Yearly Archives: 2017

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 relatively modest impacts of their funds’ absolute returns, Manager Changes typically highlights changes in equity and hybrid funds.

Ticker Fund Out with the old In with the new Dt
NRFAX AEW Real Estate Fund   No one, but … Gina Szymanski will join the portfolio management team of Matthew Troxell, J. Hall Jones and John Garofalo. 12/16
AGCAX Arbitrage Credit Opportunities Fund James Powers will no longer serve as a portfolio manager to the fund. Gregory Loprete and Robert Ryon will continue to manage the fund. 12/16
BEQRX Balter L/S Small Cap Equity Fund Apis Capital Advisors will no longer serve as a subadvisor to the fund. The fund’s assets will be managed by the adviser or the remaining subadvisors. 12/16
BBHEX BBH International Equity Fund Walter Scott & Partners Limited and Mondrian Investment Partners Limited will no longer serve as subadvisors to the fund. Odd decision with such a strong fund and long-tenured team. Select Equity Group will subadvise the fund. 12/16
CLPAX Catalyst Exceed Defined Risk Fund, formerly Catalyst/Lyons Hedged Premium Return Fund In lieu of the planned liquidation, the fund instead undergoes a change in name, objective, and management team. Lyons Wealth Management, LLC will no longer serve as subadvisor of the fund. Alexander Read, Matthew Ferratusco and Brandon Burns will no longer be portfolio managers of the fund. Joseph Halpern joins Michael Schoonover in managing the fund. 12/16
DGDAX Dreyfus Global Dynamic Bond Fund Jonathan Day is no longer listed as a portfolio manager for the fund. Parmeshwar Chadha joins Howard Cunningham and Paul Brain in managing the fund. 12/16
GPGAX Dreyfus GNMA Fund Robert Bayston is no longer managing the fund. Eric Seasholtz and Karen Gemmett have taken over management of the fund. 12/16
FSRBX Fidelity Select Banking Portfolio No one, but … Matt Reed joins John Sheehy in managing the fund. 12/16
FSCHX Fidelity Select Chemicals Portfolio Mahmoud Sharaf no longer manages the fund Richard Malnight now manages the fund. 12/16
FSHOX Fidelity Select Housing Portfolio Holger Boerner is no longer listed as a portfolio manager for the fund. Neil Nabar will manage the fund. 12/16
FWRLX Fidelity Select Wireless Portfolio Kyle Weaver no longer manages the fund Matthew Drukker and Harlan Carere co-manage the fund. 12/16
FMSVX FMC Strategic Value Fund Edward Lefferman will cease serving as a co-portfolio manager of the fund after 18 years.  A strange fund, blinding performance for years but they refused to apply for a ticker symbol. Paul Patrick will continue to manage the fund. 12/16
ITHAX Hartford Capital Appreciation Effective immediately, David Palmer, W. Michael Reckmeyer, III and Peter Higgins will no longer serve as additional portfolio managers to the fund. Greg Pool and Tom Simon will serve as additional portfolio managers. 12/16
HGAAX Henderson All Asset Fund Effective January 31, 2017, Chris Paine will no longer serve as a portfolio manager of the fund. Paul O’Connor will continue to serve. 12/16
KGSCX Kalmar “Growth-with-Value” Small Cap Fund No one, but … James Gowen joins Ford Draper and Dana Walker in managing the fund. 12/16
SWOSX Laudus Small-Cap MarketMasters Fund No one, but … Voya Investment Management is added as a new investment manager with Joseph Basset and James Hasso added to the management team. 12/16
MFOCX Marsico Focus Fund Coralie Witter is no longer a portfolio manager for the fund. Thomas Marsico will continue as the sole manager of the fund. 12/16
MGRIX Marsico Growth Fund Coralie Witter is no longer a portfolio manager for the fund. Thomas Marsico will continue as the sole manager of the fund. 12/16
