On July 1, 2021, AMG Funds and Yacktman Asset Management launched the AMG Yacktman Global Fund (YFSNX).
In reality, Yacktman chose to dump the least attractive name in their stable – AMG Yacktman Focused Fund – Security Selection Only – in favor of the simple “Global” moniker. Yacktman manages two of the most outstanding funds in excellent: Yacktman (five stars, Silver-rated, Great Owl, multi-million dollar investment by the lead managers, top 2% returns over 15 years) and Yacktman Focused (five stars, Silver-rated, Great Owl, multi-million dollar investment by the lead managers, top 1% returns over 15 years). Yacktman Global uses the exact same security selection process that drives Yacktman Focused.
The investment approach is identical:
The Fund seeks long-term capital appreciation and, to a lesser extent, current income. The Fund is non-diversified and mainly invests in common stocks of … companies of any size, some but not all of which pay dividends. Yacktman employs a disciplined investment strategy, buying growth companies at what it believes to be low prices. Yacktman believes this approach combines the best features of “growth” and “value” investing. When they purchase stocks, they generally search for companies they believe to possess one or more of the following three attributes: Good Business … Shareholder-Oriented Management … Low Purchase Price.
There are three differences between Focused and Global.
- Global is more … global. Currently, 63% of the portfolio is invested in international equities, compared to 37% in Focused.
- Global is cheaper. The resolution, which renamed the fund, also reduced the management fee from 87 basis points down to 71 and capped the expense ratio. As a result, an investor in Global is charged 1.04% versus 1.28% in Focus.
- Global remains fully invested. By prospectus, the fund intends to keep at least 95% of the portfolio in equities. In the past five years, Yacktman Focused and Yacktman have never had more than 83% in equities.
That last factor strikes us as central. Yacktman believes that there are times when the risks of stocks are disproportionate to their rewards, and in those times, they allow cash (18-31% over those five years) to accumulate. Financial advisors and market bulls hate it when they do that. Both groups lean toward a “we make our own dang asset allocation decisions; we hired you to pick stocks, not to make allocation decisions for us!”
That decision has serious implications. One of the surest ways to make money is to avoid losing it. Yacktman’s intelligent caution and decades of experience lead them to occasionally tap the brakes when they see caution lights flashing. That’s reflected in the different risk/return profiles of Focused and the former Focused – Security Selection Only funds.
|Three year returns||16.0%||16.8|
|Down market deviation||10.3||12.2|
|Upside capture / S&P500||86||98|
|Downside capture / S&P500||74%||94|
|Morningstar rating||Five stars||Four stars|
|MFO rating||Great Owl||Great Owl|
Surely part of the difference is attributable to Global’s higher stake in international equities, but the significance of that effect is hard to measure.
Are you smarter than …?
One of the most popular game shows of the 21st century was “Are you smarter than a 5th grader” (2007-11). In it, adults were challenged to correctly answer questions on issues normally covered in elementary school. To date, only two contestants managed to make it to the final round and answer the question correctly.
Four years-plus. Two people definitively smarter than a 5th grader.
The follow-on question might be, “Are you smarter than Stephen Yacktman?” An investor who chooses their own tactical asset allocation (that is, who answers the question “are the caution lights flashing?” on their own) is betting that they are. For those folks, Yacktman Global will be a premier vehicle for accessing the security selection skills of one of the industry’s most accomplished teams.
Others might choose to look at Yacktman or Yacktman Focus, which we named as two of our 21st Century champions.
Fund website: Yacktman Global