Tag Archives: mutual funds

July 2015, Funds In Registration

First Western Short Duration High Yield Credit Fund First Western Short Duration High Yield Credit Fund will seek a high level of current income and capital growth. The plan is to invest in a global portfolio of junk bonds and floating rate senior secured loans. The fund will be managed by Steven S. Michaels. The minimum initial investment is $1,000. The opening expense ratio for retail shares will be 1.2%. RiverNorth Marketplace Lending Fund RiverNorth Marketplace Lending Fund will seek “a high level of total return, with an emphasis on current income.” The plan is to invest in “loans to consumers, small- and mid-sized companies and other borrowers originated through online platforms.” That is, they’ll subscribe to loans through peer-to-peer lenders such as Lending Tree and Prosper.com. They urge you to think of this as a fund that might fit into the “high yield / speculative income” slot in your portfolio. They also, rightly, raise two red flags: (1) no one has ever done this before and so there’s no established market for trading these shares, which might well make them illiquid for rather longer than you like and (2) this is structured as a closed-end fund but will likely function as an interval fund; that is, you might have to request redemption of your shares then wait for a redemption window. That’s akin to the practice in hedge funds, since they also make money from the mispricing of illiquid investments. The fund will be managed by Philip K. Bartow and Patrick W. Galley. Mr. Bartow just joined RiverNorth after serving as “Principal at Spring Hill Capital, where he focused on analyzing and trading structured credit, commercial mortgage and asset-backed fixed income investments.” Mr. Galley is RiverNorth’s Alpha male. Details like purchase requirements and expenses have yet to be worked out. RQSI Small Cap Hedged Equity Fund RQSI Small Cap Hedged Equity Fund will seek total return with lower volatility than the overall equity market. The plan is to invest in a diversified portfolio of U.S. small cap stocks and ADRs, when they need exposure to a foreign stock, which will be selected using the Ramsey Quantitative Systems, Inc. quantitative system. The manager will use options, futures and ETFs to hedge the portfolio. The fund will be managed by Benjamin McMillan, formerly a manager for Van Eck Global’s Long/Short Equity Index Fund. The minimum initial investment is $2,500. The opening expense ratio will be 1.56% for retail shares. T. Rowe Price Emerging Markets Value Stock Fund T. Rowe Price Emerging Markets Value Stock Fund will pursue long term growth of capital. The fund will invest in “stocks of larger companies that are undervalued in the view of the portfolio manager using various measures.” The fund will be managed by Ernest Yeung. Mr. Yeung joined T. Rowe in 2003. Price describes him as having “joined the Firm in 2003 and his investment experience dates from 2001. He has served as a portfolio manager with the Firm throughout the past five years.” He’s also described as a “sector expert” on Asian media and telecomm stocks. I can, however, only find a four month fill-in stint as manager of T. Rowe Price New Asia Fund (MUTF: PRASX ) . Presumably he’s been managing something other than mutual funds and has done it well enough to satisfy Price. The opening expense ratio, after waivers, will be 1.5%. The minimum initial investment will be $2,500, reduced to $1,000 for tax-advantaged accounts. The prospectus is dated August 24, 2015 which suggests the launch date. Thornburg Better World Fund Thornburg Better World Fund will seek long-term capital growth. The plan is to invest in international “companies that demonstrate one or more positive environmental, social and governance characteristics.” They can also hold fixed income securities, but that’s clearly secondary. The fund will be managed by Rolf Kelly, who has been with Thornburg since 2007. Before that, he was a “reservoir engineer” for an oil company. The minimum initial investment is $5,000, reduced to $2,000 for various tax-advantaged accounts. The opening expense ratio is 1.83% for “A” shares, which also carry an avoidable 4.5% load. United Income and Art Fund United Income and Art Fund will seek income with long-term capital appreciation as a secondary objective. The plan is to invest in equity and fixed-income mutual funds (based on “performance, risk, draw downs, portfolio holdings, turnover, and potential concentration risk – easy peasy!) and up to 15% in potentially illiquid “art companies,” plus long and short ETFs for hedging. The fund will be managed by Doran Adhami and Itay Vinik of United Global Advisors. Mr. Adhami was a Vice President of Investments for UBS from 2005-13; Mr. Vinik was an intern there and is now, with “approximately three years” of industry experience, United Global’s CIO. He also helps manage the Ace of Swords Fund . The minimum initial investment is $500. The opening expense ratio has not been released; the existence of a 2% redemption fee and a 0.25% 12(b)1 fee have been established. Zevenbergen Genea Fund Zevenbergen Genea Fund will seek long-term capital appreciation. The plan is to invest in the stocks of 15-40 firms which are “benefitting from advancements in technology.” I’m certain that’s not nearly as dumb as it sounds. International exposure would come mostly through ADRs. The fund will be managed by Nancy Zevenbergen, Brooke de Boutray, and Leslie Tubbs. The adviser has about $2.4 billion in assets under management and all of the managers have experience as portfolio managers at regional banks. The minimum initial investment is $2,500. The opening expense ratio is 1.40%. Zevenbergen Growth Fund Zevenbergen Growth Fund will seek long-term capital appreciation. The plan is to invest in 30-60 industry leaders, described as firms which seek to invest in industry leaders with “strong competitive positioning.” International exposure would come mostly through ADRs. The fund will be managed by Nancy Zevenbergen, Brooke de Boutray, and Leslie Tubbs. The adviser has about $2.4 billion in assets under management and all of the managers have experience as portfolio managers at regional banks. The minimum initial investment is $2,500. The opening expense ratio is 1.3%.

