Category Archives: Mutual Fund Commentary

Morningstar Minute

By David Snowball

The Mutual Fund Observer is the product of a virtual team and, when our colleagues from England and Trinidad were working with us, a virtual global team. Chip and I reside in Iowa, Ed and Sam in Illinois, Charles in California, Bob C in Ohio and Dennis in Montana. One of the great attractions of the Morningstar conference is that it gives us a chance to work side-by-side on interviews and stories, and to share quick and personal reactions to the ideas and personalities we encounter.

As ever, we’ll try to offer some quick responses in the form of end-of-day posts to Continue reading →

To the shareholders of Quaker Event Arbitrage Fund: open your danged mail!

By David Snowball

Quaker Funds, based in Berwyn PA, are a small family at tactical allocation funds. As they imagine a transition which will include an ESG focus, it became clear that Thomas Kirchner’s event-driven fund would be something of an anomaly. Event arbitrage funds aim to profit from predictable but short-lived market anomalies when, for example, a firm announces a change of control or reorganization. Limiting himself to relatively rare events in a relatively limited slice of the equity universe makes very little sense, so QEAAX/QEAIX is trying to join the Continue reading →

Briefly Noted

By David Snowball

Updates

In October 2016, Dennis Baran profiled City National Rochdale Emerging Markets (RIMIX/CNRYX). His bottom line on the fund,

CNRYX offers an investor exposure to emerging markets by its concentrated strategy in Asia. Since inception, the fund has adhered to its six-country Asian allocation and not included other EM Asian countries or EM countries outside of that region in any meaningful way. The manager believes that the long-term positives of the region discussed here can become a virtuous cycle that could last for decades and lead to fund outperformance. The results thus far support that thesis: the fund has earned a five-star designation from Morningstar, is ranked highest by Lipper in total return, consistent return, tax efficiency, expense, and is a MFO Great Owl.

Continue reading →

May 1, 2018

By David Snowball

Dear friends,

If you’re ever had cause to poke around MFO, perhaps “About Us” or “Support Us,” you’ll have spotted the younger me and the younger version of my son, Will. We were poking around England seven years ago, around the time we launched MFO, and we wanted to give folks a peek at the people behind the text. Continue reading →

Rolling Down the Appian Way

By Edward A. Studzinski

“To succeed in the world, it is not enough to be stupid, you must also be well-mannered.”

Voltaire

There is a show on Showtime cable that purports to give a pretty good reading of the world of hedge funds and their masters, called “Billions.” It is now into its third season. A scene in the third episode of this season resonated with me regarding some of the issues and problems that active managers face today. The main character, Bobby Axelrod of Axe Capital, has surrendered his rights to trade as a hedge fund manager/chief investment officer in return for having his personal capital unfrozen and thus accessible. His successor as Chief Investment Officer at the firm, Taylor Mason, has begun a search to find some quantitative managers that can be brought into the firm, hoping they will be additive to the Continue reading →

The Morningstar Minute

By David Snowball

Morningstar’s plan to roll out their own family of mutual funds, for use with their managed portfolio service, is becoming more concrete. In an April 23, 2018 filing with the SEC, Morningstar notes that they’re in “the quiet period” required by the SEC; nonetheless their filing says a lot.

Morningstar will offer nine funds to their Morningstar Managed Portfolio clients. That’s a booming Continue reading →

New York AG forces fund companies out of the indexing closet

By David Snowball

(with special thanks to rforno of MFO’s Discussion Board for the title)

The New York State Attorney General’s office has weighed-in on behalf of investors, and active share. Active share is a measure of the extent of the difference between what’s in fund’s portfolio and what’s in the fund’s benchmark index. If your fund holds all the same stocks in all the same percentage as its benchmark, then its active share is zero. A zero active share is good if you’ve bought – and are being charged for – an index fund. A zero active share is bad is you were sold – and are being charged for – something masquerading Continue reading →

Living a Rewarding Retirement : Settling into Retirement, May, 2018

By Robert Cochran

There have been many changes for me since August 31, 2017.  On that day, I officially retired as partner and Chief Compliance Officer of PDS Planning, Inc. in Columbus.  Having worked for a total of almost 50 years (five of those while I was in college), there was more than a bit of trepidation as I neared retirement.  Would I really fill my time?  Would I find myself longing to be at work again, missing the daily interactions with colleagues and meetings with clients? Would I be able to sit back and not be on top of the financial markets?  These were just a few of the thoughts running through my 67 year-old brain as I cleaned out my desk and office.

Notice that I did include the future of the company I helped build in Continue reading →

It’s going to get worse before it gets better

By David Snowball

Not the stock market. I have no earthly clue about what it’s going to do, when, or why. I mean the headlines.

On April 24, the Dow dropped by 425 points. That’s 1.7%, which isn’t large and isn’t saying “the market” dropped by 1.7%. The Dow is a narrow and quirky construct. The broader market is reflected in the performance of the Vanguard Total Stock Market Index Fund (VTSMX), which declined Continue reading →

Briefly Noted . . .

By David Snowball

Update

Two notable updates from the folks at Zeo.

