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Long/Short Equity Funds: The Best And Worst Of November

After posting losses in September and gains in October, Morningstar’s long/short equity mutual fund category was flat for the month of November – but this doesn’t mean there weren’t standout funds. Indeed, one of the worst performers from October was able to bounce back into the top three for November. In this review of the category, we look not only at the one-month returns of the month’s best and worst funds, but also the composition of their three-year returns in terms of alpha and beta, as well as their three-year Sharpe ratios and standard deviations. A quick refresher: Beta refers to the risk level of a security relative to the market. A beta of 1.0 implies the same risk level as the market, while a beta of more than 1.0 means the security (or fund in this case) is riskier than the market. A beta of less than 1.0 implies a risk less than the market. Alpha is the amount of performance in excess of a security’s beta adjusted benchmark. Sharpe ratio is a measure of return (above the risk free rate) per unit of risk – the higher, the better. (click to enlarge) Top Performers in November The three best-performing long/short equity mutual funds in November were: For the second straight month, a Catalyst fund topped the list. But while October saw the Catalyst Hedged Insider Buying Fund (MUTF: STVIX ) lead all long/short equity mutual funds, in November it was the Catalyst Insider Long/Short Fund that led the pack at +7.21%. For the first eleven months of the year, CIAAX returned an even 2%, and its three-year return through November 30 stood at an annualized 4.42%. The fund had a negative alpha (-0.60) for the three-year period, with a three-year beta of 0.39, and a Sharpe ratio of 0.35. The Burnham Financial Long/Short Fund was November’s second-best-performing long/short equity mutual fund, with returns of +5.53%. While its gains lagged those of the Catalyst Insider fund, BURFX’s longer-term numbers are much more appealing: Its three-year return of 20.31%, and alpha of 11.98%, was accomplished with a relatively low level of volatility (9.17% standard deviation) and a beta of just less than half the market (0.45). The fund’s three-year Sharpe ratio of 2.07 is outstanding. Finally, the Turner Medical Sciences Long/Short Fund was the third-best long/short equity mutual fund to own in November, boasting returns of +5.36%. This was a turnaround for the Turner fund, which was the third-worst performer in October, with losses of 4.99%. Over the past three years, TMSCX has returned an annualized 14.61% with a beta of just 0.19. This has resulted in the fund’s alpha of 11.94% ranking just 4 basis points less than the Burnham fund above, despite a much lower 3-year annualized return. However, with it’s higher standard deviation over the period, the fund’s Sharpe ratio stood came it 0.93 for the three-year period, a bit less than half the Burnham fund’s Sharpe ratio. (click to enlarge) Worst Performers in November The three worst-performing long/short equity mutual funds in November were: The Philadelphia Investment Partners New Generation Fund, the month’s worst performer, lost more than the month’s top-performer gained, with a one-month return of -7.55%. Its dismal three-year returns of -5.45% can be broken down into a 0.80 beta and -17.54 alpha, resulting in a Sharpe ratio of -0.49 for the three years ending November 30. The Clinton Long Short Equity Fund hasn’t been around long enough to have three-year return data, but its one-month losses of 4.84% in November made it the second-worst long/short equity mutual fund to own that month. For the first eleven months of 2015, WKCIX lost 13.49% of its value. The Whitebox Tactical Opportunities Fund ( WBMIX ) was November’s third-worst long/short equity fund, with returns of -3.58%. For the first eleven months of 2015, WBMIX generated losses of 19.50%, and its three-year returns of -3.17% through November 30. The fund has a low 3-year beta of 0.13 and a -4.90 alpha. The fund’s three-year Sharpe ratio stood at -0.33 as of November 30. (click to enlarge) October’s Best and Worst: Follow-Up The Catalyst Hedged Insider Buying ( STVIX ), Tealeaf Long/Short Deep Value (MUTF: LEFIX ), and Giralda Manager (MUTF: GDAMX ) funds were October’s top three long/short equity mutual funds, with respective one-month returns of 10.71%, 9.05%, and 8.73%. In November, STVIX returned a category-matching 0.00%, while LEFIX and GDAMX posted respective one-month returns of 3.02% and 0.15%. October’s worst performers were the CMG Tactical Futures Strategy Fund (MUTF: SCOIX ) and the Highland Long/Short Healthcare Fund (MUTF: HHCAX ), which lost 6.74% and 5.54%. In November, those funds continued their losing ways with returns of -2.02% and -1.55%, respectively. Past Performance does not necessarily predict future results.

Weiss Funds Launches Alternative Balanced Risk Fund

By DailyAlts Staff Weiss Funds launched the Weiss Alternative Balanced Risk Fund (MUTF: WEISX ) on December 1. The fund’s objective is to pursue returns with moderate volatility and reduced correlation to traditional asset classes, such as stocks and bonds. The fund’s “balanced risk” allocation strategy consists of: A long-only portfolio of stocks (“the equity component”); A long-only portfolio of debt securities (“the bond component”); and A diversified, multi-strategy long/short portfolio of stocks, bonds, and/or derivatives (“the long/short component”). The Weiss Alternative Balanced Risk Fund’s equity component will generally invest in U.S. large- and mid-cap stocks and is designed to approximately track the stock market as a whole. The fund’s fixed-income holdings, including those in the bond and long/short components, will target weighted average maturity of 9 years, and will consist of only highly-rated securities. Portfolio managers Jordi Visser, Charles S. Crow IV, and Edward Olanow are responsible for the day-to-day management of the fund. Mr. Visser is President and CEO at Weiss and oversees the investment management process. Mr. Crow is responsible for the fund’s quantitative methodologies, and he and Mr. Olanow are in charge of trading. Together, the managers allocate across the fund’s three components according to the expected contributions to overall portfolio risk for each. In the words of the prospectus, these allocations can “fluctuate widely.” Currently, the Weiss Alternative Balanced Risk Fund is available in I ( WEISX ) and K (MUTF: WEIKX ) classes, with respective net-expense ratios of 3.33% and 3.23%. A and C class shares, with respective net-expense ratios of 3.58% and 4.23%, are listed in the fund’s prospectus but are not yet available for purchase. The minimum initial purchase levels for I and K shares are $250,000 and $2 million, respectively. A and C shares, when available, will have a minimum initial purchase of $5,000. For more information, visit the fund’s web page .

Nontraditional Bond Funds: The Best And Worst Of October

By DailyAlts Staff Nontraditional bond funds bounced back from September’s losses of 1.04% to post a 0.73% aggregate gain in October, according to Morningstar. In addition to the category swinging from losses to gains, the best-performing nontraditional bond funds posted bigger gains in October than September, and the worst-performing funds posted lighter losses. What follows is a recap of last month’s best and worst performers, concluding with a follow-up report on September’s standout funds. (click to enlarge) Top Performing Funds in October The PIMCO Floating Income Fund (MUTF: PFIIX ) was October’s top-performing nontraditional bond fund, gaining 3.19% for the month. In September, PFIIX was one of the category’s three worst performers, falling 2.80%. The fund’s rebounding performance was emblematic of the nontraditional bond category’s swing from loss to profit in October, but despite its solid gains for the month, PFIIX was still down 2.69% for the twelve months ending October 31. Over longer periods, its returns have been more attractive: The fund’s three- and five-year annualized returns of 1.34% and 2.25%, respectively, besting the category averages of 1.00% and 2.11%. PFIIX debuted in 2005 and has $657.4 million in assets under management (“AUM”). The second-best nontraditional bond fund to own in October was the WHV/ Acuity Tactical Credit Long/Short Fund (MUTF: WHAIX ), which returned +3.11% for the month. The fund launched on December 16, 2014, so it still didn’t have a one-year return as of October 31. For the first ten months of 2015, WHAIX boasted impressive gains of 8.01%, ranking at the very top of the category. Its AUM recently stood at $52.5 million. October’s third-best nontraditional bond fund – for the second month in a row – was the Robinson Tax Advantaged Income Fund (MUTF: ROBNX ), which added gains of 3.02% on top of the previous month’s 1.04%. The fund, which originally launched on September 30 of last year and has $64.1 million in AUM, returned +2.86% for the year ending October 31. (click to enlarge) Worst Performing Funds in October The Parametric Absolute Return Fund (MUTF: EOAIX ) was the worst-performing nontraditional bond fund in October, falling 3.45%. EOAIX, which launched in 2010, generated gains of 3.38% in the first ten months of 2015, but lost 4.20% for the three months ending October 31. The fund has $29.6 million in AUM. The Palmer Square Long/Short Credit (MUTF: PCHIX ) and the Legg Mason Alternative Credit (MUTF: LMANX ) funds were the category’s next-worst performers in October, posting respective losses of 2.45% and 1.85%. Of the two, PCHIX is the smaller and younger fund, with $20.6 million in AUM and a November 2014 launch date, compared to LMANX’s $789.5 million AUM and August 2010 debut. PCHIX’s losses have also been steeper over the three- and ten-month periods ending October 31, at 4.73% and 7.28%, respectively; compared to LMANX’s lighter losses of 3.77% and 5.21%. (click to enlarge) September’s Best and Worst: Follow-Up As previously stated, September’s third-best and third-worst nontraditional bond funds found their way into October’s top three – but what happened to the #1 and 2 best- and worst-performers from the prior month? The best nontraditional bond funds in September were the Cedar Ridge Unconstrained Credit Fund (MUTF: CRUMX ) and the Forward Credit Analysis Long/Short Fund (MUTF: FLSIX ), both of which returned +1.07%. In October, CRUMX posted gains but underperformed at +0.58% compared to the category average of +0.74%. FLSIX outperformed, gaining 0.94% for the month. The Highland Opportunistic Credit Fund (MUTF: HNRAX ) was September’s worst performer by a longshot, falling 7.2%. The month’s next-worst fund, the Fortress Long/Short Credit Fund (MUTF: LPLIX ), posted comparatively lighter losses of 3.17%. In October, HNRAX was able to eke out a 0.07% gain – still well under the category average – while LPLIX outperformed with an impressive gain of 1.29%.