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PartnerSelect Smaller Companies Fund (I class) to be reorganized

https://www.sec.gov/Archives/edgar/data/1020425/000168386320013174/f6885d1.htm

(MSSFX)

497 1 f6885d1.htm FORM 497
LITMAN GREGORY FUNDS TRUST

Supplement dated September 11, 2020

to Prospectus of the

Litman Gregory Funds Trust dated April 29, 2020, as supplemented

This supplement should be read in conjunction with the Prospectus dated April 29, 2020, as supplemented.

For all existing shareholders of the PartnerSelect Smaller Companies Fund (formerly, Litman Gregory Masters Smaller Companies Fund):

The Board of Trustees (the "Board") of the Litman Gregory Funds Trust (the "Trust" or the "Funds") has approved the tax-free reorganization of the PartnerSelect Smaller Companies Fund, a series of the Trust (the "Smaller Companies Fund"), into the PartnerSelect SBH Focused Small Value Fund, a series of the Trust (the "SBH Focused Small Value Fund") (the "Reorganization"). The Reorganization does not require the approval of the shareholders of the Smaller Companies Fund or the SBH Focused Small Value Fund.

The Reorganization was proposed because, among other things, the announced pending retirement of Dick Weiss, portfolio manager of the portion of the Smaller Companies Fund sub-advised by Wells Capital Management, Inc., and the decision by Litman Gregory Fund Advisors LLC (the "Adviser") to not recommend the continuation of the sub-advisory relationship with Wells absent Mr. Weiss as portfolio manager. The Board also considered the overall decline in assets in the Smaller Companies Fund from shareholder redemptions that has resulted in a corresponding increase in the Smaller Companies Fund's expense ratio. The Adviser has advised the Board that it is unlikely that the Smaller Companies Fund will increase in size significantly in the foreseeable future. The SBH Focused Small Value Fund and the Smaller Companies Fund have the same investment objective and similar investment strategies, policies, risks, and restrictions. Furthermore, the investment sub-advisor of the SBH Focused Small Value Fund also currently manages a portion of the Smaller Companies Fund, thus preserving access by shareholders to this manager's portfolio management expertise. The Adviser has committed to limit the expenses of the SBH Focused Small Value Fund at a level below that of the Smaller Companies Fund at least through April 30, 2022. By consolidating the two funds instead of liquidating the Smaller Companies Fund, the Adviser believes that significant realized and unrealized capital losses and capital loss carryforwards may be preserved for the benefit of shareholders while allowing individual shareholders to assess their particular tax situations and act in their own best interest with respect to the realization of capital gains or losses.

To effectuate the Reorganization, the Smaller Companies Fund will transfer all of its assets to the SBH Focused Small Value Fund, and the SBH Focused Small Value Fund will assume all of the liabilities of the Smaller Companies Fund. On the date of the closing of the Reorganization, shareholders of the Smaller Companies Fund will receive Institutional Class shares of the SBH Focused Small Value Fund equal in aggregate net asset value to the value of their shares of the Smaller Companies Fund, in exchange for their shares of the Smaller Companies Fund. The Reorganization is expected to be effective in October 2020.

Effective September 14, 2020, shares of the Smaller Companies Fund will no longer be offered to new shareholders, and shareholders holding Institutional Class shares of any other series of the Trust will not be able to exchange their shares for shares of the Smaller Companies Fund. Shareholders of the Smaller Companies Fund will be allowed to redeem their shares in the Fund until the closing of the Reorganization.

Please keep this Supplement with your Prospectus.

Comments

  • Thought LITMAN GREGORY has gone to advisory only.

    Long time ago I invested with their Master Select International fund and left several years later. The concept of running a fund utilizing multiple "star" money mangers was interesting but there is no synergistic between between the stock picks. The end result of was higher level of volatility (than funds with a single manager/team) and offered very little downside protection during drawdown. I stayed with a total international index fund for awhile and slowly selected a few actively managed funds (slowly).
  • I invested in their alt fund MASNX, and was satisfied with it, until this spring when it blew up. I sold and managed to hold on to some profits.
  • I reviewed MASNX and decided to pass given the high expense ratio. The drawdown in March really expose how funds, active or passive, response. Many tanked badly.