Our 2014 profile of Zeo Strategic Income celebrated their “extraordinarily thoughtful relationship between manager and investor. Both their business and investment models are working. Current investors – about a 50/50 mix of advisors and family offices – are both adding to their positions and helping to bring new investors to the fund, both of which are powerful endorsements. Modestly affluent folks who are looking to both finish ahead of inflation and sleep at night should likely make the effort to Continue reading →

April 1, 2018

By David Snowball

Dear friends,

It’s spring.

It’s snowing.

Happy Easter.

Or Happy Eostre, if you prefer. The timing of Easter appears to be another instance of religious plagiarism, as early Christians borrowed a pagan spring festival as the (endlessly variable) date on which to celebrate the Resurrection. We don’t know that Eostre actually was a pagan goddess, since only the Venerable Bede testifies to her existence. Still, it makes sense and would be a great time to be hopeful.

So, Felices Pascuas and/or chag Continue reading →

Snowball’s portfolio

By David Snowball

Roy Weitz, founder of FundAlarm and sort of godfather to MFO, annually shared his portfolio, and his reflections on it, with his readers. He owned up to his mistakes, talked through his logic and revealed his plans. When I began contributing to FundAlarm, he encouraged me to do likewise. This essay, then, is an annual “think aloud” exercise that might help you imagine how to make more informed, satisfying decisions for yourself. In constructing it, I drew on my reading and conversations with managers as well as the tools available at Morningstar and MFO Premium.

I’ve thought long and hard to create a portfolio that allows me to be dumb and lazy. My overarching goal is to have a portfolio that lets me Continue reading →

The Morningstar Minute

By David Snowball

Morningstar’s analysts can cover a limited number of funds, “those investments that are most relevant to investors and that hold a significant portion of industry assets.” When analysts cover a fund, they issue a forward-looking rating based on five research-driven “pillars.” Those ratings are described by medal assignments: Gold, Silver, Bronze, Neutral and Negative. The analyst ratings are distinct from the iconic star ratings; the star ratings are backward looking (they tell you how a fund did based on risk and return measures) while the analyst ratings are forward-looking (they aspire to tell you how a fund will do based on a broader set of Continue reading →

The 15 / 15 Funds

By David Snowball

It was ridiculously easy to make 15% total returns in 2017. 3,406 funds managed the feat.

And it was not particularly hard to hold 15% cash in 2017, though it was certainly unpopular with investors. 970 funds held that level of cash, either as collateral on derivative purchases, as a defensive move, or from the inability to find suitable investments.

Making 15% is good. It’s about 50% above the Continue reading →

Launch Alert: T. Rowe Price Multi-Strategy Total Return Fund

By David Snowball

On February 23, 2018, T. Rowe Price launched Multi-Strategy Total Return (TMSRX / TMSSX) which combines six liquid-alt strategies in a single package. These multi-strategy or multi-alternative funds function in the way that hedged funds were originally envisioned to: they combine strategies whose returns are not dependent on the movements of the broad equity and bond markets and, ideally, are not correlated with each other. The goal is to produce the Continue reading →

March 1, 2018

By David Snowball

Dear friends,

I’m often a bit confused. Sometimes it’s as simple as the stuff in my pantry. Why, for instance, is cranberry sauce canned upside down? Look! The part you’ve supposed to open is on the bottom.

Sometimes it’s the challenge of figuring other people out. What was Snap’s board thinking when they gave their CEO at $637 million (an amount equal to 75% of the company’s revenue) bonus? Someone named Kylie Jenner shared the following 19 words on Twitter: “”so does anyone else not open Snapchat anymore? Or is it just me? Ugh, this is so sad.” How on Earth did that convince investors to trim $1.6 billion in Snap’s market value in 24 hours? Continue reading →

Funds for the Gun-Shy

By David Snowball

I grew up in western Pennsylvania where even the elementary schools let out classes on the first day of small game season. I’m the son of a veteran and a hunter, and the grandson of a sheriff. I spent a lot of mornings, just after dawn, in blaze orange, walking as quietly as a seven-year-old could. I owned a single-barrel 20 gauge Remington and cared for it well. (I also owned a .22 with a scope I never quite mastered.) I was thrilled when I got to stay overnight in a hunting camp with “the men,” though I modestly regretted both the jar of Limburger cheese that someone had left the season before and the creepy sounds you heard when visiting the outhouse at night. I’ve sheltered in the eerie calm of a Continue reading →

Launch Alert: JOHCM Global Income Builder

By David Snowball

On November 29, 2017, J.O. Hambro Capital Management launched JOHCM Global Income Builder (JOFIX/JOBIX) managed by the firm’s Multi Asset Value Team. It seeks to achieve a reliable stream of meaningful monthly income distributions, coupled with some capital growth and a vigilant concern for limiting investor losses. It is a multi-asset fund but it is largely unconstrained: it targets US and international income-producing securities including common stock, high-yield and investment grade debt, preferred shares and convertibles, and a variety of hedges including gold, precious metals, currency forward contracts, and inflation-linked vehicles. Continue reading →

The Morningstar Minute

By David Snowball

The Morningstar Investment Conference returns to June and to the McCormick Place. MICUS runs June 11–13, 2018 at McCormick Place, Chicago. Jeremy Grantham and Dan Kahnemann are speaking and folks from a bunch of first-tier small fund firms will be there: Centerstone, FPA, JOHCM, Moerus, Queens Road, RiverPark, Seafarer. Not Grandeur Peak or Rondure. Pity. We’ll be there. Let us know if you’d like to meet. Continue reading →