January 1, 2017

By David Snowball

Dear friends,

Welcome to the New Year.

If you think contemporary politics are crazy, ask yourself “why is January 1 the start of the year?” Ancient cultures tended to align their calendars with the rhythm of the natural world: solstices, equinoxes, the waxing and waning of the moon, planting seasons and harvests. January 1 aligns with, well, nothing.

Which was the point. The ancient Roman had two calendars running simultaneously. The joint rulers, called consuls, took office around January 1 after the week of solstice celebrations. That began “the consular year.” The religious calendar recognized spring as the beginning of the new year, so New Year’s Day fell in late March.  In an odd bit of anarchy, their calendar contained Continue reading →

“What Goes Around ……”

By Edward A. Studzinski

Democracy – “The substitution of election by the incompetent many for the appointment of the corrupt few.”

        George Bernard Shaw

So, another calendar year has gone by, and fund managers everywhere are dissecting their relative performance in comparison to some benchmark index. To put things into perspective for a real-world comparison (at least in terms of the performance numbers), the Admiral shares of the Vanguard S&P 500 Index Fund, which charges a five basis point fee, had a one-year Continue reading →

For fund managers, a lesson from a failed squatter toilet

By David Snowball

People are weird. They doggedly do things that are stupid and self-destructive. If you ask them “why?” the answer is often “because that’s what I’m comfortable doing.”

Investors are people.

Fund managers are people.

People are people.

People are weird.

Our story begins with smoldering dung. Nearly half of the world’s population cooks their food in stoves, often unvented, that burns solid fuel, often dung. In some parts of Africa it’s 98% while folks in Continue reading →

Whose Fund Is It, Anyway?

By Leigh Walzer

The Closed End Fund (CEF) industry, with $200 billion in assets, is dwarfed in size by the open-ended mutual fund industry.   CEFs generally get little attention in Mutual Fund Observer and sites like Bogleheads. Trapezoid monitors most of the closed-end fund universe for manager skill in relation to expense ratio, using the same methodology and database as for open-end mutual funds. (MFO readers are invited to register for a free no-obligation demo which covers several mutual fund sectors)

There are many closed end funds trading at discounts to Net Asset Value (NAV). The average fund trades today at a 7% discount. This is not as big as it was a year ago, but still above the historic average. Exhibit I shows the average closed fund discount for all US CEFs (based on equal weighting) We are aware of 100 CEFs trading at discounts of 12% or greater. Sometimes those discounts persist so long they become Continue reading →

Expect More of the Same in 2017

By Robert Cochran

 2016 was the year of surprises.  Conventional wisdom and expectations were mostly proven wrong.  Think about the following events. It was common knowledge that the Britain vote to leave the European Union would fail.  Common knowledge was wrong.  At the beginning of 2016, all major investment firms suggested loading up on European stocks and reducing domestic exposure.  They were proven wrong.  Many of the same firms recommended investing in large U.S. companies over small companies.  They were wrong. The polls and broadcast media told us the U.S. presidential election options were two: whether Clinton would win by a small amount or by a landslide.  The polls and media were totally wrong, and they are still blaming everything and everyone else but themselves. 

Economists, investment experts, and the media agreed that a Trump victory would mean a Continue reading →

No Load MFO Ratings

By Charles Boccadoro

We’ve eliminated load from our MFO Ratings methodology, following Morningstar’s lead, effective immediately on our premium site and starting with 4th quarter update on our main site. Previously annualized return calculations included any maximum front load specified in the prospectus, which is what an investor may pay when purchasing shares of a fund, expressed as percentage of the purchase amount.

Morningstar’s Director of Global ETF Research, Ben Johnson, was quoted recently that “fewer investors are paying commissions or sales charges, which is why we’re removing Continue reading →

great horned owl

Intrepid International Fund (ICMIX),(Liquidated), January 2017

By Dennis Baran

This fund has been liquidated.

Objective and strategy

The fund seeks long-term capital appreciation by investing in an international, all-cap portfolio. The fund is non-diversified and its primary focus is on developed markets. Its strategy is benchmark-agnostic, so its country, industry and sector weightings may differ substantially from those in its benchmark index or peer group. Its process capitalizes on market disruptions, fear, and volatility to generate bargains. The fund plans to hold between 15-50 different companies, may hold substantial cash and is typically hedges its currency exposure when cost effective.

