Litman/Gregory Searching for New Sub-advisor for Newly Re-opened Fund
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Friday, September 14, 2007

Litman/Gregory Searching for New Sub-advisor for Newly Re-opened Fund

Litman/Gregory Fund Advisors are searching for a new sub-adviser to absorb the excess flows that may result from the re-opening of its Masters' Select International Fund. Net redemptions have caused the fund, which was closed in 2004 as it reached $1 billion in assets, to re-open. Performance is said not to be the cause of the net redemptions.

Effective September 12, 2007, Litman/Gregory Fund Advisors has re-opened the Masters' Select International Fund. Originally launched on December 1, 1997, the fund closed to most new shareholders on October 27, 2004 when it reached $1 billion in assets.

We are re-opening the fund in response to a lengthy period of shareholder redemptions-in 12 of the past 15 months the fund has experienced net redemptions. This has occurred despite the fund's strong performance both relative to benchmarks and its peer group (see table at the end of this announcement), and is partly the result of the lack of inflows to offset naturally occurring redemptions. We believe net outflows are not in the best interests of existing shareholders because they force trading that results in additional transaction costs and can trigger taxable gains.

Additionally, positive cash flows give the sub-advisors an opportunity to reposition their portfolios by regularly providing fresh cash that can be deployed into their most attractive holdings. Without positive cash flows this would have to be achieved by liquidating existing positions.

Following Masters' Select International's initial close three years ago, at first there were strong cash flows from existing shareholders. Because the flexibility of our small-cap and all-cap managers can be impacted by too much asset growth, we realized we could be forced to "hard close" - meaning that even existing fund shareholders wouldn't be able to add to their holdings. For that reason we began looking for an additional sub-advisor who would be able to absorb the bulk of the excess flows so that a hard close would not be necessary. We have written about this idea in several shareholder reports, and noted that it would require finding a manager who meets the very high standards we have set for Masters' managers, and whose investment style does not materially alter the generally neutral overall style of the fund. Despite the recent redemption history we remain concerned that a period of strong flows from existing shareholders could happen again, possibly necessitating a hard close. Though this is not an issue now, we have continued to look for an additional sub-advisor and expect to make an announcement in the very near future.

But for now, because we believe the ideal cash-flow situation for Masters' Select International is characterized by small positive flows, the concern is the need to stem the existing outflows. For this reason we believe re-opening the fund is the right thing to do. If this results in inflows that are too strong over a sustained period we will partially or fully close the fund again.

Some shareholders may wonder why we would re-open the fund given an asset base that is quite a bit higher than it was when we closed the fund (appreciation has been the primary driver of the asset growth). Though the fund's asset base is small compared to many other successful and established international funds, we remain sensitive to this issue.

When we originally closed the fund we anticipated continued asset growth from appreciation and small asset inflows from existing shareholders. The negative flows over the past 15 months led us to revisit capacity discussions with our sub-advisors. The backdrop for these discussions was our objective to maximize long-term returns and our unwillingness to risk performance in exchange for more assets. Based on these discussions, we believe that the fund can handle approximately $10 million per month of net inflows on average (or, on a temporary basis, a somewhat larger number if we add another sub-advisor). This amounts to about 6% growth in the fund's asset base per year. Sub-advisors with less capacity are targeted at a lower allocation of fund assets and will receive a smaller portion of these inflows (consistent with their already existing target allocations).

The absolute dollar amount they would receive if the fund is experiencing flows at this level would be well within their limits. For now, the fund will remain open unless, in the judgment of Litman/Gregory in conjunction with feedback from the fund's sub-advisors, cash inflows reach a level that could be detrimental to long-term performance.

As always, we appreciate your confidence in investing with us in the Masters' Select Funds, and we will continue to focus on our goal of delivering superior long-term returns for all of the Masters' Select Funds.

Past performance is not a guarantee of future returns. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted. To obtain the performance as of the most recently ended calendar quarter, please visit The Fund imposes a 2% redemption fee on shares held less than 180 days. Performance does not reflect the redemption fee. If reflected, performance would be lower.

Morningstar, Inc is an independent mutual fund research and rating service. Each Morningstar category represents a universe of funds with similar investment objectives. Rankings for the periods shown are based on fund total returns with dividends and distributions reinvested and do not reflect sales charges. The highest percentile rank is 1 and the lowest is 100.

Must be preceded or accompanied by a prospectus.

Gross expense ratios are per the Prospectus dated April 30, 2007. Net expense ratios are per the Semi-Annual Report dated June 30, 2007. Through December 31, 2007, Litman/Gregory has contractually agreed to waive a portion of its advisory fees effectively reducing total advisory fees to approximately 0.97% of the Fund's average daily net assets.

Mutual fund investing involves risk. Principal loss is possible. The Fund may invest in foreign securities. Investing in foreign securities exposes investors to economic, political and market risks and fluctuations in foreign currencies. The Fund may invest in smaller companies, which involve additional risks such as limited liquidity and greater volatility.

Litman/Gregory Fund Advisors, LLC has ultimate responsibility for the performance of the Masters' Select Funds due to its responsibility to oversee the Funds' investment managers and recommend their hiring, termination and replacement.

S&P Citigroup PMI Global (ex US) Index is a broad based index that represents the largest 80% of investable companies in 52 developed & emerging market countries.

Cash flow measures the cash generating capability of a company by adding non-cash charges (e.g., depreciation) and interest expense to pretax income.

Masters' Select Funds are distributed by Quasar Distributors, LLC. (9/07)

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