Monthly Archives: March 2021

March 1, 2021

By David Snowball

Welcome to spring!

Virtually.

I first knew that spring had arrived – despite the day’s sub-zero temps – when I noticed that my students weren’t blinking anymore. The cheerful banter and occasional sass of my January term class is a chapel-like silence. Sitting in orderly rows, they look neither right nor left but smile in bland detachment. Footwear begins to shift from winter’s stylish combat boots to sneakers and sandals. The Bold celebrate a 45-degree day by donning shorts and carrying a light jacket over their arms (while The Old stays sensibly zipped up and suspicious of youth and weather both).

I can’t verify that their “fancy lightly turns to thoughts of love,” but there’s pretty good evidence of thoughts of Greek life rush activities, days spent sunning oneself without the prospect of unsightly mask tan lines, and the start of a spring sports season that involves traditional fall sports. In the past week, we’ve posted wins in men’s volleyball, men’s and women’s basketball, baseball, softball, women’s bowling, and men’s and women’s track and field … only women’s lacrosse (despite Kathryn Hettinger’s four-goal outburst last game) and women’s volleyball (despite  Olivia Doak’s 31! assists against Elmhurst) remain winless.

As I read Isocrates’ (436-388 BCE) complaints about his students “chilling their wine at the Nine-fountains … and many, hanging about the training-schools of the flute-girls,” I realize it was ever thus.

It’s nice to recall that some of the rhythms of life overcome even pandemics and Zoom.

Lions and tigers and bears, oh my!

It is not a good time to be dependent on the income generated by bonds. Warren Buffett’s 2021 shareholder letter warns that

… bonds are not the place to be these days. Can you believe that the income recently available from a 10-year U.S. Treasury bond … has fallen 94% from the 15.8% yield available in September 1981? In certain large and important countries, such as Germany and Japan, investors earn a negative return on trillions of dollars of sovereign debt. Fixed-income investors worldwide – whether pension funds, insurance companies or retirees – face a bleak future.

That’s certainly consistent with GMO’s forecast of a real loss of 3 – 4% annually for bond investors over most of the rest of this decade. Research Affiliates “Asset Allocation Interactive” tool forecasts real losses of 0.5 – 3.2% annually for every investment-grade fixed-income class over the next ten years. The yield on 10-year Treasuries was 1.44% (close of 2/26/2021), which was substantially higher than at the start of the month. T. Rowe Price, excellent as ever at pulling things together in their 2021 Global Multi-Asset Outlook, shows that the yield on a 10-year bond strongly predicts your subsequent 10-year returns:

Here’s how to read that: if the 10-year Treasury yielded 4% on the day you bought it, your 10-year total returns would run from somewhere around 2.5% to 5.5%. You get that by looking at the “4” on the bottom axis and go up until you hit the first blue dot (it looks about 2.5% to me) and continuing until you reach the top dot along that line (looks about 5.5%).

Now look at what happens if you start at 1.4% … oh, wait. There’s never been a yield that low before. Okay, the lowest previous yield – a bit over 2% – and you can sketch in a 10-year return of a bit over 2%.

So, if the expected 2021 inflation rate of 2.2% – which doesn’t account for the potential effect of a $1.9 trillion stimulus spree – plays out, investors in ultra-safe bonds have locked-in a guaranteed loss.

That’s led to some anxious discussions, especially among folks invested heavily in fixed income, about the prospect of rising inflation, rising interest rates, and a subsequent

Two quick notes on that one. First, a bear market in bonds looks nothing like a bear market in stocks. Bear stock markets have an element of shock and awe to them: thousand point drops in a day, two thousand point drops … three thousand point drops, 12-22% one-day declines. Bond bear markets are far less dramatic. Ben Carlson, one of the Ritzholz Wealth Management folks who writes The Wealth of Common Sense blog, looks at the “shock and awe” phase of bond bear markets.

So, a bear market in bonds is much different from a bear market in stocks. The following chart shows the drawdowns in both the five-year Treasury bond and the long-term Treasury bond.1 The biggest losses for both long- and intermediate-term bonds occurred in the 1980-81 period that Dalio mentioned. The maximum drawdown for long-term bonds was just shy of 21 percent, while the five-year note fell 8.9 percent in that time. This was the only period with losses in excess of 20 percent for long bonds. The only time frame that came close was from 1969 to 1970, when long-term Treasuries fell about 19 percent. Five-year bonds have not had a double-digit decline in this period. (What Is a Bond Bear Market Anyways? 3/27/2018)

From A Wealth of Common Sense (2018)

Second, a bear market in bonds can grind on for decades. Allowing for the corrosive effects of inflation on returns, Mr. Carlson calculates, “long-term government bonds lost 60 percent of their value after inflation in a drawdown that lasted almost 50 years. Even five-year bonds were down more than 40 percent in real terms.” Roughly put, if you buy a 30-year bond today, the real value of its monthly coupon might well be less than zero for decades.

Think of it this way: your bond pays you $50 every month, and that’s enough to buy a small cart of groceries today. In 30 years, you’ll still be receiving that $50 check each month, but your small cart of groceries will cost $100 if inflation ticks along at 2.2%.

What’s to be done?

Eat your broccoli or, climate permitting, grow your own broccoli.

Jason Zweig wrote last week (2/26/2021) of the insistence of investors – even theoretically sophisticated professional investors – to surrender to magic thinking. That is, to the belief that there’s a Wizard out there who can reliably and consistently offer you satisfying returns without risk.

In the 1980s and 1990s, it was bond funds whose use of derivatives promised smooth sailing but delivered “devastating losses to their investors.” In 2020 it was pension funds that lost billions on tail risk insurance. In 2021, it’s the masses locked out of their Infinity Q Diversified Alpha Fund as directors and auditors try to unravel the larceny behind the fund’s magical performance.

One investor in the fund admits to Mr. Zweig that “the other alternative [to believing the wizard] is to say, ‘Our goal is unrealistic, so we need to cut our expectations.’ But that’s harder.” Mr. Zweig concludes:

Nobody wants to hear that the most certain way to earn more from your investments in a low-interest-rate world is to save more and spend less. That’s as exciting as eating your broccoli—but it won’t leave you feeling sick.

Eat your broccoli.

I know that bitcoin, dogecoin, and ethereum beckon. It’s clear that winning the Gamestop game just once could be a game-changer. SPACs, right? What could go wrong with writing a large check to a stranger whose explanation is either “trust me” or “I found the next 1000% gainer. Trust me”?

We’ll try to share some options for decent, low volatility income funds and look at the role that a sliver of equity might play in bolstering an income-oriented portfolio.

The month in headlines

We are daily inundated by the news, and the sheer volume of that torrent sometimes numbs us to what we’re reading. As a refresher, here are other ways of reading the month’s headlines.

The month’s scariest headline

Business Insider reports:

In 2021, 16 companies either have or are expected to go public with a valuation of over $1 billion despite having zero revenues. That’s more than double the number in 1999, three more than in 2001, and two more than in the year 2000, during the height of the dot-com bubble . . . Over 90% of zero revenue companies that plan to go public with over a $1 billion valuation in 2021 thus far intend on using a SPAC to do so.

To be clear, these are not zero-earning companies: that is, firms that take in less than they spend. These are billion-dollar stocks whose underlying firms take in nothing, zip, zero. Powered largely by the SPACs and the restless energy of people looking for the next Gamestop (dear Lord), these are publicly traded companies that have yet to sell $1 worth of goods or services.

The average street corner lemonade stand has more revenue than these 16 titans combined.  And yet, the belief in magic springs eternal.

The month’s silliest headline

Yes, little bubba. It’s clear from the stock market’s performance on March 1, 2021, you’ve got an all-clear to invest boldly for the rest of the year.

(sigh)

The month in financial porn

Etymologically, “pornography” is descending from a Greek term that translates to “writing about what the prostitutes do.” (A brothel, in ancient Greece, was designated a porneion.) About every two weeks, I’m offered up something akin to the following …

It’s odd how rarely we see “Professor David Snowball shares how he quit his $50,000-a-year job to turn to pursue his passion as a soup-maker, which turned out to be disastrously ill-considered, leaving him wrought with self-loathing, deeply in debt and hopeful of catching on anywhere that offered health benefits.”

Which, with 775,000 personal bankruptcies last year, seems the likelier outcome than the eternally sunny “I retired at 35 to spend time on the veranda with my outrageously cute dog and spouse, basking in the glow of my own brilliance.”

The headline that packs two errors in the first 12 words

(a) 3%. Not a correction. Barely a hiccup.

(b) “in the coming week”? Dear friends, if “the coming week” is an important time frame for your financial health, get out of stocks now and stay out!

The headline that gets it precisely backward

Isn’t the actual headline “tech-savvy younger investors are three-quarters of the victims of investment scams”?

The headline that calls the Darwin Awards to mind

First of all, good! Secondly, ummm … one of the stocks was selling for $0.0004 a share.  Who exactly thought, “Hey, if I can buy 2500 shares for a dollar, it’s got to be a winner”?

Speaking of which

The name change alone caused the company’s stock to triple in value. Now it appears that the proprietors of the Long Island Iced Tea Company weren’t actually at the cutting edge of blockchain technology … indeed, never had anything at all to do with it … though it continues to brew tea.

I wearily mention this to folks tempted into SPAC-ling themselves. Eat your broccoli.

Thanks to …

The folks who make it all possible, most especially the folks whose regular and routine generosity allow us to have a little bit of predictability: the good folks at S&F Investment Advisors and Gardey Financial, Greg (hi, Greg!), Matthew, William, Brian, the other William, David, Doug and Wilson (howdy ho, good neighbor!).

Thanks to the folks who’ve shared this month: Trev, Michael, Sunny, Philip, and Robert

Apologies to Vincent. We missed your note in January, appreciate the contribution, and shake our walking sticks angrily in the direction of Moscow, Kentucky.

And a cheerful wave to Marty. Two of my students wore Door County hoodies to class last week, which made me think of your note. Part of the “broccoli and Toews” discussion below is being undertaken with you in mind. Be well, and I’ll keep working on asset allocation options.

Broccoli, by the way …

Can be delicious. Also beautiful. Broccoli rabe and broccolini, likewise. The keys are heat, garlic, and olive oil.

Heat a rimmed baking sheet to 500. Peel the stems of some broccoli and then split the stems and florets lengthwise, so you get bits that look like little trees split in half by lightning. Toss them with olive oil, freshly sliced garlic, salt, and pepper. Pull the stinkin’ hot baking sheet very, very carefully out of the oven. Lay the broccoli cut side down on the sheet and pop it back in for about 10 minutes. Don’t scoot it around! People are forever ruining a nice sear by moving stuff. Poke the stems with a sharp knife; if the knife sinks in easily, it’s done. (Turn off the oven.) Serve with a squeeze of lemon. Maybe a nice piece of salmon. (Salmon fans might check into Sikta Salmon Shares. Nice people. Great salmon. Environmentally and socially responsible.)

The other sense of “eat your broccoli” is something like “do the right thing over and over, then harvest lots of small wins rather than looking for that one magic bolt from the blue.” We’ve been talking with the managers of short and ultra-short bond funds, who think they might be able to do something really quietly useful: consistently and without great drama, get you the 2.5%+ returns you need to keep from losing your cash to inflation. We’ll introduce the guys from Channel Short Duration, Intrepid Income, Cavanal Hill Limited Duration, and more!

Also coming in March: what happens when the top-performing international small-cap value fund is stuffed in the wrong box and languishes? We’ll talk to the guys at Harbor International Small Cap to find out. Plus a talk with Phil Toews, CEO of Toews Asset Management, a guy whose been thinking a lot about how to manage our predictably irrational behavior. He thinks his suite of Toews funds might help.

We’ll see, and we’ll see you, on April 1!

Be safe and have a joyful start to your spring.

david's signature

Do As I Say …….

By Edward A. Studzinski

“Snow on the pines
thus breaks the power
that splits mountains.”

Otaka Gengo Tadao (大高源五忠雄,one of the forty-seven Ronin).

Last month, David Snowball opined on Morningstar’s John Rekenthaler’s requiem for mutual funds. And while David agreed with Rekenthaler that the end of the fund industry was not imminent, both feel that it is inevitable. I have felt that to be the case for some time. Rather than be the Cassandra who predicts the end of the happy days for a new generation of fund managers and analysts (not their investors) I chose to sit quietly in the weeds until the signs were obvious. Seeing daily notices of fund closings and consolidations, in conjunction with fee reductions and personnel reductions, we are at a tipping point. Younger generations of analysts and portfolio managers are going to have to forego dreams of zooming around the Great Lakes or some other bodies of water in their yachts.

As investment volatility (equities and fixed income) has increased, we also see the harbingers of change in the environment for funds, specifically the world of taxes and regulation. On almost a daily basis, one sees articles about the needs at the state level for increased revenues. The suggestions to solve the tax revenue shortfalls include raising capital gains tax rates, capping the deduction for qualified dividend income and, raising marginal rates, and/or placing special levies on high-income taxpayers.

