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*
-16.56%
Nav*
$7.56, -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 December 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-3.0%-18.3%-18.1%-6.9%-2.8%0.4%
ICE BoAML 3-Month US TBill0.3%2.1%2.3%1.6%1.0%0.6%
QTDYTD1 year3 years5 yearsSince inception
Fund-3.0%-18.3%-18.1%-6.9%-2.8%0.4%
ICE BoAML 3-Month US TBill0.3%2.1%2.3%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 November 30, 2019)

Benchmark: MSCI World
Position Details
Fund
Cash33,553,628
Market value (long)58,583,581
Market value (short)-57,725,023
Net positional value858,559
NAV34,412,186
Fund
Net exposure2.49%
Leverage3.38
Long positions 88
Short positions 117
Total205
Fund Characteristics
Long portfolioShort portfolioBenchmark
No. of exposures 88 117 1650
Weighted avg. market cap (US $MM)$55,931$9,755$167,816
FY2 price/earnings10.117.816.3
Price/book value1.31.62.5
Return on equity (%)18.07.119.6

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
Hemfosa Fastigheter AB3.87%
British American Tobacco plc3.52%
Takeda Pharmaceutical Co., Ltd.3.47%
Novartis AG3.46%
Microsoft Corp.3.45%
SSE Plc3.43%
WestRock Co.3.41%
Yangzijiang Shipbuilding (Holdings) Ltd.3.41%
FirstEnergy Corp.3.38%
Genworth Mi Canada3.38%
Top 10 Short Exposures
CompanyEnding weight
Électricité de France SA-3.36%
Argo Group International Holdi-3.28%
Singapore Telecommunications Ltd.-3.27%
Houlihan Lokey, Inc.-3.25%
Umicore-3.23%
CoreSite Realty Corp.-3.23%
Deutsche Wohnen SE-3.22%
SiteOne Landscape Supply, Inc.-3.20%
Capital & Counties Properties Plc-3.17%
GAS Natural Sdg-3.16%
Sector Exposure
SectorLong exposureShort exposureNet exposure
Materials17.4%-11.8%5.63%
Information Technology24.1%-19.4%4.66%
Energy10.1%-5.5%4.59%
Communication Services11.2%-7.5%3.65%
Industrials27.5%-26.7%0.85%
Health Care10.5%-10.0%0.54%
Consumer Discretionary14.2%-14.8%-0.60%
Financials28.8%-30.8%-2.00%
Utilities10.9%-15.8%-4.81%
Real Estate12.5%-17.4%-4.89%
Consumer Staples3.5%-8.6%-5.11%
Country Exposure
CountryLong exposureShort exposureNet exposure
Switzerland9.4%-3.4%6.01%
China8.4%-4.1%4.29%
Sweden3.9%0.0%3.87%
Canada11.3%-7.5%3.80%
United Kingdom16.6%-13.3%3.24%
Italy2.6%0.0%2.63%
New Zealand2.4%-0.4%1.96%
Japan22.7%-21.8%0.91%
South Korea10.8%-10.3%0.51%
Singapore3.4%-3.3%0.14%
Belgium3.1%-3.2%-0.17%
Israel0.0%-0.7%-0.67%
Portugal0.0%-1.3%-1.34%
Hong Kong0.0%-1.9%-1.88%
Germany4.2%-6.8%-2.67%
United States64.5%-67.5%-2.99%
Norway0.0%-3.3%-3.33%
Spain0.3%-4.0%-3.67%
Australia4.1%-7.9%-3.73%
France3.2%-7.6%-4.41%
Regional Allocation
Long exposureShort exposureNet exposure
Europe - Other29.8%-20.0%9.8%
Pacific51.7%-49.5%2.2%
North America75.8%-75.0%0.8%
Developed Middle East0.0%-0.7%-0.7%
Euro13.4%-23.0%-9.6%

Commentary (As of November 30, 2019)

Highlights

  • Equities largely continued to rally in November as suggestions of a potential trade deal between the US and China may have buoyed investor sentiment.
  • New European Central Bank President Christine Lagarde has addressed geopolitical risks in recent speeches and indicated steps governments can take to boost the effectiveness of monetary policy. We believe fiscal stimulus is the logical next step for European economies, with low-to-no borrowing costs and aging populations struggling to save sufficiently for retirement.
  • Without the specter of major economic slowing to weigh on revenue growth, cyclical stocks have fared well from late summer. We focus our fundamental research efforts on companies improving free cash flows and returning capital to shareholders via dividends and share buybacks, paying shareholders to wait for enhanced earnings from operational restructuring.

Portfolio attribution

Equities largely continued to rally in November as suggestions of a potential trade deal between the US and China may have buoyed investor sentiment. The top performing markets in our investable universe were New Zealand, Ireland, Denmark, the United States, and the Netherlands. The worst performing markets were Finland, Hong Kong, Austria, Norway, and South Korea. The best performing sectors in the World Index were information technology, health care, and industrials. The worst performing sectors were utilities, real estate, and consumer staples.

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 November, none of our quantitative alpha factor categories demonstrated predictive power. Contrary to expectations, stocks with cheap valuations marginally underperformed those with expensive valuations, 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.

Investment outlook

With central governments globally using monetary and fiscal tools to forestall recession (and economic cycles), bond prices have fallen and yields have risen. Without the specter of major economic slowing to weigh on revenue growth, cyclical stocks have fared well from late summer. We focus our fundamental research efforts on companies improving free cash flows and returning capital to shareholders via dividends and share buybacks, paying shareholders to wait for enhanced earnings from operational restructuring. As investors continue to crowd into defensive trades, our fundamental research strives to identify companies that can execute on restructuring plans and position themselves for an improvement in performance.

On an aggregate long/short portfolio basis, we are maintaining a near market-neutral posture, with 2.52% 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 materials and information technology, where we have significant positive net exposure, and against consumer staples and real estate, where we have meaningful negative net exposure. By geography, we are net biased toward Switzerland and China, and biased against France and Spain. Gross exposure (leverage) for the Fund is 339%(3.39x) as of November 30, 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: