https://www.sec.gov/Archives/edgar/data/890540/000113542816001730/reaves-497.txt
497
1
reaves-497.txt
THE ADVISORS' INNER CIRCLE FUND II (THE "TRUST")
REAVES UTILITIES AND ENERGY INFRASTRUCTURE FUND (THE "FUND")
SUPPLEMENT DATED SEPTEMBER 15, 2016
TO THE CLASS A SHARES PROSPECTUS AND THE INSTITUTIONAL CLASS SHARES PROSPECTUS,
EACH DATED NOVEMBER 28, 2015 (THE "PROSPECTUSES")
AND THE STATEMENT OF ADDITIONAL INFORMATION, DATED NOVEMBER 28, 2015 (THE "SAI")
This supplement provides new and additional information beyond that contained in
the Prospectuses and SAI, and should be read in conjunction with the
Prospectuses and SAI.
Effective on or about November 30, 2016 (the "Conversion Date"), the Fund will
automatically convert its outstanding Class A Shares to Institutional Class
Shares of the Fund. After the Conversion Date, Class A Shares will no longer be
offered by the Fund, and will be terminated as a separately designated class of
the Fund.
The automatic conversion of the Fund's Class A Shares into Institutional Class
Shares on the Conversion Date is not expected to be a taxable event for federal
income tax purposes or to result in the recognition of gain or loss by
converting shareholders, although shareholders should consult their own tax
advisors.
The fees and expenses of Institutional Class Shares, which are set forth in the
Institutional Class Shares Prospectus, do not include the 4.75% maximum sales
charge (load) imposed on purchases of Class A Shares or the 0.25% distribution
and service (12b-1) fee payable with respect to Class A Shares.
Additionally, effective as of the Conversion Date, the minimum initial
investment for Institutional Class Shares will be $1,000, and all references to
"$1,000,000" in the Institutional Class Shares Prospectus are hereby deleted and
replaced with "$1,000."
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
WHR-SK-012-0100

Hi Davidrmoran,
It's interesting that you refer to a coin flip as an example. We often suggest the flip as a 50/50 outcome game. That's yet another example of an oversimplification. We don't know as much as we think we know.
While the coin toss outcome might be a theoretical even likelihood, practical physics considerations shift those even odds. If you flip a coin, the probability is 51% that the coin with the side up on the flip will land that same way. When you spin a coin, the likelihood of a tail outcome is well in excess of .50%. Test data supports these outcome odds.
We learn something every day. Here is a reference to some testing conducted by a physics professor:
http://www.smithsonianmag.com/science-nature/gamblers-take-note-the-odds-in-a-coin-flip-arent-quite-5050-145465423/
Enjoy. You also might profit from these insights. Good luck!
Best Wishes.

Wow. A blast from the past. The very first story in the very first issue of the Observer was entitled "Successor to 'the worst best fund ever.'" The story started this way:
They’re at it again. They’ve found another golden manager. This time Tom Soveiro of Fidelity Leveraged Company Stock and its Advisor Class sibling. Top mutual fund for the past decade so:
Guru Investor, “#1 Fund Manager Profits from Debt”
Investment News, “The ‘Secret’ of the Top Performing Fund Manager”
Street Authority, “2 Stock Picks from the Best Mutual Fund on the Planet”
Motley Fool, “The Decade’s Best Stock Picker”
Mutual Fund Observer, “Dear God. Not again.”
The first sign that something might be terribly amiss is the line: “Thomas Soviero has replaced Ken Heebner at the top.”
...
The fund managed the highest returns of any fund in the preceding decade (nearly 15% annually during "the lost decade"), yet its average investor either made little (about 3% in the no-load shares) or actually lost money (a small negative return in the Advisor class shares).
The fund has had a rough past four years. Assets are down 50% from their peak. Mr. Soveiro had been expanding the franchise but has lately been forced to (or has chosen to) give up his role in other funds. And now, not surprisingly, this.
David

FYI: Apple Inc.’s third-quarter rally is unwelcome news to the unusually large swath of investors who have been giving up on the stock.
Regards,
Ted
http://www.bloomberg.com/news/articles/2016-09-15/apple-s-20-rally-is-tough-pill-for-295-funds-that-just-bailed
M*: Funds Selling APPL:
http://investors.morningstar.com/ownership/shareholders-selling.html?t=AAPL&region=usa&culture=en-US&ownerCountry=USA

FYI: On April 6, 2016, the U.S. Department of Labor established a federal standard of fiduciary duty that requires investment advisers and brokers who give advice to clients holding retirement plans to place the interests of investors before their own interests. One of the many press reports on the rule headlined its story: “Finally, John Bogle's dream of a fiduciary standard will come true.”
Regards,
Ted
http://www.investmentnews.com/article/20160915/FREE/160919972?template=printart

hey david: i forgot i'd put a limit order in on REXX and, by God, it hit today, at 50 cents/ share, so we're in this together now (unless you've bailed). Go REXX, ha ha.