There have been, in addition to the pandemic, multiple demands on executive time which are distractions from the core goal of running the business. As it is now proxy time, another data point that one should examine is the extent to which public companies have had to dedicate resources away from the goal of simply running the business for the benefit of the shareholders. The proxy should tell you to what extent there are now reporting requirements or requests relative to ESG criteria, as well as the justification for being in a particular industry or line of business. Those requirements or requests are sourced by regulators and/or consultants working on behalf of investors (especially institutional).

The average CEO in our study put in 9.7 hours a day and 62.5 hours a week. Face-to-face interactions took up 61% of the work time, another 15% was spent on the phone or reading and replying to written correspondence and the final 24% was spent on electronic communications. “How CEOs Manage Time,” Harvard Business Review (2018)

That is on top of the usual investor relations events that take place in a fiscal year. How many calls or meetings are scheduled, taking up how many hours or days of the chief executive officer or chief financial officer? How much time is required for quarterly earnings presentations and conference calls, all of which are pre-scripted and rehearsed? The nature of these matters and their calls on executive time is such that one wonders what the actual time is that is devoted to running the business. Or rather, is the function of the chief executive officer and chief financial officer positions such that they are there to protect or screen the operators at a functional level from being pulled away from devoting their full time and attention to the corporation’s lines of business?

My conclusion as I have thought about taxes? I am of the mind that individual investors should only own mutual funds in tax-free (IRA, 401(k), or pension) accounts. Are there exceptions? Yes, for things such as ultra-short, low-duration, fixed-income funds that serve as money market proxies with slightly higher risk levels. And in a more normal rate environment, money market funds.

I also am becoming more of the mind that the maximum ability to devote time to properly run a business, without the distractions that appear to take away from the profit maximization goal is to be found in private equity situations rather than public equity. My sources involved with private equity tell me that the private equity firms have tended to concentrate on and develop specialties. And resultingly they concentrate their efforts in those situations where they have a skill-set advantage, allowing them to be laser-like focused. Private equity boards and management teams are not cluttered up with individuals or managers who are not attuned to making the business as profitable as possible.

For those who are skeptical of my arguments, I suggest during proxy season that you examine the biographies of the individuals serving on the various boards of directors of public companies that you are interested in or in which you already hold an investment. Upon such examination, you should be able to identify and distinguish between those directors who are there for window dressing, and those who are contributing to the process. Another metric to check is the size of the board. Even for huge mega-cap organizations, boards larger than twenty are probably bordering on being dysfunctional.  A final metric to examine is the number of boards an individual is serving on in addition to the one you are examining. More than two is probably too many for non-management directors to be effective. Board service should not be viewed in the context of a retired executive or investor assembling a “board portfolio” of seats in order to supplement his or her retirement income.

Interest Rates and Inflation

Last week we saw the fear of rising interest rates creep into the investment marketplace as the yields on the 10-year U.S. Treasury increased, giving lie to the stability promised by Federal Reserve Chairman Powell. Along with that came a seven-year Treasury auction that has been described selectively as “the worst in history” in terms of liquidity and the clearing price that was required.

While the Federal Reserve has spoken in terms of a 2% inflation target, the market seems to be anticipating an overshoot, with the Consumer Price Index possibly going over 3%. The work of The Institutional Strategist suggests that given commodity pricing surges, we could see the Producer Price Index north of 6%. That degree of rising inflation ultimately will be priced into both bond yields (increasing) and equity prices (decreasing). If there is one thing we have seen recently, it is that the days of straight-line movements and extrapolation are over for now. Look for the volatility in various asset class markets to continue. Also, look for commodity prices (copper, steel, agriculture, and energy) to continue to increase given demand. Finally, given the example of Texas over the last few weeks, now is not the time to run out and trade the internal combustion engine auto for the electric vehicle.

A Reading Suggestion

I read in the February 2021 issue of Wired an excerpt from 2034: A Novel of the Next World War by Elliot Ackerman and Admiral James Stavridis, to be published on March 9, 2021. For those who know little about proactive cyber warfare and electromagnetic pulse weapons, I suggest getting the book. It will give you an appreciation of the dangers of too much technology, especially when unintended consequences are not considered. For the skeptics, I will point out that the most recent aircraft carrier to join our fleet, with new technology without the bugs ironed out, has catapults that can’t launch planes and elevators that have trouble moving planes and weapons between decks. And we also have a class of littoral combat ships that appears to have problems with the new engine gearing systems.

Inflation, Trends, and Market Manipulation

By Charles Lynn Bolin

This past week has seen some significant market turmoil as the yield on 10-year treasuries climbed quickly to 1.5% while the S&P 500 dipped 2.5% on Thursday, February 25th. I show the Moving Average Convergence Divergence indicator below. The trends are short-term bearish. In this article, I focus on funds that lost less than a half percent on Thursday and were trending up over the past several months for clues on where to invest with the possibility of inflation rising.

This article is divided into four sections for those who wish to skip to particular sections:

  1. Beginning with the End in Mind
  2. Inflation, Trends or Market Manipulation?
  3. Performance of Inflation Resistant Funds
  4. Recent Performance of Trending Funds

Figure #1: Technical Indicators

Source: Author

1. Beginning with the End in Mind

On Thursday, February 25th, the S&P 500 fell 2.5%. For the past 12 months, the S&P 500 has risen 17%. Jil Mislinski describes how highly the markets are valued in Is the Market Still Overvalued? Inflation is inversely related to market valuations. Higher inflation will lower market valuations. Is Mr. Market predicting inflation?

Table #1 is a list of some of the nearly 700 funds that I track which lost less than a half percent last Thursday and generally have positive three-month trends, returns, and positive fund inflows. These are the funds worth taking a look at. First, I note that T. Rowe Price Multi-Strategy Total Return Fund (TMSRX) remains a solid performer and is one of my larger holdings. Second, I note that commodities, excluding gold, are on the list. Commodities are often good hedges for inflation because the costs can often be passed on to consumers.

Table #1: Funds with Low Drawdowns that are Trending Up with Positive Inflows

Lipper Category ETF Fidelity Vanguard Other 25-Feb 3 Month Return
Ultra-Short Obligations ICSH FHQFX VUSFX BUBIX -0.03 0.10
Alternative Equity Market Neutral       ARBIX -0.09 2.85
Municipal Short-Intmdt Debt SUB FSTFX VMLTX PRFSX -0.11 0.04
Municipal Short Debt JMST   VWSTX BTMIX -0.11 0.12
Absolute Return Bond       SUBFX -0.15 1.06
Global Income       PRSNX -0.17 0.64
Global High Yield GHYG       -0.26 2.72
Short Investment Grade Debt SPSB FSHBX VFSTX BSBIX -0.27 0.02
Municipal Intermediate Debt   FLTMX VWITX BMNIX -0.27 -0.10
U.S. Government Short FTSD   VSGBX   -0.27 0.05
Short-Intmdt Invest Grade Debt ISTB FNSOX     -0.31 -0.10
Commodities General       EIPCX -0.32 17.30
High Yield     VWEHX   -0.33 1.62
Municipal General & Insured Debt MMIN FTABX   NOTEX -0.33 -0.36
Commodities Agriculture DBA       -0.34 13.37
Emerging Mrkts Hard Crncy Debt     VEMBX TRECX -0.35 0.89
Alternative Multi-Strategy       TMSRX -0.37 4.63
Alternative Credit Focus UCON     BASIX -0.39 1.48
U.S. Mortgage JMBS   VMBSX   -0.41 -0.22
Alternative Event Driven       DEVDX -0.41 8.22
Flexible Income       ETIBX -0.46 -0.34
Alternative Global Macro       RPIEX -0.49 3.82

Source: Created by the Author Using Morningstar

2. Inflation, Trends, or Market Manipulation?

The Consumer Price Index for Urban Consumers (CPI-U) is currently running at less than 1.5% YOY which is below the past ten years, but it is rising. However, Food and beverage are increasing at 3.7%. Rising grocery prices make life a struggle for those just making ends meet. Figure #2 shows the dollar has continued to weaken and commodity prices are rising. Figure #3 shows the velocity of money has steadied its rapid descent and flattened, commodity prices are rising, and the dollar has been weakening. Note that the decline of the dollar has abated year to date.

Figure #2: Commodity Prices and 10 Year Treasury Yield

Source: Created by the Author Using St Louis Federal Reserve (FRED) Database

Figure #3: Velocity of Money, Dollar, and Import Prices

Source: Created by the Author Using St Louis Federal Reserve (FRED) Database

Figure #4 shows inflation expectations, rising prices, and rising bond yields. Rising interest rates increase the costs to borrowers lowering profits and reducing the amount of money available for spending as larger amounts are required to service debts such as large deficits.

Figure #4: Inflation Breakeven and Forward Rates, PCE Price Index, Inflation Adjusted Rate

Source: Created by the Author Using St Louis Federal Reserve (FRED) Database

One of the sources that I follow carefully on Seeking Alpha is Lipper Alpha for their fund flow analysis such as in Inflation Concerns Boost Flows Into Inflation Protected And Loan Participation Funds And ETFs. Tom Roseen has a thorough review of the trends behind the fund flows.

While conventional taxable fixed-income funds witnessed their tenth consecutive week of net inflows – attracting $6.2 billion this week – inflation-protected and floating-rate funds also witnessed continued attention…

…On the Inflation Protected Securities Funds (and ETFs) side, the top three attractors for investors’ assets year to date were the Schwab US TIPS ETF (SCHP, +$1.7 billion), the iShares TIPS Bond ETF (TIP, +$1.1 billion), and the iShares 0-5 Year TIPS Bond ETF (STIP, +$713 million). The top draws for Loan Participation Funds (and ETFs) were the SPDR Blackstone Senior Loan ETF (SRLN, +$1.3 billion), the Invesco Senior Loan ETF (BKLN, +$1.2 billion), and the BlackRock Floating Rate Income Portfolio, Institutional Shares (BFRIX, +$704 million [including all share classes]).

Inflation provides a contrarian view to the recovery as explained by Michael Lebowitz in Will “Go Crazy” Drive The Bear Out Of Hibernation?. Much of the inflation in asset prices is due to monetary policy. As inflation on consumers rises and bond yields rise, the Federal Reserve may have to tighten monetary policy:

The seemingly omnipotent Fed may find themselves cornered by rising interest rates, rising inflation expectations, and falling asset prices. They may have no option but to reverse the stimulus.

Given the current egregious level of equity valuations, all investors should think deeply about what it would take for the Fed to take their foot off the monetary gas pedal. ‘Go crazy’ might be the rationale.

Market manipulation occurs on a much grander scale than many of us realize. In September 1992, speculators “broke the British Pound” by shorting the pound. Currency manipulation was evident during the Asian Contagion in 1997. Shorting the Dollar Is Also Proving Uncomfortable at the Moment describes the shorting of the US Dollar at the moment. Since most commodities are priced in dollars, a falling dollar raises some prices.

3. Performance of Inflation Resistant Funds

Let’s take a closer look at inflation-resistant funds. Of the funds that I track, those in Table #2 performed the best on a risk-adjusted basis for their Lipper Category.

Table #2: Traditional Inflation Resistant Lipper Categories

Lipper Category ETF Fidelity Other
Absolute Return     SUBFX
Commodities Precious Metals BAR    
Real Return   FSRRX  
Real Estate   FRIFX  
Commodities General COMT   EIPCX
Commodities Agriculture DBA    
Precious Metals Equity   FSAGX  
Commodities Base Metals DBB    

Figure #5 shows the inflation-resistant funds for the past three months. Those not shown, such as gold have not performed well recently. While most held up well on Thursday, some fell on Friday. Commodities will be a good investment if inflation trends continue, but if the short-term reversal gains traction, they likely will be volatile.

Figure #5: Inflation Resistant Funds

Figure #6 shows the more stable of the funds from the previous figure. I show TMSRX as a baseline fund. I have more faith investing in it over the intermediate-term than I do betting on commodities and inflation. I do own a small amount of inflation-protected bonds for diversification.

Figure #6: Stable Inflation Resistant Funds

4. Recent Performance of Trending Funds

Table #3 contains mostly funds that I have previously identified as trending higher with positive fund inflows. Figure #7 shows the funds that have been mostly stable over the past week. Others have not performed as well.