TMFEX Motley Fool Epic Voyage Fund William Mann, III is leaving Motley Fool Asset Management to join The Motley Fool, LLC The rest of the team remains with Bryan Hinmon stepping up to Chief Investment Officer and Senior Portfolio Manager roles. 12/16
TMFGX Motley Fool Great America Fund William Mann, III is leaving Motley Fool Asset Management to join The Motley Fool, LLC The rest of the team remains with Bryan Hinmon stepping up to Chief Investment Officer and Senior Portfolio Manager roles. 12/16
FOOLX Motley Fool Independence Fund William Mann, III is leaving Motley Fool Asset Management to join The Motley Fool, LLC The rest of the team remains with Bryan Hinmon stepping up to Chief Investment Officer and Senior Portfolio Manager roles. 12/16
NOIAX Natixis Oakmark International Fund No one, but … Michael Manelli joins David Herro in managing the fund 12/16
NTBAX Navigator Tactical Fixed Income No one, but … Jonathan Fiebach joins Robert Bennett, Mason Wev, David Rights and K. Sean Clark in managing the fund. 12/16
NMFIX Northern Multi-Manager Global Listed Infrastructure Fund Brookfield Asset Management is no longer listed as an advisor to the fund. Maple-Brown Abbott Limited will subadvise a portion of the fund. 12/16
OAKIX Oakmark International Fund No one, but … Michael Manelli joins David Herro in managing the fund 12/16
OARDX Oppenheimer Rising Dividends Fund No one, but … Josh Peters joins Manind Govil in managing the fund. 12/16
PECZX PIMCO Emerging Markets Corporate Bond Said Saffari is no longer managing the fund. The fund is jointly managed by Kofi Bentsi, Mohit Mittal, Yacov Arnopolin and Luke Spajic 12/16
PECZX PIMCO Emerging Markets Corporate Bond Fund Said Saffari is no longer managing the fund. Kofi Bentsi, Mohit Mittal, Yacov Arnopolin and Luke Spajic will manage the fund. 12/16
PGMMX Principal Multi-Manager Equity Long/Short Fund Columbus Circle Investors is no longer an advisor to the fund. There’s no change listed to the management team. Not sure what’s up. 12/16
PPGAX Putnam Global Sector Fund The following are no longer managing the fund: Walter Scully, Ferat Ongoren, David Morgan, Vivek Gandhi, Kelsey Chen, Jacquelyne Cavenaugh, Christopher Eitzmann, Greg Kelly, Sheba Alexander, Isabel Buccellati, Di Yao, Neil Desai, Ryan Kauppila, Daniel Schiff and Michael Maguire. Kathryn Lakin joins Samuel Cox and Aaron Cooper on the management team. 12/16
LQISX QS Global Market Neutral Fund Austin Kairnes is no longer listed as a manager for the fund. Jacqueline Hurley joins Russell Shtern, Stephen Lanzendorf and Joseph Giroux on the management team. 12/16
LMISX QS U.S. Large Cap Equity Fund Austin Kairnes is no longer listed as a manager for the fund. Jacqueline Hurley and Russell Shtern join Stephen Lanzendorf on the management team. 12/16
SANAX Sandalwood Opportunity Fund Shelton Capital Management is no longer a subadvisor to the fund. The management will be handled by the fund’s other subadvisors. 12/16
SHAAX Schooner Hedged Alternative Income Fund Morgan Avitabile will no longer manage the fund. Anthony Fusco and Gregory Levinson will continue to manage the fund. 12/16
SCORX Sextant Core Fund Bryce Fegley and long-time manager Peter Nielsen will no longer manage this small disappointing fund Phelps McIlvaine and Christopher Paul were added in December to co-manage the fund. 12/16
TGLDX The Tocqueville Gold Fund No one, but … Ryan McIntyre joins John Hathaway and Douglas Groh in managing the fund. 12/16
IMUAX Transamerica Multi-Manager Alternative Strategies Portfolio Prat Patel is no longer listed as a portfolio manager for the fund. Timothy Galbraith is joined by Rishi Goel and James Schaeffer. 12/16

