http://www.sec.gov/Archives/edgar/data/912036/000119312512377027/d405495d497.htmAston Funds
ASTON/River Road Independent Value Fund (the “Fund”)
Class N Shares & Class I Shares
Supplement dated August 31, 2012 to the Prospectus dated February 29, 2012 for the Aston Funds
(the “Prospectus”) and the Summary Prospectus dated March 1, 2012 for the Fund (the
“Summary Prospectus” and together with the Prospectus, the “Prospectuses”)
IMPORTANT NOTICE
This supplement provides new and additional information beyond that contained in the Prospectuses and should be retained and read in conjunction with the Prospectuses. Keep it for future reference.
The Fund will commence accepting investments from new investors on September 4, 2012. The Fund has been closed to new investors (with certain limited exceptions) to facilitate management of the Fund’s investment portfolio. The Fund will remain open to new investors until such time as the investment adviser and Board of Trustees determine that accepting new investors is no longer in the best interests of the Fund.
The Fund reserves the right to reject any investment for any reason.
For more information, please call Aston Funds: 800-992-8151 or visit our website at www.astonfunds.com.
Comments
Just looking at YTD performance, ARIVX has done pretty poorly compared to PVFIX. Both were profiled on MFO and both are cash-heavy, small value funds, with PVFIX more focused on micro-caps and deeper value.
Also while I understand and support the manager's rationale for holding so much cash, it also makes me reluctant to add to my position. I would rather give Cinnamond more money when he actually has something to do with it.
I had called RRAM in late 2011, and they reported a top capacity of $800M prior to the soft-close of ARIVX. Smells like asset gathering to me, especially since the fund has lots of cash, currently at 52.77%. Do they really need to be managing more cash at ARIVX, and charging 1.47% to do so ?
Kevin
Stumped and confused shareholder.
Mike_E
I think most of us on this board are in because it is Aston Riverroad. If it becomes Aston Highroad, we wouldn't be in this fund. We would take the River somewhere else. Let's trust the manager and hope the ER is worth it.
BWG
I really have no issue with the reopening just yet. If he ( Eric ) plans on closing this fund once they have the 200 million = problem solved.
I understand that the manager thought they'd have more AUM when they closed the first time. This I can understand because this is Eric's only fund with relatively low assets compared against Charles Dreifus, etc. When they closed the fund they counted on that 200 mil for payroll, etc. I believe this will be like any Artisan fund reopening and re-closing
I have much more concern about OAKBX reopening
Hi perpetual_Bull,
My issue is not so much with the reopening as it is with the 12B-1 fee. ARIVX is not the only one that charges a 12B-1 while being closed or not marketing actively; there are plenty of others that do the same. However that does not make it acceptable. It reflects poorly on a fund trying to position itself as looking out for its shareholders.
BWG
And that gets us to the 12b-1 fee. As I said, it's great marketing - it pulls in dollars to the fund (and keeps the dollars there, by continuing to pay the fee so long as the dollars are invested through the brokerage). Just what a 12b-1 fee is supposed to do (draw and maintain dollars). Some funds call this out as a separate 12b-1 line item; others bury it in "other expenses", or let the management company pay the fee (but then the management company turns right around and charges the fund a higher management fee than it would otherwise). See a M* article on 12b-1 fees, especially the 7th paragraph beginning: Take another example - shareholders buying "no transaction-fee funds" ...
So whether a fund breaks out the NTF platform fee into a separate 12b-1 line item or not, you're still paying it. In fact, kudos to the funds honest enough to show it as a line item. If you don't want to pay the platform fee (regardless of whether or not it shows up as a 12b-1 fee), then don't buy NTF funds. Buy Vanguard from Vanguard (or pay a transaction fee), buy Fidelity from Fidelity (or pay a transaction fee), and if you're grandfathered by Janus, buy D shares directly from Janus instead of T shares through an NTF platform, with their higher expenses. Janus' separate share class for NTF platform shows how these platforms really do cost you money, even if the charge doesn't appear as an explicit 12b-1 fee.
In fact, when I look at total expense ratios, I do not see a clear relationship between NTF/TF funds and expense ratios. Two small cap examples: PVFIX is not an NTF fund anywhere (according to Morningstar), and its expense ratio is 1.76%. HSCSX is NTF at several brokerages but its expense ratio is a mere 1.06%. I suspect you would be able to find examples and counter-examples all over the map.
- you don't care where the money you pay goes
- NTF fees don't appear to cost more
Let me address the latter first. In short, TANSTAAFL. Funds pay brokerages, that money has to come from somewhere. There are only two possibilities: it comes from the fund (or from the distributor and/or manager), or it comes from cost savings, because the brokerage is taking over some of the administrative/distribution services. The latter is the rationale that the brokerages originally gave for charging their fees, viz. that they were actually saving funds money. And it's likely true for very small funds starting out, but not in general. The former means that you're paying for the privilege of buying NTF. Even if the management co. is paying the fee, it's not doing it for nothing. It maintains its profit margin by passing the costs on to you.
So why aren't you seeing this clearly when you look at funds? Primarily because fund expenses are all over the map regardless of NTF fees. That is, if you look at TF funds, their costs range widely; throwing in NTF funds should, on average, raise the average cost you're seeing, but from fund to fund the natural wide variation of fees obscures this effect. I am suggesting that but for the platform charges for NTF services, the ERs of a fund would be lower.
Here's some direct evidence. Third Ave Value and Harbor funds were originally NTF. They subsequently went TF, and offered a special NTF share class with higher fees to cover the costs. They also raised the minimums on the original shares so that they could call the shares "institutional". But that was largely a sham to keep the brokerages happy. Harbor's "institutional" class shares have only a $50K min - not small potatoes, but not exactly in the institutional realm either. And it doesn't even have to be that high. Baird institutional funds come with a "mere" $25K min (e.g. BCOIX, BCOSX).
A fair question might be that if all this is so obvious, why don't funds simply offer two retail classes, one for sale NTF and one for sale with a TF (or direct). Selected Shares tried this truthful path, and got beaten down by the brokerages, who saw this as a threat to their image of "free" trades. Here's a Kiplinger column on that, A Secret About Buying Funds Through an Online Broker. Janus took a different tack. They grandfathered existing direct investors into lower cost D shares, then raised the fees on their traditional T shares available NTF though brokerages. Janus can say that new investors cannot buy D shares, so the brokerages are not competing directly with lower cost retail shares.
As to one not caring where the money goes, I respectfully submit that everyone on this board would disagree. Given the choice between two funds, same ER, same performance, where one was paying 0.75%/year (part of a 12b-1 fee) as a load to the sales person (or brokerage), and one where that money went to the manager (perhaps because the fund had fewer AUM and was thus getting fewer total dollars in pay), people would pick the latter.
That fee being continuously skimmed may not feel like a load, but there it is. Studies show that people would rather pay more for a cellphone contact that costs them hundreds of dollars more if they get their phone "for free", rather than pay as they go (prepaid) and buy the phone themselves. It's great marketing, but lousy for the consumer. Same with funds. People (even long term investors) would rather pay the C share loads over time than pay a smaller load up front. And people would rather pay a higher fee for getting the shares NTF than pay a smaller brokerage commission up front.
In short, people do care about where the money goes, but they don't necessarily analyze the costs completely analytically.