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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07763
LITMAN GREGORY FUNDS TRUST
(Exact name of registrant as specified in charter)
1676 N. California Blvd., Suite 500
Walnut Creek, CA 94596
(Address of principal executive offices) (Zip code)
(Name and Address of Agent for Service)
Jeremy L. DeGroot
1676 N. California Blvd., Suite 500
Walnut Creek, CA 94596
Registrant’s telephone number, including area code: (925) 254-8999
Date of fiscal year end: December 31
Date of reporting period: June 30, 2020
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Item 1. | Report to Shareholders. |
The following is a copy of the report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Act”):
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Semi-Annual Report
PartnerSelect Equity Fund (FKA Litman Gregory Masters Equity Fund)
PartnerSelect International Fund (FKA Litman Gregory Masters International Fund)
PartnerSelect Smaller Companies Fund (FKA Litman Gregory Masters Smaller Companies Fund)
PartnerSelect Alternative Strategies Fund (FKA Litman Gregory Masters Alternative Strategies Fund)
PartnerSelect High Income Alternatives Fund (FKA Litman Gregory Masters High Income Alternatives Fund)
June 30, 2020
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the PartnerSelect Funds’ shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the PartnerSelect Funds or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on www.partnerselectfunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change; and you need not take any action. You may elect to receive shareholder reports and other communications from the PartnerSelect Funds or your financial intermediary electronically by notifying your financial intermediary directly or, if you are a direct investor, by calling 800-960-0188.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your reports. If you invest directly with the PartnerSelect Funds, you can call 800-960-0188. Your election to receive reports in paper will apply to all funds held with the PartnerSelect Funds or your financial intermediary.
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PartnerSelect Funds Concept
Investment Philosophy: Alternative Strategies Fund and High Income Alternatives Fund
The Alternative Strategies Fund and the High Income Alternatives Fund were created based on the following fundamental beliefs:
First, Litman Gregory believes it is possible to identify investment managers who will deliver superior long-term performance relative to their passive benchmarks and peer groups. This belief is based on Litman Gregory’s extensive experience evaluating managers and mutual funds on behalf of their clients. The managers in these funds were chosen for their specialized and demonstrated expertise, as well as for their complementary, non-correlated investment approaches.
Second, not only do we want high-quality managers, but we want to offer access to them at an acceptable cost. We spent years engaged in research to find the right mix of managers we believe can deliver on both fronts.
Third, these funds don’t seek to simply replicate what each manager is already doing elsewhere, but to bring investors additional value-add through flexibility, and the ability to be more opportunistic.
The PartnerSelect Alternative Strategies Fund Concept
The Alternative Strategies Fund is a multi-manager fund that combines alternative and absolute-return-oriented strategies chosen based on Litman Gregory’s conviction that each individual strategy is compelling and that collectively the overall fund portfolio is well-diversified. This fund is intended to complement traditional stock and bond portfolios by offering diversification, seeking to reduce volatility, and to potentially enhance returns relative to various measures of risk.
This fund will contain many risk-control factors including the selection of strategies that seek lower risk exposure than conventional stock or stock-bond strategies, the risk-sensitive nature of the managers, the skill of the managers, and the overall strategy diversification.
Typically, each manager will run between 18% to 25% of the portfolio, but Litman Gregory may tactically alter the managers’ allocations to attempt to take advantage of particularly compelling opportunities for a specific strategy or to further manage risk. We will have a high hurdle for making a tactical allocation shift and don’t expect such top-down shifts to happen frequently.
The PartnerSelect High Income Alternatives Fund Concept
The High Income Alternatives Fund is a multi-managed fund created to include multiple types of income-producing investments that could improve returns and diversify risks while playing an important strategic role in navigating interest rate and credit cycles.
We partnered with skilled, experienced managers running differentiated strategies. Each offers access to alternative sources of income that clients may otherwise not own, or to which they may be under-allocated. We seek to generate a high level of income with an eye toward capital preservation—meaning that we don’t want to chase high income without consideration for valuations and risk.
Investment Philosophy: The Equity Funds
Our equity funds are based on two fundamental beliefs:
First, it is possible to identify investment managers who will deliver superior long-term performance relative to their passive benchmarks and peer groups. This belief is based on our extensive experience evaluating stock pickers and mutual funds on behalf of our investment management clients.
Second, that most stock pickers have an unusually high level of conviction in only a small number of stocks and that a portfolio limited to these stocks will, on average, outperform a more diversified portfolio over a market cycle. However, most stock pickers typically manage portfolios that are diversified beyond these highest-conviction holdings in order to reduce risk and to facilitate the management of the larger amounts of money they oversee.
The Concept Behind Our Equity Funds
Based on the above beliefs, these funds seek to isolate the stock-picking skills of a group of highly regarded investment managers. To meet this objective, the funds are designed with both risk and return in mind, placing particular emphasis on the following factors:
• | We only choose stock pickers we believe to be exceptionally skilled. |
• | Each stock picker runs a very concentrated sub-portfolio of not more than 15 of his or her “highest-conviction” stocks. |
• | Although each manager’s portfolio is concentrated, our equity funds seek to manage risk partly by building diversification into each fund. |
¡ | The Equity and International Funds offer diversification by including managers with differing investment styles and market-cap orientations. |
¡ | The Smaller Companies Fund brings together managers who use different investment approaches, though each focuses on the securities of smaller companies. |
• | We believe that excessive asset growth often results in diminished performance. Therefore, each fund may close to new investors at a level that Litman Gregory believes will preserve each manager’s ability to effectively implement the PartnerSelect concept. If more sub-advisors are added to a particular fund, the fund’s closing asset level may be increased. |
Diversification does not assure a profit or protect against a loss in a declining market.
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2 | ||
5 | ||
6 | ||
PartnerSelect Equity Fund | ||
8 | ||
13 | ||
14 | ||
PartnerSelect International Fund | ||
16 | ||
24 | ||
25 | ||
PartnerSelect Smaller Companies Fund | ||
28 | ||
32 | ||
33 | ||
PartnerSelect Alternative Strategies Fund | ||
34 | ||
45 | ||
46 | ||
PartnerSelect High Income Alternatives Fund | ||
88 | ||
95 | ||
96 | ||
111 | ||
112 | ||
114 | ||
Statements of Changes in Net Assets | ||
115 | ||
115 | ||
116 | ||
116 | ||
117 | ||
Financial Highlights | ||
118 | ||
119 | ||
120 | ||
121 | ||
122 | ||
123 | ||
124 | ||
125 | ||
149 | ||
150 | ||
152 | ||
156 | ||
158 |
This report is intended for shareholders of the funds and may not be used as sales literature unless preceded or accompanied by a current prospectus for the PartnerSelect Funds. Statements and other information in this report are dated and are subject to change.
Litman Gregory Fund Advisors, LLC has ultimate responsibility for the funds’ performance due to its responsibility to oversee its investment managers and recommend their hiring, termination and replacement.
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Litman Gregory Fund Advisors’
We are deeply committed to making each PartnerSelect Fund a highly satisfying long-term investment for shareholders. In following through on this commitment we are guided by our core values, which influence four specific areas of service:
First, we are committed to the PartnerSelect concept.
• | We will only hire managers who we strongly believe will deliver exceptional long-term returns relative to their benchmarks. We base this belief on extremely thorough due diligence research. This not only requires us to assess their stock-picking skills, but also to evaluate their ability to add incremental performance by investing in a concentrated portfolio of their highest conviction ideas. |
• | We will monitor each of the managers so that we can maintain our confidence in their ability to deliver the long-term performance we expect. In addition, our monitoring will seek to assess whether they are staying true to their PartnerSelect Funds mandate. Consistent with this mandate, we focus on long-term performance evaluation so that the PartnerSelect managers will not be distracted by short-term performance pressure. |
Second, we will do all we can to ensure that the framework within which our stock pickers do their work further increases the odds of success.
• | Investments from new shareholders in each fund are expected to be limited so that each fund’s asset base remains small enough to retain flexibility to add value. |
• | The framework also includes the diversified multi-manager structure that makes it possible for each manager to invest, when appropriate, in an opportunistic manner knowing that the potential volatility within his or her portfolio will be diluted at the fund level by the performance of the other managers. In this way, the multi-manager structure seeks to provide fund-level diversification. |
• | We will work hard to discourage short-term speculators so that cash flows into the funds are not volatile. Lower volatility helps prevent our managers from being forced to sell stocks at inopportune times or to hold excessive cash for non-investment purposes. |
Third, is our commitment to do all we can from an operational standpoint to maximize shareholder returns.
• | We will remain attentive to fund overhead, and whenever we achieve savings we will pass them through to shareholders. For example, we have had several manager changes that resulted in lower sub-advisory fees to our funds. In every case we have passed through the full savings to shareholders in the form of fee waivers. |
• | We will provide investors with a low minimum, no-load, no 12b-1 Institutional share class for all PartnerSelect Funds, and a low minimum, no-load Investor share class for the Alternative Strategies and High Income Alternatives funds |
• | We also will work closely with our managers to make sure they are aware of tax-loss selling opportunities (only to be taken if there are equally attractive stocks to swap into). We account for partial sales on a specific tax lot basis so that shareholders will benefit from the most favorable tax treatment. The goal is not to favor taxable shareholders over tax-exempt shareholders but to make sure that the managers are taking advantage of tax savings opportunities when doing so is not expected to reduce pre-tax returns. |
Fourth, is our commitment to communicate honestly about all relevant developments and expectations.
• | We will continue to do this by providing thorough and educational shareholder reports. |
• | We will continue to provide what we believe are realistic assessments of the investment environment. |
Our commitment to PartnerSelect Funds is also evidenced by our own investment. Our employees have, collectively, substantial investments in the funds, as does our company retirement plan. In addition, we use the funds extensively in the client accounts of our investment advisor practice (through our affiliate Litman Gregory Asset Management, LLC). We have no financial incentive to do so because the fees we receive from PartnerSelect Funds held in client accounts are fully offset against the advisory fees paid by our clients. In fact, we have a disincentive to use the funds in our client accounts because each PartnerSelect Fund is capacity constrained (they may be closed as mentioned above), and by using them in client accounts we are using up capacity for which we may not be paid. But we believe these funds offer value that we can’t get elsewhere and this is why we enthusiastically invest in them ourselves and on behalf of clients.
While we believe highly in the ability of the Funds’ sub-advisors, our commitments are not intended as guarantees of future results.
While the funds are no-load, there are management fees and operating expenses that do apply, as well as a 12b-1 fee that applies to Investor class shares. Please refer to the prospectus for further details.
Diversification does not assure a profit or protect against loss in a declining market.
Must be preceded or accompanied by a prospectus.
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Must be preceded or accompanied by a prospectus.
Effective July 31, 2020 the name of the Litman Gregory Masters Funds was changed to PartnerSelect Funds.
Each of the funds may invest in foreign securities. Investing in foreign securities exposes investors to economic, political, and market risks and fluctuations in foreign currencies. Each of the funds may invest in the securities of small companies. Small-company investing subjects investors to additional risks, including security price volatility and less liquidity than investing in larger companies. Debt obligations of distressed companies typically are unrated, lower rated, in default or close to default and may become worthless. The International Fund will invest in emerging markets. Investments in emerging market countries involve additional risks such as government dependence on a few industries or resources, government-imposed taxes on foreign investment or limits on the removal of capital from a country, unstable government, and volatile markets. Investments in debt securities typically decrease when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in mortgage-backed securities include additional risks that investor should be aware of including credit risk, prepayment risk, possible illiquidity, and default, as well as increased susceptibility to adverse economic developments. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. The funds may invest in master limited partnership units. Investing in MLP units may expose investors to additional liability and tax risks. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management, and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. The funds may make short sales of securities, which involves the risk that losses may exceed the original amount invested.
The Morningstar Rating for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed products monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five, and 10-year (if applicable) Morningstar Rating metrics. The weights are 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10 year overall rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. PartnerSelect Alternative Strategies Fund was rated against the following numbers of Multialternative funds over the following time periods as of 6/30/2020: 252 funds in the last three years, and 191 funds in the last five years. With respect to these Multialternative funds, PartnerSelect Alternative Strategies (MASFX) received a Morningstar Rating of 4 stars and 4 stars for the three- and five-year periods, respectively. Ratings for other share classes may be different. Morningstar rating is for the Institutional share class only; other classes may have different performance characteristics. The Investor share class received a rating of 3 stars and 4 stars for the three- and five-year periods, respectively.© 2020 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Merger arbitrage investments risk loss if a proposed reorganization in which the fund invests is renegotiated or terminated.
Investments in absolute return strategies are not untended to outperform stocks and bonds during strong market rallies.
Multi-investment management styles may lead to higher transaction expenses compared to single investment management styles. Outcomes depend on the skill of the sub-advisors and advisor and the allocation of assets amongst them.
Past performance does not guarantee future results.
Mutual fund investing involves risk; loss of principal is possible.
Performance discussions for the Alternative Strategies Fund and the High Income Alternatives Fund are specifically related to the Institutional share class.
Some of the comments are based on current management expectation and are considered “forward-looking statements”. Actual future results, however, may prove to be different from our expectations. You can identify forward-looking statement by words such as “estimate”, “may”, “expect”, “should”, “could”, “believe”, “plan”, and similar terms. We cannot promise future returns and our opinions are a reflection of our best judgment at the time this report is compiled.
Opinions expressed are subject to change, are not guaranteed and should not be considered recommendations to buy or sell any security.
Sharpe ratio is the measure of a fund’s return relative to its risk. The Sharpe ratio uses standard deviation to measure a fund’s risk-adjusted returns. The higher a fund’s Sharpe ratio, the better a fund’s returns have been relative to the risk it has taken on. Because it uses standard deviation, the Sharpe ratio can be used to compare risk-adjusted returns across all fund categories. The Fund’s Sharpe ratio ranked 5 out of 100 in its Peer Group, US OE Mulitalternative Morningstar Category from 10/1/2011 to 6/30/2020. Past performance is no guarantee of future results.
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See pages 10, 20, and 29 for each fund’s top contributors. See pages 11, 22 and 30 for each fund’s portfolio composition. See pages 44 for the Alternative Strategies Fund’s individual strategy portfolio allocations. See pages 94 for the High Income Alternative Fund’s individual strategy portfolio allocations. Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
Diversification does not assure a profit or protect against a loss in a declining market.
Leverage may cause the effect of an increase or decrease in the value of the portfolio securities to be magnified and the fund to be more volatile than if leverage was not used.
References to other mutual funds should not be interpreted as an offer of these securities.
Litman Gregory Fund Advisors LLC has ultimate responsibility for the performance of the PartnerSelect Funds due to its responsibility to oversee the investment managers and recommend their hiring, termination and replacement.
Any tax or legal information provided is merely a summary of our understanding and interpretation of some of the current income tax regulations and it is not exhaustive. Investors must consult their tax advisor or legal counsel for advice and information concerning their particular situation. Neither the Funds nor any of their representatives may give legal or tax advice.
Please see page 150 for index definitions. You cannot invest directly in an index.
Please see page 152 for industry definitions.
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PartnerSelect Funds’ Performance
Average Annual Total Returns | ||||||||||||||||||||||||||||
Institutional Class Performance as of 6/30/2020 | Year-to- Date | 1-Year | 3-Year | 5-Year | 10-Year | 15-Year | Since Inception | |||||||||||||||||||||
PartnerSelect Equity Fund (12/31/96) | -7.52% | -0.97% | 6.07% | 7.04% | 11.19% | 6.73% | 7.78% | |||||||||||||||||||||
Russell 3000 Index | -3.48% | 6.53% | 10.04% | 10.03% | 13.72% | 8.78% | 8.35% | |||||||||||||||||||||
Morningstar Large Blend Category Average | -5.69% | 3.45% | 8.05% | 8.04% | 11.64% | 7.27% | 6.81% | |||||||||||||||||||||
Gross Expense Ratio: 1.35% Net Expense Ratio as of 4/29/2020*: 1.24% | ||||||||||||||||||||||||||||
PartnerSelect International Fund (12/1/97) | -22.83% | -14.74% | -4.97% | -3.55% | 3.12% | 3.42% | 5.69% | |||||||||||||||||||||
MSCI ACWI ex-U.S. Index | -11.00% | -4.80% | 1.13% | 2.26% | 4.97% | 4.44% | 4.72% | |||||||||||||||||||||
MSCI EAFE Index | -11.34% | -5.13% | 0.81% | 2.05% | 5.73% | 4.09% | 4.35% | |||||||||||||||||||||
Morningstar Foreign Large Blend Category Average | -10.89% | -4.67% | 0.40% | 1.62% | 5.23% | 3.84% | 3.58% | |||||||||||||||||||||
Gross Expense Ratio: 1.36% Net Expense Ratio as of 4/29/2020*: 1.12% | ||||||||||||||||||||||||||||
PartnerSelect Smaller Companies Fund (6/30/2003) | -18.66% | -17.04% | -0.13% | 0.85% | 7.68% | 4.60% | 6.37% | |||||||||||||||||||||
Russell 2000 Index | -12.98% | -6.63% | 2.01% | 4.29% | 10.50% | 7.01% | 8.55% | |||||||||||||||||||||
Morningstar Small Blend Category Average | -17.02% | -11.54% | -0.92% | 2.07% | 8.79% | 5.76% | 7.53% | |||||||||||||||||||||
Gross Expense Ratio: 1.88% Net Expense Ratio as of 4/29/2020*: 1.46% | ||||||||||||||||||||||||||||
PartnerSelect Alternative Strategies Fund (9/30/2011) | -2.43% | 0.03% | 1.89% | 2.47% | n/a | n/a | 4.19% | |||||||||||||||||||||
3-Month LIBOR | -2.51% | -0.19% | 1.64% | 2.23% | n/a | n/a | 3.94% | |||||||||||||||||||||
Bloomberg Barclays Aggregate Bond Index | 0.94% | 2.13% | 2.08% | 1.50% | 0.91% | 1.76% | 0.99% | |||||||||||||||||||||
Morningstar Multialternative Category Average | 6.14% | 8.74% | 5.32% | 4.30% | 3.82% | 4.39% | 3.48% | |||||||||||||||||||||
HFRX Global Hedge Fund Index | -5.44% | -3.35% | 0.05% | 0.03% | 1.54% | 1.26% | 1.16% | |||||||||||||||||||||
Russell 1000 Index | -1.09% | 3.09% | 1.18% | 0.71% | 1.12% | 0.90% | 1.58% | |||||||||||||||||||||
Gross Expense Ratio as of 4/29/2020: 1.63% | -2.81% | 7.48% | 10.64% | 10.47% | 13.97% | 8.91% | 14.56% | |||||||||||||||||||||
Net Expense Ratio as of 4/29/2020: 1.35% | | The Net Expense Ratio reflects a contractual fee waiver and/or expense reimbursement, which is in place through 4/30/2021. See the Fund’s prospectus for more information. | | |||||||||||||||||||||||||
Adjusted Expense Ratio as of 4/29/2020: 1.30% | | The Adjusted Expense Ratio is the same as the Net Expense Ratio exclusive of certain investment expenses, such as interest expense from borrowings and repurchase agreements, dividend expense from investments on short sales, and acquired fund fees and expenses. | | |||||||||||||||||||||||||
PartnerSelect High Income Alternatives Fund (9/28/2018) | -5.05% | -2.65% | n/a | n/a | n/a | n/a | -0.15% | |||||||||||||||||||||
Bloomberg Barclays Aggregate Bond Index | -5.25% | -2.92% | n/a | n/a | n/a | n/a | -0.38% | |||||||||||||||||||||
ICE BofAML U.S. High Yield TR USD Index | 6.14% | 8.74% | 5.32% | 4.30% | 3.82% | 4.39% | 9.50% | |||||||||||||||||||||
HFRX Fixed Income—Credit Index | -4.78% | -1.10% | 2.94% | 4.58% | 6.48% | 6.68% | 2.20% | |||||||||||||||||||||
Gross Expense Ratio as of 4/29/2020: 1.98% | 1.67% | 4.98% | 2.20% | 1.65% | 2.42% | 5.11% | 2.66% | |||||||||||||||||||||
Net Expense Ratio as of 4/29/2020: 1.48% | | The Net Expense Ratio reflects a contractual fee waiver and/or expense reimbursement, which is in place through 4/30/2021. See the Fund’s prospectus for more information. | | |||||||||||||||||||||||||
Adjusted Expense Ratio as of 4/29/2020: 0.98% | | The Adjusted Expense Ratio is the same as the Net Expense Ratio exclusive of certain investment expenses, such as interest expense from borrowings and repurchase agreements, dividend expense from investments on short sales, and acquired fund fees and expenses. | |
Performance quoted represents past performance and does not guarantee future results. 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 funds may be lower or higher than the performance quoted. To obtain the performance of the funds as of the most recently completed calendar month, please visit www.partnerselectfunds.coms.
