June 2024 IssueLong scroll reading

Briefly Noted

By TheShadow


Morningstar expresses concerns with Akre Focus (AKREX).

On March 31, 2024, this portfolio had double-digit stakes in four different stocks … Such hefty positions aren’t the only concerns here, though. The transition from firm founder Chuck Akre to younger managers and analysts has been rocky, featuring several unexpected departures. The investment team currently consists only of manager John Neff and two research analysts.

There has been a serious problem with outflows from the fund, in almost a quarter since Mr. Akre formally separated himself from day-to-day management at the end of December, 2020. Firm assets peaked in 2021 at $18 billion and now sit at $12 billion. The fund’s performance is less of a concern since manager John Neff has continued Mr. Akre’s discipline and his performance pattern: solid but not spectacular in up markets and outstanding protection in down markets. Exceptional in down markets and respectable in up markets is pretty much the story for funds that invest in higher-quality names.

DFA’s ETFs have hauled in over $33 billion over the past 12 months, while its mutual funds have had $26 billion in outflows. Umm … same portfolios, different packaging mostly.

American investors are cashing out of sustainable funds. The first quarter of 2024 saw $9 billion in outflows, according to an analysis by Axios and Morningstar. European investors, who hold $2.5 trillion of the world’s $3 trillion in sustainable fund assets, have mostly stayed the course … and, likely, why the governors in the states hardest hit by climate change (think Florida, Alabama, Texas) are the ones working hardest to deny its existence by forbidden state investments in sustainable funds.

Cinnamond Speaks. Eric Cinnamond, co-manager of the absolute value / small cap Palm Valley Capital Fund (PVCMX) posted a May 1st commentary on the markets and his portfolio. It begins by quoting Seinfeld and sparked a lively conversation on the MFO discussion board. Here is WABAC’s distillation of Cinnamond’s message:

Shorter Cinnamond: Cracker Barrel sucks. Small caps suck. Jerry and Elaine confirm it.

Another board member, yugo, helpfully added, “you forgot ‘Alcohol makes people buy stocks’.” The ensuing discussion, which is well worth following, meditated on Mr. Cinnamond’s refusal to commit to what he sees as an overvalued small-cap market and on whether people would embrace the fund if it were marketed as a small-cap balanced fund.

Hancock Speaks. A second discussion worked over recent commentary by Tom Hancock, portfolio manager of GMO US Quality Equity ETF (QLTY). The fund uses the discipline embodied in GMO’s $10 billion, five-star GMO Quality fund, though will have a slightly different mandate. Mike W notes

He is not a fan of NVDA or TSLA due to valuation concerns but does hold positions in the other Mag 7. Interesting that he has been able to keep pace with SPY since launch even without NVDA.

While the folks on the board can get a bit fiery, they’re a healthy reminder of the power of honest, evidence-driven debate. You should drop by, and drop in.

Briefly Noted . . .

BlackRock Strategic Income Opportunities Fund and BlackRock Strategic Global Bond Fund have now added shares of the iShares Bitcoin Trust to their portfolios. The funds has about $38 billion in assets between them.

Jensen Quality Growth ETF is in registration.  Total Annual Fund Operating Expenses have not been stated. The ETF will be managed by Eric Schoenstein, Robert McIver, Kirt Havnaer (portfolio manager),  Allen Bond, Kevin Walkusk and Adam Calamar.

T Rowe Price Technology ETF is in registration.  Expenses have not been stated.   Dominic Rizzo will be the portfolio manager.

Small Wins for Investors

The trade settlement period has decreased from T+2 business days, since 2017, to T+1 business days effective May 28. The “T+1” settlement cycle will apply to the same securities transactions covered by the “T+2” settlement cycle.  These include transactions for stocks, bonds, municipal securities, exchange-traded funds, certain mutual funds, and limited partnerships that trade on an exchange.

Closings (and related inconveniences)

On May 24, 2024, Westwood Capital Appreciation And Income Fund closed to new investors. While the filing didn’t suggest it, this might be a prelude to … something darker.

Old Wine, New Bottles

Effective July 29, 2024, the Buffalo Discovery becomes Buffalo Mid Cap Discovery Fund. Mid-capness follows.

Effective June 10, 2024, the fund name of the Eagle MLP Strategy Fund (the “Fund”) is changed to Eagle Energy Infrastructure Fund. 

On May 14, 2014, Amplify International Enhanced Dividend Income ETF was rechristened Amplify CWP International Enhanced Dividend Income ETF. “Capital Wealth Planning,” if you care. They also added Seymour Asset Management as a third subadviser with CWP and Penserra.

Knowledge Leaders Developed World ETF has become AXS Knowledge Leaders ETF.

On June 24, 2024, Metropolitan West Flexible Income Fund has been reorganized with and into TCW Flexible Income ETF.

TCW Artificial Intelligence Equity and TCW New America Funds have been converted into ETFs. TCW Artificial Intelligence Equity has been converted into the TCW Artificial Intelligence ETF; the TCW New America Fund has been converted into the TCW Compounders ETF; both of which are actively managed.  

Off to the Dustbin of History

On or about June 21, 2024, abrdn Emerging Markets Sustainable Leaders Fund will be merged into abrdn Emerging Markets ex-China Fund.

On August 23, 2024, Clearbridge All Cap Value and Small Cap Value Funds will be reorganized into ClearBridge Value Fund. The disappearing funds will close on June 24, 2024.

Frontier HyperiUS Global Equity Fund will be liquidated on or about June 10.

In a sort of two-for-one swap, four Guggenheim funds will become two New Age (really?) funds at some point in the third quarter of 2024. Guggenheim Large Cap Value Fund, Guggenheim RBP Large-Cap Defensive Fund, Guggenheim RBP Dividend Fund, and Guggenheim RBP Large-Cap Value Fund collectively become New Age Alpha Large Cap Value Fund if shareholders (sheep) approve. Guggenheim Directional Allocation Fund will become New Age Alpha Allocation Fund.

The KL Allocation Fund is being merged into the (utterly and completely unrelated) AXS Astoria Inflation Sensitive ETF. Founding manager Steven Vanelli gets demoted from The Guy to “participating in the Acquired Fund’s investment committee.”

Effective immediately, the Lebenthal Ultra Short Tax-Free Income Fund, the last remnant of Centaur Mutual Funds Trust, has closed and will be liquidated on July 10, 2024.

Silk Invest New Horizons Frontier Fund has closed and will be liquidated on June 27, 2024. The fund, which targets smaller companies primarily in the Middle East, North Africa, Sub Saharan Africa (SSA), Frontier Asia, and Latin America, X, has been underwater since its inception in 2016.

Templeton International Climate Change Fund will be liquidated on or about August 9, 2024. It’s a market story rather than a performance story. The fund launched in 2022 and has handily outperformed its peers but it has drawn just $3 million in assets, none of which comes from its managers. The European version of the fund, by comparison, has also handily outperformed its peers … and has drawn €1.4 billion in assets.

Terra Firma US Concentrated Realty Equity Fund will be liquidated on or about June 28.

Teucrium AiLA Long-Short Base Metals Strategy ETF is expected to cease operations, liquidate its assets, and distribute the liquidation proceeds to shareholders on or about June 6, 2024.

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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.