January 2023 IssueLong scroll reading

Briefly Noted . . .

By TheShadow

Disruptors disrupted: the suite of Fidelity Disruptive funds is being converted to ETFs in June 2023. 

The funds are approaching their three-year anniversary, but only one has reached to $100 million AUM threshold. Fidelity offers that the conversion might provide “lower net expenses, additional trading flexibility, increased portfolio holdings transparency, and the potential for enhanced tax efficiency.”

Current Mutual Funds New ETFs Conversion Dates
Fidelity Disruptive Automation Fund Fidelity Disruptive Automation ETF June 9, 2023
Fidelity Disruptive Communications Fund Fidelity Disruptive Communications ETF June 9, 2023
Fidelity Disruptive Finance Fund Fidelity Disruptive Finance ETF June 9, 2023
Fidelity Disruptive Medicine Fund Fidelity Disruptive Medicine ETF June 9, 2023
Fidelity Disruptive Technology Fund Fidelity Disruptive Technology ETF June 9, 2023
Fidelity Disruptors Fund Fidelity Disruptors ETF June 16, 2023

J.P. Morgan Asset Management has filed SEC filings to convert four mutual funds into ETFs. The four J.P. Morgan funds being converted are the Limited Duration Bond Fund, the High Yield Municipal Fund, the Sustainable Municipal Income Fund, and the Equity Focus Fund. The two municipal funds are scheduled to be converted on July 14, 2023, while the remaining two funds are scheduled for conversion on July 28, 2023.

Mirae Asset Discovery Funds is reorganizing two mutual funds into exchange-traded funds. Its Emerging Markets Fund and Emerging Markets Great Consumer Fund will be reorganized into the Global X Emerging Markets ETF and Global X Emerging Markets Great Consumer ETF, respectively. If the reorganizations are approved by shareholders, the reorganizations are expected to occur on or about April 14, 2023.

T. Rowe Price has filed a registration filing for five transparent exchange-traded funds (ETFs). The five funds, T. Rowe Price Core Equity ETF, T. Rowe Price Growth ETF, T. Rowe Price International Equity ETF, T. Rowe Price Small-Mid Cap ETF, and T. Rowe Price Value ETF, are scheduled to launch on March 1, 2023. These ETFs will be actively managed. Presently, T. Rowe Price has a total of ten ETFs. Five of the ten ETFs are equity strategies, while the remaining five are bond strategies. The expense ratios and management were not disclosed in the SEC filings.

Vanguard Short-Term Tax-Exempt Bond ETF is in registration. The fund is planned to launch in the first quarter of 2023. The ETF is intended for investors seeking to generate tax-exempt yield in their portfolios while minimizing interest rate sensitivity. The ETF will have an estimated expense ratio of 0.07%, compared to 0.54% for the average short-term bond fund. The portfolio manager will be Stephen M. McFee.

Small Wins For Investors

Primecap Odyssey Aggressive Growth Fund, rated three stars by Morningstar, has reopened to new investors effective December 15. The fund has been soft-closed since January 2014. According to CityWire, the fund reopened due to:

… after existing shareholders pulled more money from the strategy last month than at any time in nearly a decade …In November alone, investors yanked $362 million, the fund’s largest single month of redemptions over at least the past 10 years.

Kopernik Global All-Cap Fund, rated five stars by Morningstar, will reopen to new investors effective January 3, 2023.

Old Wine, New Bottles

Eaton Vance is planning to reorganize three of its funds, Eaton Vance Special Equities Fund, Eaton Vance Global Small-Cap Equity Fund, and Eaton Vance Focused Global Opportunities Fund, into a newly formed series of the Calvert Funds. The reorganizations are expected to be completed during the third quarter of 2023.

First Eagle Fund of America will change its name to First Eagle Rising Dividend Fund on or about March 1, 2023. There will be some changes to the investment policy and strategy as well.

The Harbor High Yield Fund is being reorganized into the Harbor Scientific Alpha High-Yield ETF. The reorganization is expected to occur on or about the close of business on February 24, 2023.

Following Mr. Miller’s exit, Miller Opportunity Trust Fund changed its name to Opportunity Trust, effective December 19.

Parnassus Endeavor Fund changed its name to the Parnassus Value Equity Fund effective December 30.

Vanguard Short-Term Tax-Exempt Fund will change its name to Vanguard Ultra-Short-Term Tax-Exempt Fund, effective on or about February 28, 2023.

Off to the Dustbin of History

abrdn Emerging Markets Debt Fund will cease to exist on or about February 16, 2023.

Alger Weatherbie Enduring Growth Fund will be liquidated on or about March 23, 2023.

Amberwave Invest USA JSG ETF will be liquidated on January 20, 2023. The “JSG” was “jobs, security, and growth.”

AQR International Equity Fund will liquidate on or about January 27, 2023.

Columbia Acorn USA is slated to merge into Columbia Acorn “in the second quarter of 2023.”

Eaton Vance Emerging Markets Debt Fund will disappear on or about January 20, 2023.

Franklin FTSE Russia ETF will be liquidated. The ETF was approved to be liquidated on July 20, 2022. However, the SEC granted exemptive relief to suspend the right of redemption and, if necessary, to postpone the date of the payment of redemption proceeds until the fund completed the liquidation of its portfolio. The ETF may make one or more liquidating distributions. It is possible that the liquidation of the fund will take an extended period of time if circumstances involving Russian securities do not improve.

Franklin International Small Cap Fund will be liquidated on or about February 23, 2023.

Three Great Lakes Advisors funds were merged into two Cambiar funds on December 12, 2022. Great Lakes Disciplined Equity and Large Cap Value were both absorbed into Cambiar Opportunity (four-star, $325 million), while Small Cap Opportunity was merged into Cambiar Small Cap (three-star, $98 million). The funds had net assets of just $66 million and were a distinct afterthought in Great Lake’s $9 billion portfolio. Cambiar is a Denver-based “relative value” investment management firm with a billion in AUM, but it has seen over $500 million in outflows during 2022. Lipper categorizes Cambiar Opportunity as a multi-cap value fund that pretty consistently, though modestly, tops its peers. Small Cap is undistinguished.

IQ S&P High Yield Low Volatility Bond ETF, IQ Hedge Long/Short Tracker ETF, IQ Hedge Event-Driven Tracker ETF, IQ Hedge Macro Tracker ETF, and IQ Hedge Market Neutral Tracker ETF have been slated for liquidation on February 7, 2023.

Putnam PanAgora Risk Parity Fund crosses the final frontier on January 26, 2023

Virtus Seix Short-Term Bond Fund, Virtus Seix Short-Term Municipal Bond Fund, Virtus Seix U.S. Mortgage Fund, and Virtus Silvant Small-Cap Growth Stock Fund were liquidated effective December 16.

Wagner Select Fund will be reorganized into the Wagner Acorn Fund in the second quarter of 2023.

WCM International Long-Term Growth Fund will be liquidated on or about January 20, 2023. There’s a certain amount of irony to giving a long-term growth fund just 15 months before pulling the plug. An experienced team and a Morningstar Gold q-rating couldn’t save it in the face of a 40% drawdown and bottom 2% performance in 2022.

Manager changes

Tocqueville is out at the American Beacon Tocqueville International Value Fund, effective January 20, 2023, and EAM Global Investors is in. The fund is a large-cap offering which Morningstar affirms is “a solid offering on all fronts.” The fund’s new name, American Beacon EAM International Small Cap Fund, will reflect the change in advisor and strategy, which is apt to come with at least modest tax consequences since the current portfolio is just 4% small cap, but it also has only modest embedded capital gains. Similarly, Sound Point is out at American Beacon Sound Point Floating Rate Income Fund. First Eagle Alternative Credit assumes responsibility for the renamed American Beacon FEAC Floating Rate Income Fund on December 31, 2022.

William Miller III will no longer serve as the portfolio manager of both the Miller Opportunity Trust Fund and the Miller Income Fund, effective December 30.

Effective December 31, 2022, Larry Cordisco is no longer a portfolio manager of the Osterweis Fund or for Osterweis Growth & Income. Mr. Cordisco has been the firm’s co-CIO for core equity strategies for the past four years, and his LinkedIn profile now describes him as a “digital health founder” and co-founder of qlaro whose motto is “cancer is complex, we bring clarity.” Qlaro is an app that helps cancer patients sort through their treatment options; Mr. Cordisco’s bio there notes that he’s had to manage the care of family members with cancer three different times.” We wish him, his family, and his enterprise well. The Osterweis Fund is now managed by John Osterweis, Gregory Hermanski, and Nael Fakhry. The Osterweis Growth & Income Fund is under the care of a large team led by John Osterweis, Carl Kaufman, Gregory Hermanski, and Nael Fakhry, with Eddy Vataru, James Callinan, and Venkatesh Reddy chipping in. It’s a good group.

PIMCO Diversified Income Fund and PIMCO Low Duration Income Fund have tweaked their management teams to uncertain effect following two manager departures. Scott Mather took a leave of absence from managing Low Duration in October 2022 and retired in December. Jerome Schneider stays in place on the two-star Low Duration fund and is joined by three PIMCO veterans: Jelle Brons, Daniel Hyman, and Marc Seidner. Eve Tournier, the longest-tenured manager on Diversified Income, has departed, with Morningstar suggesting that she’s been gradually stepped back from the management. Effective December 6, 2022, Regina Borromeo and Charles Watford joined the team of Daniel Ivascyn, Alfred Murata, and Sonali Pier. Ms. Pier has been recognized as the winner of the 2021 U.S. Morningstar Award for Investing Excellence in the Rising Talent category.

On December 8, North Star Investment Management became the advisor to the Walthausen Small Cap Value Fund, rated three stars by Morningstar, effective December 15. North Star Investment Management manages the North Star Micro Cap Fund, the North Star Dividend Fund, the North Star Opportunity Fund, and the North Star Bond Fund. Gerard S.E. Heffernan Jr. had been the manager of the Walthausen Small Cap Value Fund since 2018, succeeding John Walthausen, who retired on July 30, 2021. Peter Gottlieb and Eric Kuby will be the new portfolio managers of the fund.

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About TheShadow

The Shadow here! Like Mark, I’m a long-time member of the MFO community. I’ve started over 2300 discussion threads, most focusing on developments in the fund industry. I am a personal investor that was introduced to mutual funds when I was young to fund my college education. As I have grown older, I have expanded my mutual funds holdings to a point where I probably have too many; however, this year they all did extremely well due to the overall performance of the market. I work in the financial industry regulating the consumer finance industry in my state. My hope for the months ahead is that I might share word of developments in the finance industry – the comings and goings, launches and liquidations, the fun and the follies – with you.