 

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 high quality growth stocks.

Without question, the fund’s primary draw is Mr. Jain. Mr. Jain is GQG’s Chairman and CIO and he’s the fund’s sole portfolio manager. Before that, he was Co-CEO, CIO and Head of Equities at Vontobel Asset Management, an arm of a major Swiss bank. He joined Vontobel in 1994 as an analyst and rose to become the manager or co-manager for 17 funds available to American or European investors. By far the most famous of them is Virtus Emerging Markets Opportunities Fund (HEMZX) which he managed from 2006-2016. Over the five years prior to Mr. Jain’s departure, HEMZX outperformed 99% of its peers (per Bloomberg) and grew to $9.4 billion. The fund was particularly adept at minimizing the damage caused by major market declines, though that same discipline caused it to lag when markets got frothy. When word of Mr. Jain’s departure was released, Vontobel’s stock dropped 11%. Morningstar downgraded HEMZX from Silver to Bronze and the fund saw billions in outflows by year’s end. That seems to substantiate the judgment by Axel Schwarzer, the head of Vontobel, that Mr. Jain was “the bedrock for the firm’s success over the past 22 years.”

Ultimately, Mr. Jain was responsible for managing $48 billion in assets. We know that he was concerned by the ballooning size of his fund and managed to close other avenues into the strategy, though the fund remained open. His discussion of GQG’s principles, which focus on aligning the advisor’s interests with the investors’, raise the prospect that he was not uniformly delighted with the bank’s business decisions.

GQG is contractually waiving fees and reimbursing expenses to keep Investor Class expense ratio from exceeding 1.33%, and the Institutional and Retirement classes from exceeding 1.08%, through November, 2018. 

The fund offers three share classes; the Investor Class (GQGPX) has a $2,500 minimum initial investment, the Institutional Class (GQGIX) has a $500,000 minimum and the R6 Retirement Class (GQGRX) has no minimum.

The fund’s website is http://gqgpartners.com/products/us-mutual-funds/; there’s a three minute introductory video from Mr. Jain and his partners that’s really worth listening to.

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/ROME. ROTA (Return on Tangible Assets) is a way of identifying high-quality businesses. At base, it measures a sort of capital efficiency: a company that generates $300 million in returns on a $1 billion in assets is doing better than a company that generates $150 million in returns on those same assets. Cognios research shows ROTA to be a stable identifier of high quality firms; that is, firms that use capital well in one period tend to continue doing so in the future. As Mr. Buffett has said, “A good business is one that earns high return on tangible assets. That’s pretty simple. The very best businesses are the ones that earn a high return on tangible assets and grow.” ROMA (Return on Market Value of Equity) is a valuation screen that divides a company’s profits by its current stock price to calculate a “profit yield.” It looks a lot like the inverse of the stock’s p/e, so that a high profit yield signals a low valuation for the stock .The combined quality and value screens skew the portfolio toward value.

In general and over time, the strategy works. The Market Neutral fund, which incorporates the large cap value strategy, has earned five stars from Morningstar and its returns since inception (through December 30, 2016) have more than tripled those of its market-neutral peers. Close observers will note that Market Neutral posted a small loss for 2016, which was largely attributable to losses in the fund’s short book. And, too, the market seemed intent on rewarding bad companies. Mr. Angrist commented in November that

… the worst quality businesses …that were trading at the highest prices and have the highest amount of debt significantly outperformed companies that have much better business models that are trading at cheaper prices and have far less debt. Over time we make money by the market doing just the opposite, essentially, and this is one of those unusual periods of time when the market rewarded essentially everything that we were short and penalized everything that we were long.

And, indeed, over time the strategy has made money. The Large Cap Value separate account composite has returned 18.13% annually over the past five years, far ahead of the Russell 1000 Value’s 16.15%.

The fund is managed by a team led by Jonathan Angrist, Cognios’ president and chief investment officer, supported by Brian Machtley and Francisco Bido. The team also manages the Market Neutral Fund and all three managers have substantial personal investment in the fund. In addition the new funds received $40 million in seed capital from Cognios.

Investor shares of the Value Fund carry 1.10% expense ratio, after waivers. Institutional shares are 25 basis points lower.

The Value Fund offers two share classes; the Investor Class (COGLX) has a $1,000 minimum initial investment and the Institutional Class (COGVX) has a $100,000 mininum. At the same time they launched Cognios Large Cap Growth Fund (COGGX/COGEX) which parallels a successful strategy which had been offered only through separate accounts. Over the past five years, Cognios LCG has outperformed the Russell 1000 Growth by 359 basis points a year.

The fund’s website is http://www.cogniosfunds.com/; you might be tempted to visit the advisor’s own site, but the information on the two sites is largely the same.

Updates

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 departure from MarketWatch. He wrote last week that “I will be leaving MarketWatch at some point in January, although I expect the site to continue originating my column for the foreseeable future. It’s all about the state of journalism and Dow Jones … but it is also a good time for me to consider my options. My radio show (MoneyLife with Chuck Jaffe) will continue.”