The performance quoted does not include a deduction for taxes that a shareholder would pay on distributions or the redemption of fund shares.
*Gross and net expense ratios per the Prospectus dated 4/29/2020. There are contractual fee waivers in effect through 4/30/2021. Indexes are unmanaged, do not incur expenses, taxes or fees and cannot be invested in directly.
MSCI index returns source: MSCI. Neither MSCI nor any other party involved in or related to compiling, computing, or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability, or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates, or any third party involved in or related to compiling, computing, or creating the data have any liability for any direct, indirect, special, punitive, consequential, or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent. Source note: Returns prior to 1999 are the MSCI ACWI ex-US GR index. Returns from 1999 onwards are MSCI ACWI ex-US NR index.
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Investors have been on quite a roller-coaster ride so far this year. After a dramatic decline in the first quarter, financial markets delivered an equally surprising rebound in the second quarter. Against all odds, financial markets seemed to defy grim economic news, the continued spread of COVID-19, and worldwide protests over racial injustice.
Unprecedented global money printing and government spending were key to the sharp turnaround in the markets. Driven by massive, coordinated monetary and fiscal policy actions, the S&P 500 Index soared nearly 40% from its March 23 low, notching its best return over any 50-day period in market history.
For the second quarter overall, the S&P 500 gained 21%, cutting its year-to-date loss to just 3.1%. However, beneath the surface, and continuing a trend that has played out over the past 13 years, growth stocks — technology stocks in particular — were the engine driving the market index higher. The Russell 1000 Growth index is up 10% on the year, while its Russell 1000 Value counterpart is down 16% — a stunning 26 percentage point divergence in only six months.
Source: Morningstar Direct as of 6/30/2020. Indexes are unmanaged and cannot be invested into directly.
Among smaller company stocks, the Russell 2000 Index surged 25% in the second quarter, but still sported a 13% loss for the first half. Here again, growth dominated value, with a 20 percentage point spread between the two segments.
The MSCI EAFE Index gained 14.9% in the second quarter, and was down 11.3% on the year. The MSCI EAFE Growth Index is beating the MSCI EAFE Value index by 16 percentage points over this period. The Vanguard FTSE Emerging Markets Index gained 19% for the quarter, and declined 10% on the year. The U.S. dollar depreciated slightly during the second quarter, providing a modest tailwind to foreign market returns for dollar-based (unhedged) investors. We see potential for more significant dollar declines looking out over the next several years.
Turning to the fixed income markets, the Bloomberg Barcalys Aggregate Bond Index returned 6% for the first half of the year. The 10-year Treasury yield dropped sharply during the crisis period, ending the first half near an all-time low at 0.65%. After suffering swift and severe losses in March, credit-sensitive sectors of the fixed income market sharply rebounded in the second quarter The ICE BofA Merrill Lynch US High-Yield Cash Pay Index and S&P/LSTA Leverage Loan Index gained 10%, leaving both sectors down just under 5% on the year.
All five of the PartnerSelect funds had strong absolute returns in the second quarter, and four funds outperformed their primary benchmark index. However, the positive second quarter performance was not enough to make up for the funds’ underperformance in the first quarter. For the first half of the year, all five of the PartnerSelect funds trail their benchmarks. The PartnerSelect Equity fund was down 7.52% versus a 3.48% loss for the Russell 3000 Index. After an extremely strong 2019, the International Fund dropped 22.83%, compared to an 11.00% decline for the MSCI ACWI ex-U.S. Index. The Smaller Companies Fund fell 18.66% versus a 12.98% loss for the Russell 2000 Index. The Alternative Strategies Fund had a 2.43% loss, compared to a 0.94% gain for 3-Month LIBOR. And the High Income Alternatives Fund lost 5.05%, compared to a 6.14% gain for the Aggregate Bond Index and a 4.78% loss for the High-Yield Bond Index.
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Performance quoted represents past performance and does not guarantee future results. 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 funds may be lower or higher than the performance quoted. To obtain standardized performance of the funds, and performance as of the most recently completed calendar month, please visit www.partnerselectfunds.com.
We believe the Funds can perform a valuable role within a diversified investment portfolio. Each fund is sub-advised by highly disciplined, experienced, and skilled investors who we believe can outperform their benchmark over full market cycles. As noted above, this has been an extraordinary 13-year cycle (so far) of Growth hugely outperforming Value. Our equity funds have suffered in relative terms given this backdrop. The Alternative Strategies Fund can serve as a core, lower-risk holding that seeks to provide access to proven managers and strategies, differentiated sources of return, and diversification relative to traditional stock and bond investments. Finally, the High Income Alternatives Fund is intended to be a complement to traditional fixed-income allocations, seeking long-term returns that are significantly higher than core fixed-income and comparable to high-yield bonds, but with lower volatility and downside risk than high-yield due to the fund’s diversified sources of return and manager strategy flexibility.
As we turn to the second half of the year we have two new developments to share. First, effective July 31, we have changed the name of our fund family to PartnerSelect Funds. We believe this name better represents our mission to partner with high-quality managers running distinctive strategies who we believe possess a clear investment edge. Bringing strategies to the U.S. mutual fund marketplace that are not otherwise available also creates a partnership with our shareholders seeking attractive long-term performance. As an independent advisor, Litman Gregory focuses on launching funds that we believe deserve to exist based on their investment merits and that can deliver notable results. We are strongly aligned with other shareholders in the funds, being significant investors of our own and our clients’ capital in these funds.
Second, we are excited to announce the first new fund offering under the PartnerSelect name. The PartnerSelect SBH Focused Small Value Fund is a focused portfolio in an inefficient market space. The fund is sub-advised by Segall Bryant & Hamill’s Mark Dickherber and Shaun Nicholson, two skilled portfolio managers who specialize in small-company value investing. What differentiates this strategy is the managers’ ability to identify the building blocks of potential higher profitability for a company before they are recognized by the market consensus. This strategy is unique, and an example of the value PartnerSelect Funds intends to bring to the mutual fund marketplace. The fund opened for investment on July 31 and is available on most trading platforms in the Institutional share class.
Stay tuned for further new PartnerSelect offerings in the months to come.
As always, we thank you for your continued confidence and investment in the PartnerSelect Funds. Our commitment and confidence are reflected in the collective personal investments in the Funds by Litman Gregory principals, employees, and the Funds’ trustees of over $20 million, as of June 30, 2020.
Sincerely,
Jeremy DeGroot, President and Portfolio Manager
Jack Chee, Portfolio Manager
Rajat Jain, Portfolio Manager
Jason Steuerwalt, Portfolio Manager
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The PartnerSelect Equity Fund (formerly the Litman Gregory Masters Equity Fund) fell 7.52% for the first half of 2020, trailing the 3.48% loss for the fund’s Russell 3000 Index benchmark and the 5.69% loss for the Morningstar Large Blend category. Since the fund’s inception on December 31, 1996, the fund’s 7.78% annualized return is slightly behind the benchmark return of 8.35% but ahead of its peer group’s 6.81% return.
Performance as of 6/30/2020 | ||||||||||||||||||||||||||||
Average Annual Total Returns | ||||||||||||||||||||||||||||
Three Month | Year-to- Date | One- Year | Three- Year | Five- Year | Ten- Year | Since Inception | ||||||||||||||||||||||
PartnerSelect Equity Fund (12/31/96) | 22.68% | -7.52% | -0.97% | 6.07% | 7.04% | 11.19% | 7.78% | |||||||||||||||||||||
Russell 3000 Index | 22.03% | -3.48% | 6.53% | 10.04% | 10.03% | 13.72% | 8.35% | |||||||||||||||||||||
Morningstar Large Blend Category* | 19.32% | -5.69% | 3.45% | 8.05% | 8.04% | 11.64% | 6.81% | |||||||||||||||||||||
Performance quoted represents past performance and does not guarantee future results. 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 funds may be lower or higher than the performance quoted. To obtain standardized performance of the funds, and performance as of the most recently completed calendar month, please visit www.partnerselectfunds.com. As of the prospectus dated 4/29/2020, the gross and net expense ratios were 1.35% and 1.24%, respectively. There are contractual fee waivers in effect through April 30, 2021. |
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Performance of Managers
Of the fund’s seven sub-advisors, four outperformed their respective benchmarks in the first half of 2020, while three underperformed. The three sub-advisors benchmarked to value indexes outperformed their respective value benchmarks. The fund’s one dedicated growth sub-advisor also outperformed their growth benchmark. The three sub-advisors that underperformed in the first half were blend managers benchmarked to broader market indexes. The performance of the sub-advisors ranged from negative 17.90% to positive 22.85%. (Returns are net of sub-advisor management fees.)
Key Performance Drivers
Over the first six months of 2020, stock selection drove relative underperformance, while sector allocation had a small negative effect on returns. It is important to understand that the portfolio is built stock by stock and that sector weightings are a residual of the bottom-up, fundamental stock-picking process employed by each sub-advisor. That said, we do discuss short-term relative performance at both the sector and stock level to help shareholders understand the drivers of recent performance. It is also important to remember that the performance of a stock over a relatively short period tells us nothing about whether it will be a successful position; that is only known at the point when the stock is sold.
The financials sector was the leading detractor from relative performance in the period due to both sector-allocation and stock-selection effects. Financials underperformed the broad index significantly (by around 25 percentage points) during the first half, so the fund’s overweighting of nine percentage points (19.51% vs. 10.52% for the Russell 3000 index) hurt performance from a sector-allocation standpoint. Stock selection was also a headwind as the fund’s financial holdings underperformed the index names. Capital One Financial and Wells Fargo were the leading detractors in the first half of 2020. Capital One is owned by Bill Nygren of Harris Associates, as well as Chris Davis and Danton Goei of Davis Advisors. Wells Fargo is owned by Davis and Goei.
Nygren says Capital One’s share price held steady in January and February, but its share price weakened severely in March along with a general equity market decline. The company reported fourth quarter total net revenue and earnings per share that exceeded market expectations. Results were good, in Nygren’s view, with solid year-over-year total revenue growth of 7% and loan growth of 7%. The net interest margin expanded 22 basis points to 6.95%. For its first quarter, Capital One delivered good fundamental performance, in his view, with 3% growth in pre-provision earnings, 6% organic loan growth, and a 7% increase in credit card purchase volume. However, a large coronavirus-related reserve build drove quarterly earnings per share down to -$3.10. CEO Richard Fairbank is confident in Capital One’s ability to weather the storm, noting that the company’s liquidity and capital position are both improved in comparison to the great recession during which the company managed quite well. As a result of the 2020 Dodd-Frank Act Stress Test, Capital One’s minimum required CET1 ratio is 10.1%, less than management’s internal target of 11%. Overall, Nygren believes Capital One is a well-managed company with a strong capital base that is trading at a discount to his estimate of its intrinsic value.
Davis and Goei say certain sectors, especially high-grade financials, have declined more than the overall market, and present investors with, in select instances, single-digit valuations and possess financial strength well beyond the 2008–2009 crisis. They believe their position in Wells Fargo is an example of one of these holdings. According to the Fed’s recent stress test, Wells Fargo may show credit losses in excess of $15 billion over the next two years. That is a large sum in absolute terms. In relative terms, this is a business that generated more than $23 billion in pre-tax earnings in 2019 alone. That was with an unfavorable interest rate and yield curve environment as well as having to
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operate under an asset cap imposed in 2016. In their view, the balance sheet, capital ratios, deposit-based funding model, and exceedingly low valuations (i.e., single-digit multiples on normalized cash earnings, or “owner earnings”) are the basis for belief that it has the durability to weather an economic recession and to recover thereafter.
Overall, stock selection in the consumer discretionary sector was also a headwind. The sector had two of the fund’s top three contributors during the first half of the year (Amazon.com and Thor Industries). But it also had several names on the leading detractors list, including, Norwegian Cruise Line, Hilton Worldwide, and Nordstrom.
Amazon.com is owned by the team from Davis Advisors and by Mike Sramek of Sands Capital. Davis and Goei note that the current environment has accelerated favorable trends such as online shopping and the use of cloud computing services. They add that Amazon continues to be among the most capable and best-managed companies they have ever owned. Owning such durable long-term “compounding machines” is a key, in their experience, to delivering value for shareholders over time.
Thor Industries was another top contributor within the consumer discretionary sector—gaining more than 45% during the first six months of 2020. Thor Industries, owned by Clyde McGregor of Harris Associates, is the company for recreational vehicles, an industry that they view as very attractive. McGregor says Thor Industries reported fiscal second quarter results that included revenue of $2 billion, which exceeded market projections of $1.8 billion. Importantly, orders in North America (calculated as revenue plus changes in the order backlog) were positive for the fourth consecutive quarter. The company’s inventory position appears to be healthy, as management cited that a suspension in production coupled with ongoing dealer sales have worked to maintain balanced inventory levels. Thor issued another operational update in May that revealed the company is increasing production levels to meet greater demand than originally anticipated. Dealers continued to sell retail units while the company’s production facilities were temporarily shut down in March and April and inventory levels for certain products in the United States became low. In response, Thor recalled furloughed employees and restored compensation to original terms. Later, the company’s fiscal third quarter earnings report showed that earnings per share ($0.43 vs. -$0.25) and revenue ($1.68 billion vs. $1.64 billion) bested consensus estimates.
Norwegian Cruise Line was among the fund’s worst performers in the first half of 2020. The share price of the company, owned by Dick Weiss of Wells Capital Management, fell substantially over the last six months due to the impact the coronavirus has had on cruise operators. The company, as well as other cruise operators, had to cease operations and as a result the company had to raise external capital to fortify its balance sheet to wait out the “storm.” Unfortunately, visibility into when cruise operators may restart is limited. As a result, Weiss sold out of the company given high near-term cash burn and limited visibility into the future for the industry as a result of the coronavirus and its impact on travel.
Another travel-related company in the fund, Southwest Airlines, was similarly impacted by the pandemic and the subsequent halting of travel all around the world. The stock is owned by McGregor. He notes that throughout the second quarter, the management team at Southwest provided incremental updates on operational and revenue trends as the coronavirus pandemic severely curtailed the company’s business. While passenger demand and bookings were weak early in the quarter, the company experienced modest improvement beginning in early May 2020 when new passenger bookings outpaced trip cancellations, which reversed net negative booking trends in March and April. Southwest also realized somewhat higher passenger demand and bookings for June. The company estimated that May 2020 year-over-year operating revenues declined in a range of 85%–90%, capacity fell roughly 64%, and the load factor was about 30%, which all aligned with management’s previous projections. Nevertheless, McGregor finds news of booking trends encouraging and is hopeful that it points to a developing recovery. Importantly, management indicated that based on current cash balances, daily expenditures, short-term investments, and proceeds from recent sale-leaseback transactions, Southwest has approximately 20 months of liquidity. In addition, the company is the only U.S. airline with an investment-grade rating by all three credit rating agencies, which allows for access to credit, if necessary. Southwest Airlines has remained profitable for 45 consecutive years, even as several peers experienced bankruptcies. McGregor likes Southwest Airlines’ culture of outstanding service and employee satisfaction that translates to brand loyalty among customers. The company’s point-to-point network approach eliminates the complexity and cost of maintaining major hubs, which has led to earnings margins that are in excess of the industry average.
Both the fund’s underweight to, and stock selection within the information technology sector detracted from relative returns. Technology stocks in the index gained nearly 15% during the first half of the year and was the top-performing sector. Information technology makes up 26.57% of the Russell 3000 Index compared to a 15.93% weight in the fund at the end of June. Despite the overall headwind from the fund’s technology exposure, ServiceNow was a bright spot for returns. The stock is owned by Sramek of Sands Capital and returned 43.48% during the first two quarters of the year. ServiceNow is the leading provider of enterprise workflow automation software, based on market share. Enterprise digital transformation is a powerful secular tailwind that should drive demand for ServiceNow’s offerings over the next decade. The business’s extensible workflow automation platform is a key enabler of the digital transformation efforts necessary for companies to remain competitive in the modern world, driving cost savings and functionality improvements for ServiceNow’s customers. After building a leading position addressing IT department workflows, ServiceNow has gained strong momentum for its solutions addressing other enterprise workflows, including customer service, human resources management, and facilities management. The business’s easy-to-customize platform has resulted in high organic growth rates and best-in-class margins at its scale, in addition to consistently compelling product releases. Sramek believes that the durability of ServiceNow’s above-average growth potential is underappreciated, given its ability to address multiple use cases across enterprises. They view valuation through a five-year lens and expect
Fund Summary | 9 |
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the company to grow free cash flow by 5x and revenue by 4x from 2019 to 2025 as the business continues to upsell and/or cross-sell into its customer base, and as it gains leverage on operating expenses, especially sales and marketing. Sramek believes ServiceNow is positioned as the clear winner in the current environment, as IT departments scramble to support a remote workforce, respond to heightened customer and employee demands, and ensure business continuity and risk management—all while cutting costs. Given their long-term growth expectation, Sramek believes ServiceNow is rationally valued.
