Our full alpha-generating capabilities, seeking lower volatility or no equity market correlation

The Fund takes long and short exposures in common and preferred stocks of companies located primarily in developed countries outside the US and of companies in the US. To obtain exposure to long and short positions in securities, the Fund enters into one or more total return equity swap agreements. Although the Fund is permitted to take direct long and short positions in securities, other than swap agreements, it does not currently intend directly to purchase or sell securities or directly to hold short positions in securities. The Investment Adviser integrates fundamental and quantitative research to manage the Fund’s long exposures (the “long portfolio” of the Fund). The Investment Adviser uses its quantitative investment strategy designed to identify short exposures that it expects to underperform the MSCI World Index to manage the Fund’s short exposures (the “short portfolio” of the Fund). The Fund’s investment objective is to seek long-term growth of capital with low or no correlation to the MSCI World Index.

YTD Return*
-8.01%
Nav*
$7.01, -0.03
Inception
January 24, 2011
Cusip
14949P406
Benchmark
ICE BoAML 3-Month US TBill
Minimum Investment
$1,000,000
Sales Charge
None
Net Expense Ratio
1.52%
Gross Expense Ratio
1.72%
*As of February 21, 2020

Strategy overview

The portfolio managers discuss our Global Absolute Return Fund strategy.

Portfolio managers

Chief Executive Officer
Fundamental Portfolio Manager
President
Head of Fundamental Research
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Head of Quantitative Research
Quantitative Portfolio Manager
Quantitative Portfolio Manager
Quantitative Portfolio Manager

Performance

QTD YTD 1 year3 years5 years Since inception
Fund -6.0%-6.0%-21.3%-6.6%-3.6%0.0%
ICE BoAML 3-Month US TBill 0.1%0.1%2.2%1.7%1.1%0.6%
QTD YTD 1 year3 years5 years Since inception
Fund -6.0%-6.0%-21.3%-6.6%-3.6%0.0%
ICE BoAML 3-Month US TBill 0.1%0.1%2.2%1.7%1.1%0.6%
QTD YTD 1 year3 years5 years Since inception
Fund -0.1%-15.9%-15.9%-5.6%-2.3%0.7%
ICE BoAML 3-Month US TBill 0.5%2.3%2.3%1.7%1.1%0.6%
QTD YTD 1 year3 years5 years Since inception
Fund -0.1%-15.9%-15.9%-5.6%-2.3%0.7%
ICE BoAML 3-Month US TBill 0.5%2.3%2.3%1.7%1.1%0.6%
20192018201720162015201420132012
Fund -15.9%9.0%-8.2%11.2%-5.2%0.1%12.5%-3.7%
ICE BoAML 3-Month US TBill 2.3%1.9%0.9%0.3%0.0%0.0%0.1%0.1%
Fund
ICE BoAML 3-Month US TBill
20192018201720162015201420132012
-15.9%9.0%-8.2%11.2%-5.2%0.1%12.5%-3.7%
2.3%1.9%0.9%0.3%0.0%0.0%0.1%0.1%

Portfolio (as of January 31, 2020)

Benchmark: MSCI World
Position Details
Fund
Cash 13,067,647
Market value (long) 20,227,619
Market value (short) -20,213,028
Net positional value 14,591
NAV 13,082,239
Fund
Net exposure 0.11%
Leverage 3.09
Long positions 94
Short positions 114
Total 208
Fund Characteristics
Long portfolio Short portfolio Benchmark
No. of exposures 94 114 1644
Weighted avg. market cap (US $MM) $60,698 $12,890 $189,703
FY2 price/earnings 8.9 17.1 16.2
Price/book value 1.2 1.5 2.6
Return on equity (%) 19.0 4.8 19.8

A “weighted average” measures a characteristic by the market capitalization of each stock. Price/book ratio is the weighted average of the price/book ratios of all the stocks in a portfolio. The P/B ratio of a company is calculated by dividing the market price of its stock by the company’s per-share book value. The price/earnings ratio is the weighted average of the price/earnings ratios of the stocks in a portfolio. The FY2 P/E ratio is a forward P/E ratio using a next-twenty-four months EPS estimate in the denominator. Return on equity is calculated by taking a year's worth of earnings and dividing them by the average shareholder equity for that year.