Chuck is assuredly the most widely-read mutual fund reporter left standing. His departure is part of the larger unwinding of professional journalism triggered by the moronic insistence that people should receive their news for free, as if serious reporting simply appeared, without cost or effort. In consequence, paid readership is down and advertising revenue is down, so news organizations go into a period of managed decline. MarketWatch had already laid off all of their other senior correspondents and the Wall Street Journal, the most prestigious Dow-Jones brand, “as part of the cost cutting, offered all of its news employees the option to take a buyout.”

Every journalist at the country’s premier financial publication was deemed expendable.

We’ll follow Chuck as best we can!

Morningstar on the move

For those who missed the announcement, the 2017 Morningstar Investment Conference has been forced to surrender its traditional June date. The conference remains at the vast McCormick Place but will now take place Wednesday, April 26 through Friday, April 28. The explanation from one of the folks at Morningstar was “we’re a big conference by mutual fund industry standards, but we’re simply not big enough to command premier dates and premium space at the McCormick Place.”

We’ll try to be there for you.

Briefly Noted

By David Snowball

SMALL WINS FOR INVESTORS

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 Global (AGLOX) by 12 bps. The new e.r. for each is 1.13% on Investor shares and 0.88% on Institutional ones.

Effective February 24, 2017, BBH International Equity Fund (BBHEX) will eliminate its “N” class shares but lower the investment minimum for “I” class (BBHLX) down to $10,000 from $5 million. It will also lower the expense ratio for BBHLX from 0.89% to 0.70%. That’s all to the good. At the same time, though, BBH boots Walter Scott & Partners of Edinburgh after a successful 12 year run managing the fund and Mondrian Investment Partners after five years. They’re succeeded by Select Equity Group. No word on why, though the 20% reduction in their compensation might have contributed to it.

BNY Mellon Municipal Opportunities Fund (MOTIX) reopened to new investors on December 15, 2016.

Matthews Asia reduced the institutional share class minimums on all its funds from $3,000,000 to $100,000 on December 30, 2016.

CLOSINGS (and related inconveniences)

Balter Event-Driven (BEVRX) has closed to all investors. Technically, the Board “approved the indefinite suspension of all sales of Fund shares.” It’s a former hedge fund that hasn’t exactly caught fire since conversion to a ’40 Act fund, which suggests that this closure might be the fund’s first step into the darkness.

Effective at the close of business on January 27, 2017 Janus Enterprise Fund will close to new investors. The fund has more than doubled in size in a year, from $5 billion to $10 billion. The underlying strategy now holds more than $13 billion. Only two of 192 mid-cap growth funds are larger than Enterprise. I would be cautious about approaching it since it’s rare for funds that have closed after ballooning to thrive. That said, there is some reason for a final look. First, it has been a splendid midcap fund. With the exception of the 2000-2002 bear market, it has matched or outperformed its mid-cap growth peers. It has an experienced manager and a very low turnover strategy. Second, the two larger mid-cap growth funds, T. Rowe Price Mid Cap Growth (RPMGX) and Principal Midcap (PEMGX), are themselves excellent vehicles. Both are closed and both have continued doing well since closure. Closing a few billion ago would have been a nice touch. Contrarily, telegraphing the closure a month or more in advance is an open invitation for a final surge of performance chasers. Be cautious.

OLD WINE, NEW BOTTLES

Effective on or about February 15, 2017, BlackRock Disciplined Small Cap Core Fund (BDSAX) will be renamed BlackRock Advantage Small Cap Core Fund.

Good news for fans of Catalyst/Lyons Hedged Premium Return Fund (CLPAX): the fund was not liquidated on December 28, 2016. Woohoo! Instead, it rebooted as Catalyst Exceed Defined Risk Fund with the objective of pursuing capital appreciation and preserving of capital.

Good Harbor Tactical Equity Income Fund (GHTAX) is changing its name to the Leland Real Asset Opportunities Fund. No explanation for the “Leland” part since no one seems to be coming or going. My best guess is that it’s a change-of-distribution arrangement, since some of the other Good Harbor funds already trade under the Leland name.

Horizon Dynamic Dividend Fund (HNDDX) has become the Horizon Active Dividend Fund. The name change took place on December 28, the day the fund (now with almost $50,000 in assets) launched.

On February 28, 2017, MainStay Global High Income Fund (MGHAX) becomes MainStay Emerging Markets Debt fund with the predictable changes to its investment strategy. On the same day, MainStay Emerging Markets Opportunities Fund (MEOAX) will become MainStay Emerging Markets Equity Fund.

