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Natixis CGM Advisor Targeted Equity Fund: An End Of An Era

Summary Natixis Asset Management, the fund’s distributor, has recently announced the closure of the CGM Advisor Targeted Equity Fund to new investors, and plans to liquidate the fund on 2/17/2016. The fund is managed by CGM’s Kenneth Heebner and has been active since 1968. Fund has significantly underperformed the market over the last 8 to 10 years. One of the oldest mutual funds is about to shut the doors. Natixis has just sent out a letter to financial advisor informing them of the board’s decision to liquidate the CGM Advisor Targeted Equity Fund (MUTF: NEFGX ) (MUTF: NEBGX ) (MUTF: NEGCX ) (MUTF: NEGYX ) on February 17th, 2016. As per the letter… The Board considered a number of factors in making this decision. Natixis Funds are managed solely by firms in which Natixis Global Asset Management has an ownership interest. In early January 2016 Natixis will no longer hold any ownership interest in Capital Growth Management (CGM). The Board determined that, since there is no other manager or fund within the Natixis Funds complex that has a similar investment style, it would not be in the best interest of shareholders to have another portfolio manager assume responsibility for managing the Fund or to merge it into another fund. If you are currently an investor, what are you to do? The Basics Originally launched in 1968, the fund has been managed over the last 39 years by Kenneth Heebner. Fund Basics : Sponsor: Natixis Global Asset Management Managers: Sub-Advised by CGM, Kenneth Heebner AUM: $448.53 Million across share classes Historical Style : Large Blend Investment Objectives: Seeks long-term growth of capital through investment in equity securities of companies whose earnings are expected to grow at a faster rate than that of the overall United States economy. Number of Holdings: 21 Current Yield: 0%, Annual Distributions Inception Date: 11-27-1968 Fees: A Share : 1.15%, I Share: .89% Source: Natixis Global Asset Management The fund’s special sauce is twofold. First, the fund is concentrated and typically holds between 20 and 30 securities. The reasoning for this being, if you hold 100 names or more and many funds do, you might as well own an index fund as you are in a quasi index fund with higher fees. As a concentrated fund, you are able to make specific investment bets. The second part to the special sauce is selecting “aggressive large-cap” holdings with a competitive long-term track record. The Numbers Pre 2007 the fund was a shining example that active management can work. 2007 in particular was a stand out year where the fund returned 34.42%, beating the S&P 500 by over 28%. Yes, the fund was concentrated and had a higher beta, it certainly brought alpha to the portfolio. Unfortunately, since 2008, the fund has been mediocre at best. (click to enlarge) Source: YCharts Even over the last 10 years, the fund has still not gotten its mojo back. (click to enlarge) Source: YCharts Putting this into perspective, we can take a look at the Risk Reward Scatterplot and MPT statistics for the fund compared to the S&P 500. (click to enlarge) Source: Morningstar While the fund has returned positive numbers, it has done so with both a higher beta to the market, and a lower alpha, not keeping up with the market. This trend holds true for both the 3, 5 and 10 year numbers. Our Take & Bottom Line This was a great fund Pre 2008, however during the great financial melt UP inspired by zero interest rate policy, active managers have been left behind as the entire markets went up. All you heard for the last 8 years has been index funds, ETFs, etc. Only this year have you started seeing a return to good active managers in a market that has gone nowhere for the year. The question is…. what does the future hold? Unfortunately, no one knows how CGM will manage in the future. The fund has typically had very active turnover in the portfolio with very little to show for it. It would not be prudent to invest in the funds right now, so this discussion focuses for those that are current investors. Even though Natixis will be liquidating the funds, CGM does have 3 mutual funds that are no load funds, as opposed to the Natixis CGM funds that were sold primarily through financial advisors. For investors who still believe in CGM and Kenneth Heebner, your choice would be to invest in the CGM Focus Fund (MUTF: CGMFX ) which mimics the Natixis fund very well. Unfortunately, the performance has been just as tepid. Perhaps this fund closing is just an opportunity to take a moment and reevaluate your options. In any case, it would be prudent to process your sell order now, rather than wait for the fund liquidation to happen by itself and hope to avoid any other special distributions & 1099s.