Goldman Sachs’s Conviction Stock List For Mutual Funds

According to analysts at Goldman Sachs, Large cap mutual fund managers have had a successful start to this year. In 2014, 11% of large cap value mutual funds had outperformed the Russell 1000 large cap index. In 2015, so far, this number has soared to 76% of large cap value mutual funds beating the index. However, the equation changes when comparing with the S&P 500 performance. After fees, 43% of the funds could beat the S&P 500 year to date. So, 57% of funds are underperforming considering fees, when reviewing 248 large cap equity mutual funds. Goldman Sachs analysts have also released a conviction buy and sell lists. Interestingly, these lists are to help managers pick stocks that are underweight in the value mutual fund sector. Underweight Stocks Large cap mutual funds have been underweight on stocks such as Netflix (NASDAQ: NFLX ), Amazon.com (NASDAQ: AMZN ) and Yum! Brands (NYSE: YUM ). Year to date, these stocks have astounding returns of 89%, 38% and 23%, respectively. On the other hand, funds were overweight on Comcast Corporation (NASDAQ: CMCSA ) (NASDAQ: CMCSK ), Lowe’s Companies (NYSE: LOW ) and Time Warner Inc. (NYSE: TWX ) But these stocks have performed poorly. While Comcast and Time Warner are up 3.4% and 1.3%, Lowe’s is down 1.8% year to date. The point here is, Goldman Sachs analysts are recommending large cap fund managers to hold stocks, which have a predominantly underweight view. Below we present Goldman Sachs’s conviction lists. The first one lists buy-rated stocks on which the average large-cap core fund is most underweight and the second list shows sell-rated stocks on which the average large-cap core fund is most overweight (as of Jun 2): (click to enlarge) (click to enlarge) Source: Lionshares, FactSet and Goldman Sachs Our Take If we calculate the average return of buy-rated underweight constituents, it is a healthy 11.4%. On the other hand, the average return of the sell-rated overweight constituent is a negative -0.9%. Though the average return speaks in favor of the buy-rated underweight constituents, we believe holding specifically these stocks is not the only necessary step. The New York Times Company reported in April that Morningstar data revealed that only 12% of Goldman Sachs’s mutual funds had beat their analyst-assigned benchmarks over the last 10 years. What is more important is to pick stocks, sectors or industries that are fundamentally strong and offer great growth potential. Potential winners with positive historical performance should also be a good indicator. For example, the healthcare sector has been a strong performer. Incidentally, to prove this true, the top 20 US stock holdings for the Goldman Sachs fund family only featured one of the sell-rated overweight constituents. It was just W.W. Grainger (NYSE: GWW ) who made it to the top 20 holdings, while Navient Corp., (NASDAQ: NAVI ) Apple (NASDAQ: AAPL ) and Cardinal Health (NYSE: CAH ) were at the top of the holdings list (as of Jun 26). Goldman Sachs’s year-to-date total return of 2.2% lagged the category average of 2.9% (as of May 31). However, it has consistently outperformed the category average in 2014, 2013 and 2012. To pick the potential gainers, we will consider the Zacks Mutual Fund Rank. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund. Below we present 3 mutual funds from the Goldman Sachs fund family that either carry a Zacks Mutual Fund Rank #1 (Strong Buy) or a Zacks Mutual Fund Rank #2 (Buy). These funds have a low expense ratio and carry no sales load. The minimum initial investment is within $5000. These funds are not only in the green so far this year, but have positive total return over the last 1, 3 and 5-year periods. They also have encouraging average EPS growth. Goldman Sachs Strategic Growth Fund Retirement (MUTF: GSTTX ) seeks capital growth over the long term. A minimum of 90% of total assets are invested in publicly traded domestic securities. A maximum of 25% of assets may also be invested in non-US securities. GSTTX currently carries a Zacks Mutual Fund Rank #2. Goldman Sachs Strategic Growth IR has gained 4.4% and 13.7% year to date and over the last 1-year period, respectively. The 3 and 5-year annualized returns stand at 20.1% and 16.3%. Expense ratio of 0.91% is lower than the category average of 1.19%. The average EPS growth is 14.5%. Goldman Sachs Large Cap Growth Insights Fund Retirement (MUTF: GLCTX ) seeks capital appreciation with dividend income being the secondary objective. GLCTX invests a minimum of 80% of its assets in a diversified portfolio of equity investments of large-cap US issuers. Investments are also made in non-US issuers, but which are domestic in the US. GLCTX currently carries a Zacks Mutual Fund Rank #1. Goldman Sachs Large Cap Growth Insights IR has gained 3.9% and 12.9% year to date and over the last 1-year period, respectively. The 3 and 5-year annualized returns stand at 21.6% and 18.8%. Expense ratio of 0.71% is lower than the category average of 1.19%. The average EPS growth is 11.8%. Goldman Sachs Concentrated Growth Fund Retirement (MUTF: GGCTX ) invests, under normal circumstances, at least 90% of its total assets in equity investments selected for their potential to achieve capital appreciation over the long term. The fund may invest up to 10% of its total assets in fixed-income securities, such as government, corporate and bank debt obligations. GGCTX currently carries a Zacks Mutual Fund Rank #2. Goldman Sachs Concentrated Growth IR has gained 4.2% and 13.3% year to date and over the last 1-year period, respectively. The 3 and 5-year annualized returns stand at 18.9% and 15.6%. Expense ratio of 1.02% is lower than the category average of 1.19%. The average EPS growth is 13.4%. Original Post

