Monthly Archives: January 2021

January 1, 2021

By David Snowball

Farewell to 2020!

The three words that best describe it are as follows, and I quote: “Stink, stank, stunk!” (With thanks to the incomparable Thurl Ravenscroft, 1914-2005, who brought the song to life.)

Unwashed socks? Seasick crocodile? Dead tomato splotched with moldy purple spots? Three decker sauerkraut and toadstool sandwich with arsenic sauce? Got it, got it, got it!

It stunk.

But really, “the worst year ever” (Time magazine, 12/7/2020)? “The year when everything changed” (The Economist, 12/19/2020 … and dozens of newspapers)? A “year unlike any other” (ABC News, CBS News, and every headline writer stuck for something to say)?

Oi, such the drama!

It was a very trying year, as many are. It was a year of serious inflection points, where the direction of lives and industries altered, as most are. It was a year of personal tragedies, as all are. We grieve for the lives needlessly lost and exult for the strength of will that saw so many commit so much to preserve the rest of us.

And for all of that, here we are, still standing.

We are, as a species, addicted to storytelling. Stories allow us to connect events and to connect with each other. Stories are driven by drama, and being at the center of a drama validates our lives (could you imagine a biography sadder than “he was born, he lived a life with no great challenges or consequences, he died”?) and compels our listeners. Still, the historian in me feels compelled to clear my throat and mutter, sotto voce

1919 (collapse of the 400-year old Hapsburg monarchy, shockwaves from the collapse of the 200-year-old Russian empire, fatal weakening of the 600-year old Ottoman and 400-year old British empires, the third wave of a global pandemic, a wave of mail bombings and 10,000 mass arrests, dubbed “The Year Our World Began”)?

1932 (the DJIA falls 89% from its highs of three years prior, tens of thousands of WWI veterans and their families march on Washington DC and are driven out by tanks and infantry deployed in the streets of the capital, Hitler and Roosevelt ascend to power, the outbreak of war between Japan and China presages the bloodiest war in human history)

1968 (Robert Kennedy and Martin Luther King are assassinated in quick succession, riots break out in hundreds of cities, Richard Nixon’s “Southern strategy” calls for exploiting fears of “those who would destroy America, those who would burn it” without ever mentioning “race” to draw Southern conservatives and transform the Republican party, the Tet offensive begins the end of US involvement in the war in Vietnam)

2001 (terror comes to America)

2007 (Apple releases the iPhone, which sets in motion a revolution that gutted entire industries and rewrote the rules of human interaction)

2008 (a global financial crisis with $14 trillion lost in the US alone and a fundamental restructuring of the role of government in the marketplace)

If you want to look farther back to darker times, two beloved classics are Barbara Tuchman’s A Distant Mirror: The Calamitous 14th Century (1978) and William Manchester’s A World Lit Only by Fire: The Medieval Mind and the Renaissance (1992). 

Broadway Tower, ca 1794, Worcestershire, UK

Quick side note to academic historians who suddenly find their undies in a bunch: yes, I know. Now take a chill pill and enjoy the rest of the issue.

A quick side note to the rest of us. The urge to look back to simpler times isn’t new. Anyone who has traveled in the UK has come across “follies.” These are freakish architectural confections, where some (mostly) 18th-century rich guy decided that his property, or his town, really needed an ancient tower, a stone keep or, perhaps, medieval ruin or two … and so they built some. The people who made those decisions are often about as weird as they sound. If you’re looking forward to holiday travel abroad, pick up or download a copy of Rory Fraser, Follies: An Architectural Journey (2020).

The point is not that 2020 wasn’t really bad. It’s that we are stronger than it was. Our goals need to be (1) to learn from it, (2) to grow stronger from it, and (3) to be better because of it. All of which you can do because you’re amazing.

Welcome to 2021.

Our New Year’s issue is devoted, mostly, to making sense of the immediate past in order to navigate toward a better year. To that end

“Thinking about 2021” offers some reflections on managing the stresses, financial and otherwise, that we’re under and making some sensible longer-term decisions about our finances.

“21st Century Champions” notices (with surprise) that we’re entering the third decade of the new century, one which has seen three epic market collapses and the longest bull market in modern (which I add because, who knows, the Babylonians might have done better?) history. Using the risk-sensitive screener at MFO Premium, we identified 12 equity-oriented funds that have assembled first-tier records of risk-adjusted performances across three major cycles.

“Managers with some serious explaining to do,” on the flip side, identifies 12 funds with billions in assets and deeply, consistently troubling records across the span of the 21st century. These are billion-dollar-plus funds that have trailed 90-100% of their peers for the past 3-, 5-, 10- and 15-year periods. It’s the sort of consistency familiar to Cleveland Browns fans, dwellers in The Factory of Sadness. (I’m from Pittsburgh, and even I am half-rooting for them.) There might be a good reason you own them since most were famous once upon a time, but we think it’s time to double-check.

In “Another Year of Living Dangerously,” Ed Studzinski warns of the need, even for cautious investors, to move beyond the potential futility of investing in the 60/40 fund for the decade ahead. As uncomfortable as it seems, he argues that investors need to look to the last redoubts of reasonably valued stocks: small and value, with a splash of absolute return fixed income tossed in.

In “As I Age,” our colleague Lynn Bolin takes a personal and slightly uncomfortable look at the complexity he’s created in his finances, reflects on the differences that the new chapter of life holds, and grapples with the fact that, “As we age, we will need to prepare for the eventuality that we will need help managing finances.” That journey starts here.

“Launch Alert: Towpath Technology” focuses on a new-old fund, Towpath Technology, which embodies the strategy (and the manager) that won Red Oak Technology Select a series of “Best 10-year fund” awards from Lipper across a series of market disruptions. Manager Mark Oelschlager is thoughtful about risk, growth, and valuations (“surprisingly important predictors of returns, even in tech,” he avers) and has posted some sneaky-good returns with Towpath Focus.

“Launch Alert: Wasatch Greater China” focuses on a new fund from an adviser that almost always gets it right. If England drove the global economy in the 19th century and America in the 20th, there’s a real chance that China – deeply flawed and riven with cracks – might do so in the 21st. China’s market has become both “too big to ignore” and “rich with opportunities.”

We hope that it inspires, enlightens, and encourages. Twas our goal all along.


Thanks to the 223,850 readers who joined us over the course of 2020. Regardless of whether you joined in the MFO discussion board, wrote any of us, provided financial support, or wished we published a print version of the Observer so that you could crumple it up and hurl it with due force against the wall, you’re the reason we exist.

Thanks to those who did share financial support through checks (Fitz, Wilson, Dan, the Nikolai Family, Edward, Ben, John, Nick and Deb, S&F Investment Advisors, Mitchell, and several very generous but anonymous donors), one-time PayPal contributions (Jane from Rohnert Park, Charles R, Binod from Houston, Kevin, Jeroen, Richard, and Kevin from Brooklyn) or automatic monthly donations through PayPal (David, Doug, Gregory, William, Matthew, the other William, and Brian).

Thanks to the folks who’ve shared books with us for our winter reading: David Sherman at Cohanzick and the good folks at Litman Gregory and at Cook & Bynum. We’re waiting for a good blizzard to crack the covers!

With thanks and good cheer, on behalf of Chip and me, Ed, Charles and Lynn, and the other David and Raychelle who toil under the hood,

david's signature

Another Year of Living Dangerously

By Edward A. Studzinski

“Finance is the art of passing currency from hand to hand until it finally disappears.”

Robert Sarnoff (1918-1997), creator of the RCA conglomerate

So, to paraphrase Churchill, are we actually at the end of the beginning, at least as it pertains to the war against the coronavirus? Well, maybe. In this country, there are two vaccines approved, and globally we are looking at a total of four at this point that seem to meet the hurdle rate of at least fifty percent efficacy (Oxford-Astra Zeneca and Sinopharm (China) being the other two). Just as getting fiber optic cable laid that last mile to a home being the most challenging and most expensive exercise, getting the vaccines into the arms of the population seems to be the problem. And then, of course, there are now the politics of deciding which part of the population goes first.

Much to my surprise, the United Kingdom seems to have a solution that is working on getting a large part of the population inoculated. Prioritization is done based on age, oldest first, and appointments are given by postal code. This would seem to be a quick way to get large numbers of people inoculated on the first pass in Chicago, accessing databases for voting and driver’s licenses and mailing out the appointment cards. But that is probably too simple.

Where to Invest?

Projected 10-year returns, courtesy of Research Affiliates’ Asset Allocation Interactive

That is a good question with no immediate answer. With interest rates as low as they are and markets across the board as high as they are, what is the correct asset allocation? The traditional 60% equity/40% fixed income allocation, which is the classic balanced fund allocation used by many defined benefit pension plans, does not work at present. Specifically, looking forward to the next five to ten years, the expected returns from the equity portion as well as the fixed income portion are lower than they ever have been before in this country. One usually expected one to anchor and offset the other over time and in volatile markets. Not now. Put bluntly, there is no margin of safety in either asset class.

So, what is to be done? Certainly not cash, where if you are getting one or two basis points on a money market fund, you are doing quite well. But your purchasing power will be eaten away by inflation, especially given that the Federal Reserve will be trying to inflate away the nation’s debt (and will succeed in continuing to drive the dollar lower).

Previously I have argued for uncorrelated investments in periods such as this. Large capitalization, liquid equities, especially tech, are overvalued, even taking into account the low interest rate scenario. Smaller capitalization equities, especially value, are generally not. But in both instances, beware of situations where the business has too much debt leverage. You are looking for asymmetric opportunities. As Howard Marks of Oaktree has said, “If you find an investment where if things go well you’ll make 30 percent and if things go poorly you lose 30 percent, it’s not a great thing.” And he also makes one other point, which is that if you have a downward market or economic fluctuation, an unlevered portfolio will make it through, a levered portfolio will not.

One other point I think that Howard Marks makes so well applies to for-profit as well as not-for-profit businesses. “Most of the real challenges in economic history have come from people who have overestimated their ability to live through bad times with a leveraged structure.”

So, where to invest? I think ultra-short fixed income, especially very low duration, is an area of interest (and like David Snowball, I am a fan of RiverPark Short Term High Yield fund). I am also a fan of the now-closed FPA New Income fund, which I own. In terms of small-cap value funds, there are a number on our list. That is an area I am thinking about still, as a number of those funds are starting to embark on succession plans with new co-managers brought in. What I would say is, don’t be greedy in terms of what you should be thinking of at this time for an expected return.


Given the year we have had, why is governance important? At the investment management as well as the corporate level, you want to avoid situations where the portfolio managers or the corporate managers are putting themselves ahead of the investors or shareholders. This WILL be a year to be reading carefully the Statement of Additional Information from fund managements to see how much they have invested in their product, how much their board has invested in the product, and how they are being compensated.

For corporations, it will mean a very careful reading of the proxy to see how management compensation is being addressed. You need to be looking at total compensation in light of today’s environment. You also need to be looking at options or the other equivalents used to increase management compensation beyond salary and bonus. As many of those will be under-water at this point, look carefully to see whether they are what they are or whether a rejiggering is being proposed. Being an investor does not mean that you always come last relative to the management. Finally, look carefully at board composition, which will tell you something about whether you have a group of rubber stamps or a group of fiduciaries.

Best wishes for a better New Year!

MFO Premium Webinar: Guest Lynn Bolin and Back To Basics

By Charles Boccadoro

This coming Tuesday, January 5th, we will host two webinars about the MFO Premium search tool site, which is now in its sixth year.

Since March especially, the tools have never been more popular. We intend to discuss their overall utility in culling down from the vast number of funds available today to then maintaining a select list of candidate funds for individual investors and financial advisers alike.

The first or morning session will feature my colleague Lynn Bolin, who contributes regularly to MFO and Seeking Alpha. The second or afternoon session will be a general overview and a quick review of the newest features since the last webinar.

Some improvements since our last webinar:

  • 64 Evaluation Periods, including 6 Full Cycle and 10 Unique
  • Alternative Energy Category
  • 40 Screenshots
  • Blog Archival Feature
  • Return Greater Than Yield Screen
  • Searchable Industry Sector Allocations
  • A significant Portfolio Analysis Tool Upgrade

The morning session will be at 11 am Pacific time (2pm Eastern). The afternoon at 2pm Pacific time (5pm Eastern). The webinars will be enabled by Zoom. You are welcome to register for both webinars.

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 topics you’d like discussed, or general questions, happy to answer promptly via email ([email protected]) or scheduled call.

Things I think I think, early 2021 version

By David Snowball

I’ve been pondering things at year’s end, from elections and intransigence to the possibilities of functional government and transcendence. I’m not at all (not even 1%) sure of what 2021 will bring, and yet I need to plan for it anyway.

So, here’s a sort of think-aloud experiment in which I just share what I’ve learned in the past couple of months and where it might (or might not) lead in the year ahead. I’ll divide the essay into two sections: “stakes in the ground” represent the things I’m pretty sure are true, and “things I think I think” are possible implications if I am right.

Here are the stakes in the ground.

  1. U.S. stocks are historically expensive.

    As of 12/30/2020, the Shiller CAPE P/E ratio (technically, “a price-earnings ratio based on average inflation-adjusted earnings from the previous ten years,” which is an attempt to mitigate short-term earnings volatility) is 34.19. That would represent the second-highest p/e peak since 1860. That’s twice its historic average and 25% higher than its post-Global Financial Crisis average.

    Apologists for stock valuations make two arguments. (1) It’s a whole new world where traditional measures of valuation don’t count. And (2) it still beats the heck out of bonds. The former argument is at its loudest shortly before market crashes (remember “the fundamental measures of a stock’s value are clicks and eyeballs” during the late 90s bubble?). The latter is true, though stocks are more volatile, and it takes only a brief rise in interest rates to destabilize the market.

