Monthly Archives: October 2018

October 1, 2018

By David Snowball

Dear friends,

Welcome to autumn! The leaves are only hinting at the changes to come and my tomatoes tenaciously insist that it’s still August and they’re still going to ripen. But the 40 degree nights and yesterday’s pictures from Montana give lie to their obstinate optimism.

blizzard on the highway

My optimism is fed by other springs: by the ripening of apples and the prospect of a long lovely drive up the Mississippi, by the chance this week to see my son at college and to celebrate his new friends. By the excuse to unpack the warm and bulky sweaters that have warmed me through, in a couple cases, nearly 30 winters … along with the plaid flannel shirts that my family rolls their eyes at. We’ll can some tomatoes and a bit of homemade apple sauce and, quite likely, invite my first-year students – from Vietnam and Pakistan, Nepal and Sweden, the UK and the PRC – over for homemade bread and soup, bits of pie and the chance to spend an evening away from campus. It is fed, finally, by the hope that the chaos of summer resolves into the quiet, predictable rhythms of fall.

We’ll see.

Those looking for a reason to renew their sense of the decency and extraordinary good of everyday folks might enjoy Charles’s essay this month, about the 110 members of the Alpha Architect team who participated in The March for The Fallen event. It offers, Charles notes, “proof positive that there is more to this group of money managers and financial advisors than their stereotypes hyping products, gathering assets, and pocketing high fees.” It’s a good tale.

This is our second issue of the Observer in two weeks, following the mid-month launch of our September issue. We know that many folks will have missed it. There was much cool stuff there, still timely. Dennis profiled the Conestoga SMID Cap Fund (CCSMX) while Charles shared a Launch Alert for a very promising Litman Gregory Masters High Income Alternatives Fund. I spent rather a lot of time with the managers of Seafarer Overseas Growth & Income, working to understand the recently unveiled changes in management team and portfolio strategy. Ed, as ever, stepped back from the day-to-day fray to take a longer look at the consequences of Amazon’s rise and the prospects of its fall. It was, on whole, a good collection and we commend it to you.

For folks who wondered what was up with the September issue and couldn’t find out, we urge you to confirm signing up for the MFO monthly email notification. About 7,000 of our 27,000 or so readers receive a monthly notice of the new issue’s launch and its highlights. We’ve also used that list to give folks a heads up in the rare occasions that we’ve had to delay release of an issue or we’ve offered folks the opportunity to participate in a conference call with an exceptional fund manager. We don’t share your email and we don’t send more than one email each month, except in extraordinary circumstances. Your choice. You can either click on the link above or complete the form at the bottom of MFO’s homepage.

Thanks, as ever, to our steady subscribers, Deborah and Greg, and to our newest monthly contributor, David, your faith in us is greatly appreciated. It’s easy to set up a regular, monthly contribution through our PayPal link. If you set a recurring contribution of $10 or more a month, it would (a) be ridiculously painless for you; (b) wonderfully helpful for us; and (c) earn you both a tax deduction and access to MFO Premium. Many thanks, too, to John, Paul, Mitchell, Marva, and Steve; we couldn’t do it without your help.

With luck, November will see us back on our normal rotation. (I say that just to hear God laugh at me.) We’ll do our best. You likewise!

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Consequences – Unintended or Not?

By Edward A. Studzinski

“The danger is not that a particular class is unfit to govern.  Every class is unfit to govern.”

          John Emerich Edward Dalberg Acton, aka Lord Acton, “Letter to Mary Gladstone” (24 April 1881)

The continued shrinking of liquidity has been a continued concern of mine.  We are at a point where the danger signals are again blinking, except the danger will come not from the direction anticipated.

Years ago, after the dot.com craze and then the Crash of 2008, one of my former colleagues had become quite focused on limiting the size of individual positions in his funds to those equities where the entire position could be exited in say, five days trading volume.  Note here that trades used to settle after five days as well.  The result was that the market capitalization of those issues that he held drifted steadily upwards to the point where his ownership was mostly of large cap or mega cap securities.  It is worth observing that the reputation of the firm had been made as small cap and mid cap value investors.  The reputation of the portfolio manager in question, as an analyst, had been made again in mid cap value investments.  But, the change was made to benefit and protect the firm’s investors, and it served its purpose during those periods.

Fast forward to today, where passive investing as well as exchange traded funds have taken dramatic market share from active investors.  As passive investors, the turnover in the portfolios is minimal.  Transactions take place to deal with withdrawals or with changes to the benchmark indices.  Now suppose the trend or shift to passive continues, and the number of active managers continues to shrink.  First go those with poorer results.  Then we proceed to eliminate the remainder in terms of quality of performance.  If this continues unabated, the active manager pool shrinks so that there is only one last active manager standing, in which case there is no one left to trade with.  Or perhaps there are two left, so they can trade with each other.  Liquidity of course becomes non-existent.  And then the performance of the active universe of managers as a whole becomes the average of the two, which will be nothing to write home about.  The only way out of this trap is for active managers to shift to multi asset class portfolios, AND, for cash to be introduced as an alternative asset. 

Jack Bogle famously warned, “If everybody indexed, the only word you could use is chaos, catastrophe,” because there would be no active managers to set the prices for stocks. An equally troubling question: who will buy when the markets fall and the indexes automatically sell? Where would the liquidity arise? ds

To the extent the above appears illogical, let me suggest this.  People have, especially at the direction of their advisors or consultants, placed a higher percentage of their equity investments in large cap, easily benchmarked investments.  Those portfolios are highly correlated to the germane index, and the argument is that they are highly liquid.  At the same time, uncorrelated small cap and micro cap portfolios are avoided as too risky because of their illiquidity.  My observation is this – those large cap, correlated portfolios are far more risky than they appear to be, because their true liquidity is much less than you might anticipate notwithstanding their reported market capitalization.  Rather, there is an increasing danger of an absence of bids for those issues in any major market panic or dislocation.  Consider this in your thoughts about portfolio asset allocation accordingly.

Nowhere to run to, nowhere to hide

By David Snowball

Good news: The US stock indexes are at, or quite near, all-time highs!

Bad news: The US stock indexes are at, or quite near, all-time highs.

Good news: the 3rd quarter of 2018 had the highest returns over any quarter in over five years!

Bad news: the 3rd quarter of 2018 had the highest returns over any quarter in over five years.

Good news: the advance in equities has left almost no one behind!

Bad news: the advance in equities has left almost no one behind.

It’s the eternal story of the market: the seven fat years are inevitably followed by the seven lean years. That’s not random. There’s a rational economical linkage at work: with a steadily but not spectacularly growing economy, with steadily but not spectacularly growing earnings, with steadily but not spectacularly growing demand, you can project your likely returns over the next five or ten years. Any single year or two might see a spectacular crash or a spectacular price spike, but over time the rule never changes: the more you make now, the less you’ll make later.

We’ve been making a lot: the Dow Jones Industrials climbed 9.5% in the third quarter while the S&P 500 rose 7.7%. Over the past decade, the Dow and S&P have been returning 12% per year – and that includes the dramatic losses in late 2008 and early 2009.

The “real” economy, meanwhile, has been clocking in at 2-3% a year.

That combination leaves us with a rather expensive stock market. The folks at the Leuthold Group provided the following snippets in September 2018:

Stock market bulls like to look at the market’s “forward” valuation; that is, they want to imagine what companies might earn next year and use that to assess the market’s valuation. Based on those numbers, the market seems only “reasonably expensive.” Leuthold argues that forward p/e’s are simply a circular fantasy: “the forward P/E multiple is only ‘cheaper’ than it was during the dot-com era—between 1998 and 2001—hardly a rousing endorsement! Indeed, excluding the extreme ending of the dot-com era, the current forward P/E multiple is one of the highest valuations since 1990 …

Finally, the central problem with the forward P/E multiple is that it is based on “investor sentiment,” as this measure depends on future consensus earnings per share estimates. That is, it reflects emotions associated with collective thought. Rather than an objective valuation assessment, it simply reinforces the consensus view. If investor sentiment is bullish (typically because the stock market has been rising), future earnings expectations rise, keeping the market cheap.”

By less sentimental estimates, the market is substantially overpriced. If you look at actual earnings, which can be calculated in different ways, we’re near the highest valuations in history.

… the valuation of the U.S. stock market based on trailing earnings is extremely high compared to historic norms. The market cap to corporate profits ratio is now at the 96.6 percentile of its history since 1951, the CAPE P/E multiple is at the 95.2 percentile since 1950, and the trailing S&P 500 P/E multiple is at the 85.9 percentile since 1950! 

Stocks are at historic highs when you compare their prices to those of bonds. Leuthold again: “relative to bonds, the contemporary bull market has carried stocks to an all-time record!”

Likewise, homes: “The U.S. stock market is also at a record, today, relative to home prices.”

Likewise, incomes: the average American, working for the average hour wage, would have to work for “105.5 hours to buy the S&P 500 index. By comparison, it only took 89 hours at the top of the dot-com market, and only 36 hours when this bull market began in 2009!”

Likewise commodities, the GDP, foreign assets and on and on.

The traditional response has been, “don’t worry, there’s always a bull market somewhere!” That is, some stocks will be historically pricey but others will be historically cheap. When the market darlings crash, investors plan to take refuge in the market’s laggards. That worked in 2000: tech and telecom cratered while industrials surged on. By Leuthold’s calculation, the game has changed: the current bull market has not left any real pockets of value as all sectors powered ahead.

The median trailing P/E multiple among all U.S. stocks is at a post-war high of 21.1x which is more than 50% higher than it was in 2000 (i.e., 21.1x in June 2018 versus 14.6x in June 2000)! Today, the overall stock market is very highly priced, but the median U.S. stock is “uniquely” highly priced. That is, the “broadness” of record valuation risk today is unprecedented, at least during the post-war era!

Martha and the Vandellas summarized our position this way:

Nowhere to run to, baby, nowhere to hide
Got nowhere to run to, baby, nowhere to hide
It’s not love, I’m a running from
It’s the heartbreak I know will come…

Many confidently disagree. Having scaled the infamous “wall of worry,” they’re within about 30 seconds of endorsing Irving Fisher’s conclusion that “stock prices have reached what looks like a permanently high plateau.” (That’s a conclusion he made on October 16, 1929.) At the end of September, one “lead research analyst” surveyed the case for caution and dismissed it: “This all sounds scary, but the stock market doesn’t care—it’s been too busy surging to new highs!”

—

So, what might we reasonably expect from this historically rich market over the medium term, say the next 5 – 10 years?

The world’s largest investment managers estimate that a balanced portfolio will be zero, plus or minus three percent, before inflation and taxes, with substantial volatility.

Over the past ten to fifteen years, the US market has returned 10-11% annually with 14-15% volatility. That’s measured by the performance of Vanguard Total Stock Market Index Fund (VTSMX). Vanguard estimates that over the next 10 years, stocks will return around 4% with 17% volatility. Roughly speaking, expect 60% less gain but 20% more pain. Their bond market projections are 2.5% gain and 5.0% volatility. Over the past five years, Vanguard Total Bond Market Fund (VBMFX) returned 2% with 2.8% volatility so you might expect a small rise in returns and a near doubling of volatility. (Vanguard economic and market outlook for 2018: Rising risks to the status quo, 12/2017). That implies a balanced portfolio will return 3.4% annually, before accounting for the effects of inflation, fees and taxes.

chart showing the ten year outlook for equity markets

BlackRock reaches a similar conclusion: 5% US equity returns with 17% volatility. A 60/40 portfolio would, by their calculation, sit at 4% returns before inflation with a 12% standard deviation.

Sadly, Vanguard and BlackRock represent the optimists. Institutional investor Grantham, Mayo, van Otterloo (GMO) uses a simple reversion-to-the-mean method to project negative 4.4% real (that is, after-inflation) returns from US stocks and negative 0.3% real returns from US bonds over the next seven years. In that case, a 60/40 portfolio would lose 2.75% annually

chart showing GMO's predictions for returns

(7 Year Asset Class Returns, 8/30/2018). The British institutional investor Schroders, with rather more than a half trillion dollars in global assets, estimates 1.6% returns on US stocks over the next seven years and 0.3% returns on US bonds (Seven year asset class forecast returns, 2017 update). That comes out to 0.75% annually, before fees and taxes. Research Affiliates estimates 0.6% annually for a 60/40 portfolio over the next decade.

The cockeyed optimists of the bunch, Callan Associates, which does investment consulting for institutional clients, projects 10-year returns of 7% of US stocks and 3% for US bonds, their lowest projection since 1988. That would translate to pre-inflation returns of 5.4%.

Here’s the tally for your portfolio over the next decade: Vanguard: 3.4%. BlackRock: 4%. Schroders: 0.75%. Research Affiliates: 0.6%. GMO: negative 2.75%.

So returns for a core 60/40 portfolio in the range of negative 3% to positive 3% per year are plausible, though unpalatable.

—

Can you do better?

Maybe. All of the estimates above assume that your portfolio’s returns are driven by the overall returns in the stock market. Some managers believe that they can decouple your returns from the market’s. Fund raters tend to place these funds into categories such as market neutral, event arbitrage or absolute return. Most of these managers realize that while an individual stock’s price is largely driven by broad market movements, events unrelated to the broad movement of the stock market also can affect a stock’s price.

If the market rises, some stocks will rise more. If the market falls, some stocks will fall less. No surprise but also no comfort: if the market drops 40% and your stock drops only 35%, you’re still screwed. The goal would be to somehow neutralize the effects of the market’s overall movement, so that you just captured your 5% gain instead of capture the market’s 40% fall and your 5% gain. Some strategies attempt to do precisely that.

One common method is called pair trading: identify one stock that you believe is worth, say, 5% more than another similar stock. (Ford might be worth 5% more than GM.) Invest long in the valuable stock, then short the value-less one. If the market rises, your hope is that the good stock will rise by 5% more than bad stock will. The losses on your short position (shorts fall when markets rise) will offset all but 5% of your long position’s rise, but you still get a 5% profit. On the other side, you’re also betting that the bad stock will fall 5% more than the good stock will fall if the market tumbles. The gains on your short position would offset the overall decline in the market, leaving you again with a 5% profit.

There are two problems with these strategies:

  1. People hate them when the market is rising, since you’re limiting yourself to small gains rather than riding the bull.
  2. Most managers suck at implementing them. They charge too much, return too little, and often cheat by being market-positive rather than market-neutral. That is, they have more long positions than short ones in hopes of riding the bull … but just a bit, they promise.

If the market is indeed on the verge of a sustained period of low returns and high risk, it would be useful to identify now the managers who might help you and to weed out the poseurs. With the help of the screeners at MFO Premium, we looked for funds that might serve you. Here are the criteria:

  1. They should, over the past five years, have maintained a market neutral position. That is, their returns should be driven by stock-picking and not by the market’s exuberance. To do that, we looked for funds with a stock market correlation (R-squared) of under 5 (on a scale of 0-100).
  2. They should, over the past five years, have returned 4% or more. That is, their stock-picking abilities should allow them to exceed the likely returns available for the next 5-10 years.

We searched in three Lipper fund categories: absolute return, market neutral and event-driven. We’d originally looked at several other categories, including long/short, enhanced equity, and tactical allocation, but both the correlation to the stock market and volatility were consistently high. No salvation there.

We started with 71 funds, then dumped any fund with a correlation over 10. That included some famous entrants: Gateway, Eaton Vance, Goldman Sachs, Calamos and Gotham all had funds with correlations of 75 and up.

25 funds remained, then we dumped any fund that hadn’t made at least 4% per year.  Just four remained.

Name Lipper Category APR/yr MaxDD Std Dev R2 vs SP500
Cognios Market Neutral Large Cap COGIX Alternative Equity Market Neutral 5.7% -10% 7.2% 0.05
Columbia Absolute Return Currency & Income RARAX Absolute Return 5 -13 10.9 0
Invesco Macro Allocation Strategy GMSHX Absolute Return 4.5 -7.8 6 0.07
PIMCO Mortgage Opportunities and Bond PMZIX Absolute Return 4.4 -0.8 1.5 0.01

Investors anxious for slightly higher returns who are willing to place more of those returns at risk by increasing their market correlation can add a few options.

Name Lipper Category APR/yr MaxDD Std Dev R2 vs SP500
BlackRock Event Driven Equity BILPX Alternative Event Driven 7.7 -5.9 7 0.36
AmericaFirst Tactical Alpha ABRFX Absolute Return 6.9 -12.4 9.7 0.38
ATAC Rotation ATACX Absolute Return 6.2 -18.8 14.9 0.13

One younger fund, Balter Invenomic (BIVIX), would qualify except for its short track record. One reason to consider the fund, in addition to its performance, is that its manager Ali Motamed also brings a stint as co-manager of Boston Partners Long/Short Equity (BPLEX). Balter has substantially outperformed Boston Partners since inception, with a negligible correlation to the market.

Name Lipper Category APR/yr MaxDD Std Dev R2 vs SP500
Balter Invenomic BIVIX Alternative Long Short Equity 6.5 -4.3 6.3 0.10

Bottom line: you do have options. The simplest option is to invest with managers who hold cash. GMO anticipates that the real return on cash alone will far outstrip both US stocks and bonds in the years ago. We’ve repeated argued that “dry powder” serves you well. Our most recent review of high cash – solid return fund was April’s 15/15 funds story. That is, funds that held at least 15% cash and yet made at least 15% returns in 2017.

The other option, laid out here, is to consider funds that maintain a near-zero correlation to the stock market but have a record of returns higher than what we think the market will bring in the years ahead. These strategies tend to be complicated, so you need to spend some time learning cat hiding in pile of colorful leavesabout what your managers actually do so that you have an understanding of the jolts that will come along. If you read their shareholders communications and think “WTF?”, then you should look elsewhere. Heck, if you search for their shareholder communications and can barely fund anything, I’d conclude “WTF” and recommend that you look elsewhere. And they do tend to be expensive, so don’t overcommit.

We’ve profiled Cognios Market Neutral Large Cap, and have been impressed with their consistent focus and discipline.

As always, readers with access to MFO Premium (free for a year when you make a $100 tax-deductible contribution to support MFO) can easily run these screens – or craft their own – in order to have their safe space in a market that offers nowhere to run to, nowhere to hide!

#MFTF

By Charles Boccadoro

“But we in it shall be remembered —

We few, we happy few, we band of brothers …”

                                                  Shakespeare

Nearly 400 civilians and military participated on September 29th in the 7th annual March for the Fallen event at Fort Indiantown Gap’s army training campus. The march honors fallen soldiers that have “given the ultimate sacrifice,” so that “we can watch the sun come up like we see on this beautiful fall morning over a free country,” stated Major General Anthony Carrelli at the 6am welcome ceremony.

More than 110 of the participants came as part of the Alpha Architect team led by Wes Gray. Most of these folks were from the finance sector, as AA’s Ryan Kirlin coins “Crazy civilians in the finance sector who met on Twitter.”

The composition of the AA Team?

Most wore no company logos. No titles. No name tags. But several possess considerable notoriety, Eric Balchunas and Jeremy Schwartz among them.

Some came from as far as Milan, Vancouver, and Los Angeles. Some “carried heavy,” meaning a 35-lb backpack. Some brought their spouses. Some were service veterans.

Most appeared physically fit like Ben Johnson, some incredibility fit like Cory Hoffstein, but others were admittedly out-of-shape and overweight.

Some did not train at all, naturally gifted apparently, like Bonnie Schwartz and Meb Faber, despite Wes’ encouragement for months to “Get After It,” yet still managed to crush it.

Nearly all opted for the 28-mile course, including 3000-ft elevation change, versus the 14-mile or 5-mile courses.

Some developed horrible foot blisters, like Andrew Miller, at the 10-mile mark. Others could barely walk back to their barracks … barracks!

Some finished extremely fast, practically running the course, like Nick McCullum in 4 hours something, but others literally took all day, including last-man-in Erik Chavez … Wes held-up the informal awards ceremony until Erik arrived, sometime after 8pm.

But all finished.

And most were smiling … just about all day!

How could that be?

And, why would these people do this?

Or, as AA’s Pat Cleary joked: “Although Cliff Asness couldn’t attend, he did want to share a quick note….’What the hell is wrong with you people???’ “

For many, it’s very personal, like Eric Mendez whose family members have fallen. Others never served in the military or, going in, did not intend to march for anyone specifically … yet all on the AA team ended-up wearing dogtags with the name of a fallen soldier in honorarium.

Maybe participants were motivated by the pictures of the fallen in the starting area … and again at every mile marker along the way.

Maybe they kept marching because military participants carrying heavy, often while struggling up the hills, thanked passing civilians carrying light without prompting: “Thank you sir for your support.”

Can you believe that?

Maybe it was because “our country has rarely been so divided,” the military chaplain stated at the welcome, and somehow this march helps assuage.

Jim Kirlin, Ryan’s dad and a Vietnam War vet (Company C, First Battalion, First Regiment, First Marine Division … rifle company), spoke of “being part of something bigger than yourself” and the motivational power of leadership, recalling his own witness to leadership of a young Captain Marsh Carter during the first drop-in chopper battle, called Ban Lahn II.

Wes finished the 28-mile course in 6 hours and 17 minutes … among the fastest civilians carrying heavy. If that was not enough, he doubled-back 6 miles to walk through the finish line again with his wife Katie. How about that? (BTW. Ryan, an Olympic-class rower and Wes’ junior, came in right behind him.)

While hiking up the 2-mile long “killer hill” at the 19th mile, Katie spoke of the gratification she felt as a former military wife, the sense of community and brotherhood, which she misses: “It brings together the two worlds that have been a major part of our lives: military and finance. It feels good!”

By evening’s end, hoarse from the event, Wes toasted the following from the eulogy of Doug Zembiec, the Lion of Fallujah:

Be a person of Principle.

Fight for what you believe in.

Keep your word.

Live with integrity.

Be brave.

Believe in something bigger than yourself.

Serve your country.

Teach. Mentor.

Give something back to society.

Lead from the front. Conquer your fears.

Be a good friend.

Be humble, but be self-confident.

Appreciate your friends and family.

Be a leader, not a follower.

Be valorous on the field of battle.

Take responsibility for your actions.

Never forget those that were killed.

Here’s to the fallen…

Funds in Registration

By David Snowball

Before funds can be offered to the public, they’ve got to be submitted to the SEC which has 70 days to review the application. That means that funds hopeful of launching by December 30th need to be filed by October 15th. This month’s 15 new funds, including offerings from both DoubleLine and T. Rowe Price, represent the first part of that year-end wave.

Aware Ultra-Short Duration Enhanced Income ETF

Aware Ultra-Short Duration Enhanced Income ETF , an actively-managed ETF, seeks to maximize current income targeting a yield of 0.75% to 1.00% over the yield of the most recently issued 3-month U.S. Treasury bill. The plan is to buy bonds with a duration under one year; there’s no particular explanation of how they plan to outperform a T-bill other than by maintaining a longer duration. The fund will be managed by a team headed by John E. Kaprich of Aware Asset Management. Its opening expense ratio has not been released.

Catalyst Enhanced Income Strategy Fund

Catalyst Enhanced Income Strategy Fund will seek current income. The plan is to primarily invest in agency and non-agency residential mortgage backed securities, with up to 15% illiquid securities. The fund will be managed by Leland Abrams and Brandon Jundt. Its opening expense ratio is 1.53%, and the minimum initial investment for the no-load “I” shares will be $2,500.

DoubleLine Colony Enhanced Real Estate Income Fund

DoubleLine Colony Enhanced Real Estate Income Fund will seek total return which exceeds the total return of its benchmark index over a full market cycle. The plan is to use derivatives to replicate performances of the Dow Jones US REIT Index then to invest essentially all of the fund’s assets in debt instruments managed by DoubleLine. As a practical matter, the fund will normally be leveraged to 200% of its actual assets: 100% notional exposure to the REIT index plus 100% exposure to bonds. In theory, you should get the return of the REIT index plus the returns of the bond portfolio; both, however, might be negative in any given period so that you could enjoy double losses. The fund will be managed by The Gundlach and Jeffrey Sherman . Its opening expense ratio has not been published, and the minimum initial investment will be $2,000 for retail shares.

John Hancock Global Thematic Opportunities Fund

John Hancock Global Thematic Opportunities Fund will seek capital appreciation by investing mainly in equities of companies that may benefit from global long-term market themes. The fund will be managed by Hans Peter Portner and Gertjan Van Der Geer of Pictet Asset Management. Its opening expense ratio is 1.28% for “A” shares, which also carry a 5.0% load. We normally ignore load-bearing funds, but load-waived versions are widely available so we let it in. The minimum initial investment will be $1,000.

JPMorgan Corporate Bond Research Enhanced ETF

JPMorgan Corporate Bond Research Enhanced ETF, an actively-managed ETF, seeks to provide total return. The plan is to buy investment grade bonds and beat its benchmark by “overweighting securities with higher credit scores” and by being smart about which sectors of the economy to invest in. The fund will be managed by a team led by Lisa Coleman. Its opening expense ratio has not been released.

