http://www.sec.gov/Archives/edgar/data/1089951/000119312516529205/d162847d497.htm
497 1 d162847d497.htm AMG FUNDS
Filed pursuant to 497(e)
File Nos. 333-84639 and 811-09521
AMG FUNDS
AMG SouthernSun Small Cap Fund
Supplement dated April 4, 2016 to the Prospectus, dated February 1, 2016
The following information supplements and supersedes any information to the contrary relating to AMG SouthernSun Small Cap Fund (the “Fund”), a series of AMG Funds, contained in the Fund’s Prospectus, dated February 1, 2016.
Effective April 15, 2016, the Fund will reopen to new investors.
Effective April 15, 2016, the Prospectus will be amended as follows:
With respect to the sub-section “Buying and Selling Fund Shares” in the section “Summary of the Fund”, the first paragraph will be deleted in its entirety.
With respect to the sub-section “Other Important Information About the Fund and Its Investment Strategies and Risks” in the section “Additional Information About the Fund”, the heading “Fund Closure” and the subsequent two paragraphs will be deleted in their entirety.
PLEASE KEEP THIS SUPPLEMENT FOR FUTURE REFERENCE
ST322

The Share Price segment laments the overabundance of share classes and their various associated fees. I'm going to try approaching this from the other end - what services do you get and how should they be paid for?
There are account servicing costs (statements, tax info, etc.) that are pretty constant per account. Funds can cover these costs by charging everyone the same rate (single share class, large investors subsidize small ones), or by creating a tiered structure (multiple share classes), so that each investor pays a somewhat similar dollar amount for the servicing portion. Phrased that way, cheaper Vanguard Admiral shares, or Selected Funds class D shares don't sound like a bad thing.
Where I think tiered accounts makes little sense is at the institutional level. Why should a $5M account pay double what a $200M account pays?
Transactions (buying/selling) have costs. It is cheap but not free to push paper around. Very cheap for funds, less so for brokerages. Thus they skim 40 basis points/year to make it seem you're not paying anything (NTF), or let you pay a la carte (TF). If a fund wants to give you a choice, it uses multiple share classes.
Advice has its costs, too. Pay via a wrap account (typically 1%/year), or at point of sale (front end load), or on the installment plan (skimming a percentage each year), or a la carte (fee only). Regardless, you will pay. Different methods, different share classes.
18 shares classes is absurd, but with choice of service and payments method comes choice of offerings (share classes).
Much of this is done to obfuscate, and that is not a "good thing". Even funds with single share classes may be doing this. Sequoia charges a flat 1% management fee and the management company pays for everything. In reality, you're paying, you just don't know how much (and how much is going to actually manage the fund) because it's all rolled up into a single number. But hey, it looks good, no 12b-1 fee.
I have the same issue with FPA. Crescent is marketed as a noload fund, but its expenses (for a balanced fund) are out of line with its siblings (formerly loaded funds). You're virtually paying a load or transaction fee or whatever you want to call it, you just don't know it because it's buried.
In contrast, look at a fund like American Century Ultra (TWCUX). As with Sequoia it rolls all the expenses into a single management fee. But it reduces that fee on institutional shares by 20 basis points. That gives you a reasonable idea of how much extra it costs to service retail customers.
Personally, I'm glad I can buy cheaper Admiral shares and pay TFs for cheaper shares that save me money in the long run. The commentary suggested that this was inequitable. I respectfully disagree. I see the issue as clarity not fairness.

On the question of Crescent's benchmark: their objective is to produce "equity-like" returns with reduced volatility over the course of a full market cycle, so it does make some sense to hold their FMC performance to some all-equity benchmark. In their estimation, MSCI World is likely to be a bit closer going forward than the S&P 500. In the short term and especially in down markets, it will certainly be a misleading comparison.
On the question of Ed's reservations: institutional culture and identity are fragile things, so when there are personnel transitions there are also likely to be culture transitions. Those are hard to get right. T Rowe pulls it off because the fund-level changes occur within the context of firm-level continuity. When you look at boutique managers, fund-level changes are often coincident with firm-level changes. Messrs. Ende and Geist have left. Mr. Rodriquez hasn't managed funds since 2009 or 2010 and is now 65. Mr. Atteberry, Mr. Rodriquez's successor at New Income, is 62. There's no evidence that either is leaving but, by the time you're in your 60s, empire-building is more typically in your past than in your future.
The effects of these generational changes can be profound and, occasionally, positive. The problem is that, as outsiders, we're pretty much clueless about a firm's internal decision-making and dynamics. One reason we haven't talked more about it is that we don't have more to say; that is, in principle concern is warranted but we have little to work with in individual instances. So, we try to stick with what we can document.
For what that's worth,
David

We still have Crescent on our watch list. For them to suggest that the MSCI ACWI Index is a good benchmark is impossible to swallow. FPACX's make-up is 37% cash, 43% U.S. stocks (mostly very large cap), 8% international stocks, 5% bonds, and 6% Other. The ACWI Index is basically 55% U.S. stocks and 43% international stocks. Where is the comparison? It is just too convenient.

FYI: The last time dividend investing was really in favor was back in the mid-1980s—long before the era of the smartphone and the MP3 player. Laptops had just made their debut; the Internet as we know it today remained merely a gleam in the eye of Silicon Valley geeks.
Regards,
Ted
http://www.wsj.com/articles/federated-strategic-value-is-no-1-fund-1459735515
M* Snapshot SVAAX;
http://www.morningstar.com/funds/XNAS/SVAAX/quote.html
Lipper Snapshot SVAAX:
http://www.marketwatch.com/investing/Fund/SVAAX
SVAAX Is Ranked #23 In The (LCV) Fund Category By U.S. News & World Report:
http://money.usnews.com/funds/mutual-funds/large-value/federated-strategic-value-dividend-fund/svaax

SunEdison (NYSE: SUNE) shares plummeted more than 50 percent in after-hours trading Friday amid a report that the troubled energy company could file for bankruptcy.
OppenheimerFunds, David Einhorn's Greenlight Capital and Vanguard Group(5.95% : naesx, vtsmx,visgx,vexmx) are among the largest SunEdison shareholders

The management (not ER) fee on FCNTX is 0.56%. On $107B, that's about $600M. Let's say Danoff gets half of that, or $300M. That's not even beginning to count his pay for managing New Insights and lots of other funds.
SEQUX's management fee is 1.00%, the same as its ER, because the management company is responsible for all the fund expenses (similar to what American Century does with its legacy funds like TWCGX). But for the sake of argument, let's say that Danoff gets to keep all of it. That's still only $55M ($5.5B fund).
So, if Sequoia stops printing prospectuses and investor statements, stops taking in money and selling shares, stops doing all the other things that fund distributors do, and if its management company stops taking any cut, and ..., then its fee might go up just a tad instead of a whole lot to pay for Danoff.
Of course, he could volunteer take a pay cut to go back to having fun managing something smaller than a whale.

Read this before Ted posted it (pretty rare!). I thought the article a bit shoddy. 5 & 10 years (to my thinking) are too short of time frames to draw big assumptions. If I recall, they compared gold's performance to the S&P 500, REITS, and international and EM markets over the past 5 & 10 years. All of these are subject to substantial deviations over short periods. But I do think the overall point being made is valid: Investing regularly over time in a broad basket equities can be very profitable. Hard to disagree on that. But the time frames used are very short.
Re gold, I sold all of my small speculative position in OPGSX last week. It was up 37% YTD and 44% since I bought it around Labor Day last fall. Still exposed a bit through other funds; but pure plays on this stuff (or miners) are bit like snacking on nails. Not for everyone.

@Edmond: For the last time ! YTD & First Quarter
Regards,
Ted
Gaffney: EVBAX 4.24%
Fuss: LSBRX 2.73%
Gross: JUCAX 2.18%
Gundlach: DBLTX 1.75%
Ivascyn: PIMIX 1.74%
Hasenstab TPINX -(0.14)%
Regards,
Ted

The article indicates if one had put the money in REITS, rather than the S&P, one could have done even better.
The problem with these types of articles is there is they are based on a single "end-point". --- With stocks near all-time highs, and gold 4-5 years into its bear market, the case to avoid gold is a easy --- but fallacious argument to make. It could just as well been made in Dec 1999 -- but would have proven a lousy argument to have made over the ensuring decade.

I agree that asset bloat is a potential problem, but more to watch out for than a reason to rule out MWTRX now - especially in a tax-sheltered account where switching funds is painless.
As a reference point, posts here have had only positive words about DBLTX (OP holds it, PRESSmUP wound up with it, Samuel spoke of it as a fine fund). It now holds $57.6B, with DoubleLine as a whole taking in $10B in the past quarter (total $95B AUM).
http://www.mutualfundobserver.com/discuss/discussion/26816/gundlach-s-doubleline-capital-grew-to-95-billion-in-march
Which raises another fact. A few years ago, the MetWest team took on managing the TCW funds when MetWest was acquired by TCW. IMHO that was the time to have been concerned about asset bloat at MetWest. Big percentage jump in assets while also having to deal with significant outflows.

FYI: Los Angeles-based firm added $10 billion in first quarter.
Total Return Fund increased to $57.6 billion on mortgage bet.
DoubleLine Capital, the Los Angeles-based investment firm headed by Jeffrey Gundlach, increased assets under management to $95 billion at the end of March, according to an e-mail from company analyst Loren Fleckenstein, $10 billion more than the firm reported Dec. 31.
The flagship DoubleLine Total Return Bond Fund, which invests primarily in mortgage-backed securities, climbed to $57.6 billion in assets, and has returned 1.75 percent so far in 2016, according to data compiled by Bloomberg.
Regards,
Ted
http://www.bloomberg.com/news/articles/2016-04-01/gundlach-s-doubleline-capital-grew-to-95-billion-in-march

FYI: Another quarter, another lesson in long-term investing.
Economic uncertainty around the world and a brutal start to the year for stocks helped send the price of gold surging to its best quarter in 30 years. But an analysis of 10 common investments by the Associated Press shows that regular investors who put a steady amount of money every month into an account like a 401(k) would have been far better off in stocks or bonds.
Regards,
Ted
http://www.bigstory.ap.org/article/9e6749ab7e694bf3b95cb56be104cbe4/investor-derby-gold-won-first-quarter-stocks-win-long-term

BIV/VBILX/VBIIX also has noticeably more treasury exposure than AGG. It's basically AGG if you restrict in two ways: 1) limit to intermediate term bonds (those with maturities in 5-10 years), and 2) remove securitized bonds (about 1/4 of AGG).
The government and corporate portions increase proportionately, so there is more government bond and more corporate bond exposure. The latter resulting in an increase in credit exposure (relative to the MBS's it is replacing).
However, an MBS will generally yield more than a comparably rated corporate bond. That's because the MBS has extension/prepayment risk (which I view as a variant of interest rate risk). "To quote a Wall Street adage, a mortgage-backed security 'goes up like a two-year bond' when rates fall and 'goes down like a six-year bond' when rates rise." See negative convexity.
So if one swaps MBS for corporate, it is necessary to go down the credit ladder just to maintain yield. To put it another way, just because the credit rating has gone down doesn't mean that the yield has gone up - the rating may have dropped just enough to compensate for the inherently lower-yield of corporates.
The bottom line is that while it is true that there's more credit risk than AGG, without quantifying that difference it isn't clear that this is a factor that's increasing the yield. Even if the credit rating difference is large enough to increase yield, the resulting yield increase isn't as sizeable as the credit difference would seem to make it at first blush.

BIV is not a very credit sensitive fund, but it has noticeably more credit exposure than the Barclays Agg. During the financial crisis the mutual fund lost more than the Agg and fell about as much as DODIX in the Q4 2008. The fund currently has about 39% in Baa bonds v. 26% for the Barclays Agg and has a lower government bond stake.

Maybe we are looking at different websites but *M shows BIV as currently having 57% in AAA rated bonds, 16% with A rating and and 23% in BBB rated bonds. Based on these numbers, the fund does not appear to be credit sensitive overall. The duration is on the high end for an intermediate fund (6.5 years) so I do believe it has more risk on the interest rate side.

My take on his commentary:
SEQUX: Just another reason in the long line of reasons for the need to index. Not a popular opinion for stockbrokers or financial advisors or anybody who makes their living advising people. But these are the same people charging 4% commission for a Certificate of Deposit annuity paying 2.5%. I have previously discussed the value of VBINX or similar.
FPACX: I sold it a month ago. Held it for many many years. My reason is different from Mr. Snowball. IMHO, I believe human nature is such that it is difficult to be the best at a profession that requires so much. Eventually your motivation and drive begins to weaken. Asset size doesn't help matters. The funds commentary alerted me to that possibility.
Money Market: Are we saying that Treasury only Money Markets will not break $1.00 NAV? Is there no option left come October that will not break the buck for a brokerage sweep account?

Hi @hank,
Thank you for the inquiry.
I have my portfolio along with each sleeve and investment area set up in Morning's portfolio manager. With this, it is easy for me to view daily performance along with weekly, monthly, year-to-date and rolling 1, 3, 5 and 10 year performance.
I too, have to wait until the following day to find fund distributions reflected in Morningstar fund reports. In addition, it can take up to three days before the distributions actually show up in my brokerage account.
I hope this information helps.
Old_Skeet

Crude set to lose ytd gains on 1st day of 2nd quarter.
Oil tumbled 4 percent on Friday to open the second quarter, after a Saudi prince reportedly said the kingdom will not freeze production without Iran and other major producers doing so and data showed the global crude glut was likely to grow.
Brent crude fell $1.70, or 4.2 percent, to $39.07 a barrel by 11:29 a.m. ET. It was on track to a similar loss on the week, after ending the first quarter up 6 percent and March 15 percent higher.
U.S. crude fell $1.40 to $36.94 a barrel. It was on track to a 6 percent drop on the week, after a first-quarter gain of 4 percent and March rally of 14 percent.
The dollar's .DXY first rebound in a week after stronger-than-expected U.S. jobs data added pressure on oil,
http://www.reuters.com/article/us-global-oil-idUSKCN0WX00R
1st Quarter Wrap
The March rebound has made an impact on longer return windows too. For instance, nearly all corners of global markets are now in the black for year-to-date comparisons through the end of 2016’s first quarter....for the moment the rearview mirror is offering a new excuse to think positively.
1

http://www.capitalspectator.com/major-asset-classes-march-2016-performance-review/
Also; @Junkster's munis remain strong
Nuveen Muni High Inc Opp NMZ
NMZ (Price) 1 mo+1.14 ytd+2.85 1yr+8.13 3yr+8.31
http://performance.morningstar.com/funds/cef/total-returns.action?t=NMZ&region=usa&culture=en_US
SPDR Select Sector Fund - Energy Select Sector Stock Chart
Read more: http://www.nasdaq.com/symbol/xle/stock-chart#ixzz44bC3QaOM
XLE
61.00 -0.92 (-1.49%)
Real-time: 2:00PM EDT 4/01/2016

"It's not just what happened lately".
To repeat my point, what happened lately (if there's a sizeable performance difference) distorts comparisons in all time frames. If it's not just what happened lately, let's throw out the past year (4/1/15 - 3/31/16) and run those figures again (e.g. 5 years 4/1/2010 - 3/31/2015):

Cumulative	BIV	MWTRX
1 year		10.69%	10.54%
3 years		11.25%	11.66%
5 years		13.43%	13.52%

Here's the source: 1 year, 3 year, 5 year
"OP had a specific request, and quite a valid one IMO"
Yes, a "bond fund that may act as a substitute for DODIX, which is a TF fund at Fidelity". BIV has transaction fees at Fidelity that are even higher than those for DODIX.
"You need something like BIV in your portfolio, perhaps now more than ever."
What does something "like" BIV mean, and why do you need something like that now more than ever?
In the context of the OP's request (with treasuries first on the list), I took note that BIV is heavily weighted in Treasuries. So if by "something like BIV" you mean something loaded with treasuries, why not a treasury (or more broadly, a government) bond fund? That would at least give one the ability to tweak allocations (by adding/selling some of the fund, especially in the tax-sheltered account).
Why now more than ever, when treasuries have had an extremely long run, and BIV has a longer duration than almost any other intermediate bond fund? (Out of 214 distinct intermediate term bond funds for which M* has duration figures, BIV/VBILX/VBIIX has the fourth longest.)
It is true that BIV (because of its large treasuries weighting) did well in 2008. Sovereign debt (such as treasuries) was virtually the only asset class that gained then. Are there other times where that's been true, or is stocking up on treasuries a Maginot line?