3 Large Cap Blend Mutual Funds To Diversify Your Portfolio

A blend fund is a type of equity mutual fund which holds in its portfolio a mix of value and growth stocks. Blend funds are also known as “hybrid funds”. Blend funds aim for value appreciation by capital gains. They owe their origin to a graphical representation of a fund’s equity style box. In addition to diversification, blend funds are great picks for investors looking for a mix of growth and value investment. Meanwhile, large cap funds usually provide a safer option for risk-averse investors, when compared to small cap and mid cap funds. These funds have exposure to large cap stocks, providing long-term performance history and assuring more stability than what mid cap or small caps offer. Below, we will share with you 3 potential large cap blend mutual funds . Each has either earned a Zacks #1 Rank (Strong Buy) or a Zacks #2 Rank (Buy), as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all large cap blend funds, investors can click here to see the complete list of funds. Fidelity Large Cap Core Enhanced Index Fund No Load (MUTF: FLCEX ) seeks capital growth over the long run. The fund invests a lion’s share of its assets in large cap companies listed on the S&P 500 Index. Factors including historical valuation, growth and profitability are considered before investing in a company. FLCEX aims to provide return greater than that of the S&P 500 Index. It invests in companies throughout the globe. The Fidelity Large Cap Core Enhanced Index Fund has returned 14.9% over the past one year. FLCEX has an expense ratio of 0.45%, as compared to a category average of 1.08%. Schwab Core Equity Fund Inv (MUTF: SWANX ) invests a major portion of its assets in equity securities of domestic companies. The fund seeks to maintain a portfolio which is expected to provide a higher total return than the S&P 500 index. Though SWANX invests in companies having a market capitalization of more than $500 million, the fund allots a sizable portion of its assets in large cap stocks. The Schwab Core Equity Fund has returned 17.2% over the past one year. Jonas Svallin is one of the fund managers, and has managed this fund since 2012. Schroder North American Equity Fund Advisor (MUTF: SNAVX ) seeks capital appreciation over the long term. The fund invests a large chunk of its assets in companies that are located or traded in North America. Though SNAVX focuses on acquiring stocks of large cap companies, it may also invest notable portion of its assets in mid and small cap companies. SNAVX invests in equity securities, including common and preferred stocks. The fund has returned 11.6% over the past one year. As of March 2015, SNAVX held 407 issues, with 4.21% of its assets invested in Apple Inc. (NASDAQ: AAPL ) Original Post Share this article with a colleague

European Funds See Inflows For 6-Consecutive Weeks

Stock funds attracted $8.4 billion for the week ending Mar 4, according to data from Lipper. This was the biggest inflow since late December. Of these, $6.9 billion was invested in non-U.S. stock funds. U.S.-focused stock funds added $1.5 billion. This came just a week after the U.S. investors had poured the most money into non-domestic stock funds since 2013. Jeff Tjornehoj, head of Lipper Americas Research said: I think those investors are expecting a rally in European stocks after the ECB opens the QE (quantitative easing) spigots next week. As for the broader markets, it has been a mixed week so far. Optimism that the U.S. economy was gradually picking up the pace had boosted benchmarks to record highs on Monday. Nasdaq had closed above the 5k mark for the first time since Mar 2000 boosted by a new deal in the technology sector. However, markets then dropped for two consecutive days, dragged down by dismal monthly car sales and a drop in private-sector employment gains in February, among other factors. Markets rebounded on Thursday, somewhat boosted by the ECB announcing a trillion-dollar stimulus plan that will kick off on Monday. Till close of markets on Mar 5, the Dow and Nasdaq are up just 0.02% and 0.07%, while the S&P 500 is down 0.2%. Funds Flow Data As mentioned, while $6.9 billion was poured into non-U.S. stock funds, U.S.-focused stock funds added $1.5 billion. U.S.-focused stock funds were able to witness inflows, after it lost $3.1 billion in outflows in the prior week. This was the biggest outflow in three weeks. Coming back to this week, U.S.-based European stock funds witnessed inflows for the sixth-consecutive week, adding $708 million for week ending Mar 4. Inflows into these funds may have been due to investors’ expectation of a rally as the ECB begins the bond repurchase plan. Emerging market stock funds added $1.4 billion, the most since Jun 2014. Separately, Taxable bond funds and high-yield “junk” bond funds registered their ninth and sixth consecutive week of inflows, respectively. While taxable bond funds added $170 million, the latter attracted $309 million. U.S. Treasuries funds had the biggest outflows since Jun 2014, losing out on $2.8 billion. On the other hand, the Investment Company Institute reported total money market fund assets were $2.67 trillion for the week ended Mar 4, down by $18.60 billion. Markets and Key Developments This Week On Monday, Nasdaq closed above the 5000 mark for the first time since Mar 2000 boosted by a new deal in technology sector. The Dow and the S&P 500 also touched record highs as the U.S. economy is seen to be gradually picking up the pace. Markets ended in the green, despite reports of a slowdown in manufacturing activity and consumer spending. Meanwhile, interest cuts in China also drove benchmarks higher on Monday. The S&P 500 and Dow closed at a record high for the fifth and fourth time this year, respectively. Dismal monthly car sales report dragged benchmarks down from their record highs in light volume trade on Tuesday. Profit taking also retreated Nasdaq from its key 5K level. Also affecting the markets was Israeli Prime Minister Benjamin Netanyahu’s criticism of White House and Iran’s attempts of a nuclear deal. Markets ended in the red for the second consecutive day on Wednesday, handing the Dow and S&P 500 their worst closing levels since Feb 19. Some opined there was no real panic in the markets. Private-sector employment gains in February were lower than prior month. Separately, ISM services index showed modest improvement. Markets snapped a two-day losing streak on Thursday, somewhat boosted by the ECB announcing a trillion-dollar stimulus plan that will kick off on Monday. Higher-than-expected initial claims numbers had offset some gains on Thursday. It was the year’s second lightest trading session, as investors refrained from betting big bucks ahead of Friday’s nonfarm payroll report. The jobs number may influence the timing of the rate hike decision. ECB Stimulus : The European Central Bank (ECB) announced a 1 trillion euro ($1.1 trillion) bond-buying program. The repurchase is due to start from coming Monday, Mar 9. As announced in January, ECB will buy government bonds worth 60 billion euros a month through a quantitative easing program. The QE program will continue till Sep 2016. ECB President Mario Draghi said this time that ECB would purchase these bonds even if they have a negative yield. However, the negative yield should not cross -0.2%, as they need to be within the level of ECB’s deposit rate. The bank also increased growth and inflation targets. Growth estimates were revised up to 1.5%, 1.9% and 2.1% for 2015, 2016 and 2017 respectively. Draghi said: The substantial, additional easing of our monetary policy stands, supports and reinforces the emergence of more favorable developments of the euro area economy, financial market conditions and the cost of external finance for the private economy have eased further. Borrowing conditions for firms and households have improved considerably. Obamacare in Court : Another key event of this week has been the commencement of the third hearing on Obamacare in the U.S. Supreme Court. King v. Burwell is the biggest challenge Obamacare has had to deal with till now and threatens to derail President Obama’s signature policy measure. 3 Mutual Funds to Buy Given the continued inflows into the non-US stock funds and particularly in the U.S.-based European stock funds, we would suggest 3 Non-US Equity funds, that are likely to see further upside. These funds carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy). Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund. Also, the funds have high total return over the last four weeks, carry no sales load and have low expense ratio. The minimum initial investment in these funds is $5000. Henderson European Focus Fund (MUTF: HFEIX ) seeks capital growth over the long term. The fund invests a majority of its net assets in equities of European firms. The fund has no limits regarding geographic asset distribution within Europe. It may invest in one country or limited number of countries. HFEIX carries a Zacks Mutual Fund Rank #2. It has returned 8.1% over the last four weeks. It carries an expense ratio of 1.11% as compared to category average of 1.50%. Ivy International Core Equity Fund (MUTF: ICEIX ) invests a lion’s share of its assets, and borrowings, in equities that are mostly traded in developed European and Asian/Pacific Basin markets. To boost return, the fund may also invest in those issuers who are either located or operate in emerging market countries. ICEIX carries a Zacks Mutual Fund Rank #1. It has returned 5.5% over the last four weeks. It carries an expense ratio of 1.04% as compared to category average of 1.19%. VY T. Rowe Price International Stock Portfolio (MUTF: IMASX ) seeks capital appreciation over the long term. The fund invests a majority of its assets in stocks of companies located outside the U.S. For diversification, the fund invests in among developed and emerging countries. The fund emphasizes large-cap companies, and to an extent also invests in mid-cap firms. However, the fund may invest in companies of all sizes. IMASX carries a Zacks Mutual Fund Rank #2. It has returned 5.5% over the last four weeks. It carries an expense ratio of 0.77% as compared to category average of 1.37%.