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AIRR: Don’t Tell the Shareholders Too Much

BenWPBenWP
in Fund Discussions
I am entirely satisfied with the Richard A Bernstein Advisors AIRR, a proven winner.

However, were an alert shareholder to want more information on how the proprietary index the fund uses is constituted and how the managers choose and weight stocks, he/she/they would find only the following innocuous statement in the Annual Report that may or may not signal a material change in the fund’s strategy:

“During the fiscal year ended September 30, 2024, the Fund’s principal investment strategies were revised to reflect that the universe of eligible industries included in the Fund’s tracking index was expanded.”

True, the fund info on its website outlines what general principals are used to select the SMID stock holdings in the industrial and regional banking sectors. Of course great latitude is offered to the managers regarding weighting and screening. However, what “principal investment strategies “ actually changed remains opaque to me. The apparent intern who wrote the offending sentence needs instruction on avoiding Americanisms such as “reflect that,” but no one really wants a lesson in proper usage.

Comments

  • WABACWABAC
    edited December 1
    @BenWP, https://www.ftportfolios.com/Common/ContentFileLoader.aspx?ContentGUID=678fcb8a-2c51-4ef2-a08f-c813cf67fb33

    From the prospectus:
    issued by companies classified according to the Global Industry Classification Standard as comprising the following industries: (a) Commercial Services & Supplies; (b) Construction & Engineering; (c) Electrical Equipment; (d) Machinery; and (e) Banks.
    This was amended on July 10 like so:
    issued by companies classified according to the Global Industry Classification Standard as comprising the following industries: (a) Aerospace & Defense; (b) Air Freight & Logistics; (c) Building Products; (d) Commercial Services & Supplies; (e) Construction & Engineering; (f) Electrical Equipment; (g) Ground Transportation; (h) Industrial Conglomerates; (i) Machinery; (j) Marine Transportation; (k) Trading Companies & Distributors; (l) Transportation Infrastructure; and (m) Banks.
  • WABACWABAC
    edited December 1
    Just going through the purchases since July 10 we can see companies like Zurn Elkay (water infrastructure) and Kirby (tank barge operator) among the top ten holdings.

    Looking at some of the other holdings, I think the changes were underway before the prospectus was amended.
  • BenWPBenWP
    Many thanks @WABAC for digging up all that valuable info. M* reports 48% turnover, a fair amount for a fund following an index. Not that I object to the active management. I like your conclusion that portfolio changes had already taken place before the prospectus was revised. A sure-fire way of preventing front running, n’est-ce pas?
  • WABACWABAC
    BenWP said:

    Many thanks @WABAC for digging up all that valuable info. M* reports 48% turnover, a fair amount for a fund following an index. Not that I object to the active management. I like your conclusion that portfolio changes had already taken place before the prospectus was revised. A sure-fire way of preventing front running, n’est-ce pas?

    Yo sabe nada. :)

    I do think it's a reasonable move in line with their general thesis. I'm not upset that I bought it.

    The overlap with other etf's tops out at less than 20%, https://www.etfrc.com/AIRR And none of the overlaps in the top ten are GRID or PAVE. I recently added positions in all three, plus FIW, to my taxable. I'm in a situation where I can add more in the future if opportunities appear. They usually do.
  • Dennis Baran
    AIRR 1st quartile vs. SP 500 LT 1.5%, 10 yr. 3.7%, 5yr. 8.9%, 3 yr. 13.8%, 1yr. 34.2. Also Down Cycle vs SP 500 2021-2022 (9 mos.) 8.7%. Great Owl and my largest holding.
  • BenWPBenWP
    Just goes to show how M*’s rating system makes little sense at times. While AIRR gets five stars, it also gets the grade of Negative and critical comments about process and personnel. Seems way off the mark to me. Today’s M* lead article talks of how poorly SCV has done for last 10 years, a category that is a partial fit for AIRR. For my part it’s a fund-picker’s market with regard to small caps; @WABAC mentioned a couple of winners we share. An investor could have done nicely in SMLF in recent years during a period when slavishly buying SC index funds might have been disappointing.
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