No one mourns a dead mutual fund.
Oh, there’s always an obituary – in the form of a legal filing formally announcing a liquidation or merger – but investors seldom learn the real cause of death, nor do they generally feel any sense of loss.
Nearly 550 funds and ETFs liquidated or merged out of existence in 2019, according to Morningstar Inc., representing the fourth straight year when the industry lost more than 5 percent of its participants.
Most of the casualties deserve their ignominious demise. The list is a mix of the uninspired, goofy and mediocre, a combination of has-beens and never-weres, along with the occasional good performer that just never clicked with the public.
Before 2019 is far into the rear-view mirror – and in the spirit of year-end retrospectives about famous people who died in the past 12 months – let’s go whistling past the fund graveyard tossing the last bit of dirt on some of its newest inhabitants.
Among the funds taking the big dirt nap in 2019:
Wintergreen Fund, which started with justifiable promise and died having never achieved any of its potential. Manager David Winters was a fund star – having worked with the legendary Michael Price at the Mutual Series funds – before breaking out on his own in 2005. The fund drew money from investors who were willing to be patient with Winters’ deep-value style.
But as value continued to lag behind growth for the last decade, Wintergreen’s performance went from bad to worse. Assets – one roughly $400 million – were just $125 million when the fund closed in the spring. At that time, the fund was dead last in its Morningstar asset category over the last three and five years, and had trailed the average “world stock fund” by 4 percent annually over its last decade, according to Morningstar.
Patriot Balanced Fund, which promised “terror-free investing” but provided mostly “bad-results investing.” The fund was heavy on rhetoric when it opened in 2012, promising to stay away from companies doing business with nations identified by the U.S. State Department as “sponsors of terrorism,” currently Iran, North Korea, Sudan and Syria. It bought domestic companies that honor American embargoes against those nations, which enabled it to buy more than 90 percent of the market cap of Standard & Poor’s 500, yet somehow it lagged both the index and roughly 80 percent of its peers until it was shuttered in March; it is survived by its sister, the Patriot Fund.
Insignia Macro Fund, which didn’t go from first to worst in the last year, it went from first to dead. In 2018, the fund topped its peer group, holding a 9 percentage-point edge on its standard peer, according to Morningstar. This year, it lagged the peer group badly and was in negative territory through the first half of the year, which apparently prompted management to pull the plug just after Labor Day.
Rogers AI Global Macro ETF – ticker symbol BIKR — combined artificial intelligence with the investment acumen of Jim Rogers, famously known as the “Investment Biker.”
The idea was to use knowledge gained from Rogers’ travels to rotate through holdings in single-country ETFs, but no one signed up to ride with Rogers on this one. The fund had less than $4 million in assets – and a mediocre track record – when it was closed in mid-July.
Leland Currency Strategy Fund, which was liquidated in late February. The end came about a month after Morningstar’s John Rekenthaler penned a piece noting that multi-currency funds were among the five worst types of alternative funds; this fund fit in with the peer group Rekenthaler criticized by saying “Might as well have stashed your cash under a mattress.”
Skybridge Dividend Value Fund, speaking of a Morningstar call that likely resulted in a fund’s death. Skybridge was doomed the moment it was part of a Morningstar piece titled “StayAway from These Funds” in 2018. The fund had high costs, unimpressive buy-in from management and a questionable investment strategy. It was merged out of existence – into the Centre Global Infrastructure Fund – in July.
US Sentiment Leaders ETF had a great ticker symbol (BUZZ) but not much else. Lagging its peer group badly, BUZZ created no buzz, so it died in February. It seems inevitable that the issue will live fast, die young and leave a forgettable legacy.
ProSports Sponsors ETF was a short-lived gimmicky idea (but another great ticker symbol, FANZ). The fund died in January, presumably when someone realized that picking a portfolio based on who buys advertising on racing cars, blimps or during football games doesn’t seem like such a great idea once you have sobered up, exited the luxury box and returned to real life.
Eaton Vance Global Bond Fund was liquidated in early September, but wasn’t dead for long. Five weeks later, the company announced that Eaton Vance Diversified Currency Income would change its name to, yup, Eaton Vance Global Bond Fund. The currency fund wasn’t just renamed after its dead relative, it started buying, you guessed it, global bonds. It’s tough to figure out whether the dead fund actually died or if it was really the surviving fund that passed, but the one thing you can be sure of is that the moves cost shareholders money just to pay for all of the filings.
Comstock Capital Value, part of the Gabelli Funds family, had the most unusual death of the year. It basically stopped being a mutual fund without actually liquidating, instead turning from a mutual fund to an operating company, effectively a conglomerate investing in other companies. The bearish, lousy fund’s unusual move apparently was driven by a desire to take advantage of the tax benefits from losses. Shareholders were able to ride through to get shares in the new company; why anyone might do that was the head-scratcher here.
Janus Henderson All Asset Fund should have been listed here a year ago. It was slated to liquidate on New Year’s Eve 2018 – but the board put off its execution first until March and then to late June. The fund was a big laggard over its last five years, bleeding assets that entire time; the board never explained why it stayed execution twice, but shareholders didn’t benefit from the extensions. The moral of the story: When management wants to close, it’s time for you to leave, even if they take their sweet time shutting down.
Lazard US Realty Fund doesn’t quite belong on the list of dead funds just yet, but should be treated by investors like a zombie. The fund’s closing was scheduled for Halloween, then November 30 and now January 31, 2020. Even if the board finds a deal that somehow saves the fund by merging it into something else, it’s hard to believe investors will benefit from being among the walking dead until the deed is done.