the fund. Julien Albertini, Manish Gupta, and Christian Heck of First Eagle Investment Management, LLC will serve as portfolio managers upon Iridian’s resignation. The trio has no fund management experience and plans to fundamentally change the fund’s investment strategy to focused, dividend-paying equity. 6/20
FCVT First Trust SSI Strategic Convertible Securities ETF Ethan Ganz is no longer listed as a portfolio manager for the fund. Stephen Wachtel joins George Douglas, Ravi Malik, Michael Opre, and Florian Eitner on the management team. 6/20
GSRAX Goldman Sachs Rising Dividend Growth Fund Ying “Susie” Wang is no longer listed as a portfolio manager for the fund. Kyri Loupis joins Monali Vora, Aron Kershner, and Christopher Lvoff in managing the fund. 6/20
FSTEX Invesco Energy Norman MacDonal is no longer listed as a portfolio manager for the fund. Kevin Holt will now manage the fund. 6/20
JIAFX JHancock Multi-Asset High Income Fund No one, but . . . Caryn Rothman, Geoffrey Kelley, and John Addeo join Christopher Walsh and Nathan Thooft on the management team. 6/20
JIVIX JHFunds2 International Value Fund Peter Nori and Christopher Peel no longer manage the fund. Joseph Feeney, Christopher Hart, Joshua Jones, and Joshua White will now manage the fund. 6/20
MSAUX Morgan Stanley Inst Asia Opp Fund Krace Zhou is no longer listed as a portfolio manager for the fund. Anil Agarwal joins Kristian Heugh in managing the fund. 6/20
NCBIX New Covenant Balanced Income Fund Erin Garrett no longer serves as a portfolio manager to the fund. Richard Bamford will continue to manage the fund. 6/20
NCICX New Covenant Income Fund Erin Garrett no longer serves as a portfolio manager to the fund. Julien Scholnick, John Bellows, S. Kenneth Leech, Edmund Ingalls, Bill O’Malley, Richard Bamford, James Gubitosi, Mark Lindbloom, and Frederick  Marki will continue to manage the fund. 6/20
PRESX T. Rowe Price European Stock Fund No one, immediately, but Dean Tenerelli will be stepping down from portfolio manager duties, effective October 1, 2020. Tobias Mueller joins Dean Tenerelli and will continue managing the fund after Mr. Tenerelli’s departure. 6/20
TCOFX Tactical Offensive Fixed Income Fund Erin Garrett no longer serves as a portfolio manager to the fund. Sean Simko, Time Sauemelch, and Richard Bamford will continue to manage the fund. 6/20
TORYX The Torray Fund Robert Torray relinquished his duties as President of the Trust and co-manager of the fund, which he started in 1990. Sad end to a storied career, but the fund has seen outflows in 123 of the past 125 months and has consistently trailed 90% of its peers over the past 15 years. Jeffrey Lent will join Shawn Hendon in managing the fund. 6/20
THCGX Thornburg Core Growth Fund Ted Chang concluded his year of service as co-portfolio manager of the fund Greg Dunn continues to serve as the portfolio manager of the fund 6/20
Various Thornburg Short Duration Municipal Fund, Thornburg Limited Term Municipal Fund, Thornburg Intermediate Municipal Fund, Thornburg Strategic Municipal Income Fund, Thornburg California Limited Term Municipal Fund, Thornburg New Mexico Intermediate Municipal Fund, and Thornburg New York Intermediate Municipal Fund Nicholos Venditti will conclude his service as co-portfolio manager of the funds. Eve Lando has joined David Ashley in managing the funds. 6/20
TNSAX Touchstone International Small Cap Fund Stephen Dexter and David Dineen will no longer serve as portfolio managers for the fund. Wayne Hollister will now manage the fund. 6/20
VVPLX Vulcan Value Partners No one, but . . . McGavock Dunbar, we could so see him bringing a claymore to the office, joins C.T. Fitzpatrick in managing the fund. 6/20
VVPSX Vulcan Value Partners Small Cap No one, but . . . McGavock Dunbar joins C.T. Fitzpatrick in managing the fund. 6/20
WCMRX WCM Focused International Growth Fund No one, but . . . Sanjay Ayer joins Paul Black, Peter Hunkel, Michael  Trigg, and Kurt Winrich on the management team. 6/20


Briefly Noted . . .

