GAINX numbers through January...

If I have this right, there's a British or Irish version of GAINX whose portfolio is essentially identical, so for tax purposes the managers (British citizens, I believe) would invest in the British version. I wonder if you could ask them the extent of their personal holdings in these funds? Thanks, these conversations are extraordinarily useful.

i would like to hear more about GAINX. the fund has been around for over 2 years and doesn't seem as a resounding commercial success @ just $5.5mm. Thus here my questions, if i may:
• Since the fund expenses are being heavily subsidized, for how long are they willing to continue without assets?
• GAINX has “dividend builder” in its name. What if a current holding has an attractive yield – due to its share depreciation (not just in sympathy with the market movement, but due to the company-specific issues) – would they retain the holding?
• Related to the above: Would they consider protecting ‘total return’ or do ‘dividends’ take priority?
Thanks. fa

We’d be delighted if you’d join us on Monday, February 9th, from noon to 1:00 p.m. Eastern, for a conversation with Matthew Page and Ian Mortimer, managers of Guinness Atkinson Global Innovators (IWIRX) and Guinness Atkinson Dividend Builder (GAINX).
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These are both small, concentrated, distinctive, disciplined funds with top-tier performance. Guinness reports:

Guinness Atkinson Global Innovators is the #1 Global Multi-Cap Growth Fund across all time periods (1,3,5,& 10 years) this quarter ending 12/31/14 based on fund total returns. They are ranked 1 of 500 for 1 year, 1 of 466 for 3 years, 1 of 399 for 5 years and 1 of 278 for 10 years in the Lipper category Global Multi-Cap Growth.

Why? Good academic research, stretching back more than a decade, shows that firms with a strong commitment to ongoing innovation outperform the market. Firms with a minimal commitment to innovation trail the market, at least over longer periods.
The challenge is finding such firms and resisting the temptation to overpay for them. The fund initially (1998-2003) tracked an index of 40 stocks chosen by the editors of Wired magazine “to mirror the arc of the new economy as it emerges from the heart of the late industrial age.” In 2003, Guinness concluded that a more focused portfolio and more active selection process would do better, and they were right. In 2010, the new team inherited the fund. They maintained its historic philosophy and construction but broadened its investable universe. Ten years ago there were only about 80 stocks that qualified for consideration; today it’s closer to 350 than their “slightly more robust identification process” has them track.
This is not a collection of “story stocks.” The managers note that whenever they travel to meet potential US investors, the first thing they hear is “Oh, you’re going to buy Facebook and Twitter.” (That would be “no” to both.) They look for firms that are continually reinventing themselves and looking for better ways to address the opportunities and challenges in their industry.
Matt volunteered the following plan for their slice of the call:

I think we would like to address some of the following points in our soliloquy.

• Why are innovative companies an interesting investment opportunity?
  
• How do we define an innovative company?
  
• Aren’t innovative companies just expensive?
  
• Are the most innovative companies the best investments?

I suppose you could sum all this up in the phrase: Why Innovation Matters.

In deference to the fact that Matt and Ian are based in London, we have moved our call to noon Eastern. While they were willing to hang around the office until midnight, asking them to do it struck me as both rude and unproductive (how much would you really get from talking to two severely sleep-deprived Brits?).
HOW CAN YOU JOIN IN?
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If you can't join but have questions for the guys, share them here. In general, either the managers will read them or folks from the adviser follow these discussions then brief them.
Hope you're all safe and warm,
David

The expense ratio of .99 seems rather high for an ETF. It will be interesting to see how it compares with FMIJX, which comes in at about the same expenses, hedges, is willing to go to cash, is more qualitative in its stockpicking, and looks to me like about the best international mutual fund out there. GAINX also seems to use generally similar methods for a global fund with an expense ratio a bit lower if you combine QVAL with IVAL.

It varies with the strategy. The more stocks you wish to own, the greater your capacity will be. Likewise, the lower down on the capitalization scale you wish to go, the lower your capacity will be. For example, let's say a fund wants to own 40 stocks and it's will to go down to $1 billion in market cap. Assuming you don't want to own more than 5% of any stock you get:
$1 billion x .05 = $50 million x 40 (the no. of stocks held) = $2 billion.
So roughly measured, you get a $2 billion capacity for that sort of strategy (GAINX might be a good example). That would be my rule of thumb, anyway.

@rjb112: i don't necessarily follow mega caps, but i own a chunk of S&P500 index, VGHCX and a few individual names that are considered mega caps. i like GAINX (heavily subsidized ER and global market leaders). institutionally, we are overweight US large caps in multi-asset accounts. the argument is that, fundamentally, profitability of US companies is rising and, technically, large caps usually lead when the rally is mature -- like it is now.

"Timing in and out, trying to own that "perfect" fund and collecting hot funds just doesn't make sense to me anymore. It can be fun as a hobby, but it can be detrimental on returns. Play on the fringe, invest the bulk with a longer term vision. "
Well said and that's really it. Again, I'm not one of those people who says that their way is the only way - farthest thing from it. People who use technical indicators and all of the other factors - all that stuff fascinates me. 5+ years ago, I moved in and out of things constantly and I really feel that it was detrimental on returns. Gradually I did that less and less.
The thing is, less micromanaging doesn't mean I'm not enjoying investing. If anything, having a "best ideas"/themes portfolio and having all but a couple of things pay a dividend has actually made the entire effort less stressful and decisions less emotional and less focused on the day-to-day. I can just own a (to use examples) Canadian National Railway or Conocophillips and that's it. Collect the dividend. Love researching ideas, have ideas in mind if I want to put more money in the market. Otherwise, best ideas that pay a dividend and just sit on them.
I think you have a portion that can be still for "play", but I dunno, I don't even find myself that interested in that anymore. I was going to invest in a little Canadian pot stock the other day and instead went with Marine Harvest (MHG), which has a variable dividend but a very generous dividend policy and is one of the world's largest seafood companies.
GAINX is really appealing and probably what I'll continue to move the rest of the money from PQIDX to.
As for TOLLX mentioned above, that's a great infrastructure mutual fund. I own INF, which I think is a good CEF play on it and I just keep reinvesting that monthly div. There's also Brookfield Infrastructure (BIP), which is a pure play on infrastructure but results in a K-1 at tax time.

Hi Scott. I've come to the same conclusion as you - think long term. Timing in and out, trying to own that "perfect" fund and collecting hot funds just doesn't make sense to me anymore. It can be fun as a hobby, but it can be detrimental on returns. Play on the fringe, invest the bulk with a longer term vision.
Anyway, in setting up my 401k rollover to Schwab, GAINX is one of the funds I'm considering as my large cap dividend focused fund (a 'theme' I like going forward). I noticed you were buying and I liked what I read in David's assessment. The other I was considering with dividend focus was SCHD.

I did add a couple of things in the last week that fit into the themes like I like and moved a bit more into GAINX, but otherwise I'm just not finding a whole lot of interest. Not selling anything.
Personally, for me, it becomes what do I want to own long-term. If something happens that requires a significant re-think of the thesis, fine, but the intent is long-term. I've really found it makes the whole process of investing more enjoyable. I still enjoy it, still do tons of research on new ideas, but to have names where you can feel like there's a good degree of "autopilot" and dividends just reinvest is - I find - significantly less stressful and there's less in the way of emotions involved in decisions.
I don't want to be trying to time the market and instead will just let dividends continue to come in (including a number of monthly payers, like VET and INF) and reinvest. There's nothing wrong with what you're doing, but I don't want to have to manage as frequently.

I'm really kind of surprised at that (re: amount invested.) I have continued to stay away from adding more to the Pimco equity funds given the turbulence at Pimco and the manager changes that have taken place at the equity funds.
I've been selling Pimco Dividend and Income Builder and moving it to GAINX and elsewhere. Pimco EQS L/S is having a blah year after a great year last year, but as I've often noted, I didn't expect that fund to be consistent, given the nature of the fund.