The fund is intended for Continue reading →

old license plates on a wall

Funds in registration

By David Snowball

The SEC requires managers to submit plans for their new funds 75 days before they’re offered for sale to the public. This month finds 16 new funds in the pipeline. The most intriguing are the two Rondure funds, launched by a partnership between former Wasatch star manager Laura Geritz and the folks at Grandeur Peak. We wrote in December about the partnership. One of pure EM, the other global and both are positioned to hold stocks that are somewhat larger and more seasoned than we associate with Grandeur Peak. Artisan, which rarely launches a bad fund, has registered plans for its niche-est fund, Artisan Thematic, led by an experienced hedge fund guy. Continue reading →

old alarm clock

Manager changes

By Chip

Each month, dozens of funds undergo changes to their management teams; sometimes those changes are minor (one of 13 co-managers has stepped aside) and sometimes they fundamentally change a fund’s prospects (Rajiv Jain’s departure from Virtus EM Opportunities triggered billions in outflows).  Among this month’s three dozen changes is the baffling dismissal of two successful teams from BBH International Equity (BBHEX), the arrival of a co-manager for David Herro at Oakmark International (OAKIX) and the removal of the co-manager at two of Tom Marsico’s funds.

Because bond fund managers, traditionally, had made Continue reading →

Launch Alert: GQG Partners Emerging Markets Equity Fund GQGPX

By David Snowball

On December 28, 2016, GQG Partners LLC launched their Emerging Markets Equity Fund which will be managed by Rajiv Jain.

The fund pursues an eminently sensible strategy. They are looking for companies that they believe are “reasonably priced, and have strong fundamental business characteristics, sustainable earnings growth and the ability to outperform peers over a full market cycle and sustain the value of their securities in a market downturn, while [trying to] avoid investments in companies that it believes have low profit margins or unwarranted leverage, and companies that it believes are particularly cyclical, unpredictable or susceptible to rapid earnings declines.” That will tilt the portfolio toward Continue reading →

Launch Alert: Cognios Large Cap Value Fund (COGLX & COGVX)

By David Snowball

On October 3, 2016, Cognios Capital launched Cognios Large Cap Value Fund, which represents the “long” sleeve of its long-short flagship fund, Cognios Market Neutral Large Cap Fund (COGMX/COGIX). They launched the fund in response to requests from existing clients, mostly investment advisors, who wanted easy access to the long-only option. Cognios waited until mid-December to publicize the fund’s launch.

They target high-quality value stocks, rather than growth ones. They use a quantitative screen called ROTA/ROMEROTA (Return on Tangible Assets) is a way of identifying high-quality businesses. At base, it measures a Continue reading →


By David Snowball

PIMCO pays up

PIMCO has agreed to write to $19.8 million check to resolve a long-running enforcement action initiated by the SEC. The short version: PIMCO launched PIMCO Total Return ETF (BOND), one of the earliest actively-managed ETFs, in 2012. Early performance was eye-opening, since the ETF outperformed PIMCO’s $175 billion flagship Total Return Fund (PTTRX). It turns out that the outperformance was achieved by mispricing 43 of the fund’s 156 holdings and was supported by “other, misleading reasons” offered for the fund’s success.  PIMCO’s description speaks of “43 smaller-sized positions of non-agency mortgage-backed securities using third-party vendor prices, as well as PIMCO’s policies and procedures related to these matters.”

Jaffe on the move

Chuck Jaffe has announced his imminent Continue reading →

fountain pen writing a note

Briefly Noted

By David Snowball


Effective January 1, 2017, the management fee for AMG River Road Long-Short Fund (ARLSX, formerly ASTON/River Road Long-Short Fund) will be reduced from 1.10% to 0.85% . At the same time AMG River Road Select Value Fund (ARSMX, formerly ASTON/River Road Select Value Fund) drops from 0.9 to 0.75%. In both cases, the total e.r. then falls as well.

AQR Global (AQGNX) and International Equity Funds (AQINX) have reduced their expense ratios by 10 and 5 basis points, respectively.

Ariel has lowered fees on both International (AINTX) and Continue reading →