Table #3: Trending Funds with Positive Fund Inflows

Name Symbol Max DD APR Rtn 3 mon Trend Flow Yld SMA 10
Guggenheim Total Rtrn Bond GIBIX -1.1 9.3 2.5 -0.3 3.0 2.6 7.9
Carillon Reams Uncons Bond SUBFX -3.0 8.2 3.0 0.3 1.2 3.0 10.2
Columbia Div Fxd Inc Alloc DIAL -5.5 9.0 2.7 -0.2 11.0 2.7 9.3
Vanguard Target Retire Inc VTINX -6.6 9.7 5.7 0.4 0.2 1.6 11.1
Natixis Loomis S. Strat Alpha LASYX -6.2 6.3 4.7 0.5 1.2 2.3 11.0
Aptus Defined Risk ETF DRSK -3.1 11.6 1.9 -0.1 11.6 1.2 9.3
Absolute Strat Conv Arb ARBIX -3.1 7.5 3.5 0.9 16.1 0.1 7.6
Manning&Napier Uncons Bond EXCPX -4.6 6.0 3.3 0.7 3.9 2.6 8.6
Vanguard LS Income VASIX -4.3 8.9 3.7 0.0 1.4 1.7 8.4
Columbia Adaptive Risk Alloc CRAZX -7.1 10.7 8.2 0.4 0.5 0.9 9.8
Navigator Tctcl Fxd Inc NTBIX -4.0 7.2 5.0 0.0 2.8 1.3 8.9
Advisory Research Strat Inc ADVNX -3.3 9.7 4.0 0.2 1.2 2.2 9.5
Fidelity Asset Manager 30% FTANX -8.3 10.2 6.7 0.6 2.6 1.4 13.3
BlackRock Strat Inc Oppor BASIX -6.7 6.5 4.1 0.4 1.8 2.4 8.9
Invesco S&P500 Dwnsd Hdgd PHDG -6.2 13.7 4.4 2.8 3.7 0.6 9.4
KL Allocation Inst GAVIX -2.0 14.6 4.5 0.0 1.3 2.2 13.2
T Rowe Price Mlti-Strat Tol Rtrn TMSRX -4.7 9.2 3.9 0.9 5.4 0.8 11.4
Schwab Mthly Inc-Max Payout SWLRX -3.7 7.5 3.3 -0.1 2.5 2.0 6.6
Fidelity Freedom Index Inc FIKFX -3.1 8.1 3.6 0.1 2.2 1.3 7.3

Source: Created by the Author using the MFO Premium database

Figure #7: Short Term Performance of Trending Funds

Closing

My belief is that we are at a period of high valuations which will mean revert at some point over the coming decade bringing lower returns as valuation multiples fall. Funds have been flowing into fixed asset funds including inflation-protected bonds. With vaccines, the recovery will probably continue, and stimulus will have to be reduced to prevent inflation. There are some valid drivers of inflation as well as market manipulation.  The timing of when this happens is rather murky.

Investors should build storylines around investments while following trends. This article represents my storyline around inflation, bond yields, and high valuations. I maintain a traditional, diversified, conservative approach which includes some asset rotation to manage risks including inflation.  

Best Wishes and Be Safe!

Considering the “ESG bubble”

By David Snowball

ESG funds drew over $50 billion of net inflows in 2020, more than double their gains in 2019, according to Morningstar. On the whole, they performed splendidly.

A particularly surprising finding is that ESG-screened funds perform exceptionally well in sharp market corrections, both in market crashes between 2000-2011 and in the 2020 Covid crash. While such funds might marginally trail broader markets in good times, their down-market performance gives them an attractive long-term profile.

A panicked crowd immediately gathered and cried, “bubble!!!!”

Four quick bits of perspective here:

    • The total bubblicious inflows are less than the market cap of Pinterest, the 333rd largest company by market cap.

    • Anyone linked to NASDAQ.com pointing elsewhere and crying “bubble” is like a Kardashian pointing at someone and crying “botox bimbo!” (The most recent Khloe K Khontroversy involves suspicions of “finger stretching surgery.” Ick.)

    • You need to read the articles, not the headlines. The NASDAQ bubble article, for instance, uses the head of Norway’s sovereign wealth fund as their authority. That’s fine, except the quote from the Norwegian is, “What is interesting is, if you compare the situation now with the situation before the year 2000, then the stock market was right that technology companies were going to do well in the future … But the valuation went a little high, so it came down again, but the technological development continued. We may see something of the same sort now, that what is happening in the green shift is extremely important and real.”

      Likewise, the Institutional Investor article notes, “63% [of the 200 gatekeepers surveyed] predicted that all funds would incorporate environmental, social, and governance factors in five years,

      And several of the authors come across as blowhards desperate for attention, which is signaled by their delight in insulting those “hand-wringing, teeth-gnashing do-gooders …who have never produced anything” with whom they disagree by their extremely selective use of evidence.

    • Funds are not asset classes. Socially responsible funds cannot be “in a bubble” because they are simply vehicles for accessing assets or asset classes. It is certainly possible for a manager to chase “bubble stocks,” but that’s not an automatic outcome.

Morningstar reports that there are 169 value-oriented funds whose portfolios have above average or high sustainability scores. Of those, 22 have five-star ratings. Highlights include:

  Morningstar category 3-year return Status
Smead Value Large value 13.4 5 star + Gold
Clarkston Founders Mid-cap blend 13.1 5 star + Silver
Applied Finance Select Large value 12.4 5 star + Silver
Clifford Capital Partners Mid-cap value 10.7 5 star + Silver
Fidelity Low-Priced Stock Mid-cap value 8.5 5 star + Silver
Parnassus Endeavor Large value 16.2 5 star + Neutral
Yacktman Focused Large value 14.0 5 star + Silver
Yacktman Large value 12.7 5 star + Silver
Sterling Capital Equity Income Large value 10.3 5 star + Neutral
American Century Disciplined Core Value Large value 9.1 5 star + Neutral
Madison Dividend Income Large value 8.9 5 star + Neutral

The “neutral” ratings for American Century and Parnassus are driven by recent or impending manager retirements.

The list above focuses on the fund’s portfolio, not its objective. A manager with no interest in socially responsible investing might create an objectively socially responsible portfolio because they favored tech and avoid energy.

Using a narrower set of criteria, focusing on funds who have consciously adopted social responsibility screens, the screener at MFO Premium turns up 60 equity funds that (1) fall in the domestic, global, or international value style box and (2) are flagged as socially conscious. Of those, seven have earned MFO’s Great Owl designation for consistently top-tier risk-adjusted-performance.

  Lipper category 3-year return Status
Saturna Amana Income Equity Income 9.0% Great Owl + Honor Roll
Parnassus Core Equity Equity Income 14.0 Great Owl + Honor Roll
Steward Global Equity Income Global Equity Income 6.5 Great Owl + Honor Roll
Calvert US Large-Cap Value Responsible Index Multi-Cap Value 6.6 Great Owl
Hartford Climate Opportunities Global Multi-Cap Value 15.6 Great Owl
Pax ESG Beta Dividend Equity Income 9.8 Great Owl
Franklin ClearBridge Dividend Strategy ESG ETF Equity Income 8.8 Great Owl
Neuberger Berman Large Cap Value Multi-cap value 11.1 Honor Roll
Ariel Mid-cap value 5.1 Honor Roll
Eaton Vance Tax-Managed Global Dividend Income Global equity income 7.1 Honor Roll

Bottom line

The reality of ESG / socially-responsible investing is that it will become a dominant market force because smarter environmental, social, and governance choices by corporations are increasingly a matter of survival. While ESG investing will not save the world, it may accelerate the corporate decisions that might.

The demand for those investments is likely to rise with each new headline: whether it’s the weather-triggered collapse of the Texas power grid, the death of the Atlantic Ocean currents, or the calving of icebergs the size of New York City, consumers grow anxious, legislators pass laws, regulators take action … and “green” companies benefit. University of Chicago researchers note, “whenever there’s bad climate news, green stocks benefit, and such stocks effectively become a hedge against headlines about climate change” (When green investments pay off, 2/23/2021)

The negative consequence of that demand is that unqualified, and sometimes unscrupulous, actors will move in to meet it. Firms with no notable competence will rebrand (have rebranded) failing mainline funds as green ones or hastily launch … well, something marketable. (We already have funds for Low Carbon, Carbon Transition, Carbon Impact, Carbon Free, Climate, Climate Opportunities, Climate Change, Climate Leadership, and Vegan Climate investing.)

For investors seeking to make responsible choices, three bits of advice:

  1. Don’t wait for the perfect investment to come along. It won’t.
  2. Trust the people who have earned your trust. There are a host of outstanding new options (readers know that I invest in Brown Advisory Sustainable Growth), but there are also firms that have been working to act responsibly and earn your trust for decades. They’re exemplified by Vanguard FTSE Social Index or Vanguard Global ESG Select, Fidelity US Sustainability Index, Northern US Quality ESG, the upcoming T Rowe Price Global Impact Equity fund, and BlackRock Advantage ESG US Equity … as well as the work of ESG specialists such as Parnassus, Pax, New Alternatives, Green Century and others.
  3. Don’t let your portfolio be the end of your involvement. Both political parties need to (a) move and (b) move together to craft solutions that will reverse decades of neglect and shape decades of new investment, perhaps using those investments to strengthen the prospects of both rural America and hollowed-out urban neighborhoods.

Keep reading, and we’ll try to keep helping.

Introducing “Dashboard of Launch Alerts”

By Charles Boccadoro

This new tool went live on our MFO Premium site this past month.
 

The Launches Dashboard compiles and tracks funds first appearing in our “Launch Alert” feature of the monthly MFO commentary. It follows a format similar to the Profiles Dashboard but lists funds by alert date, most recent on top to oldest on the bottom, since MFO launched in May 2011.

Hundreds of new funds are launched annually (e.g., 590 in 2020), but most are not worth mentioning. David highlights just a dozen or so each year.

When a manager with a strong record leaves an established firm to start anew, David lets us know:

  • Andrew Foster created Seafarer Capital Partners, LLC and launched Seafarer Overseas Growth and Income (SIGIX), as discussed in the February 2012 commentary.
  • Laura Geritz created Rondure Global Advisors, LLC and launched Rondure New World (RNWIX) in 2016.

As he does when an established firm of high stewardship launches a fund in a new market:

Usually, the Launch Alerts contain a paragraph or two describing why the fund may be worthy. Some are longer than others, a kind of mini-profile:

Since 2016, MFO breaks-out Launch Alerts in the new magazine format. Before that, they were included in the long-scroll format.

While about 1-in-6, as of January 2021, end-up in the dust bin (not shown, e.g., Whitebox Funds), many of the funds in Launch Alert have gone-on to do quite well, some spectacularly. In fact, 18 are currently Great Owl funds, which means they have bested their peers in risk-adjusted return for at least the past 3 years. Here they are … youngest alert on top … all featured more than three years ago:

  • Seven Canyons World Innovators Inv (WAGTX)
  • Touchstone Large Cap Focused A (SENCX)
  • Touchstone Balanced A (SEBLX)
  • American Beacon Shapiro Equity Opportunities Y (SHXYX)
  • Artisan Global Discovery Inv (APFDX)
  • Driehaus Small Cap Growth Inst (DNSMX)
  • Artisan Focus Inv (ARTTX)
  • Osterweis Emerging Opportunity (OSTGX)
  • Seafarer Overseas Value Inst (SIVLX)
  • Grandeur Peak Global Stalwarts Inst (GGSYX)
  • Artisan Developing World Adv (APDYX)
  • T Rowe Price Global High Income Bond (RPIHX)
  • Touchstone Sands Capital Emerging Markets Growth Inst (TSEGX)
  • DoubleLine Shiller Enhanced CAPE I (DSEEX)
  • Grandeur Peak Global Reach Inst (GPRIX)
  • T Rowe Price Emerging Markets Corporate Bond Inv (TRECX)
  • RiverPark Short Term High Yield Inst (RPHIX)
  • Wasatch Frontier Emerging Small Countries Inv (WAFMX)

And here’s how they appear in the new tool, showing risk and performance since launch:
As an adviser or individual investor, I would check this list often.

Launch Alert: Humankind US Stock ETF 

By David Snowball

In the normal course of events, we screen the fund universe (which includes active ETFs) for intriguing options which had debuted in the preceding three months. In general, that means reviewing “Funds in Registration” columns from the preceding quarter, as well as screening MFO Premium and Morningstar databases.

We arrived at this fund differently. It was highlighted on MFO’s discussion board by The Shadow and extensively and thoughtfully discussed by other folks. I’ve never been burdened by the delusion that I need to be The Guy Who Finds the Funds. Rather to the contrary, I’ve often nodded at Anne Serling’s recollection of her father’s last interview, where he noted that “I’ve pretty much spewed out everything I had to say, none of which has been particularly monumental, nothing which will stand the test of time … Good writing, like wine, has to age well, and my stuff is momentarily adequate.”

(Mr. Serling died in 1975, at age 50 after open-heart surgery, having earned six Emmy Awards for his “momentarily adequate” writing.)

In celebration of my colleagues’ insights, and Mr. Serling’s humanity and humility:

Submitted for your approval, Humankind US Stock ETF.

On Wednesday, February 26, 2021, Humankind Investments launched its first ETF, the  Humankind US Stock ETF (HKND). The fund seeks to provide broad exposure to US equities with a focus on companies that contribute the greatest value to society. Unlike most of what we cover, the fund is driven by Humankind’s proprietary index which attempts to measure each firm’s value to society. The underlying logic is that the firms with the greatest long-term social value are also those with the greatest long-term financial prospects. The firm explains:

At Humankind we’re not trying to redefine corporate morality. We’re working to quantify it. We do a deep dive on companies – using a combination of over 30 metrics for assessment – to analyze targets holistically and within the context of the market in which they operate. Then we assign an estimated dollar value to the benefit they provide to humanity.

The logic is fairly simple though the actual process is really complex: quantify the firm’s direct humankind value (they treat their employees well and make good products) then its indirect humankind value (their factory uses lots of electricity and some of their suppliers benefit from forced labor). Add them together, knowing that one or both of the values might be negative. That gives you their total humankind value. Invest in the highest value firms.

The actual index construction and calculation is done by Solactive, a German firm that specializes in creating investable indexes. They calculate something like 11,000 indexes and provide the indexes for about 500 ETFs.

By its nature, the index will favor larger companies since they have the resources to generate the largest immediate benefit. That’s reflected in their current top 10 investments:

  1. Alphabet / Google
  2. Verizon
  3. Microsoft
  4. Corteva – formerly DuPont’s ag division
  5. Deere
  6. Apple
  7. HP
  8. Johnson & Johnson
  9. Pfizer
  10. General Electric

At the other end of a 1000-name index, their smallest holdings are iRobot, maker of the Roomba vacuum and other consumer robots, and Trupanion, a provider of pet health insurance.

Beyond that, they try to promote responsible corporate behavior by providing capital to good actors and by engaging with management.

Folks on the discussion board shared a range of reflections.

Lewis Braham: I “thought it was another gimmick at first, but this one seems legit, especially with a low 0.11% expense ratio … this one has a reasonable mission, eliminate the worst corporate actors from the portfolio while trying to change or improve the remaining ones through shareholder activism.”

The Shadow: “One of the individuals used to work at Vanguard.” The founder and CEO was a data scientist in Vanguard’s quantitative investing group.

Catch 22 thought the fund would attract inflows.

rforno, on the other hand, scanned the holdings list – it’s an index fund, so the holdings reflect the index that Humankind designed and Solactive built – and noted that “half of these positions are in < 50 lots, and many are in the single digits.” Indeed, they held a single share in 26 companies. Mr. Braham allowed that that wasn’t particularly striking for a newly launched fund tracking a diversified index. rforno allowed that he “made some fair points, I guess” and ended with thanks.

Disagreements, as it turns out, can be both civil and productive. Carew388 recommended Silver-rated Vanguard ESG US Stock ETF (ESGV), which launched 9/28/2018, charges 12 bps and simply excludes “bad actors” from its portfolio and Observant endorsed the five-star Parnassus Core Equity Fund (PRILX), which has also earned the MFO Great Owl designation for its consistently top-tier risk-adjusted returns.

Bottom line

Humankind seems like a perfectly legitimate option for investors looking for cheap, diversified exposure to responsible firms. Its founders have both decent credentials and a serious commitment to the subject. While a portfolio with 900 – 1000 stocks might seem slightly overdone, the Vanguard ETF tracks over 1400, and the portfolio is intentionally designed to avoid imposing unintended sector and liquidity risks.

At the very least, the Humankind folks are good communicators and have constructed two welcoming and informative sites for potential investors to vet their options.

Administrative notes

Humankind US Stock ETF charges 0.11% and opened with assets of $28.5 million dollars. Including separate accounts, the firm managed $112 million at year-end 2020. The Humankind ETF website has details on the fund’s initial portfolio and the Humankind advisor website has novice-friendly walkthroughs of how they invest, and a thoughtful article on the complexity of figuring out what’s “responsible”. In a related article, they decry the sort of “lipstick on a pig” approach to labeling firms as “responsible” just for the marketing edge it creates. All of their stuff is blessedly short and accessible.

Launch Alert: Virtus KAR Small-Mid Growth

By David Snowball

On December 8, 2020, Virtus Investment Partners, in partnership with Kayne Anderson Rudnick (KAR) Investment Management, launched Virtus KAR Small-Mid Growth Fund. The fund applies Kayne Anderson’s firmwide discipline to small and mid-cap stocks. The hallmarks of that discipline are

  • A focus on quality: the firm advertises that “For more than 30 years, we have focused on investing in quality businesses. Small caps, mid-caps and large caps. Core, value and growth. All market environments. For KAR, quality is not a fad. It is our heritage and the standard to which we hold ourselves.”
  • A focus on valuation: they target stocks that are undervalued relative to their future growth potential, though those are still very richly valued by conventional measures.
  • A focus on focus: all of the strategies hold 25-50 names.
  • A focus on risk: they target “the highest quality companies with competitive advantages and with little individual business risk … and little to no debt … purchased at attractive prices” which, by their nature, are less volatile than their peers.

So 25-50 domestic stocks with capitalizations in the $1 billion – 35 billion range and an anticipated holding period of around three or four years with an understandable preference for longer holds. The fund will “primarily” own US stocks but the fund’s siblings discussed below, also hold 10-20% non-US stocks.

Virtus KAR Small-Mid Growth is managed by Julie Biel. Ms. Biel has been a KAR analyst since 2013, with a focus on small- to mid-cap tech stocks.  A December 2020 article in Forbes identified her as one of the “Wonder Women” of investing (along with folks like Cathie Wood of ARK, Nancy Zevenbergen and Sarah Ketterer of Causeway) based on their 2020 performance. Before joining KAR in 2013, Ms. Biel worked as an equity research analyst at Imperial Capital (a multi-national investment bank) and at Merrill Lynch. In all, she’s been in the industry since 2004. She earned an MBA (2009) from UCLA and is a Chartered Financial Analyst charter holder, one of the most challenging professional certifications in the industry to achieve. She’s also a competitive show rider.

Reasons to consider the fund

The strategy seems to work with small caps. Virtus KAR Small Cap Growth is a five-star fund that’s also earned a Bronze analyst rating from Morningstar and MFO’s Great Owl designation for consistently top-tier risk-adjusted returns. Morningstar analyst Adam Sabban highlights “a talented management duo … a rigorous focus on high-quality companies … durable portfolio … holdings [that] tend to sport materially lower volatility in earnings and revenue than the broader market …stellar results.” The fund has an exceptionally high active share (98) and low turnover (17%).

The strategy seems to work with mid-caps. Virtus KAR Mid Cap Growth is a five-star fund that’s earned a Gold analyst rating from Morningstar. The fund has a long and winding history, starting in 1994 as National Worldwide Opportunities Fund, becoming a Phoenix fund under three separate monikers (World Opportunities, Equity, Phoenix Aberdeen Worldwide) before being adopted by KAR in February 2012. In the nine years since CIO Douglas Foreman became manager, the fund finished as one of the top 10 mid-growth funds for total return and one of the top five in Sharpe ratio. The fund has a high active share (84) and exceptionally low turnover (14%).

The strategy seems to work with separately managed accounts. Ms. Biel has managed the KAR Small-Mid Sustainable Growth Strategy in separately managed accounts since 2018. (The “sustainable” in the name refers to the sustainability of a firm’s business model, not particularly an environmental sensitivity. It’s likely that the fear of confusing investors is what kept the word from being used in the fund’s name.) She’s responsible for about $35 million in 50 separately managed accounts, which does seem like a useful testing ground. Since its inception, the strategy returned 31.1% annually against 20% for its benchmark index. It also seems to embody less turnover and lower volatility than its peers. Ms. Biel also has a substantial personal investment ($100,000 – 500,000) in the strategy.

Bottom line

Over most trailing periods – whether it’s 5 years, 20 years or 50 years – the returns from the small-growth group are modestly ahead of the large-growth group’s, though with substantially higher volatility. Therein lies the key to considering such funds: if your manager isn’t keenly attuned to managing the risk of high-profile crashes, it’s not worth considering. The evidence at hand suggests that KAR is pretty thoughtful about those risks and they trust Ms. Biel to manage them. It’s worth investigating, especially for investors not looking for pure (read: hi vol) small-cap exposure.

Administrative details

The fund’s “A” shares carry a 5.5% load that’s universally ignored at online brokerages and an expense ratio 0f 1.30%. The minimum initial investment is $2500, reduced to $100 for tax-advantaged accounts and those with an automatic investment plan. It’s likely to take a little while before the fund is on the standard brokerage platforms as its siblings already are. The fund’s Virtus webpage probably should be read in conjunction with the strategy’s factsheet at Kayne Anderson since the latter reveal both more detail and a slightly longer record.

Funds in Registration

By David Snowball

The Securities and Exchange Commission, by law, gets between 60 and 75 days to review proposed new funds before they can be offered for sale to the public. Each month we survey actively managed funds and ETFs in the pipeline. The “actively-managed” proviso allows us to avoid the pain of reporting on the endless array of ETFs that have commissioned indices of … oh, SPACs plus cannabis or cryptocurrencies plus hotel stocks or stocks also loved by Gamestop investors. (The examples are hypothetical but still representative of the idiocy of the moment.) This month brings 15 new products in the pipeline, most of which will launch in late April or May.

About two-thirds of the month’s filings are new offerings from well-established advisors.

David Sherman, whose RiverPark Short Term High Yield Fund has the highest 10-year Sharpe ratio of any fund in existence, offers up new ultra-short and responsible credit funds for institutional investors, with both funds permitting Mr. Sherman to dabble in SPACs.

Homestead is offering a balanced fund that invests in companies exposed to rural America, which is consistent with the advisor’s history (they started as the retirement system for America’s rural electrification co-ops) and might be an okay idea, if only because it likely avoids exposure to the endlessly alluring, endlessly disastrous meme stocks.

Oaktree is bringing its 10-year-old emerging markets strategy to the masses.

T. Rowe Price is offering up a low-cost, non-transparent ETF to highlight the stock selection skills of its analyst corps.

Arga Emerging Markets Value Fund

Arga Emerging Markets Value Fund will pursue long-term capital appreciation. The plan is to invest in mid- to large-cap value stocks. The fund will be managed by A. Rama Krishna, Takashi Ito, and P. Sujith Kumar. The firm has a sort of behavioral finance bias and an urge to “take the emotion” out of decisions. The expense ratio will be 1.30% and the minimum initial investment will be $5,000. The same prospectus also offers an International Value version of the same fund.

Baron New Asia Fund

Baron New Asia Fund will seek capital appreciation. No real details on the investment discipline except “we’ll do Baron stuff with mid- to large-cap Asian companies.” The fund will be managed by three long-time Baron employees, Michael Kass, Anuj Aggarwal, and Shuyang Bai. The expense ratio hasn’t been disclosed. The minimum initial investment will be $2,000.

CrossingBridge Responsible Credit Fund

CrossingBridge Responsible Credit Fund will seek current income and capital appreciation consistent with the preservation of capital. The plan is to construct an ESG-screened portfolio of … well, stuff: bills, notes, bonds, debentures, convertible bonds, loan participations, syndicated loan assignments, and other evidence of indebtedness issued by U.S. or foreign corporations, governments, government agencies, or government instrumentalities, including floating-rate securities, preferred stock, and fixed income-like equities, convertible bonds, preferred stocks, and SPACS. The portfolio duration will be 24 years. The fund will be managed by David Sherman and Jonathan Berg. The expense ratio has not been disclosed. The minimum initial investment is $50,000.

CrossingBridge Ultra-Short Duration Fund

CrossingBridge Ultra-Short Duration Fund will seek to offer a higher yield than cash instruments while maintaining a low duration. They have the same unconstrained investment universe as their Responsible Credit Fund but an average portfolio duration of 1 year or less. The fund will be managed by David Sherman and Jonathan Berg. The expense ratio has not been disclosed. The minimum initial investment is $50,000.

DGI Balanced Fund

DGI Balanced Fund will seek long-term capital appreciation and current income. It’s a conventional balanced fund designed to be offered to folks living in Puerto Rico. It will be managed by Carlos González. The expense ratio has not been disclosed. The minimum initial investment is $250.

Freedom Day Dividend ETF

Freedom Day Dividend ETF will seek dividend growth. The fund will invest in 30-50 mid- to large-cap companies with the prospect of rising dividends. The fund will be co-managed by Ryan Krueger and Brandon Koepke, though it sounds like Mr. Krueger will be the lead. The expense ratio is 0.39%.

Goldman Sachs Future Planet Equity ETF

Goldman Sachs Future Planet Equity ETF will seek long-term capital appreciation. The managers will invest in a global portfolio of companies that are seeking to solve environmental problems, such as clean energy, resource efficiency, sustainable consumption, the circular economy, and water sustainability. The fund will be managed by Alexis Deladerrière, Raj Garigipati, and Jamie McGregor. The expense ratio has not been disclosed.

Homestead Rural America Growth & Income Fund 

Homestead Rural America Growth & Income Fund will pursue long-term total return through capital appreciation and current income. The plan is to invest in the stocks and bonds of companies that have exposure to “rural America.” That’s determined either by the services the companies provide (e.g., agriculture), the population density of the areas where their facilities are located, or their presence in areas served by the National Rural Electric Co-op. The fund will be managed by a team from RE Advisors. The minimum initial investment is $500 but the expense ratio has not been disclosed.

Janus Henderson U.S. Real Estate ETF

Janus Henderson U.S. Real Estate ETF will seek total return through a combination of capital appreciation and current income. The managers will invest in REITs and REOCs with the prospect of committing a bold 15% of assets to Canada. The fund will be managed by Greg Kuhl and Danny Greenberger. Prior to joining Henderson, Mr. Kuhl was Global REITs guy at Brookfield Investment Management and Mr. Greenberger managed a long/short real estate hedge fund. The expense ratio has not been disclosed.

Left Brain Compound Growth Fund

Left Brain Compound Growth Fund will seek long-term capital appreciation. The plan is to invest in stocks and high-yield bonds with “a focused, opportunistic, best ideas strategy.” No real idea of what that strategy is. The expense ratio, after waivers, is 2.0% and the minimum initial investment is $5,000. The fund caught the attention of the folks on our discussion board; we commend, especially, long-term member Lewis Braham’s assessment of the fund.

Oaktree Emerging Markets Equity Fund

Oaktree Emerging Markets Equity Fund will seek long-term growth of capital. In September 2019, Oaktree became a signatory to the United Nations-supported Principles for Responsible Investment and intends to construct an ESG-screened equity portfolio that actively considers the risk of loss that can occur as a result of unpredictable market events and seeks to construct a portfolio that is appropriately diversified across various countries and sectors. Frank J. Carroll and Janet L. Wang will manage the fund. The manager already manages about $8 billion in EM assets for Oaktree. The SICAV version of the strategy modestly trails its peers since inception. Expenses will range from 1.10 – 1.35%, putting aside the extortionate “C” shares that no one (ever) should buy. “A” shares require a $1000 minimum initial investment.

Philotimo Focused Growth and Income Fund

Philotimo Focused Growth and Income Fund seeks current income and long-term growth. The plan is to invest in fixed-income securities, dividend-paying small-cap value stocks, and maybe some REITs. The focus is on companies with special circumstances such as spinoffs and restructuring. The idea is that those companies are systematically mispriced; the fixed income stuff is designed to offer ballast. The fund will be managed by David L. Kanen. The expense ratio will be 1.49% and the minimum initial investment will be $2,500. “Philotimo” is a famously untranslatable Greek word whose surface meaning involves “a lover of honor” but which resonates with notions of dignity, humility, and respect. Just fyi.

Principal International Adaptive Multi-Factor ETF

Principal International Adaptive Multi-Factor ETF seeks long-term growth of capital. The expense ratio has not been disclosed. The plan is to divide companies into factors (value, momentum, quality, and volatility) and then use a quantitative system to overweight some and underweight others. It will be managed by an as-yet-unnamed team from Principal. The same prospectus offers US Large Cap and US Small Cap versions of the same fund.

Putnam Focused Large Cap Growth ETF

Putnam Focused Large Cap Growth ETF will seek capital appreciation. It will be an active, non-transparent ETF that invests in, well, large-cap growth companies. Not much detail beyond that, except to note that it will be non-diversified. The fund will be managed by Richard Bodzy and Gregory McCullough. Messrs. Bodzy and McCullough manage the four-star large-cap, slightly focused Growth Opportunities fund. The expense ratio hasn’t been disclosed.

T. Rowe Price US Equity Research ETF

T. Rowe Price US Equity Research ETF will seek long-term capital growth. The word “Research” in a fund’s name often signals the fact that the firm’s equity analysts will have a disproportionate role in the portfolio’s construct. That seems to be the case here. The plan is to construct a non-diversified portfolio whose size, style, and sector exposures are pretty close to that of the S&P 500 (which controls for a bunch of risk factors), then to add value through superior stock selection within those confines. The fund will be a non-transparent, active ETF managed by a rather large team led by Ann M. Holcomb, Joshua Nelson, Jason B. Polun, and Thomas H. Watson. The expense ratio is 0.34%.

Manager Changes, January and February 2021

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.

January and February saw changes that affected about 134 funds. Among the most eye-catching:

The venerable Dan Fuss steps aside from his responsibilities at a slug of Loomis Sayles funds on March 1, 2021, the 45th anniversary of his arrival at the firm. Mr. Fuss received Morningstar’s Outstanding Portfolio Manager award in 2019 and was the Morningstar Fixed-Income Manager of the Year in 2009, a Navy veteran (1955-59), former manager of Yale’s endowment,  member of the Fixed Income Analysts Society’s Hall of Fame and the architect of Loomis, Sayle’s multi-sector investing strategy. He’s made a difference in the world.

On October 1, 2021, Larry J. Puglia is slated to step down from T. Rowe Price Blue Chip Growth after 28 years at the helm. In answer to a reader’s question, I noted, “TRP handles manager changes better than anyone in the industry. Even superstars who depart suddenly, which is incredibly rare, are replaced by folks who scarcely miss a beat. Generally strong internal culture, widely accepted discipline, and 12-month hand-over periods. A striking example is Health Sciences, where Kris Jenner was so good that he was seen as irreplaceable; then he left on atypically short notice to run a hedge fund, and his successors turned Jenner’s five-star fund into … well, a five-star fund. Not quite as eye-watering but five stars.” I wish Mr. Puglia, after decades of successfully steering a near $100 billion fund, a happy retirement. I have faith that his successor will do him proud.

One of the names above the door, William Browne, has stepped aside after nearly 50 years at the firm and 28 years managing Tweedy, Browne Global Value, and Tweedy, Browne Value. The Browne family joined forces with Bill Tweedy in 1945.  (I rather like the fact that his MBA is from Trinity College, Dublin, which has an incredibly cool library and a freakish formal name: the College of the Holy and Undivided Trinity of Queen Elizabeth). A long-tenured team remains in place with each fund.

Speaking of “the name above the door,” 361 Capital has stepped away from managing the 361 long/short funds.

Ticker Fund Out with the old In with the new Dt
ADMQX 361 Domestic Long/Short Equity Fund On April 1, 361 Capital will no longer manage the fund. Wells Capital Management (aka Wells Fargo) will take over management of the funds. Odd since Wells seems to be selling off their own funds. 2/21
AGAQX 361 Global Long/Short Equity Fund On April 1, 361 Capital will no longer manage the fund. Wells Capital Management (aka Wells Fargo) will take over management of the funds. 2/21
GIGAX Aberdeen Emerging Markets Sustainable Leaders Fund Dominic Byrne, Martin Connaghan, Samantha Fitspatrick, Jamie Cumming, and Bruce Stout are no longer listed as managers for the fund. Fionna Manning, William Scholes, and David Smith will now serve as portfolio managers for the fund. 1/21
BJBIX Aberdeen International Sustainable Leaders Effective immediately, all references to Jamie Cumming in the Prospectus and SAI are deleted. Joanna McIntyre and Victoria MacLean will continue to manage the fund. 1/21
ATFPX Alger 25 Fund Ankur Crawford will no longer serve as portfolio manager for the fund. Daniel Chung will now serve as portfolio manager for the fund. It’s a short-term shtick since Alger 25 is slated for merger, but managing 13 funds as diverse as health sciences and emerging markets does seem a bit much. 2/21
ASUAX AllianzGI Global Sustainability No one, but… Gunnar Miller and Robbie Miles will now serve as portfolio managers for the fund. 1/21
AAHAX American Beacon AHL TargetRisk Core Fund No one, but… Effective February 1, 2021, Otto van Hemert of AHL Partners LLP is added as a portfolio manager. 2/21
AAIPX American Beacon International Equity No one, but… Brian Cho will join the management team for the fund. 1/21
TQENX AMG TimesSquare Emerging Markets Small Cap Caglar Somek will no longer serve as portfolio manager for the fund. David Oh is added as a portfolio manager of the Fund. David Oh and Magnus Larsson are jointly and primarily responsible for the day-to-day management of the fund. 1/21
QGMIX AQR Global Macro No one, but… Effective March 31, 2021, Ashwin Thapar and Jonathan Fader will join the management team. 1/21
ARTGX Artisan Global Value Justin Bandy will no longer serve as a portfolio manager for the fund. Daniel O’Keefe and Michael McKinnon continue to serve as portfolio managers for the fund. 1/21
ARTQX Artisan Mid Cap Value James Kieffer has stepped down as manager for the fund. Thomas Reynolds, Daniel Kane, and Craig Inman will continue to manage the fund. 1/21
ARTNX Artisan Select Equity Justin Bandy will no longer serve as a portfolio manager for the fund. Daniel O’Keefe and Michael McKinnon continue to serve as portfolio managers for the fund. 1/21
ARTLX Artisan Value James Kieffer has stepped down as manager for the fund. Thomas Reynolds, Daniel Kane, and Craig Inman will continue to manage the fund. 1/21
ATVAX Athena Behavioral Tactical Effective January 22, 2021, Princeton Fund Advisors, LCC, will no longer serve as the fund’s investment adviser. Effective January 22, 2021, AthenaInvest Advisors, LLC will serve as the fund’s investment adviser. 1/21
AVEDX Ave Maria Rising Dividend Fund Effective on March 1, 2021, Joseph Skornicka retires from Schwartz Investment Counsel, Inc. (the “Adviser”). George Schwartz will serve as co-portfolio manager with Brandon S. Scheitler, co-portfolio manager of the Fund. 2/21
AVEMX Ave Maria Value Joseph Skornicka will no longer serve as a portfolio manager for the fund. Ryan Kuyawa joins Timothy Schwartz in serving as portfolio managers for the fund. 1/21
AVEWX Ave Maria World Equity Fund Robert Schwartz will no longer serve as portfolio manager for the fund. Anthony Gennaro will join Joseph Skornicka to serve as portfolio managers for the fund. 1/21
AVEWX Ave Maria World Equity Fund Effective on March 1, 2021, Joseph Skornicka retires from Schwartz Investment Counsel, Inc. (the “Adviser”). Anthony W. Gennaro, Jr., CFA, CPA, will serve as the portfolio manager of the Ave Maria World Equity Fund 2/21
AWTM Aware Ultra-Short Duration Enhanced Income ETF John Kaprich, Andrea Roemhildt, and Stephen Smitley are no longer listed as managers for the fund. Charles Ragauss and Michael Venuto will now serve as portfolio managers for the fund. 1/21
KCMIX AXS Multi-Strategy Alternatives Martin Kerns and Kerns Capital Management have been removed as sub-advisers to the fund. Parker Binion and Mark Lacuesto will continue as managers. 1/21
DGIEX BNY Mellon Global Emerging Markets Sophia Whitbread will no longer manage the fund. Paul Birchenough, Ian Smith, and Naomi Waistell will continue to manage the fund. 2/21
BISAX Brandes International Small Cap Equity Fund No one, but… Effective February 10, 2021, Bryan Barrett joins Yingbin Chen, Mark Costa, and Luiz Sauerbronn as portfolio managers for the fund. 2/21
BSCAX Brandes Small Cap Value Fund No one, but… Effective February 10, 2021, Bryan Barrett joins Yingbin Chen, Mark Costa, and Luiz Sauerbronn as portfolio managers for the fund. 2/21
BBVLX Bridge Builder Large Cap Value Effective February 1, 2021, James Kieffer will no longer serve as a portfolio manager for the fund. Daniel Kane, Thomas Reynolds IV, and Craig Inman will continue to serve as portfolio managers of Artisan Partners’ portion of the fund. 1/21
BIAZX Brown Advisory Mortgage Securities John Lucker will no longer serve as a portfolio manager for the fund. Effective as of January 8, 2021, Thomas D.D. Graff, CFA, has taken sole responsibility for the day-to-day portfolio management of the Fund. 1/21
ACRNX Columbia Acorn Richard Watson becomes the fifth manager to leave the fund since 2015. Matthew Litfin and Erika Maschmeyer continue to manage the fund. 2/21
CZAMX Columbia Multi-Manager Alternative Strategies Edward Chen will no longer serve as a portfolio manager for the fund. Effective March 31, 2021, Jonathan Fader and Yao Hua Ooi will join Roger Foltynowicz, Gregg Loprete, and Todd Munn in managing the fund. 1/21
DBALX Davenport Balanced Income Fund Charles Gomer has retired and will no longer manage the fund. Nine other managers soldier on. 2/21
FIUTX Delaware Equity Income Fund Kristen Bartholdson, Nikhil Lalvani, and Robert Vogel are no longer listed as portfolio managers for the fund. Benjamin Leung and Scot Thompson will now serve as portfolio managers for the fund. 2/21
FGINX Delaware Growth and Income Fund Kristen Bartholdson, Nikhil Lalvani, and Robert Vogel are no longer listed as portfolio managers for the fund. Benjamin Leung and Scot Thompson will now serve as portfolio managers for the fund. 2/21
FCUTX Fidelity Flex Small Cap Fund Clint Lawrence no longer serves as portfolio manager of the fund. Derek Janssen has managed the fund since February 2021. 2/21
FCPVX Fidelity Small Cap Value Fund Clint Lawrence no longer serves as portfolio manager of the fund. Derek Janssen has managed the fund since February 2021. 2/21
FIUBX First Investors Equity Income Fund Kristen Bartholdson, Nikhil Lalvani, and Robert Vogel are no longer listed as portfolio managers for the fund. Benjamin Leung and Scot Thompson will now serve as portfolio managers for the fund. 2/21
FGIBX First Investors Growth and Income Fund Kristen Bartholdson, Nikhil Lalvani, and Robert Vogel are no longer listed as portfolio managers for the fund. Benjamin Leung and Scot Thompson will now serve as portfolio managers for the fund. 2/21
FFALX Franklin Global Allocation Thomas Nelson and May Tong will no longer serve as portfolio managers for the fund. Todd Brighton, Edward Perks, and Eugene Podkaminer will now manage the fund. 2/21
GOLDX Gabelli Gold Fund No one, but… Effective February 1, 2021, Mr. Christopher Mancini has been added to the portfolio management team for the Gabelli Gold Fund, Inc. Caesar Bryan has been onboard since 1994 and remains. 2/21
GTMEX Glenmede Large Cap Value Portfolio Wade Wescott will no longer manage the fund. John Kichula, Mark Livingston, 1/21
ONOF Global X Adaptive U.S. Risk Management Kimberly Chan will no longer serve as portfolio manager for the fund. John Belanger, Nam To, Wayne Xie, and Vanessa Yang will continue to manage the fund. 2/21
GSCAX Goldman Sachs Commodity Strategy Fund Peter Stone and Samual Finkelstein are no longer listed as portfolio managers for the fund. Robert Hyman will now serve as portfolio manager for the fund. 2/21
GGMBX Goldman Sachs Global Managed Beta Fund Effective immediately, Kate El-Hillow will no longer serve as a portfolio manager for the Fund. Neill Nuttall and Siwen Wu will continue to serve as portfolio managers for the Fund. 2/21
GSAYX Goldman Sachs Long Short Credit Strategies Fund No one, but… Effective February 10, 2021, Aakash Thombre will become a portfolio manager for the Fund. Michael McGuiness and Ashish Shah will continue to manage the Fund. 2/21
GSEQX Goldman Sachs Multi-Manager Global Equity Fund Effective immediately, Kate El-Hillow will no longer serve as a portfolio manager for the Funds. Siwen Wu will now serve as a portfolio manager for the funds along with Neill Nuttall and Betsy Gorton. 2/21
GRASX Goldman Sachs Multi-Manager Real Assets Strategy Fund Effective immediately, Kate El-Hillow will no longer serve as a portfolio manager for the Funds. Yvonne Woo will continue to serve as a portfolio manager for the fund. 2/21
GNCFX Goldman Sachs Multi-Manager Non-Core Fixed Income Fund Effective immediately, Kate El-Hillow will no longer serve as a portfolio manager for the Funds. Siwen Wu will now serve as a portfolio manager for the funds along with Neill Nuttall and Betsy Gorton. 2/21
SFAFX Goldman Sachs Strategic Factor Allocation Fund Effective immediately, John Landers will no longer serve as a portfolio manager for the fund. Patrick Hartnett joins Federico Gilly and Nishank Modi in managing the fund. 2/21
GGIIX GuideStone Funds Global Impact Fund  Matt Peden will no longer serve as a portfolio manager for the fund. David Spika joins the management team in managing the fund. 2/21
HICSX Harbor Convertible Securities Effective January 4, 2021, Raymond F. Condon no longer serves as a portfolio manager to Harbor Convertible Securities Fund. Mark R. Shenkman, Justin W. Slatky, Jordan N. Barrow, CFA, and Thomas Whitley, CFA, continue to serve as portfolio managers to the fund. 1/21
HIIDX Harbor Diversified International All Cap No one, but… Justin Hill joins the management team for the fund. 1/21
HIINX Harbor International Michael Godfrey will no longer serve as a co-portfolio manager for the fund. Justin Hill joins the management team for the fund. 1/21
HRMDX Heartland Mid Cap Value No one, but … Troy McGlone has joined Colin McWey and William Nasgovitz as a portfolio manager for the fund. 1/21
SNLN Highland/iBoxx Senior Loan ETF David Owens will no longer serve as portfolio manager for the fund. Matt Pearson will now serve as portfolio manager for the fund. 1/21
HISIX Homestead International Equity No one, but … Babatunde Ojo has joined Ferrill Roll, Andrew West, Bryan Lloyd, and Patrick Todd serve as the portfolio managers of the fund. 1/21
ATDAX Invesco Endeavor Fund Raymond Anello will no longer serve as Portfolio Manager of the Funds. Belinda Cavazos continues to manage the fund. 2/21
OPMSX Invesco Main Street Mid Cap Fund Raymond Anello will no longer serve as portfolio manager of the Funds. Belinda Cavazos joins the management team for the fund. 2/21
OSCYX Invesco Main Street Small Cap Fund Raymond Anello will no longer serve as portfolio manager of the funds. Raman Vardharaj, Magnus Krantz, Kristin Pak, Joy Budzinski, Matthew Ziehl, and Adam Weiner will continue to manage the fund. 2/21
ATIAX Invesco Select Companies Fund Raymond Anello will no longer serve as portfolio manager of the funds. Raman Vardharaj, Magnus Krantz, Kristin Pak, Joy Budzinski, Matthew Ziehl, and Adam Weiner will continue to manage the fund. 2/21
JANRX Janus Henderson Global Select Fund Effective March 1, 2021, Garth Yettick is gone. George Maris and Julian McManus will continue to manage the fund. 2/21
JAOSX Janus Henderson Overseas Effective on or about March 1, 2021, Garth Yettick will have left the building. George Maris and Julian McManus will continue to manage the fund. 2/21
JPUS JPMorgan Diversified Return U.S. Equity ETF No one, but … Alistair Lowe has joined the management team, which consists of Yazann Romahi, Joe Staines, and Yegang (Steven) Wu. 1/21
JPME JPMorgan Diversified Return U.S. Mid Cap Equity ETF No one, but … Alistair Lowe has joined the management team, which consists of Yazann Romahi, Joe Staines, and Yegang (Steven) Wu. 1/21
JPSE JPMorgan Diversified Return U.S. Small Cap Equity ETF No one, but … Alistair Lowe has joined the management team, which consists of Yazann Romahi, Joe Staines, and Yegang (Steven) Wu. 1/21
JDIV JPMorgan U.S. Dividend ETF No one, but … Alistair Lowe has joined the management team, which consists of Yazann Romahi, Joe Staines, and Yegang (Steven) Wu. 1/21
JMIN JPMorgan U.S. Minimum Volatility ETF No one, but … Alistair Lowe has joined the management team, which consists of Yazann Romahi, Joe Staines, and Yegang (Steven) Wu. 1/21
JMOM JPMorgan U.S. Momentum Factor ETF No one, but … Alistair Lowe has joined the management team, which consists of Yazann Romahi, Joe Staines, and Yegang (Steven) Wu. 1/21
JQUA JPMorgan U.S. Quality Factor ETF No one, but … Alistair Lowe has joined the management team, which consists of Yazann Romahi, Joe Staines, and Yegang (Steven) Wu. 1/21
VGRIX JPMorgan U.S. Value Factor ETF No one, but … Alistair Lowe has joined the management team, which consists of Yazann Romahi, Joe Staines, and Yegang (Steven) Wu. 1/21
EMBOX Lazard Emerging Markets Equity Blend Erianna Khusainova, Kim Tilley, Stephen Marra, James Donald, and Jai Jacob will no longer manage the fund. Rohit Chopra, Ganesh Ramachandran, and John Reinsberg will now manage the fund. 2/21
LBFAX Loomis Sayles Bond Fund Effective March 1, 2021, Daniel J. Fuss has resigned as portfolio manager of the fund. Matthew Eagan, Elaine Stokes, and Brian Kennedy will continue to manage the fund. 2/21
LSFIX Loomis Sayles Fixed Income Fund Effective March 1, 2021, Daniel J. Fuss has resigned as portfolio manager of the fund. Matthew Eagan, Elaine Stokes, and Brian Kennedy will continue to manage the fund. 2/21
LGMNX Loomis Sayles Global Allocation Fund Effective March 1, 2021, Daniel J. Fuss has resigned as portfolio manager of the fund. Effective March 1, 2021, Matthew J. Eagan has joined the portfolio management team of the Fund. 2/21
LSIOX Loomis Sayles High Income Opportunities Fund Effective March 1, 2021, Daniel J. Fuss has resigned as portfolio manager of the fund. Matthew Eagan, Elaine Stokes, and Brian Kennedy will continue to manage the fund. 2/21
LSHIX Loomis Sayles Institutional High Income Fund Effective March 1, 2021, Daniel J. Fuss has resigned as portfolio manager of the fund. Matthew Eagan, Elaine Stokes, and Brian Kennedy will continue to manage the fund. 2/21
LGBCX Loomis Sayles Investment Grade Bond Fund Effective March 1, 2021, Daniel J. Fuss has resigned as portfolio manager of the fund. Matthew Eagan, Elaine Stokes, and Brian Kennedy will continue to manage the fund. 2/21
NEZYX Loomis Sayles Strategic Income Fund Effective March 1, 2021, Daniel J. Fuss has resigned as portfolio manager of the fund. Matthew Eagan, Elaine Stokes, and Brian Kennedy will continue to manage the fund. 2/21
MPGFX Mairs & Power Growth Mark Henneman will be stepping down as co-manager of the fund. Andrew Adams and Peter J. Johnson will continue to manage the fund. 1/21
MSCFX Mairs & Power Small Cap No one, but … Christopher Strom has been named co-manager of the fund. Allen Steinkopf and Andrew Adams will continue to manage the fund with Mr. Strom. 1/21
MSMLX Matthews Asia Small Companies No one, but… The fund changes its name and focus on April 30, 2021. At that time, Robert Harvey and Jeremy Sutch will join as co-managers, while Vivek Tanneeru will remain as lead manager. 2/21
MAKAX Morgan Stanley China Equity Portfolio May Yu will no longer serve as a portfolio manager for the fund. Amay Hattangadi will now manage the fund. 1/21
OASGX Optimum Small-Mid Cap Growth No one, but … Samuel Smith and Ryan Smith have joined William Grierson, Daniel Hagen, and Paul von Kuster as portfolio managers for the fund. 1/21
MAHIX PartnerSelect High Income Alternatives Greg Mason and Troy Ward will no longer serve as portfolio managers for the fund. Anne Walsh, Jason Steuerwalt, Scott Minerd, Paul Kunz, Neil Hohmann, Andrew Hofer, Derek Devens, Jeremy DeGroot, Jack Chee, Steven Brown, and Adam Bloch will continue to manage the fund. 1/21
PAXDX Pax ESG Beta Dividend Fund Michael Branch, Ran Leshem, Annie Tan, and Robert Tymoczko are no longer serving as portfolio managers for the fund. Andrew Braun and Scott LaBreche will now serve as portfolio managers for the fund. 2/21
PXGAX Pax ESG Beta Quality Fund Michael Branch, Ran Leshem, Annie Tan, and Robert Tymoczko are no longer serving as portfolio managers for the fund. Andrew Braun and Scott LaBreche will now serve as portfolio managers for the fund. 2/21
PXDIX Pax Global Sustainable Infrastructure Michael Branch, Ran Leshem, Annie Tan, and Robert Tymoczko will no longer serve as portfolio managers for the fund. Andrew Braun and Scott LaBreche will now serve as portfolio managers for the fund. 1/21
PXNIX Pax International Sustainable Economy Michael Branch, Ran Leshem, Annie Tan, and Robert Tymoczko will no longer serve as portfolio managers for the fund. Andrew Braun and Scott LaBreche will now serve as portfolio managers for the fund. 1/21
PXWGX Pax U.S. Sustainable Economy Michael Branch, Ran Leshem, Annie Tan, and Robert Tymoczko will no longer serve as portfolio managers for the fund. Andrew Braun and Scott LaBreche will now serve as portfolio managers for the fund. 1/21
IG Principal Investment Grade Corporate Active ETF John Friedl and Timothy Warrick are no listed as portfolio managers for the fund. Matthew Minnetian will now serve as the sole portfolio manager for the fund. 1/21
GSTEX Principal Street High Income Municipal No one, but … Troy Willis has been added as the lead portfolio manager of the fund. 1/21
RPMMX Reinhart Mid Cap PMV Matthew Martinek is no longer serving as a co-portfolio manager for the fund. Joshua D. Wheeler has joined the management team as a co-portfolio manager. 1/21
SMQFX SEI Emerging Markets Equity Fund AllianceBernstein L.P. no longer serves as a sub-adviser to the fund. Robeco Institutional Asset Management, whose named managers are Jaap van der Hart and Fabiana Fedeli, join 20 other managers on this sort of undistinguished fund. 2/21
DEBTX Shelton Tactical Credit Guy Benstead no longer serves as a member of the portfolio management team. Jeffrey Rosenkranz, David Falk, and William Mock will continue to serve as members of the fund’s portfolio management team. 1/21
SEEIX SIT International Equity James Stephenson and Peter Boardman will no longer serve as portfolio managers for the fund. Asa Annerstedt, Chris Gowlland, Jens Hansen, Allan Jensens, and Klaus Petersen have joined the portfolio management team. 1/21
SNWAX Snow Capital Small Cap Value Anne Wickland will no longer serve as a portfolio manager for the fund. Phil Greenblatt has joined Joshua Schachter as a portfolio manager for the fund. 1/21
SSILX State Street International Stock Selection Fund Effective immediately, Stuart Hall no longer serves as Portfolio Manager of the Fund. Adel Daghmouri continues to serve as a Portfolio Manager of the Fund. 2/21
TRBCX T. Rowe Price Blue Chip Growth Effective October 1, 2021, Larry J. Puglia will step down as a portfolio manager and Chair of the fund’s Investment Advisory Committee. Paul D. Greene II will succeed Mr. Puglia to become portfolio manager of the fund and Chair of the fund’s Investment Advisory Committee. 1/21
TCHP T. Rowe Price Blue chip Growth ETF Effective October 1, 2021, Larry J. Puglia will step down as a portfolio manager and Chair of the fund’s Investment Advisory Committee. Paul D. Greene II will succeed Mr. Puglia to become portfolio manager of the fund and Chair of the fund’s Investment Advisory Committee. 1/21
TBWIX Thornburg Better World International Di Zhou will conclude her service as co-portfolio manager for the fund. Lei Wang has been named portfolio manager for the fund. 1/21
TGVAX Thornburg International Value Di Zhou will conclude her service as co-portfolio manager for the fund. Matt Burdett has joined Lei Wang as a portfolio manager for the fund. 1/21
TMCGX Thrivent Mid Cap Growth No one, but … Siddharth Sinha has joined David Lettenberger in managing the fund. 1/21
SEBLX Touchstone Balanced Fund Effective March 31, 2021, Timothy Policinski will retire as a member of the portfolio management team of the fund. Daniel Carter, Austin Kummer, and James Wilhelm will continue to serve as the portfolio managers of the fund. 2/21
TBGVX Tweedy, Browne Global Value Fund William Browne will no longer serve as portfolio manager for the fund. Sean McDonald has joined Roger de Bree, Frank Hawrylak, Jay Hill, Thomas Shrager, John Spears, and Robert Wyckoff in managing the fund. 1/21
TBCUX Tweedy, Browne Global Value Fund Ii – Currency Unhedged William Browne will no longer serve as portfolio manager for the fund. Sean McDonald has joined Roger de Bree, Frank Hawrylak, Jay Hill, Thomas Shrager, John Spears, and Robert Wyckoff in managing the fund. 1/21
TWEBX Tweedy, Browne Value Fund William Browne will no longer serve as portfolio manager for the fund. Sean McDonald has joined Roger de Bree, Frank Hawrylak, Jay Hill, Thomas Shrager, John Spears, and Robert Wyckoff in managing the fund. 1/21
TBHDX Tweedy, Browne Worldwide High Dividend Yield Value Fund William Browne will no longer serve as portfolio manager for the fund. Sean McDonald has joined Roger de Bree, Frank Hawrylak, Jay Hill, Thomas Shrager, John Spears, and Robert Wyckoff in managing the fund. 1/21
USAUX USAA Aggressive Growth Fund Effective February 12, 2021, Wasif Latif leaves the team. The remaining ten managers will continue to manage the fund. 2/21
USCGX USAA Capital Growth Fund Effective February 12, 2021, Wasif Latif leaves the team. The remaining seven managers will continue to manage the fund. 2/21
USGRX USAA Growth & Income Fund Effective February 12, 2021, Wasif Latif leaves the team. The remaining six managers will continue to manage the fund. 2/21
UIGRX USAA Growth Fund Effective February 12, 2021, Wasif Latif leaves the team. The remaining eleven managers will continue to manage the fund. 2/21
USISX USAA Income Stock Fund Effective February 12, 2021, Wasif Latif leaves the team. Lance Humphrey and Elie Masri have joined Mannik Dhillon as portfolio managers to the Fund. 2/21
USSCX USAA Science & Technology John Averill will no longer serve as a portfolio manager for the fund. Bruce Glazer has joined the management team for the fund. 1/21
USSCX USAA Science & Technology Fund Effective February 12, 2021, Wasif Latif leaves the team. The remaining nine managers will continue to manage the fund. 2/21
USCAX USAA Small Cap Stock Effective January 4, 2021, references to Tyler Dann as a portfolio manager for all the funds are removed. The management team continues to manage the fund. 1/21
USCAX USAA Small Cap Stock Fund portfolio The remaining 17 managers will continue to manage the fund. 2/21
USAWX USAA Sustainable World Effective January 4, 2021, Tyler Dann is out. The management team continues to manage the fund. 1/21
UVALX USAA Value Effective January 4, 2021, Tyler Dann is out. The management team continues to manage the fund. 1/21
UVALX USAA Value Fund Effective February 12, 2021, Wasif Latif leaves the team. Mannik Dhillon, Robert Harris, and Joseph Mainelli will continue to serve as portfolio managers for the fund. 2/21
VCAAX VALIC Company I Asset Allocation Fund Kate Faraday, Jose Aragon, Michael Kelly, and Robert Vanden Assem will no longer serve as portfolio managers for the fund. Jeffrey Geller, Gerhardt Herbert, and Morgan Moriarty will now serve as portfolio managers for the fund. 2/21
VEIRX Vanguard Equity Income Fund James Stetler will retire from Vanguard in July 2021 and will no longer serve as a co-portfolio manager for Vanguard’s portion of the Fund. Effective immediately, Sharon Hill will be added as a co-portfolio manager of Vanguard’s portion of Vanguard Equity Income Fund (the Fund). 2/21
VEIPX Vanguard Equity Income Fund James P. Stetler will retire from Vanguard in July 2021 and will no longer serve as a co-portfolio manager for Vanguard’s portion of the fund. Sharon Hill will be added as a co-portfolio manager of Vanguard’s portion of the fund and will remain upon Mr. Stetler’s retirement. 2/21
VEXPX Vanguard Explorer Fund James P. Stetler will retire from Vanguard in July 2021 and will no longer serve as a co-portfolio manager for Vanguard’s portion of the fund. Binbin Guo and Cesar Orosco will remain portfolio managers of Vanguard’s portion of the fund upon Mr. Stetler’s retirement. 2/21
VQNPX Vanguard Growth and Income Fund No one, for now, but James Stetler will retire in July 2021. Cesar Orosco will join James Stetler and Binbin Guo in managing the fund. 2/21
VINEX Vanguard International Explorer Fund Matthew Dobbs will retire from Schroder Investment Management North America Inc. at the end of March 2021 and will no longer serve as a co-portfolio manager for the Schroders portion of the fund. Luke Biermann, who currently serves as a portfolio manager with Mr. Dobbs, will remain as portfolio manager of the Schroders portion of the fund upon Mr. Dobbs’ retirement. 2/21
VMNFX Vanguard Market Neutral Fund No one, for now, but James Stetler will retire in July 2021. Cesar Orosco will join James Stetler and Binbin Guo in managing the fund. 2/21
VSEQX Vanguard Strategic Equity Fund No one, for now, but James Stetler will retire in July 2021. Cesar Orosco will join James Stetler and Binbin Guo in managing the fund. 2/21
VSTCX Vanguard Strategic Small-Cap Equity Fund No one, for now, but James Stetler will retire in July 2021. Cesar Orosco will join James Stetler and Binbin Guo in managing the fund. 2/21
VWUSX Vanguard U.S. Growth Fund No one, for now, but James Stetler will retire in July 2021. Cesar Orosco will join James Stetler and Binbin Guo in managing the fund. 2/21
VWIAX Vanguard Wellesley Income Fund Effective at the close of business on June 30, 2021, Michael Stack will retire from Wellington Management Company LLP and will no longer serve as a portfolio manager for Vanguard Wellesley Income Fund. Loren Moran and W. Michael Reckmeyer III, who currently serve as portfolio managers with Mr. Stack, will remain as portfolio managers of the Fund upon Mr. Stack’s retirement. 2/21
ASUAX Virtus AllianzGI Global Sustainability Fund Effective on March 1, 2021, Jeremy Kent and Paul Schofield will no longer be portfolio managers of the fund. Robbie Miles and Gunnar Miller will now manage the fund. 2/21
LETRX Voya Russia No one, but… Robert Davis has joined Renat Nadyukov as a portfolio manager for the fund. 1/21
EIVAX Wells Fargo Classic Value Jean-Baptiste Nadal and Miquel Giaconi will no longer serve as portfolio managers for the fund. James Tringas, Bryant VanCronkhite, and Shane Zweck will now manage the fund. 1/21
EWEAX Wells Fargo Intrinsic World Equity Jean-Baptiste Nadal has announced his intention to retire on April 30, 2021. He will continue to serve as a portfolio manager till April 30, 2021. Amit Kumar and Miguel Giaconi continue to manage the fund. 1/21
WFSAX Wells Fargo Small Company Growth No one, but… Ryan Smith and Samuel Smith have joined William Grierson, Daniel Hagen, and Paul von Kuster as portfolio managers for the fund. 1/21
BVDRX William Blair Small Cap Value Fund Chad Kilmer will no longer serve as a portfolio manager for the fund. Stephen Livingston joins David Mitchell and Mark Leslie as a portfolio manager for the fund. 2/21
BSMNX William Blair Small-Mid Cap Value Fund Chad Kilmer will no longer serve as a portfolio manager for the fund. Stephen Livingston joins David Mitchell and Mark Leslie as a portfolio manager for the fund. 2/21