Added a bit to GAINX. Added STWD (Starwood Property Trust.) Added a little to Blackstone (BX). Added a little to Vermilion Energy (VET).

If you are looking at a moderate allocation fund, I prefer FPACX and OAKBX. Some here also like PRWCX. GAINX does not have bonds. Whether adding bonds to your portfolio is prudent, is a different question. If you are looking only for a stock fund oriented towards dividend-income, take a look at ETFs like HDV or VIG. I have bought HDV almost three years back and have added every year. So far so good.
I have been tempted to buy individual dividend-stocks, but low expenses of HDV (0.14%) are attractive.

Went with GAINX the other day as an equity income fund.

Hi, Ted!
You’re right…..I got so excited I ran out the back door and jumped in the pool….beat the dog by a step and a half, yessir! A man of action I am!
Sorry,...I just couldn’t stop myself. My wife says, “One too many….and, will you ever learn?” Women! No sense of humor! Ok, being serious…..you are quite right. I do overthink sometimes. Haven’t done much since January….was busy then. Bought GAINX -- toehold; GLFOX and NMFIX -- bought 2….1 just didn’t seem enough. Like Dennis Gartman, I want something that hurts when you drop it on your foot. I think he should drop something on his head so he doesn’t talk so much, but I digress…..
The most I put money into is MLPs, GLPAX, LCPAX, MLOZX. I don’t understand everything about MLPs, but I know I want to be there. So I guess you could say little cash, lots of talk. Sort of like the Fed when you’re out of bullets….
The Puddn

Hi, guys.
The nice folks at the Leuthold Group share a copy of Perception for the Professional, their research publication for paying clients, with me each month. About 60 pages of data analyses and reports. Jun Zhu this month wrote "Dividend Paying Strategies -- Which is Best?" and the findings are interesting.
Zhu notes that dividend-oriented strategies have been exceedingly popular, though many now fret that those stocks have been badly bid up. There's also a fear that dividend paying stocks lag when interest rates are rising. That turns out to be true, but not an investable insight: rate rising cycles tend to be triggered with little warning and last an average of nine months.
Even allowing for a lag during the 20% of months in which rates have risen, the strategy works well over time. Zhu writes "In the falling rate and neutral months, dividend paying stocks outperformed non-dividend paying stocks by a large margin. Regardless of interest rate changes, from 1927 to 2013, dividend paying stocks were the winner."
Zhu argues that there are at least four distinct dividend oriented (or dividend-oriented? Drmoran notes that I over-hyphenate. Overhyphenate? Over hyphenate?) strategies that manifest themselves in funds and ETFs. They are:
1. broad focus on dividend-paying stocks, which typically imposes simple size and liquidity requirements, then invests in dividend paying stocks.
2. high dividend-yield, which targets the highest-yielding stocks.
3. dividend growth, which requires consistent increases in payouts over 5-10 years.
4. quality dividends, which adds screens for the quality of the firm's financial strength and management. Those might include debt load, return on equity, earnings stability and dividend coverage ratios.
Leuthold tested those strategies by looking at the performance of dividend oriented ETFs from 1989 - 2014. They admit that few of the ETFs represent pure instances on one strategy of another, but most are strongly aligned with one of them.
They found (1) the dividend strategies as a group substantially outperformed the S&P500 (12.2% annually versus 9.0%) with lower volatility (4.2% S.D. versus 4.3%), (2) that "companies which have raised dividends for 10 consecutive years are actualy the worst performers" and (3) the quality dividend strategy blew away the competition on returns without incurring heightened volatility.
Quality dividend ETFs returned 14% annually with 4.1% S.D. The other three strategies clustered between 10.9% - 12.2% returns with S.D.s of 4.0 - 4.5%.
Charles might be the one to ponder about the mutual fund implications of the research, since fund managers add the overlap of relative value and absolute value orientations. As I think about the funds we've profiled, Guinness Atkinson Inflation Managed Dividend (GAINX) strikes me as a quality dividend / relative value bunch while Beck, Mack and Oliver Partners (BMPEX) would qualify as quality dividend / absolute value.
Leuthold's list of "quality" ETFs includes:
Schwab US Dividend Equity (SCHD)
iShares High Dividend Equity (HDV)
FlexShares Quality Dividend Index (QDF)
First Trust Value Line Dividend (FVD)
WisdomTree US Dividend Growth (DGRW)
FlexShares Quality Dividend Dynamic Index (QDYN, with the note this is a higher beta product)
FlexShares Quality Dividend Defensive Index (QDEF, lower beta).
For what interest it holds,
David

GAINX, profiled in the Mutual Fund Observer, looks promising.
PGVFX is a pretty aggressive global value fund with a good record.
Less aggressive are TWEBX and JPPIX.
For what it's worth, I like all of these and own all except TWEBX.

TWEBX is now a fully global fund and is rock solid, very much like ARTGX.
GAINX is a relatively new fund, low expenses and attacking investments from the dividend growth angle.
DODWX is a low expense large cap value fund from a very experienced company. For my tastes they're too willing to move into big banks, but you may differ on that.
JPPIX is a low expense all cap value fund of a conservative nature. It comes in various fund classes depending on how much you have to invest.
PGVFX is another low expense all cap value fund which owns quite a bit of smallcap. They just lowered their expenses to 0.99%. I think it's a nice way to get international small value at a very reasonable price.
GPROX is a new global small cap fund. There aren't too many of these around and this looks like a good one.
FPRAX just became a global fund. Absolute value, meaning they're willing to go into cash if they can't find anything they like. From a fine fund company, it's certainly one to keep an eye on.
There are some good choices out there. I own several of these myself.

Dear friends.
Day One consisted of a keynote address and the chance for a half dozen short one-on-one conversations.
The keynote address, by PIMCO's chief operating officer, Douglas Hodge, was nearly pointless. Part love song to the ETF ("you've democratized finance!") and part pedestrian droning (did you know that many people haven't saved enough for retirement, that the retirement stool has three legs and that asset class correlations spike during a crisis?), the most startling thing was how little PIMCO contributed to the talk. Mr. Hodge has access to some of the world's best fixed-income research and ended up giving the talk that any good financial planner would give one the first night of his "investing for the long term" seminar.
There is a conference website (eventmobi.com/ETFInvest) that reproduces the slides used and might offer video. If you're feeling philosophical, you might want to look at Mr. Hodge's slides on the relationship between national income and life expectancy. There are a series of twelve, by decade from 1900. As you might expect, there's a global trend toward rising life expectancy and there's a very clear relationship between wealth and life expectancy. Except in sub-Saharan Africa (the dark blue dots) where there seems to be no linkage between the two.
Curious.
I spoke with Jim Atkinson, president of Guinness Atkinson Funds. He volunteered that he was, for what interest it holds, really impressed with the consistently high level of understanding folks on the board show - and their broad-based civility in discourse. He's interested in arranging a talk between the London-based managers of GAINX and me.
Actively-managed ETFs are under 1% of all ETF assets; MINT is the largest of them. As a result, they're not much in evidence here but I'm spending some time trying to see how the ETF providers are thinking about them - and whether the folks at Morningstar have any insight into T. Rowe's plan to launch non-transparent active ETFs. I'll pass along what I learn.
David
p.s. funniest giveaway: FTSE ("footsie") is giving away little gray footie socks, the kind that don't come up to your ankle bond. We'll post a picture once the light is good enough to get a clear shot.

Hey David,
I just read your August commentary. Here are a few observations and thoughts in the order of their place in your commentary:
* I do not see the value of looking since inception returns and qualifying these as beating cash, bonds and stocks in particular each fund has a different inception. Some has not gone thought a single market cycle and others had several. Some might even have gone through different managers, even changed the strategy. Charles is a good guy, he is trying to distill the data to eliminate information overload for some but in the process a lot of detail is lost to the point that some of the stuff presented is not very useful at all. One has to look into the details and is willing to spend time reading, comparing etc. There is no shortcut!
* Even if I am critical of the value of such tables, I think they are not complete in terms of all the funds that David has profiled. Immediately looking at the fund list I do not see funds like GRTVX, WSCVX to name a couple.
* Regarding RTV's category containing only two funds: David, can you get someone to add the number of funds in the category to the Rank in Category column for each year so that we can deal with this sort of situations better? I think you have better influence on M* than I do. And what sort of categorization is that? Do you open a new category for just two funds? What is wrong with placing these funds in some small cap category with many other funds? I can't believe there are not enough small cap funds to sort this fund out.
* Regarding big picture at Grandeur Peak: "International Opportunities, the non-US sub-set of Global." Which global? I think it is the Global Opportunities. I think the word Opportunities has dropped off.
Having said that, if Intl. Opportunities is the International sub-set then why does it have proportionally higher cash holding and slightly different country/region exposure weights? It may be the same stocks but different weights changes the character. Assume that one day, Grandeur Peak will have US Opportunities but you cannot reconstruct Global Opportunities from US and Intl. Opportunities if the allocation of individual securities within sub-slices are different. Can you ask them about this?
* You have two interesting Elevator Talks this month. I like these a lot more and far more useful to investors like me than the one for interval fund. I will be doing more research on these. FRNKX is interesting in its truly all-cap approach. I kind of compare that with FLPSX which has turned to sort of an all-cap fund over time. GAINX is also interesting. I think I will probably compare it to VDIGX, VDAIX and MNDFX. Considering LSOFX that you profiled this month was an elevator talk a couple months ago, perhaps you can profile these in more detail. I am more interested in FRNKX. It looks like its NTF brokerage coverage is limited though.
* Regarding fund name changes: Marsico experience recently reminds me the downfall of Artio. I am watching. That is not a healthy trend for them.
* Regarding funds that are liquidated: Invesco Dynamics. I had invested in this fund at some point in an older 401k. It was a hotrod fund as I remember (back then I did not know much about funds). After the dotcom bust, the fund did not recover.
* In Closing: I would place the links/logos of Amazon and PayPal right here.
* In several places in the article, a space or two needs to be added:
...can get elevated,temporarily at least...
...most of these are positive.But every now...
...Morningstar's peerless AlexAuerbach to check...
Barron'sfeatured a nice story...
...Gardiner and presidentEric Huefner both...
...$2500 minimum investment.3.77%, the only... (I think you dropped ER or Expense ratio before the percentage as well)
...that day to this.JHancock did better...
Also, on Fund Profiles:
* GPROX, GPGOX: Blake Walker's last name is listed as Walters once in each profile.
* GPGOX have expense waiver that reduces the expense to 1.75%. In both profiles there is a reference to 1.88 for GPGOX.
* GPROX profile mentiones that sub-portfolios tilt the portfolio in one way or another. I think GPGOX is not tilting but getting more focused by reducing the number of investments.
* Since GPGOX already have larger number of holdings why they did not just create a new fund for holding a more focused portfolio instead of selling equities from GPGOX and creating unnecessary turnover and tax burden for investors outside of shielded accounts.
* LSOFX Profile: add the word percent after deviation is eight.
* I would also would be very interested in comparing the performance of hedge fund with that of mutual fund (LSOFX) for the period the mutuaI existed. They should be able to provide the record for hedge fund. Maybe it is present on the website. I did not research yet.
* LSOFX Bottom Line: It would have been good to include "How many months it rouse when S&P 500 was down?" I think this is complimentary to the question you answered there but is equally important.
* SGHIX: Their portfolios may invest in up to 505 in equities. I think 505 should be 50%.
Finally David: You have profiled a number of Long/Short and Hedged equity type funds and had interviews for some. Have you invested in any yet personally? If yes, which ones. If not, why not?