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*
-27.89%
Nav*
$5.43, +0.05
Inception
January 24, 2011
Cusip
14949P505
Benchmark
ICE BoAML 3-Month US TBill
Minimum Investment
$5,000
Sales Charge
None
Net Expense Ratio
1.77%
Gross Expense Ratio
1.97%
*As of July 02, 2020
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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
Head of Quantitative Research
Quantitative Portfolio Manager
Quantitative Portfolio Manager
Quantitative Portfolio Manager

Performance

QTD YTD 1 year3 years5 years Since inception
Fund -8.8%-27.4%-29.6%-11.9%-7.6%-2.9%
ICE BoAML 3-Month US TBill 0.0%0.6%1.8%1.8%1.2%0.7%
QTD YTD 1 year3 years5 years Since inception
Fund -8.8%-27.4%-29.6%-11.9%-7.6%-2.9%
ICE BoAML 3-Month US TBill 0.0%0.6%1.8%1.8%1.2%0.7%
QTD YTD 1 year3 years5 years Since inception
Fund -19.9%-19.9%-27.9%-10.5%-6.1%-1.9%
ICE BoAML 3-Month US TBill 0.6%0.6%2.2%1.8%1.2%0.7%
QTD YTD 1 year3 years5 years Since inception
Fund -19.9%-19.9%-27.9%-10.5%-6.1%-1.9%
ICE BoAML 3-Month US TBill 0.6%0.6%2.2%1.8%1.2%0.7%
20192018201720162015201420132012
Fund -16.1%8.9%-8.3%11.0%-5.4%-0.3%12.0%-3.9%
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
-16.1%8.9%-8.3%11.0%-5.4%-0.3%12.0%-3.9%
2.3%1.9%0.9%0.3%0.0%0.0%0.1%0.1%

Portfolio (as of May 31, 2020)

Benchmark: MSCI World
Position Details
Fund
Cash 9,504,223
Market value (long) 16,816,733
Market value (short) -16,658,627
Net positional value 158,106
NAV 9,662,329
Fund
Net exposure 1.64%
Leverage 3.46
Long positions 95
Short positions 114
Total 209
Fund Characteristics
Long portfolio Short portfolio Benchmark
No. of exposures 95 114 1637
Weighted avg. market cap (US $MM) $56,451 $9,785 $210,908
FY2 price/earnings 7.8 17.4 17.1
Price/book value 0.9 1.3 2.4
Return on equity (%) 18.6 3.0 20.3

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
SYNNEX Corp. 3.84%
Tokuyama Corp. 3.68%
NRG Energy, Inc. 3.42%
Exelon Corp. 3.35%
H&R Block, Inc. 3.34%
Leidos Holdings, Inc. 3.29%
British American Tobacco plc 3.28%
American Equity Investment Life Holding Co. 3.27%
Aviva Plc 3.26%
Samsung Electronics Co., Ltd. 3.23%
Top 10 Short Exposures
CompanyEnding weight
AMP Ltd. -3.72%
The UNITE Group Plc -3.67%
Haidilao International Holding Ltd. -3.34%
ABIOMED, Inc. -3.27%
Soitec SA -3.22%
Kyushu Electric Power Co., Inc. -3.22%
The Travelers Cos., Inc. -3.20%
IWG Plc -3.08%
Bâloise Holding AG -3.08%
First Quantum Minerals -3.00%
Sector Exposure
Sector Long exposure Short exposure Net exposure
Industrials29.7%-21.5%8.21%
Financials37.2%-31.7%5.55%
Consumer Discretionary20.6%-15.3%5.25%
Health Care17.2%-12.7%4.51%
Materials14.9%-11.6%3.29%
Energy6.9%-7.0%-0.04%
Communication Services6.2%-9.9%-3.69%
Consumer Staples3.9%-8.1%-4.18%
Information Technology19.8%-24.8%-5.01%
Utilities9.1%-14.3%-5.19%
Real Estate8.5%-15.2%-6.72%
Country Exposure
Country Long exposure Short exposure Net exposure
China 14.2% -7.0% 7.17%
Switzerland 9.5% -4.5% 4.94%
Netherlands 4.5% -0.6% 3.92%
Belgium 2.6% 0.0% 2.59%
Germany 7.5% -5.1% 2.41%
Singapore 1.8% 0.0% 1.81%
Israel 0.9% 0.0% 0.91%
Canada 16.1% -15.3% 0.84%
Austria 0.6% 0.0% 0.56%
Spain 4.0% -3.6% 0.41%
Sweden 0.3% 0.0% 0.31%
United States 59.5% -59.2% 0.29%
Japan 18.9% -18.6% 0.27%
South Korea 10.1% -10.0% 0.14%
Italy 0.0% -0.6% -0.63%
Finland 0.0% -0.9% -0.88%
Portugal 0.0% -2.8% -2.80%
France 2.5% -5.5% -3.00%
United Kingdom 16.1% -19.4% -3.26%
Denmark 0.0% -3.4% -3.40%
Hong Kong 0.0% -5.1% -5.13%
Australia 5.0% -10.4% -5.49%
Regional Allocation
Long exposure Short exposure Net exposure
Euro21.7%-19.1%2.6%
North America75.6%-74.5%1.1%
Developed Middle East0.9%0.0%0.9%
Pacific49.9%-51.2%-1.2%
Europe - Other25.9%-27.3%-1.4%

