This is a story that deserves a lot of thought and discussion.
One of the fundamental beliefs we’ve had when investing in funds is that we will get our money back when we want it. Sure, we’re vaguely aware that somewhere in the legalese (those pesky lawyers) there is language that distributions could be delayed during difficult times, but we figured that we weren’t the type to sell during those times of distress and that once the selling panic was over the funds could resume normal operations. And we might have read somewhere that distributions could be made in the form of stocks instead of cash, but we believed that couldn’t happen in the good quality funds that we invested in, those were simply things that happened in small high risk funds run by fraudsters.
But now it’s happened. A highly respected fund has refused to cash out one of its investors, and has instead given an investor some crummy stock that the fund doesn’t want, that probably has a tax obligation that the fund will avoid by distributing the stock. The investor will have to pay the fees to sell the stock, incur the risk the stock will decline in value, and may have to pay the capital gain on the sale.
Talk about breach of fiduciary duty!!!
This is a risk that I’m not sure I want to take with my retirement funds. I’m going to take a closer look at my funds and if they are not backed up by a big reputable fund family I’m going to question if they could be subject to this sort of risk.
It may also make sense to reconsider investing the old fashioned way: Buying stocks one at a time. Anyone still subscribe to Value Line?

@Junkster thanks for the reply. I was watching munis (and have a position in them) since you and another poster Dox? mentioned them.

The name is not Dox it is Dex. While reading past threads I came across some good posts he made about cash flow in retirement which changed my mind about its importance.

"a low tolerance for risk"
Ummm ... you might reflect on that conclusion in light of the positioning of my portfolio, which I publish annually. In the non-retirement portfolio, about 50% of my money is in equities and 50% in income-producing securities. Within the equity sleeve, 50% is international and within international more than 50% is a combination of small, emerging and frontier. Domestic is overweight small- to micro-cap which a distinct value pitch. I have no savings account (0.01% APR does nothing for me) but instead balance very conservative income-oriented investments (the aforementioned RPHYX) with quite aggressive ones.
It might be a bit misleading to point to one fund and generalize from it. I mean, really, why is substituting RPHYX and RPSIX for CDs and a savings account "risk averse"?
My self-description would be closer to this: "I will accept no risk unless I perceive a serious assymetry, in which the probable upside is substantially greater than the probable downside." One measure of the ability of a manager to achieve that goal is to look at a risk-return ratio over a meaningful period of time. My default is Sharpe over a full market cycle. The FMC orientation simply reflects the fact that I have better things to do than try to time my portfolio; I have neither the interest nor the discipline to pull that off. Some folks do, although the evidence suggests a far larger number simply thinks they do.
So, if you start with my premise - high risk-return ratio over meaningful periods - which small caps should I be looking at? When I screen for open, retail small cap funds - domestic, global, international - no-load or load-waived at Scottrade and sort by descending Sharpe, the top ones are:
1. Intrepid Endeavor, first by a lot. ARIVX is a near-clone in terms of risk-return but it doesn't have a full cycle record.
2. Westwood Mighty Mites
3. Homestead Small Cap
4. Pinnacle Value
5. Tributary Small Cap.
If you play with the risk-reward measure (Sortino, Martin, Ulcer Index) you get a slight shuffle of the top ten with the addition of Queens Road SCV and Royce Special.
I'm not enamored with the Royce or Gabelli organizations. Love Homestead's low minimum initial investment ($500), don't love the $1.2 billion size as much. Queens Road is very much worth a look. Tributary really would qualify as "in the shadows." And still the numbers point most consistently to ICMAX and the much-derided ARIVX.
I bet you're wondering why I buy and sell funds so rarely. Briefly, I go through this sort of pondering with every single one.
David

FYI: The California Public Employees' Retirement System recently opened a new chapter in socially responsible investing (also known as environment, social and governance, or ESG, investing) when its investment committee decided to start requiring that the boards of the companies it invests in include climate change experts.
Regards,
Ted
http://www.bloomberg.com/gadfly/articles/2016-04-04/can-calpers-live-with-responsible-investment-returns

http://www.sec.gov/Archives/edgar/data/1032423/000119312516525838/d137367d497.htm
497 1 d137367d497.htm 497 - SUPPLEMENT DATED MARCH 31, 2016 TO PROSPECTUS DATED FEBRUARY 28, 2016
DIAMOND HILL FUNDS
Diamond Hill Small Cap Fund
Diamond Hill Small-Mid Cap Fund
Diamond Hill Mid Cap Fund
Diamond Hill Large Cap Fund
Diamond Hill Select Fund
Diamond Hill Long-Short Fund
Diamond Hill Research Opportunities Fund
Diamond Hill Financial Long-Short Fund
Diamond Hill Corporate Credit Fund
Diamond Hill High Yield Fund
Supplement Dated March 31, 2016 to Prospectus Dated February 28, 2016
Effective April 30, 2016 at 4:00 pm Eastern Time, the Diamond Hill Small-Mid Cap Fund (the “Fund”) will close to most new investors.
The Fund will remain open to additional investments under the following circumstances:
•Existing shareholders of the Fund may add to their accounts, including through reinvestment of distributions.
•Qualified defined contribution retirement plans, such as a 401(k), 403(b) or 457 plans, utilizing the Fund as an investment option on April 30, 2016 may continue to establish new participant accounts in the Fund for those Plans.
•Financial Advisors who have clients invested in the Fund as of April 30, 2016 may establish new positions in the Fund for new clients where operationally feasible.
•Investors may purchase the Fund through certain intermediary sponsored fee-based model programs, provided that the sponsor has received permission from Diamond Hill Funds that shares of the Fund may continue to be offered through the program. Approved or recommended lists are not considered model portfolios.
• Trustees, Directors, and employees of Diamond Hill Funds or Diamond Hill Investment Group, Inc. and their immediate family members may open new accounts and purchase shares of the Fund.
In general, the Fund will look to the financial intermediary to prevent a new account from being opened within an omnibus account at that intermediary. The Fund’s ability to monitor new accounts that are opened through omnibus accounts or other nominee accounts is limited and the ability to limit a new account to those that meet the above criteria with respect to financial intermediaries may vary depending upon the capabilities and cooperation of those intermediaries.
The Fund reserves the right to make additional exceptions or otherwise modify the foregoing closure policy at any time. The Fund also reserves the right to reject any purchase or refuse any exception, including those detailed above for any reason.
This Supplement and the Statutory Prospectus dated February 28, 2016, provide the information a prospective investor ought to know before investing and should be retained for future reference.

Who knows, the Baby Boomers drove stocks in the 80s and 90s as they were in the accumulation phase. Maybe they will drive bond funds of all sorts and varieties as they are in the retirement income stage.

Very interesting comment Junkster. Most financial pundits see bonds stagnant or losing money over the next 10 years. But your pondering statement makes sense.

Thanks TSP-Transfer One of PIMCO's TIPs funds is up almost 7% YTD. I have never held so many bond funds preferring to be 100% in either junk munis or junk corporates - whichever is working best. But now holding bond funds in emerging markets, junk corp, junk muni, and bank loan. Might have to look harder at a TIPS fund. Who knows, the Baby Boomers drove stocks in the 80s and 90s as they were in the accumulation phase. Maybe they will drive bond funds of all sorts and varieties as they are in the retirement income stage.

http://www.sec.gov/Archives/edgar/data/357298/000089843216002113/a485apos.htm
"N" class for existing investors.
Excerpt from filing:
Who Can Buy Class N Shares
Class N shares are offered without any sales charge to the following types of investors (see “Opening an Account”):
•Clients of financial intermediaries who: (i) charge such clients a fee for advisory, investment, consulting or similar services; or (ii) have entered into an agreement to offer Class N shares through a no-load program or investment platform.
•Investors who invest directly in a Portfolio.
•Shareholders who owned shares of any Portfolio prior to May 31, 2016 may continue to purchase Class N shares of any Portfolio.
•Retirement and other benefit plans.
•Endowment funds and foundations.
•Any state, county or city, or its instrumentality, department, authority or agency.
•Accounts registered to insurance companies, trust companies and bank trust departments.
•Any entity that is considered a corporation for tax purposes.
•Investment companies.
•Trustees, officers and other individuals who are affiliated with the Trust or the Investment Adviser.

@bee: I think such a federal retirement system for all who toil in the public sector would only be possible in a highly-centralized economy. I'm thinking of European countries in which the state is the employer of train drivers, school teachers, and functionaries. In France, for example, the public sector accounts for about 25% of the economy. Over here, we can't even get agreement on a national identity card let alone a single-payer health system. FWIIW, I'm a retiree from a public university with my retirement plans in TIAA-CREF.

http://www.sec.gov/Archives/edgar/data/791107/000093247116013031/ps82042013.htm
497 1 ps82042013.htm PARTIAL CLOSED SUPPLEMENT
Vanguard Convertible Securities Fund
Supplement to the Prospectus and the Summary Prospectus
Important Change to Vanguard Convertible Securities Fund
Vanguard Convertible Securities Fund is now open to new accounts for institutional clients who invest directly with Vanguard.
The Fund will remain closed to prospective financial advisory and intermediary clients (other than clients who invest through a Vanguard brokerage account) until further notice, and there is no specific time frame for when the Fund will reopen for new account registrations by these clients.
During the Fund’s closed period, current shareholders may continue to purchase, exchange, or redeem shares of the Fund online, by telephone, or by mail. Participants in certain qualified retirement plans may continue to invest in accordance with the terms of their plans.
The Fund may modify these transaction policies at any time and without prior notice to shareholders. You may call Vanguard for more detailed information about the Fund’s transaction policies. Participants in employer-sponsored plans may call Vanguard Participant Services at 800-523-1188. Investors in nonretirement accounts and IRAs may call Vanguard’s Investor Information Department at 800-662-7447. Institutional investors may call Vanguard’s Institutional Division at 888-809-8102 or may call their relationship managers directly.
© 2013 The Vanguard Group, Inc. All rights reserved.
Vanguard Marketing Corporation, Distributor. PS 82 042013

A somewhat separate comment:
I have often wonder why state, city workers and non-profit workers aren't offered the government's simple but successful Thrift Savings Plan (TSP) as their sole option, much like Federal workers. Instead, TIAA-CREF and more vulturous investment choices are the norm.
In retirement these "government" and "non-profit" retirees will have their pension and Social Security income offset by government regulations WEP and GPO (ssa.gov/planners/retire/wep). So, as a saver, why are they not eligible for these government investment choices during their working career?
If Federal law is gonna decide what I am eligible to keep in retirement shouldn't I have access to the Federal investment options while working?

Hi, msf.
I've been sort of grouchy with TIAA(-CREF) for a decade. I had a spat with their head P.R. guy about their justification for steadily rising e.r.'s and was not pleased when when of their board members explained some of their maneuvering as "an attempt to find alternate sources of profits" (a curious stand for a non-profit to take, I thought).
When I helped redesign Augustana's retirement plan, I discovered the multiple R-class issue. Each R-class was linked to a specific level of assets in the retirement plan; at base, the more money you gave TIAA(-CREF), the lower your e.r.'s. TIAA famously offers more hand-holding than most providers, so I could easily imagine significant expenses beyond the investment-management part but I don't know enough about their expense structure to say whether there's a neat correspondence between the breakpoints between the various share classes and the actual cost of operation.
Sorry that I couldn't be more definitive,
David

BenWP,
I use it only to check against other LC funds, do not own and did not know about its issues.
I also guess I did not adhere strictly to usual definitions of growth.
I am a large and longtime DSENX owner myself. I try without success to figure out why one set of these named holdings does differently from others, when it does. I should've included FLCEX also.
I look not just for growth but also decline damping. Over 2.5y (and shorter too) it is interesting to me that only NOBL and CAPE do as well as or better than DSENX, although OUSA sure looks like a winner thus far.
In retirement my long historical interest in the broadest diversifications (SC, EM) has become waaay diminished, and in REIT and foreign somewhat reduced as well.