Holdings are subject to change.

Top 10 Long Exposures
CompanyEnding weight
Genworth Mi Canada 3.15%
Showa Denko K.K. 3.11%
British American Tobacco plc 3.08%
Air New Zealand Ltd. 3.05%
Roche Holding AG 3.04%
SYNNEX Corp. 3.03%
KDDI Corp. 3.03%
Tokuyama Corp. 3.02%
FirstEnergy Corp. 3.01%
Spirit Realty Capital, Inc. 2.99%
Top 10 Short Exposures
CompanyEnding weight
GAS Natural Sdg -3.04%
Deutsche Wohnen SE -3.02%
Umicore -3.02%
Houlihan Lokey, Inc. -3.00%
Bâloise Holding AG -3.00%
CoreSite Realty Corp. -2.98%
AusNet Services Ltd. -2.96%
Virtu Financial, Inc. -2.95%
Boeing Co. -2.90%
The Travelers Cos., Inc. -2.90%
Sector Exposure
Sector Long exposure Short exposure Net exposure
Communication Services8.9%-3.4%5.53%
Industrials29.8%-24.9%4.85%
Materials15.0%-11.5%3.46%
Information Technology21.4%-18.6%2.88%
Energy7.2%-4.7%2.47%
Health Care10.5%-8.5%2.03%
Consumer Discretionary14.5%-16.2%-1.71%
Financials23.8%-27.8%-4.06%
Utilities9.3%-14.1%-4.80%
Consumer Staples3.5%-8.4%-4.96%
Real Estate10.7%-15.7%-5.02%
Country Exposure
Country Long exposure Short exposure Net exposure
Switzerland 8.8% -3.8% 4.99%
United Kingdom 11.6% -6.9% 4.68%
Japan 18.6% -15.4% 3.15%
New Zealand 3.1% 0.0% 3.05%
Singapore 2.9% 0.0% 2.90%
China 11.1% -8.4% 2.69%
Canada 10.2% -7.9% 2.32%
Austria 0.6% 0.0% 0.59%
Netherlands 0.4% 0.0% 0.42%
Sweden 0.0% 0.0% 0.00%
Israel 0.8% -0.8% -0.01%
South Korea 11.3% -11.3% -0.06%
Belgium 2.9% -3.0% -0.11%
Italy 0.4% -0.8% -0.40%
Finland 0.0% -0.6% -0.64%
Denmark 0.0% -1.0% -1.04%
Portugal 0.0% -1.4% -1.35%
Norway 0.0% -1.5% -1.47%
Germany 5.2% -7.1% -1.90%
Spain 1.7% -3.9% -2.20%
Hong Kong 0.0% -2.9% -2.92%
United States 59.1% -62.3% -3.24%
France 2.9% -6.8% -3.82%
Australia 3.0% -7.9% -4.97%
Regional Allocation
Long exposure Short exposure Net exposure
Europe - Other20.4%-13.3%7.2%
Pacific49.9%-46.0%3.8%
Developed Middle East0.8%-0.8%-0.0%
North America69.3%-70.2%-0.9%
Euro14.1%-23.5%-9.4%

Commentary (As of January 31, 2020)

Highlights

  • After delivering impressive returns in calendar 2019, equity markets faltered in January in local currency terms, as concerns over the coronavirus outbreak may have weighed on investor optimism.
  • In China, key infrastructure and travel were shut down in an attempt to slow the spread of the coronavirus, which will likely be a near-term drag on Chinese (and global) economic growth. Chinese authorities will likely enact additional targeted stimulus in response to the outbreak.
  • Our fundamental research seeks to identify well-managed companies with strong balance sheets, with company leaders committed to improving earnings. As we wait for these companies in our long portfolio to emerge from operational setbacks and reignite growth, they typically generate sufficient cash flow to reward shareholders via dividends and share buybacks.