Stock selection within the communication services sector was strong during the first six months. Netflix, owned by both Nygren of Harris Associates and Sramek of Sands Capital, was the leading contributor in the sector. The stock gained 40.63% during the first half of 2020. Nygren notes that Netflix’s first quarter earnings report included paid net subscriber additions of 15.8 million, which handily bested guidance for 7 million additions, and the company guided for 7.5 million additions in the second quarter. The first quarter earnings margin expanded over 1000 basis points to a record 20.6%, and management reiterated guidance for a 16% full-year earnings margin despite a large transactional currency headwind. Additionally, investments continue to be made in post-2020 projects as Netflix’s 2020 content slate is unchanged, with filming completed and post-processing completed remotely. In June, an analyst note indicated Netflix’s second quarter paid membership additions were progressing at a pace to exceed management’s guidance additions for the period. Netflix has added more subscribers year over year since launching its streaming business, and growth will likely be perpetuated by increasing broadband penetration, more robust payments infrastructure, the proliferation of smart TVs, and reinvestment into content. Moreover, Nygren likes that Netflix’s significant spending on programming requires little incremental investment as new users subscribe, and thinks its superior content provides a formidable barrier to entry. In Nygren’s view, founder Reed Hastings has displayed the patience and fortitude to guide the company through multiple business model evolutions and is an excellent steward of shareholder capital.
Portfolio contribution for a holding represents the product of the average portfolio weight and the total return earned by the holding during the period. Past performance is no guarantee of future results. Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
Top 10 Individual Detractors as of the Six Months Ended June 30, 2020 | ||||||||||||||||||
Company Name | Fund Weight (%) | Benchmark Weight (%) | 6-Month Return (%) | Contribution to Return (%) | Economic Sector | |||||||||||||
Capital One Financial Corp. | 2.72 | 0.12 | -38.55 | -1.11 | Financials | |||||||||||||
Wells Fargo & Co. | 1.36 | 0.45 | -50.94 | -0.92 | Financials | |||||||||||||
Norwegian Cruise Line Holdings Ltd. | 0.22 | 0.02 | -83.70 | -0.73 | Consumer Discretionary | |||||||||||||
Concho Resources Inc. | 1.01 | 0.04 | -40.80 | -0.71 | Energy | |||||||||||||
Hilton Worldwide Hldgs. | 1.56 | 0.08 | -33.67 | -0.65 | Consumer Discretionary | |||||||||||||
Raytheon Technologies Corp | 1.05 | 0.34 | -44.56 | -0.64 | Industrials | |||||||||||||
Berkshire Hathaway Inc. Class A | 2.38 | 0.00 | -21.29 | -0.50 | Financials | |||||||||||||
Southwest Airlines Co. | 1.19 | 0.07 | -36.43 | -0.50 | Industrials | |||||||||||||
Reinsurance Group Of America | 0.37 | 0.02 | -52.75 | -0.47 | Financials | |||||||||||||
Nordstrom Inc. | 0.55 | 0.01 | -61.63 | -0.46 | Consumer Discretionary |
Portfolio contribution for a holding represents the product of the average portfolio weight and the total return earned by the holding during the period. Past performance is no guarantee of future results. Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
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Portfolio Mix
The Equity Fund portfolio is the result of seven bottom-up stock pickers with diverse investment approaches building concentrated portfolios. Therefore, the portfolio often looks quite different from its benchmark. For example, it is common for the fund to have meaningful sector over- or underweights. As of midyear, the fund was nine-percentage points overweight to the financials sector (19.51% vs. 10.52%) and underweight to the health care and information technology sectors (underweight by 4.6 and 10.6 percentage points, respectively). The fund also has a meaningful overweight to the consumer discretionary sector—20.26% compared to 11.31% in the Russell 3000 Index.
Sub-advisors have been busy in 2020 taking advantage of market volatility and purchasing new stocks for their respective sleeves. At the end of June, there were more than 20 stocks that sub-advisors have purchased since March 2020. The new names are spread across the majority of sectors in the index. Stocks such as Cal Marine Foods and Constellation Brands were added in the consumer staples sector. New stocks in the financials sector include Charles Schwab and Northern Trust. In the technology sector, Sea Ltd. and Intuit have been recently added.
Fund positioning typically doesn’t shift meaningfully over a six-month period. At the sector level, the largest change is a 3.6 percentage point increase to the consumer discretionary sector. With the increase to consumer discretionary stocks, it is roughly a 9% overweight relative to the index (about the same overweight as the fund has to financials). The fund’s market-cap dispersion also remained unchanged from the beginning for the year. Mega- and large-cap stocks make up roughly 58% of the portfolio, while mid- and smaller-sized companies collectively account for approximately 40% of assets. The fund’s weighted-average market cap stands at $225.1 billion at the end of June, while its median market cap is $35.7 billion. Foreign holdings account for approximately 17% of the portfolio, which is just one percentage point higher from the start of the year.
Sector Allocation | ||||||||
Fund as of 6/30/2020 | Russell 3000 as of 6/30/2020 | |||||||
Communication Services | 13.4% | 9.8% | ||||||
Consumer Discretionary | 20.3% | 11.3% | ||||||
Consumer Staples | 4.2% | 6.3% | ||||||
Energy | 2.0% | 2.6% | ||||||
Finance | 19.5% | 10.5% | ||||||
Health Care & Pharmaceuticals | 10.3% | 14.9% | ||||||
Industrials | 9.4% | 8.8% | ||||||
Information Technology | 15.9% | 26.6% | ||||||
Materials | 1.0% | 2.7% | ||||||
Real Estate | 1.0% | 3.6% | ||||||
Utilities | 0.0% | 3.0% | ||||||
Cash Equivalents & Other | 3.0% | 0.0% | ||||||
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100.0% | 100.0% | |||||||
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Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
Fund Summary | 11 |
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By Market Capitalization | By Domicile | |
Market Capitalization: Micro-Cap < $981 million Small-Cap $981 million - $4.4 billion Small/Mid-Cap $4.4 billion - $10.6 billion Mid-Cap $10.6 billion - $29.4 billion Large-Cap > $29.4 billion Totals may not add up to 100% due to rounding |
Closing Thoughts
We believe the Equity Fund comprises an eclectic mix of highly skilled, disciplined, and opportunistic stock pickers who have the potential to add significant additional value through concentrating in only their highest-conviction names. We continue to expect the fund to be successful relative to its benchmark and peers over complete market cycles.
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PartnerSelect Equity Fund Managers
INVESTMENT MANAGER | FIRM | TARGET MANAGER ALLOCATION | MARKET CAPITALIZATION OF COMPANIES IN PORTFOLIO | STOCK-PICKING STYLE | BENCHMARK | |||||
Christopher Davis Danton Goei | Davis Selected Advisers, L.P. | 15% | Mostly large companies | Blend | S&P 500 Index | |||||
Pat English Jonathan Bloom | Fiduciary Management, Inc. | 15% | All sizes | Blend | S&P 500 Index | |||||
Bill Nygren | Harris Associates L.P. | 15% | Mostly large- and mid-sized companies | Value | Russell 3000 Value Index | |||||
Clyde McGregor | Harris Associates L.P. | 15% | All sizes, but mostly large- and mid-sized companies | Value | Russell 3000 Value Index | |||||
Scott Moore Chad Baumler | Nuance Investments, LLC | 10% | All sizes | Value | Russell 3000 Value Index | |||||
A. Michael Sramek | Sands Capital Management, LLC | 17% | All sizes, but mostly large- and mid-sized companies | Growth | Russell 1000 Growth Index | |||||
Richard Weiss | Wells Capital Management, Inc. | 13% | All sizes, but mostly small- and mid-sized companies | Blend | Russell 3000 Index |
Equity Fund Value of Hypothetical $10,000
The value of a hypothetical $10,000 investment in the PartnerSelect Equity Fund from December 31, 1996 to June 30, 2020 compared with the Russell 3000 Index and Morningstar Large Blend Category.
The hypothetical $10,000 investment at fund inception includes changes due to share price and reinvestment of dividends and capital gains. The chart does not imply future performance. Indexes are unmanaged, do not incur fees, expenses or taxes, and cannot be invested in directly.
Fund Summary | 13 |
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PartnerSelect Equity Fund (formerly Litman Gregory Masters Equity Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited)
Shares | Value | |||||||
COMMON STOCKS: 95.8% | ||||||||
Communication Services: 13.4% | ||||||||
5,975 | Alphabet, Inc. - Class A* | $ | 8,472,849 | |||||
3,422 | Alphabet, Inc. - Class C* | 4,837,373 | ||||||
3,100 | Charter Communications, Inc. - Class A* | 1,581,124 | ||||||
7,588 | Facebook, Inc. - Class A* | 1,723,007 | ||||||
12,178 | Netflix, Inc.* | 5,541,477 | ||||||
31,817 | Sea Ltd. - ADR* | 3,412,055 | ||||||
248,200 | Sirius XM Holdings, Inc. | 1,456,934 | ||||||
28,625 | Tencent Holdings Ltd. | 1,841,568 | ||||||
56,336 | ViacomCBS, Inc. - Class B | 1,313,755 | ||||||
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30,180,142 | ||||||||
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Consumer Discretionary: 20.3% | ||||||||
23,573 | Alibaba Group Holding Ltd. - ADR* | 5,084,696 | ||||||
3,855 | Amazon.com, Inc.* | 10,635,251 | ||||||
3,275 | Booking Holdings, Inc.* | 5,214,913 | ||||||
11,000 | Dollar General Corp. | 2,095,610 | ||||||
119,700 | General Motors Co. | 3,028,410 | ||||||
40,035 | Hilton Worldwide Holdings, Inc. | 2,940,571 | ||||||
37,300 | Lear Corp. | 4,066,446 | ||||||
51,200 | Naspers Ltd. - Class N, ADR | 1,876,480 | ||||||
62,051 | Nordstrom, Inc. | 961,170 | ||||||
51,200 | Prosus N.V. - ADR* | 952,320 | ||||||
80,451 | Revolve Group, Inc.* | 1,195,502 | ||||||
31,345 | Thor Industries, Inc. | 3,339,183 | ||||||
43,500 | TJX Cos., Inc. (The) | 2,199,360 | ||||||
46,353 | YETI Holdings, Inc.* | 1,980,664 | ||||||
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45,570,576 | ||||||||
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Consumer Staples: 4.2% | ||||||||
27,541 | Beiersdorf AG - ADR | 629,450 | ||||||
20,749 | Cal-Maine Foods, Inc.* | 922,915 | ||||||
12,700 | Constellation Brands, Inc. - Class A | 2,221,865 | ||||||
11,086 | Diageo Plc - ADR | 1,489,848 | ||||||
18,965 | Monster Beverage Corp.* | 1,314,654 | ||||||
86,283 | Nomad Foods Ltd.* | 1,850,770 | ||||||
8,182 | Sanderson Farms, Inc. | 948,212 | ||||||
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9,377,714 | ||||||||
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Energy: 2.0% | ||||||||
27,279 | Concho Resources, Inc. | 1,404,868 | ||||||
31,000 | EOG Resources, Inc. | 1,570,460 | ||||||
142,322 | Parsley Energy, Inc. - Class A | 1,519,999 | ||||||
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4,495,327 | ||||||||
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Financials: 19.6% | ||||||||
107,200 | Ally Financial, Inc. | 2,125,776 | ||||||
43,500 | American International Group, Inc. | 1,356,330 | ||||||
42,600 | Arch Capital Group Ltd.* | 1,220,490 | ||||||
77,000 | Bank of America Corp. | 1,828,750 | ||||||
49,475 | Bank of New York Mellon Corp. (The) | 1,912,209 | ||||||
19 | Berkshire Hathaway, Inc. - Class A* | 5,078,700 | ||||||
24,400 | Berkshire Hathaway, Inc. - Class B* | 4,355,644 | ||||||
91,060 | Capital One Financial Corp. | 5,699,446 | ||||||
89,473 | Charles Schwab Corp. (The) | 3,018,819 | ||||||
33,352 | Chubb Ltd. | 4,223,030 | ||||||
43,300 | Citigroup, Inc. | 2,212,630 | ||||||
15,030 | JPMorgan Chase & Co. | 1,413,722 | ||||||
14,313 | MetLife, Inc. | 522,711 | ||||||
12,695 | Northern Trust Corp. | 1,007,221 |
Shares | Value | |||||||
Financials (continued) | ||||||||
32,072 | Pinnacle Financial Partners, Inc. | $ | 1,346,703 | |||||
20,927 | Travelers Cos., Inc. (The) | 2,386,724 | ||||||
48,640 | US Bancorp | 1,790,925 | ||||||
93,280 | Wells Fargo & Co. | 2,387,968 | ||||||
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43,887,798 | ||||||||
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Health Care: 10.3% | ||||||||
17,000 | Alexion Pharmaceuticals, Inc.* | 1,908,080 | ||||||
39,502 | DENTSPLY SIRONA, Inc. | 1,740,458 | ||||||
20,186 | Edwards Lifesciences Corp.* | 1,395,054 | ||||||
2,416 | ICU Medical, Inc.* | 445,293 | ||||||
4,645 | Illumina, Inc.* | 1,720,276 | ||||||
56,700 | Koninklijke Philips N.V.* | 2,645,632 | ||||||
39,140 | LivaNova Plc* | 1,883,808 | ||||||
25,220 | Merit Medical Systems, Inc.* | 1,151,293 | ||||||
86,184 | Mylan N.V.* | 1,385,839 | ||||||
27,000 | Quest Diagnostics, Inc. | 3,076,920 | ||||||
2,550 | Regeneron Pharmaceuticals, Inc.* | 1,590,308 | ||||||
33,574 | Smith & Nephew Plc - ADR | 1,279,841 | ||||||
10,053 | UnitedHealth Group, Inc. | 2,965,132 | ||||||
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23,187,934 | ||||||||
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Industrials: 9.3% | ||||||||
8,155 | 3M Co. | 1,272,099 | ||||||
30,095 | Allison Transmission Holdings, Inc. | 1,106,894 | ||||||
18,675 | Carlisle Cos., Inc. | 2,234,837 | ||||||
26,480 | Carrier Global Corp. | 588,386 | ||||||
22,500 | Eaton Corp. Plc | 1,968,300 | ||||||
33,500 | Ferguson Plc | 2,739,869 | ||||||
331,000 | General Electric Co. | 2,260,730 | ||||||
16,200 | Honeywell International, Inc. | 2,342,358 | ||||||
110,100 | Howmet Aerospace, Inc. | 1,745,085 | ||||||
13,240 | Otis Worldwide Corp. | 752,826 | ||||||
26,480 | Raytheon Technologies Corp. | 1,631,698 | ||||||
62,000 | Southwest Airlines Co. | 2,119,160 | ||||||
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20,762,242 | ||||||||
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Information Technology: 14.5% | ||||||||
13,048 | Amphenol Corp. - Class A | 1,250,129 | ||||||
9,580 | Atlassian Corp. Plc - Class A* | 1,726,987 | ||||||
39,324 | Genpact Ltd. | 1,436,112 | ||||||
5,766 | Intuit, Inc. | 1,707,832 | ||||||
69,876 | NCR Corp.* | 1,210,252 | ||||||
7,215 | Palo Alto Networks, Inc.* | 1,657,069 | ||||||
11,563 | ServiceNow, Inc.* | 4,683,709 | ||||||
78,060 | TE Connectivity Ltd. | 6,365,793 | ||||||
43,763 | Visa, Inc. - Class A | 8,453,699 | ||||||
10,037 | Workday, Inc. - Class A* | 1,880,532 | ||||||
24,512 | Zendesk, Inc.* | 2,170,047 | ||||||
|
| |||||||
32,542,161 | ||||||||
|
| |||||||
Materials: 1.2% | ||||||||
35,580 | Agnico Eagle Mines Ltd. | 2,279,255 | ||||||
27,525 | Arconic Corp.* | 383,423 | ||||||
|
| |||||||
2,662,678 | ||||||||
|
| |||||||
Real Estate: 1.0% | ||||||||
49,400 | CBRE Group, Inc. - Class A* | 2,233,868 | ||||||
|
| |||||||
| TOTAL COMMON STOCKS | 214,900,440 | ||||||
|
|
The accompanying notes are an integral part of these financial statements.
14 | Litman Gregory Funds Trust |
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PartnerSelect Equity Fund (formerly Litman Gregory Masters Equity Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Shares | Value | |||||||
PREFERRED STOCK: 1.5% | ||||||||
Information Technology: 1.5% | ||||||||
85,000 | Samsung Electronics Co. Ltd. - (Preference Shares) | $ | 3,285,946 | |||||
|
| |||||||
| TOTAL PREFERRED STOCK | 3,285,946 | ||||||
|
| |||||||
Principal Amount | ||||||||
SHORT-TERM INVESTMENTS: 2.9% | ||||||||
REPURCHASE AGREEMENTS: 2.9% | ||||||||
$6,566,000 | Fixed Income Clearing Corp. 0.000%, 6/30/2020, due 07/01/2020 [collateral: par value $6,222,100, U.S. Treasury Notes, 1.625%, due 02/15/2026 value $6,697,890] (proceeds $6,566,000) | 6,566,000 | ||||||
|
| |||||||
| TOTAL SHORT-TERM INVESTMENTS | 6,566,000 | ||||||
|
| |||||||
| TOTAL INVESTMENTS | 224,752,386 | ||||||
|
| |||||||
Liabilities in Excess of Other Assets: (0.2)% | (493,653 | ) | ||||||
|
| |||||||
NET ASSETS: 100.0% | $ | 224,258,733 | ||||||
|
|
Percentages are stated as a percent of net assets.
ADR | American Depositary Receipt |
* | Non-Income Producing Security. |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 15 |
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PartnerSelect International Fund
The PartnerSelect International Fund fell 22.83% in the first half of 2020, underperforming its primary benchmark, the MSCI ACWI ex USA Index, which was down 11.00%. The Morningstar Foreign Large Blend category showed a loss of 10.89% through the first half of 2020. Since its inception on December 1, 1997, the fund has returned 5.69%, annualized, compared to the MSCI ACWI ex USA Index return of 4.72%, the MSCI EAFE Index return of 4.35%, and the Morningstar Foreign Large Blend category return of 3.58%.
Performance as of 6/30/2020 |
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Average Annual Total Returns | ||||||||||||||||||||||||||||
Three Month Return | Year-to- Date | One Year | Three- Year | Five- Year | Ten- Year | Since Inception | ||||||||||||||||||||||
PartnerSelect International Fund (12/1/1997) | 15.03% | -22.83% | -14.74% | -4.97% | -3.55% | 3.12% | 5.69% | |||||||||||||||||||||
MSCI ACWI (ex- U.S.) Index | 16.12% | -11.00% | -4.80% | 1.13% | 2.26% | 4.97% | 4.72% | |||||||||||||||||||||
MSCI EAFE Index | 14.88% | -11.34% | -5.13% | 0.81% | 2.05% | 5.73% | 4.35% | |||||||||||||||||||||
Morningstar Foreign Large Blend Category Average | 16.21% | -10.89% | -4.67% | 0.40% | 1.62% | 5.23% | 3.58% | |||||||||||||||||||||
Performance quoted represents past performance and does not guarantee future results. 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 funds may be lower or higher than the performance quoted. To obtain standardized performance of the funds, and performance as of the most recently completed calendar month, please visit www.partnerselectfunds.com. As of the prospectus dated 4/29/2020, the gross and net expense ratios were 1.36% and 1.12%, respectively. There are contractual fee waivers in effect through 4/30/2021. |
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MSCI index returns source: MSCI. Neither MSCI nor any other party involved in or related to compiling, computing, or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability, or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates, or any third party involved in or related to compiling, computing, or creating the data have any liability for any direct, indirect, special, punitive, consequential, or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent. Source note: Returns prior to 1999 are the MSCI ACWI ex-US GR index. Returns from 1999 onwards are MSCI ACWI ex-US NR index.
Performance so far this year has been extremely disappointing. The fund was slightly behind or matched its two benchmarks during the second quarter, so the majority of the underperformance year to date stems from the downturn markets suffered in the first quarter due to COVID-19.
The fund’s exposure to cyclical stocks significantly hurt performance when global economies virtually shut down. The fund lacked adequate defense for this scenario because its sub-advisors considered companies that would have defended well to be expensive, a view they all have generally held for several years now. Even names that one would think would defend well did not as much: As we wrote last quarter, Aerospace supplier CAE normally would be resilient in a downturn due to its training business but was hit hard by a near-total shutdown of aviation; sales of Coke (referring to Coca Cola European Partners) would normally be very resilient in a downturn but were not when all restaurants are closed and people are stuck in their homes; and Informa would normally see its major exhibitions hold up well, but not in a world where nobody is travelling.
16 | Litman Gregory Funds Trust |
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The fund’s relative performance in the second quarter started recovering strongly in late May to early June and this period coincided with value stocks outperforming their growth counterparts. By mid-June, over the trailing three-month period, the fund was ahead of its peers and benchmark by 600 and 770 basis points, respectively. Chart below.
But since mid-June, the past several-years trend of “quality” and “long-duration growth stocks” outperforming value stocks renewed in strength.
Fund Summary | 17 |
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This cycle against value has been an exceptionally long one and it was turbocharged due to COVID-19. The MSCI EAFE Value Index lagged the MSCI EAFE Growth Index by more than 1,000 basis points in the first quarter of 2020, a three-sigma or standard-deviation event, according to Lazard Asset Management. Chart below.
While the fund’s cyclical or value bent has been painful to bear this year, it proved quite profitable in 2019 when the fund rose around 30% beating both its benchmarks, as well as international value and growth style benchmarks, and stood among the top two percent of its foreign blend peers. We think this outperformance in 2019 was largely driven by non-benchmark stock selection. By its very nature, this idiosyncratic risk could zig while our peers or the “value” factor zag over shorter periods.
As such, over the short to medium term we expect the fund to do very well in an environment of relatively stable recovery or reflation for the global economy. This is largely contingent on the coronavirus: whether there will be a second wave of infections, how bad and for how long will it last, when we will have a vaccine, etc.
How our managers reacted to COVID-19
The first order of business for all managers was to ensure that companies they owned had the balance-sheet strength to survive an extended period of economic shutdown and/or below-normal economic activity lasting one to two years—a timeframe within which a vaccine to fight the coronavirus is expected to be available, if not sooner, and we know markets typically price in these developments well in advance.
Next, the fund’s sub-advisors diligently assessed what scenario or outcome was being priced into stock prices. Invariably that led managers to add to existing holdings where in their respective judgments price declines far exceeded the potential decline in intrinsic value due to COVID-19. Another common theme we found was that managers selectively upgraded their portfolios in terms of quality. Such investments were generally funded by selling stocks that had held up well during the crisis. There were a few sales where the cyclicality of the business combined with financial leverage made the risk-reward less attractive. As such, across the portfolio, from March to June the four sub-advisors in the fund sold only four stocks outright and added 10 new names. For the most part they added to existing holdings or trimmed to make room for new ones.
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Given the level of reassessment all our sub-advisors undertook of their holdings, while keeping a longer-term perspective that looked beyond the COVID-19 valley, the fact they held onto most everything they owned pre-COVID-19 highlights the quality of the portfolio: You can have quality even in a business model that is cyclical or relatively highly geared to economic growth. And our conversations with sub-advisors suggests the overall portfolio remains extremely compelling. During the depths of the crisis, a few of our managers said to us their portfolios were as attractive as seen around the 2008 financial crisis or the euro crisis.
Performance of Managers
In the first half of 2020, all four managers underperformed their respective benchmarks, two of them significantly. The underperformance ranged from -2.32% to -11.37%, net of their sub-advisory fee. (In 2019 all managers outperformed their respective benchmarks, with the range being +2.72% to +20.67%.)
While we expect each sub-advisor’s performance over the short term to vary significantly from their benchmarks, the fund has never seen this magnitude of coordinated underperformance over a six-month period relative to its primary index. The extreme nature of the COVID-19 crisis and the fund’s cyclical bent, which had accumulated over the past several years, combined in a brutal manner. There were only a handful of areas that offered protection but the fund didn’t have those in sufficient quantities because our sub-advisors didn’t find them attractive enough to warrant shelf-space in the high-conviction, long-term, absolute-return-focused portfolios they manage on behalf of our shareholders.
Of the four sub-advisors, two have been on the fund for at least five years, both of which are outperforming their benchmarks (net of their fees) since their respective inception dates. A third manager is slightly behind (around 30 bps annualized). The fourth manager is underperforming its benchmark by around 400 basis points, annualized, driven almost fully by the first quarter’s performance. This manager was the best performer in 2019 by a good margin.
To highlight the sharp performance divergence between 2019 and the first half of this year, consider the following table.
2019 | Weight | Return | Contribution | |||||||||
Comm services | 15.21 | 40.36 | 6.34 | |||||||||
Financials | 18.91 | 33.53 | 6.31 | |||||||||
Industrials | 15.82 | 26.07 | 4.55 |
Year to date | Weight | Return | Contribution | |||||||||
Industrials | 16.51 | -34.02 | -5.43 | |||||||||
Financials | 18.10 | -28.08 | -5.31 | |||||||||
Comm services | 24.51 | -13.36 | -2.94 |
In 2019, the fund’s top three contributions to performance came from communication services, financials, and industrials, sectors which the fund is overweight relative to the benchmark and its peers. These sectors have been the top detractors from absolute performance in the first six months of the year. The performance drag in communication services came from poor stock selection rather than sector allocation.
The fund’s sector and country allocations though are driven by bottom-up stock selection. Looking at the top dozen names in both periods, you see many holdings switching roles from being strong outperformers to significant detractors in the first half: Informa, Frontline, CNH Industrial, Israel Discount Bank, Exor, Easyjet. We will discuss a few of these in detail later in this report.
When concerns about COVID-19 and the economy eventually abate, odds are good these sectors and underlying stocks will do well again, especially because most will come out stronger from this crisis. Some companies in these sectors, such as Informa, may have experienced a decline in long-term intrinsic value due to COVID-19 but not nearly to the extent priced into these stocks and, therefore, offer compelling opportunity.
Key Performance Drivers
The attribution analysis shows stock selection was the primary driver behind the fund’s underperformance in the first six months of 2020. It was weakest in industrial and communication services sectors, followed by materials and financials. During the second quarter, we saw stock-picking contribution come back strongly from financials and communication services, although in the latter Informa and Grupo Televisa held back overall gains. Stock picking in the energy sector was also a drag on performance during the second quarter.
From a regional perspective, stock selection in Europe was by far the most significant detractor from overall performance during the first half of 2020. The pandemic has spurred Europe into action. It is finally showing signs of prudent fiscal coordination and the support necessary for growth and innovation across the European Union. We think this could be a catalyst for the fund’s European-domiciled holdings (where the fund is significantly overweight versus the benchmark), many of whom generate a good portion of their profits outside the region but have underperformed nevertheless.
Fund Summary | 19 |
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Portfolio contribution for a holding represents the product of the average portfolio weight and the total return earned by the holding during the period. Past performance is no guarantee of future results. Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
Top 10 Individual Detractors as of the Six Months Ended June 30, 2020 | ||||||||||||||||||||
Company Name | Fund Weight (%) | Benchmark Weight (%) | 6-Month Return (%) | Contribution to Return (%) | Country | Economic Sector | ||||||||||||||
Informa PLC | 4.11 | 0.05 | -48.80 | -2.49 | United Kingdom | Communication Services | ||||||||||||||
OCI NV | 1.91 | 0.00 | -50.48 | -1.34 | Netherlands | Materials | ||||||||||||||
EasyJet PLC | 1.27 | 0.01 | -55.58 | -1.32 | United Kingdom | Industrials | ||||||||||||||
Lloyds Banking Group PLC | 2.26 | 0.18 | -53.48 | -1.21 | United Kingdom | Financials | ||||||||||||||
Frontline Ltd. | 3.26 | 0.00 | -38.34 | -1.20 | Bermuda | Energy | ||||||||||||||
Aurelius Equity Opportunitie | 0.60 | 0.00 | -57.85 | -1.02 | Germany | Financials | ||||||||||||||
Grupo Televisa SAB | 1.55 | 0.02 | -55.33 | -1.00 | Mexico | Communication Services | ||||||||||||||
CNH Industrial NV | 2.27 | 0.04 | -36.35 | -0.89 | Netherlands | Industrials | ||||||||||||||
Rolls-Royce Holdings PLC | 1.37 | 0.05 | -61.04 | -0.87 | United Kingdom | Industrials | ||||||||||||||
Safran SA | 2.25 | 0.19 | -35.15 | -0.80 | France | Industrials |
Portfolio contribution for a holding represents the product of the average portfolio weight and the total return earned by the holding during the period. Past performance is no guarantee of future results. Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
The top detractor during the first six months was Informa. This stock is owned by two fund sub-advisors—Lazard and Pictet. It’s an example of a stock that has been hit especially hard due to the pandemic and has yet to recover in a meaningful manner.
Pictet says about 60% of its revenue is driven by its exhibitions/conference business, which has high incremental margins—a desirable attribute for Pictet—and grows cash flows faster than revenue. Informa’s remaining business—academic publishing—is quite stable.
The Pictet team is assuming that Informa attains 2019 level of revenue by 2022. This assumption of course assumes that over the next two years, assuming the pandemic is largely behind us, people would want to travel to exhibitions and network. While no one can opine confidently about how people will behave, Pictet’s co-portfolio manager Fabio Paolini explains why in his view the exhibitions the company offers are high on the scale of business necessity, “Exhibitions are an important conduit of business and in some cases cannot be replaced. Think about a boat show, construction exhibition, jewelry, fashion, etc. … The contact and inspection of the product in addition to personal relationships and networking cannot be replaced. In some geographies exhibitions have been encouraged to restart given the significant benefit they bring to the local economy.”
Encouragingly, Informa has been able to transplant some of the loss of business by hosting virtual exhibitions. While these don’t generate the same revenue, their lower cost structure means higher operating margins, mitigating the hit on profits. Paolini observes, “The market hasn’t appreciated the above-mentioned positives because the exhibition business is late cycle. Historically exhibition have always recovered their previous level of revenues. Currently investors have given more credit to companies that have a faster and visible recovery potential [emphasis ours].”
The Pictet team believes Informa could easily double from its current price. Paolini says this type of a franchise typically trades at low single-digit free cash flow yields. Today it trades at double-digit normalized free cash flow yields.
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While it’s among the most attractive opportunities in the fund, Informa is also dependent on the evolution of the pandemic. Informa’s current stock price is pricing in a material structural change in Informa’s exhibition business, which both the Pictet and Lazard teams consider unlikely given the strength of the underlying franchise and how its customers use its services.
Another detractor was Exor. Exor is the holding company vehicle of the Agnelli family and owns PartnerRe, a leading global reinsurer, as well as stakes in a number of publicly listed and unlisted companies. The negative share performance was driven by two factors according to David Marcus of Evermore: (1) an approximate 15% reduction in Exor’s stated net asset value (NAV) stemming from sharp market price declines in key listed holdings such as Fiat Chrysler (-33%) and CNH Industrial (-38%); and (2) a widening of the holding company discount below NAV from 17% at year-end, to 27% at June 30, 2020.
In any investment, Marcus is looking for cheapness but also a catalyst to unlock the value he sees. Given the strength of its franchise and management, Exor is what Marcus would call a compounder, where there are always some catalysts acting to unlock value and compound investor wealth. In February, the company entered into a Memorandum of Understanding (MoU) to sell PartnerRe for $9 billion to French insurer Covea. Covea ultimately walked away from this deal in May citing the uncertainties created by COVID-19. Marcus believes this walkout is more indicative of the current unique situation than a reflection on PartnerRe’s business value. Exor stayed disciplined and did not attempt to salvage the PartnerRe deal by renegotiating its terms. This discipline is important to relay to the marketplace, according to Marcus, because Exor’s Fiat Chrysler is in the middle a merger with Peugeot.
Another listed holding, CNH Industrial, has plans to split into two independent publicly traded companies—one focused on trucks and propulsion systems and the other agriculture and construction equipment—that Marcus believes should help unlock value. David Herro of Harris associates also owns CNH Industrial on behalf of the fund.
Marcus says Exor is “cheap on cheap” (i.e., not only is there a sizable discount in Exor shares relative to the market price of Exor’s holdings, but that Exor’s underlying holdings are also trading well below what he and his team estimate believe to be its intrinsic value).
Israel Discount Bank has been a profitable holding for the fund since Mark Little of Lazard purchased it in the fall of 2016. It was also a top contributor to performance in 2019 and among the top detractors in the first half of 2020. Little says Israel Discount Bank lagged the market recovery, as did banks globally, on fears around credit costs and the impact of ever-lower interest rates. Israeli banks in particular were hurt by the dramatic rise in virus cases in Israel following the easing of the lockdown, leading to fears that economic activity would need to be restricted again. While these pressures are real, Little believes the Israeli economy and banking system will be relatively resilient and that the more positive trends of the last several years can resume next year. Little believes this should allow the bank to return to its organic focus on costs and improving returns on equity. On this basis, he views the bank’s valuation at well below its book value as very attractive.
Among the positive contributors was Nexon, a Korean gaming franchise. Nexon’s key game Dungeon & Fighter (D&F) has been a huge success in China. While the lockdown has stimulated demand for their products, the key development in the quarter was confirmation of the imminent launch of the mobile version of D&F. Comparable launches suggest this could be very material, according to Lazard’s Mark Little. Nexon continues to trade at very attractive valuation levels—single-digit earnings multiples once adjusted for its significant cash balance.
Examples of Companies Managers Have Bought
Vinci: Recent concerns on traffic trends created an opportunity for Pictet to own a long-dated asset with exposure to French toll road and international airport assets. Pictet considers Vinci’s concession business (70% of the value) to be resilient and predictable, looking beyond the unique circumstances stemming from the COVID-19 pandemic. In addition, it offers inflation protection and exposure to some structural drivers, such as passenger growth. Vinci has grown both organically and through acquisitions while maintaining a strong balance sheet, which attests to management’s capital-allocation skills. According to Pictet, Vinci traded at an attractive double-digit free cash flow yield at the time of purchase despite limited liquidity and balance sheet risks. Given the long-dated nature of its assets they view 2020 as a temporary setback that won’t impact the structural strengths of Vinci. While airport traffic (25% of value) will take more time to recover, toll roads traffic is likely to recover quickly. Finally, Pictet acknowledges contracting activity (15% of valuation) will suffer this year inevitably, but the significant backlog and exposure to predominantly public infrastructure gives significant protection to Vinci revenues.
Constellium: Constellium is a French global producer of downstream aluminum products serving a diversified group of industries: packaging, aerospace, and automotive end markets. Looking through the COVID-19 crisis and beyond 12 months, Marcus believes the company trades at around 5x his estimated 2022–2023 EBITDA number or a high-teens free cash flow yield for 2022. In addition, Constellium trades at roughly a third of the replacement cost of its assets. Marcus adds, “These are assets that have an economic reason to exist and thus would be built if they didn’t exist in a post-COVID-19 world.”
Portfolio Mix
The fund’s sub-advisors are tasked with investing only in their highest-conviction ideas so they will naturally invest very differently from the fund’s benchmark allocations. We believe this is key to generating excess returns.
Fund Summary | 21 |
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While there were no dramatic shifts in sector or regional weightings over the past six months, a few things are worth noting.
• | Partly by relative price movements and by actions taken by the fund’s sub-advisors, over the past six months the fund’s exposure to communication services (+4.1%), consumer staples (+2.7%), and financial sectors (+2.5%) increased slightly, while allocations to energy (-2.6%), industrials (-3.6%), and technology (-2.8%) correspondingly decreased. |
• | As mentioned above, the fund’s top three sector weightings are communication services (21.9%), financials (20.0%), and industrials (19.0%). These are also the top overweights vs. the fund’s benchmark, with active weights at +14.5%, +2.5%, and +7.7%, respectively. |
• | Regionally, the fund’s largest overweight versus its benchmark is to Europe (72.1% for the fund versus 41.2% for the benchmark). The fund’s allocation to Europe increased by over five percentage points in the past six months. The fund is quite underweight Asia ex Japan (4.4% vs. 23.1% for the index), and only slightly underweight to Japan now (13.4% vs. 16.4% for the index) after the weighting to this country increased by four percentage points over the past six months. |
• | The fund’s allocation to emerging-market stocks decreased during the past six months from 10.2% of net assets to 5.6%. Given the current investment approaches of the sub-advisors in the fund and how they view relative risk-reward in emerging vs. developed markets, this is not surprising. At a time when there were lots of opportunities in the developed markets due to COVID-19, managers gravitated there. As we have noted in the past, over a full market cycle we expect the current managers in the fund will give us emerging-market exposure that lies somewhere between that of the EAFE (0%) and MSCI ACWI ex USA indexes (18.1%, as of 6/30/20). This is why we report performance versus both indexes. |
• | The fund’s market-cap exposure did not change materially over the past six months. The fund had 23% of its net assets in smaller-cap stocks ($5.5 billion or less in market cap) and 69.8% in mid to large-caps (greater than $5.5 billion in market cap). |
• | As of the end of June, the fund had about a tenth of its Swiss franc exposure hedged back to the U.S. dollar. At the fund level, it means less than 1% of its foreign currency exposure is hedged back to the U.S. dollar. |
Fund as of 6/30/2020 | iShares MSCI ACWI ex-U.S. as of 6/30/2020 | |||||||
Communication Services | 22.3% | 7.4% | ||||||
Consumer Discretionary | 10.5% | 12.3% | ||||||
Consumer Staples | 9.7% | 9.6% | ||||||
Energy | 2.6% | 4.4% | ||||||
Finance | 19.5% | 17.5% | ||||||
Health Care & Pharmaceuticals | 2.2% | 10.5% | ||||||
Industrials | 20.9% | 11.3% | ||||||
Information Technology | 3.5% | 10.6% | ||||||
Materials | 5.6% | 7.3% | ||||||
Real Estate | 0.0% | 2.8% | ||||||
Utilities | 1.6% | 3.4% | ||||||
Cash Equivalents & Other | 1.6% | 3.0% | ||||||
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100.0% | 100.0% | |||||||
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By Region
Fund as of 6/30/2020 | iShares MSCI ACWI ex-U.S. as of 6/30/2020 | |||||||
Africa | 1.2% | 1.1% | ||||||
Australia/New Zealand | 1.3% | 4.5% | ||||||
Asia (ex Japan) | 4.4% | 23.1% | ||||||
Japan | 13.4% | 16.4% | ||||||
Western Europe & UK | 72.1% | 41.2% | ||||||
Latin America | 1.8% | 2.3% | ||||||
North America | 2.2% | 6.9% | ||||||
Middle East | 2.1% | 1.5% | ||||||
Cash Equivalents & Other | 1.6% | 3.0% | ||||||
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100.0% | 100.0% | |||||||
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Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
22 | Litman Gregory Funds Trust |
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By Asset Class Fund as of 6/30/2020 | By Market Capitalization Fund as of 6/30/2020 | |
Market Capitalization: Developed Markets Small-Cap < $5.5 billion Developed Markets Large and Mid-Cap > $5.5 billion
* Totals may not add up to 100% due to rounding | Market Capitalization: Small-Cap < $5.5 billion Mid-Cap $5.5 billion - $15 billion Large-Cap > $15 billion |
Concluding Thoughts
The main focus of the fund’s sub-advisors has always been to generate great absolute long-term performance and to not worry about short-term volatility or tracking error, although they are very mindful of permanent loss of capital given each is running a highly focused portfolio of typically no more than 15 stocks. While we aim to keep a balance in terms of value and growth styles, we also know that these attributes are hard to measure and they can shift. Fundamentally, we believe no sensible investor will knowingly overpay for something, least of all managers we invest with.
Our managers, who are all long-term thinkers and focused on bottom-up stock selection, have also had a relatively more challenging time navigating through a number of macro headwinds, starting from Brexit, the zero to negative interest rate environment in Europe stemming from its debt crisis, trade wars of varying intensity that have resulted in the market shuttling between risk-on and risk-off, and now COVID-19. Historically, macro events have tended to be shorter-term issues or noise, but they have made their presence felt for longer in this cycle. We joke internally that the use of the word “unprecedented” in today’s financial journalism itself is unprecedented. Yes, our managers have made their share of mistakes, but collectively they haven’t been outliers relative to what the fund has experienced historically with the current and past roster of managers. Some macro risks/headwinds may remain with us for some time, such as a sustained U.S.-China trade or tech war.
With regard to the value vs. growth dichotomy we have discussed in recent letters, we have historically not focused on these things because we think they are cyclical (i.e., shorter-term factors). Over the long term “style” factors should not matter. However, the COVID-19 crisis may have resulted in two important big-picture developments: the prospect of a lengthy period of low interest rates that may continue to favor growth over value and an acceleration in some technology trends already in place. This is causing us to take a harder look at the fund’s overall portfolio balance, including whether adding a quality-growth or growth manager today makes sense, an area the fund has sorely missed over the past several years.
Now may seem too late in the game to be thinking about adding a growth manager. But we should be thinking about it if we are objective. We want to be disciplined but not anchored to a position. Yes, we still believe the fund currently has a relatively strong value tilt overall and expect it to do very well when value returns to favor. Yes, we believe valuation risk in “quality” and “growth” segments is higher than it was five years ago. As Howard Marks of Oaktree reminded us recently, everything has a fair price and any good thing can be taken to extremes.
We will weigh all the above-mentioned factors and more in our due diligence, in addition to maintaining the very high standard we need before making any changes to the sub-advisor mix on the fund. We should note that the fund may be in a situation where any gains realized over the next few years could be sheltered from taxes. The fund, as of June 30, 2020, had roughly a quarter of its net asset value in loss carryforwards.
Our primary focus at Litman Gregory has always been finding great stock pickers with a belief that over the long term that’s what will matter, not “value versus growth.” Importantly, the managers currently in the fund are executing their investment discipline in the manner we expect them to, and they are holding true to the mandate we have given them.
We thank you for your patience and support.
Fund Summary | 23 |
Table of Contents
PartnerSelect International Fund Managers
INVESTMENT MANAGER | FIRM | TARGET MANAGER ALLOCATION | MARKET CAPITALIZATION OF COMPANIES IN PORTFOLIO | STOCK-PICKING STYLE | BENCHMARK | |||||
David Marcus | Evermore Global Advisors | 25.00% | All Sizes | Value | MSCI World ex U.S. Value Index | |||||
David Herro | Harris Associates L.P. | 25.00% | All sizes, but mostly large- and mid-sized companies | Value | MSCI World ex U.S. Value Index | |||||
Mark Little | Lazard Asset Management, LLC | 25.00% | All sizes | Blend/Relative Value | MSCI All Countries World Free ex U.S. Index | |||||
Fabio Paolini Benjamin Beneche | Pictet Asset Management, Ltd. | 25.00% | All sizes | Blend | MSCI EAFE Index |
International Fund Value of Hypothetical $10,000
The value of a hypothetical $10,000 investment in the PartnerSelect International Fund from December 1, 1997 to June 30, 2020 compared with the MSCI ACWI ex-U.S. Index and Morningstar Foreign Large Blend Category.
The hypothetical $10,000 investment at fund inception includes changes due to share price and reinvestment of dividends and capital gains. The chart does not imply future performance. Indexes are unmanaged, do not incur fees, expenses or taxes, and cannot be invested in directly.
24 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect International Fund (formerly Litman Gregory Masters International Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited)
Shares | Value | |||||||
COMMON STOCKS: 98.5% | ||||||||
Australia: 1.3% | ||||||||
2,759,403 | Incitec Pivot Ltd. | $ | 3,581,916 | |||||
|
| |||||||
Austria: 1.9% | ||||||||
199,748 | S&T AG* | 5,113,450 | ||||||
|
| |||||||
Belgium: 2.2% | ||||||||
283,796 | Fagron | 5,965,940 | ||||||
|
| |||||||
Bermuda: 3.8% | ||||||||
790,464 | Frontline Ltd. | 5,517,439 | ||||||
219,926 | Jardine Strategic Holdings Ltd. | 4,747,140 | ||||||
|
| |||||||
10,264,579 | ||||||||
|
| |||||||
Canada: 1.4% | ||||||||
230,208 | CAE, Inc. | 3,723,095 | ||||||
|
| |||||||
Cayman Islands: 2.3% | ||||||||
237,321 | Trip.com Group Ltd. - ADR* | 6,151,360 | ||||||
|
| |||||||
Denmark: 1.3% | ||||||||
26,098 | Carlsberg A/S - Class B | 3,448,272 | ||||||
|
| |||||||
Finland: 2.2% | ||||||||
174,582 | Sampo Oyj - Class A | 5,999,569 | ||||||
|
| |||||||
France: 18.0% | ||||||||
163,600 | BNP Paribas S.A.* | 6,487,343 | ||||||
1,661,966 | Bollore S.A. | 5,213,808 | ||||||
208,161 | Constellium SE* | 1,598,676 | ||||||
449,429 | Elis S.A.* | 5,238,928 | ||||||
346,609 | Engie S.A.* | 4,279,450 | ||||||
59,986 | Safran S.A.* | 6,002,139 | ||||||
43,885 | Vinci S.A. | 4,036,689 | ||||||
602,852 | Vivendi S.A. | 15,455,934 | ||||||
|
| |||||||
48,312,967 | ||||||||
|
| |||||||
Germany: 4.0% | ||||||||
18,465 | Allianz SE | 3,767,381 | ||||||
142,250 | Daimler AG | 5,767,436 | ||||||
58,479 | LPKF Laser & Electronics AG | 1,264,251 | ||||||
|
| |||||||
10,799,068 | ||||||||
|
| |||||||
Ireland: 1.2% | ||||||||
47,179 | Ryanair Holdings Plc - ADR* | 3,129,855 | ||||||
|
| |||||||
Israel: 2.1% | ||||||||
1,865,495 | Israel Discount Bank Ltd. - Class A | 5,714,958 | ||||||
|
| |||||||
Japan: 13.4% | ||||||||
258,000 | Asahi Group Holdings Ltd. | 9,052,828 | ||||||
38,700 | Cocokara fine, Inc. | 2,084,112 | ||||||
133,100 | Matsumotokiyoshi Holdings Co. Ltd. | 4,828,372 | ||||||
451,648 | Nexon Co. Ltd. | 10,216,884 | ||||||
18,500 | Nintendo Co. Ltd. | 8,244,834 | ||||||
24,400 | Toyota Motor Corp. | 1,533,066 | ||||||
|
| |||||||
35,960,096 | ||||||||
|
| |||||||
Mexico: 1.8% | ||||||||
902,946 | Grupo Televisa SAB - ADR* | 4,731,437 | ||||||
|
| |||||||
Monaco: 0.9% | ||||||||
69,364 | Scorpio Bulkers, Inc. | 1,061,269 | ||||||
111,627 | Scorpio Tankers, Inc. | 1,429,942 | ||||||
|
| |||||||
2,491,211 | ||||||||
|
|
Shares | Value | |||||||
Netherlands: 6.9% | ||||||||
879,741 | CNH Industrial N.V.* | $ | 6,147,374 | |||||
164,934 | EXOR N.V. | 9,406,490 | ||||||
300,290 | OCI N.V.* | 3,125,658 | ||||||
|
| |||||||
18,679,522 | ||||||||
|
| |||||||
Norway: 0.8% | ||||||||
173,874 | Atlantic Sapphire A/S* | 2,266,388 | ||||||
|
| |||||||
South Africa: 1.2% | ||||||||
17,520 | Naspers Ltd. - Class N | 3,194,798 | ||||||
|
| |||||||
South Korea: 0.4% | ||||||||
4,530 | NAVER Corp. | 1,015,930 | ||||||
|
| |||||||
Spain: 3.2% | ||||||||
38,600 | Amadeus IT Group S.A. | 2,009,004 | ||||||
1,023,255 | Codere S.A.*(a) | 1,805,397 | ||||||
276,654 | Siemens Gamesa Renewable Energy S.A.* | 4,897,682 | ||||||
|
| |||||||
8,712,083 | ||||||||
|
| |||||||
Sweden: 5.6% | ||||||||
838,609 | Modern Times Group MTG AB - Class B* | 9,099,807 | ||||||
191,224 | Nordic Entertainment Group AB - Class B* | 5,848,797 | ||||||
|
| |||||||
14,948,604 | ||||||||
|
| |||||||
Switzerland: 6.4% | ||||||||
29,335 | Cie Financiere Richemont S.A. | 1,869,404 | ||||||
504,433 | Credit Suisse Group AG* | 5,208,743 | ||||||
3,225,200 | Glencore Plc* | 6,814,773 | ||||||
81,658 | Julius Baer Group Ltd.* | 3,413,787 | ||||||
|
| |||||||
17,306,707 | ||||||||
|
| |||||||
United Kingdom: 15.4% | ||||||||
61,700 | Ashtead Group Plc | 2,070,525 | ||||||
117,572 | Coca-Cola European Partners Plc | 4,447,899 | ||||||
225,948 | Compass Group Plc | 3,103,000 | ||||||
182,751 | easyJet Plc | 1,534,275 | ||||||
458,532 | Gamesys Group Plc* | 4,868,589 | ||||||
1,650,099 | Informa Plc | 9,584,160 | ||||||
19,003,050 | Lloyds Banking Group Plc | 7,318,045 | ||||||
340,289 | Prudential Plc | 5,115,745 | ||||||
937,400 | Rolls-Royce Holdings Plc* | 3,303,063 | ||||||
|
| |||||||
41,345,301 | ||||||||
|
| |||||||
United States: 0.8% | ||||||||
333,287 | Genco Shipping & Trading Ltd. | 2,093,042 | ||||||
|
| |||||||
| TOTAL COMMON STOCKS | 264,950,148 | ||||||
|
|
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 25 |
Table of Contents
PartnerSelect International Fund (formerly Litman Gregory Masters International Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount | Value | |||||||
SHORT-TERM INVESTMENTS: 1.3% | ||||||||
REPURCHASE AGREEMENTS: 1.3% | ||||||||
$3,559,000 | Fixed Income Clearing Corp. 0.000%, 6/30/2020, due 07/01/2020 [collateral: par value $3 372 600, U.S. Treasury Note,1.625%, due 02/15/2026 value $3,630,495.] (proceeds $3,559,000) | $ | 3,559,000 | |||||
|
| |||||||
| TOTAL SHORT-TERM INVESTMENTS | 3,559,000 | ||||||
|
| |||||||
| TOTAL INVESTMENTS | 268,509,148 | ||||||
|
| |||||||
Other Assets in Excess of Liabilities: 0.2% | 408,706 | |||||||
|
| |||||||
NET ASSETS: 100.0% | $ | 268,917,854 | ||||||
|
|
Percentages are stated as a percent of net assets.
ADR | American Depositary Receipt |
L.P. | Limited Partnership |
* | Non-Income Producing Security. |
(a) | Security is valued using significant unobservable inputs in good faith in accordance with procedures approved by the Board of Trustees. |
CURRENCY ABBREVIATIONS:
CHF | Swiss Franc |
USD | U.S. Dollar |
The accompanying notes are an integral part of these financial statements.
26 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect International Fund (formerly Litman Gregory Masters International Fund)
SCHEDULE OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS at June 30, 2020 (Unaudited)
At June 30, 2020, the Fund had the following forward foreign currency exchange contracts:
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||
Counterparty | Settlement Date | Fund Receiving | U.S. $ Value at June 30, 2020 | Fund Delivering | U.S. $ Value at June 30, 2020 | Unrealized Appreciation | Unrealized Depreciation | |||||||||||||||||
State Street Bank and Trust Company | 12/16/2020 | USD | $ | 903,838 | CHF | $ | 906,853 | $ | — | $ | (3,015 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 27 |
Table of Contents
PartnerSelect Smaller Companies Fund
The PartnerSelect Smaller Companies Fund, formerly the Litman Gregory Masters Smaller Companies Fund, declined 18.66% for the first half of 2020, finishing the period well behind the 12.98% loss for the Russell 2000 Index benchmark and the 17.02% loss for the Morningstar Small Blend category.
Performance as of 6/30/2020 | ||||||||||||||||||||||||||||
Average Annual Total Returns | ||||||||||||||||||||||||||||
Three Month | Year-to- Date | One- Year | Three- Year | Five- Year | Ten- Year | Since Inception | ||||||||||||||||||||||
PartnerSelect Smaller Companies Fund (6/30/03) | 27.11% | -18.66% | -17.04% | -0.13% | 0.85% | 7.68% | 6.37% | |||||||||||||||||||||
Russell 2000 Index | 25.42% | -12.98% | -6.63% | 2.01% | 4.29% | 10.50% | 8.55% | |||||||||||||||||||||
Morningstar Small Blend Category | 22.90% | -17.02% | -11.54% | -0.92% | 2.07% | 8.79% | 7.53% | |||||||||||||||||||||
Performance quoted represents past performance and does not guarantee future results. 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 funds may be lower or higher than the performance quoted. To obtain standardized performance of the funds, and performance as of the most recently completed calendar month, please visit www.partnerselectfunds.com. As of the prospectus dated 4/29/2020, the gross and net expense ratios for the Smaller Companies Fund were 1.88% and 1.46%, respectively. There are contractual fee waivers in effect through 4/30/2021. |
|
Performance of Managers
In the six-month period, the performance of the fund’s three sub-advisors was mixed. One manager substantially outperformed their benchmark, one manager performed in line, and another lagged meaningfully. The portfolio of Mark Dickherber and Shaun Nicholson of Segall Bryant & Hamill (SBH) declined 11.31%, outperforming the 23.50% loss for the Russell 2000 Value benchmark. The portfolio of the fund’s other value manager, Jeff Bronchick of Cove Street, fell 29.08%, lagging the value benchmark. The portfolio of Dick Weiss of Wells Capital dropped 13.96%, which trailed the 12.98% loss for his Russell 2000 benchmark. (Manager returns are net of sub-advisory management fees.)
Longer term, Weiss, who has been on this fund since its June 2003 inception, is outperforming the benchmark by 1.3 percentage points, annualized, over the 17-year period. Cove Street is now lagging the value benchmark over their 13 years on the fund with a 2.73% annualized return, compared to 3.25% for the Russell 2000 Value. The fund’s newest manager, SBH, has been on the fund for just over three years. Over that period, the team is decisively outperforming their Russell 2000 Value benchmark, posting an annualized return of 7.34% versus a loss of -4.35% for the Russell 2000 Value.
Key Performance Drivers
In the first half of 2020, stock selection was the clear driver of performance, while sector selection had a small net positive impact on performance. It is important to understand that the portfolio is built stock by stock and that sector weightings are a residual of the bottom-up, fundamental stock-picking process employed by each sub-advisor. That said, we do report on the short-term relative performance of both sector weights and stock selection to help shareholders understand the drivers of recent performance. It is also important to remember that the performance of a stock over a relatively short period tells us nothing about whether it will be a successful position; that is only known at the point when the stock is sold.
At the overall sector level, health care, information technology, and communication services were the largest detractors. Within health care, both sector exposure and stock selection hurt returns. Health care was the only sector in the benchmark to post a gain in the six-month period, and fund’s underweight to the sector (9.62% vs. 20.43%) was a key detractor. Although names such as Capital Senior Living and Orthofix declined meaningfully in the period, Colfax, owned by Cove Street, was a bright spot. Colfax is not a pure-play health care company but got into the space after completing a transformational acquisition into medical devices in 2019. Bronchick says the deal was “reasonably” financed, and he believes things are on track. He has a target value of $45 at the present time, although he thinks that value will move higher. The stock traded at $14 in March and has rebounded up to $28 at the end of June. Looking ahead, Bronchick says there is no question that the company’s welding segment will be somewhat depressed for a while. And, without a lot of elective surgeries going on in the United States, the medical segment has also been impacted by the virus. But his research suggests that when the dust settles, Colfax will have two businesses with long-term secular tailwinds and a management team that is adept at maximizing the performance of its businesses.
Information technology was another sector with large detractors. One of the biggest detractors was ViaSat, a provider of satellite communications and defense encryption services. The stock has been in the portfolio since mid-2014 and has shown up on the lists of biggest winners and biggest losers in various periods. In the first six months of this year, it was the single-largest detractor. Bronchick continues to see the company as a long-term compounder, driven by technological moats that its competitors cannot surmount in the short or medium term, as well as the continued buildout of a global Ka-band satellite constellation. The company’s new second-generation satellite (ViaSat-2) continues to sell its capacity across terrestrial broadband, commercial airlines, and defense services. Continued
28 | Litman Gregory Funds Trust |
Table of Contents
penetration by the company into airborne services for the military and government are providing excellent high-margin growth to the government segment and generating additional wins for future deployments. SpaceX’s StarLink continues to publicize its progress with its low-Earth orbit (LEO) constellation, which has put pressure on the stock. In addition, COVID-19 has caused the airline connectivity portion of the business to decline with fewer flights and travelers, which Cove Street views as a temporary headwind. At the end of the period, the stock was the largest holding in Bronchick’s sleeve of the portfolio.
Another detractor in the information technology space is NCR, owned by SBH since August 2018. NCR is a company that SBH continues to believe has a multiyear return-on-investment-capital (ROIC) improvement opportunity, driven by a new management team that is changing the culture, focusing the business, and removing costs. In the period, NCR was a large detractor as investors seemed concerned the company’s overall exposure to restaurants and retail, though small, could be a larger risk if the economy shuts down again. Dickherber and Nicholson have traded NCR—both adding and trimming—though maintaining a core position given they think their thesis is strengthening and are merely dealing with a poor perception situation with their ATM/bank exposure, which is becoming a lower percentage of the overall business. They believe the new management team will drive improved capital allocation and improved returns on invested capital over time.
Within consumer staples, Hain Celestial owned by SBH was a top contributor. The company is a leading organic and natural products company with operations in North America, Europe, and India. The recent stock price appreciation reflects improved results and tailwinds from stay-at-home benefits alongside the material changes the new management team has made to improve returns and capital allocation. SBH believes the new management team will continue to drive improved capital allocation and improved returns over time. They have trimmed back the position given the performance and how they manage reward and risk, though the co-managers remain impressed with management and expect improved metrics to drive shares higher in the coming years.
In the consumer discretionary sector, Chewy was among the biggest winners in the period, gaining over 60%. The company is an e-commerce supplier of pet products. Weiss says that the company grows revenues at a double-digit rate and has a substantial opportunity to expand in the pet industry and is seeing a surge in demand and order size relating to stay at home orders. Demonstrating the growth, Weiss reports that the company’s fourth quarter results saw sales grow 35% year over year, while first quarter sales were also strong. Due to strong stock price performance, the team trimmed the position during the period. Looking ahead, the company has a strong competitive advantage as an e-commerce player in the current environment and Weiss expects the company to continue to gain share within the pet supply industry.
Within energy, Noble Energy is an exploration and production company that was among the largest detractors. Cove Street’s original thesis for owning the company was multifold including a business outlook that focused on returning free cash to shareholders. While the company was well positioned within the industry, the coronavirus pandemic sent commodity prices, including oil, to near record lows. As a result, the energy sector was hard hit and Noble was no exception. The team sold out of the position due to changing dynamics at the company and industry due to the global demand slowdown cause by the coronavirus.
Portfolio contribution for a holding represents the product of the average portfolio weight and the total return earned by the holding during the period. Past performance is no guarantee of future results. Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
Fund Summary | 29 |
Table of Contents
Top 10 Individual Detractors as of the Six Months Ended June 30, 2020 | ||||||||||||||||||
Company Name | Fund Weight (%) | Benchmark Weight (%) | 6-Month Return (%) | Contribution to Return (%) | Economic Sector | |||||||||||||
Viasat Inc. | 4.69 | 0.00 | -47.58 | -2.40 | Information Technology | |||||||||||||
Noble Energy Inc. | 0.71 | 0.00 | -87.77 | -1.71 | Energy | |||||||||||||
NCR Corp. | 3.05 | 0.00 | -50.74 | -1.58 | Information Technology | |||||||||||||
The E W Scripps Co. Class A | 3.03 | 0.03 | -43.69 | -1.57 | Communication Services | |||||||||||||
Millicom International Cellular SA | 3.52 | 0.00 | -45.78 | -1.56 | Communication Services | |||||||||||||
Capital Senior Living Corp. | 0.73 | 0.00 | -76.68 | -1.20 | Health Care | |||||||||||||
Compass Minerals International Inc. | 6.31 | 0.10 | -17.76 | -1.17 | Materials | |||||||||||||
WPX Energy Inc. Class A | 1.50 | 0.00 | -53.57 | -1.16 | Energy | |||||||||||||
GP Strategies Corp. | 3.56 | 0.01 | -35.15 | -1.10 | Industrials | |||||||||||||
Orthofix Medical Inc. | 3.23 | 0.04 | -30.71 | -1.03 | Health Care |
Portfolio contribution for a holding represents the product of the average portfolio weight and the total return earned by the holding during the period. Past performance is no guarantee of future results. Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
Portfolio Mix
As is typically the case given the fund’s high active share, the portfolio’s exposures tend to be quite different from its Russell 2000 Index benchmark. It is common for the fund to have meaningful sector over- and underweights. For example, as of June 30, 2020, the fund was underweight to the health care and financials sectors by eight percentage points each. The largest overweights were in the communication services and industrials sectors; both were higher than the benchmark by approximately six percentage points.
At the sector level, there were some meaningful portfolio shifts during the first half of the year. The largest change was a 9.2 percentage point decrease to materials, while information technology and health care increased by 5.2 and 4.6 percentage points, respectively. The fund’s cash allocation declined modestly from 11.15% to 8.42% at mid-year. The fund’s weighted-average market capitalization declined from $3.05 billion at the beginning of the year to $2.69 billion at the end of June.
The fund remains sufficiently diversified by investment style across the three managers. With 40 stocks, we believe the portfolio is well-diversified in terms of holdings and sector exposures.
We believe the fund comprises an eclectic mix of highly skilled, disciplined, and opportunistic stock pickers who have the potential to add significant additional value through concentrating in only their highest-conviction names.
Sector Allocation | ||||||||
Fund as of 6/30/2020 | Russell 2000 Index as of 6/30/2020 | |||||||
Communication Services | 8.5% | 2.5% | ||||||
Consumer Discretionary | 7.9% | 11.8% | ||||||
Consumer Staples | 3.9% | 3.3% | ||||||
Energy | 2.2% | 2.3% | ||||||
Finance | 8.4% | 16.3% | ||||||
Health Care & Pharmaceuticals | 12.6% | 20.6% | ||||||
Industrials | 20.2% | 14.5% | ||||||
Information Technology | 17.6% | 13.9% | ||||||
Materials | 8.1% | 4.0% | ||||||
Real Estate | 2.0% | 7.1% | ||||||
Utilities | 0.0% | 3.6% | ||||||
Cash Equivalents & Other | 8.4% | 0.0% | ||||||
|
|
|
| |||||
100.0% | 100.0% | |||||||
|
|
|
|
Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
30 | Litman Gregory Funds Trust |
Table of Contents
By Market Capitalization | By Domicile | |
Market Capitalization: Micro-Cap < $981 million Small-Cap $981 million - $4.4 billion Small/Mid-Cap $4.4 billion - $10.6 billion Mid-Cap $10.6 billion - $29.4 billion Large-Cap > $29.4 billion Totals may not add up to 100% due to rounding |
Fund Summary | 31 |
Table of Contents
PartnerSelect Smaller Companies Fund Managers
INVESTMENT MANAGER | FIRM | TARGET MANAGER ALLOCATION | MARKET CAPITALIZATION OF COMPANIES IN PORTFOLIO | STOCK-PICKING STYLE | BENCHMARK | |||||
Jeff Bronchick | Cove Street Capital, LLC | 33-1/3% | Small- and mid-sized companies | Value | Russell 2000 Value Index | |||||
Mark Dickherber & Shaun Nicholson | Segall Bryant & Hamill | 33-1/3% | Small- and mid-sized companies | Value | Russell 2000 Value Index | |||||
Richard Weiss | Wells Capital Management, Inc. | 33-1/3% | Small- and mid-sized companies | Blend | Russell 2000 Index |
Smaller Companies Fund Value of Hypothetical $10,000
The value of a hypothetical $10,000 investment in the PartnerSelect Smaller Companies Fund from June 30, 2003 to June 30, 2020 compared with the Russell 2000 Index and Morningstar Small Blend Category.
The hypothetical $10,000 investment at fund inception includes changes due to share price and reinvestment of dividends and capital gains. The chart does not imply future performance. Indexes are unmanaged, do not incur fees, expenses or taxes, and cannot be invested in directly.
32 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Smaller Companies Fund (formerly Litman Gregory Masters Smaller Companies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited)
Shares | Value | |||||||
COMMON STOCKS: 92.2% | ||||||||
Communication Services: 8.6% | ||||||||
5,805 | Discovery, Inc. - Class C* | $ | 111,804 | |||||
65,000 | EW Scripps Co. (The) - Class A | 568,750 | ||||||
104,055 | MDC Partners, Inc. - Class A* | 216,435 | ||||||
27,993 | Millicom International Cellular S.A.* | 732,017 | ||||||
|
| |||||||
1,629,006 | ||||||||
|
| |||||||
Consumer Discretionary: 8.0% | ||||||||
39,503 | American Eagle Outfitters, Inc. | 430,583 | ||||||
13,656 | Cheesecake Factory, Inc. (The) | 312,995 | ||||||
9,000 | Chewy, Inc. - Class A* | 402,210 | ||||||
3,625 | Mohawk Industries, Inc.* | 368,880 | ||||||
|
| |||||||
1,514,668 | ||||||||
|
| |||||||
Consumer Staples: 3.9% | ||||||||
16,986 | Hain Celestial Group, Inc. (The)* | 535,229 | ||||||
4,670 | TreeHouse Foods, Inc.* | 204,546 | ||||||
|
| |||||||
739,775 | ||||||||
|
| |||||||
Energy: 2.2% | ||||||||
66,553 | WPX Energy, Inc.* | 424,608 | ||||||
|
| |||||||
Financials: 8.5% | ||||||||
14,923 | AllianceBernstein Holding L.P. | 406,502 | ||||||
14,586 | Bank of NT Butterfield & Son Ltd. (The) | 355,753 | ||||||
15,300 | StoneX Group, Inc.* | 841,500 | ||||||
|
| |||||||
1,603,755 | ||||||||
|
| |||||||
Health Care: 12.7% | ||||||||
20,000 | Avanos Medical, Inc.* | 587,800 | ||||||
27,750 | Change Healthcare, Inc.* | 310,800 | ||||||
5,617 | Integer Holdings Corp.* | 410,322 | ||||||
5,081 | Magellan Health, Inc.* | 370,811 | ||||||
11,738 | MEDNAX, Inc.* | 200,720 | ||||||
16,396 | Orthofix Medical, Inc.* | 524,672 | ||||||
|
| |||||||
2,405,125 | ||||||||
|
| |||||||
Industrials: 20.4% | ||||||||
6,800 | ASGN, Inc.* | 453,424 | ||||||
16,773 | Avis Budget Group, Inc.* | 383,934 | ||||||
4,692 | Axon Enterprise, Inc.* | 460,426 | ||||||
89,360 | GP Strategies Corp.* | 766,709 | ||||||
22,600 | Macquarie Infrastructure Corp. | 693,594 | ||||||
6,997 | Regal Beloit Corp. | 610,978 | ||||||
11,916 | SPX Corp.* | 490,343 | ||||||
|
| |||||||
3,859,408 | ||||||||
|
| |||||||
Information Technology: 17.8% | ||||||||
8,505 | Brooks Automation, Inc. | 376,261 | ||||||
20,814 | Dropbox, Inc. - Class A* | 453,121 | ||||||
8,607 | FARO Technologies, Inc.* | 461,335 | ||||||
6,952 | FLIR Systems, Inc. | 282,043 | ||||||
31,459 | NCR Corp.* | 544,870 | ||||||
25,000 | ViaSat, Inc.* | 959,250 | ||||||
1,731 | WEX, Inc.* | 285,632 | ||||||
|
| |||||||
3,362,512 | ||||||||
|
| |||||||
Materials: 8.1% | ||||||||
20,097 | Compass Minerals International, Inc. | 979,729 | ||||||
17,373 | Norbord, Inc. | 396,278 | ||||||
14,587 | Olin Corp. | 167,605 | ||||||
|
| |||||||
1,543,612 | ||||||||
|
|
Shares | Value | |||||||
Real Estate: 2.0% | ||||||||
11,890 | Equity Commonwealth | $ | 382,858 | |||||
|
| |||||||
| TOTAL COMMON STOCKS | 17,465,327 | ||||||
|
| |||||||
Principal Amount | ||||||||
SHORT-TERM INVESTMENTS: 8.0% | ||||||||
REPURCHASE AGREEMENTS: 8.0% | ||||||||
$1,511,000 | Fixed Income Clearing Corp. 0.000%, 6/30/2020, due 07/01/2020 [collateral: par value $1,431,900, U.S. Treasury Notes, 1.625%, due 02/15/2026 value $1,541,394] (proceeds $1,511,000) | 1,511,000 | ||||||
|
| |||||||
| TOTAL SHORT-TERM INVESTMENTS | 1,511,000 | ||||||
|
| |||||||
| TOTAL INVESTMENTS | 18,976,327 | ||||||
|
| |||||||
Liabilities in Excess of Other Assets: (0.2)% | (30,310 | ) | ||||||
|
| |||||||
NET ASSETS: 100.0% | $ | 18,946,017 | ||||||
|
|
Percentages are stated as a percent of net assets.
L.P. | Limited Partnership |
* | Non-Income Producing Security. |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 33 |
Table of Contents
PartnerSelect Alternative Strategies Fund
The PartnerSelect Alternative Strategies Fund (Institutional Share Class) declined 2.43% for the first six months of 2020. During the same period, 3-month LIBOR returned 0.94%, the Morningstar Multialternative category lost 5.44%, the HFRX Global Hedge Fund Index dropped 1.09%, and the Bloomberg Barclays U.S. Aggregate Bond Index gained 6.14%.
Since its inception on September 30, 2011, the fund’s annualized return is 4.19%. This compares favorably to the 0.99% return for 3-month LIBOR, 1.16% for the Morningstar Multialternative category, 1.58% for the HFRX Global Hedge Fund Index, and 3.48% for the Bloomberg Barclays U.S. Aggregate Bond Index. The fund’s volatility (annualized standard deviation) is 4.65% and its beta to the U.S. stock market is 0.29.
QUARTER END PERFORMANCE – 6/30/2020 |
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Average Annual Total Returns | ||||||||||||||||||||||||
Three Month | Year-to- Date | One- Year | Three- Year | Five- Year | Since Inception | |||||||||||||||||||
PartnerSelect Alternative Strategies Fund Institutional Class | 7.64% | -2.43% | 0.03% | 1.89% | 2.47% | 4.19% | ||||||||||||||||||
PartnerSelect Alternative Strategies Fund Investor Class | 7.64% | -2.51% | -0.19% | 1.64% | 2.23% | 3.94% | ||||||||||||||||||
3-Month LIBOR | 0.44% | 0.94% | 2.13% | 2.08% | 1.50% | 0.99% | ||||||||||||||||||
Bloomberg Barclays Aggregate Bond Index | 2.90% | 6.14% | 8.74% | 5.32% | 4.30% | 3.48% | ||||||||||||||||||
Morningstar Multialternative Category | 4.67% | -5.44% | -3.35% | 0.05% | 0.03% | 1.16% | ||||||||||||||||||
HFRX Global Hedge Fund Index | 6.19% | -1.09% | 3.09% | 1.18% | 0.71% | 1.58% | ||||||||||||||||||
Russell 1000 Index | 21.82% | -2.81% | 7.48% | 10.64% | 10.47% | 14.56% | ||||||||||||||||||
SEC 30-Day Yield1 as of 6/30/2020 Institutional: 2.37% Investor: 2.11% |
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Unsubsidized SEC 30-Day Yield2 as of 6/30/2020 Institutional: 2.09% Investor: 1.83% | ||||||||||||||||||||||||
1. The 30-day SEC Yield is computed under an SEC standardized formula based on net income earned over the past 30 days. It is a “subsidized” yield, which means it includes contractual expense reimbursements, and it would be lower without those reimbursements. |
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2. The unsubsidized 30-day SEC Yield is computed under an SEC standardized formula based on net income earned over the past 30 days. It excludes contractual expense reimbursements, resulting in a lower yield. |
|
EXPENSE RATIOS | ||||||||
Gross Expense Ratio | 1.63% | 1.88% | ||||||
Net Expense Ratio | 1.35% | 1.60% | ||||||
The Net Expense Ratio reflects a contractual fee waiver and/or expense reimbursement, which is in place through 4/30/2021. See the Fund’s prospectus for more information. |
| |||||||
Adjusted Expense Ratio | 1.30% | 1.55% | ||||||
The Adjusted Expense Ratio is the same as the Net Expense Ratio exclusive of certain investment expenses, such as interest expense from borrowings and repurchase agreements, dividend expense from investments on short sales, and acquired fund fees and expenses. |
| |||||||
Performance quoted represents past performance and does not guarantee future results. 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. Other share classes may impose other fees. To obtain standardized performance of the funds, and performance as of the most recently completed calendar month, please visit wwwpartnerselectfunds.com. |
|
The Risk/Return Statistics table below presents some of the key performance metrics that we track for the fund
PartnerSelect Alternative Strategies Fund, Risk/Return Statistics, 6/30/20 |
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MASFX | Bloomberg Barclays U.S. Aggregate Bond Index | Morningstar Multi-alternative Category | HFRX Global Hedge Fund Index | Russell 1000 Index | ||||||||||||||||
Annualized Return | 4.19 | 3.48 | 1.16 | 1.58 | 14.56 | |||||||||||||||
Total Cumulative Return | 43.17 | 34.93 | 10.52 | 14.68 | 228.48 | |||||||||||||||
Annualized Std. Deviation | 4.65 | 2.96 | 4.35 | 4.27 | 13.31 | |||||||||||||||
Sharpe Ratio (Annualized) | 0.76 | 0.95 | 0.13 | 0.23 | 1.04 | |||||||||||||||
Beta (to Russell 1000) | 0.29 | -0.01 | 0.30 | 0.28 | 1.00 | |||||||||||||||
Correlation of MASFX to | 1.00 | -0.06 | 0.84 | 0.68 | 0.80 | |||||||||||||||
Worst Drawdown | -13.00 | -5.39 | -13.49 | -10.83 | -32.47 | |||||||||||||||
Worst 12-Month Return | -5.36 | -2.47 | -6.65 | -8.19 | -8.03 | |||||||||||||||
% Positive 12-Month Periods | 84.54% | 79.38% | 74.23% | 68.04% | 93.81% | |||||||||||||||
Upside Capture (vs. Russell 1000) | 29.06 | 9.14 | 21.66 | 22.07 | 100.00 | |||||||||||||||
Downside Capture (vs. Russell 1000) | 28.73 | -10.23 | 38.65 | 35.79 | 100.00 | |||||||||||||||
Past performance does not guarantee future results |
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Since inception (9/30/11) | ||||||||||||||||||||
Worst Drawdown based on weekly returns |
34 | Litman Gregory Funds Trust |
Table of Contents
Portfolio Commentary
After a volatile and challenging first quarter, we were pleased to see the Alternative Strategies Fund produce a strong return of 7.64% in the second quarter, leaving the fund down slightly for the year to date. Several of the fund’s sub-advisors took advantage of the extreme—and in their view temporary—price dislocations across credit and equity markets during the period, positioning their portfolios and the fund overall for strong forward-looking risk-adjusted returns.
Loomis Sayles was a striking example of this. They greatly reduced hedges and increased exposure to corporate credit (as well as some structured credit) during the depths of the fear and market panic in March, as they recognized the “bazooka” of monetary and fiscal stimulus backstopping the U.S. credit market, in the short term at least. Loomis gained 10.12% in the second quarter.
Water Island also stood out in this regard, adding to positions they felt had the strongest merger agreements at extraordinarily wide spreads, producing excellent returns for the quarter as the environment normalized to some extent. Water Island is the top-performing sub-advisor for the year to date through the second quarter with a gain of 3.84%.
FPA invested roughly 10% of their still-significant cash position in the first quarter, spread among U.S. and international equities and credit. For the most part, the purchases were in companies severely hurt by the economic shutdown, but where FPA sees fundamental value in an eventual recovery well in excess of their currently depressed prices.
DoubleLine and Loomis Sayles’s portfolios both still offer very attractive mid- to high-single-digit yields even after their performance rebound in the second quarter. This is partially from having gotten noticeably more aggressive (more applicable to Loomis Sayles) and partially from owning assets that haven’t been the direct target of Federal Reserve/Treasury support programs and thus haven’t yet recovered as fully (more applicable to DoubleLine). The result is a large portion of the portfolio that produces an attractive yield with additional capital appreciation potential as well for significant areas.
DCI held up extremely well during the first quarter downturn and is slightly positive for the year but was hurt by the nearly indiscriminate credit rally in the second quarter. However, the credit spread environment is still good relative to the extremely tight levels prior to the pandemic. Going forward, an increased differentiation between improving and deteriorating credits, following the recent liquidity-driven rally, should provide a good environment for the DCI strategy.
While there are reasons for concern about the fundamental health of the economy given very high unemployment and the resurgence in new cases of COVID-19 in several parts of the country, we are optimistic about the fund’s prospects for continued good performance from here. The fund’s diversified structure and the quality of our sub-advisors should enable it to both withstand further market turbulence and generate strong risk-adjusted returns over the full market cycle.
Performance of Managers
For the first half of 2020, three of the five sub-advisors produced positive returns. Water Island’s Arbitrage and Event Driven strategy gained 3.84%, the Loomis Sayles Absolute Return strategy gained 1.32%, DCI’s Long-Short Credit strategy returned 0.05%, DoubleLine’s Opportunistic Income strategy fell 5.00%, and FPA’s Contrarian Opportunity strategy lost 10.32%. (All returns are net of the management fee charged to the fund.)
Strategy Allocations
The fund’s capital is allocated according to its strategic target allocations: 25% to DoubleLine, 19% each to DCI, Loomis Sayles, and Water Island, and 18% to FPA. We use the fund’s daily cash flows to bring the manager allocations toward their targets when differences in shorter-term relative performance cause divergences.
Fund Summary | 35 |
Table of Contents
CURRENT TARGET STRATEGY ALLOCATIONS AS OF JUNE 30, 2020
Manager Commentaries
DCI, Long-Short Credit Strategy:
The DCI Long-Short Credit Managed Account gained 2.1% (net) in the second quarter and returned 0.05% for the first half of 2020.
While credit-market healing dominated Q2, sparking a furious relief rally in low-quality distressed names that boosted beta and challenged security selection, we continue to see elevated spread dispersions and heightened credit differentiation and opportunity which should be a strong positive factor for the strategy alpha going forward.
For the first half of 2020, the CDS sleeve was a modest positive contributor, while the bond sleeve lagged on losses to credit selection. Alpha generation in both sleeves held up well until the end of May, when the market’s “junk rally” took stronger hold and long positions broadly lagged shorts. We do not see this as a sustainable move and think the alpha generation will re-assert itself as the economic uncertainty stabilizes and correlations ease. The portfolio gains were led by shorts in energy, steel, retail, and travel, which were mostly offset by losses in rentals and consumer durables and homebuilders. The portfolio selection in the bond sleeve was dragged down by longs in oil, homebuilders, autos, and REITS, with some offset from media and technology names.
Net beta effects were a positive contributor, as rates were a net positive on the huge bond rally and flight-to-quality credit beta moves were about flat. The derivative hedges performed in line with expectations, and, if anything, made a small net gain in the case of the credit hedging. By design the portfolio construction is always focused on asset selection—favoring firms with lower default risk (as measured by DCI’s proprietary default probability model) and improving fundamentals—and is constructed neutral to credit beta.
Broad market moves in H1 were extraordinary. The speed and scale of the market collapse in March, and the subsequent rally in Q2 were without precedent. Credit markets were particularly struck, suffering huge market dislocations on panic selling in mid-March before bouncing back on the Fed interventions. The widespread easing and normalization in credit has been welcome, but uncertainty and dislocations remain. Credit curves continued to normalize in Q2, with shorter dated bonds benefiting from the Fed’s focus on that part of the curve, but remain flat by historical levels indicating that more steepening may be in order. Other measures of market health, like the bond-CDS basis and spread dispersion, have eased further from April but, likewise, still remain elevated. High-yield firms, particularly in the energy sector, continued to face default pressures and high-profile bankruptcies have now become the norm. The current CDX HY index (launched in mid-March) has already set the record for defaults with seven, and the next roll is not until September. There were two more defaults in June, California Resources and Chesapeake Energy both went bankrupt, as the dominoes continued to fall among shale producers. We expect default probabilities and realized defaults to remain high in the second half.
Portfolio positioning rotated significantly over this episode, with a notable move from short-to-long in energy and in media, and from long-to-short in consumer goods and industrials. The strategy remains long tech and housing, and short financials, and still sees attractive short positions in many retailers. As always, the credit selection portfolio favors improving fundamentals and strong credit quality.
36 | Litman Gregory Funds Trust |
Table of Contents
DoubleLine, Opportunistic Income Strategy:
Executive Summary
For the trailing six-month period ended June 30, 2020, the Opportunistic Income portfolio underperformed the Bloomberg Barclays U.S. Aggregate Bond Index return of 6.14%. The primary driver of underperformance was asset allocation; the portfolio consistently maintained a higher allocation to credit assets than the benchmark, which hindered relative performance during March 2020 when the entire risk asset spectrum experienced sharp price declines due to the COVID-19 pandemic. The benchmark index consistently maintained a roughly 30% allocation to credit assets—predominantly corporate bonds—while the portfolio was about 75% credit assets throughout this performance period. The historic stimulus programs launched by the Federal Reserve in March and April of 2020 were significantly more beneficial for the corporate bonds in the benchmark than the residential and commercial securitized credit exposures within the Portfolio. These credit exposures did begin to recover during the second quarter of 2020, but their recovery remained on a slower trajectory than unsecured corporate credit due to a lack of direct monetary stimulus from the Federal Reserve.
Current Positioning
As of June 30, 2020, the portfolio has a yield to maturity of 6.09% and an effective duration of 2.16 years. The portfolio continues to rely on a barbell of agency mortgage-backed securities (MBS) and non-agency MBS, with the agency-backed portion providing a longer-duration exposure and the non-agency portion providing a lower duration but higher spread pickup. When blended together and complimented with diversifying sectors such as commercial mortgage-backed securities (CMBS), collateralized loan obligations (CLOs), asset-backed securities (ABS), and bank loans, the portfolio represents what we view as the optimal credit mix for the current opportunity set in the market.
Key Performance Drivers
The largest contributor to portfolio returns during the period was agency RMBS. The agency RMBS held in the portfolio are predominantly Inverse-IO securities that are known to exhibit relatively long durations. They are held in the portfolio to serve as a credit hedge or buffer for when economic growth slows and interest rates fall, which is why they delivered strong returns in both the first and second quarters of the 2020 calendar year. The largest detractors from performance over the period were CMBS and ABS. These sectors were more acutely impacted by the COVID-19 economic disruptions—especially as it relates to state-mandated stay-at-home orders. CMBS backed by retail and hospitality properties as well as ABS backed by aviation debt and consumer-related debt were all in the immediate path of the COVID-19 shutdowns and subsequent spike in unemployment.
Discussion of Monetary Policy
The first quarter of 2020 ended with a flurry of new stimulus programs from the Federal Reserve, most notably the commencement of QE4 and returning the policy rate to the zero-lower-bound. However, the early days of the second quarter had some important policy updates as well. For example, on April 9, the Federal Reserve expanded the size and scope of the Primary and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF) as well as the Term Asset-Backed Securities Loan Facility (TALF). Following their update, these programs were poised to provide a cumulative $850 billion in credit to qualifying borrowers. The underlying details of these facilities were generally more supportive of corporate debt than asset-backed debt, but they did help most fixed-income credit sectors stave off any additional downward price moves. Our view on the Federal Reserve’s foray into the corporate bond market is that investors should be cautious of over-extending into the popular “follow-the-Fed” trade of 2020. Our reasoning is that investment-grade corporate bond spreads finished the second quarter at just 80 bps over agency-backed mortgages, which may not be adequate compensation for the default risk in the corporate sector as the U.S. economy continues to experience highly recessionary economic conditions.
Discussion of Fiscal Policy
Fiscal policy changes were relatively muted in the second quarter when compared to the monumental CARES Act that was signed into law during the first quarter. Instead, most of the market focus was directed towards lawmakers’ assessment of the spread of COVID-19 throughout various regional economies as easing lockdown measures was clearly the only way to stave off deeper economic contractions. Daily new cases of COVID-19 in the United States were steadily declining for most of April and May but began sharply increasing again during the final three weeks of June as state economies reopened and testing became more readily available. One of the main focuses on our economic radar will be the effects of the various COVID-19 unemployment benefits rolling off during the summer of 2020 and how this plays into repayment rates on consumer debt segments.
Rates and Inflation
The U.S. yield curve underwent substantial changes during the first quarter of 2020 as the Federal Reserve cut their policy rate by 50 bps on March 2 and then an additional 100 bps back to the zero-lower-bound on March 15—all in an effort to ease financial conditions as the COVID-19 pandemic swept over the world economy. During the second quarter, yield curve changes were relatively benign by comparison as fixed-income investors had a heightened sense of clarity around the future path of short-term policy rates as well as the glide path for the various asset purchasing programs. The big story of Q2 2020 was the U.S. Treasury Department’s first auction of 20-year notes since 1986. On May 20, the Treasury Department auctioned $20 billion of 20-year notes at a yield of 1.22%, receiving about $50 billion in total orders for the bond. This new tenor for the U.S. yield curve is part of the Treasury Department’s initiative to extend its term financing and allow the federal government more time to pay off its massive debt load. This announcement corroborates our long-held view that the U.S. budget deficit, which will likely top $3 trillion in the year 2020 alone, will ultimately put upward pressure on long-term U.S. Treasury rates.
Fund Summary | 37 |
Table of Contents
Defaults
Default expectations for fixed-income assets increased sharply during the first quarter of 2020 as the COVID-19 pandemic began to rattle credit markets as early as February. When forbearance and deferment data started spiking in the March remittance reports for securitized credit assets, many investors began planning for the worst. Now, at the end of second quarter and with a few more months of repayment data on the books, there is a slightly clearer picture for which sectors will be able to ride out the COVID-19 storm and which sectors will experience more serious cash flow disruptions. As of this writing, our analysis shows that default and forbearance activity for U.S. residential mortgages has generally come in below the most-feared expectations, and that in turn has allowed bonds backed by these loans to stage a moderate rally back towards their pre-COVID-19 levels. There are, however, some fixed-income sectors that remain more acutely impacted by the pandemic—namely the travel and hospitality segments of ABS and CMBS. These sectors did rally throughout the course of Q2, but they still have considerable ground to cover before fully retracing their spread widening from the March 2020 selloff.
FPA, Contrarian Opportunity Strategy:
Overview
We1 closed our first quarter letter with the observation that economies were worse than stock indices might suggest. What we thought true then is only more true today, yet in the second quarter, the market made one of its larger quarterly moves.
The global MSCI ACWI Index advanced 19.22% in the second quarter, while the domestic S&P 500 Index increased 20.54%, erasing the majority of the year-to-date decline to March’s trough. Our portfolio increased 13.23% (net) over the same period. Year-to-date, the portfolio has returned -11.43% (net) while the S&P 500 and the MSCI ACWI have returned -3.08% and -6.25%, respectively.
We would have thought that a global pandemic, social disturbances, extreme political polarity, and all that has accompanied those trends would have created more fear—or at least caution—in global markets. Yet stock markets and debt markets are up around the world, and in many cases, way up. Koyantsqatsi, a word used by the Hopi Native American tribe to describe a life out of balance, is as apt a description for this disconnect as any.
At the beginning of the year, the global economy was expected to grow 2.5% this year, but thanks to COVID-19, that outlook has darkened significantly and the consensus view now looks for a -5.2% contraction.2 Although you wouldn’t know it from the popular indexes, this darkened outlook has pushed the average stock down 10.92%.3 Economic data suggest we won’t return to normal in the near future (see Exhibit A).
Exhibit A: Select Economic Data/Indicators
12/31/2019 unless indicated | 6/30/2020 unless indicated | |||||||
GDP Growth (Estimated 2020) | ||||||||
U.S. | 1.8% | -6.1% | ||||||
Global | 2.5% | -5.2% | ||||||
U.S. Unemployment (%) | 3.6% | 11.1% | 4 | |||||
Oil (WTI $/barrel) | $ | 61 | $ | 39 | ||||
Hotel Occupancy5 | ||||||||
Asia Pacific | 66.6% | 35.8% | ||||||
Europe | 66.9% | 31.9% | ||||||
Americas | 80.7% | 30.6% | ||||||
Middle East and Africa | 64.4% | 13.3% | ||||||
Residential Mortgages in Forbearance | 0.25% | 6 | 8.5% | 7 | ||||
U.S. Budget Deficit (2020 estimated)8 | $ | 1.0tn | $ | 3.7tn | ||||
U.S. National Debt (2020 estimated)9 | $ | 24.2tn | $ | 26.9tn |
38 | Litman Gregory Funds Trust |
1 | Any reference to “we”, “our”, or “us” throughout this Commentary refers to the FPA portfolio management team. |
2 | Source: The World Bank, Global Economic Prospects, June 2020 |
3 | As of June 30, 2020. This reflects the average year-to-date performance of the S&P 500 Index constituents. |
Past performance is no guarantee, nor is it indicative, of future results. Comparison to any index is for illustrative purposes only. The Fund does not include outperformance of any index or benchmark in its investment objectives. Please see end of Commentary for important disclosures and definitions. |
4 | Source: The Bureau of Labor Statistics, as of June 1, 2020. |
5 | Source: Statista.com. Data as of September 2019 (pre-COVID) and May 2020. |
6 | Source: MBA.org. Data as of March 2, 2020. |
7 | Source: MBA.org. Data as of June 29, 2020. |
8 | Source: Congressional Budget Office April 2020. |
9 | Federal Reserve Bank of St. Louis, U.S. Office of Management and Budget. 2019 year-end total debt including estimated deficit. |
Table of Contents
In March, we were particularly concerned with the high COVID-19 transmission and fatality rates and what a “closed” global economy might look like. Rightly or wrongly, that influenced our judgment. Securities were on sale and we went shopping, but we could have bought even more. There is no lesson here, as presented with the same facts, we would do the same thing again. This coronavirus has delivered less death than initially anticipated, but we are far from done with it, hitting new highs in daily infections almost every day.
We never believed COVID-19 posed existential risk to the global economy, confident that we will eventually reach the other side as we always do. But we still do not know how bad things might get along the way. The world remains, as always, uncertain, though uncertainty has narrowed for now. The left tail of the probability distribution has flattened from what we expected.
Although stocks are still expensive, the portfolio was cheaper to assemble, and we believe the companies in it have more growth and better balance sheets than the stock market overall. In an uncertain world, this gives us some margin of safety, particularly since governments seem willing to do anything to resolve the crisis, including keeping interest rates low or even negative, printing money, giving money away, and making loans that can be forgiven.
Whether the stock market buying spree is driven by need (given the lack of an alternative) or greed, the result is the same. Investors are showing a willingness to look across a deep chasm and accept a sanguine view of the future for many businesses, particularly those in the tech space. However, prices for high quality businesses have not fallen to levels we might have hoped. And thanks to unprecedented U.S. government involvement in the country’s corporate debt markets, high-yield bonds also have not presented the opportunity that one might have expected. This story, however, is far from written.
Portfolio discussion
Contributors to and detractors from the portfolio’s trailing 12-month returns are listed below.
Exhibit B: Trailing Twelve Month Contributors and Detractors10
Contributors | Perf. Cont. | Avg. % of Port. | Detractors | Perf. Cont. | Avg. % of Port. | |||||||||||||||||
TTM | ||||||||||||||||||||||
Alphabet | 1.18% | 4.7% | Howmet Aerospace | -1.56% | 2.9% | |||||||||||||||||
Microsoft | 0.89% | 1.9% | American International Group | -1.56% | 3.5% | |||||||||||||||||
Broadcom | 0.62% | 2.7% | CIT/Regional Banks (hedge) | -1.09% | 1.3% | |||||||||||||||||
Charter Communications | 0.61% | 2.3% | McDermott International (multiple issues) | -0.93% | 0.8% | |||||||||||||||||
0.57% | 2.3% | Wells Fargo | -0.89% | 1.7% | ||||||||||||||||||
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| |||||||||||||||
3.87% | 13.9% | -6.03% | 10.2% |
As is clear from the above, the portfolio’s investments in the tech sector have continued to outperform its more traditional value investments. While we own a number of high-quality growing businesses that trade at reasonable valuations, it seems no price is too high for some “quality” stock, and no price is too low for lower quality ones. Similarly, growth can’t be expensive enough, nor value cheap enough.
We have come across a number of references made to work done by Empirical Research that identified 75 U.S. large-cap stocks with great growth characteristics. Looking back to the 1950s, that firm has not seen a period as expensive as the current—at 66 times forward price-to-earnings (“P/E”) estimates, and the highest relative P/E multiple for these 75 names when compared to the rest of the U.S. large-cap market. This is not to suggest that these companies are bad (although, approximately 30 percent of them do lose money).11
A lot must go right in the future for such companies to justify their current valuation. Conversely, a lot would have to go incredibly wrong for many of the value stocks that have been left behind in this bull run to prove to be unreasonable investments in the future.
