(PUB) Investing 2016

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Alternative Funds Make a Splash Changes to the 500 | Russel Kinnel

Litman Gregory Masters Alternative Strategies MASNX is a fairly bold alternative fund with a well-known lineup. The Bronze-rated fund is split between a bond side and a stock side. The bond side includes a global unconstrained-bond strategy run by Loomis Sayles and an aggressive mortgage sleeve run by Double- Line Capital. The other half of the fund is run by First Pacific Advisors, Water Island Capital (merger arbitrage), and Passport Capital (long-short). See Page 6 for details. Three Go Out Artisan Small Cap Value ARTVX is being merged into Artisan Mid Cap Value ARTQX , so it’s going out.

I’m adding three funds to the Morningstar 500 . Causeway Emerging Markets CEMVX , with a Morn- ingstar Analyst Rating of Bronze, is showing that quantitative approaches canwork just aswell in emerging markets as in developed markets. Management believes the quantitative approach enables it to cast a wider net than would otherwise be possible using analysts for fundamental research. It combines value and momentum models along with top-down models and risk-management models to build the portfolio. The resulting portfolio has about 100 stocks and has a distinct value tilt. The top-down and risk-management models are crucial because big macroeconomic and currency move- ments have overwhelmed individual company funda- mentals for much of the past decade. In fact, the results have been pretty strong in a variety of markets. The fund is run by Causeway’s quantitative team, so it does not have the same management as Causeway International Value CIVVX . See Page 5 for details. Two Multialternative Funds Join Last month, we wrote about the landscape in the world of multialternative funds. This month, I’m adding two of the funds profiled in that article. Both are available in most No Transaction Fee platforms. Natixis ASG Global Alternatives GAFAX aims to track a hedge fund index by using futures contracts to mimic what hedge funds are doing. It does so using a targeted 8% volatility level and using a stop-loss rule to curb the downside. By trying to replicate hedge fund performance rather than actually running a hedge- fund-like strategy, the fund can save some money on investment professionals and pricey subadvisors. Thus, the fund’s fees are cheaper than most in an admit- tedly pricey group. See the facing page for more.

What is Morningstar FundInvestor 500 ? The Morningstar FundInvestor 500 features the industry’s best and most notable funds. Use the list to get new in- vestment ideas and track the funds you already own. FundInvestor subscribers have access to one-page monthly reports on all 500 funds on mfi.morningstar.com. Just type in the name or ticker of the fund in the search box.

Oppenheimer Gold & Special Minerals OPGSX has been dropped from coverage.

Finally, Neutral-rated Appleseed APPLX has less than $200 million and is a logical candidate to drop. K

Summary of Changes Add

Drop

Causeway Emerging Markets

Appleseed

Litman Gregory Masters Alt Strats

Artisan Small Cap Value

Natixis ASG Global Alternatives

Oppenheimer Gold & Special Min

Rating Change (Upgrade)

From

To

Baird Core Plus Bond

´ • ‰ ´ • Œ

Vanguard Strategic Equity

Wasatch Core Growth

Rating Change (Downgrades)

From

To

Amana Growth

• ´ • ´ ´ ‰ • ‰ Œ •

Amana Income

Artisan Small Cap Value

Longleaf Partners

Longleaf Partners Small-Cap

Sequoia Œ ´ Virtus Emerging Markets Opportunities • ´ Virtus Foreign Opportunities • ´ To Manning & Napier Pro-Blend Cnsrv Term ´ ˆ Manning & Napier Pro-Blend Extnd Term ´ ˆ Manning & Napier Pro-Blend Max Term ´ ˆ Rating Change (Under Review) From

New Ratings

To

Baird Aggregate Bond

• ´ • ´

Causeway Emerging Markets

FMI International

T. Rowe Price Global Technology

T. Rowe Price Health Sciences

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