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The Best And Worst Of February: Nontraditional Bond Funds

Nontraditional bond funds lost an average of 0.47% in February, bringing the category’s one-year returns through the end of the month to -4.06% versus 1.50% for the Barclays U.S. Aggregate Bond Index. As a result, investors pulled a total of $21.7 billion out of the category for the year ending February 29, bringing total category assets down to $125 billion. Despite this, there have been some stellar performers in the category: Six funds generated one-year returns in excess of +2%, but this represented just a small fraction of the 129 funds in the category with track records of at least a year. Meanwhile, 84 funds in the category suffered one-year losses of at least 2%, with 13 of those posting double-digit losses. Best Performers in February The three best-performing nontraditional bond funds in February were: The BTS Tactical Fixed Income Fund was the only mutual fund in February’s top three, edging out a pair of ETFs to rank as the month’s top performer. BTFAX returned +3.30% in the shortest month of the year, bringing its one-year returns to +1.37% for the year ending February 29. This was good enough for it to rank in the top 6% of its category, which may be why the fund received more than $84.7 million in inflows for the year. The fund’s one-year beta of 1.49 is high, but with its bullish returns, investors don’t seem to mind. ETFs from ProShares and Deutsche X-trackers took the second and third spots for February, returning +1.89% and +1.51%, respectively. Only the former has been around long enough to have a one-year track record, and it returned +0.86% for the year ending February 29, ranking in the top 1% of all nontraditional bond ETFs. It suffered $3.95 million in net outflows for the year, though, compared to the Deutsche fund, which received $6.25 million in inflows. Worst Performers in February The three worst-performing nontraditional bond funds in February were: Highland’s Opportunistic Credit Fund was February’s worst-performing nontraditional bond fund, and it was very near the bottom of the category for its one-year returns. HNRZX lost 4.86% in February, bringing its one-year losses through February 29 to a painful 32.16%. The fund’s beta of -1.02 indicates nearly perfect inverse correlation to the Barclays US Aggregate Bond Index, but its -36.09% one-year alpha better explains its woeful returns. Over the three-year period, the fund lost an annualized 7.70%, ranking at the very bottom of the category. Thus, it’s more than a little surprising that it enjoyed more than $5.9 million in inflows for the one-year period ending February 29. PIMCO’s Capital Securities and Financials Fund only launched on April 13, 2015. It lost 3.83% for the month. Coming in as the third-worst performing nontraditional bond fund is the Putnam Premier Income Fund, which returned -3.68%. Its one-year return through February 29 stood at -10.04%. Past performance does not necessarily predict future results. Jason Seagraves contributed to this article. Note: MPT statistics (alpha and beta) are calculated relative to the Barclays U.S. Aggregate Bond Index.

The Best And Worst Of February: Multi-Alternative Funds

Multi-alternative mutual funds and ETFs endured another tough month in February, losing 0.49% in the aggregate versus a one-month return of 0.48% for the Morningstar Moderate Target Risk Index. Although the category was down 6.12% for the year ending February 29 (slightly better than the Index return of -6.47%), macroeconomic and market forecasts have kept investor interest strong, with category-wide inflows of more than $18 billion for the year ending February 29. The biggest recipient of investor inflows was the John Hancock Global Absolute Return Strategy Fund (MUTF: JHAIX ), which saw its asset base grow by a whopping $3.58 billion for the year ending on Leap Day. On the flip side, the multi-alternative fund that suffered the biggest outflows was the Goldman Sachs Absolute Return Tracker Fund (MUTF: GARTX ), which saw its asset base fall by more than $966 million. Surprisingly, the differential between the annual return of the two funds, for the period ending February 29, was small: -4.77% for JHAIX and -5.20% for GARTX. For the month of February, the funds posted respective returns of -1.56% and -0.12%, which failed to make the top three – but also kept the two funds out of the category’s doldrums. Best Performers in February The three best-performing multi-alternative funds in February were: Grant Park Multi Alternative Strategies Fund (MUTF: GPAAX ) KCM Macro Trends Fund (MUTF: KCMTX ) Astor Macro Alternative Fund (MUTF: GBLMX ) Grant Park’s fund took the top spot among multi-alternatives in February, returning +3.65%. Its one-year returns of -0.47% still ranked in the top decile of the category, and that’s one of the reasons it was able to garner more than $93 million in investor inflows for the year ending February 29. The KCM and Astor Macro funds posted respective one-month gains of 3.13% and 2.83% in February. Since the Astor fund only launched on April 1, 2015, only the KCM fund had a one-year track record: Its annual return through February 29 stood at -8.45%, ranking in the bottom 30% of its category. This, along with its higher than average annual volatility of 12.16%, can help explain why investors withdrew $2.89 million from the fund for the year. Worst Performers in February The three worst-performing multi-alternative funds in February were: Granite Harbor Alternative Fund (MUTF: GHAFX ) Granite Harbor Tactical Fund (MUTF: GHTFX ) Palmer Square Absolute Return Fund (MUTF: PSQAX ) February was a tough month for Granite Harbor, as two of its alternative funds were the period’s worst performers. GHAFX fell a stunning 17.50%, and GHTFX dropped a nearly-as-bad 16.78%. For the year ending February 29, the pair of one-star rated funds were down 22.74% and 23.37%, respectively, each ranking in the bottom 1% of the category. The Palmer Square Absolute Return Fund looks a lot better by comparison, despite ranking as the third-worst multi-alternative fund in February. It lost 7.50% for the month and was down 19.24% for the year – both bad numbers, but considerably less so than Granite Harbor’s funds. Nevertheless, its outflows of more than $84 million were far steeper than either of the Granite Harbor funds, whose comparatively small sizes ($14.7 million and $12.5 million, compared to PSQAX’s $160.2 million) lead to smaller absolute outflows of $21.3 million and $16.6 million for the year ending February 29. Past performance does not necessarily predict future results. Jason Seagraves contributed to this article.

The Best And Worst Of February: Long/Short Equity

Long/short equity mutual funds and ETFs suffered another month of losses in February, falling 0.33% in the aggregate versus a drop in the S&P 500 Index of 0.13%. Of the universe of 179 funds with a full month of performance in February, only 65 managed to post monthly gains, but there were some particularly strong standouts. Nevertheless, the category saw total outflows of $399 million over the month and more than $3.9 billion for the year ending February 29, 2015. Will long/short equity funds be able to rebound and stem the outflows, or will the category continue to lose assets in March? Time will tell. Best Performers in February The three best-performing long/short equity funds in February were: QuantShares Hedged Dividend Income Fund (NYSEARCA: DIVA ) Gotham Absolute 500 Fund (MUTF: GFIVX ) Gotham Total Return Fund (MUTF: GTRFX ) The 1-year old QuantShares fund, with $3.6 million in assets, was February’s top performer, returning an astounding 9.26% for the month. For the year ending February 29, however, the fund was down 1.97%, but this was surprisingly good enough to rank in the top decile of the category. The fund’s one-year beta, relative to the S&P 500, was 0.45, but its alpha of -0.21% resulted in a Sharpe ratio of -0.35. Still, given the category’s substandard performance overall, investors invested a net $1.23 million in the fund for the year ending on Leap Day. Gotham’s pair of funds – GFIVX and GTRFX – ranked #2 and 3, respectively. The former returned +5.66% in February, giving it one-year returns of -2.83% through the end of the month, handily beating the S&P 500 Index, which fell 6.19% over the same period; while the latter returned +5.08% for the month, and didn’t have one-year returns since it launched on March 31, 2015. GFIVX, the more mature fund, had a 0.72 beta, alpha of 1.77% and volatility of 11.55% for the year ending February 29. This resulted in a one-year Sharpe ratio of -0.20, compared to that of the Index of -0.45. Worst Performers in February The three worst-performing long/short equity funds in February were: Neuberger Berman Global Long Short Fund (MUTF: NGBAX ) Catalyst Insider Long/Short Fund (MUTF: CIAAX ) Caldwell & Orkin Market Opportunity Fund (MUTF: COAGX ) The Neuberger Berman Global Long Short Fund was February’s worst-performing long/short equity fund, losing a stunning 8.59% for the month. This dropped its one-year return to -14.46% through the end of February, ranking in the bottom 10% of its category. Surprisingly, the fund enjoyed positive net flows for the year ending February 29, with investors putting $4.1 million more into the fund than they withdrew. Perhaps they’re attracted to the fund’s -0.06 beta coefficient, which is about as close to “uncorrelated” as you can get. But with a -15.40% one-year alpha, the fund’s low correlation hasn’t helped its investors much. The Catalyst Insider Long/Short Fund suffered monthly losses of 5.62% in February, which brought its one-year return through the end of the month to -3.21%. This was good enough to rank in the top quarter of the category, but not good enough to convince investors to stick with the fund – it suffered outflows of more than $7 million for the year. Perhaps investors looked past its attractive 1.47% alpha to its 17.33% annualized volatility, which ranked fourth out of the category’s 142 funds with one-year track records. Finally, the Caldwell & Orkin fund was the month’s third-worst performer with losses of 4.88%, but the fund ranked in the top 7% of its category based on its one-year returns of +1.38%. This was undoubtedly one of the reasons it received a whopping $87.47 million in net inflows for the year. Its one-year beta (-0.07), alpha (+1.26%), Sharpe ratio (0.19), and volatility (8.75%) were all attractive relative to the category averages, too. Past performance does not necessarily predict future results. Jason Seagraves contributed to this article. MPT statistics (alpha and beta) are relative to the S&P 500 Index.