Hi Guys,
The writer makes a case for portfolio diversification during retirement. I don’t object to that conclusion, but I do think that the method used to justify that conclusion was heavy-handed and a little deceitful. He also did not report on the tradeoff that exists with portfolio survival probability and likely median end wealth. These are easily estimated using Monte Carlo codes.
In arriving at his conclusion, the author honestly admits that he selected an especially poor time period for the equity marketplace (like since 2000). That’s an especially weak approach if general conclusions are the goal of the study. His conclusions would be far more convincing if he had done multiple simulations using data from several timeframes. Again, this is easily accomplished using a Monte Carlo tool like from the PortfolioVisualizer website.
I did precisely that. I ran a half dozen reasonable simulations in about 6 minutes.
To get a respectable number of portfolio failures, I assumed a slightly high initial 4.5% drawdown rate, both adjusted for inflation and not so. I made runs using the entire available market data sets and similar runs using only the data starting from the year 2000.
Not unexpectedly, more portfolio failures were predicted for a 100% US Equity portfolio over a 60/40 US Equity/Total Bond portfolio for the more recent 2000 starting point. In a sense, the chosen data timeframe preordained the outcome.
Using the full market data sets, portfolio survival estimates were 80% for the all Equity portfolio and 87% for the 60/40 Mixed portfolio. Using market returns data starting in 2000, portfolio survival rates dropped to 50% and 67% for the all Equity and the Mixed portfolios, respectively.
What the author failed to report is that the end wealth for the surviving all Equities portfolio was always much higher than that for the Mixed portfolio. The differences were substantial. Therein rests the usual tradeoff: More risk; higher rewards.
I did a perturbation case that demonstrated portfolio survival odds would increase substantially if inflation drawdown increases were not needed,
The referenced piece would have been far more complete and more compelling if a simple analysis of the type I just described had been performed. The work required approaches zero. I’m astonished that many folks, including professionals, do not take advantage of this powerful tool when doing investment studies or making investment decisions.
As the writer said: “Sizable bond allocation cushions market volatility”. But there is a price for that cushion.
Best Wishes.

FYI: Stocks have outperformed other investments over almost all 30-year rolling periods. If you’ve got the time and the stomach, nothing else belongs in your portfolio.
Regards,
Ted
http://www.marketwatch.com/story/why-a-100-stock-portfolio-can-ruin-your-retirement-2016-03-22/print

municipalbonds.com
Can You Be Too Safe With Muni Bonds?
Most investors are aware that they can risk too much, but few realize that playing it too safe also has its own set of risks. By taking on less risk, an investor may compromise their ability to achieve their target performance goal, such as a retirement goal, for their portfolio.
Municipal bonds are widely regarded as a safe-haven asset class since government backing provides better credit ratings than most corporate bonds. Exemptions from federal, state, and local income taxes further create a higher after-tax yield than comparable private-sector bonds. These attributes have helped muni bonds perform extremely well over the past couple of years as investors sought out safe-haven asset classes amid the drop in equity prices.
Muni Bonds vs. S&P 500 Figure 1 – Muni Bond v. S&P 500 Returns in 2015 – Source: StockCharts.com
Below, MunicipalBonds.com takes a look at a few common ways investors may be playing it too safe with muni bonds and some key changes they may want to consider.
Overallocating Muni Bonds
The first mistake that investors often make is overallocating their portfolio to municipal bonds during troubled times in order to reduce their risk.
A number of research studies have shown that investors sacrifice between 1.2% and 4.3% of their returns due to attempts at market timing – also known as the behavior gap. According to Betterment’s analysis, investors trying to time the market over 20 years risk losing out on $117,700 in aggregate value for every $100,000 invested over the time period. This calculation was made using one of the more conservative estimates of 1.56%.
Betterment Estimated Growth Figure 2 – Estimated Cost of Timing the Market – Source: Betterment
Investors may be tempted to overallocate their portfolio to muni bonds during an economic downturn, but doing so could cost them money over the long run. Often times, it’s a much better idea to keep a steady allocation that is set up to meet a target goal over time rather than trying to time the market and avoid losses. Research suggests that few people are able to do the latter successfully over the long term.
Short-Duration Mistakes
The second mistake that investors often make is focusing on short-duration municipal bonds during troubled times in order to reduce their risk.
Duration is an important measure of risk when it comes to all types of bonds, including muni bonds. It’s a measures of how long, in years, it takes for the price of a bond to be repaid by internal cash flows. Bonds with longer durations carry greater risk and experience more price volatility than bonds with shorter durations. After all, longer durations mean that bondholders are tied to the bond’s interest rate over a longer period of time.
Interest Rate Effect on Bonds Figure 3 – Impact of Interest Rate Changes Based on Duration – Source: Blackrock
The problem with moving into short-duration as a safer investment than longer-duration muni bonds is that there’s an increased reinvestment risk. In other words, an investor may not be able to reinvest the proceeds of a short-term bond into a comparable bond when it matures. Longer-duration muni bonds have lower reinvestment risk because there’s a longer period of time before the bond matures and the interest rate differential may be minimal.
The Bottom Line
Most investors are aware that their portfolio can be too risky, but playing it safe has its own costs. Often times, investors purchase short-duration municipal bonds as a safe-haven asset. Market timing has a long-term cost known as the behavior gap, while short-duration bonds may pose a reinvestment risk. Investors should carefully consider these risks when evaluating muni bonds – especially during an economic downturn.

Yes David. I sometimes wonder how much better off I'd be had I just given all of my retirement savings to Mr. Danoff and Mr. Tillinghast and stepped away. Too painful to consider.

@Junkster

But I also have that covered as my long time lady friend is my neighbor.

So your not against the idea borrowing (a cup a sugar) in retirement. ;)
I have often wondered how spending habits change in retirement. Interesting how RMD will be your largest expense.
M* has a discussion on what to do with RMD:
morningstar.com/cover/videocenter.aspx?id=671306
One reader comment (end of article) I found educational:
"Unlike Roth IRAs, Roth 401k accounts DO have RMDs. They aren't taxed, of course, but you must deal with those distributions."

I have been a bit obsessed recently with retirement - which means less trading. I have given deferred annuities a close look including the newer QLAC's. As much as I try though, I just can't get into them. For the most part you just get your principal paid back to you until the age at which the longevity tables say you are suppose to expire. They only seem to be of benefit to the insurance companies and those who live to a ripe old age.
When and if rates ever rise, I can see me putting as much as 25% of my nest egg in 5 year CDs to offset part of my living expenses (after allowing of course for any income from SS, CDs, etc.) My biggest expense in retirement will be the taxes paid on my RMD.
As for withdrawal rates. I look at my nest egg and then my estimated annual spending in retirement (and err on the very high side) It's not like I have some huge oversized nest egg. But I don't need Monte Carlo analysis to tell me that even if I were 100% in cash forever, that I better start spending more money now and enjoying life lest I die with too much of a nest egg.
In retirement it helps to be single, live in a very low cost living area of the country, be a frugalist, and be 100% debt free. I have those bases covered. Then again, it isn't fun to be alone in old age. But I also have that covered as my long time lady friend is my neighbor.

Debt is a drag on one's available resources.
If a newly minted retiree has had the discipline to pay off debt prior to retirement more power to them, but using your retirement nest egg to eliminate debt at the start of retirement seems counter intuitive to why these dollars where saved in the first place. If eliminating debt is a priority, keep working, stop saving for retirement and eliminate debt with working income, not your retirement nest egg.
A very wise retiree once told me that prior to retirement try to live on your retirement income...save the extra or use it to pay down debt. One quickly realizes if they are ready to consider living on retirement income. If not, no harm...no foul...keep working.
Also, I'm a big advocate of maintaining a monthly financial spreadsheet. Track everything and you will soon develop a picture that can be very helpful in decision making.