Mesirow Financial Core Bond Fund

Mesirow Financial Core Bond Fund will seek maximize total return through capital appreciation and current income consistent with preservation of capital. The plan is to buy government bonds, municipal bonds, corporate bonds, residential and commercial mortgage-backed securities, asset-backed securities, convertible securities, loan participations and assignments, and U.S. dollar-denominated foreign debt securities. They maintain a duration pretty close to their benchmarks and believe “the majority of available excess returns can be captured through yield curve positioning, sector allocation and issue selection.” The fund will be managed by a team from Mesirow Financial, headed by Peter W. Hegel. Its opening expense ratio is 0.85%, and the minimum initial investment will be $5,000.

Mesirow Financial High Yield Fund

Mesirow Financial High Yield Fund will seek high level of current income consistent with the preservation of principal. The plan is to buy junk bonds and to select them through the lens of “various criteria such as historical and future expected financial performance, management tenure and experience, capital structure, free cash flow generation, barriers to entry, security protections, yield and relative value, and ownership structure.” The fund will be managed by a team headed by Robert Sydow. Its opening expense ratio is 1.0%, and the minimum initial investment will be $5,000.

Mesirow Financial Small Cap Value Fund

Mesirow Financial Small Cap Value Fund will seek long-term capital appreciation with less volatility than the U.S. small cap value market. The plan is to build a “well-diversified portfolio with broad representation across market industries and sectors,” focusing on attractively valued securities with “potential catalysts that are expected to lead to accelerated earnings and cash flow growth.” The fund will be managed by Kathryn A. Vorisek and Leo Harmon. Its opening expense ratio is 1.23%, and the minimum initial investment will be $5,000.

Northern Cross International Fund

Northern Cross International Fund will seek long-term total return, principally from growth of capital. The plan is to use a bottom-up discipline to construct a portfolio of 40-80 stocks from the developed and developing worlds. The fund will be managed by Howard Appleby, Jean-Francois Ducrest, and James LaTorre. The record provided for their separate account composite is a bit odd: they’ve trailed their benchmark in each of the past five years after leading it for eight consecutive years. Its opening expense ratio is 0.65%, and the minimum initial investment will be $10,000. The prospectus helpfully notes, “You may purchase or redeem shares directly from the Fund by calling **** VARIABLE Fund_ PhoneNumbers is not defined **** (toll free).”

Quadratic Interest Rate Volatility and Inflation Hedge ETF

Quadratic Interest Rate Volatility and Inflation Hedge ETF , an actively-managed ETF, seeks to hedge the risk of rising long-term interest rates, an increase in inflation and inflation expectations, and an increase in interest rate volatility, while providing inflation-protected income. The plan is to “invest in a mix of U.S. Treasury Inflation-Protected Securities and long options tied to the shape of the interest rate yield curve.” The fund will be managed by Nancy Davis of Quadratic Capital Management. Its opening expense ratio has not been disclosed.

Reynders McVeigh Core Equity Fund

Reynders McVeigh Core Equity Fund will seek capital preservation and long-term capital growth. The plan is to pursue a pretty typical “good companies at a fair price” strategy, with at least 60% in domestic stocks with market caps above $15 billion. The fund will be managed by Charlton “Chat” Reynders, III,  Patrick McVeigh and Eric Shrayer . Its opening expense ratio is 1.01%, and the minimum initial investment will be $1,000. I can’t, for the life of me, figure out why 1.01% is a good idea. They’re waived 43 bps in fees but decide to plant themselves in the “above 1.0%” range so that they lose in any screen that sets expenses at or below 1.0%. Odd.

SGA International Small-Mid Cap Equity Fund

SGA International Small-Mid Cap Equity Fund will seek total return, consisting of current income and long-term capital appreciation. The plan is to invest, directly or indirectly, in a portfolio of international small to mid-cap caps. “The Adviser integrates a systematic, quantitative screening process with traditional research and active risk management,” they promise. The fund will be managed by a team headed by Cynthia Tusan, CFA, President of Strategic Global Advisers. Its opening expense ratio is 1.40%, and the minimum initial investment will be $10,000.

Strategy Shares Drawbridge Dynamic Allocation ETF

Strategy Shares Drawbridge Dynamic Allocation ETF, an actively-managed ETF, seeks long term capital appreciation. The plan is to invest in eight sub-strategies, each of which has “rotation” in its name and each of which targets “the top performing ETF” (or ETFs) in eight different asset classes. If you’re wondering what could possibly go wrong, check “Principal Risk Factors” in the Prospectus but be sure to give yourself a bit of time: it runs from page 12 to page 38. The fund will be managed by Matthew B. Tuttle of Tuttle Asset Management. Its opening expense ratio is 1.37%.

T. Rowe Price Dynamic Credit Fund

T. Rowe Price Dynamic Credit Fund will seek total return through a combination of income and capital appreciation. The plan is to invest, both long and short, in a wide variety of global credit instruments without constraints to particular benchmarks, asset classes, or sectors. The fund will be managed by Saurabh Sud. Its opening expense ratio is 0.81%, and the minimum initial investment will be $2,500.

WisdomTree International PutWrite Strategy Fund

WisdomTree International PutWrite Strategy Fund , an actively-managed ETF, seeks long-term growth of capital and income generation. The plan is to sell “listed put options on one or more ETFs that track the performance of developed markets outside of the U.S. and Canada. The Fund attempts to generate returns through the receipt of option premiums from selling International ETF Puts, while investing the sales proceeds in U.S. Treasury Bills of varying maturities.” The fund will be managed by a person or persons as yet unnamed. Likewise its opening expense ratio has not been released. WisdomTree is simultaneously launching similar PutWrite funds focusing on emerging markets, long-term Treasuries, and high-yield corporate bonds.

Manager changes

By Chip

Yikes, the world is spinning faster and faster! In the course of a normal month we’ll highlight 60-70 manager changes in equity and allocation funds. We mostly skip bond funds because, frankly, it’s a danged rare fixed income team that’s materially affected by the departure of a single individual. This month, though, brought a record 105 manager changes.

By far the most consequential was  the fission of Artisan’s outstanding global value team, which has been nominated six times for Morningstar’s “international manager of the year” honors.  David Samra and Daniel O’Keefe have been working together at Artisan since 2002, have co-managed Global Value (ARTGX, four stars, Gold rated) since inception and have managed or co-managed International Value (ARTKX, five stars, Gold rated) since inception. They’ve now divided the responsibility for those funds, with Mr. O’Keefe leading the Global Value fund’s management team and Mr. Samra leading the International Value fund’s team. Both will gain two co-managers.

At a step down in significance, Boniface “Buzz” Zaino steps aside from several Royce funds and Jayme Wiggins does likewise at Intrepid. Both were senior people at well-respected smaller shops.

 

Ticker Fund Out with the old In with the new Dt
AGFQX 361 Global Managed Futures Strategy Fund Clifford Stanton will no longer serve as a portfolio manager to the fund. Blaine Rollins, Aditya Bhave, Jason Leupold, and John Riddle will continue to serve as portfolio managers of the fund. 9/18
AGMQX 361 Macro Opportunity Fund Clifford Stanton will no longer serve as a portfolio manager to the fund. Blaine Rollins, Aditya Bhave, and Jason Leupold will continue to serve as portfolio managers of the fund. 9/18
AMFQX 361 Managed Futures Strategy Fund Clifford Stanton will no longer serve as a portfolio manager to the fund. Blaine Rollins, Aditya Bhave, Jason Leupold, John Riddle and Randall Bauer will continue to serve as portfolio managers of the fund. 9/18
AIEQ AI Powered Equity ETF (AIEQ) No one, but . . . Ning Shen joins Samuel Masucci, James Francis, and Devin Ryder on the management team. 9/18
AHLAX American Beacon AHL Managed Futures Strategy Fund Nick Granger will no longer serve as a portfolio manager for the fund. Matthew Sargaison will run the fund with Russell Korgaonkar. 9/18
ARTGX Artisan Global Value Fund N. David Samra will no longer manage the fund. Daniel O’Keefe will continue to manage the fund and is joined by Justin Bandy and Michael McKinnon. 9/18
ARTKX Artisan International Value Fund Daniel O’Keefe will no longer manage the fund. N. David Samra will continue to manage the fund and is joined by Ian McGonigle and Joseph Vari. 9/18
BXEAX Barings Emerging Markets Debt Blended Total Return Fund No one, but . . . Natalia Krol joins Ricardo Adrogué and Cem Karacadag in managing the fund. 9/18
BAMBX BlackRock Alternative Capital Strategies Fund No one, but . . . Jeffrey Rosenberg joins Tom Parker and Scott Radell in managing the fund. 9/18
MDEFX BlackRock Eurofund Nigel Bolton and Brian Hall are no longer listed as portfolio managers for the fund. Andreas Zoellinger will now manage the fund. 9/18
ITEQ BlueStar Israel Technology ETF (ITEQ) No one, but . . . Ning Shen joins Samuel Masucci, James Francis, and Devin Ryder on the management team. 9/18
BPGIX Boston Partners Global Equity Fund No one, but . . . Joshua White joins Joshua Jones, Christopher Hart, and Joseph Feeney in managing the fund. 9/18
BGRSX Boston Partners Global Long/Short Fund No one, but . . . Joshua White joins Joshua Jones, Christopher Hart, and Joseph Feeney in managing the fund. 9/18
BPLEX Boston Partners Long/Short Equity Fund No one, but . . . Patrick Regan joins Robert Jones in managing the fund. 9/18
BUFEX Buffalo Large Cap Fund Elizabeth Jones is no longer listed as a portfolio manager for the fund. Alexander Hancock will now manage the fund. 9/18
ETAFX Carillon Cougar Tactical Allocation Fund James Breech will no longer serve as a portfolio manager for the fund. Abdullah Sheikh will continue to manage the fund. 9/18
CFRAX Catalyst Floating Rate Income Fund Tom Wojczak is no longer listed as a portfolio manager for the fund and Princeton Advisory Group is no longer a subadvisor of the fund. Stan Sokolowski will now manage the fund. 9/18
CAGOX Cavalier Growth Opportunities Fund Other managers are no longer listed. As of September 1, Brian Shevland and Lee Calfo will manage the fund. 9/18
CAVTX Cavalier Tactical Rotation Fund Other managers are no longer listed. As of September 1, Dr. Henry Ma will manage the fund. 9/18
DSGAX Dreyfus Select Managers Small Cap No one, but . . . Alexi Makkas joins the other 19 or so managers. 9/18
MJ ETFMG Alternative Harvest ETF No one, but . . . Ning Shen joins Samuel Masucci, James Francis, and Devin Ryder on the management team. 9/18
IFLY ETFMG Drone Economy Strategy ETF No one, but . . . Ning Shen joins Samuel Masucci, James Francis, and Devin Ryder on the management team. 9/18
HACK ETFMG Prime Cyber Security ETF No one, but . . . Ning Shen joins Samuel Masucci, James Francis, and Devin Ryder on the management team. 9/18
SILJ ETFMG Prime Junior Silver ETF No one, but . . . Ning Shen joins Samuel Masucci, James Francis, and Devin Ryder on the management team. 9/18
IPAY ETFMG Prime Mobile Payments ETF No one, but . . . Ning Shen joins Samuel Masucci, James Francis, and Devin Ryder on the management team. 9/18
GAMR ETFMG Video Game Tech ETF No one, but . . . Ning Shen joins Samuel Masucci, James Francis, and Devin Ryder on the management team. 9/18
ETHO Etho Climate Leadership U.S. ETF No one, but . . . Ning Shen joins Samuel Masucci, James Francis, and Devin Ryder on the management team. 9/18
BEARX Federated Prudent Bear Fund Lila Murphy will no longer serve as a portfolio manager for the fund. P. Ryan Bend and Chad Hudson will continue to manage the fund. 9/18
FICDX Fidelity Canada Fund Risteard Hogan is no longer listed as a portfolio manager for the fund. Ryan Oldham has been managing the fund since June 20, 2018. 9/18
FIEUX Fidelity Europe Fund Stefan Lindblad is no longer listed as a portfolio manager for the fund. Andrew Sergeant has been managing the fund since June 1, 2018. 9/18
Various Fidelity Freedom Index Funds No one, but . . . Finola McGuire Foley joins Andrew Dierdorf and Brett Sumsion in managing the funds. 9/18
FFGCX Fidelity Global Commodity Stock Fund Joe Wickwire will no longer serve as a portfolio manager for the fund. Jody Simes will now manage the fund. 9/18
FDCPX Fidelity Select Computers Portfolio Christopher Lin will no longer serve as a portfolio manager for the fund. Caroline Tall will continue to manage the fund. 9/18
FSAGX Fidelity Select Gold It is expected that Joe Wickwire will retire effective as of the close of business on or about March 29, 2019. Steve Calhoun joins Joe Wickwire and will continue to manage the fund upon Mssr. Wickwire’s retirement. 9/18
FPHAX Fidelity Select Pharmaceuticals Portfolio Asher Anolic is no longer listed as a portfolio manager for the fund. Karim Suwwan de Felipe will continue to manage the fund. 9/18
FSPTX Fidelity Select Technology Portfolio  No one, but . . . Nidhi Gupta joins Charlie Chai in managing the funds. It’s expected the Mssr. Chai will retire at the end of the year. 9/18
FDSCX Fidelity Stock Selector Small Cap Fund Richard Thompson will no longer serve as a portfolio manager for the fund. Jennifer Fo has been named interim co-manager, joining Shadman Riaz, Morgen Peck, and Eirene Kontopoulos, until Mssr. Venanzi’s return. 9/18
FTRNX Fidelity Trend Fund No one, but . . . Shilpa Mehra joins Daniel Kelley in managing the fund. 9/18
SCAFX Fiera Capital STRONG Nations Currency Fund No one, but . . . effective as of August 1, 2018, Jonathan Lewis has resumed his role as  lead portfolio manager of the Fund. Iraj Kani and Jonathan Lewis will continue to manage the fund. 9/18
HIOIX Fintrust Income and Opportunity Fund Hope Lundt and John Mills are no longer listed as portfolio managers for the fund. Allen Gillespie, David Lewis, and James Treadwell will now manage the fund. 9/18
FRBSX Franklin Balance Sheet Investment Fund Daniel Perrin is no longer listed as a portfolio manager for the fund. Grace Hoefig will continue to manage the fund. 9/18
FAAAX Franklin K2 Alternative Strategies Fund David Saunders is no longer listed as a portfolio manager for the fund. Robert Christian and John Brooks Ritchey are joined by Anthony Zanolla on the management team. 9/18
TFSIX Franklin Mutual Financial Services Fund Richard Cetlin is no longer listed as a portfolio manager for the fund. Andrew Sleeman and Andrew Dinnhaupt will continue to manage the fund. 9/18
GMAMX Goldman Sachs Multi-Manager Alternatives Fund Robert Mullane is no longer listed as a portfolio manager for the fund. Betsy Gorton and Kent Clark will continue to manage the fund. 9/18
HIINX Harbor International Fund Howard Appleby, Jean-Francois Ducrest, and James LaTorre are no longer listed as portfolio managers for the fund. Simon Todd, Michael Nickson, William MacLeod, Simon Somerville, Neil Ostrer, Nick Longhurst, Michael Godfrey, David Cull, Charles Carter, and William Arah will now manage the fund. 9/18
HIIGX Harbor International Growth Fund Tom Walsh will no longer serve as a portfolio manager for the fund. Moritz Sitte, Sophie Earnshaw, Joseph Faraday, Iain Campbell, and Gerard Callahan will continue to manage the fund. 9/18
ITHAX Hartford Capital Appreciation Fund Kent Stahl has announced his plan to retire effective December 31,2018. Gregg Thomas will continue to manage the fund. 9/18
HIACX Hartford Capital Appreciation HLS Fund Kent Stahl has announced his plan to retire effective December 31,2018. Gregg Thomas will continue to manage the fund. 9/18
HINVX Heartland International Value Fund Michael Jolin will no longer serve as a portfolio manager for the fund. Robert Sharpe will continue to manage the fund. 9/18
ICMBX Intrepid Capital Fund Jayme Wiggins will no longer serve as a portfolio manager for the fund. Mark Travis and Jason Lazarus will continue to manage the fund. 9/18
ICMAX Intrepid Endurance Fund Jayme Wiggins will no longer serve as a portfolio manager for the fund. Mark Travis will now manage the fund. 9/18
ICMTX Intrepid Select Fund Jayme Wiggins will no longer serve as a portfolio manager for the fund. Clay Kirkland and Mark Travis will now manage the fund. 9/18
GLTAX Invesco Global Targeted Returns Fund No one, but . . . Danielle Singer joins Richard Batty, David Jubb, David Millar, and Gwilym Satchell. 9/18
IARAX Invesco Real Estate Fund No one, but . . . Grant Jackson joins Mark Blackburn, Paul Curbo, Joe Rodriguez, Jr., Darin Turner, and Ping Ying Wang on the management team. 9/18
JOLAX Janus Henderson Emerging Markets Managed Volatility Fund Phillip Whitman is no longer listed as a portfolio manager for the fund. Adrian Banner, Vassilios Papathanakos, and Joseph Runnels continue to manage the fund. 9/18
JGDAX Janus Henderson Global Income Managed Volatility Fund Phillip Whitman is no longer listed as a portfolio manager for the fund. Adrian Banner, Vassilios Papathanakos, and Joseph Runnels continue to manage the fund. 9/18
JMIAX Janus Henderson International Managed Volatility Fund Phillip Whitman is no longer listed as a portfolio manager for the fund. Adrian Banner, Vassilios Papathanakos, and Joseph Runnels continue to manage the fund. 9/18
JRSAX Janus Henderson U.S. Managed Volatility Fund Phillip Whitman is no longer listed as a portfolio manager for the fund. Adrian Banner, Vassilios Papathanakos, and Joseph Runnels continue to manage the fund. 9/18
LITOX Lazard Global Realty Equity Portfolio Gautam Garg is no longer listed as a portfolio manager for the fund. Christopher Hartung joins Jay Leupp in managing the fund. 9/18
LREOX Lazard US Realty Equity Portfolio Gautam Garg is no longer listed as a portfolio manager for the fund. Christopher Hartung joins Jay Leupp in managing the fund. 9/18
LSGLX Loomis Sayles Global Bond Fund Effective March 2019, Kenneth Buntrock, portfolio manager of the fund, will retire. David Rolley, Lynda Schweitzer and Scott Service will remain as co-portfolio managers of the fund. 9/18
LSFAX Loomis Sayles Senior Floating Rate and Fixed Income Fund Effective March 2019, Kevin Perry, portfolio manager of the fund, will retire. John Bell and Michael Klawitter will remain as co-portfolio managers of the fund. 9/18
LDFVX Lord Abbett Fundamental Equity Fund Sean Aurigemma is no longer listed as a portfolio manager for the fund. Jeff Diamond, So Young Lee, and Eli Rabinowich will now manage the fund. 9/18
MADFX Matrix Advisors Dividend Fund Steven Pisarkiewicz has retired and will no longer serve as a portfolio manager for the fund. David Katz, Lon Birnholz, Jordan Posner, Steven Roukis, and Stephan Weinberger will continue to manage the fund.. 9/18
MDIDX MFS International Diversification Fund Thomas Melendez will no longer be a portfolio manager, effective March 31, 2019. Camille Humphries Lee joins Mssr. Melendez in managing the fund. 9/18
MRSAX MFS Research International Fund Thomas Melendez will no longer be a portfolio manager, effective March 31, 2019. Camille Humphries Lee joins Mssr. Melendez, Jose Luis Garcia, and Victoria Higley in managing the fund. 9/18
NCEGX North Country Equity Growth Fund Manuel Orta will no longer serve as a portfolio manager for the fund. Adam Horowitz joins Peter Capozzola in managing the fund. 9/18
QQQX Nuveen NASDAQ 100 Dynamic Overwrite Fund Keith Hembre is no longer listed as a portfolio manager for the fund. Jody Hrazanek will now manage the fund. 9/18
SPXX Nuveen S&P 500 Dynamic Overwrite Fund Keith Hembre is no longer listed as a portfolio manager for the fund. Jody Hrazanek will now manage the fund. 9/18
OASVX Optimum Small-Mid Cap Value Fund Susan Schmidt is no longer listed as a portfolio manager for the fund. William Costello joins Menno Vermeulen, Greg Sleight, Puneet Mansharamani, Josef Lakonishok, Guy Lakonishok, Prashant Inamdar, Thomas Lieu, and Grant Taber in managing the fund. 9/18
PRCGX Perritt MicroCap Opportunities Fund George Metrou will no longer serve as a portfolio manager for the fund. Michael Corbett will continue to manage the fund. 9/18
LSEIX Persimmon Long Short Ken Cavazzi is no longer listed as a portfolio manager for the fund. David Daglio joins Timothy Melly, Arthur Holley, Gregory Horn, H. George Dai, Daniel Brazeau, and Joshua Bennett in managing the fund. 9/18
PIBAX PGIM Balanced Fund Ted Lockwood has retired, as planned. Stacie Mintz, John Moschberger, Edward Lithgow, Joel Kallman, Edward Campbell, and Irene Tunkel will continue to serve as portfolio managers of the fund managed by Quantitative Management Associates LLC (QMA). 9/18
JDUAX PGIM Conservative Allocation Fund Ted Lockwood has retired, as planned. Joal Kallman, Peter Vaicunas, and Edward Campbell will continue to manage the fund. 9/18
JDAAX PGIM Growth Allocation Fund Ted Lockwood has retired, as planned. Joal Kallman, Peter Vaicunas, and Edward Campbell will continue to manage the fund. 9/18
PCGAX PGIM Income Builder Fund Ted Lockwood has retired, as planned. Edward Campbell, Rory Cummings, and Peter Vaiciunas will continue to serve as portfolio managers for the segment of the fund managed by Quantitative Management Associates LLC (QMA). 9/18
JDTAX PGIM Moderate Allocation Fund Ted Lockwood has retired, as planned. Joal Kallman, Peter Vaicunas, and Edward Campbell will continue to manage the fund. 9/18
PAMGX PGIM QMA Defensive Equity Fund Ted Lockwood has retired, as planned. Edward Campbell, Joel Kallman, Edward Lithgow, and Peter Vaiciunas will continue to serve as portfolio managers for the fund. 9/18
PUDAX PGIM Real Assets Fund Ted Lockwood has retired, as planned. Edward Keon, Jr., Edward Campbell, Joel Kallman, Rory Cummings, Yesim Tokat-Acikel, and Marco Aiolfi will continue to serve as portfolio managers for the segment of the fund managed by Quantitative Management Associates LLC (QMA). 9/18
PCGRX Pioneer Mid Cap Value Fund No one, but . . . Timothy Stanish joins Edward Shadek and Raymond Haddad on the management team. 9/18
PMDAX Principal Small-Midcap Dividend Income Fund No one, but . . . Sarah Radecki joins Daniel Coleman and David Simpson on the management team. 9/18
BIKR Rogers AI Global Macro ETF (BIKR) No one, but . . . Ning Shen joins Samuel Masucci, James Francis, and Devin Ryder on the management team. 9/18
RLPHX Royce Low-Priced Stock Fund Robert Kosowsky is no longer listed as a portfolio manager for the fund. James Stoeffel and Brendan Hartman will continue to manage the fund. 9/18
ROSFX Royce Micro-Cap Opportunity Fund Boniface “Buzz” Zaino will be retiring from the fund, effective October 1, 2018. He will stay on as a Royce senior advisor. Robert Kosowsky joins William Hench in managing the fund. 9/18
RYOTX Royce Micro-Cap Portfolio Robert Kosowsky is no longer listed as a portfolio manager for the fund. James Stoeffel and Brendan Hartman will continue to manage the fund. 9/18
RYPNX Royce Opportunity Fund Boniface “Buzz” Zaino will be retiring from the fund, effective October 1, 2018. He will stay on as a Royce senior advisor. Robert Kosowsky joins William Hench in managing the fund. 9/18
PISRX Salient International Small Cap Fund Bill Barker and Justin Hill will no longer manage the fund. James O’Leary and Aiden O’Leary will now manage the fund. 9/18
GAL SPDR SSGA Global Allocation ETF Lorne Johnson will no longer serve as a portfolio manager for the fund. Jeremiah Holly joins Timothy Furbush and Michael Martel in managing the fund. 9/18
INKM SPDR SSGA Income Allocation ETF Lorne Johnson will no longer serve as a portfolio manager for the fund. Timothy Furbush, Michael Martel, and Jeremiah Holly will continue to manage the fund. 9/18
SGLAX Summit Global Investments Global Low Volatility Fund No one, but . . . Matt Hanna and Aash Shah join David Harden in managing the fund. 9/18
LVOLX Summit Global Investments U.S. Low Volatility Equity Fund No one, but . . . Matt Hanna and Aash Shah join David Harden in managing the fund. 9/18
TRREX T. Rowe Price Real Estate Fund David Lee will be retiring from T. Rowe Price at the end of 2018. Effective January 1, 2019, Nina P. Jones will replace Mr. Lee as the fund’s portfolio manager. 9/18
AAAGX Thrivent Large Cap Growth Fund Darren Bagwell will no longer serve as a portfolio manager for the fund. Lauri Brunner will now manage the fund. 9/18
AALGX Thrivent Large Cap Stock Fund Darren Bagwell will no longer serve as a portfolio manager for the fund. Lauri Brunner joins Kurt Lauber and Noah Monsen in managing the fund. 9/18
VCFVX VALIC Company I International Value Heather Arnold and Norman Boersma are no longer listed as portfolio managers for the fund. Venkateshwar Lal and Dale Winner will now manage the fund. 9/18
VGWIX Vanguard Global Wellesley Income Fund Effective June 30, 2019, John Keogh will retire and no longer serve as a portfolio manager for the fund. Loren Moran, Michael Stack, and Ian Link will remain as the portfolio managers of the fund upon Mr. Keogh’s retirement. 9/18
VWINX Vanguard Wellesley Income Fund Effective June 30, 2019, John Keogh will retire and no longer serve as a portfolio manager for the fund. Loren Moran, Michael Stack, and W. Michael Reckmeyer, III, will remain as the portfolio managers of the fund upon Mr. Keogh’s retirement. 9/18
VWELX Vanguard Wellington Fund Effective June 30, 2019, John Keogh will retire and no longer serve as a portfolio manager for the fund. Edward Bousa, Loren Moran, and Michael Stack will remain as the portfolio managers of the fund upon Mr. Keogh’s  retirement. 9/18
VWNFX Vanguard Windsor II Fund Effective at the close of business on December 31, 2018, Sheldon J. Lieberman will retire and will no longer serve as a portfolio manager for the fund. Additionally, Christopher Blake is no longer listed as a portfolio manager for the fund. Ronald Temple joins Binbin Guo, David Ganucheau, Jeff Fahrenbruch, James Stetler, Lewis Sanders, John Mahedy, Andrew Lacey, and George Davis in managing the fund. Upon Mssr. Lieberman’s retirement, Scott McBride will also join the team. 9/18
VMSAX Virtus Aviva Multi-Strategy Target Return Fund Brendan Walsh, Daniel James, and Ian Pizer are no longer listed as portfolio managers for the fund. James McAlevey and Mark Robertson join Peter Fitzgerald on the management team. 9/18
IBPSX Voya Balanced Portfolio Christopher Corapi has announced he intends to retire on or about June 1, 2019. Matthew Toms, Barbara Reinhard, and Paul Zemsky will continue to manage the fund after his retirement. 9/18
ISVGX Voya Growth and Income Portfolio Christopher Corapi has announced he intends to retire on or about June 1, 2019. Vincent Costa, James Dorment, and Kristy Finegan will continue to manage the fund after his retirement. 9/18
IEDAX Voya Large Cap Value Christopher Corapi has announced he intends to retire on or about June 1, 2019. Vincent Costa will continue to manage the fund after his retirement. 9/18
WHGMX Westwood SMidCap Fund Susan Schmidt is no longer listed as a portfolio manager for the fund. William Costello joins Prashant Inamdar, Thomas Lieu, and Grant Taber in managing the fund. 9/18
WHGPX Westwood SMidCap Plus Fund Susan Schmidt is no longer listed as a portfolio manager for the fund. William Costello joins Prashant Inamdar, Thomas Lieu, and Grant Taber in managing the fund. 9/18

Briefly noted

By David Snowball

The imminence of Halloween reveals itself in the deadened thud as the walking dead move toward the graveyard. Summer saw a curious lull in fund liquidations and manager changes both, but the end of summer is ending that reprieve. Our mid-September and October issues recount 70 obituaries, the vast majority of which were announced in the past 30 days. A precious few were high-performing funds that couldn’t attract attention. There seems to be a pattern in the remainder: lots of funds designed to hedge against market volatility, lots of funds designed to hedge against rising prices and a few more funds with exposure to emerging markets.

Updates

In our July issue, we profiled LS Opportunity Fund (LSOFX) which has been guided for the past three years by Prospector Partners. In its class, we found that LSOFX had the highest returns and some of the lowest risks for the period that Prospector has guided it. We concluded that Prospector’s risk-management takes the sharp edges off the market and “allows you to become a better, more committed long-term investor.” For those interested in a follow-up, Long Short Advisers just hosted a webinar on the fund’s performance and the managers’ outlook.

In our September issue, we reviewed – and endorsed – the evolution of Seafarer Overseas Growth & Income (SFGIX). The story, at base, is that both the management team and the portfolio strategy are evolving to become less centered on Andrew Foster and on the “steady Eddy” stocks that Andrew favors. Our argument was that the move was thoughtful, rational and well-designed to serve investors. Morningstar put Seafarer’s analyst rating “under review” for about three weeks. We’re pleased to report that they’re now reaffirmed Seafarer’s Silver rating. William Samuel Rocco, one of Morningstar’s longest-tenured analysts, writes that Seafarer’s “team and strategy remain solid after some modifications, and its other strengths are still intact… [it] remains an appealing emerging-markets vehicle for the long haul.” We agree.

Briefly Noted . . .

SMALL WINS FOR INVESTORS

As of October 31, 2018, Brown Advisory Global Leaders Fund (BAFLX) Institutional Shares of the Fund will be offered for sale to eligible purchasers.

Driehaus continues making substantial fee reductions. As of November 1, 2018, the management fee for Driehaus Emerging Markets Small Cap Growth Fund (DRESX) drops from 1.50 to 1.15% and expenses get capped at 1.45% overall.

Something’s up at Kopernik. Kopernik Global, the company, is the shadow of a guy named David Iben. Mr. Iben is one of those fabulously successful guys (he managed Voya Global for six years) who struck out on his own. And, for a while, “struck out” seemed like a good choice of words. Over its first couple years, his flagship Global fund sort of looked like this:

The fund staged a furious rebound, though it never recovered the ground lost in its early crash:

performance chart for kggax

In the midst of all that, Kopernik launched a second fund which is only open to Institutional investors, Kopernik International Fund (KGIIX). Morningstar designates it as a five-star fund, though with exceptionally high volatility.

According to a filing with the SEC, Kopernik is dropping the sales load from the “A” shares of its International Fund but maintaining them on the “A” shares of its Global Fund. Odd. Odder still is that there don’t appear to be “A” shares for the International fund. So I’m guessing that there’s a hypothetical, never-launched “A” which is now “Investor” which presumably will be available for sale. They’re also modifying their principal investment strategies to allow them to hold a lot of cash as a temporary defensive maneuver, just in case conditions call for it.

Effective September 28, 2018, Mairs & Power Small Cap Fund (MSCFX) re-opened to all investors. 

Effective September 17, 2018, retail shares of the Marmont Redwood International Equity Fund (MRIDX) will be offered for purchase. The managers also run small cap growth portfolios for both John Hancock and Dreyfus.

The low minimum, no-load “Legacy” share class of Meridian Equity Income (MEIFX) reopens on November 1 to those purchasing directly from the advisor.

Effective September 30, 2018, the Quaker funds stopped charging front-loads and renamed their “A” class shares as “Advisor” class. At the same time, they’re liquidating the “C” share class and moving those investors into the (cheaper!) Advisor shares. Sadly, they’re also merging away half their funds. You win some, you lose some. Details in the “Dustbin,” below.

CLOSINGS (and related inconveniences)

Upon the recommendation of Luther King Capital Management Corporation, the LKCM funds are liquidating the Adviser Class shares of LKCM Small Cap Equity Fund (LKSAX) on or about October 31, 2018 and have terminated the Adviser Class shares for LKCM Equity Fund (LKEAX) and LKCM Small-Mid Cap Equity Fund (LKSDX), which is less of an issue as they have not commenced operations and have no assets or shareholders. LKCM attributes the move to “changes in the marketplace for the distribution of mutual funds.”

Global X Iconic U.S. Brands ETF (LOGO), which is tiny and not growing, was liquidated on September 28, 2018. Somehow the fact that a collection of “iconic U.S. brands” couldn’t draw investor interests almost makes them seem less than iconic. Ironic?

OLD WINE, NEW BOTTLES

On February 15, 2019, Fidelity SAI International Minimum Volatility Index Fund (FSKLX) will be renamed Fidelity SAI International Low Volatility Index Fund and Fidelity SAI U.S. Minimum Volatility Index Fund (FSUVX) will be renamed Fidelity SAI U.S. Low Volatility Index Fund. I’m guessing “Low” is higher than “Minimum”?

Global X is switching index providers for its various China ETFs from Solactive to MSCI. In consequence, on December 5, 2018, Global X China Financials ETF (CHIX) will become Global X MSCI China Financials ETF and Global X China Industrials ETF (CHII) becomes Global X MSCI China Industrials ETF, the main consequence of which is that the number of portfolio holdings in each will double from about 40 to about 80. At the same, Global X NASDAQ China Technology ETF (QQQC) becomes Global X MSCI China Communication Services ETF and Global X China Energy ETF (CHIE) turns into Global X MSCI China Energy ETF, each with a 50% cut in portfolio holdings. Global X China Consumer ETF (CHIQ) becomes Global X MSCI China Consumer ETF and Global X China Materials ETF (CHIM) becomes Global X MSCI China Materials ETF, both with a modest broadening of the portfolio.

And, on November 19, 2018, Global X YieldCo Index ETF (YLCO) becomes Global X YieldCo & Renewable Energy Income ETF.

Finally, Global X is in the process of acquiring three Horizon ETFs. Following all of the legal niceties, Horizons DAX Germany ETF (DAX) will become Global X DAX Germany ETF, Horizons NASDAQ 100 Covered Call ETF (QYLD) becomes Global X NASDAQ 100 Covered Call ETF and Horizons S&P 500 Covered Call ETF (HSPX) morphs into Global X S&P 500 Covered Call ETF.

Invesco S&P SmallCap Utilities ETF (PSCU) was rechristened Invesco S&P SmallCap Utilities & Communication Services ETF in late September, 2018.

Alert! Alert! Alert! Effective on or around October 23, 2018, iShares MSCI Global Impact ETF will change its ticker symbol from MPCT (which made immediate sense) to SDG (which doesn’t). I’m sure there was a compelling argument – and likely an ad hoc task force, two reviews and a 150 slide PowerPoint deck – behind the change.

Meridian Equity Income Fund (MEIFX) is undergoing a makeover. Effective November 1, it gets rechristened as Meridian Enhanced Equity Fund and the current provision that it seeks “income as a component of total return” and that it focuses on “dividend-paying” equities both disappear. Morningstar rates it as a three-, four- and five-star fund currently.

meridian equity morningstar ratings

All of the share classes have returned over 21% through the first three quarters of 2018, though volatility tends to be a third higher than its peers.

On November 30, 2018, Putnam Global Telecommunications Fund (PGBZX) is be rechristened Putnam Global Communications Fund. That’s triggered by a change in the GIC Standard for the field and it’s going to trigger “significant dispositions of certain portfolio holdings.” Just as a heads up, “significant dispositions” are generally taxable and, being unplanned, might well be painfully taxable.

The Tocqueville International Value Fund (TIVFX) is being adopted by American Beacon, with the fund’s current adviser becoming its new sub-adviser. No word on the date. I’m guessing the new fund’s name will be something like, oh, American Beacon Tocqueville International Value Fund.

The 14 Westcore funds have become the Segall Bryant & Hamill funds. The names are parallel (Westcore SCG is now SBH SCG) with a few inconsequential tweaks: Micro Cap (two words) becomes Micro-Cap Opportunity, Fundamental International Small Cap becomes International Small Cap, that sort of thing.

OFF TO THE DUSTBIN OF HISTORY

creepy skull on black backgroundOn September 20, 2018, the Board of Trustees authorized “an orderly liquidation” of the ALPS/Dorsey Wright Sector Momentum ETF (SWIN). From September 21, 2018 through October 22, 2018, the Fund will be in the process of closing down and liquidating its portfolio, and it will cease operation of October 22, 2018.

In what looks like a tiff and/or dust-up, the adviser to American Independence U.S. Inflation-Protected Fund (FFIHX) has advised the Board to liquidate the fund rather than try to re-organize it, has announced their decision to cease management of the fund on October 30, 2018, and to suspend their prior, voluntary cap on the fund’s fees and expenses immediately. The Board hasn’t responded, but that seems pretty much like a fatal wound.

AMG Managers Montag & Caldwell Balanced Fund (MOBAX) and AMG Managers Montag & Caldwell Mid Cap Growth Fund (AMCMX) disappear on October 26, 2018. MOBAX launched in 1994 and has been managed by Ron Canakaris the entire time. It’s a relatively low volatility balanced fund (59% downside capture) whose returns were too modest to maintain a viable investor base. Given Mr. Canakaris’s recent decision to step down as lead manager of Montag & Caldwell Growth, it might be that the fund’s sunset is linked to his.

The Board of Trustees of Professionally Managed Portfolios has approved the merger of Congress SMid Core Opportunity Fund (CACOX) into the Congress Mid Cap Growth Fund (CMIDX). I like their honesty: “the Acquired Fund has grown slowly since its inception, and as of August 31, 2018 the Acquired Fund had only approximately $25.6 million in assets. At the current asset size, the Acquired Fund is unable to support its own expenses without significant subsidy from the Advisor.”

Fidelity is merging away two of its Advisor funds. In each case, the Advisor will disappear into the retail version of the same fund on December 7, 2018. The affected funds are Fidelity Advisor High Income Fund (FHIAX), merging in Fidelity High Income Fund (SPHIX) and Fidelity Advisor Emerging Markets Income Fund (FMKAX), which is absorbed by Fidelity New Markets Income Fund (FNMIX).

FMC Select Fund (FMSLX), once a fabulously successful stealth fund that operated without marketing or even a ticker symbol, will liquidate on October 29, 2018.

Glenmede Mid Cap Equity Portfolio (GMQAX) will be liquidated on November 15, 2018.

Speaking of “distressed,” Guggenheim Event Driven and Distressed Strategies Fund (RYDOX) will, in recognition of “the Fund’s small asset base and low market demand,” liquidate on October 30, 2018.

John Hancock U.S. Growth (JHUAX) will probably merge into John Hancock Strategic Growth Fund (JSGAX) by March 2019. Right now they’re in the “call a shareholder meeting in December” stage of things.

Loomis Sayles Core Disciplined Alpha Bond Fund (LSABX) will liquidate on or about November 15, 2018.

LMCG Global Market Neutral Fund (GMNRX) is closed to new investments and will liquidate on or around the close of business on or about October 31, 2018.

Meeder Aggressive Allocation Fund (FLAGX) will merge into the Meeder Dynamic Allocation Fund (FLDGX), to be effective as of December 3, 2018.

Effective September 25, 2018, the MM Select Bond and Income Asset Fund (MSBJX) was dissolved. The MM in question is Massachusetts Mutual.

NorthPointe Small Cap Value Fund (NPSVX) will liquidate on or about October 26, 2018.

Oppenheimer International Growth and Income Fund (OIMAX) will liquidate on or about November 16, 2018.

PhaseCapital Dynamic Multi-Asset Growth Fund (PHDZX) was liquidated on or about September 27, 2018

Effective as of November 2, 2018, Putnam Emerging Markets Income Fund (PEMWX) will be closed to new purchases and will be liquidated on November 16, 2018.

Quaker Global Tactical Allocation Fund (QTRAX) will merge into the Quaker Impact Growth Fund (QUAGX, formerly the Quaker Strategic Growth Fund) and Quaker Mid-Cap Value Fund (QMCVX) disappears into the Quaker Small/Mid-Cap Impact Value Fund (QSVIX, formerly the Quaker Small-Cap Value Fund). Their target timeframe is “the Fall of 2018.”

Schwab GNMA Fund (SWGSX) will close on October 26, 2018 and will liquidate on November 7, 2018. Schwab notes that investors can continue making investments in the fund right up until the day of execution, but why would you?

Strategic Advisers Income Opportunities Fund of Funds (FPIOX), a Fidelity product, will liquidate on or about December 12, 2018.

Effective immediately, the Topturn OneEighty Fund (TTFOX) has closed to new investments and will discontinue its operations effective October 26, 2018. It was an expensive fund-of-funds that mostly did okay, wherein lay the problem. “Expensive” and “okay” are hard to market.

Virtus will be dragging 10 funds into the graveyard on Halloween this year, none will be returning. Virtus Conservative Allocation Strategy Fund (SVCAX), Virtus Growth Allocation Strategy Fund (SGIAX), Virtus DFA 2015 Target Date Retirement Income Fund, Virtus DFA 2020 Target Date Retirement Income Fund, Virtus DFA 2030 Target Date Retirement Income Fund, Virtus DFA 2035 Target Date Retirement Income Fund, Virtus DFA 2040 Target Date Retirement Income Fund, Virtus DFA 2045 Target Date Retirement Income Fund, Virtus DFA 2050 Target Date Retirement Income Fund, and Virtus DFA 2060 Target Date Retirement Income Fund will liquidate on October 30, 2018.

Westwood Global Equity Fund (WWGEX) will liquidate on October 12, 2018.