MMNIX - Came across this "relative value arbitrage" fund that has a really nice, smooth run during the past few months. How many funds can say that? In its brief 16 month life, MMNIX had only 1 negative month (-0.20%).
The Miller Market Neutral Income Fund (MMNIX) has a $1 million minimum, which is an issue for the average investor. The Class A version (MMNAX) has not yet been rolled out despite being listed on the prospectus. I am inquiring with Miller as to whether Class A and C will ever be available.
https://www.millerfamilyoffunds.com/wp-content/uploads/2025/04/Miller-Market-Neutral-Fund-MMNIX-Q1-2025-Fact-Sheet.pdfI appreciate a low SD fund (1.6) that can return ~10% per year. A little more history would be nice, of course.
Comments
Here's a Portfolio Visualizer comparison of MMNIX with two other relative value arbitrage funds. The other two funds, LEOIX and PSCAX have had no negative months in the same 16 month span.
LEOIX does have a slightly higher std dev (1.7), but has a 12.05% annualized return vs. 9.63% for MMNIX. This results in a Sharpe ratio of 3.76 vs. 2.75 for MMNIX.
PSCAX has a lower std dev of 1.45, but one pays for that with a lower annualized return of 8.23% and a lower Sharpe ratio of 2.16.
If you want to get a sense of what to expect from this fund over a significant period of time, you could look at how these other funds performed. Over ten years, they've each returned 3.9% annually, give or take a few basis points (per Fidelity).
One doesn't need to look at alternatives for funds that offer a smooth a ride and decent performance. Here's a Fidelity comparison of PRFRX with LEOIX and PSCAX. PRFRX has outperformed PSCAX over 3, 5, and 10 years with a similar 3 year std dev. Its performance longer term is comparable to LEOIX with a 3 year std dev that's about 1/3 lower. And half the cost (ER) of both.
As always, there are no free lunches out there.
Additional benefits of TestFol are use of daily returns (vs monthly for PV, M*, etc), no run time limits and rolling metrics. TestFol SD values are higher due to daily data.
TestFol can be more useful for newer funds with short histories. Run for MMNIX, LEOIX, PSCAX shows some unusual spikes for LEOIX that cause higher SD (so, its Sharpe Ratio is lower).
https://testfol.io/?s=d6oP8Rt4alp
In this case though, those spikes are not noise but data errors. TestFol didn't handle divs correctly. LEOIX went ex-div on Dec. 20th. The div was $0.191 (Yahoo). NAV's were:
Dec 19 - $8.75
Dec 20 - $8.58
Dec 23 - $8.54
https://finance.yahoo.com/quote/LEOIX/history/
On Dec 20th, TestFol appears to have added the div to the old price to get a spike. It corrected that the next day (Dec 23rd). Hence the supposed 2.06% "drawdown" on the 23rd.
Actual gain on Dec 20th was: [($8.58 + $0.191) - $8.75] / $8.75 = 0.24%
Using Yahoo's adj close: ($8.58 - $8.56) / $8.56 = 0.233%
Using TestFol's figures (mouse over graph):
Dec 19 - $11,082.19
Dec 20 - $11,286.16
Gain: ($11,286.16 - $11,082.19) / $11,082.19 = 1.84%
FWIW using Yahoo's daily adjusted close figures from Jan 2, 2024 through May 19, 2025, the (daily) standard deviation of LEOIX is 1.58.
The prospectus says 1.61% - 0.31% (fee waiver) = 1.30% net
Schwab and Fidelity also report these figures.
M* says the ER is 3.55%. When "adjusted" (for borrowing costs, etc.) this becomes 1.26%
Dec 2024 annual report says 3.78%.
Both MFO and Marketwatch report this same figure and source their data from Lipper.
Lazard's fact sheet for the fund reports 3.8% net (the same as 3.78%, rounded), adding that the gross expenses are 4.2%.
Are the prospectus figures merely "wishful thinking" (prospective) while annual report figures are real (retrospective)? Then what are we to make of M*'s figures?
Websites and quarterly reports may report actual ERs that may be slightly lower. These may also show any fee waivers.
Morningstar does its own thing as it isn't regulated as funds are. In its current reporting, M* EXCLUDES costs related to leverage and shorting.
Now look at what happens with ETFs or OEFs that invest in CEFs. Both have the misfortune of M* including underlying fund fees in their ER leading to negative ratings.
Sabra’s CEFS - ER from M* 3.46% leading to a negative rating
MDFIX (mentioned in this week’s Barron’s) - ER from M* 3.33% - also a negative rating
In the later two the underlying funds’ fees count towards the fund’s ER. But in the first instance I don’t believe those underlying fees are included.
I went back and checked old docs. While the May 1, 2025 prospectus (and Schwab and Fidelity) report ERs of 1.61 (gross) and 1.30 (net), the May 1, 2024 prospectus reports ERs of 4.24% (gross) and 3.78% (net). It looks like this old prospectus is where Lipper got its 3.78% figure.
Regarding M*, in addition to reporting an adjusted ER of 1.26% as you described (i.e. excluding leverage/shorting costs), M* reports an "unadulterated" ER of 3.55%.
According to M*, that figure comes straight from the 2024 annual report. https://awgmain.morningstar.com/webhelp/glossary_definitions/va_vl/Fund_Expense_Ratio.html
There are multiple errors here. The first is mine - I misread the Dec 2024 annual report., quoting the ER for open (retail) shares, not institutional shares (LEOIX). The other errors are Lazard's.
According to this excerpt of the annual report for LEOIX, the 2024 annual costs were 3.52%. But in the more detailed financial tables, on p. 48, Lazard reports the net expense ratio as 3.55%. So that's where M* got this figure.
Lazard also misreported the NAV of LEOIX for several days in 1Q25.
https://www.lazardassetmanagement.com/content/dam/lazard-asset-management/lmap-documents/257770/LazardEnhancedOpportunitiesPortfolioReprocessingLetter.pdf