 

Briefly Noted

By David Snowball

Updates

On the value of actual human intelligence: The decade’s biggest fund scandal broke on Monday when the SEC accused the advisor of Infinity Q Diversified Alpha Fund (IQDNX) of “adjusting the methodology for obtaining certain asset valuations.” James Velissaris, founder and CIO, was placed on administrative leave while the investigation continues.

The remnants of the fund’s website describe it this way:

On Monday, February 22, 2021, the Infinity Q Diversified Alpha Fund and its investment adviser, Infinity Q Capital Management, sought and obtained an order from the Securities and Exchange Commission permitting the Fund to suspend redemptions and postpone the date of redemption payments beyond seven days. The Fund and Infinity Q took this step because Infinity Q has been unable to value certain assets held by the Fund. As disclosed by the Fund, Infinity Q, as the adviser, is responsible for pricing the Fund’s assets, and its valuation of assets for which current and reliable market quotations are not readily available is subject to review by the Board of Trustees.

According to the SEC’s Order, the Fund learned on Thursday, February 18 that the Chief Investment Officer of Infinity Q had been adjusting the methodology for obtaining certain asset valuations, and that the resulting valuations may not have accurately reflected the fair value of those assets. On Friday, February 19, Infinity Q confirmed these facts and stated that it could not value the assets for purposes of calculating the Fund’s net asset value. The Chief Investment Officer of Infinity Q has been relieved of his duties, effective February 21, 2021.

The advisor has frozen redemptions because they have no reliable idea of what a share of the fund is worth and are planning to liquidate the fund. Mr. Velissaris has, to the extent possible, disappeared from the internet. Through his company, Wildcat Capital Management, he also serves “a number of ultra-high net worth clients.” (A colleague prophesies that, if any of them are from Jersey, one might commence the search for Mr. Velissaris under the endzone at the Meadowlands.)

Morningstar’s “machine-learning model that uses the decision-making processes of our analysts” concluded that every indication is that Infinity Q is the best of the best, a GoldQ fund.

Morningstar hasn’t yet said anything about the fund or its endorsement, at least at Morningstar.com. Two reasonable statements might be: (1) oops and (2) not clear that any system could have been designed to intercept such fraud. Still, taking down the Gold rating would be good optics.

Briefly Noted . . .

Baron Focused Growth Fund shared the following prospectus update on 2/4/2021:

The following is added to “Principal Risks of Investing in the Fund”

Tesla.  As of the date of this prospectus supplement, about 48% of the Fund’s assets are invested in Tesla stock. Therefore, the Fund is exposed to the risk that were Tesla stock to lose significant value, which could happen rapidly, the Fund’s performance would be adversely affected.

One might check with the folks at American Heritage, Sequoia, Fairholme, Third Avenue … on how that whole “bet the house on a single stock” thing plays out. Spoiler alert: “At first, brilliantly. Then …”

Karner Blue Biodiversity Impact Fund has decided to convert both their Investor and Institutional share classes into the … umm, Butterfly share class. (sigh) The investment minimum will be $2,000.

Wells Fargo has agreed to sell its asset management business, which has assets of $603 billion, to two private-equity firms: GTCR and Reverence Capital Partners for $2.1 billion. It seems very Wells Fargo of them to sell off the old portion of the business which doesn’t appear to be scandal-ridden. Wells Fargo funds, a small slice of the asset management business, have seen consistent outflows since 2015. The remainder of the asset management business appears to center on money markets.

SMALL WINS FOR INVESTORS

As of April 1, 2021, American Century Mid-Cap Value Fund will reopen to new investors. The fund has earned five stars at Morningstar and seems like a reasonably risk-conscious offering. As I looked at the fund’s metrics at MFO Premium, two things stand out. First, its long-term performance is far stronger than its short- or medium-term performance. Second, it’s both a little bit less volatile and a little bit less remunerative than its peers, so its five-year risk-adjusted returns are right in line with its peer group and its three-year record trails its peers by a tad.

I suppose if I were dabbling in the multi-cap value waters I might consider an equally—weighted SP 500 Index fund such as Index Funds S&P 500® Equal Weight NoLoad (INDEX) which has modestly outperformed its ETF competitors through a thoughtful trading strategy. For an active value play, you could do a lot worse than Monongahela All-Cap Value (MCMVX) which is a five-star fund, a Great Owl, and a member of MFO’s Honor Roll.

Effective immediately, Class I shares of the Issachar Fund (LIOTX) are available for purchase. It’s a small, four-star tactical allocation fund whose manager, Dexter Lyons, has heavily invested in the fund. The retail shares cost $1,000 and carry a 1.97% expense ratio. The numbers for the newly opened institutional shares are 1.72% and $100,000. Issachar, for folks fascinated by such stuff, was one of the 12 tribes of ancient Israel and also one of the 10 lost tribes. 

CLOSINGS (and related inconveniences)

Grandeur Peak closed a series of funds on February 26. Grandeur Peak Global Opportunities, International Opportunities, International Stalwarts, and Global Micro Cap were hard closed to investors using financial intermediaries, and one was soft closed. All remain available for the retail investors who purchased the funds directly through Grandeur Peak.

Shares of the five-star Hillman Value Fund are temporarily unavailable for purchase while the fund transitions from Hillman Capital to ALPS. Once the dust settles, the $160 million fund will reopen.

Effective as of the close of business on March 12, 2021, JPMorgan Hedged Equity Fund will be closed to new investors, though existing investors will be able to add to their positions.

Effective at the close of business on May 5, 2021, Lord Abbett Developing Growth Portfolio will not be available for purchase by new investors. 

Effective on March 19, 2021, Lord Abbett Micro Cap Growth Fund will not be available for purchase by new investors. Notwithstanding the fact that it’s a really good microcap fund, assets were scarce until the second half of 2020 when money came pouring in the door spurred by the fund’s 80% return in 2020.

Vanguard Capital Opportunity, Primecap, and PRIMECAP Core Funds have closed to new accounts, other than folks in their managed investment plans. Current shareholders are limited to $25,000/year in additions to the fund. (I briefly contemplate a world in which that sentence would have any remote relevance to me.)

Weitz Ultra Short Government Fund has limited sales of its shares through financial intermediaries.

OLD WINE, NEW BOTTLES

Bogle Investment Management, most famously Jack Bogle’s son, has decided to stop managing small, four-star Bogle Small Cap Growth Fund (BOGIX). The Board is giving that role to Summit Global Investments whose presence will cause the fund to be renamed SGI Small Cap Growth Fund. The reborn fund will also have a new ESG mandate.

On April 6, 2021, Capital Link NextGen Vehicles & Technology ETF becomes Capital Link Global Green Energy Transport and Technology Leaders ETF. Rather than frittering away time on “vehicle and technology companies,” as previously, they’ll invest (passively) in Green Energy Transport and Technology Leaders.

At the same time, Capital Link NextGen Protocol ETF becomes Capital Link Global Fintech Leaders ETF.

Effective April 26, 2021, the DCM/INNOVA Fund will change its name to DCM/INNOVA High Equity Income Innovation Fund. The only change in the fund’s principal investment strategy will be to delete the obligation to invest at least 80% in dividend-paying stocks. Nothing about “high equity income” or “innovation.” Longtime readers will recognize, and lament, the fund’s ticker: TILDX. When Zeke Ashton retired from managing the splendid Centaur Total Return fund, it was purchased by another adviser and completely rewired.

Diamond Hill Investment Group has committed to sell the five-star Diamond Hill High Yield and Corporate Credit Funds to enable Brandywine Global Investment Management sometime in the second quarter of 2021. Between them, the funds have $3 billion in assets. No reason for the sale is offered but the management teams are going to Brandywine along with their charges.

Horizon Defensive Multi-Factor Fund will jettison its “Risk Assist” strategy and become Horizon U.S. Defensive Equity Fund on or about March 29, 2021.

On or about July 1, the JPMorgan Intrepid Value Fund becomes the JPMorgan U.S. Applied Data Science Value Fund.  What, you ask, does an applied data science fund do? Pretty much the same thing as every other fund:

… the adviser will employ a data science driven investment approach that combines research, data insights, and risk management. The adviser defines data science as the discipline of extracting useful insights from collections of information. The adviser will analyze a wide variety of data sources, including the adviser’s fundamental research, company fundamentals, and alternative data, in order to evaluate the financial prospects of each security.

Effective February 23, the Marmont Emerging Markets Fund was renamed the Dakota Emerging Markets Fund. No need to hurry to update your bookmarks, though. The filing also notes, “Shares of the Fund are not currently offered for sale.”

On April 30, 2021, Matthews Asia Small Companies becomes Matthews Emerging Markets Small Companies Fund. The new fund will be able to invest “in emerging market countries anywhere in the world.” Matthews notes that Asia is 75% of the EM small-cap universe so a broader mandate won’t necessarily cause turmoil in the portfolio and “shareholders of the Fund will benefit more from exposure to a broader investment universe.” This decision parallels Matthews’ decision to launch an all-world emerging markets fund, Matthews Emerging Markets Equity, in April 2020. The fund, with a smaller allocation to Asia than its peers, has easily outperformed its peers and benchmark since inception.

On April 1, 2021, Putnam Global Equity Fund will be “repositioned” as Putnam Focused International Equity Fund. That will likely occasion a considerable tax bill for its remaining shareholders since two-thirds of the current portfolio is invested in US stocks. The unstated reason for the change shows up when you look at the fund’s asset flows over the past decade.

The picture sort of suggests net outflows in 117 of the past 120 months perhaps because the fund isn’t very good (it’s okay). And, perhaps because advisors prefer “international” to “global” products so that they can guess wrong themselves about the ideal asset allocation rather than letting Putnam do it for them.

The parent company of THB Asset Management MicroCap Fund (THBVX) which, as you might expect, is THB Asset Management, has sold its business to Victory Capital Management. Toward the end of March, the fund – with its management team intact – is apt to be renamed Victory MicroCap Fund. It’s a four-star small blend fund that is a little more volatile but a lot more profitable than its SB peers.

On May 1, 2021, the T. Rowe Price New America Growth Portfolio will change its name to the T. Rowe Price All-Cap Opportunities Portfolio.

Westchester Capital Management, the adviser to the WCM funds, is in the process of being acquired by Virtus Investment Partners. Many hoops still to jump through but somewhere later this year, WCM Alternatives: Event-Driven Fund and WCM Alternatives: Credit Event Fund will be rebranded as Virtus funds, though their management teams will remain intact.

OFF TO THE DUSTBIN OF HISTORY

Sometime in the third quarter of 2021, the AIG funds either become or are eaten by the Touchstone funds.

AIG Fund Acquiring Touchstone Fund
AIG International Dividend Strategy Fund Touchstone International Equity Fund,
AIG U.S. Government Securities Fund Touchstone Active Bond Fund
AIG Flexible Credit Fund plus AIG Strategic Bond Fund Touchstone Strategic Income Opportunities Fund, a new fund
AIG Senior Floating Rate Fund Touchstone Credit Opportunities Fund
AIG Active Allocation Fund AIG Multi-Asset Allocation Fund Touchstone Balanced Fund
AIG Strategic Value Fund Touchstone Value Fund
AIG Focused Dividend Strategy Fund plus AIG Select Dividend Growth Fund Touchstone Dividend Equity Fund, a new fund
AIG Focused Alpha Large-Cap Fund Touchstone Large Cap Focused Fund
AIG Focused Growth Fund Touchstone Sands Capital Select Growth Fund

On May 7, 2021, the Alger 25 Fund merges with the Alger 35 Fund. Contrary to the laws of mathematics and my expectations, the result is not the Alger 60 Fund.

On the theme of “death and taxes,” AQR’s tax-managed line of funds will meet death sometime between March 8 and March 15, 2021.

Target Funds Acquiring Funds
AQR Emerging Multi-Style Fund AQR TM Emerging Multi-Style Fund, which will thereafter be renamed AQR Emerging Multi-Style II Fund
AQR TM International Momentum Style Fund AQR International Momentum Style Fund
AQR TM International Multi-Style Fund AQR International Multi-Style Fund
AQR TM Large Cap Momentum Style Fund AQR Large Cap Momentum Style Fund
AQR TM Large Cap Multi-Style Fund AQR Large Cap Multi-Style Fund
AQR TM Small Cap Momentum Style Fund AQR Small Cap Momentum Style Fund
AQR TM Small Cap Multi-Style Fund AQR Small Cap Multi-Style Fund

The one-star, $3 million Donoghue Forlines Dividend Mid-Cap Fund will cease operations and be liquidated on March 18, 2021. None of the four managers, including Mr. Forlines, had chosen to invest in the fund which, really, should be de rigueur if your name is above the door.

Eaton Vance Hexavest Global Equity Fund and Eaton Vance Hexavest International Equity Fund were liquidated on February 25, 2021. The funds have three stars and $60 million, total, between them.

After two slight delays, Emerald Small Cap Value Fund is now set to be liquidated on March 12, 2021.

In one of the oddest mergers ever, the Highland Socially Responsible fund is merging with the NexPoint Merger Arbitrage Fund which, shortly thereafter, will become a Virtus fund. Why odd? Usually in a merger, the fund’s board of trustees – charged by law with looking out for the interests of the fund’s shareholders – try to find an acquiring fund that sort of does the same thing that the investors originally signed up for but does it better. In this case, that’s not even vaguely true. The Highland fund seeks “long-term growth of capital and future income rather than current income” through a long-only equity portfolio. The Merger Arbitrage fund wants returns that are uncorrelated with the stock market, and seeks to “profit from the ‘spread’ between the purchase value and the value of a stock at the completion of a merger.” There is not even room for the ESG screening that’s the core of the Highland strategy.

The correlation between the two funds is 0.33; based on correlation alone, the Highland shareholders would have a better fit merging into RiverPark Short Term High Yield (0.53), Vanguard Emerging Markets Bond (0.56), or Vanguard Emerging Markets Stocks (0.71). A better explanation is that NexPoint was simply buying the $70 million in Highland assets to add to their $77 million in existing Merger Arbitrage assets.

Iron Strategic Income Fund will be liquidated on April 30, 2021.

Notwithstanding the burgeoning popularity of ESG investing, $35 million JHancock ESG All Cap Core Fund will be absorbed by John Hancock ESG Large Cap Core Fund, likely around April 16, 2021.

Leader High Quality Low Duration Bond Fund is merging into the Leader Total Return Fund but, as to timing, the adviser only says, “in early March 2021, shareholders will receive additional information.”

On or about April 30, 2021, Matthews Emerging Asia Fund will merge into the Matthews Asia Small Companies Fund which is expected to be renamed the Matthews Emerging Markets Small Companies Fund. The Emerging Asia fund has had a couple of pretty rough years (bottom 1% in 2017 and 2019) though Morningstar continues expressing its faith in the fund. Asia Small Companies, meanwhile, lost its star manager and team in August 2020, though its investors have remained loyal.

PIMCO Multi-Strategy Alternative Fund, a perfectly reasonable hedged mutual fund, has seen substantial outflows and will be liquidated on May 14, 2021.

Following inevitable shareholder approval, the $16 million Riverbridge Eco Leaders Fund will be merged into Riverbridge Growth Fund. Both have earned the Great Owl designation, with both receiving four stars from Morningstar. The management teams are the same, and the correlation between the two funds is .99, so the transition should be pretty much painless.

The Selective Opportunity Fund will be liquidated on June 21, 2021. Its sibling, Selective Premium Income Fund, will depart at the end of April.

The microscopic (and consistently underperforming) State Street Defensive Global Equity Fund will be liquidated on May 14, 2021.

On April 15, 2021, the one-star Transamerica Dynamic Income will be eaten by the five-star Transamerica Multi-Asset Income.

Victory Trivalent Emerging Markets Small-Cap Fund and Victory Sophus Emerging Markets Small Cap Fund will suffer their final defeat on April 28, 2021. The funds have $15 million and four stars between them.

The $1.4 million William Blair Small-Mid Cap Value Fund will be terminated on or before April 15, 2021