  2. Stock valuations were driven by zero interest rates and a sea of borrowed money.

    FINRA reports that stock investors drew a record $722 billion against their stock portfolios through November (“Margin debt reaches a record,” Wall Street Journal, 12/28/2020). Margin debt rose 50% in the last eight months. The translation: stock investors have borrowed three-quarters of a trillion dollars this year in order to buy more stocks, using their portfolios as collateral for the loan. If the value of your portfolio falls, you can be forced to sell portions off at the worst possible time in order to repay the borrower; that’s “a margin call.” And selling into a falling market triggers more selling, more marginal calls, and so on. The last two times margin debt spiked by 50% were, by the way, at the market peaks in 2000 and 2007 (per a tweet by investor Troy Bombardia, 12/28/2020).

    Unbeknownst to the borrowers, that’s a tricky business. Several guys much savvier than me (think: John Rekenthaler, “Robinhood was indeed too good to be true,” 12/21/2020, and Jason Zweig, “When the stock market is too much fun,” 12/11/2020) have made fairly convincing arguments that the Robinhood trading platform encourages rampant risk-taking by inexperienced (Covid-dimmed) investors. Regulators in Massachusetts are pursuing action against the company on the same grounds.

  3. The U.S. dollar has grown weaker, a move that will likely continue.

    The value of the U.S. dollar against a basket of other currencies has declined by 12% since March, and most analysts believe that the decline will continue as the global economy starts to snap back from the Covid-induced slump (“King dollars abdicates and that is OK,” Wall Street Journal, 12/31/2020). At base, non-US entities need U.S. dollars only to buy U.S. stuff, primarily financial assets such as stocks and bonds. And if their interest in U.S. financial assets wanes (remember those zero interest rates and ridiculous stock valuations we mentioned above?), so does the demand for – and price of – U.S. dollars.

  4. Investors are feeling cocky.

    In a research note, the Leuthold Group reported that “Lately, investor-sentiment measures have become an increasing concern. Several metrics, including the AAII Bulls less Bears, the put/call ratio, CNN’s Fear & Greed Index, the smart-money/dumb-money indicator, and the investment newsletter writers’ sentiment index all suggest optimism has become excessive” (“Sentiment Skepticism,” 12/14/2020). In commenting on the excess of margin debt, Georgetown finance professor James Angel was a bit blunter, “The stock market is euphoric right now. A lot of people are extrapolating from the recent past and going, ‘Wow, the market’s gone up a lot, and I think it’ll go up more.’ We’ve seen this play out before, and it doesn’t end well” (WSJ, 12/28/2020).

  5. “Markets can remain irrational a lot longer than you and I can remain solvent.”

    Generally attributed to John Maynard Keynes, the likeliest (though not certain) source of the aphorism is Wall Street economist A. Gary Shilling. Sensible people know that we’re ripe for a wipeout. The problem is that “the market” doesn’t know that and might well refuse to cooperate for years.

    Remember, Fed chair Alan Greenspan warned that “irrational exuberance has unduly escalated asset values” in December 1996 … three years and three months before the market peak.

Things I think

  1. There’s a chance that the federal government might act to pass a vast infrastructure bill, likely targeting “green” investments, early in the Biden administration.
  2. There’s a likelihood that the economy will begin to rebound by mid-2021 as more of us get vaccinated, and the Covid threat recedes.
  3. The companies most likely to prosper if that occurs are the firms left behind in the work-from-home / find the next Tesla (Blink Charging Co., up 2100%) / find a vaccine (vaccine maker Novamax, up 2700%) / love me my Zoom (Z.M., stock up 425% last year) meetings frenzy of 2020. Vacation destinations, airlines, hotel chains, construction firms, financials all might benefit from a rebound in the real economy.
  4. The passion for ESG / green / sustainable / impact investing will rise as all-Covid-all-the-time fades and knowledge of the climate crisis reasserts itself. That’s in-line with the Biden administration’s emphasis on the climate crisis, with a rising impulse among conservatives to find market-based green solutions rather than continuing to deny the obvious, and with the prospect that a new Secretary of Labor will suspend attacks on using ESG-screened investments in retirement plans.

    Brown Advisory Sustainable Growth is a five-star, Great Owl that we’ve profiled and that I’ve included in my own portfolio. By our reckoning, there are 42 funds that are socially-responsible and have excellent records over more than five years but “socially-responsible” covers (for the pun) a multitude of sins. Some are funds with conservative social agendas. Others pursue alternate energy or women’s global empowerment. In this area, more than most, quant screens barely scratch the surface of what you need to know.

  5. If the market doesn’t “pop,” it might well rotate. That’s what happened in 2000 when TMT (tech-media-telecom) stocks crashed, but “real economy” value stocks sailed on.

    Investors interested in small + value might want to know about Palm Valley Capital Fund (which we’ve profiled) and North Star Micro Cap (which we will).  Large + value are, indisputably, the two Yacktman funds. Folks looking beyond the U.S. might be intrigued by Johnson International, one of the very few international value funds to earn the Great Owl designation, or T. Rowe Price Global Value Equity, a tiny fund with a “Gold” rating at Morningstar.

  6. Almost all asset class projections have emerging markets, and often E.M. value, outperforming all other asset classes over the next 5-10 years. The starkest is GMO’s 7-year asset class projection, below, but the same point is made by major investors from Research Affiliates to BlackRock.

    A falling dollar (see above) drives dramatic gains in E.M. stocks. The Leuthold Group notes, “there is a close inverse relationship between movement in the U.S. dollar and E.M. stocks’ relative performance. Dollar weakness played a huge role in driving E.M. outperformance in the early 1990s and again during the 2000s … further dollar weakness may also make E.M. stocks the big winners of 2021” (James Paulsen, “A Dollar Bust Is An EM Boom!” 12/18/2020).

    If that’s the case, investors ought to consider adding EM / EM value exposure while it’s still relatively cheap. A number of fine new E.M. value funds have begun to appear, but we wanted to look at funds that have survived some of the market’s vicissitudes. We started by screening all E.M. funds by five-year performance, then identified the ones that ended up in Morningstar’s “value” style box. The top five, ranked by five-year returns:

      1-year 3-year 5-year
    Schwab Fundamental Large Company Index Fund (SFENX) -1.68 1.85 11.42
    Pzena Emerging Markets Value (PZVEX) 7.46 2.35 11.24
    PIMCO RAE Emerging Markets (PEAFX) 1.38 0.54 10.86
    Seafarer Overseas Growth and Income (SFGIX/SIGIX) 21.49 7.17 10.79
    T. Rowe Price Emerging Markets Discovery (PRIJX) 6.92 4.27 10.59

    (By way of full disclosure, I own shares of Seafarer in my personal account and T. Rowe Price in my retirement account.)

    If we broaden the inquiry to all open, retail E.M. funds, some unexplored possibilities emerge. Those include Artisan Developing World, Virtus KAR Emerging Markets Small Cap, WCM Focused Emerging Markets, and Touchstone Sands Capital Emerging Markets Growth: all five-star, Great Owl funds with retail investor minimums, first-rate managers, and exceptional performance.

  7. You need to stop reading manic-depressive financial media. The function of profit-driven media is to attract your attention. Nothing does that like alternating extremes of pessimism and euphoria. Take, for instance, this sampling of December’s insights from Business Insider:

    • Value will outperform growth for the next 4-5 years, December 1

    • The S&P 500 could gain 10% over the next year, December 2

    • The S&P 500 will soar 25% by the end of 2022, December 3

    • The U.S. will see an explosion of growth in 2021, a veritable supersonic boom, December 4

    • The stock market will crash by 70% and suffer 12 lean years, December 7

    • Small cap stocks will climb another 13% in 2021, December 7

    • Investors will enjoy double-digit yearly returns over the next two years, December 7

    • Four indicators are pointing to a roaring stock market, December 8

    • Positive feedback loop set to drive stocks higher in 2021, December 11

    • A Great Depression-like crash could strike at any moment, December 12, the same day Goldman offers 16 stocks, including one with a 159% return potential

    • Morgan Stanley’s found 90 sustainable stocks with upsides of 10-137%, December 17

    • Stocks are primed for sustained gains in a way they haven’t been in years, December 18

    • We’re in for a 61% stock market crash in the next 18-24 months, December 21

    • It could be a Roaring 20s that will end badly, December 22

    • We’re at the extreme end of the fear/greed spectrum, December 23

    • We’re a few months away from a 75% crash, December 26

    Business Insider editors would rightly point out that none of those represent the editorial judgment of the publication itself. They’re just the opinions of Wall Street Experts who’ve agreed to speak with Business Insider.

    And what makes them Wall Street Experts? Umm … their willingness to speak with Business Insider?

  8. You should avoid Yahoo

    Really, how hard could that be?

    Yahoo has a partnership with Zacks to provide a daily stream of robo-articles, presumably for cheap. Each article has the same template:

    “If you’re looking to invest in <Area X>, then you should really <consider / avoid> Fund Y because it’s rated <strong buy / strong sell> which is based on nine forecasting factors like size, cost, and past performance, and is expected to outperform its peers in the future.” A fill in the blank fund profile follows.

    A recent article on mid-cap growth funds starts with this promise: “For high returns, investors can choose mid-cap funds that bear lesser risk than small-cap funds. Mid-cap funds are unfazed by broader market gyrations” (Top 3 Mid-Cap Growth Funds to Make Your Portfolio Grow, 12/22/2020). They then recommend three funds.

    “Unfazed by broader market gyrations”? Really? The average mid-cap growth fund declined 52.5% in the 2009 bear market, and the recommended funds declined 45 – 54% at the same time. Did anyone even read that sentence before publishing it?

  9. We all should focus on the things with can control, rather than obsessing over the ones we can’t. There is an indisputable body of psychological and motivational research that all supports the same finding: the prospect of Big Changes terrifies us at an instinctual level, and all attempts at making sweeping changes in our lives fail. (Go on! Try: “I’m going to hit the gym and put in an hour of HIT three times a week, then celebrate with a vegan steak afterward.”)

    On the upside, some changes are possible and sustainable: small, concrete, measurable changes don’t scare us, quickly reassure us, and tend to stick. Take a walk to the corner and back before dinner. Have one brightly colored food at each meal. Ask your employer to bump your retirement withholding by 1%. Each change sticks and makes the next change more possible.

  10. Say thanks. Often. For small things and large. It strengthens the bonds between people, reminding them that they make a difference and that their actions matter to you. It makes a remarkable and growing difference in your psychological and physical health and in the health of the people you say it to. I’ll share the research if you’d like.


21st Century champions

By David Snowball

The second decade of the 21st century has just closed. The third decade promises turbulence in the near-term and disappointment in the longer term. A host of factors drives that pessimism. Interest rates are near-zero and likely to remain there, according to the chairman of the Fed, for years. That means that money market funds will return zero only if their sponsors waive all of their operating expenses. It also means that the long-term returns on US bonds may fall below zero because their advisers are not predisposed to offer their services for free. Investors, in response, are poured into equities and have done so using record amounts of borrowed money.

That’s driven the price of US stocks to their second-highest level in 150 years, as measured by the Shiller PE Ratio.  At 34.1 (as of 12/30/2020), it is more than double its historic average (16.8).

Over the long term, the returns you earn are conditioned by the price you pay: if you pay too much for your stocks, your long-term returns are going to be disappointing. State Street Global Advisors projects 6% long-term (10+ year) returns on equities, while BlackRock puts it at 5% and JPMorgan at 4%. And those are the professional optimists!  We needn’t even talk about the projections from GMO and those horrified by the consequences of more than a decade of financial manipulation by the Fed and others.

So, grownups say 4-6% for US equities over the next decade with high volatility and some risk of a severe price reset. Over the past decade, US growth investors have grown accustomed to 15-16% annual returns, while even much put-upon value investors have made double-digit gains. Translation: you might get slammed in the short-term and see your gains reduced by 50-75% in the long-term.

What to do?

Our recommendation: look for managers who have gotten it right, time after time.

To help identify such managers, we started with a list of 20-year, equity-oriented Great Owl funds. The Great Owl designation is earned by funds that have earned risk-adjusted returns in the top 20% of their peer groups for the past 3-, 5-, 10- and 20-year periods.

That’s really hard. There are 2076 equity-oriented mutual funds with a record of 20 years or more. Only 52 of them – 2.5% – are Great Owls. We refined the list by including only actively managed funds (42 of them, with most of the remainder being S&P 500 index funds) that are open to new investment (35 funds).

Using the screener at MFO Premium, we looked for ways to make the most relevant information comprehensible at a glance. We did that by identifying ratings that focus on returns (APR rating), risks (maximum drawdown, standard deviation, downside deviation, bear market performance, down market performance), and the risk-return balance (Sharpe rating). In our system, a blue box always represents a value in the top 20%, a green box is a value in the next 20%, yellow is the third tier, and so on.

The following table highlights the 12 best funds of the 21st century. The first six funds received perfect scores (7-for-7 top tier ratings), then four near-perfect funds (6-for-7), and two pretty durn perfect ones (5-for-7), with none receiving a score lower than green.

What does this mean?

Let’s be clear: this is not a list of the funds with the highest 20-year raw returns. That list would be topped by Lord Abbett Micro Cap Growth (LMIYX, 14.4% APR), which is not a Great Owl, and Wasatch Micro Cap (WMICX, 14.3% APR), which is. The difference is driven by our concern for what risks investors were subjected to on the road to the fund’s returns. Why? Two risks: (1) risks are sticky, and returns are not. High volatility strategies tend to remain high volatility across time, which can lead to ugly performance stretches. And (2) investors don’t stick with high volatility strategies for long.

The Great Owl funds are ones whose returns outstrip their risks, not just once in a while but in every measurement period: three years and five years and ten years and 20 years.

What’s up with these funds?