@JoJo26 The replicating ETF portfolio does not have to be static (just as the fund's composition changes over time). You can run the calculation periodically and adjust the portfolio. One variant of the methodology does this monthly based on a rolling chunk of history. No fund, even one with a high turnover, changes all its holdings overnight, i.e. there is some inertia. So, even if you run the calculation with a one-month lag, you can still get a reasonably good tracking. Applying that approach to MAPOX over the same period, you get the ETF portfolio cumulatively outperforming by ~1.9% at ~0.5% lower standard deviation. See goo.gl/2Z3V5Q

@Patrick1 You may want to consider that an equal-weight S&P 500 is really a large-cap index with a mid-cap tilt -- see RSP analysis at goo.gl/q1t6Lf

@Mulder420 asked for thoughts on FISMX, so I provided an alternative. No shenanigans, pure math. If you do not care about strict replication accuracy, use fewer ETFs. Sure, FISMX performance may divert from that of the ETF portfolio over time. Nevertheless, thanks to the fund inertia, you can track it reasonably well with a 1-month delay (a different fit mode) and still get better risk-adjusted results (e.g. by about 1.3% since Aug 2015). In addition, ETFs will give you an immediate visibility into exposures, as opposed to the "black box" nature of the mutual fund (re: the delayed semi-annual holdings disclosures subject to all sorts of manipulation). This is very useful when constructing the overall investment portfolio.

5 year records:
GBLAX "This fund makes the Fantastic 45 in its first year of eligibility. Launched in February 2011 ..."

FYI: Out of a universe of more than 8,000, only these 45 mutual funds passed Russ Kinnel’s strict screen for fantastic funds.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=768923

It would be real nice to have the Symbol column stick (stay) when scrolling horizontally.
Here's an exercise for US LC div / value types. Examine mfund PRBLX against the usual etfs SPHD, CAPE, NOBL, OUSA, HDV, SCHD, VYM, DVY, with IJH for a side entity. (Some are 'high-div', yes.) Observe that the UI range is over an order of magnitude for these similarish funds, with DVY by some measure the worst. Is this chiefly because it is older than all the other LC etfs save one? Examine the various risk columns. Check which are GO (CAPE!). Then do a $10k-growth graph at M* for 1/3/5/6/7/8/9y when available, with changing start points, looking at the the fall 08 dip and recovery the next spring or later, ditto for more-recent dips, and see if you can fathom the UI range noted above.
All very puzzling and for me not such a helpful screen. Why would anyone prefer DVY, for example, based on this? Or IJH? It is as though we are ranking by recovery months (say) when one has had mild allergic rhinitis and the other whopping pneumonia. Gosh, the former has to be a healthier person, right?

@LLJB
Here's link to Patrick O’Shaughnessy's Commentary page. He's a true student of the markets. And, here is link to the paper he briefed in Chicago Friday, Alpha or Assets?
Market cap index investing certainly making a lot of smart money managers look not so smart these past several years. Everyone would have been wise to simply invested in VFINX or VBINX back in 2009 and forgotten about it.

Value investors, which have all the academic findings to back-up the strategy's premium, have underperformed during this period. Hard to say exactly why. Some argue it's the cheap money that enables investors to chase growth stocks, which would otherwise be "unaffordable," if you will. Others argue since all assets have been "artificially inflated," again because of ZIRP, there has not been much distinction between value and growth ... everything is expensive!
It's interesting to think of the market cap index as the first quant fund. And, in fact, because it is market cap, it's actually a momentum strategy.
Yes, I'm skeptical of many money managers, fund families, and attendant fees. Published misuses of investors by firms like Edward Jones abound. Heck, look at what Wells Fargo did recently! I hate front loads, back loads, 12b-1 fees, and multiple share classes. I have made my dislike of American Funds known for all these reasons. Assets are sticky, so asset gathers abound.
All that said, I remember Peter Lynch once saying that just because an investment wins, does not mean it was for the right reason. And, just because it underperforms, does not mean it was for the wrong reason. I do think there are money managers and shops out there that are really trying to do the right kind of investing for all the right reasons.
I know David's mission for MFO is to help investors identify those very opportunities, especially when they are under-the-radar, like the individuals and firms you mentioned.
@MikeM2
I did not make it over to the Fidelity booth, unfortunately. But will keep eye out for Fidelity's new offering.

