A surprising number of interesting funds have quietly entered the SEC’s new-fund pipeline. While we don’t cover passive ETFs or funds not available to the general public, even there there were interesting developments. DFA Emerging Markets Targeted Value Portfolio will target small and mid-cap EM value stocks, which is consistent with DFA’s research bent and validates the increasing interest in EM value. Impact Shares YWCA Women’s Empowerment ETF will target firms whose values align with the YWCA’s long-time public goals. Of more direct interest, Rajiv Jain of GQG Partners is launching a fund focusing on US equities, a long-time AllianzGI manager is adding an EM value fund to the mix, The Great Gabelli is seizing the helm of his 15th fund and a team from France is offering a direct challenge to the ideology of market-cap-weighted indexes.
American Beacon Continuous Capital Emerging Markets Value Fund
American Beacon Continuous Capital Emerging Markets Value Fund will seek long-term capital appreciation. The plan is to “apply a fundamental research philosophy and approach to identify companies that trade at attractive valuations and are of high quality.” They warn that this will be an actively traded, high turnover portfolio. The fund will be managed by Morley D. Campbell of Continuous Capital, LLC. Mr. Campbell managed $4 billion for Allianz NFJ, for whom he worked from 2008-18. He managed a number of funds in the AllianzGI NFJ family, including the four-star AllianzGI NFJ Emerging Markets Value Fund Class (AZMAX) which serves as the template for this fund. He’s convinced the SEC to allow him to include AZMAX’s record, but not its name, as “comparable fund performance” in his prospectus. That’s new to me. Its opening expense ratio for Investor class shares is 1.54%, and the minimum initial investment will be $2,500.
Argent Small Cap Fund
Argent Small Cap Fund will seek long-term capital appreciation. The plan is to build a 60-80 stock portfolio “emphasizing valuation and anticipating change to identify overlooked and underappreciated stocks in the small-cap universe.” By design, they hold both growth and value stocks. The fund is a conversion of a ten year old hedge fund; the hedge fund outperformed the Russell 2000 by about 150 bps a year though we have no measure of the fund’s volatility. The fund will be managed by John F. Meara and Eduardo Vigil who co-managed the predecessor fund. For now, only the Institutional share class will be offered though the prospectus also includes details on a retail share class. Its opening expense ratio has not been released, and the minimum initial investment for institutional shares will be $250,000.
Brown Advisory Latin American Fund
Brown Advisory Latin American Fund will seek capital growth by investing in a concentrated portfolio of high-quality Latin American growth companies. It will be an all-cap fund and will avoid firms with majority state ownership or which are dependent on selling commodities. The fund will be managed by Rupert Brandt and Peter Cawston. Its opening expense ratio for Investor shares is 1.56%, and the minimum initial investment will be $100.
First Trust Brookmont Dividend Equity
First Trust Brookmont Dividend Equity, an actively-managed ETF, seeks long-term total return. The plan is to use a top-down model and quant screens to identify stocks with attractive current yields, potential dividend growth and the opportunity for capital appreciation. The manager then applies non-quantitative screens (a/k/a research and judgment) to create a portfolio from them.The fund will be managed by a team from Brookmont Capital Management. Its opening expense ratio has not been disclosed.
First Trust Limited Duration Strategic Focus
First Trust Limited Duration Strategic Focus, an actively-managed ETF, seeks to generate current income. The plan is to build an ETF-of-ETFs using a discipline which “combines a bottom-up fundamental credit analysis with disciplined portfolio construction.” That seems admirable, if noncommittal. The fund will be managed by a team of seven from First Trust Advisors. Its opening expense ratio has not been disclosed.
FormulaFolios Flexible Income
FormulaFolios Flexible Income, an actively-managed ETF, seeks to provide “a strong, steady long-term total return relative to traditional US bond asset classes while maintaining a strong level of risk management.” The plan is to invest in other fixed income ETFs. The manager constructs the portfolio using two screens, one which tracks price momentum in fixed income sectors and one which measures the credit spreads between fixed income areas. Each screen determines the allocation of 50% of the portfolio. The fund will be managed by Jason Wenk, FormulaFolio’s founder and CIO, and Derek Prusa. Its opening expense ratio has not been disclosed.
FormulaFolios Sector Rotation
FormulaFolios Sector Rotation, an actively-managed ETF, seeks long-term total return. The plan is to use derivatives, or a combination of derivatives and direct investments, to implement a strategy that is 50% managed futures and 50% actively managed bond. The fund will be managed by Jason Wenk, FormulaFolio’s founder and CIO, and Derek Prusa. Its opening expense ratio has not been disclosed.
Gabelli Global Mini Mites Fund
Gabelli Global Mini Mites Fund will seek long-term capital appreciation. The plan is to focus on creating a global portfolio of micro-cap companies that appear to be underpriced relative to their “private market value.” This will be the 15th fund to be managed by The Gabelli, now 76 years of age. Its opening expense ratio for the no-load AAA shares is 1.25%, and the minimum initial investment will be $10,000.
GQG Partners US Select Quality Equity Fund
GQG Partners US Select Quality Equity Fund will seek long-term capital appreciation limiting downside risk through full market cycles. The plan is to create an all-cap growth portfolio which might include recent IPOs. They will target firms that have “strong fundamental business characteristics, sustainable and durable earnings growth and the ability to outperform peers over a full market cycle and sustain the value of their securities in a market downturn.” The fund will be managed by Rajiv Jain, Chairman and Chief Investment Officer of GQG Partners. Mr. Jain is most famous for the decade-long performance of the Vontobel Emerging Markets Opportunity portfolio that led all emerging markets funds during his tenure but, in reality, he was responsible for over $40 billion in equities across a wide array of countries and styles. Its opening expense ratio is 0.84%, and the minimum initial investment will be $2500.
JPMorgan Core Plus Bond
JPMorgan Core Plus Bond, an actively-managed ETF, seeks a high level of current income by investing primarily in a diversified portfolio of high-, medium- and low-grade debt securities. The prospectus contains the usual collection of dressed-up language: “The adviser allocates … among a range of sectors based on strategic positioning and other tactical considerations. The Fund’s allocations will be reviewed and rebalanced periodically, if appropriate. Individual portfolio managers will be responsible for day-to-day investment management decisions on the assets that are allocated to their respective sleeves; provided, however, the remaining credit of the portfolio, excluding distressed debt, will be managed across the ratings continuum. In buying and selling investments for the Fund, the adviser looks for market sectors and individual securities that it believes will perform well over time. The adviser selects individual securities after performing a risk/reward analysis that includes an evaluation of interest rate risk, credit risk, currency risk, legal provisions and the structure of the transactions.” The fund will be managed by a three person JPMorgan team led by Steven Lear, the CIO for macro strategies within JP Morgan’s global fixed income group. Its opening expense ratio has not been disclosed.
iM Dolan McEniry Corporate Bond Fund
iM Dolan McEniry Corporate Bond Fund will seek total return, with a secondary investment objective of preserving capital. The plan is to invest 75% of the portfolio in investment grade corporate bonds and 25% in high-yield corporates, including foreign corporates. The adviser does reserve the right to retreat into high grade, short term debt if the market goes south. The fund will be managed by a team led by, well, Dolan and McEniry. Its opening expense ratio for Advisor shares is 1.05%, and the minimum initial investment will be $2,000.
KBI Global Investors Water Fund
KBI Global Investors Water Fund will seek long-term total return. The plan is to build a global portfolio of 35-50 ESG-screened water stocks. The portfolio will be non-diversified and conviction weighted, with the most promising stocks receiving disproportionate weightings in the portfolio. The fund will be managed by a four person team from KBI Global Investors (North America). Its opening expense ratio is 1.35%, and the minimum initial investment for Investor shares will be $10,000.
PGIM QMA Strategic Alpha Large-Cap Core
PGIM QMA Strategic Alpha Large-Cap Core, an actively-managed ETF, seeks long-term growth of capital. The plan is to beat the S&P 500 by employing QMA’s “proprietary multi-factor quantitatively driven investment process for the Fund. The stock selection process utilizes systematic tools that evaluate stocks based on various signals, such as value, quality and volatility, to differentiate between attractive and unattractive stocks, subject to risk constraints. The investment management team exercises judgment when evaluating underlying data and positions recommended by its quantitative tools.” The fund will be managed by Stephen Courtney and Edward Lithgow from Quantitative Management Associates LLC. Its opening expense ratio has not been released.
The same prospectus details the simultaneous launch of small cap, small value and international versions of the ETF.
Touchstone Anti-Benchmark US Core Equity Fund
Touchstone Anti-Benchmark US Core Equity Fund will seek capital appreciation. The plan is to invest in 70-100 US stocks in their proprietary anti-benchmark index. This is an entirely quant process designed to maximize the portfolio’s diversification, a goal which market cap weighted indexes fail to achieve. The advisor estimates that they can add 3-5% to returns while reducing volatility by 20-30% with reference to a standard, market cap weighted index. Here’s their explanation of the process. The fund will be managed by a five person team of quants from TOBAM S.A.S., an SEC-registered investment adviser, located on Avenue des Champs Elysées, Paris. TOBAM manages about $10 billion in assets. Its opening expense ratio for no-load “Y” shares is 0.54%, after waivers, and the minimum initial investment will be $2500, reduced to $1000 for tax-advantaged accounts and $100 for those set up with an automatic investing plan.
Touchstone Anti-Benchmark International Core Equity Fund
Touchstone Anti-Benchmark International Core Equity Fund will seek capital appreciation. The plan is to invest in 100-150 international stocks in their proprietary anti-benchmark index. This is an entirely quant process designed to maximize the portfolio’s diversification, a goal which market cap weighted indexes fail to achieve. The advisor estimates that they can add 3-5% to returns while reducing volatility by 20-30% with reference to a standard, market cap weighted index. The fund will be managed by a five person team of quants from TOBAM S.A.S., an SEC-registered investment adviser, located on Avenue des Champs Elysées, Paris. TOBAM manages about $10 billion in assets. Its opening expense ratio for no-load “Y” shares is 0.69%, after waivers, and the minimum initial investment will be $2500, reduced to $1000 for tax-advantaged accounts and $100 for those set up with an automatic investing plan.
