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Market Beating Performance Helped This Market Neutral Fund Grow Assets

Low correlation to traditional asset classes has always been one of the appealing features of alternative investments, but with the S&P 500 Index posting double-digit successive gains of 15.9%, 32.2%, and 13.6% from 2012 through 2014, low correlation hurt more alternatives than it helped. Even in 2015, a year marked by out-sized volatility, the S&P managed to eke out a modest gain of 1.36%, while most alternative categories posted losses in the aggregate. But not the LMCG Global Market Neutral Fund (MUTF: GMNIX ). Its annual gains of 4.82% in 2015 smashed the S&P 500’s returns and beat Morningstar’s Market Neutral category average by 507 basis points, and those returns followed a solid 9.99% return in 2014. Top Performance in 2015 This solid performance no doubt helped the fund attract interest from investors, pushing its assets under management (“AUM”) above $100 million by early 2016. While the fund’s 2015 performance fell a bit short of Morningstar’s Fund Manager of the Year award winner in the alternatives category, the Vanguard Market Neutral Fund (MUTF: VMNIX ), it did beat out 87% of its competitors in the market neutral category. In fact, the LMCG fund spent much less time underperforming over the course of 2015 than did the Vanguard fund. Click to enlarge “The fund has gained early traction with sophisticated advisors, who are familiar with alternative mutual funds and feel comfortable using it for a variety of goals,” said LMCG CEO Kenneth Swan, in a recent statement celebrating the milestone. “Traditional ‘low-volatility’ options such as bond funds or allocating to cash may not deliver the overall return profile these advisors are seeking. We designed this fund to offer investors a different option: to potentially generate positive returns regardless of the market’s direction.” The fund’s stock-selection process uses quantitative methodology that’s been “time-tested over 15 years and stress-tested in extreme market selloffs.” The strategy seeks capital preservation and is designed to generate positive returns in any market environment. Macro bets are avoided, and the fund does not use leverage. Volatility Likely to Continue “Equity markets could continue to be volatile in 2016,” said Gordon A. Johnson, Lead Portfolio Manager of the fund. “Our fund is designed to generate alpha on the long and short side – both domestically and internationally – and strives to provide a smoother ride for the investor whether the volatility that we are seeing continues or subsides.” The LMCG Global Market Neutral Fund is available in institutional ( GMNIX ) and investor (MUTF: GMNRX ) share classes, with respective net-expense ratios of 1.60% and 1.85%, excluding certain expenses as outlined in the prospectus. The minimum investment for GMNIX is $100,000, while the minimum for GMNRX is $2,500. Past performance does not necessarily predict future results. Jason Seagraves contributed to this article.

There’s The Time Value Of Money – And There’s The Value Of Your Time

An underappreciated benefit of low-cost, index-based investing is the modest time involved. That is, in comparison to the time commitment associated with individual stock-picking or some other variant of active investment management. The low-cost, index-based approach gives an investor more time to enjoy other pursuits. Such as time with family and friends, a good book, music, charitable and civic activities, hobbies (what’s a hobby?)… and on occasion a nice glass of wine. Active investment management in contrast goes hand-in-hand with consistent if not constant dedication to general economic news, industry-specific business news, and company-specific news. Attention to all the topics, risks, and developments described in detail in Securities and Exchange Commission filings or other disclosure documents that few investors read in time-consuming detail. Attention that’s paid by oneself or by compensating another to pay that attention. (It’s commonly forgotten that the word “pay” in the phrase “pay attention” is literal. One pays with one’s time, a precious, perishable, and irretrievable item. A costly item.) “Found time” via indexing has value of course. Value that may be hard to quantify, but quantification matters little. Please remember this: the average human life span is less than one million hours. Concern yourself not with Chinese export trends and currency manipulation, Midwest factory capacity utilization, Janet Yellen’s disposition, Vladmir Putin’s territorial ambitions of the month, Apple’s iPhone sales during the most recently concluded quarter, the price of oil, or the like. Or whether that company of which you hold many shares of stock will successfully bid that contract, win that lawsuit, or get that drug approved. Instead, relax. Yes, index-based investing consumes time – just not much. For example, a little time is involved in prudent rebalancing. That’s time well spent. As is time taking advantage of opportunities to reduce one’s investment costs, as cost pressures on investment managers of all stripes continue to lower costs. And with “robo-advisors” and their increasingly sophisticated auto-pilot portfolios sprouting like weeds these days, the time commitment to be a responsible low-cost, index-based investor decreases even more. Unless an investor consumes the greater part of daily economic news for enjoyment or as a hobby – and seems that’s a tall order with today’s information proliferation – what’s not to like about time saved? Especially when coupled with low-cost, index-based investing that can be expected, as empirical studies time and again show, to yield higher risk-adjusted net returns.

Should You Bet On Airlines ETF Despite Mixed Earnings?

The airline stocks have been highfliers since the second half of 2015 on dirt cheap oil prices and encouraging fundamentals. Earnings picture was also pretty decent for the space. Higher margin, lower debt, surging ancillary revenues and a host of modifications in operations helped the sector gain altitude (read: Highflier Airlines Earnings : Time for JETS ETF ). As a result, the pure-play aviation ETF U.S. Global Jets ETF (NYSEARCA: JETS ) lost just 5.5% (as of January 21, 2016) after accounting for all the global market issues. This was quite respectable when compared with the 11.7% losses put up by the broader market ETF SPDR S&P 500 ETF (NYSEARCA: SPY ) in the same timeframe ( read: The 13 Best and Most Interesting ETFs to Launch in the First Half of 2015 ). In such a backdrop, all eyes were fixed on airlines earnings this season. But sadly, major carriers fell shy of investors’ expectations. Greenback strength appears to be main reason behind this underperformance. Q4 Results in Detail The season unveiled with Delta Air Lines (NYSE: DAL ) missing on both lines in Q4 of 2015. Results were hurt by the strength in the U.S. dollar, with foreign currency movements having an adverse impact of $160 million. However, Delta’s shares added 3.3% despite the earnings miss in the key trading session of January 19. This is because the company, the bottom line of which grew 51% year over year on low oil costs, expects to generate over $3 billion in savings in 2016 on steeply plunging oil prices. This Zacks ETF Rank #1 (Strong Buy) stock has a Zacks Momentum & Value style score of ‘A’ and a Growth score of ‘B’, at the time of writing. United Continental (NYSE: UAL ) also came up with soft Q4 results this month as both earnings and revenues miss. Adjusted earnings were up substantially year over year on lower fuel costs. Revenues declined 3% on lower passenger revenues. Cargo revenues were also downhill while the other revenues improved 10.9%. However, its indicators are promising with a Zacks ETF Rank #2 (Buy), and Value score of ‘A’ and Momentum score of ‘B’. Shares also added modest gains of about 0.5% to close January 21, the day it reported earnings. Yet another leading U.S. carrier Southwest Airlines Co. ‘s (NYSE: LUV ) fourth-quarter 2015 bottom line matched the Zacks Consensus Estimate while the top line missed the same. But investors should notice that revenues grew 7.5% year over year helped by 3.3% and 119% expansion in Passenger and Other revenues, respectively. This Zacks ETF Rank #1 stock also boasts hopeful indicators of Momentum score of ‘A’ each and a Value score of ‘B’. LUV was up 0.5% post reporting earnings. Though these heavy-weight companies underperformed on earnings, the sector has seen sturdy performances by others. Alaska Air Group Inc. (NYSE: ALK ) reported earnings (on an adjusted basis) of $1.46 per share in the fourth quarter, beating the Zacks Consensus Estimate of $1.43. Earnings increased 55% year over year. Revenues of $1.38 billion were in line with the Zacks Consensus Estimate. The top line grew 5% on a year-over-year basis. The company also hiked its quarterly dividend by 38% to $0.275 per share. This star performance within the struggling pack offered the stock over 8.1% gains post earnings. ALK has a Zacks ETF Rank #1, a Value and Growth scores of ‘B’ and a Momentum score of ‘A’. Should You Buy JETS? By now, one must have realized from the indicators that the mood in the airlines industry is upbeat. The sector is in the top 4% category of the Zacks Industry Rank at the time of writing, giving strong cues of the upcoming flight in the entire industry. However, as company-specific risks seem higher, investors might play the trend via basket approach to tap the entire potential of the space. And to do so, what could be a better option other than the JETS ETF? The $46.8 million-fund holds over 30 stocks in its portfolio and is concentrated on a few individual securities, as it allocates about 70% to the top 10 holdings. American Airlines (12.46%), Southwest Airlines (12.37%), Delta Airlines (12.13%) and United Continental (10.54%) are the top four elements in the basket. Alaska Air holds the ninth position in the fund with 3.74% weight. The product charges 60 bps in fees. Link to the original post on Zacks.com