Yacktman and Yacktman Focused are almost freakishly successful, year and year, by almost every measure. They’re sort of the (pre-2020) New England Patriots of investing. Adam Sabban at Morningstar characterizes them as “half equity fund, half absolute-return hedge fund,” which favors great core businesses but is willing to hold cash, buy during panics and shop overseas. They’ve appeared in virtually every MFO essay on great risk-adjusted funds.

Parnassus Core (originally Parnassus Equity Income) is one of the oldest socially-responsible funds around. It has appeared in nearly a dozen MFO essays (Overachieving Defenders, 20 Equity Funds with the best capture ratios, Investors Guide to the End of the World, Best of the Best …) where we were screening for consistent, risk-conscious excellence.

Amana Income is an equity income fund designed to meet the needs of Muslim investors. The translation is that it holds no debt instruments, focuses on socially responsible firms with rock-solid balance sheets, then holds them forever. (Really. Reported portfolio turnover is 0%.) The only caveat is that long-time lead manager Nick Kaiser stepped down in May 2020 as part of a long-planned management transition.

Provident Trust, profiled by our colleague Dennis Baran in 2018, is a multi-cap equity fund that happily turns to bonds and cash to moderate volatility. The plan is to win over the span of entire market cycles, even at the price of lagging during some phases of the market. Dennis concluded, “Provident wants to be your manager. Singular. As in, ‘the only guys you need.’ Failing that, they’d like to be your core holding. We believe that they have made a strong argument, over 15 years and several market cycles, to be precisely that.” The fund is part of the Provident Trust Company of Waukesha, Wisconsin (site of the first legal forward pass in football history).

Jensen Quality Growth is a domestic large-cap fund that holds 20-25 “attractively priced stocks from a well-vetted universe of consistently profitable companies” (Dan Culloton of Morningstar’s phrase). At the launch of Jensen Global Quality Growth, we noted, “Across all those metrics, Jensen sits in the top tier which should be very reassuring to investors contemplating seriously unsettled markets.”

Janus Henderson Balanced has two sleeves: a large-cap US growth equity sleeve and an unconstrained fixed-income sleeve. The fixed income and equity managers decide together how much equity exposure (from 35-65%) is warranted by market conditions. A five-star fund with two flags: it’s huge ($24 billion), and the lead managers have either recently (fixed income) or imminently (equity) retired.

JHancock US Global Leaders Growth is a concentrated domestic equity fund that targets 25-30 high-quality companies with the prospect of sustainable earning growth. The focus is more on the sustainability of a firm’s growth than its raw, short-term growth metrics. From what we can tell, the internal culture encourages healthy disagreement and debate, which seems to lead to fewer investing mistakes.

LKCM Equity invests in mid- to large-cap US stocks. The targets are 60 companies with strong histories of capital allocation and stable balance sheets. Morningstar views it as a slightly underperforming large growth fund, while Lipper (and the firm) view it as an outstanding multi-cap core fund. The key concern here is that the lead manager, Luther King, is 80, and the firm is famously tight-lipped about their plans and perspectives. Mr. King added two co-managers in 2010, including his son.

Madison Dividend Income is a (mostly) domestic, (mostly) large-cap equity fund that holds about 40 names. They first target stocks with yields exceeding the S&P 500’s but have a special attraction to companies with a “history of increasing dividend payments in the past, and a business model which supports the possibility of continuing these increases in the future.” Although they stay fully exposed to the stock market, they stress a “participate (in bull markets) and protect (in bears)” philosophy. Historically, it has captured three-quarters of the market’s upside and less than two-thirds of its downside, which illustrates the principle at work. Before 2012, this was the Madison Mosaic Balanced Fund.

Meridian Contrarian is the only small (or small-to-barely-mid) cap fund on the list. The managers target “fallen angels,” high-quality businesses that are faced “real business challenges” but whose managers have and can execute a turnaround plan. They buy the firms when they’ve stumbled (and hence are historically cheap) and hold on while monitoring the turnaround. As sketchy as that might seem, the fund has a top-five capture ratio and exceptional risk scores.

Columbia Dividend Income is a large-cap, domestic equity fund that targets firms with steady-to-increasing dividend payouts. The managers prefer “sustainable growth” to “fast growth” and seem pretty skeptical of the tendency of management to cook the books in order to generate attractive financial metrics. They’ve got a “to have and to hold” mindset: they have about 80 stocks and hold them about four-times longer than their peers do. The flags here might be the fund’s size, $28 billion, and the persistently modest level of insider investment.

To learn more, use the Search function at MFO, which will lead you to the articles that mention them. Morningstar has analyst coverage of several and ratings on all. Remember, though, that our ratings tend to be more risk-sensitive than Morningstar’s and our assessment periods are different (we’re looking at 20 years here), so the funds highlighted here can range from three- to five-star offerings by Morningstar’s measure.

The complete list of 35 open, 20-year Great Owl funds is available here. (Chip’s warning: the file is printable, but is formatted for legal-sized paper. Otherwise, screen reading will work best.)

As I Age

By Charles Lynn Bolin

I won’t grow up,
I don’t want to wear a tie.
Or a serious expression
In the middle of July.
And if it means I must prepare
To shoulder burdens with a worried air,
I’ll never grow up, never grow up, never grow up
Not me,
Not I,
Not me!

Peter Pan

Several readers have asked that I expand on a comment I made about aging a few months ago. This is a hard article for me to write because it means looking at investing from a different perspective. The typical American works 30 to 50 years before retiring and must save enough to last another 20 to 30 years, or more. This means saving diligently and investing wisely while working, and managing expenses and risk during retirement.

This article is set up in the following sections, so readers may skip to sections that interest them. Key points are added at the beginning of each section for those who want to skip ahead.

  • Section 1 of this article is an introduction to preparedness for retirement
  • Section 2 covers the investment environment to determine allocations
  • Section 3 covers the dilemma of investing with high valuations and low-interest rates
  • Section 4 looks at simplifying the portfolio as a partial solution to aging.
  • Section 5 covers the role of financial advisors and managed accounts

1. Introduction

Key Point: As we age, we will need to prepare for the eventuality that we will need help managing finances. We need to leave our finances in order for our loved ones in case of unplanned circumstances.

I am grateful to the gentleman living in Florida who introduced me to Mutual Fund Observer in 2018. He was retired and about six years older than I. His words of wisdom stuck in my mind, and I pass them along.

“So, just like Bear Markets (you know you will get them) … the same is true for Hurricanes (you know you will get them) … so it’s good to take precautions and have a defensive strategy…

IMHO, any self-managed retirement financial plan should consider normal and above normal cognitive decline/impairment to handle or modify a portfolio at 5-year intervals as the retiree and spouse age. Complex portfolios and systems may be harder for the retiree or their spouse to handle as they age. 

In other words, what looks to be working at age 65 may not be working the best at age 75. There are many academic studies in this area as well as articles on sites such as Seeking Alpha:

Defending Your Retirement Financial Plan from Cognitive Decline [by ISTJ Investor]”

I found other articles by ISTJ Investor and began following him on Seeking Alpha. An insightful article on retirement planning, Creating Your Retirement Financial Plan, suggests putting your goals in writing with some well thought out suggestions. I plan on retiring within a couple of years and have printed a copy for when I sit down with my financial advisor. The advice is pertinent to those in their 40’s but becomes more so immediately before retirement. ISTJ Investor addresses one question that I struggle with, “Should you consolidate accounts to simplify and lower fees or maintain accounts at different institutions to diversify?” I choose the latter to protect against potential poor performance or changes at an investment company.

I read an early edition of Retire Secure!: A Guide To Getting The Most Out Of What You’ve Got by James Lange about a decade ago. I was fortunate to implement strategies to be better prepared for retirement, such as preparing lifelong budgets and changing to a Roth 401k instead of a traditional Roth.

When I began working overseas and prepared my finances for long periods away from home, Charles Schwab also had some words of wisdom about family finances that stuck with me for nearly two decades.

“Put bluntly, do all you can to ‘teach your wife to be a widow’-or, if you, as the wife, are in charge of the finances, ‘teach your husband to be a widower’. Take the saying metaphorically: Don’t let yourself, or anyone in your family, be indispensable in terms of understanding family finances.”

Charles Schwab’s New Guide to Financial Independence

There have been several enlightening moments that have impacted my wife’s and my philosophy for savings. Best laid plans are often interrupted through circumstances beyond our control. Retirement strategies should address risk and be simple. Financial advisors should be consulted and managed accounts evaluated.

2. Investing Environment and Strategy

Key Point: High valuations and low-interest rates should be factored into expectations for lower returns over the next decades.

For the 20 year period from 1962 to 1981, large-cap stocks returned 2.8% without dividends or 6.7% with dividends re-invested. (Source: S&P 500 Return Calculator, with Dividend Reinvestment) Dividends averaged 3.9%. Adjusted for inflation, stocks returned 0.8% with dividends re-invested. For the 18 year period from 1982 to 1999, stocks returned 15.0% without dividends and 18.6% with dividends. Dividends averaged 3.1%. For the 13 year period from 2000 to 2012, the stock market returned -0.2% without dividends or 1.8% with dividends or -0.6% when adjusted for inflation with dividends. Dividends averaged 1.9%. There are several key takeaways from these points. First, there are long periods where stocks have low returns. Secondly, dividends have been declining for decades and will play a smaller role in portfolio income and protection. Thirdly, high valuations are a reliable indication of lower returns in the future. These are realities that investors face today.

Figure #1 shows the investment model I built based on over 100 economic, financial, monetary policy, and risk data series mostly available at the St. Louis federal Reserve. The model takes into account valuations, dividends, interest rates, and stock technical indicators. These indicators are composited into a single indicator (dashed blue line) that measures the investment environment. The investment environment is poor. The government is injecting massive stimulus for this reason. The dark blue line is my allocation to stocks based on the main indicator and capped using Benjamin Graham’s guidelines of never having more than 75% in stocks nor less than 25%. The model has advocated a low allocation to stocks partly due to falling interest rates and rising bond prices. The dark red line is the percent of indicators that are negative, giving a qualitative feel of the risk in the environment. The shaded area is a rules-based momentum of the main indicator indicating potential time periods where an investor may want to be more or less aggressive. It is not intended as a short term timing tool.

Figure #1: Investment Environment 

Source: Created by the Author

In my opinion, current high stock prices price in high optimism for economic recovery and benefits from a stimulus. Jeffrey Kleintop at Charles Schwab summarizes my concerns for 2021 in Top Five Global Investment Risks In 2021, which I paraphrase below:

  1. Slower than anticipated vaccine rollout
  2. Continued geopolitical and trade tensions
  3. Negative reaction to stimulus tapering 
  4. Zombie companies with insufficient cash flow to covert debt payments
  5. Weak dollar with interest rate shock and inflation

Figure #2 is a simpler view of the same investment model. It shows the value of $1 invested in 1995 following this method (blue line) compared to $1 invested in the S&P 500 with dividends re-invested (orange line). The strategy of the investment philosophy is that lower returns are required when drawdowns are minimized. While this strategy is working now, as I age, I need to simplify and put things on auto-pilot.

Figure #2: Investment Model Allocations 

Source: Created by the Author

This concept is illustrated using Portfolio Visualizer (link) with Payden Global Fixed Income Fund (PYGFX), the conservative Vanguard Wellesley Income Fund (VWINX), the moderate Vanguard Wellington Fund (VWELX) compared to the S&P 500. It took a decade for the returns of the S&P 500 to catch up to the more conservative funds. This is a critical point for retirees living on investment income.

Table #1: Comparison of Risk Managed Funds Following a Major Bear Market

Source: Created by the Author Using Portfolio Visualizer

Figure #3: Performance of Asset Classes Following Major Bear Markets. 

Source: Created by the Author Using Portfolio Visualizer

3. The Dilemma

Key Point: Diversification and managing risk take on higher importance in the coming decades.

The Investment Model does not know about COVID-19, rising cases and deaths, vaccines, and increasing lockdowns. That is where investors have to use their interpretations of the environment and risks. The current investment environment is high valuations, high deficits and debts, aging demographics, high unemployment, low dividends, and low-interest rates in a pandemic that I expect will gradually get better over the next 12 months. This forms my belief that the next decade or two will likely see higher volatility and lower returns. Uncertainties exist longer-term over inflation and the value of the dollar.

Figure #4 shows the same time period using a multi-sector income fund, flexible income, and portfolio funds as possible supplements to a traditional 60% stock/40% bond portfolio.

Figure #4: Performance of Flexible Asset Classes Following Major Bear Markets

Source: Created by the Author Using Portfolio Visualizer

Table #2 shows a summary of all no-load funds by category since 2007. Capital refers to the percent of assets under management. For example, of all funds extracted, only 1% of assets under management are in the Global Income category. Mixed-Asset categories are the most common, with Flexible Income, Flexible Portfolio, and Alternative Global Macro also being popular. Long Term Capital Gains (LTCG) is shown as an approximation of tax efficiency. I have broken the categories into six groups based on risk and risk-adjusted returns. For a retirement portfolio, I favor the first three groups for stability, Group 4 for income, and prefer to minimize assets held in the more aggressive group.

