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*
-18.87%
Nav*
$7.35, -0.02
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
1.81%
*As of November 13, 2019

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

QTDYTD1 year3 years5 yearsSince inception
Fund-3.3%-18.5%-21.1%-5.5%-2.8%0.4%
ICE BoAML 3-Month US TBill0.2%2.0%2.4%1.6%1.0%0.6%
QTDYTD1 year3 years5 yearsSince inception
Fund-3.3%-18.5%-21.1%-5.5%-2.8%0.4%
ICE BoAML 3-Month US TBill0.2%2.0%2.4%1.6%1.0%0.6%
QTDYTD1 year3 years5 yearsSince inception
Fund-3.9%-15.8%-14.4%-3.7%-2.4%0.8%
ICE BoAML 3-Month US TBill0.6%1.8%2.4%1.5%1.0%0.6%
QTDYTD1 year3 years5 yearsSince inception
Fund-3.9%-15.8%-14.4%-3.7%-2.4%0.8%
ICE BoAML 3-Month US TBill0.6%1.8%2.4%1.5%1.0%0.6%
2018201720162015201420132012
Fund9.0%-8.2%11.2%-5.2%0.1%12.5%-3.7%
ICE BoAML 3-Month US TBill1.9%0.9%0.3%0.0%0.0%0.1%0.1%
Fund
ICE BoAML 3-Month US TBill
2018201720162015201420132012
9.0%-8.2%11.2%-5.2%0.1%12.5%-3.7%
1.9%0.9%0.3%0.0%0.0%0.1%0.1%

Portfolio (as of October 31, 2019)

Benchmark: MSCI World
Position Details
Fund
Cash38,279,923
Market value (long)62,881,763
Market value (short)-63,544,934
Net positional value-663,171
NAV37,616,751
Fund
Net exposure-1.76%
Leverage3.36
Long positions 92
Short positions 123
Total215
Fund Characteristics
Long portfolioShort portfolioBenchmark
No. of exposures 92 123 1651
Weighted avg. market cap (US $MM)$53,112$9,386$161,009
FY2 price/earnings10.016.615.7
Price/book value1.41.62.5
Return on equity (%)18.76.919.6

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
Koninklijke VolkerWessels NV3.87%
Tokuyama Corp.3.53%
Daily Mail & General Trust Plc3.43%
BNP Paribas SA3.42%
Showa Denko K.K.3.40%
SSE Plc3.35%
Brixmor Property Group, Inc.3.34%
Alaska Air Group, Inc.3.32%
Takeda Pharmaceutical Co., Ltd.3.32%
Manulife Financial3.28%
Top 10 Short Exposures
CompanyEnding weight
Daimler AG-3.61%
Umicore-3.35%
Bayerische Motoren Werke AG-3.34%
Houlihan Lokey, Inc.-3.31%
The Kraft Heinz Co.-3.29%
SiteOne Landscape Supply, Inc.-3.23%
GAS Natural Sdg-3.22%
ICU Medical, Inc.-3.22%
AusNet Services Ltd.-3.21%
Bâloise Holding AG-3.19%
Sector Exposure
SectorLong exposureShort exposureNet exposure
Communication Services12.9%-6.3%6.62%
Information Technology21.6%-16.3%5.39%
Industrials29.0%-24.0%5.02%
Materials15.9%-12.1%3.79%
Energy8.5%-6.7%1.85%
Consumer Discretionary13.2%-15.8%-2.61%
Health Care9.6%-12.9%-3.28%
Financials29.2%-33.1%-3.94%
Real Estate12.3%-16.3%-4.05%
Consumer Staples4.9%-10.1%-5.18%
Utilities10.2%-15.4%-5.22%
Country Exposure
CountryLong exposureShort exposureNet exposure
China7.9%-1.6%6.25%
Netherlands5.2%0.0%5.17%
Switzerland8.6%-3.5%5.11%
Japan23.9%-19.5%4.35%
Sweden3.1%0.0%3.13%
Italy3.1%0.0%3.13%
Canada10.7%-7.7%2.99%
New Zealand1.8%-0.3%1.47%
Austria1.2%0.0%1.18%
South Korea11.0%-10.6%0.37%
Israel0.0%-0.6%-0.62%
Belgium2.7%-3.3%-0.64%
United Kingdom15.4%-16.1%-0.71%
Australia3.9%-5.8%-1.90%
Singapore1.1%-3.1%-1.95%
Portugal0.0%-2.4%-2.37%
France3.4%-5.9%-2.49%
Norway0.0%-3.6%-3.60%
Spain0.0%-4.0%-3.99%
United States59.9%-65.1%-5.12%
Hong Kong0.0%-5.4%-5.44%
Germany4.4%-10.3%-5.89%
Regional Allocation
Long exposureShort exposureNet exposure
Europe - Other27.1%-23.2%3.9%
Pacific49.6%-46.5%3.1%
Developed Middle East0.0%-0.6%-0.6%
North America70.6%-72.7%-2.1%
Euro20.0%-25.9%-5.9%

Commentary (As of October 31, 2019)

Highlights

  • Developed market equities rose during the month amid signs of easing geopolitical uncertainties and continued dovish stances from global central banks.
  • With the European Central Bank apparently intending to continue negative interest rates and asset purchases until reaching a 2% inflation target, European governments will likely need to increase fiscal stimulus to thwart further deterioration in economic conditions.
  • The resurgence of value and cyclicality over growth and momentum continued for a second consecutive month in October. This value upturn does not surprise us given the historically wide discount of cyclical stock valuations compared to more defensive stocks that occurred this year through the end of August.

Portfolio attribution


Developed market equities rose during the month amid signs of easing geopolitical uncertainties and continued dovish stances from global central banks. The top performing markets in our investable universe were Ireland, Sweden, Austria, Germany, and Singapore. The worst performing markets were Belgium, Norway, Finland, Canada, and South Korea. The best performing sectors in the World Index were health care, information technology, and industrials. The worst performing sectors were energy, consumer staples and utilities.

The Fund takes long and short notional exposures to securities under swap agreements. We use a combination of quantitative and fundamental 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 October, value was the only quantitative alpha factor category to demonstrate predictive power. Stocks with cheap valuations outperformed those with expensive valuations. However, stocks with improving earnings growth dynamics underperformed those with worsening dynamics, stocks with positive technical indicators underperformed those with negative technical indicators, and stocks demonstrating higher earnings quality underperformed those with lower earnings quality, contrary to expectations.

Investment outlook

The resurgence of value and cyclicality over growth and momentum continued for a second consecutive month in October. As global bond yields have risen from their August 2019 lows, economically sensitive stocks generally recovered in price and valuation multiples. This value upturn does not surprise us given the historically wide discount of cyclical stock valuations compared to more defensive stocks that occurred this year through the end of August. Dividends remain an important component of total return and pay shareholders to wait for valuations to improve. For the long portfolio, we consider dividend income particularly attractive in the current ultra-low interest rate environment.

On an aggregate long/short portfolio basis, we are maintaining a near market-neutral posture, with -1.60% 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 communications services and information technology, where we have significant positive net exposure, and against consumer staples and utilities, where we have meaningful negative net exposure. By geography, we are net biased toward China and the Netherlands, and biased against Germany and Hong Kong. Gross exposure (leverage) for the Fund is 336% (3.36x) as of October 31, 2019.

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

DividendsShort-term capital gainsLong-term capital gains
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: