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The Fund bases its NAV on valuations of its interests in Underlying Funds provided by the managers of the Underlying Funds and/or their agents. These valuations involve significant judgment by the managers of the Underlying Funds and may differ from their actual realizable value. ... The Board, the Investment Manager and the Valuation Committee may have limited ability to assess the accuracy of these valuations.
The Fund may also invest ... in affiliated entities or accounts that may directly or indirectly benefit the Investment Manager or its affiliates, including Underlying Funds managed by affiliates of the Investment Manager.
For the year ended April 30, 2021, the Investment Manager has fully recovered all of its previously waived fees totaling $401,308. For a period not to exceed three years from the date on which a Waiver is made, the Investment Manager may recoup amounts waived or assumed, provided it is able to effect such recoupment and remain in compliance with the Expense Limitation.
© 2015 Mutual Fund Observer. All rights reserved.
No proof of accreditation was sought by Schwab at purchase. I was able to buy just like any other mutual fund.
The fund does buy "exotic" stuff so jockey experience is key.
“Under normal market conditions, the fund will seek to achieve its investment objective by investing, directly or indirectly through a wide range of investment vehicles (“underlying funds”), a majority of its net assets (plus any borrowings for investment purposes) in alternative income-generating investments. It may also invest in public securities, including public debt, master limited partnerships, business development companies, and preferred stock. The fund is non-diversified.” Source
Everybody’s looking for yield - including me. There just isn’t much to be found today without taking a lot of risk. So “niche” funds, “exotic” funds, “jockey” funds are in vogue. @Derf - The fund appears to have substantial real estate investments. No doubt there’s a track in there somewhere.
Interesting to know that neither ticker appears on Schwab public sites. So either Schwab shows fund only if one is logged in or is eligible to purchase fund(via RIA).
I was introduced to the fund through an investment club that I am a member of. Also ran across it in one of my saved searches on MFO Premium.
This fund is very much an alt -- high risk, high reward. Strays quite far from the usual stocks/bonds/options stuff.
Before anybody asks, to be clear I am not hawking my RIA and have no intent to share my RIA's name here in the public forum or in private messages.
I edited my original post and called out RIA.
Regarding stale and stable prices - this likely goes a long way in explaining where the high Sharpe ratio comes from. Sort of like looking at a Madoff portfolio. I'm not suggesting anything improper here (unlike with Madoff), just agreeing with Lewis that the pricing can be misleading. It's doubly risky here because for the acquired funds, this fund relies on the acquired funds' managers to price their own illiquid investments and suggest their NAVs. From the prospectus: It wasn't that many years ago when a number of posters were complaining about fair market valuations, which often meant valuing foreign securities with prices stale by hours, not days or weeks. Pricing here is much more uncertain.
The fund holds nearly 9% in money market funds, which is a drag on its performance and investors are paying an ER on. Not sure why the managers can not buy short term treasuries themselves, rather than pay an ER to a MM manager.
If you do not mind, perhaps, explain to us the ER again. If there is a cap of 1.45% plus acquired fund level ER of 0.57%, that is a total of 2.02%. How do I get to 1.85%?
How does the current waiver impact future ER, especially if the fund loses AUM?
At inception, each manager invested between $5 and 15 million. Forms 4 are posted on the fund website. May be they started the fund to invest their own money and then must have attracted clients from their previous job where all three managers worked concurrently for a number of years. Manager bios are on the fund website - seems they have always been outsourcing managers, rather than being selectors of securities and trading them.
Absent that cap, the fees (excluding acquired fund fees) would be 0.56% and the total ER would be 0.96%.
Columbia Thermostat Summary prospectus.
Extra management fees can be instead added surreptitiously by using an excessively costly share class of underlying funds. That's what Vanguard does with its funds of funds (e.g. STAR). Instead of utilizing Admiral or Institutional class shares, these funds purchase more expensive investor class shares of underlying funds. In fact, Vanguard eliminated the more expensive investor class shares of its index funds except for use in its funds of funds.
An expense cap usually reduces current expenses. In order to satisfy a cap, a fund's management company waives some of its fees. Later, the fund may operate more efficiently (e.g. economies of scale) or a cap may still be in place but with a higher expense limit. Either way, it can happen that actual expenses are below the stated cap. At that point, the cap appears to be moot.
But then the management is allowed to "claw back", i.e. recover, the fees that it originally waived. At least so long as the actual expenses plus the claw back don't exceed the current expense cap. Usually a claw back is limited to three years - management can only recover fees that it waived in the past three years.
Your question about how ERs work with caps is where the twist comes in. Total expenses of NICHX are 1.78% (per prospectus). Excluding the expenses that don't count toward the cap (such as acquired fund expenses) brings the ER well below 1.45%. So the management is allowed to claw back previously waived fees.
The annual report shows that the clawback for the year ending April 2021 amounted to 0.07%. That plus the prospectus' 1.78% ER (including underlying fund expenses) gets one to 1.85%.
Finally, it may be worth noting that the way NICHX handles fees of underlying funds that are affilitates is to disclose the conflict of interest rather than to adjust for double dipping. Again from the prospectus (Conflicts of Interest section):
The only fund of funds I ever considered buying was CTFAX (but did not buy). During my review, I called the fund and asked among other things about duplication of management fees and the rep who I spoke with said NONE. We can forgive him for a 10 bps error. I have found most reps are limited in their knowledge - may be they are over worked or may be they hold temporary jobs to invest their time! Talking to the managers / fund investment professional is the best but usually one has to be an RIA or a big investor in the fund before that access is given.
Good to know this year NICHX expenses have come under the cap - efficiencies of scale I suppose going from $550M AUM at Oct 2020 to $1.35B at Nov 2021. Nice of them not to use up the disclosed cap. (I used to work in professional services and my team never gave any part of the fee cap back to the clients!) Given the current year claw back was only 0.07% and the charged expenses were below the cap, is it reasonable to assume that all the previous waivers are now clawed back and no claw back of historic waiver would be needed in the future years? I am guessing yes, but thought I would ask in case you know the answer off hand.
More importantly, thank you for bringing to light Vanguard's clever way to charge fees (I am sure they disclosed!), considering how much chest thumping it does about fees. Thankfully, I never invest at Vanguard for their presumed low fees; high fees never stopped me from an investment, though I like to know / understand how much I am paying.