Table #2: Historical Performance of Fund Categories Over the Past 15 Years

1) Lower Risk – Higher Risk-Adjusted Returns – Higher Yield – Lower Correlation to Stocks
Lipper Category Capital % LTCG % APR Martin Ratio MAX DD % Ulcer Index Yld R vs SP500
Global Income 1 50 6.8 3.7 -6.6 1.5 2.1 0.6
Abs Return Bond 2 37 4.9 2.6 -6.7 1.6 3.3 0.6
Mxd-Ast Trgt Today 5 82 7.7 3.7 -6.8 1.7 1.9 0.9
Multi-Sector Income 2 62 6.9 3.5 -7.6 1.8 2.9 0.7
Alt Multi-Strategy 1 64 4.5 2.2 -6.7 1.9 2.1 0.7
2) Lower Risk – Moderate LTCG – Variable Risk-Adjusted Returns – Lower Yield – High Correlation to Stocks
Mxd-Ast Trgt Consv 9 79 9.0 3.8 -8.6 2.0 2.7 0.9
Absolute Return 1 37 5.2 1.6 -8.9 2.6 1.8 0.8
3) Moderate Risk – Moderate LTCG – Moderate Risk-Adjusted Returns – Lower Yield – High Correlation to Stocks
Mxd-Ast Trgt Mod 7 60 10.1 2.7 -12.4 3.3 1.7 1.0
4) Moderate Risk – Moderately High LTCG – Lower Risk-Adjusted Returns – Higher Yield
Alt Global Macro 4 78 4.9 1.0 -12.7 3.8 3.7 0.8
Flexible Income 8 76 7.0 1.5 -15.2 3.8 5.0 0.8
5) Diverse Group – Moderate LTCG – Moderate Yields – High Correlation to Stocks
Flexible Portfolio 11 52 7.1 1.8 -13.9 4.0 2.6 0.9
6) Aggressive – Moderate Risk-Adjusted Returns – High LTCP – Moderate Yield – High Correlation to Stocks
Mxd-Ast Trgt Growth 25 97 10.8 2.4 -14.5 4.1 1.9 1.0
Equity Income 23 87 13.8 2.3 -19.0 5.5 1.9 1.0
S&P 500 Index     14.5 2.3 -19.5 5.7 1.6 1.0

Source: Created by the Author Using Mutual Fund Observer

4. Simplifying the Portfolio

Key Point: We won’t all be as fortunate as Warren Buffet in health and managing finances and need to prepare for diverse possibilities.

At 65, I prefer to manage my own portfolios but consult with a Financial Advisor once a year. I recognize the need to simplify and set things up in case my wife needs to manage investments. Having a financial advisor can add several thousand dollars of expenses per million dollars of assets. Simplifying portfolios is a step in the direction of more reliance on financial advisors and managed accounts.

Each month, I use Mutual Fund Observer to track the performance of about 500 funds based on Risk, Risk-Adjusted Performance, Momentum, Yield, and Quality. This month, I separated the 100 funds that I will focus on for retirement. These funds are ranked and put into buckets, which are shown below in order of preference. Funds are ranked based on historical performance, but short-term metrics are shown to catch the impact of low-interest rates and trends. Flow refers to money flows into or out of the fund as a percentage of assets. SMA10 is the ten-month moving average, showing whether funds are at the bottom of a trend or toward the top.

Bucket #2 is for funds that should be moderately safe and that investors may need to withdraw in two or more years. As shown previously, the Vanguard Wellesley Income Fund (VWINX, VWIAX) has outperformed the S&P 500 for periods lasting more than a decade, as I expect it to do during the coming decade.

Table #3: Retirement Bucket 2 Funds

Bucket #2 Three Month  
Symbol Name Lynn’s Rank Rtn Trend Flow Yield SMA10
BACPX BlackRock 20/80 Trgt Alloc 89 2.6 2.4 4.2 2.0 1.5
AOK BlackRock Core Cons Alloc 86 2.2 2.5 2.0 2.2 0.7
FIKFX Fidelity Freedom Inc 83 1.6 1.7 6.7 1.4 2.2
VWIAX Vanguard Wellesley Inc 73 3.7 3.3 -6.7 2.8 -0.5
FTANX Fidelity Asset Manager 30% 69 2.9 2.8 1.7 1.5 0.9
Average 80 2.6 2.5 1.6 2.0 1.0

Source: Created by the Author Using Mutual Fund Observer

Bucket #3 contains funds that are a little risker than those in Bucket #2. They will have higher drawdowns than those in Bucket #2 but will outperform over longer periods of time.

Table #4: Retirement Bucket 3 Funds

Bucket #3 Three Month  
Symbol Name Lynn’s Rank Rtn Trend Flow Yield SMA10
HNDL Strategy Shares Nasdaq 7HANDL 100 2.0 2.9 44.3 6.6 1.5
FMSDX Fidelity Multi-Asset Inc 98 4.3 4.9 10.7 3.3 2.2
COTZX Columbia Thermostat 94 3.5 3.6 3.6 1.6 13.7
ETIMX Eventide Multi-Asset Inc 93 7.0 4.3 2.6 2.1 1.9
SWYDX Schwab Target 2025 85 3.8 4.1 2.6 1.7 -0.1
Average 94 4.1 4.0 12.8 3.1 3.8

Source: Created by the Author Using Mutual Fund Observer

The Income Bucket contains safer funds with higher yields. I put High Yield (junk bonds) in Bucket #3.

Table #5: Retirement Income Bucket Funds

Income Three Month  
Symbol Name Lynn’s Rank Rtn Trend Flow Yield SMA10
DIAL Columbia Dvrsfd Fixed Inc Alloc 96 1.6 1.6 8.3 2.7 1.7
GIBIX Guggenheim Total Rtn Bond 92 2.3 1.5 2.7 2.5 6.7
SWLRX Schwab Month Inc-Max Payout 84 1.7 1.7 1.2 2.3 1.2
ADVNX Advisory Research Strat Inc 79 2.1 1.8 1.3 2.2 3.5
AIMNX Horizon Active Income 75 1.2 1.4 1.0 2.2 1.8
Average 85 1.8 1.6 2.9 2.4 3.0

Source: Created by the Author Using Mutual Fund Observer

For alternatives, I look for funds that manage risk and have good risk-adjusted returns.

Table #6: Retirement Alternative Bucket Funds

Alternatives Three Month  
Symbol Name Lynn’s Rank Rtn Trend Flow Yield SMA10
CRAZX Columbia Adaptive Risk Alloc 90 1.8 3.6 0.8 2.5 0.0
TMSRX T Rowe Price Mlt-Strgy Tot Rtn 87 2.4 1.2 10.8 2.3 4.1
BASIX BlackRock Strat Inc Oppor Portf 76 2.7 1.9 2.0 2.4 0.0
ARBIX Absolute Conv Arbitrage 71 2.0 1.1 6.2 0.4 2.5
SUBFX Carillon Reams Uncons Bond 64 1.9 1.5 0.2 2.3 4.5
Average 77 2.2 1.9 4.0 2.0 2.2

Source: Created by the Author Using Mutual Fund Observer

Global Bonds may benefit if the dollar continues to weaken.

Table #7: Retirement Global Bond Funds

Global Bond Three Month  
Symbol Name Lynn’s Rank Rtn Trend Flow Yield SMA10
VEMBX Vanguard Emer Markets Bond 97 2.5 2.6 7.4 3.5 2.0
FCDSX Fidelity Intern Credit 72 2.8 1.6 0.0 2.9 0.2
PFORX PIMCO Intern Bond (US$-Hdg) 67 2.1 0.6 1.1 5.8 0.7
MDWIX BlackRock Strategic Global Bond 65 1.5 1.3 6.4 1.4 2.2
Average 75 2.2 1.5 3.7 3.4 1.3

Source: Created by the Author Using Mutual Fund Observer

Under favorable conditions, I may invest in Bucket #4 funds, which contain S&P 500 funds.

Table #8: Retirement Bucket 4 Funds

Bucket #4 Three Month  
Symbol Name Lynn’s Rank Rtn Trend Flow Yield SMA10
DIVO Amplify CWP Enh Div Income 99 5.3 5.1 18.6 4.6 -1.7
QUAL BlackRock USA Qual Fact 95 4.9 6.3 15.4 1.5 -1.4
SPY State Street SPDR S&P 500 91 3.9 6.0 4.7 1.6 -1.0
FITLX Fidelity US Sustainability 88 4.1 6.0 5.4 1.1 -1.1
CDC VictoryShares US EQ Inc Vol Wtd 82 8.7 7.0 0.2 2.6 -0.3
Average 91 5.4 6.1 8.9 2.3 -1.1

Source: Created by the Author Using Mutual Fund Observer

5. Financial Advisors and Managed Accounts

Key Point: We need to rely on experts in investing similarly to how we rely on doctors for health care services.

“Why on Earth should I hire you when I can manage my own money? I have a 401k, and if I want to make other investments, there’s a ton of information and advice available on the internet.”

That question is asked and answered in Is It Worth the Money to Hire a Financial Advisor? by The Balance. When shopping for a vehicle, I go to the internet and look at reviews, prices, and options. Once I narrow my choices, I go to the dealer and take a test drive. It doesn’t work this way with financial advisors. Go to the websites, and there is generic information with an invitation to call for more information. I read plenty of reviews and comparisons about Charles Schwab, Fidelity, and Vanguard, and there is information available about robo-advisors and fees, but not much else.

Let’s begin with changes that face us as we transition from work to retirement. Many of us began saving in Traditional IRAs or 401ks. These funds require minimum distributions (RMDs) when the investor turns 72. These distributions are taxed as ordinary income and may push a retiree into a high tax bracket when combined with other income and social security. There are advantages to contributing to a Roth IRA for many people, such as paying the tax now and letting the investments grow tax-free and no RMDs. For someone retiring before age 72, there may be the opportunity to convert a traditional IRA to a Roth IRA while incomes have dropped and before RMDs begin or starting Social Security Benefits, with the goal of converting while in a lower tax bracket. One should be aware that converting too much may increase Medicare costs. The advantage of money in after-tax accounts is that Long Term Capital Gains taxes will be lower for most people than ordinary income taxes.

Investment companies usually provide education about RMDs such as Charles Schwab, Fidelity, and Vanguard. Fidelity offers Simplicity RMD Funds, which will estimate RMDs for investors. These companies offer services to automatically transfer RMDs for retirees.

There are many reasons to consider using an advisor, but how can you find one you can trust? The following is from Vanguard Advisor’s Alpha, which describes how advisors add value. One thing that I really like about Vanguard is its unique structure in which the company is owned by the funds and thereby the investors. Vanguard Personal Advisor Services is a good starting point for research.

“For many advisors and clients, the answer [to how do advisors add value] would be ‘better than the market,’ but a more pragmatic answer for both parties might be ‘better than investors would most likely achieve if they didn’t work with a professional advisor.’ In this framework, an advisor’s alpha is more aptly demonstrated by relationship-oriented services as just mentioned—providing discipline and reason to clients who are often undisciplined and emotional—than by efforts to beat the market…”

The two largest benefits to having an advisor are for counseling on taxes and helping an investor maintain discipline. I read dozens of articles describing the advisory services available but none as succinct as Schwab vs. Vanguard by Backend Benchmarking.

“Because of its position as one of the largest asset managers in the world, Vanguard can build comprehensive plans via Personal Advisor Services [PAS] with live advice for all of its robo clients for a low fee of 0.30%, a sizable discount compared to similar offerings that offer live advice. At Vanguard, all financial planning centers on the direct client–advisor relationship. Working with a Certified Financial Planner, users can plan for multiple long-term investment goals and receive a complete illustration of their financial life by building a personal financial plan encompassing all of an investor’s various accounts. Though their digital planning tools are not as robust as those offered by some start-ups, their individualized approach available to all PAS clients stands out. Custom financial plans can incorporate complex financial situations, multiple retirement income streams, and the incorporation of accounts held outside of Vanguard. Vanguard is a quality option because of its emphasis on the human experience and low costs.”

“Schwab also provides a range of digital financial and retirement planning tools as well as access to live advisors at their Premium service level. Although it is not guaranteed, users can request to work with the same advisor each time, allowing for a level of personalization. For digital planning, Schwab allows users to create multiple independent goals, as well as prioritize each individual goal by importance into one unified plan. Users can model future account values, create a clear target goal, and see their likelihood of financial success.”

“For those who want a planning approach that is centered on live-advisers, PAS is a good choice. Investors who are looking for a combination of live advice with a robust digital planner should consider Schwab.”

For an independent review of Vanguard in Investopedia, Vanguard Personal Advisor Services Review is a good summary. Accounts up to $500,000 are assigned to a group of advisors, while accounts above that level are assigned a dedicated advisor.

Fidelity Personal and Workplace Advisors is an independent review of Fidelity by Lending Tree. I like the following feature:

“Beyond these offerings, clients willing to invest $200,000 can access a model portfolio provided by BlackRock that aims to find mutual funds and exchange-traded products that will provide risk-adjusted income given the prevailing market conditions.”

For those who want some assistance in selecting investments but are not ready for a financial advisor, an intermediate robo-advisor may be an appropriate option. Descriptions are available at Vanguard Personal Advisor Services Investment, Fidelity Go, and Charles Schwab Intelligent Portfolios.

“Vanguard Personal Advisor Services (PAS) was launched in 2015 to provide algorithmic and human investment advice for client funds placed at wholly-owned broker-dealer Vanguard Marketing Corporation (VMC). When the product was originally launched, the existing retail brokerage customers at Vanguard were the focus as that group got closer to retirement age. As they head into retirement, Vanguard PAS helps them shift from building wealth to drawing it down in a smart way.”

There are comparisons available from independent reviewers:

“But even with all of their retirement planning tools and a decent rate of return, Fidelity offers the ability to plan for retirement and use the latest tools to test your strategies and possibly expand your portfolio.

Vanguard is best for long-term mutual fund investors who really like Vanguard-sponsored trades. However, in-depth research tools, customizable charts, and a great mobile app make Fidelity the ideal online brokerage for most of today’s investors.”


I have saved diligently since getting stable employment. Income is diversified across funds, pensions, and social security. I paid off my home mortgage last month. The next step for me, as I age, is to meet with financial advisors to fine-tune the transition from work to retirement, particularly for tax planning purposes. I am talking to financial advisors to discuss this and financial advisor services and managed accounts. I favor diversifying across financial companies as well as assets.

I use Charles Schwab, Fidelity, and Vanguard and like each for their strengths. I use the Charles Schwab Intelligent Portfolio as a trial and use Fidelity advisor services with high satisfaction. Over the next five to 10 years, I need to simplify and rely more on financial advisors and possibly managed accounts. Familiarity with the companies and products is a good start, but the only way to know about the retirement services is to set up an appointment.

I won’t grow up,
I don’t want to wear a tie.
Or a serious expression
In the middle of July.
And if it means I must prepare
To shoulder burdens with a worried air,
I’ll never grow up, never grow up, never grow up
Not me,
Not I,
Not me!

Peter Pan

I wish everyone a safe and prosperous New Year!

Managers with some serious explaining to do

By David Snowball

There are about 7,000 mutual funds. Of those, 3,800 have been around for 20 years or more. Of these long-lived funds, over 1500 have more than a billion in assets.

You’d think “large and long-lived” were synonymous with “successful.” Not so much. A few of the funds have been consistently top-notch, and the vast majority have been miscellaneously mediocre.

But only twelve have managed to combine huge asset bases with decades of bottom-tier performance. They are

The Roll Call of the Wretched.

In order to earn a spot on this Rollcall of the Wretched, you had to meet two basic criteria: (1) you needed to have more than $1 billion in assets, and (2) you need to trail at least 90% of your Morningstar peers for the past 3, 5, 10 and 15 year periods. For context, we added two bits of information that you might find useful: (1) the longest-serving manager’s tenure and (2) the fund’s 2020 performance through Christmas. Some of the funds were marginally less awful in 2020 than over the long term, but we did not use 2020 as part of the screening criteria because it’s a short period and a weird year.

The Roll Call of the Wretched, 2020

  Lead manager / since 2020 3 yr 5 yr 10 yr 15 yr
ClearBridge Aggressive Growth SHRAX Richie Freeman, 1983 89% 97 99 90 94
ClearBridge Value LMVTX Sam Peters, 2010 85 96 97 94 100
DFA Two-Year Global Fixed-Income DFGFX David Plecha, 1996 100 99 100 100 100
First Eagle US Value FEVIX Matthew McLennan, 2009 93 95 95 97 90
Franklin Mutual Shares MUTHX Deborah Turner, 2001 97 99 92 92 96
Gabelli Utilities AAA GABUX Mario Gabelli, 1996 79 91 94 98 95
JPMorgan International Advantage JFTAX Zenah Shuhaiber, 2013 84 95 97 93 94
Mercer US Small/Mid Cap Equity MSCGX Lee, Meyers and Muggia, 2005 94 91 94 91 91
Oakmark Select OAKLX William Nygren, 1996 84 99 99 91 93
Russell LifePoints Balanced Strategy RBVLX Brian Meath, 1998 90 93 93 95 93

Dishonorable mention

The New York Jets had a near-lock on their quarterback of the future, Trevor Lawrence, by virtue of 13 consecutive losses. They were scoring 15 points a game while surrendering nearly 30 and had a 75% chance of owning the top spot in the 2021 NFL Draft. Then they went and messed everything up since winning two meaningless games at season’s end and forfeiting the right to draft Mr. Lawrence to the Jacksonville Jaguars.

Two funds did likewise. They were solid locks for the list of long-term losers then, just in the last couple months of 2020, they messed everything up by surging to freakish gains.

JHancock Classic Value (PZFVX) qualified in the first draft of this essay with 3, 5, 10, and 15 ranks of 99, 99, 97, and 100. Then, in the last three months of 2020, it scored a 35.6% gain. (Not 35.6% annualized, just 35.6% total in 12 weeks.) That popped its five- and ten-year returns to the 85% percentile. But really … YTD, the fund is underwater and trailing 85% of its peers despite a 35% fourth-quarter gain!  Lead manager Richard Pzena has been on board since 1996.

A similar but smaller surge in the fourth quarter lifted Selected American Shares (SLASX) off the Rollcall of the Wretched, though barely. The fund posted an 18% gain in the quarter, boosting its five-year record to “bottom 15%”.  Chris Davis has been at the helm since 1994.

Skin in the Game

Big Disappointments

36 funds are clocking in at $50 billion or more. Three of them – all American Funds, AMCAP, Investment Company of America, and Washington Mutual – have finished in the bottom half of their peer groups for the past 3-, 5-, 10- and 15-year periods. These are not “bad” funds. They are huge, cautious, inexpensive, and intended for retirement portfolios. Those features pretty much doom them to slightly and consistently lag their peers, especially in bull markets.

If we have one piece of advice to offer investors, it would be this: if a fund’s managers and board of directors have decided that their fund is not worth their money, then it is surely not worth yours. With that in mind, we checked the personal investments made by the lead managers in each of these funds.

Despite the continuingly weak, long-term performance, the vast majority of the managers had investments of more than a million dollars (apparently fund managers make somewhat more than college professors) in their funds. The exceptions are:

Mr. Plecha at DFA Two-Year Global Fixed Income has a nominal investment after a quarter-century at the helm.

Mr. Gabelli at Gabelli Utilities has a modest investment, and his co-managers have no investments.

Messrs. Lee, Meyers, and Muggia have, collectively, invested as much in the Mercer fund as I have; which is to say, nothing.

Mr. Meath at Russell LifePoints Balanced, likewise, has not invested in his fund.

There are sometimes plausible explanations for the behavior. Sometimes a fund invests in a tiny niche or is designed for use by frequent traders or in funds-of-funds. The team at JPMorgan has not invested in their fund, which quite likely reflects the fact that they’re based in London, which would give them access to the European version of the fund while making an investment in the US version a headache. Still, the evidence is pretty consistent and persuasive: skin in the game matters, and your boss’s skin in the game matters most of all.

Thinking about the pattern of futility

Little Disappointments

Truly awful funds are rarely truly large funds. To find eye-popping ineptitude, you need to look down the size scale. Of the 4600 funds with under $1 billion in assets, three have trailed 100% of their peers for the past 3-, 5-, 10- and 15-year periods. They are CGM Focus, Highland Small-Cap Equity, and Merk Hard Currency. If you count funds that have trailed 95-100% of their peers for each period, you would add IMS Capital Value, Midas, Muhlenkamp, Northeast Investors Trust, Permanent Portfolio Short-Term, Upright Growth, and Value Line Tax-Exempt. Collectively, they hold just over $1 billion, with the majority in three funds: CGM, Muhlenkamp, and Northeast Investors. 

Two words of advice: Run away!

So how did apparently bad funds grow to be so large? Typically, the fund had a run of good years, got added (often too late) to your portfolio, and languished there even after the investment environment changes, the managers didn’t, and performance suffered.

And the environment has changed dramatically. The global financial crisis of 2007-09 moved the Federal Reserve to make, then to continuing making, utterly unprecedented interventions in the financial markets. At the national level, no institution moved more quickly or more decisively. Their actions might well have prevented a spiral into economic depression. But their actions also fundamentally rewrote the investment rulebook. It bought $3.7 trillion in bonds during the crisis and another trillion thereafter. It launched the Troubled Asset Relief Program (TARP), bought $9 billion in fixed-income ETFs, and provided a trillion dollars a day in overnight loans to big banks. They’ve announced a relaxation of their anti-inflation mandate and have projected zero interest rates through 2023. That’s made cash and bonds unattractive, which, in turn, made sky-high equity valuations tolerable. An equity market once described as being on steroids is now described as being on opioids.

Some once-great funds continue to resist the song of the “newest normal,” which has led to performance that substantially lags their more-flexible (or less principled, depending on your view) peers. One way to examine that guess is to look at the funds’ relative performance before and after the global financial crisis of 2007-09.

Below we report each fund’s full market-cycle performance for the cycle that immediately preceded the global financial crisis (a cycle that began with the bursting of the dot-com bubble) and for the cycle that includes the crisis. The results do not perfectly align with the table above because here, we are using the MFO Premium screener and the Lipper Global Datafeed to capture market-cycle performance, where above, we used Morningstar data and categories to capture trailing periods.

Relative performance of funds against their Lipper peers

  2000-2007 2007-19 Change
DFA Two-Year -3.4 -2.4 +1.0
JHancock Classic +5.4 -1.8 -7.2
Oakmark Select +6.4 +0.1 -6.3
Selected American +2.6 -1.6 -4.2
Mutual Shares 2.2 -1.2 -3.4
ClearBridge Value -1.1 -4.4 -3.3
Russell Balanced +0.4 -2.1 -2.5
ClearBridge Aggressive +0.8 -1.1 -1.9
Gabelli Utilities -0.1 -0.5 -0.4
First Eagle US n/a +0.8 n/a
JPMorgan Int’l n/a -1.5 n/a

Here’s how to read the table: JHancock Classic Value returned 5.4% more than its average peers from 2000-2007 but 1.8% less from late 2007-2019, a relative decline of 7.2% between the two periods.

On the whole, eight of nine funds have better relative performance before the global financial crisis (when six were clear market leaders) than after. Two funds weren’t around in 2000, and one, Mercer US Small/Mid, does not appear in the Lipper database. (We’re investigating.)

In general, the failure (or principled refusal) to adapt to the new reality (or temporary insanity) of the market post-2008 offers a plausible explanation for the prolonged failure. Investors who anticipate a return to pre-2008 market rules might have cause to hold on.

The special case of DFA Two-Year Global Fixed Income

By MFO’s calculation, this is actually a Great Owl fund: one which lands in the top 20% of its peer group, based on risk-adjusted returns, for the past 3-, 5-, 10- and 20-year periods. The Global Income group is a mishmash at both Lipper and Morningstar, including high-yield and government bond funds, regional and global. In general, though, it’s dominated by intermediate-term funds that offer more thrills and more spills than an ultra-short fund like DFA. DFA’s effective maturity right now is measured in months rather than years; it has the lowest standard deviation (by far) and highest Martin ratio (by far) of any fund in its group – but it also has nearly the lowest total returns. In short, low returns for ultra-low volatility.

Bottom line

If you’re invested in one of the 10 (or 12) funds above, you need to have a serious talk with your fund’s manager or the financial adviser who placed you in the fund. “A serious talk” means precisely what it sounds like: these funds might be perfectly appropriate to your portfolio, they might embody a discipline in which you have unshakeable faith, and they might have virtues that are important to you but which aren’t captured in performance metrics.

Or they might be horrible mistakes made long ago and allowed to drift toward the rocks.

You owe it to yourself to know which. If it’s the latter, accept the fact that mistakes happen (I owned Muhlenkamp Fund MUHLX for several years longer than was good for my portfolio, but he was a Pittsburgh guy – kind of stubborn, but still a Steelers fan – who’d made me a lot of money over the years until “stubborn” became “intransigent” and we hit the rocks) and move on!

Move where? Start with this month’s feature on the greatest of the Great Owl funds: funds with a strong equity component and top tier risk-adjusted returns over the past 3, 5, 10- and 20-year periods. While there are no guarantees in life, starting with investors who’ve gotten it right for decades, across a range of market conditions and challenges, is a solid place to start.

Funds in Registration

By David Snowball

The Securities and Exchange Commission, by law, gets between 60 and 75 days to review proposed new funds before they can be offered for sale to the public. Fund companies anxious to have a new fund up and running by December 31st need to have it in the hopper by the third week in October at the latest. This month brings a far more sedate pace of launches with 14 new products in the pipeline, most of which will launch in February.

That said, the new funds are being offered by some absolutely A-tier advisers, which might explain their willingness to launch at unconventional times. Among the advisers are DoubleLine, MacKay, Seven Canyons, Touchstone Sands, and WCM. My early bet would be that all of these funds will be gathering a lot of attention in the next couple of years. The teams really are good. Read on!

Ashmore Emerging Markets Corporate Income ESG Fund

Ashmore Emerging Markets Corporate Income ESG Fund will seek to maximize total return. The plan is to pursue “debt instruments of all types” issued by corporations that have survived a fairly vigorous ESG screen. The “all types” proviso encompasses junk bonds, EM corporate bonds, and other spicy fare. The fund will be managed by a team from Ashmore. Its opening expense ratio has not been disclosed, and the minimum initial investment for “A” shares will be $1,000.

DoubleLine Multi-Asset Trend Fund

DoubleLine Multi-Asset Trend Fund will seek total returns in excess of its benchmark over a full market cycle. The plan is to “use derivatives, or a combination of derivatives and direct investments, to provide a return (before fees and expenses) that approximates the performance of the BNP Paribas Multi-Asset Trend Index.” The fund will be managed by Jeffrey Gundlach and Jeffrey Sherman, DoubleLine’s CEO and deputy CIO, respectively. Its opening expense ratio is not stated, and the minimum initial investment for “N” shares will be $2,500.

Formidable ETF

Formidable ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to follow a “multi-strategy approach, pursuing a range of investment strategies across asset classes and styles, while applying a dynamic risk management framework that seeks to provide returns uncorrelated to those of broad equity markets.” Themes, trends, and signals appear to be involved. The fund will be managed by folks from Formidable Asset Management and Toroso Asset Management. Its opening expense ratio has not been disclosed. The same prospectus covers a SMID cap and thematic ETFs as well.

Impact Shares Affordable Housing MBS ETF

Impact Shares Affordable Housing MBS ETF, an actively-managed ETF, seeks current income. The plan is to hold a portfolio comprised of investment-grade mortgage-backed pass-through securities issued or guaranteed by U.S. government agencies. The “impact” part is that at least 80% of the fund’s assets will go to mortgage-backed securities for mortgages made to “minority families, low-income families, and/or families that live in persistent poverty areas.” De facto, investing in such funds (there are only a few) makes housing more affordable for the groups targeted. The fund will be managed by Community Capital Management. Its opening expense ratio is 0.30%.

IQ MacKay ESG Core Plus Bond ETF

IQ MacKay ESG Core Plus Bond ETF, an actively-managed ETF, seeks total return. The plan is to create an ESG-screened but otherwise unconstrained intermediate-term global bond fund. The fund will be managed by a four-person team from MacKay Shields LLC, part of New York Life, which manages about $144 billion. Its opening expense ratio has not been disclosed.

JPMorgan Short Duration Core Plus ETF

JPMorgan Short Duration Core Plus ETF, an actively-managed ETF, seeks total return consistent with the preservation of capital. The plan is to principally invest in traditional fixed income sectors (for example, investment-grade corporate bonds) while also having the flexibility to allocate its assets to extended sectors such as high yield bonds and foreign and emerging markets debt. The fund will be managed by Steven Lear and Cary Fitzgerald. Its opening expense ratio has not been disclosed.

Seven Canyons Small Cap Growth Fund

Seven Canyons Small Cap Growth Fund will seek long-term growth of capital. The plan is to build a portfolio of “exceptional small companies, purchased early in their corporate life cycle, that have the wherewithal to become exceptional large companies.” The adviser uses the same bottom-up process in their other two funds to identify sustainable growth candidates. The fund will be managed by Spencer Stewart and Andry Kutuzov. Seven Canyons Advisors spun off from Wasatch, which its founder also founded. This is its first post-Wasatch new offering. Its opening expense ratio is 1.35%, and the minimum initial investment will be $2,000.

Touchstone Sands Capital International Growth Fund

Touchstone Sands Capital International Growth Fund will seek long-term capital appreciation. The plan is to apply Sands’ successful quality + growth model to create a portfolio of 25-40 international stocks. Sands screens for ESG factors that might “affect the sustainability of a company’s value‐creation potential.” The fund will be managed by Sunil Thakor and Ashraf Haque. Its opening expense ratio is 0.98%, and the minimum initial investment for Y shares will be $2,500.

USCF Midstream Energy Income Fund

USCF Midstream Energy Income Fund will seek high current income. The plan is to invest in midstream energy companies, such as those which own pipelines. In general, such firms collect steady income as they stand between fossil fuel producers and end-users and collect fees that are set by contract. The fund will be managed by Miller/Howard Investments. Its opening expense ratio has not been disclosed.

WCM China A-Shares Growth Fund

WCM China A-Shares Growth Fund will seek long-term capital appreciation. The plan is to identify a group of reasonably valued industry leaders using a bottom-up approach that seeks to identify companies believed to have above-average potential for growth. The fund will be managed by Michael Tian and Yan Gao of WCM Investment Management. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $1,000.

WCM Focused International Opportunities Fund

WCM Focused International Opportunities Fund will seek long-term growth. (Are you surprised?) The plan is to seek companies that are industry leaders with sustainable competitive advantages; corporate cultures emphasizing strong, quality, and experienced management; low or no debt; and attractive relative valuations. That’s the same mandate as its siblings, just applied to “a small number of issuers.” The fund will be managed by a team led by Gregory Ise and Tamara Manoukian. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $1,000.

WCM International Long-Term Growth Fund

WCM International Long-Term Growth Fund will seek long-term growth. (Are you surprised?) The plan is to seek companies that are industry leaders with sustainable competitive advantages; corporate cultures emphasizing strong, quality, and experienced management; low or no debt; and attractive relative valuations. The fund will be managed by a team led by Sanjay Ayer, a former Morningstar analyst. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $1,000.

Launch Alert: Towpath Technology

By David Snowball

On December 31, 2020, Oelschlager Investments launched the Towpath Technology Fund. The fund will be managed by Mark Oelschlager. The manager anticipates owning 25-40 tech stocks. The plan is to focus on firms with long-term, durable business advantages such as “barriers to entry, pricing power, network effects, limited competition, [or] lock-in effects.” His discipline is much more valuation-sensitive than tech managers generally pursue, and he focuses strongly on the durability of free cash flow metrics. This strategy is the same one the manager used at Red Oak Technology Select.

Mr. Oelschlager was the sole manager of Red Oak Technology Select Fund (ROGSX) for 13 years, from April 2006-January 2019; he also managed Pin Oak Equity Fund (POGSX), initially as co-manager then as sole manager from June 2006-January 2019. In sum, he was responsible for several hundred million dollars in assets.

There is fair evidence that Mr. Oelschlager is an exceptionally talented, albeit low-key, manager.

While running Red Oak, he received Lipper’s Best Fund Over 10 Years Science & Technology Funds award … three times in a row.

Over Mr. Oelschlager’s 13 years at Red Oak, an initial $10,000 investment grew to $43,500. In comparison, the Morningstar tech group average was $32,800. That performance helped earn his fund a spot on the Schwab Select list.

Over his first ten years as sole manager of Pin Oak, the fund outperformed its Morningstar peer group by 460 basis points (bps) annually and its Lipper peer group by just over 500 bps.

Measured as a large-cap value fund, his Towpath Focus Fund (TOWFX) posted the second-best returns among the 102 funds in the Lipper LCV group. Its 11.2% gain from January through November 2020 topped the average LCV fund by 11%. (2020 is the first full year of operation of TOWFX, which has a large-cap value portfolio, although Morningstar classifies it as a large-cap core fund, and Lipper places it in the multi-cap core group. It is outperforming its average peer in both of those groups, as well.)

The fund’s minimum initial investment is $2,000, which is reduced to $1,000 for accounts established with an automatic investing plan. So far, the Towpath funds are only available through direct investment with the firm, though they’re in conversation with Schwab, Fidelity, E-trade, and company to expand their distribution reach. The fund’s website is Oelschlager Investments.

Launch Alert: Wasatch Greater China

By David Snowball

On November 30, 2020, Wasatch Global Investors launched Wasatch Greater China Fund (WAGCX/WCCCX). The “Greater” part signals the inclusion of firms located in Hong Kong and Taiwan, as well as in the PRC proper. The fund will feature an all-cap portfolio of 35-50 names. This is Wasatch’s second country-specific fund, after the five-star Wasatch Emerging India Fund (WAINX), which launched in 2011.

The fund will be managed by a five-person team. The lead manager is Dan Chace, who has been at Wasatch for 18 years and who helps manage their Emerging Markets Small Cap Fund (WAEMX, four stars) plus their Micro Cap Growth and International Micro Cap strategies. The latter two have been wildly successful but are available only to institutional investors. The team is part of Wasatch’s emerging markets group. The folks at Wasatch describes the team this way:

The Wasatch Greater China Fund and underlying strategies will be managed within Wasatch’s existing emerging markets team, which is pleased to count two native Mandarin speakers among the more-recent assets comprising its world-class staff. For more than 45 years, Wasatch has successfully applied its bottom-up, research-driven approach, starting with U.S. micro- and small-cap stocks, before expanding into international and emerging markets.

Our emerging markets team currently manages four strategies with a combined $4.4 billion in AUM, focused on small- and mid-cap companies across emerging and frontier markets, including focused investment in India, whose economic growth story shares many similarities with China’s.

Wasatch also prides itself on its “due diligence.” To us, this entails boots-on-the-ground research. In normal environments, Wasatch’s portfolio managers and analysts collectively make well over a thousand trips per year to meet with company management teams all over the world.

The strategy targets the highest-quality growth companies as measure by strong financials, a sustainable competitive advantage, excellent management teams, and the prospect of above-average earnings growth. The process is described as “active, collaborative, bottom-up, fundamental.” We asked the folks at Wasatch two questions at the fund’s launch: (1) why now, especially after a year of substantial gains in Chinese stocks, and (2) why bother? That is, we already have more China-centered funds and more really good China-centered funds than any reasonable investor needs. Why add another? Here’s their take on it:

We believe it is still early enough in the Chinese market’s growth narrative to be worth our time and attention … The recently increased inclusion of Chinese companies in MSCI’s emerging-market indexes is likely to prove part of a continued, longer-term trend. The added companies represent a sizable injection of new prospective investments, and a move toward full inclusion is likely to increase the odds that investors consider “ex-China” approaches to China exposure.

… China offers a broad, deep and dynamic market, which includes many companies that meet Wasatch’s fundamental criteria for quality and growth. In short, we believe the opportunity set in China has become “too big to ignore.” While China’s growth in recent decades has been historic, we believe the market remains rich with opportunities to capture long-term growth, including in sectors such as health care, where expansion into underpenetrated, typically rural regions is likely to continue for the foreseeable future.

For investors seeking either supplemental or standalone exposure to China, we believe the Wasatch Greater China strategy offers several advantages, including dedicated exposure to China that covers the “Greater China Region”—including companies based in Mainland China, but also companies in Hong Kong and Taiwan that derive the majority of their business from China. We have also sought to differentiate the offering through its construction, focusing on areas where we believe we can find sustained growth at attractive valuations.

In general, and over time, Wasatch’s discipline works. Wasatch advises 18 funds, with 94% of the firm’s assets being in four- and five-star rated funds. One-third of the Wasatch funds have earned MFO’s Great Owl designation, awarded to funds that have risk-adjusted returns in the top 20% of their peer groups over the past 3, 5, 10, and 15 year periods. Fully half of their funds are on MFO’s Honor Roll, awarded to funds with total returns in the top 20% of their Lipper peer group for the past 1, 3, and 5 year periods. Wasatch has only two lower-rated funds, Global Value and Frontier Emerging Small Countries, both of which suffer more from the nature of their mandate than from its execution.

The fund’s opening expense ratio is 1.50%, and the minimum initial investment is $2,000. The fund’s homepage is, understandably, still pretty much a shell with …modest content.

Manager Changes, December 2020

By Chip

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

This month saw changes that affected about 90 funds, which is a bit high. Of those, more than a third were simple additions to existing teams without any offsetting departures. Three of the changes stand out:

  • The legendary Dan Fuss is retiring in March, which this month appears as a change at Guidestone Global Bond Fund (GGBEX) but has a far larger impact on the Loomis Sayles fixed-income funds that he’s been leading for 45 years.
  • Justin Thompson is leaving Rowe Price International Discovery (PRIDX). He has been leading the fund (and improving my portfolio) since 1998. Price is remarkably adept at managing such handoffs, even for their few certifiably star managers.
  • Lydia So, a distinguished former manager Matthews Asia manager, is joining Laura Geritz at Rondure New World (RNWOX), an emerging markets fund. We detailed the move in “Rondure Global upguns” (12/2020).
Ticker Fund Out with the old In with the new Dt
BJBIX Aberdeen International Sustainable Leaders Fund Dominic Byrne, Tony Hood, Donal Reynolds, and Euan Sanderson will no longer serve as portfolio managers for the fund. Jamie Cumming and Victoria MacLean will join Joanna McIntyre in managing the fund. 12/20
SASAX AIG Small-Cap Quality Fund Elizabeth Mauro, Timothy Campion, and Robert Fitzpatrick are no longer listed as portfolio managers for the fund. Jane Algieri, Timothy Pettee, and Andrew Sheridan will now manage the fund. 12/20
RMDAX AllianzGI Mid-Cap Fund Timothy McCarthy will no longer serve as a portfolio manager for the fund. Raymond Cunha will join Jeffrey Parker in managing the fund. 12/20
AZAO AllianzIM U.S. Large Cap No one, but . . . Josiah Highmark will join Thomas Paustian in managing the fund 12/20
GAFAX Alphasimplex Global Alternatives Fund David Kuenzi will no longer serve as a portfolio manager of the Fund. Kathryn Kaminski and Timothy Kang will join the portfolio management team of the fund. Alexander Healy, Peter Lee, Philippe Lüdi, and Robert Rickard will remain as co-portfolio managers. 12/20
ARHVX American Century Investments One Choice 2065 Portfolio No one, but . . . John Donner will join Scott Wilson, Richard Weiss, Vidya Rajappa, and Radu Gabudean in managing the fund. 12/20
MBGVX AMG GW&K Core Bond ESG Fund No one but… Stephen Repoff joins Mary Kane as a portfolio manager for the fund. 12/20
MFDAX AMG GW&K Enhanced Core Bond ESG Fund No one but… Stephen Repoff joins Mary Kane as a portfolio manager for the fund. 12/20
MGGBX AMG GW&K High Income Fund Scott Service, Lynda Schweitzer, and David Rolley will no longer serve as portfolio managers for the fund. Stephen Repoff joins Mary Kane as a portfolio manager for the fund. 12/20
SKSIX AMG GW&K Small Cap Value Fund William Fiedler, Michael Maloney, and Mark Odegard will no longer manage the fund. Daniel Miller and Jeffrey Whitney will now serve as portfolio managers for the fund. 12/20
LDPAX AXS Thomson Reuters Private Equity Return Tracker Fund David Armstrong, Yash Patel, and Neil Peplinski will no longer serve as portfolio managers for the fund. Greg Bassuk and Mark Lacuesta will now serve as portfolio managers for the fund. 12/20
LDVAX AXS Thomson Reuters Venture Capital Return Tracker Fund David Armstrong, Yash Patel, and Neil Peplinski will no longer serve as portfolio managers for the fund. Greg Bassuk and Mark Lacuesta will now serve as portfolio managers for the fund. 12/20
BSCVX Bernzott US Small Cap Value Fund Ryan Ross, Thomas Derse, and Scott Larson will no longer serve as portfolio managers for the fund. Sean Greely will join Kevin Bernzott in managing the fund. 12/20
BXMIX Blackstone Alternative Multi-Strategy Fund No one. The adviser was pretty sure that 19 subadvisers weren’t enough, so … Jasper Capital Hong Kong Limited and Seiga Asset Management Limited will serve as new discretionary sub-advisers to the fund. In addition, Blackstone has allocated a portion of the fund’s assets to an existing sub-adviser, Nephila Capital Ltd. 12/20
DNLAX BNY Mellon Natural Resources Fund Robin Wehbe will no longer serve as a portfolio manager for the fund. David Intoppa will join Albert Chu in managing the fund. 12/20
CAMLX Congress Large Cap Growth Fund Alexander Thorndike will longer serve as a portfolio manager for the fund. Daniel Lagan will continue to serve as a portfolio manager for the fund. 12/20
CSMVX Congress Small Cap Growth Fund Alexander Thorndike will longer serve as a portfolio manager for the fund. Gregg O’Keefe will continue to serve as a portfolio manager for the fund. 12/20
FSTAX Fidelity Advisor Strategic Income Fund Jonathan Kelly will no longer serve as a portfolio manager for the fund. Nader Nazmi joins the other nine managers of the fund. 12/20
FNARX Fidelity Select Natural Resources Portfolio Nathan Strik will no longer serve as a portfolio manager for the fund. Ashley Fernandes will now serve as a portfolio manager for the fund. 12/20
TESIX Franklin Mutual Shares Fund F. David Segal will no longer serve as a portfolio manager for the fund. Christian Correa and Grace Hoefig will join Deborah Turner and Peter Langerman as portfolio managers for the fund. 12/20
GEQIX Glenmede Equity Income Fund Wade Wescott will no longer manage the fund. John Kichula and Mark Livingston will now manage the fund. 12/20
GTMEX Glenmede Large Cap Value Fund Wade Wescott will no longer manage the fund. John Kichula and Mark Livingston will now manage the fund. 12/20
GGBZX GuideStone Funds Aggressive Allocation Fund No one, but . . . Paul Bouchey, Ricky Fong, Justin Henne, and Thomas Seto will join Matt Peden, Tim Bray, and Brandon Pizzurro in managing the fund. 12/20
GGIZX GuideStone Funds Balanced Allocation Fund  No one, but . . . Paul Bouchey, Ricky Fong, Justin Henne, and Thomas Seto will join Matt Peden, Tim Bray, and Brandon Pizzurro in managing the fund. 12/20
GFIZX GuideStone Funds Conservative Allocation Fund No one, but . . . Paul Bouchey, Ricky Fong, Justin Henne, and Thomas Seto will join Matt Peden, Tim Bray, and Brandon Pizzurro in managing the fund. 12/20
GCOZX GuideStone Funds Growth Allocation Fund No one, but . . . Paul Bouchey, Ricky Fong, Justin Henne, and Thomas Seto will join Matt Peden, Tim Bray, and Brandon Pizzurro in managing the fund. 12/20
Various GuideStone Funds MyDestination Funds, 2015 to 2055 No one, but . . . Paul Bouchey, Ricky Fong, Justin Henne, and Thomas Seto will join Matt Peden, Tim Bray, and Brandon Pizzurro in managing the fund. 12/20
GFSZX GuideStone Funds Strategic Alternatives Fund David Baker will no longer serve as a portfolio manager for the fund. Paul Bouchey, Ricky Fong, Justin Henne, Warren Naphtal, Thomas Seto, and David Souza will join the team in managing the fund. 12/20
GGBEX Guidestone Global Bond Fund Effective as of March 1, 2021, Daniel Fuss will no longer serve as a portfolio manager. Effective March 1, 2021, Matthew Eagan, Brian Kennedy, and Elaine Stokes will remain as portfolio managers for the fund. 12/20
GFSYX Guidestone Strategic Alternatives Fund Weiss Multi-Strategy Advisers LLC will no longer serve as sub-adviser to the fund, and David Baker will no longer manage the fund. The other 18 or so managers remain. 12/20
OPTFX Invesco Capital Appreciation Fund Ido Cohen and Erik Voss are no longer listed as portfolio managers for the fund. Ash Shah and Ronald Zibelli now manage the fund. 12/20
JIREX JHancock Real Estate Securities Fund John Vojticek, David Zonavetch, and Robert Thomas will no longer serve as portfolio managers for the fund. Bradford Stoesser will now serve as a portfolio manager for the fund. 12/20
VHIAX JPMorgan Growth Advantage Fund No one, but . . . Felise Agranoff will join Timothy Parton in managing the fund. 12/20
OLGAX JPMorgan Large Cap Growth Fund No one, but . . . Holly Fleiss, Larry Lee, and Joseph Wilson will join Giri Devulapally as portfolio managers for the fund. 12/20
JCMAX JPMorgan Mid Cap Equity Fund No one, but . . . Felise Agranoff and Lawrence Playford will join Timothy Parton and Jonathan Simon in managing the fund. 12/20
PECAX JPMorgan SMID Cap Equity Fund Wonseok Choi, Akash Gupta, Jonathan Tse, Lindsey Houghton, and Phillip Hart will no longer serve as portfolio managers for the fund. Daniel Percella and Don San Jose will now serve as portfolio managers for the fund. 12/20
EMBOX Lazard Emerging Markets Strategic Equity Portfolio James Donald, Jai Jacob, Stephen Marra, Erianna Khusainova, and Kim Tilley are no longer listed as portfolio managers for the fund. Rohit Chopra, Ganesh Ramachandran, and John Reinsberg will begin managing the fund in February 2021. 12/20
LABAX Loomis Sayles Strategic Alpha Fund Effective January 8, 2021, Kevin Kearns will no longer serve as a portfolio manager for the fund. Brian Kennedy and Elaine Stokes will join the fund’s portfolio management team. 12/20
MGRIX Marsico Growth Fund No one but… Effective December 21, 2020, James Marsico joins Thomas Marsico, Brandon Geisler, and Peter Marsico as a co-manager for the fund. 12/20
MMBDX MassMutual Premier Balanced Fund Stephen Ehrenberg, Scott Simler, Douglas Trevallion, Chris Cao, Michael Farrell, and David Nagle will no longer serve as portfolio managers for the fund. Jacob Borbidge, Matthew Brill, Pratik Doshi, Peter Hubbard, Michael Hyman, Michael Jeanette, Duy Nguyen, Todd Schomberg, and Tony Seisser will now be managing the fund. 12/20
MPGAX MassMutual Premier Disciplined Growth Fund Chris Cao and Michael Farrell will no longer serve as portfolio managers for the fund. Thomas Simon and Gregg Thomas will now serve as portfolio managers for the fund. 12/20
MEPAX MassMutual Premier Disciplined Value Fund Chris Cao and Michael Farrell will no longer serve as portfolio managers for the fund. Thomas Simon and Gregg Thomas will now serve as portfolio managers for the fund. 12/20
MCQAX Morgan Stanley Global Concentrated Real Estate Fund Theodore Bigman will no longer serve as a portfolio manager for the fund. Laurel Durkay manages the fund. 12/20
MUSDX Morgan Stanley Inst US Real Estate Fund Theodore Bigman will no longer serve as a portfolio manager for the fund. Laurel Durkay manages the fund. 12/20
NWUAX Nationwide U.S. Small Cap Value Fund Marc Leblond, Joel Schneider, and Jed Fogdall will no longer serve as portfolio managers for the fund. Ryan Cope and Jeff John will now manage the fund. 12/20
NGLAX Neuberger Berman Global Allocation Fund Brad Tank and Ajay Jain will cease their portfolio management responsibilities on December 31, 2020. Effective December 31, 2020, Robert Surgent and Tokufumi Kato will join Erik Knutzen, who has managed the Fund since January 2015, in managing the fund. 12/20
PCPAX PACE Large Co Value Equity Investments David Cohen, Stephanie McGirr, Andrew McIntosh, Thomas Forsha, Henry Saunders, James Shircliff, David Pyle, Thomas Stevens, Mark Donovan, and Martin MacDonnell will no longer serve as portfolio managers for the fund. Matthew Hand, Michael Reckmeyer, Laina Draegar will join the team as portfolio managers for the fund. 12/20
ROCKX Rockefeller Equity Allocation Fund Jimmy Chang has resigned as a portfolio manager for the fund. Effective immediately, Michael Seo will become a portfolio manager of the fund. 12/20
RNWOX Rondure New World Fund No one but… Lydia So will join Laura Geritz in managing the fund. 12/20
SCPAX SEI Institutional Investments Trust Large Cap Disciplined Equity Fund Haijie Chen, Denis Suvorov, Brian Kramp, and Gregory Rogers will no longer serve as portfolio managers for the fund. Ryan Taliaferro, Brendan Bradley, Gregory McIntire, and Nimrit Kang will join the team in managing the fund. 12/20
SLCAX SEI Institutional Investments Trust Large Cap Fund Gregory Rogers and Brian Kramp will no longer serve as portfolio managers for the fund. Ryan Taliaferro, Brendan Bradley, Gregory McIntire, and Nimrit Kang will join the team in managing the fund. 12/20
SIEMX Sit Emerging Markets Equity James Donald, Peter Gillespie, Kevin O’Hare, and John Reinsberg are no longer listed as portfolio managers for the fund, and Lazard will no longer subadvise. Jaap van der Hart and Fabiana Fedeli, from Robeco, join the other 15 managers on the management team. 12/20
CRDOX Six Circles Credit Opportunities Fund No one, but . . . Kathryn Glass, Thomas Scherr, Steven Wagner will join the portfolio management team for the fund. 12/20
CGLBX Six Circles Global Bond Fund No one, but . . . Munish Gupta of Pacific Investment Management Company joins the management team for the fund. 12/20
CUTAX Six Circles Tax Aware Ultra Short Duration Fund No one, but . . . Andrew Wittkop of Pacific Investment Management Company joins the management team for the fund. 12/20
CUSDX Six Circles Ultra Short Duration Fund No one, but . . . Andrew Wittkop of Pacific Investment Management Company joins the management team for the fund. 12/20
XLSR SPDR SSGA U.S. Sector Rotation No one but… Jeremiah Holly joins Michael Martel and Michael Narkiewicz in managing the fund. 12/20
SGDLX Sprott Gold Equity Fund No one, but . . . Shree Kargutkar and Maria Smirnova join Douglas Groh and John Hathaway in managing the fund. 12/20
TRGRX T. Rowe Price Global Real Estate Fund Effective April 1, 2021, Nina Jones will transition from her role as a portfolio manager of the fund. Jai Kapadia will become portfolio manager for the fund. 12/20
PRIDX T. Rowe Price International Discovery Fund Effective January 1, 2021, Justin Thomson will step down as a portfolio manager for the fund. Ben Griffiths will continue as the sole portfolio manager for the fund. 12/20
TFALX Tactical Conservative Allocation Fund No one, but . . . David Moenning and Jeff Pietsch have joined the management team of the fund. 12/20
TFAEX Tactical Growth Allocation Fund No one, but . . . David Moenning and Jeff Pietsch have joined the management team of the fund. 12/20
TFAMX Tactical Moderate Allocation Fund No one, but . . . David Moenning and Jeff Pietsch have joined the management team of the fund. 12/20
TEMGX Templeton Global Smaller Companies Fund No one but… Heather Waddell will join Harlan Hodes and David Tuttle as a portfolio manager for the fund. 12/20
TVAFX Thornburg Small/Mid Cap Core Fund Robert MacDonald will no longer serve as a portfolio manager for the fund. Steven Klopukh will now manage the fund. 12/20
THCGX Thornburg Small/Mid Cap Growth Fund Greg Dunn will no longer serve as a portfolio manager for the fund. Steven Klopukh and Timothy McCarthy will now manage the fund. 12/20
TEQAX Touchstone Global ESG Equity Fund Jimmy Chang will no longer serve as a portfolio manager for the fund. Michael Seo has joined David Harris in managing the fund. 12/20
TPYAX Touchstone International ESG Equity Fund Jimmy Chang will no longer serve as a portfolio manager for the fund. Michael Seo has joined David Harris in managing the fund. 12/20
TNSAX Touchstone International Growth Fund No one but… David McVey and Kenneth Yang join Daniel Strickberger in managing the fund. 12/20
TSAGX Touchstone Large Company Growth Fund No one but… David McVey and Kenneth Yang join Daniel Strickberger in managing the fund. 12/20
TWQAX Transamerica Large Cap Value Fund Christopher Susanin and Jack Murphy will no longer serve as portfolio managers for the fund. Jeff Agne and Paul Roukis will now serve as portfolio managers for the fund. 12/20
TDFAX Transamerica Sustainable Equity Income Brad Kinkelaar, Brian Quinn, and Lewis Ropp will no longer be listed as portfolio managers for the fund. Robin Black, Mark Peden will now serve as portfolio managers for the fund. 12/20
TTAI TrimTabs International Free Cash Flow Quality ETF Janet Johnston is no longer listed as a portfolio manager for the fund. Bob Shea and Vince Chen will now serve as the portfolio managers for the fund. 12/20
TTAC TrimTabs U.S. Free Cash Flow Quality ETF Janet Johnston is no longer listed as a portfolio manager for the fund. Bob Shea and Vince Chen will now serve as the portfolio managers for the fund. 12/20
VGWIX Vanguard Global Wellesley Income Fund On June 30, 2021, Michael E. Stack will retire from Wellington Management Company and will no longer serve as a portfolio manager for the fund. Loren Moran and Andre Desautels, who currently serve as portfolio managers with Mr. Stack, will remain as portfolio managers of the fund upon Mr. Stack’s retirement. 12/20
SGAAX Virtus SGA Global Growth Fund George Fraise will no longer serve as a portfolio manager for the fund. Hrishikesh Gupta has joined Gordon Marchand and Robert Rohn in managing the fund. 12/20
WMNAX Westwood Alternative Income Fund David Clott and Shawn Mato will no longer serve as portfolio managers for the fund. Adrian Helfert and Seth Gold will now serve as the portfolio managers for the fund. 12/20
WSDAX Westwood High Income Fund Brendan Ryan will no longer serve as portfolio managers for the fund. Hussein Adatia and Scott Barnard join Adrian Helfert as portfolio managers for the fund. 12/20
WWIAX Westwood Income Opportunity Fund David Clott will no longer serve as a portfolio manager for the fund. Scott Barnard joins Adrian Helfert as a portfolio manager for the fund. 12/20
WWTAX Westwood Total Return Fund David Clott, Adrian Helfert, and Shawn Mato will no longer serve as portfolio managers for the fund. Adrian Helfert will now serve as the portfolio manager for the fund. 12/20
WBSIX William Blair Small Cap Growth Fund Michael Balkin will no longer serve as a portfolio manager for the fund. Mark Thompson and Ward Sexton continue to manage the fund. 12/20


Briefly Noted

By David Snowball


Bill Gross must be very sad today. Mr. Gross has been involved in an ugly dispute with a neighbor. As part of that dispute, Mr. Gross played The Gilligan’s Island theme, loudly and continuously, night after night. The neighbor complained. In court. Mr. Gross’s partner, Amy Schwartz, testified to loving the “Gilligan’s Island” theme but denied playing it loud or on repeat. “I don’t know how to work a loop,” she swore. Mr. Gross himself claimed the song held “special meaning” for the couple. On December 22nd, a judge disagreed with … well, pretty much all of Mr. Gross’s claims. Mr. Gross reportedly was “disappointed” but vowed, “to dance the night away, ‘Gilligan’s Island’ forever.”

