Author Archives: David Snowball

About David Snowball

David Snowball, PhD (Massachusetts). Cofounder, lead writer. David is a Professor of Communication Studies at Augustana College, Rock Island, Illinois, a nationally-recognized college of the liberal arts and sciences, founded in 1860. For a quarter century, David competed in academic debate and coached college debate teams to over 1500 individual victories and 50 tournament championships. When he retired from that research-intensive endeavor, his interest turned to researching fund investing and fund communication strategies. He served as the closing moderator of Brill’s Mutual Funds Interactive (a Forbes “Best of the Web” site), was the Senior Fund Analyst at FundAlarm and author of over 120 fund profiles.

June 1, 2020

By David Snowball

Dear friends,

Welcome to summer.

All of us hope that it’s not going to be a long, hot one.

Some months it’s easy to write a welcome note, some months not. This is one of those latter times. Over the night just passed there were ongoing instances of “civil unrest” (the police chief’s term) with a caravan of 100 cars proceeding from one shopping plaza to the next. Four people – including a police officer simply driving his car – were shot; two, not including the officer, died. Many of the caravanning cars bore Minnesota plates. That followed a Continue reading →

The Mice that Roared: How Two Small Funds Threaten to Disrupt Two Large Industries

By David Snowball

On May 15, 2020, an unassuming filing with revolutionary potential appeared in the Securities and Exchange Commission’s EDGAR database. It was an N-1A, initial prospectus, filing for two ETFs: SmartETFs Dividend Builder ETF and SmartETFs Asia Pacific Dividend Builder ETF. Both unremarkably offered “to provide investors with dividend income and long-term capital growth.”

The real news appeared on Continue reading →

Launch Alert: ClearBridge Focus Value ETF (CFCV)

By David Snowball

On May 27, 2020, ClearBridge Investments launched ClearBridge Focus Value ETF (CFCV), one of the first active, non-transparent ETFs launched under the so-called Precidian protocol.

Precidian Investments, like ClearBridge, is an affiliate of Legg Mason. Legg paid $25 million in January 2020 to acquire the majority ownership of Precidian. It had been a minority owner since 2016. Precidian received approval from the SEC for a process that allows fund managers to evade the traditional ETF rule requiring constant, real-time portfolio transparency. Precidian now licenses its “technologies” to other advisers, allowing them to offer active funds with limited portfolio visibility.

ClearBridge Investments, a 50-year-old firm, manages $120 billion in assets. It merged in 2013 with Legg Mason Capital Management. Each of Legg’s nine affiliates managers – including Royce and Brandywine – maintains its investment autonomy while Legg handles marketing and distribution.

Sometime in the third quarter of 2020, Franklin Resources will complete Continue reading →

Launch Alert: Jensen Global Quality Growth

By David Snowball

On April 15, 2020, Jensen Investment Management launched the Jensen Global Quality Growth Fund (JGQSX).  This new fund is a global version of Jensen Quality Growth: the same discipline, same managers. Jensen Quality Growth Fund (JENSX) is, at least from the perspective of those who look at long-term accomplishments, one of the best domestic large-cap core funds in existence.

What do they do? Continue reading →

KL Allocation Fund (GAVAX/GAVIX), June 2020

By David Snowball

Objective and strategy

The fund is trying to grow capital, with the particular goal of beating the MSCI All Country World Index over the long term while maintaining an emphasis on capital preservation. The fund allocates assets between stocks (10-90%), fixed-income securities (10-90%), and cash depending on market conditions. The equity portion of the portfolio is invested in stocks of firms that they designate as “knowledge leaders.” Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge, or a unique distribution mechanism. Knowledge Leaders are largely Continue reading →

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, Funds in Registration gives you a peek into the new product pipeline. Most funds currently in registration are in a scramble to launch by June 30th with the hope that having a “standard reporting period” to share with investors sooner. In a remarkable surge, we found 31 active funds and ETFs in registration, some quite notable. Expect them to launch by the end of July 2020.

The number of ESG-themed funds in the pipeline continues to grow. This month’s crop includes a couple of passive ETFs, SPDR [S&P 500 ESG] ETF and JPMorgan Carbon Transition U.S. Equity ETF, as well as Continue reading →

Briefly Noted

By David Snowball

Updates

Index Funds S&P 500 Equal Weight NoLoad Fund (INDEX, cool ticker) passed its fifth anniversary on April 30, 2020. It’s no secret that traditional US stock indexes are becoming more and more concentrated in just a few mega-cap names. Ten percent of the S&P 500 is invested in just two stocks (Microsoft and Apple) and 20% of the entire index is held in five stocks (adding Amazon, Facebook, and Alphabet). That’s great if you want concentrated exposure, in particular to mega-cap tech.

There’s an alternative: place an equal amount in each of the S&P 500 stocks. In INDEX, for example, Apple is 0.21% of the portfolio rather than 5.09%. The resulting portfolio is Continue reading →

May 3, 2020

By David Snowball

It’s May.

Welcome to the Mutual Fund Observer’s ninth anniversary edition. When we first launched in 2011, Chip cautiously observed that the average independent website had a six-week lifespan and a median visitor of … one.

We appear to have beaten the averages by 462 weeks and 1,812,027 readers.

Our decade of readership looks remarkably like the rhythm Continue reading →

The Young Investor’s Baptism by Fire: 2020 and the market beyond

By David Snowball

“As for me, I baptize you with water for repentance, but He who is coming after me is mightier than I, and I am not fit to remove His sandals; He will baptize you with the Holy Spirit and fire.” Matthew 3:11

“Making far more than a single statement, Cantigny was the doughboys’ baptism by fire, and for those who survived, it became the crucible by which they would measure all subsequent experience, in large-scale fighting at Soissons and the grand Meuse-Argonne offensive … May 28, 1918, was the US military’s coming-of-age—the day it crossed a historical no-man’s-land that separated contemporary fighting methods from the muskets and cannon of the nineteenth century. Continue reading →

Elevator Talk: Eric Cinnamond and Jayme Wiggins, Palm Valley Capital Fund (PVCMX)

By David Snowball

Since the number of funds we can cover in-depth is smaller than the number of funds worthy of in-depth coverage, we’ve decided to offer one or two managers each month the opportunity to make a 200-word pitch to you. That’s about the number of words a slightly-manic elevator companion could share in a minute and a half. In each case, I’ve promised to offer a quick capsule of the fund and a link back to the fund’s site. Other than that, they’ve got 200 words and precisely as much of your time and attention as you’re willing to share. These aren’t endorsements; they’re opportunities to learn more.

Continue reading →

Launch Alert: Grandeur Peak US Stalwarts Institutional (GUSYX)

By David Snowball

On March 19, 2020, Grandeur Peak launched the U.S. Stalwarts (GUSYX) fund, the third of their “alumni funds.” U.S. Stalwarts will invest primarily in U.S. companies with market caps at the time of purchase of $1.5 billion or more. The fund’s first portfolio disclosure reflects those emphases: 84% US and 75% mid- to large-cap stocks.

Grandeur Peak, founded in 2011 by emigres from Wasatch Advisers which is located four miles down Continue reading →

Launch Alert: Matthews Asia Emerging Markets Equity (MEGMX/MIEFX)

By David Snowball

On April 30, Matthews Asia launched its Emerging Markets Equity Fund. In parsing the name, please note that “Asia” modifies “Matthews,” rather than “Emerging Markets.” That is, this will be the first global equity fund in the Matthews lineup. While this is not the first time that Matthews has considered a fund with global reach (Mr. Matthews and Andrew Foster discussed it a decade ago), this is the first time that the Matthews strategy map encompasses the whole Continue reading →

Bruce Fund (BRUFX), May 2020

By David Snowball

Objective and strategy

The fund seeks long-term gains which it pursues through a primarily domestic stock and bond portfolio. The managers will invest as heavily in stocks as the market warrants, which might be 40% and it might be near 80%. The equity portfolio is not constrained by market capitalization but the managers prefer small cap stocks. The bond portfolio is primarily convertible and long-dated “zero coupon” corporate bonds. The managers might invest in distressed securities, both in the equity and fixed-income portfolios. They may be “a large cash position for a transitional period of time.” At the start of the Continue reading →

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, Funds in Registration gives you a peek into the new product pipeline. Most funds currently in registration are in a scramble to launch by June 30th with the hope that having a “standard reporting period” to share with investors sooner. Continue reading →

Briefly Noted

By David Snowball

Updates

Chicago Equity Partners Balanced (MBEAX) no more. MBEAX has been a splendid performer that mixed high-quality, larger US stocks (93% mid- to mega-cap) with investment-grade bonds (99.5% BBB or above, at last reading). Effective April 17, 202, it became the AMG GW&K Global Allocation Fund (MBEAX) with a new name, new team, and new discipline. The portfolio shifts from domestic to global in both its equity and bond sleeves.

Investors should treat this as Continue reading →

April 1, 2020

By David Snowball

Dear friends,

When I say, “I hope you’re well,” it’s far more than an opening formality.

Did you blink?

If so, you missed it. The Great Bull Market of 2020. In perhaps the shortest-lived bull market in history, the DJIA rebounded by over 21.4% in three days after The (First) Bear Market of 2020. The latter growled from 19 February – 23 March, while the latter charged from 23 – 26 March after which we had a sharp down, a sharp up, a wimpy down and Continue reading →

The Long and Short of it

By David Snowball

Long-short funds generally position themselves as “the new 60/40,” that is, as funds appropriate as a core holding for a reasonably conservative investor. Their argument is that 60/40 funds work only when both the stock and bond markets are in a relatively good mood. A fund that simultaneously bets against wobbly companies with overvalued stocks and bets in favor of high-quality companies with undervalued ones has the prospect of earning money, or at least minimizing pain, even when markets are behaving poorly.

There are two problems with such funds. First, they Continue reading →

Taking the Polar Plunge

By David Snowball

First Pacific Advisers, the adviser to the FPA funds, has reached an agreement with London-based Polar Capital. Under the agreement, FPA’s International Value and World Value teams – headlined by Pierre Py and Greg Herr – will operate as Phaeacian Partners, an independent subsidiary of Polar Capital. The transition from FPA to Polar would play out over six to nine months.

Phaeacian? Mysterious race, much discussed in Homer’s works. Highly advanced, great seafarers, generally hospitable. Their king was Continue reading →

Launch Alert: Direxion Flight to Safety ETF

By David Snowball

In real estate, it’s all about location.

In investing, it’s all about timing.

On February 5, 2020, which the Dow at 28,807, Direxion launched the Direxion Flight to Safety Strategy ETF (FLYT). The passive fund tracks an index comprised of gold, large-cap utility stocks, and long-dated US Treasury bonds. It rebalances quarterly, with the least volatile component of Continue reading →