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AQR To Close Top-Performing Alternative Funds To New Investors

AQR will be closing its Style Premia Alternative (MUTF: QSPIX ) and Style Premia Alternative LV (MUTF: QSLIX ) funds to new investors as of March 16. The funds, which posted respective gains of 8.76% and 4.02% in 2015, closed out the year as two of the top three multialternative funds in December. Clearly, they are not being closed due to poor performance – both funds finished in the top 3% of their Morningstar category for the recently concluded year. Instead, the funds are being closed to new investors because they’re nearing the maximum capacity of their strategies. QSPIX, with $2.2 billion in assets, and QSLIX, with $218 million, aren’t the only alternative funds AQR has had to close for this same reason: In June 2012, the firm closed the AQR Diversified Arbitrage Fund (MUTF: ADAIX ). The fund ranked in the top 2%, 41%, and 26% of its category from 2010 through 2012. In November 2012, AQR barred new investors from buying shares of its Risk Parity Fund (MUTF: AQRIX ). That fund launched in late 2010 and ranked in the top 2% and 11% in 2011 and 2012. And in September 2013, the AQR Multi-Strategy Alternative Fund (MUTF: ASAIX ) had to be closed, too. Today, the fund has a five-star rating from Morningstar, and it ranked in the top 2% of its category in 2015 (top 4% in 2014). The procedure for how AQR will wind down new investments in QSPIX and QSLIX, and how existing shareholders will be impacted, is outlined in a January 26 SEC filing . Past performance does not necessarily predict future results. Jason Seagraves contributed to this article.

Best And Worst Q1’16: Financials ETFs, Mutual Funds And Key Holdings

The Financials sector ranks seventh out of the ten sectors as detailed in our Q1’16 Sector Ratings for ETFs and Mutual Funds report. Last quarter , the Financials sector ranked sixth. It gets our Dangerous rating, which is based on an aggregation of ratings of 41 ETFs and 244 mutual funds in the Financials sector. See a recap of our Q4’15 Sector Ratings here . Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the sector. Not all Financials sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 22 to 572). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Financials sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 Click to enlarge * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings Four ETFs are excluded from Figure 1 because their total net assets are below $100 million and do not meet our liquidity minimums. See our ETF screener for more details. Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 Click to enlarge * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The iShares US Insurance ETF (NYSEARCA: IAK ) is the top-rated Financials ETF and the Davis Financial Fund (MUTF: DVFYX ) is the top-rated Financials mutual fund. Both earn a Very Attractive rating. The PowerShares KBW Premium Yield Equity REIT Portfolio ETF (NYSEARCA: KBWY ) is the worst-rated Financials ETF and the Rydex Series Real Estate Fund (MUTF: RYREX ) is the worst-rated Financials mutual fund. Both earn a Very Dangerous rating. 602 stocks of the 3000+ we cover are classified as Financials stocks. The Progressive Corp (NYSE: PGR ) is one of our favorite stocks held by IAK and earns a Very Attractive rating. PGR also lands on January’s Most Attractive Stocks list. Since 2009, Progressive has grown after-tax profit ( NOPAT ) by 5% compounded annually. Over this same time frame, Progressive’s return on invested capital ( ROIC ) never fell below 17% and is currently a top quintile 19%. The strength in Progressive’s business helps explain why the stock was up over 17% in 2015, but even after this price increase shares remain undervalued. At its current price of $31/share, Progressive has a price to economic book value ( PEBV ) ratio of 1.0. This ratio means that the market expects Progressive’s NOPAT to never meaningfully grow from its current levels. If Progressive can grow NOPAT by just 5% compounded annually (similar to past five years) for the next five years , the stock is worth $39/share today – a 26% upside. Prologis (NYSE: PLD ) is one of our least favorite stocks held by RYREX and earns a Dangerous rating. On the surface, Prologis would appear to be a healthy business that has grown GAAP net income by 181% compounded annually since 2010. However, this net income growth fails to account for the expansion of the balance sheet to fund the GAAP growth. In fact, Prologis’ debt has increased from $3.6 billion to $10.4 billion since 2010 and in total, Prologis’ invested capital has grown from $7 billion to $25 billion over the past five years. Increasing invested capital does not come free of charge and after removing the cost for Prologis’ invested capital we find that Prologis has only earned positive economic earnings in one of the past 17 years (2005). Despite its long-term track record of value destruction, PLD is priced for significant profit growth going forward. To justify its current price of $41/share, PLD must grow NOPAT by 10% compounded annually for the next 12 years . This expectation seems highly optimistic given PLD’s history of value destruction. Figures 3 and 4 show the rating landscape of all Financials ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst ETFs Click to enlarge Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Mutual Funds Click to enlarge Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector or theme.

January ETF Asset Report: Safe Havens Rule

The month of January was all about heightened global growth concerns and deflation fears. In particular, the acute plunge in oil prices has taken a toll on a number of assets worldwide. Most economies across the world, be it China, Japan, the Eurozone or the otherwise improving U.S. economy, fears of a slowdown were prevalent. Sell-off was the keyword in January, sending most of the key global benchmarks in red. Central bank meetings came out dovish with more support promised for the future, if need be. The circumstance left investors pondering about where to invest their money and realize gains. Let’s see how this horrid start to 2016 impacted asset growth in the ETF industry. U.S. Treasury Bonds: Safe Retreat U.S. Treasuries across the yield spectrum gathered assets in January with the iShares Short Treasury Bond ETF (NYSEARCA: SHV ) being the topper. The fund attracted 2.69 billion of assets in the month. The iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) , iShares 7-10 Year Treasury Bond ETF (NYSEARCA: IEF ) and iShares 1-3 Year Treasury Bond ETF (NYSEARCA: SHY ) took third, fourth and fifth spots, hauling in around $1.67 billion, $1.36 billion and $1.18 billion in assets, respectively. Heightened global uncertainty brought this safe asset into the limelight. Dimming prospects of the frequent Fed rate hikes further, global growth worries and severely low oil price put a lid on global inflation and helped treasury valuation to soar. Gold Gets Shine Back Another safe refuge, gold, also dazzled in the month as it is often viewed as a safe haven asset to protect against financial risks, and has performed well lately (despite deteriorating fundamentals) on heightened market volatility. As a result, funds tracking the yellow metal, such as the SPDR Gold Trust ETF (NYSEARCA: GLD ), pulled in $959.2 million in assets in January. U.S. Equities Losing Out As most risky assets lost appeal in the month, investors fled the U.S. equities space. This is truer given the slowing U.S. growth momentum. Notably, the U.S. economy expanded at an annualized rate of 0.7% in the final quarter of 2015, down from the 2% growth registered in the third quarter. The Wall Street in fact went back to the 2014 levels last month. As a result, the U.S. broad equity ETFs saw huge outflows last month with the ultra-popular large-cap U.S. ETF, the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ), topping the losers’ list. The fund lost around $2.22 billion in assets. Not only SPY, but also the NASDAQ-based PowerShares QQQ Trust ETF (NASDAQ: QQQ ) came second, seeing $2.14 billion of assets gushing out. Other U.S. equity ETFs including the iShares Russell 1000 Value ETF (NYSEARCA: IWD ) and the iShares Russell 1000 Growth ETF (NYSEARCA: IWF ) also saw outflows of $1.35 billion and $1.28 billion in assets, respectively. Currency Hedged-Equities ETFs: Surprise Loser Though the prospect of further policy easing by the Bank of Japan (BoJ) was ripe in January, currency-hedged Japan ETFs fell out of investors’ favor. Probably, this was because of the fact that the greenback lagged in January (despite the December Fed liftoff) till BoJ announced a negative interest rate at the end of the month. Till January 28, 2016, the U.S. dollar fund, the PowerShares DB US Dollar Bullish ETF (NYSEARCA: UUP ) , lost 0.4% in the month while yen ETF, the CurrencyShares Japanese Yen Trust ETF (NYSEARCA: FXY ) , added about 0.5% during the same time frame. This sort of movement in currencies must have dented the currency-hedged Japanese equities ETFs like the WisdomTree Japan Hedged Equity ETF (NYSEARCA: DXJ ) which has seen assets worth $989.8 million flowing out. The problem was the same with the currency-hedged Europe equities ETF, the WisdomTree Europe Hedged Equity ETF (NYSEARCA: HEDJ ) . The fund lost $810 million in assets. Notably, euro also strengthened in the month as evident by the 1% gain in the CurrencyShares Euro Trust ETF (NYSEARCA: FXE ) till January 28, 2016. Original post