Portfolio attribution

After delivering impressive returns in calendar 2019, equity markets faltered in January in local currency terms, as concerns over the coronavirus outbreak may have weighed on investor optimism. The top performing markets in our investable universe were Portugal, Israel, Finland, Denmark, and Switzerland. The worst performing markets were Norway, Austria, South Korea, China, and Ireland. The best performing sectors in the World Index were utilities, information technology, and real estate. The worst performing sectors were energy, materials, and financials.

The Fund takes long and short notional exposures to securities under swap agreements. We use a combination of fundamental and quantitative inputs to select exposures for the long portfolio of the Fund, while we use primarily quantitative inputs to select exposures for the short portfolio. Our fundamental inputs reflect the risk-adjusted total return potential of stocks favored by our fundamental research team. Our quantitative inputs include signals that seek long (short) positions in stocks which we believe are undervalued (overvalued) and have improving (deteriorating) earnings growth dynamics, positive (negative) technical price movements, and superior (inferior) quality of earnings. During the month of January, our growth and technical factor categories demonstrated predictive power. Stocks with improving earnings growth dynamics outperformed those with worsening dynamics, and stocks with positive technical indicators outperformed those with negative technical indicators. However, returns to our value and financials strength factors were negative. Stocks with cheap valuations underperformed those with expensive valuations and stocks demonstrating higher earnings quality underperformed those with lower earnings quality, in each case contrary to expectations.

Investment outlook

In the prevailing global interest rate environment with the opportunity cost of owning long duration growth stocks low to negative, investors have continued to bid up expensive stocks to even higher valuations. Should these seemingly speculative, currently high valuation stocks fail to live up to their elevated expectations, we anticipate that the stable cash flows of economically sensitive, yet financially robust, companies would attract investor attention. Our fundamental research seeks to identify well-managed companies with strong balance sheets, with company leaders committed to improving earnings. As we wait for these companies in our long portfolio to emerge from operational setbacks and reignite growth, they typically generate sufficient cash flow to reward shareholders via dividends and share buybacks. In the current low interest rate environment, our fundamental research finds the income from these undervalued stocks especially compelling as a major component of total return.

On an aggregate long/short portfolio basis, we are maintaining a near market-neutral posture, with 0.65% net exposure overall (long exposures minus absolute value of short exposures). Consistent with our goal of delivering low equity market sensitivity, we target a zero expected beta to the World Index. On an aggregate basis, our largest net biases by sector are toward communication services and industrials, where we have significant positive net exposure, and against real estate and consumer staples, where we have meaningful negative net exposure. By geography, we are net biased toward Switzerland and the United Kingdom, and biased against Australia and France. Gross exposure (leverage) for the Fund is 308% (3.08x) as of January 31, 2020.

The market commentary expresses the portfolio managers’ views as of the date of this report and should not be relied on as research or investment advice regarding any stock. These views and the Fund holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. Any securities identified and described in this report do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. Diversification does not protect against market loss. Current and future holdings are subject to risk. International and emerging markets investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets and smaller companies involve additional risks and higher volatility. : The Fund uses swap agreements to obtain long and short exposures to securities. Swaps are derivatives which involve the use of leverage and the Fund uses significant leverage. Leverage is speculative and can magnify any losses. Short positions will lose money if the price of the underlying security increases, and losses on shorts are therefore potentially unlimited. The Fund is not appropriate for all investors.

Distributions

Dividends Short-term capital gains Long-term capital gains
2019 $0.0000 $0.0000 $0.0000
2018 $0.8783 $0.0000 $0.0000
2017 $0.0000 $0.0000 $0.0000
2016 $1.0925 $0.0000 $0.0000
2015 $0.3858 $0.0000 $0.0000
2014 $0.0000 $0.0000 $0.0000
2013 $0.433 $0.000 $0.000
2012 $0.280 $0.000 $0.000
2011 $0.101 $0.305 $0.000

Distributions are per share. Distribution amounts are based on gains and losses realized and income earned by the Fund through October 31 (or earlier under certain circumstances).

Documents

Fund information:

Forms: