Category Archives: Mutual Fund Commentary

Snowball’s potato portfolio

By David Snowball

I like gardening rather more than I like investing. I garden because it’s joyful, healthy and engaging. Most recently, I planted my first potato patch with four artisanal varieties of tubers, one each of russet, gold, red and blue. That meant adding a considerable quantity of organics and a bit of sand to a 4×4 south-facing patch that had been mostly weeds. You’re also supposed to “hill up” potatoes as they grow but I couldn’t, for the life of me, figure out quite what that meant in the context of an open patch of earth. Instead, I collected grass clippings (a safe practice since I don’t chem my lawn) and kept everything but the leaves buried.  I’m stunned and delighted to report that it actually worked. I dug around in October and there was, like, food in the ground! Continue reading →

Has your fund been left behind by Morningstar?

By David Snowball

If so, you’re not alone.

There are hundreds of funds which Morningstar once covered that they can no longer afford to follow.  Morningstar started as seven guys working out of Joe Mansueto’s apartment. They’re now a publicly-traded global corporation with 3900 employees and $130 billion in assets under management (or advisement). More importantly, they’re a corporation with $600 million in annual expenses.

If you’ve got $600 million in bills, you really need more than $600 million in income and you don’t get that by worrying about small funds that aren’t on most advisors’ radar, especially when the entire universe of active funds is contracting.  Morningstar explains the rules this way, “We’re committed to covering those investments that are most relevant to investors and that hold a significant portion of industry assets.” In this case, “relevant” is pretty much Continue reading →

Launch Alert: Polen International Growth Fund (POIRX/POIIX)

By David Snowball

On December 30, 2016, Polen Capital Management launched Polen International Growth Fund (POIIX). The fund is an international extension of the high-conviction strategy behind Polen Growth (POLRX/POLIX) and Polen Global Growth (PGIRX/PGIIX). Polen has over $9 billion in assets under management and is located in Boca Raton, Florida, “far away from the short-term pressures of Wall Street.”

The fund will typically invest in 25 to 35 large cap international stocks, including those domiciled in both developed and developing markets. It might, from time to time, dabble in a few mid-cap names. The manager will focus on Continue reading →

Prelaunch Alert: T. Rowe Price U.S. High Yield Fund

By David Snowball

On February 27, 2017, T. Rowe Price announced their plans to acquire and rebrand a very solid young high-yield bond fund. The rechristened offering will be available by the end of May, 2017.

The adopted fund is Henderson High Yield Opportunities Fund (HYOAX/HYOIX). The Henderson fund has just $61 million in assets and a four-year track record. It’s managed by Kevin Loome, who spent 11 years as a high-yield analyst at Price before leaving to become Head of High Yield Investment at Delaware Investments (which has $167 billion in assets under management) then Head of U.S. Credit at Henderson Global Investors NA, the U.S. subsidiary of Continue reading →

Briefly Noted . . .

By David Snowball

Updates

Stay of execution: the Mirae Asset Asia Fund (MALAX) and Emerging Markets Fund (MALGX) were both scheduled for liquidation. “[A]fter further consideration,” the Board changed its mind. Both are very solid little funds, with an emphasis on the “little.” They have $25 million in assets between them after almost seven years of operation. At the same time, both are four-star funds with the same manager and both are distinguished by capturing a bit less of the downside and a bit more of the upside than their peers. The question remains whether, given the current infatuation with passive funds, that will ever be enough for the funds to reach economic viability. Continue reading →

February 1, 2017

By David Snowball

Dear friends,

I’m sorry we were late to the party, but glad that you’re here. We had a rough start to February. Our estimable technical director Chip had a bad fall at work which took her out for three days. Just as we were preparing for launch, our site was vandalized by what appears to be an Indonesian hacking collaborative. Then as we thought we’d undone the damage and settled back to work, they slipped in again. (To be clear: you’re safe. We collect neither personal nor tracking information. Any financial stuff goes through Amazon and PayPal, groups that can pay for security obsessiveness. Mostly they seemed interested in vandalism for the sake of “bragging rights.”)

And then, to top it off, Mr. Trump was president. Continue reading →

Launch Alert: Osterweis Emerging Opportunity Fund (OSTGX)

By David Snowball

On October 1, 2012, Callinan Asset Management launched Emerging Growth Partners, L.P. On November 30, 2016, Osterweis Capital Management re-launched the adopted hedge fund as Osterweis Emerging Opportunity Fund.

Manager James Callinan screens the growth universe, including both IPOs and mature growth companies, for companies and stocks that meet his criteria. He says, in general, that

We want to find an undiscovered or misunderstood company that should have sustainable and open-ended revenue growth of at least 20% for three to five years. Finally, we’re looking for rising margins which may include companies that are losing money and then will break into profitability.

Continue reading →

Launch Alert: Symons Concentrated Small Cap Value Institutional Fund (SCSVX)

By David Snowball

On December 5, 2016, Symons Capital launched Symons Concentrated Small Cap Value Fund. It is, so far, available only as an institutional offering with a $1 million minimum.

The fund is an extension of the Symons Concentrated Small Cap Value composite.  As of 12/30/2016, that composite reflected quite healthy investment performance. Continue reading →

Briefly noted

By David Snowball

Updates

It feels like an unusually consequential month for some of the fund industry’s most trusted voices. Scott Burns, long-time Dallas Morning News columnist, announced his retirement after “40 years of deadlines, 36 in national syndication. That’s over 5,000 columns and more than 3.5 million words.”  Rather than share final thoughts on personal finance (which you should have been able to glean from his preceding 3.5 million words), Scott offered “collection of columns that I wrote by leaving my computer, office and comfort zone.” If you write him, he’ll Continue reading →

January 1, 2017

By David Snowball

Dear friends,

Welcome to the New Year.

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

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

For fund managers, a lesson from a failed squatter toilet

By David Snowball

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

Investors are people.

Fund managers are people.

People are people.

People are weird.

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

Launch Alert: GQG Partners Emerging Markets Equity Fund GQGPX

By David Snowball

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

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

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

By David Snowball

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

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

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 Continue reading →

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 Continue reading →

December 1, 2016

By David Snowball

What a busy month.

On Monday, November 21, four U.S. stock indexes all reached all-time highs: the S&P 500, Dow, Russell 2000 and Nasdaq; it might be that the S&P Midcap 400 did the same, but that’s less clear to me. That feat was last accomplished on December 31, 1999. The coincidence led Chip, our estimable tech director, to launch into a spirited rendition of Prince’s “1999”:

I was dreamin’ when I wrote this
Forgive me if it goes astray
But when I woke up this mornin’
Could of sworn it was judgment day

The sky was all purple
There were people runnin’ everywhere
Tryin’ to run from the destruction
You know I didn’t even care

‘Cause they say two thousand zero zero
Party over, oops out of time
So tonight I’m gonna party like it’s 1999

I was dreamin’ when I wrote this
So sue me if I go too fast
But life is just a party
And parties weren’t meant to last

Continue reading →

The three coolest studies of 2016

By David Snowball

There are scholars whose entire lives are consumed by the need to study mutual funds. Not “study” in the carefree way I do or the deeply-tainted way that marketing-driven organizations do, but “study” with considerable rigor, sophisticated tools and a willingness to struggle with complexity.

While much of the content of these studies is inaccessible to Continue reading →

What Are You Thankful For?

By Mark Wilson

What Are You Thankful For?

Thanksgiving is my favorite holiday.  We get four days off, gather with our family and friends, and prepare and eat (hopefully) good food.  All of this without the extra “stresses” of the 4th of July or (at our house) Christmas.

Once everyone is seated around the dining room table, we wait for my father-in-law to ask the question “Can we go around the table and each share what we are thankful for?”  This is a longstanding tradition and another reason why I enjoy the holiday.  It’s great to hear answers ranging from “our family’s health” and “Uncle Russ has joined us” to “cranberry sauce!” and “the turkey is Continue reading →

Elevator Talk: Colin Symons, Symons Value (SAVIX)

By David Snowball

Since the number of funds we can cover in-depth is smaller than the number of funds worthy of in-depth coverage, we’ve decided to offer one or two managers each month the opportunity to make a 200 word pitch to you. That’s about the number of words a slightly-manic elevator companion could share in a minute and a half. In each case, I’ve promised to offer a quick capsule of the fund and a link back to the fund’s site. Other than that, they’ve got 200 words and precisely as much of your time and attention as you’re willing to share. These aren’t endorsements; they’re opportunities to learn more.

Colin Symons manages SAVIX and has managed it since the fund launched in Continue reading →

Prelaunch Alert: Laura Geritz, Grandeur Peak and the Rondure Funds

By David Snowball

When Laura Geritz left Wasatch Advisors in June after a decade with the firm, there was a clear and understandable sense of loss. Ms. Geritz had three public charges:

Wasatch International Opportunities (WAIOX), : a $635 million international small-growth fund. It’s got a five-star rating from Morningstar. Over the past five years, it’s posted higher returns with lower volatility than its Lipper peer group. The estimable Lewis Braham reports Continue reading →