When Should You Sell A Mutual Fund?

Lipper’s Jake Moeller examines some qualitative reasons to reconsider holding a mutual fund investment. Investors interested in this topic can also register to attend the Lipper UK Fund Selector & Fund of Funds Forum in London on July 14, 2015. As a former fund-of-funds manager, Lipper clients regularly ask me about sell triggers for mutual funds. This question is quite amorphous; there are many factors that could result in a fund no longer being “fit for purpose,” but that depends on how the fund is being used. When investors blend funds into a portfolio, they have different tolerances for a sell decision than when, for example, they hold a single fund in isolation. When I managed a guided-architecture platform from which I constructed a number of portfolios, I would often sell a fund out of my portfolios but still keep it on the guided-architecture platform. Such decisions are uniquely a factor of what fund selectors call “style bias.” A large-cap fund, for example, might underperform considerably in a sustained mid-cap rally, but that doesn’t mean it is a poorly managed fund. The following factors are some key reasons to consider letting a fund go: Fund manager departure Fund managers move house for myriad reasons: ambition, retirement, redundancy to name a few. If the departure is restricted to a single manager, this is generally a “hold and wait” situation. Many investors will follow the new fund manager, but a large fund house should have contingency protocols in place and the performance of the old fund shouldn’t necessarily head south. Where a fund house is very quiet about a key departure, there may be a legal covenant underpinning an unpalatable situation. A single fund manager departure can also signal the start of distracting team restructuring and destabilization. Respect the fund house that gets information out early. The less that is said, the stronger the sell signal. “Activeness” A fund manager who closely tracks an index may be doing so for perfectly legitimate reasons: a lack of conviction, a portfolio restructure, or staff changes can result in emergency indexing. It is the duration of this positioning that matters. An active equity fund manager’s maintaining an index position for over three months, for example, would certainly be a red flag. Marketing support Often overlooked in importance: when a fund house stops marketing a fund or has another flavour of the month, this can often be a bad sign. “Legacy” funds are often poorly managed, and with little inflow they potentially leave investors languishing at a disadvantage. The retrenchment of sales directors can often be another leading indicator that funds might switch to legacy footing or that they are expecting less supportive inflows into their business. Corporate activity A takeover, acquisition, or merger requires considerable analysis, but it can be reduced to a very fundamental issue: cultural compatibility. Not many strategic bond managers, for example, would take well to a new parent company’s investment committee favoring utilities at any cost “because that’s best for our balance sheet.” Capacity A fund that becomes too large to maintain a manageable number of securities in its portfolio is likely to become either an index hugger or to compromise the technical expertise of its manager. There are so many quality boutique funds in the market that there is no excuse for holding an active fund that has say 2,000 securities in it. Outflows Outflows in and of themselves are not always a concern. However, when they coincide with a falling share price (where the fund manager is listed) and poor performance, you have a pretty strong sell signal. You will want to get out before all the cabs have left the rank. Round peg, square hole Has your fund house recently appointed a head of U.K. equities for your U.S. portfolio? Fund management is a specialized task and is only rarely truly portable. An expertise in one area does not guarantee expertise in another. Such an appointment warrants critical review. Courage under fire If fund managers are underperforming when their style should be in favour, an investor needs to question the skill of the managers; most fund managers make bad calls in their career but restore faith by sticking to their guns. If poor stock selection results in a fund manager “tweaking” the process or compromising philosophies, this should act as a warning flag. Poor performance Differentiate symptom and cause. Poor performance needs to be understood, not reacted to blindly. Where poor performance is a result of style biases or out-of-favor portfolio selection, one may likely end up selling just as the fund turns around. Where poor performance coincides with any of the qualitative factors outlined above, it is unlikely to be coincidence. Furthermore, these factors may occur before performance starts to be affected. Such factors warrant serious consideration to saying adieu to a fund.