    As I recall, this fund is consisted of several alternative strategies include M&A and others that have low correlations to equities and bonds. Although it sounded good at that time, this fund was not compelling enough (to me) to justify the high ER. Instead I use gold and gold miner ETFs which have much lower ER. Most of all, the correlation to stocks and bonds was quite low.

    In March everything went down. Gold held up and continues to climb today. My total bond index fund also did very well so far -7% YTD.
  • msf
    edited September 12
    Dick Weiss. Now that's a name I haven't heard in a long time. In the 90s (and somewhat beyond), he managed Strong Opportunity, a good midcap value fund. It became Wells Opportunity when Wells Fargo acquired Strong Funds.

    Here's a 1999 M* Fund Spy column with a few paragraphs in the middle about Weiss and the management of Strong Opportunity.
    https://www.morningstar.com/articles/1402/morningstar-fund-spy

    The industry pulls so many sleights of hand that one has to wonder about reorganizations that include some oddities. All the Litman Gregory Masters funds changed names just seven weeks ago to PartnerSelect. This reorganization is supposedly due in part to small size ($18.9M) but is a merger into an even smaller fund PFSVX ($9.9M).
    https://www.sec.gov/Archives/edgar/data/1020425/000168386320012117/f6483d1.htm

    That latter fund was formed just after the name change, and unlike the "Masters" funds, has only one submanagement company. It looks like it could be a shell fund designed for various purposes, including the stated purpose of carrying over losses from MSSFX and an unstated purpose of burying that fund's performance history.

    Perhaps Litman Gregory is moving away from the multi-manager concept (and poor records) and this is just the first step. MSEFX is a large cap fund with just $230M, a high ER (1.21%), and a miserable bottom 10% record over all time spans (from 1 month up to 15 years). Further, Dick Weiss, who is retiring, is this fund's only remaining original manager.

  • Sven said:

    Long time ago I invested with their Master Select International fund and left several years later. The concept of running a fund utilizing multiple "star" money mangers was interesting but there is no synergistic between between the stock picks.

    I recall the Master Select International fund.
    The fund's management lineup in the late 90s/early aughts included: Oakmark (David Herro);
    Janus (Helen Young Hayes); and Artisan (Mark Yockey).
    They were some of the most renowned international equity managers at the time.
    I never held MSILX but had invested in other funds run by these managers (OAKIX, JAOSX, ARTJX).

  • @Observant1, Interesting concept at that time, kinda like the 1992 USA Dream Team. Invested with their International fund but found there nothing special but many downsides to it.

    @msf, I remember Dick Weiss from way way back when he was with Stein Roe Opportunity fund before the firm was merged with Strong.
  • edited September 13
    Sven said:

    @Observant1, Interesting concept at that time, kinda like the 1992 USA Dream Team. Invested with their International fund but found there nothing special but many downsides to it.

    @Sven,

    The Master Select International Fund intrigued me but I was already invested internationally.
    I now gravitate towards funds with only one (preferable) or two different management teams.
    I don't want there to be "too many cooks in the kitchen".

  • Sometimes things weren't quite as we remember them. Stein Roe was acquired by Liberty (now Columbia), not by Strong. Dick Weiss did move from Stein Roe to Strong, but by switching funds, not by acquisition.
    Former Stein Roe employees say that when Richard Weiss, well-known manager of the Special Fund, failed to win support in 1991 for a new institutional equity product that would have capitalized on his existing fund's strong record, he jumped to Milwaukee-based Strong Funds and gathered nearly $2 billion in two years. Mr. Weiss was soon joined at Strong by promising Stein Roe manager Carlene Murphy Ziegler.
    https://www.chicagobusiness.com/article/19951021/ISSUE01/10008554/how-stein-roe-blew-it-once-a-big-name-now-an-also-ran

    FWIW, here's a post of mine on the convoluted path of acquisitions that ultimately led to Columbia Threadneedle. Stein Roe was acquired by Liberty, which was acquired by Fleet Boston, which already owned Columbia and rebranded some acquired funds; Fleet Boston (Columbia) was acquired by Bank of America, which sold its funds to Ameriprise.
    https://mutualfundobserver.com/discuss/discussion/comment/51510/#Comment_51510
  • I stand corrected. How these smaller shops evolved in the last 20 years.
  • I don't want there to be "too many cooks in the kitchen".
    Often mixing different strategies do not work out well for the investors. Vanguard sometimes uses several subvisiors on their funds. Some works and some don't. One has to review the prospectus carefully before investing.
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