"Global Microcap, the micro-cap subset of Global Reach"
Hmmm.....Global Reach only has a market cap average of 718 million.
Sounds like a micro-cap subset will probably have a market cap of 200-300 million

I'm not sure why number matters? I was more wondering if "wide moat" approximates quality?

jlev, I think you may be right, and "wide moat" probably is a decent approximation of quality.
The reason why the number of stocks matters:
Let's say you are asking how small caps have done YTD. You would look at the entire Russell 2000 index, all 2000 stocks. You wouldn't look at an actively managed fund of 20 carefully selected small cap stocks.
If you were asking how the stock market has done YTD, or last year, or whatever: you would look at a Total Stock Market Index fund like VTI, or some people would look at the full S&P 500 index. But you wouldn't base it on how an actively managed fund of 20 or 30 carefully selected stocks did.
Same with the question of how is "quality" doing this year. If you look at a fund whose job is to pick the 20 most undervalued wide moat stocks, you are getting more information about how that specific fund did, rather than the entire universe of "quality" stocks.
Another example is that a lot of people think the Dow 30 is "the stock market", but it's only 30 stocks, even though it is chosen to be representative of the stock market as a whole. But there's over 3600 stocks in the U.S. total stock mkt index, so there's no way any 30 stocks can be representative. The Dow 30 is up 4.5% YTD, but the S&P 500 is up 8.85% YTD.

The big picture at Grandeur Peak (from our August 2013 issue)
In the course of launching their new Global Reach fund, profiled below, Grandeur Peak decided to share a bit of their firm’s long-term planning with the public. Grandeur Peak’s investment focus is small- to micro-cap stocks. The firm estimates that they will be able to manage about $3 billion in assets before their size becomes an impediment to their performance. From that estimate, they backed out the point at which they might need to soft close their products in order to allow room for capital growth (about $2 billion) and then allocated resource levels for each of their seven envisioned strategies.
Those strategies are:

• Global Reach, their 300-500 stock flagship fund
  
• Global Opportunities, a more concentrated version of Global Reach
  
• International Opportunities, the non-U.S. sub-set of Global Reach
  
• Emerging Markets Opportunities, the emerging and frontier markets subset of International Opportunities
  
• US Opportunities, the U.S.-only subset of Global Opportunities
  
• Global Value, the “Fallen Angels” sub-set of Global Reach
  
• Global Microcap, the micro-cap subset of Global Reach

President Eric Huefner remarks that “Remaining nimble is critical for a small/micro cap manager to be world-class,” hence “we are terribly passionate about asset capping across the firm.” With two strategies already closed and another gaining traction, it might be prudent to look into the opportunity.

Some news of interest to many at MFO:

I'm not quite sure if it's the right comparison, but I use MOAT as a proxy for this concept

http://www.vaneck.com/funds/moat.aspx
"a rules-based, equal-weighted index intended to offer exposure to the 20 most attractively priced companies with sustainable competitive advantages according to Morningstar's equity research team."
This is more of a play on a very limited number of companies, actively selected by Morningstar's stock analysts. I might now consider it a 'proxy for this concept', mainly because there are too few stocks to represent the concept of quality.
http://news.morningstar.com/articlenet/article.aspx?id=665790
In the lists above, I see that GMO has a quality fund.

From Junkster's linked article: "The yield on the two-year note, which rises when bond prices fall, dropped to 0.537% during today’s market action."
Folks, that's before your short term bond fund takes its cut (the ER). So, that "safe" investment's going to earn you essentially nothing. OK - Should Armageddon occur within 2 years, prices might spike higher.

I like QUAL. Good concept. Great low fee. Volume still on light side, despite $500M AUM. So, use stops to help prevent getting stung by spread.

@Charles, how do you distinguish a bid-ask spread from a premium-discount to NAV?
Which of those 2 are you trying to minimize?

1. Fannie Mae up 4.36%
2. Sears up 1.02%
3. St. Joe up .95%

http://blogs.barrons.com/incomeinvesting/2014/09/23/strong-two-year-auction-draws-foreign-interest/?mod=BOL_hp_blog_ii
Super strong bidding today for 2 year notes at 0.589%, primarily from foreign central banks.

I like QUAL. Good concept. Great low fee. Volume still on light side, despite $500M AUM. So, use stops to help prevent getting stung by spread.

Well, as usual, I just shot my mouth off without worrying too much about the actual numbers, so when I looked into it, I was happy to see that I was correct.

@dryflower, Morningstar just came out with an article on the subject.
http://news.morningstar.com/articlenet/article.aspx?id=665790
When Will Quality Bounce Back?

These funds' lackluster recent performance doesn't tell the whole story.
"Left behind the past few years have been many funds focusing on "quality" stocks, generally defined as those that are highly profitable, generate a lot of cash, and have strong balance sheets"

In the below linked article Bespoke Investment Group provides their take on the major indexes; and, will the S&P 500 Index follow the others?
http://www.bespokeinvest.com/thinkbig/2014/9/22/dropping-like-flies.html

I think if you wanted you could use the historical information from the Fed to graph or create a table of what has historically happened to 10 Years when the Fed Funds rate changes, or pretty much any other comparison you'd want to do.
federalreserve.gov/releases/h15/data.htm
If you do that I'm sure lots of people, including myself would love to see the graph :)
The following link shows the history for the Fed's target for rates. To my surprise when rates have gone up historically they've gone up pretty quickly.
newyorkfed.org/markets/statistics/dlyrates/fedrate.html

Great resources from the Fed, LLJB. Thanks for posting that.
The historical Fed Funds rate was very interesting. Last month is shows the Fed Funds rate was 0.09%. In June 1981 it was 19.1%. That gives plenty of information for interest rate and bond market forecasters to work on.
You're right, it would be very instructive to compare changes in the Fed Funds rate with what happened to the 10-year bond. Or just a comparison between the Fed Funds rate and the 10-year Treasury. Hmmm....maybe Charles would love to sink his teeth into that data.

I'll call BS. I do not see rates at 3.75 by end of 2017.

I agree with this.
Lets say they start raising in June 2015. That would mean 2.5 years to run it up to 3.75. The economy would have to be doing very well for that to happen.

I agree with you Dex. The economy would have to be doing very well for that to happen. But we are talking bonds, not stocks. Yeah, the economy doing very well would be great for stocks, and I hope that's exactly what happens. And in the scenario you mention, "2.5 years to run it up to 3.75", bonds would tank big time. Certainly the U.S. Aggregate Bond Market Index. In that scenario, junk bonds probably do OK. And corporates much better than Treasuries.
Personally, I have no forecast for interest rates, the bond market or the stock market. I'll leave the forecasting to others.

I'll call BS. I do not see rates at 3.75 by end of 2017.

I agree with this.
Lets say they start raising in June 2015. That would mean 2.5 years to run it up to 3.75. The economy would have to be doing very well for that to happen.

I believe, although I couldn't find the details again of what I've read, that two of the most hawkish members of the Fed, Fisher and Plosser, will rotate off as voters next year. This should make the Fed more dovish on balance. At the same time, Yellen has shown herself to be pretty dovish so far and to the extent that history provides any evidence, the Fed's chairperson usually gets what they want even though there's a committee that "votes" on whatever the Fed does. At the press conference after the meeting finished Yellen commented on the "Dot Plot" specifically and my interpretation was that she essentially said it just reflects each member's expectations about a future that hasn't happened yet and it doesn't tell you anything about how much confidence each member has in their own projections.
In terms of what happens when the Fed raises rates, in theory at least, the longer the term the less the rate should adjust. That's because what people believe about the next 10 years shouldn't have a 1:1 relationship with what happens today (although admittedly it does sometimes) and because future rates should already discount what's expected for the future.
I think if you wanted you could use the historical information from the Fed to graph or create a table of what has historically happened to 10 Years when the Fed Funds rate changes, or pretty much any other comparison you'd want to do.
federalreserve.gov/releases/h15/data.htm
If you do that I'm sure lots of people, including myself would love to see the graph :)
The following link shows the history for the Fed's target for rates. To my surprise when rates have gone up historically they've gone up pretty quickly.
newyorkfed.org/markets/statistics/dlyrates/fedrate.html

I'll call BS. I do not see rates at 3.75 by end of 2017.
"the Fed just said last week that this is what they expect to do! "
And how many times has one Fed governor said one thing only to have another Fed governor say the opposite a few days later? How many times have they changed their forecasts? How many times have they moved the goalposts?
Go about your business and invest in a way that is appropriate for you. This whole situation with what the Fed is doing and analyzing whether or not a couple of words ("considerable time") were the same on the last Fed statement has really brought this whole thing into a new realm of utter ridiculousness. (Yellen: "No mechanical interpretation of "considerable time" - in other words "it depends on what your definition of is is".)
Edited to add, and sure enough...."http://headlines.ransquawk.com/headlines/fed-s-kocherlakota-says-should-be-very-cautious-about-starting-to-raise-rates-with-inflation-so-low-23-09-2014"

@JohnChisum, the bond fund you went into has a manager that is actively doing things to prepare. A lot of bond funds never do that, because by prospectus they have to stay pretty close to an index, like the total bond market index, which is based on the "Barclays Capital U.S. Aggregate Float Adjusted Index, a broad proxy for the investment-grade U.S. bond market", according to M*.
There seem to be two big IFs:
1. Will the Federal Reserve actually raise rates 3.75% by the end of 2017?
2. What will happen to longer term interest rates, such as the 10-year Treasury rate?
PIMCO doesn't believe the Fed will go that high. Bill Gross and company believe there will be a "New Neutral" rate of 2%, not the old standard of close to 4%, which apparently the Fed still believes in.
But look, the Fed just said last week that this is what they expect to do! And they told the whole world. We'll see who turns out to be correct, the Fed or PIMCO.
With regards to your question about "will bond funds perform better than equity funds in this same climate", I have no idea. I've read that stocks have not reacted nearly as badly as bonds to the initial volley of interest rate hikes. But who knows if the past historical patterns will repeat themselves.

John, the Fed also says they will raise rates in 2015....2016....and 2017. So it would be a steady raising of rates once they start. If it happens, and if the longer term rates follow suit, most bond funds are in trouble. The expected raise in 2015 would be to 1.25%, from the current rate of 0% to .25%. Even with that modest rise, the total bond market index would go down 5.7% in NAV, add in the 1.99% income for a total return of -3.7%. Again assuming that the longer term rates follow suit with what the Fed does.

Last week, the Federal Reserve released its "Dot Plot", which is a plot of what each member of the FOMC thinks the Fed Funds interest rate will be. They think they will have raised interest rates 3.75% by the end of 2017. That's a lot, and it has big implications for bond funds. The big question: if they raise rates 3.75%, how much will the 10-year Treasury yield rise? Will it also go up 3.75% from where it is now, which is 2.57%? IF it does (admittedly a very big IF), we are going to see some big drops in the NAV of bond funds. Take the Total Bond Market Index Fund (VBMFX). It has a Duration of 5.7 years. For every 1% increase in the corresponding interest rates of the bonds in the fund, the NAV is expected to drop 5.7%. IF the yield on the bonds in the fund goes up 3.75% over 3 years, we could see a 3.75 x 5.7 = 21.4% drop in the price of the fund. Add in the yield to get the total return. The current SEC yield is 1.99%. With a rise in rates/bond yields, the bond fund SEC yield will rise, but since the average bond in the Total Bond Market Fund has a maturity of 7.8 years, it should take a long time to clear those bonds out of the fund for the yield to rise enough to significantly offset the NAV drop. Not a pretty scenario for the bond market.
Your comments please!
http://blogs.marketwatch.com/capitolreport/2014/09/17/dot-plot-shows-fed-will-be-quick-about-raising-rates-once-it-starts/?mod=MW_story_top_stories