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Portfolio > Portfolio Construction

Portfolio Products Round-Up: Neuberger Berman Files, J.P. Morgan Jazzes Fund

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This week in portfolio products news, Neuberger Berman filed with the SEC for the introduction of two new mutual funds and J.P. Morgan added a new wrinkle to a bond fund. Also, Gemini Fund Services assisted in the launch of seven new alternative funds by independent advisors.

Neuberger Berman Files to Launch Two Funds

Neuberger Berman on Thursday said that it had filed to introduce two new funds, Global Equity and Global Thematic Opportunities. Both funds seek long-term growth of capital.

The Global Equity Fund will be managed by Benjamin Segal, managing director of Neuberger Berman Management and Neuberger Berman LLC. It seeks to reduce risk through diversification across many industries, and invests mainly in large-capitalization companies located anywhere in the world, including companies in both developed and emerging markets. Under normal market circumstances, the fund will invest at least 80% of its assets in equity securities.

The Global Thematic Opportunities Fund will be managed by Anthony Gleason, Alexandra (Sandy) Pomeroy, William Hunter, and Richard Levine. The portfolio managers identify companies through a two-step process that they believe to be attractively priced and that benefit from significant and underappreciated global trends. The first step involves identifying global themes through proprietary research, and the second identifies companies they believe will benefit from these themes. The portfolio managers believe this helps them choose companies whose stocks trade at a discount to their intrinsic value, thus presenting attractive long-term investment opportunities. The portfolio managers also model future cash flows to identify companies attractively priced relative to current cash flows.

J.P. Morgan Asset Management Reconfigures Bond Fund

A new twist marks a month-old mutual bond fund from J.P. Morgan Asset Management. The Tax Aware Income Opportunities Fund (JTAAX), co-managed by William Eigen and Rick Taormina, does some of the usual: it focuses 80% of its capital on tax-exempt municipal bonds. The twist comes in the other 20%, which is allocated for taxable bonds, credit derivatives and a suite of idiosyncratic hedges aimed at insulating the portfolio and juicing returns.

According to Eigen, head of absolute return and opportunistic fixed-income strategies for J.P. Morgan Asset Management, such a mix had not been tried earlier because yields on municipal bonds had been falling steadily for several years, pushing up the value of those assets. "[Muni] mutual funds haven't evolved because they haven't had to; you had to do nothing over the last 30 years but put your feet up and watch the returns roll in," he said.

Taormina, manager of municipal bonds at the firm, pointed out that now yields are at unprecedented low levels and risk premiums on many of the securities don't provide enough cushioning to withstand inflation and interest-rate increases. That 20% difference in this fund allows the flexibility to change exposure and evade volatility.

Gemini Fund Services Helps Launch Seven New Alternative Funds

As a partner to independent advisors who want to launch alternative investment funds to cater to that interest among their high-net-worth clients, Gemini Fund Services, LLC announced Tuesday that in the first quarter of 2011, it has overseen the launch of seven such new funds.

“Gemini partners with advisors to develop the investment product that meets their specific vision and needs, drawing on years of industry knowledge and insight to find creative solutions at the best cost,” said Andrew Rogers, president of Gemini Fund Services. “We are very pleased to help launch these funds and enable more advisors to compete in an increasingly costly and regulated environment.”

Gemini works with advisors to deliver investment solutions such as mutual funds, hedge funds, and alternative investments, including collective investment trusts. Then it helps advisors bring products to market with turnkey services, including comprehensive fund servicing, variable annuities, retail and variable trusts, shared compliance services, EDGAR filing and printing services.

The new funds are:

  • Arrow Commodity Strategy Fund (CSFFX)
  • Bandon Isolated Alpha Fixed Income Fund (BANIX)
  • Equinox Market Neutral Commodity Strategy Fund (EQCIX)
  • FX Strategy Fund (FXFIX)
  • Grant Park Managed Futures Strategy Fund (GPFNX)
  • James Alpha Global Enhanced Real Return (GRRAX)
  • Navigator Equity Hedged Fund (NAVCX)

Merk Hard Currency Fund Tops $500 Million in AUM

On Tuesday, Merk Investments LLC announced that its flagship fund, the Merk Hard Currency Fund (MERKX), has surpassed $500 million in assets under management. The fund was launched in May of 2005, and is a no-load, open-end currency mutual fund that

seeks to protect against the decline of the U.S. dollar relative to other currencies.

Axel Merk, president and CIO of Merk Investments, said in a statement, “Concerns about the U.S. dollar, inflationary pressures and mounting U.S. debt have helped to highlight the need for investors to diversify outside of the greenback. Beyond the woes of the U.S. dollar, currencies in general have historically exhibited low correlations with traditional asset classes, and as such, may provide diversification benefits and an attractive risk/return profile for investors’ portfolios.”

Merk Investments is the largest mutual fund company focusing exclusively on currencies, and has $650 million in assets under management. The Merk Funds are a suite of transparent no-load currency mutual funds that do not typically employ leverage; they consist of the Merk Hard Currency Fund (MERKX), the Merk Asian Currency Fund (MEAFX), and the Merk Absolute Return Currency Fund (MABFX). The goal of the Merk Funds is to provide investors with the opportunity to add managed currency exposure to their portfolios, which may provide valuable diversification benefits.

Van Eck Global Says Rare Earth/Strategic Metals ETF Clears $500 Million

Tuesday was also the day that Van Eck Global announced that Market Vectors Rare Earth/Strategic Metals ETF (REMX), which it distributes, cleared the half-billion mark in AUM. REMX, the company said, is the first U.S.-listed ETF that seeks to give investors pure play exposure to the equities of companies primarily engaged in the production, refining, and recycling of rare earth/strategic metals.

REMX seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Rare Earth/Strategic Metals Index (MVREMXTR). Jan van Eck, Principal of Van Eck Global, said in a statement, “We believe REMX offers investors balanced exposure to the sector first by including strategic metals as well as rare earths and second by including processors and recyclers, not just mining companies. An additional advantage is that the underlying index caps exposure to any company at 8%; this limit prevents any particular company from having an undue effect on the ETF.”

Rare earth/strategic metals are industrial metals that are typically mined as byproducts in operations focused on precious metals and base metals. Compared to base metals, they have more specialized uses and are often more difficult to extract.

As of March 31, 2011, the Index included 25 constituents from nine different countries. Canada has the largest country weighting, at approximately 23%, followed by Australia, at 22%, and the United States and China, with 19% and 11%, respectively. While China controls the vast majority of all rare earths production, the Index is limited to equities that are currently available to foreign investors; therefore only offshore China equities, or H-Shares, are included in the investable universe.


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