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Principal To Launch Global Opportunities Equity Hedged Fund

By DailyAlts Staff The Principal Financial Group is actively working to expand its presence in the liquid alternatives arena. On July 9, the firm launched its first ETF, the Principal EDGE Active Income ETF (NYSEARCA: YLD ), which uses a risk-managed approach to invest “opportunistically” across a wide range of income-generating asset classes. This alternative income ETF joined the firm’s alternative mutual fund, the Principal Global Multi-Strategy Fund (MUTF: PMSAX ). And now Principal is planning the launch of a new liquid alternative, the Global Opportunities Equity Hedged Fund, according to a recent SEC filing . Global Opportunities Equity Hedged The Global Opportunities Equity Hedged Fund will seek long-term capital appreciation with lower volatility than the global equity markets. It will pursue these ends by means of investing in U.S. and emerging-market equity securities paired with equity derivatives at the time of purchase. Under normal circumstances, the fund’s holdings will include securities from at least three foreign countries, and foreign securities will constitute at least 30% of its assets. Portfolio managers Christopher Ibach, Xiaoxi Li, and Principal CIO Mustafa Sagun select investments on the basis of value and/or growth potential, and they use a hedging strategy intended to reduce volatility by investing in equity derivatives. Currency forwards may also be used to hedge currency risk. According to the fund’s SEC filing, its net exposure will vary over time, but the fund will always maintain more long equity exposure than it has short exposure through derivatives. Shares of the Global Opportunities Equity Hedged Fund will be available in A-, P-, and institutional-class shares with an investment management fee of 1.10% and respective net-expense ratios of 1.55%, 1.30%, and 1.25%. The minimum initial investment for A-class shares will be $1,000. P- and institutional-class shares have no minimums for qualified investors. Principal’s Other Alternative Fund The Principal EDGE Active Income ETF only launched on July 9, and thus doesn’t have a performance record to speak of. The Principal Global Multi-Strategy Fund, however, debuted back in October 2011, and has earned a three-star rating from Morningstar. For the year ending June 30, 2015, the fund had returns of 2.41%, ranking in the top 29% of all funds in its Morningstar category. For more information, visit principalfunds.com .

Australia’s Getting Comfortable At 2% Cash Rate And Is Expected To Maintain

Summary Australia’s last two rate decreases have begun to spur the economy. The RBA will likely cite progress and hold steady at the current 2 percent rate at the August policy meeting. Australia looks profitable in the long term, but the market will not react much to policy announcement. Why Australia Won’t Lower Rates Amid an environment of global easing, lowered interest rates and weakening currencies, Australia’s RBA will have a tough decision to make concerning its own interest rate at the monetary policy meeting on August 4. Over this past year, Australia has begrudgingly cut its rates twice in order to spur economic growth as a result of lowered domestic demand and weak job growth. Since its initial 25 basis point cut in February, the accommodative policy has spurred borrowing and lending, improved the housing market, and weakened the Australian dollar against the U.S. dollar. As the Australian dollar continues to decline, currently worth US74 cents, down 9.7 percent from the beginning of the year, we can expect to see an improving trade deficit and an accompanying natural economic stimulus to the labor market in the upcoming months. RBA Governor Glenn Stevens feels that this depreciation is good news for Australia – the boost is necessary for its economy to recover , especially considering the intense pressure on its inflation level due to lowering commodities prices. All of these factors will be taken into account when policy makers determine whether to maintain its 2 percent cash rate, or cut rates further. Given its current position, it is unlikely that Australia will feel the need to further spur the economy via monetary policy – at least in 2015. Instead, the announcement will likely cite the recent improvements and maintain steady rates, with the intention to further monitor data in upcoming months. While several analysts expect rates to dip down to 1.75 percent by the end of the year, that sort of cut doesn’t make sense over this timeline. Australia has not shown as much eagerness in resorting to these accommodative measures as Asia, Europe, and now Canada have; consequently, they are unlikely to jump to a third cut so soon. With the Federal Reserve expected to liftoff rates in September or early 2016, there is even more reason for Australia to wait out the clock and see how a U.S. tightening could impact both the exchange rate and exports. As a result, the RBA will most likely maintain its 2 percent rate at the August meeting. How To React When Australia lowered its cash rate in February, the Australian stock market saw an initial surge that led to a steady climb as investors began to feel more comfortable with the economy’s future prospects. The May announcement led to a similar initial surge, but was not followed by the steady climb, as the expected easing was mostly priced in over previous months leading up to the announcement. However, in June when the RBA maintained its current rate, the stock market hardly reacted, and instead, slightly dipped over those following weeks. In looking at this historical pattern, the market will likely not jump at the news of maintained policy, meaning it would not be a very profitable short-term investment. However, with the conditions slowly improving in Australia and an outlook that supports future growth, a long-term investment with Australian exposure would likely perform well over several years, as its policy is gearing it up for continued growth and stability. The iShares MSCI Australia ETF (NYSEARCA: EWA ): This Australian ETF closely tracks the Australian index with a beta of 1.02. While on an overall downward trend since January, it has ticked up 4.2 percent from opening to close of this past week. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

LS Opportunity Fund Changes Sub-Advisor, Objective, Strategy

By DailyAlts Staff There have been a number of changes to the LS Opportunity Fund (MUTF: LSOFX ) over the past several months. On April 23, the fund’s Board of Trustees filed paperwork with the SEC announcing the termination of the fund’s sub-advisory relationship with Independence Capital Asset Partners. According to sources, this change was due to the retirement of Jim Hillary, a portfolio manager on the fund and Chairman, CEO and CIO of Independence Capital Asset Partners. In addition to Mr. Hillary’s retirement, the firm will be returning capital to his hedge fund investors. Following the termination of Independence, the fund appointed Prospector Partners, LLC, a Connecticut based asset manager, as an interim sub-advisor and transitioned the portfolio to Prospector on May 28. Shareholders are being asked to approve Prospector as the sub-advisor, along with additional changes to the fund as outlined below, at the upcoming shareholder’s meeting on September 17. Changes to Fund Objectives and Implementation Now the LS Opportunity Fund is planning changes to its investment objective and strategy, as well as giving its advisor more power to hire and fire sub-advisors. According to a July 15 SEC filing, these changes will not result in higher fees for investors, nor will they alter the long/short equity orientation of the fund’s strategy. There is, however, a moderate change to the implementation of that strategy, which will now allow the fund to combine long positions with shorts of two or more stocks in the same sector, whereas previously, it called for “pair trades” of one long and exactly two shorts. The fund’s investment objective has also been slightly revised, with the new objective “to seek to generate long-term capital appreciation by investing in both long and short positions within a portfolio consisting of primarily publicly-traded common stock, with less net exposure than that of the stock market in general.” Formerly, the word “risk” appeared in place of “net exposure” in the fund’s stated objective. Fund Performance The LS Opportunity Fund, which launched in September 2010, has a three-star rating from Morningstar. For the three-year period ending June 30, the fund returned 7.76%, ranking it in the top 38% of funds in its Morningstar category. More recently, however, the fund’s returns haven’t been as strong: Year-to-date, through June 30, the LS Opportunity Fund’s -3.57% returns ranked in the bottom 13% of long/short equity funds. For more information, view a copy of the fund’s prospectus .