A week later, on December 30, 2020, Dawn Wells – the well-loved actress who played Mary Ann on the sitcom – died at age 82 of complications arising from Covid-19. With her passing, only one of the original cast members remains.

On December 22, 2020, T. Rowe Price incorporated the following provision in the prospectus of 55 of its funds: “The Firm integrates pecuniary environmental, social, and governance factors into its investment research process. We focus on the ESG factors we consider most likely to have a material impact on the performance of the holdings in the fund’s portfolio.”

Vanguard Total Stock Market Index Fund has surpassed $1,000,000,000,000 in assets.

Congratulations to three True Believers. Morningstar’s Russ Kinnel notes that “manager ownership is the second-best predictor of outperformance after fees… I decided to look for niche funds with manager investment levels over $1 million, so I could see funds where managers really did go above and beyond in putting their money where their mouths are.” Managers familiar to MFO readers who earned Kinnel’s respect:

Mr. Kinnel’s complete story is These Fund Managers Are True Believers (11/18/2020).

Briefly Noted . . .

Bloomberg reports that Fidelity has had to waive nearly $250 million in fees and expenses for the Fidelity Government Money Market Fund (SPAXX) last year. Without those waivers, the fund would have “broken the buck” and inflicted losses on its investors. The fund’s seven-day yield is 0.01%.

Fidelity notes that it’s waiving expenses on most of its money market funds to keep them above water and anticipates doing so for “an extended period.” In the words of one observer: “ouch.” (Fidelity’s Largest Money Market Fund Waives $247 Million of Fees,” 12/23/2020).

Waddell & Reed Financial announced that it’s been acquired by Macquarie Asset Management for$1.7 billion. As our colleague, Charles Boccadorro notes, “the consolidation continues!”


On December 30, 2020, PartnerSelect High Income Alternatives Fund (fka Litman Gregory Masters High Income Alternatives Fund) closed the Investor share class for the fund and converted all of their current Investor class shareholders into Institutional class shareholders. At the same time, they drop the minimum initial investments from $100,000 to $10,000 for regular accounts and $5,000 to $1,000 for retirement accounts.

On December 10, 2020, Vanguard Treasury Money Market Fund lowered its minimum initial investment from $50,000 to $3,000. There was a lively discussion on our board about the Vanguard options.

CLOSINGS (and related inconveniences)

AlphaCentric Prime Meridian Income Fund has increased the minimum purchase requirements for regular accounts from $2,500 to $10,000 and for retirement plan accounts from $1,000 to $10,000.

Effective March 1, 2021, Federated Hermes Kaufmann Small Cap Fund (FKASX) will be closed to new investors.

Goldman Sachs Multi-Manager U.S. Dynamic Equity Fund closed to new investors on December 18, 2020.

Grandeur Peak Global Opportunities Fund (GPGIX/GPGOX) and Grandeur Peak International Opportunities Fund (GPIIX/GPIOX) will close to new investors through intermediary platforms after December 31, 2020. The Funds will remain open to existing investors. The funds will remain open to new investors who purchase directly from Grandeur Peak.

Effective on December 31, 2020, the Infinity Q Diversified Alpha Fund is closed to all new investment, including through dividend reinvestment. It’s a $1.8 billion hedge-fund style mutual fund that has earned both MFO’s Great Owl designation and a Morningstar five-star rating. “Shareholders will be notified when the Infinity Q Fund is re-opened for all investment.”

Effective on December 31, 2020, the JPMorgan Emerging Markets Equity Fund is closed to most new investors. It’s a $15 billion EM fund that has earned both MFO’s Great Owl designation and a Morningstar five-star rating.

Effective December 29, 2020, the PCS Commodity Strategy Fund has closed to new investment, and the sale of fund shares is suspended. Unlike the preceding two closure announcements, PCS is a tiny fund with a poor record. Liquidation impends.

Effective immediately, investor shares of Vanguard Cash Reserves Federal Money Market Fund (VMRXX) (formerly known as Vanguard Prime Money Market Fund) are closed to new investors. As with other Vanguard funds, the current Investor investors will be converted to Admiral shares, and then the Investor share class will be eliminated.


On December 1, 2020, Aberdeen Focused U.S. Equity Fund (GGUIX), a bad large growth fund, found a new passion as Aberdeen U.S. Sustainable Leaders Smaller Companies Fund.

On the same date, the Aberdeen International Equity Fund changed its name to the Aberdeen Emerging Markets Sustainable Leaders Fund. It’s cool that one of the managers, William Scholes, earned his B.A. in Modern and Medieval Languages from Magdalen College, Oxford. Another team member, Fiona Manning, earned her B.A. in History with French from Durham University. All of the new team members also manage emerging markets funds for European investors.

And Aberdeen Select International Equity Fund (BJBIX, formerly Artio International, more formerly Julius Baer International) changed its name to the Aberdeen International Sustainable Leaders Fund.

Then Aberdeen U.S. Multi-Cap Equity Fund changed its name to the Aberdeen U.S. Sustainable Leaders Fund. The “sustainability” thing is great and all, but it’s not clear that they’re particularly good at it.

Effective February 1, 2021, the Allianz Funds become Virtus Funds, with only a few additional naming tweaks.

Current Fund Name New Fund Name
AllianzGI Dividend Value Fund Virtus NFJ Dividend Value Fund
AllianzGI Emerging Markets Opportunities Fund Virtus AllianzGI Emerging Markets Opportunities Fund
AllianzGI Focused Growth Fund Virtus AllianzGI Focused Growth Fund
AllianzGI Global Small-Cap Fund Virtus AllianzGI Global Small-Cap Fund
AllianzGI Health Sciences Fund Virtus AllianzGI Health Sciences Fund
AllianzGI Income & Growth Fund Virtus AllianzGI Income & Growth Fund
AllianzGI International Value Fund Virtus NFJ International Value Fund
AllianzGI Large-Cap Value Fund Virtus NFJ Large-Cap Value Fund
AllianzGI Mid-Cap Fund Virtus AllianzGI Mid-Cap Growth Fund
AllianzGI Mid-Cap Value Fund Virtus NFJ Mid-Cap Value Fund
AllianzGI Small-Cap Fund Virtus AllianzGI Small-Cap Fund
AllianzGI Small-Cap Value Fund Virtus NFJ Small-Cap Value Fund
AllianzGI Technology Fund Virtus AllianzGI Technology Fund

Effective December 31, 2020, Catalyst/Exceed Defined Shield Fund became Catalyst/Exceed Buffered Shield Fund.

On March 1, 2021, the iShares MSCI Frontier 100 ETF becomes the iShares MSCI Frontier and Select EM ETF.

Effective December 28, 2020, the Jackson Square All-Cap Growth Fund has changed its investment strategy and its name to the Jackson Square International Growth Fund.

Effective on February 8, 2021, Lazard Emerging Markets Equity Blend Portfolio (EMBOX) becomes Lazard Emerging Markets Strategic Equity Portfolio. The prospectus then adds risk warnings for “value” and “focused” while scrapping “quant,” “allocation,” and “value and growth.” It also completely changes out the management team.

On February 28, 2021, MainStay MacKay Unconstrained Bond Fund becomes MainStay MacKay Strategic Bond Fund. Morningstar worries that “A short-tenured duo of managers is supported by a modest and unstable team.” I’m more irked at the cynical substitution of one marketing buzzword in the name for another.

Effective December 18, 2020, the Thornburg Value Fund name changed to Thornburg Small/Mid Cap Core Fund, and the Thornburg Core Growth Fund changed to Thornburg Small/Mid Cap Growth Fund.

Effective January 22, 2021, Toews substitutes hedges for tactics.

Current Fund Name New Fund Name
Toews Tactical Oceana Fund Toews Hedged Oceana Fund
Toews Tactical Monument Fund Toews Hedged U.S. Fund
Toews Tactical Opportunity Fund Toews Hedged U.S. Opportunity Fund

Effective December 23, 2020, the Trend Aggregation Aggressive Growth ETF became the less-aggressive Trend Aggregation Growth ETF. There was no accompanying change in the strategy or objectives.


Fans of Buying the Unloved might look for recurring words in the names of the descendants. Risk-managed. Hedged. Value. Asia. Multi-asset.

Aberdeen Asia-Pacific (ex-Japan) Equity Fund and Aberdeen U.S. Mid Cap Equity Fund will be liquidated on or about February 11, 2021.

Effective as of December 22, 2020, the US Global Investors All American Equity Fund (historically, a spectacularly poor performer) was reorganized with, and into, the Global Luxury Goods Fund. If you were looking for a reason to stop and philosophize about income inequality, K-shaped (“the rich get richer”) recoveries, and the prospect of long-term political unrest, this might be a good one.

AlphaSimplex Multi-Asset Fund disappears on or about January 14, 2021.

BNY Mellon Inflation Adjusted Securities Fund didn’t make it to Christmas. (Nuts. We’ll have to return the socks we got for it.)

Carillon Cougar Tactical Allocation Fund will be liquidated and terminated on or about February 28, 2021.

Columbia Georgia Intermediate Municipal Bond Fund and Columbia Maryland Intermediate Municipal Bond Fund will close to new investors on January 11, in anticipation of being liquidated on May 7, 2021.

Columbia Multi-Asset Income Fund and Columbia Pacific/Asia Fund are also closing to new investors on January 11, but their dispatch is much more imminent: February 5, 2021.

CornerCap Large/Mid-Cap Value Fund and CornerCap Balanced Fund will each be liquidated on February 26, 2021.

Emerald Small Cap Value Fund and Emerald Select trueLiberty Income Fund will be closed and liquidated on or about January 11, 2021.

In what strikes me as a first (or near-first), an actively-managed ETF, EquityCompass Tactical Risk Manager ETF, is giving up the ghost and agreeing to merge with another actively-managed ETF, EquityCompass Risk Manager ETF. The move requires shareholder approval, which is pretty much pro forma but keeps them from publishing a liquidation date.

FlexShares Currency Hedged Morningstar DM ex-US Factor Tilt Index Fund, and FlexShares Currency Hedged Morningstar EM Factor Tilt Index Fund will be liquidated and terminated on or about January 29, 2021

The Frontier Caravan Emerging Markets Fund was liquidated on December 15, 2020.

Effective January 29, 2021, Glenmede Large Cap Value Portfolio will close to all additional investments; then, on February 26, 2021, the Portfolio will be liquidated.

Effective on or about January 22, 2021, Goldman Sachs Imprint Emerging Markets Opportunities Fund will merge into Goldman Sachs ESG Emerging Markets Equity Fund.

GuideMark Tax-Exempt Fixed Income Fund and GuideMark Opportunistic Fixed Income Fund will be liquidated on or about March 31, 2021.

HSBC High Yield Fund and the HSBC Strategic Income Fund will each cease investment operations and liquidate assets. The Adviser expects that each fund will be liquidated on or before January 29, 2021

IQ Enhanced Core Plus Bond U.S. ETF is the object of “liquidation and dissolution” on or about February 10, 2021.

John Hancock Asia Pacific Total Return Bond Fund and U.S. High Yield Bond Fund are on the path to liquidation. Asia Pacific disappears on January 15, High Yield follows on April 16, 2021.

North Shore Dual Share Class ETF was liquidated on December 31, 2020.

Northern Municipal Money Market Fund will be liquidated and terminated on or about February 12, 2021. At some point in the second quarter of 2021, Northern Money Market Fund will merge into Northern U.S. Government Money Market.

The PCS Commodity Strategy Fund has terminated the public offering of its shares and will discontinue its operations effective February 12, 2021.

PGIM Jennison 20/20 Focus Fund will merge into PGIM Jennison Focused Growth Fund sometime in the second quarter of 2021.

Riverbridge Eco Leaders Fund will be merged into the Riverbridge Growth Fund, likely in April 2021.

Sage ESG Intermediate Credit ETF will be liquidated on January 7, 2021.

VanEck Vectors Coal ETF (KOL) is no more. The $35 million fund posted annualized losses of -8.3% over the past 13 years, including a catastrophic 88% drawdown in 2016.

Wells Fargo Cash Investment Money Market Fund is merged with Wells Fargo Heritage Money Market Fund. Should you care? Yeah, rather a lot. The driver behind the accelerating changes in the money market fund world is the realization that interest rates are near zero, and they’re not going up any time soon. That makes money market funds a money-loser for their advisers (though they’re a useful tool for keeping money in-house for other investors; someone selling a Wells Fargo equity fund can deposit the proceeds in a Wells Fargo MM fund, which makes it more likely that their next purchase will be some other Wells Fargo fund) since their investment returns are below their costs of operation. More importantly, it helps the rest of us understand forces that will shape the performance of our longer-term investments: US interest rates at zero encourage speculation, weaken the dollar (hence strengthen the case for international investing) and weaken the role of bond funds as essential partners in a balanced portfolio.