By David Snowball

Effective on October 1, 2020, all of the Alpha Architect funds will transition from index funds to actively-managed ones, though the change will likely be undetectable to investors since “the adviser’s methodology will be substantially unchanged from the current approach it uses.” The funds in question are

  • Alpha Architect U.S. Quantitative Value ETF (QVAL)
  • Alpha Architect International Quantitative Value ETF (IVAL)
  • Alpha Architect U.S. Quantitative Momentum ETF (QMOM)
  • Alpha Architect International Quantitative Momentum ETF (IMOM)
  • Alpha Architect Value Momentum Trend ETF (VMOT).

On June 30, Trillium Asset Management was acquired by Australian financial Firm Perpetual Limited. Trillium is a US-based ESG manager with $3.8 billion under advisement. The change mostly benefits Perpetual, which gets access to ESG strategies, without noticeably inconveniencing – or immediately benefiting – Trillium investors.


BlackRock has dropped the expense ratios for three giant ETFs by one basis point each: Core S&P 500 (IVV), Core S&P Mid-Cap (IJH) and Core S&P Small Cap (IJR). The resulting fees will be 3, 5 and 6 basis points, respectively. The cuts are mostly just to match Vanguard’s fees and deny them a marketing advantage.

Effective as of June 1, 2020, Boston Partners Small Cap Value Fund II dropped its investment advisory fee to 0.85% from 0.95%.

Effective immediately, RESQ Investment Partners, LLC, (the “Adviser”), has agreed to reduce the management fee of the RESQ Strategic Income Fund and RESQ Dynamic Allocation Fund from 1.45% to 1.20%.

Janus Henderson is reopening the no-load share class for all 38 US funds, beginning in July. Those include the famous (Janus Overseas), the infamous (Global Unconstrained Bond, the fund they whipped together to showcase Bill Gross’s skills), and some that are actually very good. Janus Henderson Balanced and Global Real Estate are both recognized as MFO Great Owl funds for their consistently top-tier risk-adjusted returns and Developed World Bond, which has outperformed its peers on the basis of a raw returns, as well.

Effective June 18, 2020, RBC Emerging Markets Small Cap Equity Fund (RSMAX) is dropping its investment advisory fee is reduced from 1.25% to 1.04%.

CLOSINGS (and related inconveniences)

Aegon Emerging Markets Debt (AMMVX) has closed to new investors, which is almost surely a prelude to its liquidation.

American Beacon has announced that effective May 29, 2020, they will no longer sell American Beacon funds directly to you. If you want to buy them, you’ll need to go to a supermarket just like everybody else.

Ivy Funds have eliminated the E, T, R, and Y share classes on a bunch of their funds.


American Century Income & Growth Fund will be renamed Disciplined Core Value Fund effective as of September 25, 2020.

Effective as of July 1, 2020, Boston Partners Emerging Markets Long/Short Fund (BELSX) became Boston Partners Emerging Markets Dynamic Equity Fund. So far as we can tell, it’s still the same long/short fund, which is okay but hasn’t been anything special.

Cambiar Global Ultra Focus Fund has become Cambiar Aggressive Value Fund.

On or about September 2, 2020, Columbia Global Dividend Opportunity Fund becomes Columbia International Dividend Income Fund.

On June 15, 2020, Global X Future Analytics Tech ETF became Global X Artificial Intelligence & Technology ETF.

On August 30, 2020, Goldman Sachs Blue Chip Fund (GAGVX), which receives a low ESG grade from Morningstar, relaunches as Goldman Sachs U.S. Equity ESG Fund.

On July 1, 2020, Holmes Macro Trends Fund become Holmes Global Luxury Goods Fund.

Effective on or about September 30, 2020, Invesco Developing Markets Fund will be renamed Invesco Emerging Markets All Cap Fund.

Effective on or about August 4, 2020, Invesco Floating Rate Fund becomes Invesco Floating Rate ESG Fund with the necessary attendant tweaks to the portfolio.

On or around July 20, 2020, Knights of Columbus Global Real Estate Fund becomes Knights of Columbus Real Estate Fund.

Effective on or about July 1, 2020, MFS Strategic Income Fund becomes MFS Income Fund. Same fund just less … strategic about it.

Effective August 30, 2020, the Oppenheimer name disappears from 42 Invesco Oppenheimer funds. In a few cases, the inherited name also gets tweaked but with no substantive change to the fees, strategy or team.

Effective on or about September 30, 2020, Principal Shareholder Yield Index ETF becomes Principal Value ETF. At the same time, Principal Price Setters Index ETF becomes the Principal Quality ETF and Principal International Multi Factor Core Index ETF morphs into Principal International Multi-Factor ETF.

On June 30, 2020, Vaughan Nelson Value Opportunity Fund became Vaughan Nelson Mid Cap Fund with the consequent need to, you know, invest in mid cap stocks.

Effective on August 11, 2020, Western Asset SMASh Series Ec Fund will be renamed Western Asset SMASh Series Core Plus Completion Fund.


Eighty-six funds and ETFs are leaving us soon. That’s an unprecedented wave of disappearances, more than twice what we recorded last month. While 20 of those are mergers, in which one fund simply consumes one of its siblings, 66 are straight liquidations. Those are occurring at both large (BlackRock) and boutique (Amidex) firms, with niche and mainstream funds, and with funds with both weak and respectable records. Thirteen of the disappearances are ETFs with several other ETFs becoming “repurposed” in a way that represents the virtual liquidation of the original fund.

Ben Strack of Fund Intelligence, an industry newsletter, reports that the rate of ETF liquidations is running at double last year’s total (“ETF industry poised for record number of fund closures in 2020,” June 22, 2020). He’s projecting 150 closures by August.

The Condemned Date of execution
Aberdeen Diversified Alternatives Fund August 17, 2020
Aberdeen Diversified Income Fund August 17, 2020
Aberdeen Dynamic Allocation Fund August 17, 2020
Aegon Short Duration High Yield Fund  (ADHVX) June 30, 2020
AmericaFirst Seasonal Rotation Fund (STQAX ) June 29, 2020
American Century Multi-Asset Income Fund October 16, 2020
American Century Multi-Asset Real Return Fund  October 16, 2020
AMIDEX35 Israel Fund (AMDAX) June 19, 2020
Amplify EASI Tactical Growth ETF July 6, 2020
BlackRock LifePath Smart Beta Retirement Fund, BlackRock LifePath Smart Beta 2025 Fund, BlackRock LifePath Smart Beta 2030 Fund, BlackRock LifePath Smart Beta 2035 Fund, BlackRock LifePath Smart Beta 2040 Fund, BlackRock LifePath Smart Beta 2045 Fund, BlackRock LifePath Smart Beta 2050 Fund, BlackRock LifePath Smart Beta 2055 Fund, BlackRock LifePath Smart Beta 2060 Fund and BlackRock LifePath Smart Beta 2065 Fund September 2, 2020
Brookfield U.S. Listed Real Estate Fund (BRUAX) June 29, 2020
Camelot Excalibur Small Cap Income Fund (CECAX) July 31, 2020
Campbell Dynamic Trend Fund (CDRTX) July 15, 2020
Caravan Frontier Markets Opportunities Fund (CSFOX) June 30, 2020
Causeway Global Absolute Return Fund (CGAVX), which is underwater by 25% since inception July 20, 2020
Centre Active U.S. Treasury Fund will be merged into Centre Global Infrastructure Fund. Huh? They’re merging a Treasury bond fund into a global equity fund? Skeptics might suspect that this is little more than an attempt to take the $24 million in assets from the bond fund and pour it into the $24 million equity fund (which, one notes, is underwater since inception). Pending shareholder approval
CM Advisors Small Cap Value Fund (CMOVX) August 18, 2020
Columbia Contrarian Europe Fund is merged into Columbia Overseas Core Fund, Columbia Disciplined Small Core Fund merges into Columbia Small Cap Value Fund, Columbia Select Global Growth Fund merges into Columbia Select Global Equity Fund and Columbia Small/Mid Cap Value Fund merges into Columbia Select Mid Cap Value Fund July 10, 202
Delaware Global Real Estate Opportunities Mid-August, 2020
Delaware Government Cash Management Fund Sept. 25, 2020
DGHM V2000 SmallCap Value Fund (DGSMX) June 24, 2020
FormulaFolios US Equity Portfolio June 30, 2020
Hartford Multifactor REIT ETF and Hartford Multifactor Low Volatility US Equity ETF August 14, 2020
Highland Long/Short Equity Fund merged into Highland Merger Arbitrage Fund June 29, 2020
Hotchkis & Wiley Capital Income Fund will merge into Hotchkis & Wiley High Yield Fund Pending shareholder approval
Invesco Global Market Neutral Fund, Invesco Global Opportunities Fund, Invesco Long/Short Equity Fund and Invesco Low Volatility Emerging Markets Fund August 5, 2020
Invesco RAFI Strategic Developed ex-US Small Company ETF (ISDS) August 24, 2020
IQ Short Duration Enhanced Core Bond U.S. ETF, IQ 50 Percent Hedged FTSE Europe ETF, IQ 50 Percent Hedged FTSE Japan ETF, IQ Global Agribusiness Small Cap ETF and IQ Leaders GTAA Tracker ETF August 12, 2020
iShares Europe Developed Real Estate ETF (IFEU) August 20, 2020
John Hancock International Value Fund will merge into their Disciplined Value International Fund Just as soon as shareholders agree
MFS Blended Research Global Equity Fund August 21, 2020
Mirae Asset Emerging Markets VIT Fund June 3, 2020
Morgan Stanley Institutional Fund Trust Liquid Assets Prime Portfolio June 19, 2020
MProved Systematic Multi-Strategy Fund July 15, 2020
O’Shaughnessy Small Cap Value Fund (OFSIX) July 27, 2020
Pacific Funds Large Cap Fund  (PFLAX),  Small-Cap Growth Fund (PFMAX) and Mid-Cap Equity Fund (P Class) July 31, 2020
Parametric Research Affiliates Systematic Alternative Risk Premia Fund July 30, 2020
Pioneer Global Multisector Income Fund August 28, 2020
Principal Contrarian Value Index ETF August 19, 2020
Principal Sustainable Momentum Index ETF August 19, 2020
Pzena Long/Short Value Fund (PZVLX) August 21, 2020
Rational Iron Horse Fund (IRHAX) July 31, 2020
SystematEx International Fund will be merged into Principal Diversified International Fund Likely late in the 3rd quarter, 2020
TETON Westwood Intermediate Bond Fund June 29, 2020
Thrivent Partner Growth Stock Portfolio is merging into Thrivent Large Cap Growth Portfolio July 17, 2020
Transamerica Emerging Markets Equity September 18, 2020
Transamerica Global Real Estate Securities September 18, 2020
Trend Aggregation Dividend and Income Fund (TRADX) and Trend Aggregation Growth Fund Class (TRAAX) June 19, 2020
Virtus Herzfeld Fund and Virtus Horizon Wealth Masters Fund August 18, 2020
Virtus Rampart Multi-Asset Trend Fund will merge into Virtus Tactical Allocation Fund and Virtus Rampart Sector Trend Fund merges into Virtus Tactical Allocation Fund Hmmm … sometime before year’s end
Westfield Capital Large Cap Growth Fund (WCLGX) July 1, 2020
Westwood Emerging Markets Fund (WWEMX) July 24, 2020
Xtrackers MSCI Latin America Pacific Alliance ETF June 26, 2020

In addition, Hartford announced eight mergers taking place in September

Going away Holding on Closing Date
Hartford Global Growth HLS Fund Hartford Disciplined Equity HLS Fund September 18, 2020
Hartford Growth Opportunities HLS Fund Hartford Disciplined Equity HLS Fund September 18, 2020
Hartford MidCap Growth HLS Fund Hartford MidCap HLS Fund September 18, 2020
Hartford MidCap Value HLS Fund Hartford MidCap HLS Fund September 18, 2020
Hartford Value HLS Fund Hartford Dividend and Growth HLS Fund September 18, 2020
Hartford High Yield HLS Fund Hartford Total Return Bond HLS Fund September 25, 2020
Hartford U.S. Government Securities HLS Fund Hartford Ultrashort Bond HLS Fund September 25, 2020