Commentary (As of May 31, 2020)

Highlights

  • Equity markets continued to rally in May, likely responding to massive monetary and fiscal stimulus. Investor bias in favor of growth stocks persisted with the MSCI World Growth Index outpacing the MSCI World Value Index for the fifth month in a row. We anticipate a pickup in global economic activity as countries gradually relax COVID-19 pandemic lockdown measures.
  • Though global fiscal and monetary authorities’ quick action to cushion the economic blow is encouraging, stimulus should end later this year. In the next several months, we expect the private sector in most regions to resume hiring, tap bank credit for resumption of operations, and boost capital expenditures. We believe these actions are likely to push up prices, potentially mitigating the deflationary impact of the lockdowns and lower oil prices.
  • The intense market dislocation resulting from the pandemic afforded us the rare opportunity to gain exposure in the long portfolio to companies exhibiting, in our view, extreme undervaluation. We believe these companies have recovery potential in earnings and cash flow growth, and quality characteristics such as talented management, defensible market position, and financial strength.

Portfolio attribution

Equity markets continued to rally in May, likely responding to massive monetary and fiscal stimulus. Investor bias in favor of growth stocks persisted with the MSCI WorldGrowth Index outpacing the MSCI WorldValue Index for the fifth month in a row. With one exception (during the TMT bubble), this year-to-date period has been the worst five-month performance of value versus growth in the past 40 years. We anticipate a pickup in global economic activity as countries gradually relax COVID-19 pandemic lockdown measures. The top performing markets in our investable universe were Portugal, Finland, Germany, Sweden, and Denmark. The worst performing markets were Hong Kong, Singapore, Israel, China, and the United Kingdom. The best performing sectors in the World Index were information technology, materials, and industrials. The worst performing sectors were real estate, energy, 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 May, 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

The speed and magnitude of the stimulus from global central banks and governments has likely allowed investors to anticipate a potential economic recovery. Market volatility remains high (relative to early February, before the acceleration of the pandemic), as the path to widely available COVID-19 therapies and vaccines remains unclear. The intense market dislocation resulting from the pandemic afforded us the rare opportunity to gain exposure in the long portfolio to companies exhibiting, in our view, extreme undervaluation, recovery potential in earnings and cash flow growth, and quality characteristics such as talented management, defensible market position, and financial strength. Based on the last three market cycles, and the recent recovery in markets from the late March 2020 lows, we are convinced that cyclical sectors will—once again—outperform the more defensive areas of the market. The potential for a resumption in dividend payout for a wide array of companies we believe, should add another important component to total return.

On an aggregate long/short portfolio basis, we are maintaining a near market-neutral posture, with 1.98% et 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 industrials and financials, where we have significant positive net exposure, and against real estate and utilities, where we have meaningful negative net exposure. By geography, we are net biased toward China and Switzerland, and biased against Australia and Hong Kong. Gross exposure (leverage) for the Fund is 345% (3.45x) as of May 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 $0.8637 $0.0000 $0.0000
2017 $0.0000 $0.0000 $0.0000
2016 $1.0639 $0.0000 $0.0000
2015 $0.3553 $0.0000 $0.0000
2014 $0.0000 $0.0000 $0.0000
2013 $0.412 $0.000 $0.000
2012 $0.258 $0.000 $0.000
2011 $0.094 $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: