Mutual Fund Reports

Mutual Fund Reports

Required Disclosures

S&P GLOBAL™ and S&P CAPITAL IQ™ are used under license. The owner of these trademarks is S&P Global Inc. or its affiliate, which are not affiliated with CFRA Research or the author of this content.

This report is for informational purposes only. Neither the publisher nor its sources guarantee the accuracy, adequacy or completeness of this report or make any warranties regarding results from its usage. When using this report, investors are advised to consult the accompanying glossary of investment terms.

Throughout this report, total return performance shown is historical, and assumes reinvestment of all dividends and capital gain distributions. Total Return, Peer Rank and Category Rank do not take into account loads or any other sales charges. An investment in a fund is not a bank deposit. It is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Past performance is no guarantee of future results, and investment return and principal value will fluctuate so that, when redeemed, an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted; performance current to the most recent month-end or calendar quarter- end is included in the report and can also be obtained from the fund company’s website.

The data and information shown in this report is intended for use by financial professionals and/or sophisticated investors who should verify that all data, assumptions, and results are accurate before making any investment decision or recommendation. Before acting on any information in this document, an investor should consider whether the fund is suitable for their particular circumstances and, if necessary, seek professional advice.

CFRA’s Mutual Fund Rankings provide a quantitative and holistic assessment of the performance, risk profile, and relative costs of a given fund compared to other mutual funds in its category. Rankings range from ««««« (highest) to ««««« (lowest) and follow a normalized distribution curve.

Fund Rank in Category CFRA Ranking

Top 10% «««««

Next 20% ««««

Middle 40% «««

Next 20% ««

Bottom 10% «

Risks disclaimers

Investors should read the fund’s prospectus and consider the fund’s investment goals, risks, charges and expenses before investing. The Fund may be subject, but not limited, to the following investment risks:

Equity Investing Risk

While stocks have historically outperformed other asset classes over the long term, they tend to fluctuate more dramatically over the short term. There are special risks associated with significant exposure to a particular sector,  including the possibility of increased economic, business or other developments affecting the sector, which may result in increased volatility to the fund’s share price.

Small and midsize company risk. Small and midsize companies carry additional risks because the operating histories of these companies tend to  be  more limited, their earnings and revenues less predictable, and their share prices more volatile than those of larger, more established companies. The shares of smaller companies tend to trade less frequently than those of larger, more established companies, which can adversely affect the pricing of these securities and the Fund’s ability to sell these securities.

Large cap stock risk. Stocks of large cap companies may underperform the stocks of lower quality, or smaller capitalization companies during periods when the stocks of such companies are in favor.

Growth securities risk. Growth companies generally seek to achieve high earning growth regardless of market conditions. Growth stocks usually have high price-to-earnings and price-to-book ratios, which means that these stocks are relatively high-priced in comparison with the companies’ Net Asset Values (NAVs). Stocks of growth companies or “growth securities” have market values that may be more volatile than those of other types of investments. Growth securities typically do not pay a dividend, which can help cushion stock prices in market downturns and reduce potential losses.

Value securities risk. Value stocks are those that generally have fallen out of favor in the marketplace and are considered bargain-priced compared with book value, replacement value, or liquidation value. Typically, value  stocks  are priced much lower than stocks of similar companies in the same industry. The prices of value stocks may lag the stock market for long periods of time if the market fails to recognize the company’s intrinsic worth.

International Equity Risk

Foreign investment risk. Fund’s investments in foreign securities may  be subject to political, social and economic factors affecting investments in foreign issuers. Special risks associated with investments in foreign issuers include exposure to currency fluctuations, less liquidity, less developed or less efficient trading markets, lack of comprehensive company information, political and economic instability and differing auditing and legal standards.

Foreign currency risk. Investments in foreign currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedged positions, that the U.S. dollar will decline relative to  the currency being hedged. Currency exchange rates may fluctuate significantly over short periods of time. Foreign currencies are also subject to risks caused by inflation, interest rates, budget deficits and low savings rates, political factors and government intervention and controls.

Emerging market risk. The securities of issuers located in emerging markets tend to be more volatile and less liquid than securities of issuers located in more developed economies, and emerging markets generally have less diverse and less developed economic structures and less stable political systems than those of developed countries. The securities of issuers located or doing substantial business in emerging markets are often subject to rapid and large changes in price.

Fixed Income Investing Risk

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties.

Lower-quality (high yield bonds or junk bond) debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer.

Credit and default risk. Corporate bonds are subject to credit risk. It’s important to pay attention to changes in the credit quality of the issuer, as less creditworthy issuers may be more likely to default on interest payments or principal repayment. If a bond issuer fails to make either a coupon or principal payment when they are due, or fails to meet some other provision of the bond indenture, it is said to be in default. To the extent the fund invests in high yield, its portfolio is subject to heightened credit risk.

Liquidity risk. When there is little or no active trading market for specific types of securities, it can become more difficult to sell the securities at or near their perceived value. In such a market, the value of such securities and the Fund’s share price may fall dramatically, even during periods of declining interest rates. The secondary market for certain bonds tends to be less well developed or liquid than many other securities markets, which may adversely affect the Fund’s ability to sell such bonds at attractive prices.

Derivatives risk. Investments in derivatives could have a potentially large impact on the Fund’s performance. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets. Derivatives can be highly volatile, illiquid and difficult to value.

Collateralized bond obligation risk. Collateralized Bond Obligations are structured financial products that pool together high yield bond obligations and repackages into separate groupings called tranches representing different degrees of credit quality. The higher quality tranches have greater degrees of protection and pay lower interest rates. The lower tranches, with greater risk, pay higher interest rates.

Government securities risk. The U.S. Treasury does not back in full all obligations of the U.S. government, its agencies and instrumentalities. Some obligations are backed only by the credit of the issuing agency or instrumentality, and in some cases there may be some risk of default by the issuer. The U.S. government or its agencies or instrumentalities cannot guarantee the market value of a security and they can guarantee only the timely payment of interest and principal when held to maturity. U.S government securities may increase or decrease in value based on global demand  and changes in global economic conditions affect the demand for these securities.

Municipal securities risk. Public information available  about  municipal securities is in general limited and less available than that for corporate equities or bonds. Special factors, such as legislative changes, and state and local economic and business developments, may adversely affect the yield and/or value of the Fund’s investments in municipal securities. Fund’s investments in municipal projects of a municipality or a state may impact the Fund’s value, if economic, business or political conditions change for the municipality or state.

Blended Funds & Fund of Funds Risks

Allocation risk. The ability of a fund to achieve its investment goal depends, in part, on the ability of the fund’s portfolio manager to allocate effectively the fund’s assets among equity and fixed-income securities. There can be no assurance that the actual allocations will be effective in achieving the fund’s investment goal.

Correlation risk. Although the prices of equity securities and fixed-income securities, as well as other asset classes, often rise and fall at different times so that a fall in the price of one may be offset by a rise in the price of the other, in down markets the prices of these securities and asset classes can also fall in tandem. Because the fund allocates its investments among different asset classes, the fund is subject to correlation risk.

Fund of Funds Risk. The Fund pursues its investment objective by investing in assets in the underlying sector fund rather than investing directly in stocks, bonds, cash or other investments. The Fund’s investment performance, because it is a fund of funds, depends on the investment performance of the underlying sector fund in which it invests. The Fund will indirectly pay a proportional share of the asset-based fees of the underlying sector fund in which it invests.

Equity Investing Risk

While stocks have historically outperformed other asset classes over the long term, they tend to fluctuate more dramatically over the short term. There are special  risks  associated  with  significant  exposure  to  a  particular  sector, including the possibility of increased economic, business or other developments affecting the sector, which may result in increased volatility to the fund’s share price.

Small and midsize company risk. Small and midsize companies carry additional risks because the operating histories of these companies tend to be  more limited, their earnings and revenues less predictable, and their share prices more volatile than those of larger, more established companies. The shares of smaller companies tend to trade less frequently than those of larger, more established companies, which can adversely affect the pricing of these securities and the Fund’s ability to sell these securities.

Large cap stock risk. Stocks of large cap companies may underperform the stocks of lower quality, or smaller capitalization companies during periods when the stocks of such companies are in favor.

Growth securities risk. Growth companies generally seek to achieve high earning growth regardless of market conditions. Growth stocks usually have high price-to-earnings and price-to-book ratios, which means that these stocks are relatively high-priced in comparison with the companies’ Net Asset Values (NAVs). Stocks of growth companies or “growth securities” have market values that may be more volatile than those of other types of investments. Growth securities typically do not pay a dividend, which can help cushion stock prices in market downturns and reduce potential losses.

Value securities risk. Value stocks are those that generally have fallen out of favor in the marketplace and are considered bargain-priced compared with book value, replacement value, or liquidation value. Typically, value  stocks  are priced much lower than stocks of similar companies in the same industry. The prices of value stocks may lag the stock market for long periods of time if the market fails to recognize the company’s intrinsic worth.

Growth Funds

Growth funds focus on stocks that may not pay a regular dividend but have the potential for large capital gains.

Growth securities risk. Growth companies generally seek to achieve high earning growth regardless of market conditions. Growth stocks usually have high price-to-earnings and price-to-book ratios, which means that these stocks are relatively high-priced in comparison with the companies’ Net Asset Values (NAVs). Stocks of growth companies or “growth securities” have market values that may be more volatile than those of other types of investments. Growth securities typically do not pay a dividend, which can help cushion stock prices in market downturns and reduce potential losses.

Income Funds

Income funds invest in stocks that pay regular dividends.

Risks of stock investing. While stocks have historically outperformed other asset classes over the long term, they tend to fluctuate more dramatically over the short term. There are special risks associated with significant exposure to a particular sector, including the possibility of increased economic, business or other developments affecting the sector, which may result in increased volatility to the fund’s share price.

Preferred stock risk. Preferred stock is a class of a capital stock that typically pays dividends at a specified rate. Preferred stock is generally senior to common stock, but subordinate to debt securities, with respect to the payment of dividends and on liquidation of the issuer. The market value of preferred stock generally decreases when interest rates rise and is also affected by the issuer’s ability to make payments on the preferred stock.

Index Funds

Index funds aim to achieve the same return as a particular market index by investing in all or perhaps a representative sample of the companies included in the particular index.

Indexing strategy risk. Funds that use an indexing strategy generally do not attempt to manage market volatility, but use defensive strategies or reduce the effects of any long-term periods of poor index performance. The correlation between fund and index performance may be affected by the fund’s expenses, changes in securities markets, changes in the composition of the index and the timing of purchases and redemptions of fund shares.

Non-diversification risk. Generally funds that have an indexing strategy tend to be non-diversified, which means that the fund may invest a relatively high percentage of its assets in a limited number of issuers. Therefore, the fund’s performance may be more vulnerable to changes in the market value of a single issuer or group of issuers and more susceptible to risks associated with a single economic, political or regulatory occurrence than a diversified fund.

Sector Funds

Sector funds may specialize in a particular industry segment, such as technology or consumer products stocks.

Market sector risk. Sector funds may significantly overweight or underweight certain companies, industries or market sectors, which may cause the fund’s performance to be more or less sensitive to developments affecting those companies, industries or sectors.

Money Market Risks

Compared to other mutual funds, Money Market funds have relatively low risks. By law, Money Market funds can invest only in certain high-quality, short-term investments issued by the U.S. Government, U.S. corporations, and state and local governments. Money market funds try to keep their net asset value (NAV) at a stable $1.00 per share. However, the NAV may fall below

$1.00 if the fund’s investments perform poorly. Money Market funds pay dividends that generally reflect short-term interest rates, and historically the returns for Money Market funds have been lower than for either bond or stock funds.

Inflation risk. The risk that inflation will outpace and erode investment returns over time.

Interest rate risk. Prices of fixed-income securities may accompany a rise in the overall level of interest rates. A sharp and unexpected rise in interest rates could cause a money market fund’s share price to drop below a dollar.

Credit and default risk. Corporate bonds are subject to credit risk. It’s important to pay attention to changes in the credit quality of the issuer, as less creditworthy issuers may be more likely to default on interest payments or principal repayment. If a bond issuer fails to make either a coupon or principal payment when they are due, or fails to meet some other provision of the bond indenture, it is said to be in default. To the extent the fund invests in high yield, its portfolio is subject to heightened credit risk.

Liquidity risk. When there is little or no active trading market for specific types of securities, it can become more difficult to sell the securities at or near their perceived value. In such a market, the value of such securities and the Fund’s share price may fall dramatically, even during periods of declining interest rates. The secondary market for certain bonds tends to be less well developed or liquid than many other securities markets, which may adversely affect the Fund’s ability to sell such bonds at attractive prices..

Tax risk. To be tax-exempt, municipal obligations generally must meet certain regulatory requirements. If any such municipal obligation fails to meet these regulatory requirements, the interest received by the fund from its investment in such obligations and distributed to fund shareholders will be taxable.

Structured notes risk. Structured notes, a type of derivative instrument, can be volatile, and the possibility of default by the financial institution or counterparty may be greater for these instruments than for other types of money market instruments. Structured notes typically are purchased in privately negotiated transactions from financial institutions and, thus, an active trading market for such instruments may not exist.

Municipal securities risk. Public information available  about  municipal securities is in general limited and less available than that for corporate equities or bonds. Special factors, such as legislative changes, and state and local economic and business developments, may adversely affect the yield and/or value of the Fund’s investments in municipal securities. Fund’s investments in municipal projects of a municipality or a state may impact the Fund’s value, if economic, business or political conditions change for the municipality or state.

Municipal lease risk. Municipal leases generally are backed by revenues from a particular source or depend on future appropriations by municipalities and are not obligations of their issuers; therefore they are less secure than most municipal obligations.

Non-diversification risk. Money Market funds tend to be non-diversified, which means that the fund may invest a relatively high percentage of its assets in a limited number of issuers. Therefore, the fund’s performance may be more vulnerable to changes in the market value of a single issuer or group of issuers and more susceptible to risks associated with a single economic, political or regulatory occurrence than a diversified fund.

Mutual Fund Ranking Methodology and Inputs

The overall Mutual Fund ranking is based on a weighted average computation of three components – performance analytics, risk considerations and  cost factors that evaluate, relative to its peers, a fund’s underlying holdings, its historical performance, and characteristics of the fund. For blended funds investing in individual securities, CFRA incorporates the following inputs:

Performance Analytics. The component score is a weighted average of up to four inputs:

Holdings-Based Inputs: S&P Global Market Intelligence STARS and 12-Month Yield (weighted average value of holdings)

Fund Inputs: trailing 1-year and 3-year performance vs. peers

Risk Considerations. This component score is a weighted average of up to four inputs:

Holdings-Based Inputs: Weighted Average Credit Rating

Fund Inputs: Manager Tenure, Standard Deviation and Debt Exposure

Cost Factors. This component score is a weighted average of up to three inputs: Expense Ratio (Net), Sales Load and Portfolio Turnover of the fund.

The component rankings are represented as Positive, Neutral or Negative indications, following the same methodology of a normalized distribution curve:

Positive component rankings are assigned to funds whose weighted-average score is in the top quartile of its asset category’s universe, applying a normalized distribution curve.

Neutral component rankings are assigned to funds whose weighted-average score is in the second or third quartiles of its asset category’s universe, applying a normalized distribution curve.

Negative component rankings are assigned to funds whose weighted-average score is the bottom quartile of its asset category’s universe, applying a normalized distribution curve.

In cases where sufficient analytical measures are not available on underlying assets, the component ranking will not be displayed.

For more details, including definitions, of the individual inputs to the Mutual Fund Ranking, see the Glossary section of this report. CFRA does not receive fees from funds for their inclusion in this report.

Analyst Certification
These reports are prepared by the equity research analysts of CFRA and S&P Malaysia, under contract to CFRA. All of the views expressed in STARS Stock Reports accurately reflect the research analyst’s personal views regarding any and all of the subject securities or issuers. Analysts generally update stock reports at least four times each year. No part of analyst, CFRA, or S&P Malaysia compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in a report.

About This Report’s Distributors:

This Report is published and originally distributed by CFRA US, with the following exceptions: In the UK/EU/EEA, it is published and originally distributed by CFRA UK Limited, an Appointed Representative of Hutchinson Lilley Investments LLP, which is regulated by the Financial Conduct Authority (No. 582181), and in Malaysia by S&P Malaysia, which is regulated by Securities Commission Malaysia, (No. CMSL/A0181/2007) under license from CFRA US, and its subsidiaries do not distribute reports to individual (retail) investors and maintain no responsibility for reports redistributed by third parties such as brokers or financial advisors.

General Disclaimers
Notice to all jurisdictions

Where reports are made available in a language other than English and in the case of inconsistencies between the English and translated versions of a Research Report, the English version will control and supersede any ambiguities associated with any part or section of a Research Report that has been issued in a foreign language. Neither CFRA nor its affiliates guarantee the accuracy of the translation.

The content of this material and the opinions expressed herein are those of CFRA based upon publicly-available information that CFRA believes to be reliable and the opinions are subject to change without notice. This analysis has not been submitted to, nor received approval from, the United States Securities and Exchange Commission or any other regulatory body. While CFRA exercised due care in compiling this analysis, CFRA AND ALL RELATED ENTITIES SPECIFICALLY DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, to the full extent permitted by law, regarding the accuracy, completeness, or usefulness of this information and assumes no liability with respect to the consequences of relying on this information for investment or other purposes. No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of CFRA. The Content shall not be used for any unlawful or unauthorized purposes. CFRA and any third-party providers, as well as their directors, officers, shareholders, employees or agents do not guarantee the accuracy, completeness, timeliness or availability of the Content.

Past performance is not necessarily indicative of future results. This document may contain forward-looking statements or forecasts; such forecasts are not a reliable indicator of future performance.

This report is not intended to, and does not, constitute an offer or solicitation to buy and sell securities or engage in any investment activity. This report is for informational purposes only. Recommendations in this report are not made with respect to any particular investor or type of investor. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors and this material is not intended for any specific investor and does not take into account an investor’s particular investment objectives, financial situations or needs. Investors should seek independent financial advice regarding the suitability and/or appropriateness of making an investment or implementing the investment strategies discussed in this document and should understand that statements regarding future prospects may not be realized. Investors should note that income from such investments, if any, may fluctuate and that the value of such investments may rise or fall. Accordingly, investors may receive back less than they originally invested. Investors should seek advice concerning any impact this investment may have on their personal tax position from their own tax advisor. Please note the publication date of this document. It may contain specific information that is no longer current and should not be used to make an investment decision. Unless otherwise indicated, there is no intention to update this document.

Additional information on a subject company may be available upon request.

CFRA’s financial data provider is S&P Global Market Intelligence. THIS DOCUMENT CONTAINS COPYRIGHTED AND TRADE SECRET MATERIAL DISTRIBUTED UNDER LICENSE FROM S&P GLOBAL MARKET INTELLIGENCE. FOR RECIPIENT’S INTERNAL USE ONLY.

The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Capital IQ, Inc. (“Capital IQ”). GICS is a service mark of MSCI and Capital IQ and has been licensed for use by CFRA.

For residents of the European Union/European Economic Area: Research reports are originally distributed by CFRA UK Limited (company number 08456139 registered in England & Wales with its registered office address at 131 Edgware Road, London, W2 2AP, United Kingdom). CFRA UK Limited is an Appointed Representative of Hutchinson Lilley Investments LLP, which is regulated by the UK Financial Conduct Authority (No. 582181).

For residents of Malaysia: Research reports are originally distributed by Standard & Poor’s Malaysia Sdn. Bhd. (S&P Malaysia) under license from Accounting Research & Analytics, LLC. S&P Malaysia is regulated by Securities Commission Malaysia (License No. CMSL/A0181/2007).

For residents of all other countries: Research reports are originally distributed by Accounting Research & Analytics, LLC d/b/a CFRA.

Copyright © 2017 CFRA. All rights reserved.
CFRA, the CFRA inverted pyramid logo, and STARS are registered trademarks of CFRA.