All ratings have been updated on MFO Premium site, including MultiSearch, Great Owls, Fund Alarm (Three Alarm and Honor Roll), Averages, Correlation, Dashboard of Profiled Funds, and Fund Family Scorecard.
Three perennial GOs remain GOs this month along with Honor Roll distinction: Vanguard Wellesley Income (VWINX), Vanguard Wellington Balanced (VWELX), and Vanguard PRIMECAP (VPMCX). The past 12 months, they've each delivered top quintile excess returns. They are also among the highest AUM funds in their respective categories. So much for scale eating returns, in this case anyway ... it's been that kind of market. All these funds, more than 10% return! So much too for 1% real return predictions.
Also, interesting to see how low the volatility of Aggregate Bond Index ("USBond") has been this past year, especially with respect to SP500 Index, placing bonds in bottom quintile risk category versus below average (2nd) quintile historically.

Agreed, being a one-issue investor isn't always wise, but it is not worth looking at State Street's 2015 numbers. The important news here is the shift in voting in 2016. According to the article: "State Street supported the resolutions 51 percent of the time at S&P 500 companies including Exxon Mobil Corp and Chevron Corp in this year's proxy season, up from 14 percent last year, according to a review of recent securities filings by research firm Fund Votes." This is an important change that could ultimately influence other fund companies. It will be interesting to see whether State Street has shifted its votes on any other governance issues as well.

I'm not sure there are any great managers in terms of voting records, but I'll take a look.
FWIW, here's SSgA's 2015 proxy voting record (all 9945 pages):
https://www.ssga.com/investment-topics/environmental-social-governance/2016/2015-Vote-Summary-Report.pdf
and its proxy voting guidelines:
https://www.ssga.com/investment-topics/environmental-social-governance/2016/Proxy-Voting-and-Engagement-Guidelines-US-20160301.pdf
As important as the environment is, I'm not a one-issue voter or investor. For instance, I've mentioned executive compensation. On that, SSgA is among the worst (though the average is nearly as bad):
http://www.asyousow.org/wp-content/uploads/2015/12/statestreet-2016-execcomp-resolution.pdf
Pick your poisons and your managers accordingly.

O’Shaughnessy was best of Friday's session. An industry stand out. His presentation was about the inherent conflicted nature of delivering alpha and accumulating assets. Basically. the more AUM, the more holdings a portfolio must maintain, the more it then looks like an index, the less likely its performance will deviate from the index. "Scale eats returns." He sees active share as a measure of the potential to be better (or worse) than index. "Dare to be great." He thinks both Wes Gray and Meb Faber are offering ETFs closest to the strategies he recommends. That said, he admits there are only a few money managers he would trust with his money. (He would not say which ones.)
Met with Rich Powers, Vanguard's head of EtF product management. Vanguard offers 70 ETFs with AUM totalling $565B. As a whole, the US EtF industry offers some 1800 ETFs with about $2.4T AUM. So, with just 4% of products, Vanguard has captured one quarter of the AUM. Can you believe that? Our fund family data on the MFO Premium site shows that 60 of their 70 ETFs have beaten their peers since inception. That's simply amazing. Rich had a quick response: "The power of low fees." Vanguard is the only company to offer some ETFs as simply another share class of its open-ended sibling. "Economies of scale," Rich explained.

Overall the change has been good and very predictable. The capital gain has reduced significantly and the dividend distribution is manageable, ~2% for S&P 500 index funds, for example. We have a national-based muni fund, thus we pay only state tax on the dividend.
If you have sizable long term capital gain from the past, take your time to make the change so that you income don't get move up to the next tax bracket. Also pay attention to tax harvesting throughout the year to reduce the cost base. It is the unpredictable amount we had problem with.

I had initially bought into the hype surrounding the total return fund DLTNX, but have since sold it and added to GIBIX. Before 2016 I didn't have any bond funds, as I held individual muni bonds, but half of them were called (had a total of 4) and needed to find bond funds that I could use for income and to funnel profits to on my equity portion of portfolio. With over 80% in mortgage related bonds, DLTNX seemed a bit too aggressive, despite Mr Gundlach's record. I am sticking with GIBIX, PFBPX, PYACX and STRYX plus CPXIX for some preferred stock income. My equity allocation of 65% has some fairly aggressive components along with some more moderate positions, figured my bond portion needed to be more conservative. Honest best wishes for other MFO members who have a bit more faith in Gundlach and his team. Please Lord, let him be wrong about Trump.

FYI: Those unwanted distributions will be here before you know it; navigate them wisely.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=768643