Pending shareholder approval, late in the first quarter of 2017, Mar Vista Strategic Growth Fund (MVSGX) will become Harbor Strategic Growth Fund.  

On January 1, 2017, the T. Rowe Price International Growth & Income Fund (TRIGX) will change its name to the T. Rowe Price International Value Equity Fund.

At the end of December 2017, three Westcore funds were renamed. Westcore Growth Fund (WTMGX) became Westcore Large-Cap Dividend Fund, MIDCO Growth (WTEIX) became Mid Cap Value Dividend and Select (WTSLX) became Small Cap Growth Fund II.

OFF TO THE DUSTBIN OF HISTORY

The $3 million AllianzGI China Equity Fund (ALQAX) will liquidate on January 30, 2017. By design or not, the fund has been wildly volatile, even by the standards of China funds, which means that its modestly above-average returns have not won it many fans.

AMG Managers Anchor Capital Enhanced Equity Fund (AMBEX, formerly ASTON/Anchor Capital Enhanced Equity Fund) will pass into The Great Beyond on January 31, 2017.

American Independence Navellier Defensive Alpha Fund (IFCSX), a RiskX fund, will liquidate on January 31, 2017. Mr. Navellier was appointed co-manager in May 2016, presumably in a last-ditch attempt to salvage the long-time laggard. Things got marginally better (it went from a major laggard to a minor laggard) but not good, so it’s gone.

The folks behind ASG Global Macro Fund helpfully reported in December 27, 2016, that “The Fund no longer exists, and as a result, shares of the Fund are no longer available for purchase or exchange.”

Brown Advisory Value Equity Fund (BIAVX) merged into Brown Advisory Flexible Equity Fund on December 2, 2016.

Catalyst Hedged Insider Buying Fund (STVAX) merged into Catalyst Insider Long/Short Fund (CIAAX) on December 28, 2016. It’s not automatically a good sign when your fund is seen as less attractive than a volatile, $3 million, one-star fund.

Champlain Focused Large Cap Value Fund (CIPYX) will liquidate on January 27, 2017, shortly after its third anniversary.

Given “the unlikelihood that the Fund would experience any meaningful growth in the near future,” the $10 million FundX Flexible Total Return Fund (TOTLX) will liquidate on January 6, 2017. “Unlikelihood”? Who writes “unlikelihood”? Regardless, or “irregardless” if I’m following their lead, it might be that the unlikelihood was raised by the combination of an undistinguished strategy, high expenses and mediocre returns.

Hennessy Core Bond Fund (HCBFX), which has been consistently weak and expensive for the past decade, will liquidate on or about Friday, February 17, 2017.

Kimberlite Floating Rate Financial Services Capital Fund (CEFFX) liquidated on December 16. 2016.

Hancock Horizon Value Fund (HHGAX) will merge into Federated MDT Stock Trust (FSTRX) at the beginning of February. Likewise, Hancock Horizon Core Bond Fund (HHBAX) is slated to merge into Federated Total Return Bond Fund (TLRAX). That’s a clear win for existing HHGAX shareholders but less so for HHBAX where the expense reduction is smaller and the performance of the acquiring fund is less distinguished.

MassMutual Select Diversified International Fund (MMAAX) will be dissolved on or about April 28, 2017.

MFS Institutional Large Cap Value Fund has been liquidated. They shared a reminder rather after the event.

Mirae Asset Asia (MALAX) and Emerging Markets (MALGX) funds will liquidate on February 28, 2017. Both are solid performers that haven’t found a market niche.

PNC High Yield Bond Fund (PAHBX) will liquidate on January 31, 2017.

RX Tactical Rotation Fund (RXTAX) took its last spin on December 30, 2016. The advisor pulled the plug after 17 months of operation.

The flagship Schooner Fund (SCNAX) liquidated on December 30, 2016. The same team continues to manage Schooner Hedged Alternative Income (SHAAX).

On March 24, 2017, Victory CEMP Commodity Enhanced Volatility-Weighted Index Strategy Fund (CCNAX) will merge into Victory CEMP Commodity Volatility-Weighted Index Strategy Fund (CCOAX).

Thanks, as ever, to The Shadow for his yeoman’s work in reviewing SEC filings daily.