Investors have found comfort in those businesses that have a less volatile earnings stream, for instance, consumer products companies selling staple goods, and have recent and seemingly great future prospects, such as a Netflix or Tesla. We believe there is better opportunity
Fund Summary | 39 |
10 | Reflects the top five contributors and detractors to the portfolio’s performance based on contribution to return for the trailing twelve months (“TTM”). Contribution is presented gross of investment management fees, transactions costs, and portfolio operating expenses, which if included, would reduce the returns presented. The information provided does not reflect all positions purchased, sold or recommended by FPA during the quarter. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities listed. |
11 | Source: Empirical Research Partners (“ERP”), National Bureau of Economic Research. ERP categorized a group of 75 U.S. large-capitalization (“cap”) stocks that they have faster and stronger growth credentials than the rest of the U.S. large-cap universe (830 companies) as ‘Big Growers’. Their analysis covered the period January 1, 1952 through June 8, 2020. Trailing P/E analysis showed the Big Growers, as an equally weighted group, currently trade at a relative (to the universe) trailing P/E ratio higher than anything seen since 1952. Forward P/E is the average of the Forward P/E’s for the 75 firms as of July 22, 2020. Forward P/E’s are estimates and subject to change. |
Table of Contents
in the uncomfortable, where the short-term is more challenged but with respectable long-term prospects, like industrial, travel and leisure and hospitality, and foreign-based companies. Given the portfolio’s avoidance of more richly priced companies, we believe this dichotomy should position the portfolio well for the future.
It is not the first time that our style of investing has been so out of favor. As shown in Exhibit C below and based on consensus earnings projections at that time, the portfolio’s equity portfolio has remained attractive relative to the market over the past year.12 The portfolio’s equity portfolio had better earnings-per-share (“EPS”) than the S&P 500 and MSCI ACWI, while achieving higher historic and forecasted EPS growth. Over time we would expect the relationship between valuation and growth to support improved performance, but, of course, we can make no guarantees and the disconnect may continue to try our patience. Relative to the indices, the portfolio’s equity holdings continue to trade at a discount on a Forward P/E basis. One might suggest that the growth rate of the companies held by the portfolio is lower, but as you can see in Exhibit C, both the trailing and forecasted consensus three-year EPS growth is higher than the market. There are a number of puts and takes that make these Wall Street consensus numbers far from precise, but directionally, suggests that the portfolio’s equity portfolio is (and has been) less expensive than the market and the earnings growth potential of its underlying companies is at least as good if not better than the market as one looks through the economic cycle.
Exhibit C: PartnerSelect Alternative Strategies
Equity Valuation and Earnings Growth vs Stock Market13
Price/Earnings 1 Year Forward | Price/Book | |||||||||||||||
6/30/2019 | 6/30/2020 | 6/30/2019 | 6/30/2020 | |||||||||||||
PartnerSelect Alternative Strategies Fund—Equity Only | 13.7 | 20.1 | 2.6 | 3.5 | ||||||||||||
S&P 500 | 18.1 | 24.9 | 3.3 | 3.5 | ||||||||||||
MSCI ACWI | 16.2 | 21.9 | 2.3 | 2.3 |
3-Year Historic | 3-Year Forecasted | |||||||||||||||
6/30/2019 | 6/30/2020 | 6/30/2019 | 6/30/2020 | |||||||||||||
PartnerSelect Alternative Strategies Fund—Equity Only | 22.3 | % | 13.6 | % | 14.0 | % | 18.9 | % | ||||||||
S&P 500 | 11.8 | % | 6.5 | % | 9.8 | % | 10.6 | % | ||||||||
MSCI ACWI | 11.2 | % | 3.5 | % | 9.7 | % | 11.1 | % |
We remain intent on preserving capital and purchasing power over time, though we acknowledge that the portfolio’s current risk exposure of 79.1% represents a greater concern for the former.14 We can understand why price volatility and increased equity exposure may feel incompatible with this goal, but we think that it makes sense to increase the portfolio’s exposure to an equity portfolio with the characteristics of the portfolio as depicted above. We continue to like the optionality of cash but given the increase of the global money supply and an expressed commitment by central bankers to hold rates near zero, we are reluctant to hold too much dry powder.
If we consider the equity portfolio as depicted in Exhibit C, it trades at a 5.0% earnings yield (earnings/price) on depressed COVID-19 numbers. Assuming the consensus earnings growth of 18.9% over the next three years, then the prospective earnings yield will have increased to 8.8%.15 If we then assume a more pedestrian 4% growth for the rest of the decade, the portfolio’s equity portfolio would trade at 11.5% yield in Year 10, and the portfolio will have earned a 2.1% dividend along the way, or approximately 21% of your capital, assuming no increase in dividends. If instead one were to buy a 10-year bond at 0.66% yield, in 10 years you’d have collected 6.6% of your capital pre-tax and have the option to reinvest in whatever the opportunity set might be at the time. Framed over the long-term, the portfolio’s equity portfolio’s earnings and dividend yields appear superior to the bond and cash markets. So we have chosen to accept a bit more volatility in exchange for the opportunity for a better longer-term return on capital. We believe when global economies recover, investors will appreciate the merits of many of these unloved companies with discounted valuations compared to the market. People will again stay in hotels, and Marriott will be there to accommodate them. The cruise industry will not disappear, as vacationers will once again set sail
40 | Litman Gregory Funds Trust |
12 | For illustrative purposes only. References to the portfolio’s “equity portfolio” refers to the portfolio’s long equity holdings. Long equity holdings exclude paired trades, preferreds, and cash and equivalents. The long equity segment average weight in the portfolio was 72.4% and 67.3% for Q2 2020 and YTD through 6/30/20, respectively. The long equity portfolio information shown is for illustrative purposes only and may not reflect the impact of material economic or market factors. Long equity portfolio statistics noted herein do not represent the results that the portfolio or an investor can or should expect to receive. Please see page 5 for the net performance of the portfolio for Q2 2020 and YTD through 6/30/2020. |
Past performance is no guarantee, nor is it indicative, of future results. |
13 | Source: CapIQ, Factset, Bloomberg, FPA calculations. 3-Year Forecasted EPS Growth is based on FPA calculations using consensus data from CapIQ, Factset and Bloomberg. Comparison to the S&P 500 and MSCI ACWI Indices is being used as a representation of the “market” and is for illustrative purposes only. The portfolio does not include outperformance of any index or benchmark in its investment objectives. Long equity statistics noted herein do not represent the results that the portfolio or an investor can or should expect to receive. Forward looking statistics are estimates and subject to change. |
14 | Risk exposure refers to the portfolio’s exposure to risk assets as a percent of total assets. Risk assets are any assets that are not risk free. The portfolio’s risk exposure is as of June 30, 2020. |
15 | Source: CapIQ, Factset, Bloomberg, FPA calculations. As of June 30, 2020. The earnings yield refers to the earnings per share for the most recent 12-month period divided by the current market price per share. |
Past performance is no guarantee, nor is it indicative, of future results. |
Table of Contents
(though the industry could suffer more than the hotel business). During the downturn we therefore established a position in Marriott International stock but opted to retain our perch atop the capital structure in the cruise industry, purchasing senior secured loans of Carnival Cruises and Royal Caribbean at close to 12 percent yields.
For the most part, our more significant 2020 purchases were in companies hurt in this economic downturn, in many cases quite severely. Expectations have changed, but prices sank much more than those expectations changed. Looking toward an eventual economic recovery, we believe these recent investments—LG Corp, Swire Pacific, Booking Holdings, Marriott International, NXP Semiconductors, Compagnie Financiere Richemont, and Wabtec (formerly Westinghouse Brake Technologies), complemented by additions to many of the portfolio’s existing holdings—will fare quite well and once again return to investor’s favor.
Whenever possible, we have traded lower quality businesses for higher quality ones for which growth, even if cyclical, should hopefully ensure a prosperous future. Owning higher quality businesses gives us the comfort to invest more over this next decade than previously.
30,000’ View
We believe that irrational behavior has once again entered pockets of the market. We also believe that the portfolio owns good businesses at good prices, though their stock prices appear dwarfed at the moment by the unnaturally levitating shares of businesses with unproven operating models.
Faith-based investing has a checkered history, whether it be blind faith in a charismatic CEO or in central bankers around the world. Having set zero-bound interest rates in most parts, central banks have successfully forced the move into riskier assets—but that has failed to translate into real economic growth. Those who started with an investment portfolio are generally wealthier, while those who did not are generally worse off. Central bankers have spiked the Kool-Aid punch bowl, widening by fiat the gap between the Haves and Have Nots.
Negative interest rates take money away from savers and lenders and give it to borrowers and investors, including speculators. In one shocking example, LVMH Moët Hennessy – Louis Vuitton SE (“LVMH”) acquired Tiffany for $16 billion, selling $10 billion of bonds to finance its purchase. Even the longest maturity of the bonds it sold, a tranche with an 11-year maturity, promised a yield of just 0.43%. As if that wasn’t stunning enough, the European Central Bank has snapped up about 20 percent of European bond issues that meet certain qualifications, which this new LVMH debt appears to meet. Two of the five LVMH tranches denominated in euros were even sold with negative yields—in other words, the holders of these bonds are literally paying Bernard Arnault, LVMH’s largest shareholder and the richest man in a country with historically left liberal leanings, to buy into a foreign-based luxury brand at a time when COVID-19 has vastly diminished consumer appetites. It’s no wonder we have found so few high-yield bonds to put into our portfolio.
When money costs almost nothing, or even less than nothing, it perverts price discovery. If there is no cost of capital, then one theoretically can pay an infinite price for assets, which creates a difficult backdrop for investors such as ourselves who insist on a margin of safety.
The U.S. Federal Reserve and European Central Bank are doing their best to inhibit what should have been (and might hopefully still be) a historic opportunity to buy high-yield debt. But investors thirsty for yield, coupled with central bank purchase of high-yielding corporate bonds, has propped prices up at higher levels than they otherwise would be.
The pandemic has brought the global economy to its knees. How long it will take the economy to reopen and what the world might look like when the economy does revive remains in question. We believe there will be no high interest rates in the years to come. Governments have an imperative to keep rates low, if for no other reason than minimizing budget damage. As a result, a portfolio light on risk assets might be disadvantageous.
Crisis foments change, and a new economic order can translate into a new social order. Currently, there is movement in the United States to establish greater equality, racially and financially. The coming U.S. elections are a cipher at this point. It’s impossible to know which presidential candidate will win or what the ramifications might be if one were to remain in office or the other were to take over. We think the more significant variable could be the Senate races. If the Senate were to flip to the Democrats, we can expect higher personal and corporate taxes together with more generous and costly social programs—and an attendant increase in Federal deficits and the U.S. national debt. This would likely put an even more significant crimp in our economy, and we don’t think the markets yet appreciate that. That, along with more attractive valuations outside the United States, further supports our continuing investment overseas.
Summary
We believe what one pays for a business shall guide returns. We will continue to prudently manage your portfolio.
None of us have seen anything like this, with so many businesses closed, people afraid to leave their homes, necessary socialization hijacked, and the loss of life. As Frodo said in J.R.R. Tolkien’s The Fellowship of the Ring, “I wish it need not have happened in my time.”
“So do I,” replied Gandalf, “and so do all who live to see such times. But that is not for them to decide. All we have to decide is what to do with the time that is given us.”
We wish everyone as well as can be during these extraordinary times.
Fund Summary | 41 |
Table of Contents
Loomis Sayles, Absolute Return Strategy
Market Conditions
The second quarter brought a distinct improvement in the market backdrop compared to the first three months of the year. Investors were encouraged that a gradual re-opening of the economy would limit the duration of the coronavirus-induced recession and fuel a quick recovery in growth. In addition, markets displayed confidence that the U.S. Federal Reserve (the Fed) would continue to provide support for financial assets through its highly accommodative monetary policies. These developments led to a rebound in investors’ appetites for riskier asset classes such as stocks and the higher-yielding segments of the bond market. Still, the quarter closed on a somewhat downbeat note due to a rapid rise in COVID-19 cases across the United States.
High-yield corporates also registered a strong advance and finished among the best performers of the major fixed-income market segments. The category was boosted by the same factors that supported investment-grade corporates, including hopes for a relatively swift economic recovery, reduced investor risk aversion and the Fed’s extraordinarily accommodative monetary policy.
Corporate bonds performed very well this quarter, which brought their year-to-date return back into positive territory. The asset class rallied off its March low as investors’ improving appetite for risk spurred demand for higher-yielding securities. In addition, the Fed’s announcement that it would buy corporate debt through purchases of exchange-traded funds and individual securities led to a distinct improvement in investor confidence.
U.S. Treasuries were the lowest performing major fixed-income category in the second quarter. Treasuries, which had benefited from the flight to safety in the first quarter, experienced reduced demand on this front as higher-risk investments came back into favor. Still, the category was able to post gains thanks to expectations for muted economic growth and the likelihood that the Fed will keep short-term rates near zero indefinitely. Longer duration Treasuries generally outperformed the short-end of the yield curve, with the exception of the 30-year.
Portfolio Review
With a semi-annual net return of 1.32% the portfolio outperformed its benchmark, the three-month Libor Index, which returned 0.94%. The portfolio’s positive performance was diversified across many sectors, with the majority generated from high-yield corporates, investment-grade corporates, and dividend equities. These gains were partially offset by losses from the portfolio’s exposure to securitized issues, bank loans, and currency positioning.
High-yield corporate bonds performed well during the period as spreads meaningfully tightened since Q1 volatility. The sector gave back some ground in June as media coverage centering on an increase in coronavirus cases raised doubts about the pace of economic growth. There has been a pause to spread compression after massive new issuance was met with demand during the second quarter. Within the portfolio, consumer and communications names contributed to performance.
Investment-grade (IG) corporate bonds, including the ones we hold for reserves, bolstered performance as IG spreads continued to recover during the second quarter. Massive fiscal and monetary policy responses were enough to repair liquidity and provide market stability in the first quarter. Within our investment-grade allocation, energy, communications, and technology names were particularly additive.
Our equity exposure buoyed performance, benefitting from the scale of the aforementioned policy responses and a shift toward more optimistic sentiment amid concerns that the virus will continue to stifle economic growth. Within the portfolio, technology and consumer names buoyed performance of our allocation to equities.
Within securitized assets, asset-backed securities and non-agency CMBS issues had the largest negative impacts during the period. While housing initially showed signs of slowing during the coronavirus pandemic, it has since recovered strongly along with autos as both will benefit from low borrowing costs and the willingness of banks to lend. After a period of low activity, there is now some measure of pent-up demand from U.S. consumers. Mortgage rates have plunged to an extremely low level and may remain there for the foreseeable future.
Outlook
With central banks continuing accommodation and maintaining low forward guidance, we have seen that they will go to great lengths to support their respective economies and achieve inflation targets. Many are willing to allow realized inflation to run above targets to counteract longer term disinflationary trends. We expect that large and growing budget deficits will likely need to be financed with record low interest rates.
We remained focused on central bank policy and perhaps more cautious than consensus on the speed of recovery. Given forward looking growth estimates, we see the potential for curve steepening, but have less conviction that it will take place as soon as many are expecting. We prefer tactical, event-focused positions in this context.
In terms of corporate profitability, investors have been willing to look through weak 2020 results driven by the virus’s effect on growth drivers such as manufacturing, construction, consumer discretionary spending, exports (especially of services), and tourism. Instead, markets seem to be focusing on a possible recovery next year. We expect recent, high levels of personal saving to be a potential catalyst, but also expect some economic scarring such that GDP may fall below pre-COVID-19 levels in the near term.
42 | Litman Gregory Funds Trust |
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Water Island, Arbitrage and Event-Driven Strategy:
The past six months have been an unprecedented time not just for investors but for communities around the globe. In the face of widespread uncertainty and the potential for massive economic losses stemming from the COVID-19 pandemic, the Federal Reserve (the “Fed”) swiftly cut rates to zero and embarked on a massive stimulus program to bolster the economy and financial markets. Further stimulus programs from Congress were also passed to help turn the tide. Although March 2020 officially saw the end of the longest bull run in history, with the S&P 500 Index having traded down nearly 34% at one point, investors responded with confidence. Through April and May markets in the U.S. began to recover just as quickly as they declined. Optimism around progress on coronavirus vaccines and the potential re-opening of economies across the nation may have played a part, but one must also remember the adage, “Don’t fight the Fed.”
While our event-driven strategies are somewhat isolated from broader market volatility due to their idiosyncratic nature, it is hard to remain totally unaffected in an environment with such extreme swings. During the worst moments of the downturn, when levered investors and panicked sellers sought liquidity wherever it was available, we did see correlations converge—even in our most idiosyncratic, most definitive investment opportunities (such as merger-arbitrage investments). This is not unexpected in an extreme bear market as these types of positions are often both less impacted by market moves and easier to sell, and we saw many parallels in 2020 to our experiences during 2008. While periods of market stress can lead to a spike in short-term volatility in the strategy, they can also present attractive opportunities to initiate or scale up positions at favorable rates of return. Our ability to put dry powder to work during this period led to strong gains at the mid-point of the year, with both the merger-arbitrage and special situations sleeves of the portfolio generating positive returns across both equity and credit opportunities.
The top contributor in the portfolio year to date was our merger-arbitrage position in the $10.0 billion cash-and-stock acquisition of Caesars Entertainment by fellow gaming hotel company Eldorado Resorts. During Q1 2020, casinos across the nation were forced to shutter due to the novel coronavirus outbreak, causing the share prices of casino operators to plummet. This led many investors to question the desire of Caesars and Eldorado to consummate their transaction, sending the deal spread wider. In our analysis, the merger agreement and the strategic rationale for the transaction remained strong, and with the financing for the deal already committed, we believed there was still a high likelihood the deal would reach a successful conclusion. The volatility in the deal spread allowed us to increase our position at favorable rates of return. As the market rallied in April and May, casino operator share prices began to recover. At the same time, the deal progressed through the regulatory approval process. Investors gained confidence the transaction was increasingly likely to close, driving the spread tighter and leading to gains in the portfolio. We anticipate the deal will close in early Q3 after the receipt of all required regulatory approvals.
The top detractor in the portfolio year to date was our merger-arbitrage position in Simon Property Group’s planned acquisition of fellow mall REIT Taubman Centers for $3.2 billion in cash, which was announced in early February 2020. As the novel coronavirus pandemic spread and malls shuttered or saw their traffic plummet amidst mass quarantines, investors began to fear Simon Property may attempt to abandon the transaction and Taubman shares fell as much as 24% from their peak during the quarter. We maintained our exposure to the deal as we believe the definitive merger agreement in this transaction is one of the strongest contracts in our space today, and we believe Simon has very few—if any—avenues to escape its obligation to complete the merger. In June, Simon filed to terminate the transaction, claiming Taubman has been disproportionately impacted by the pandemic and has breached its obligations under the merger agreement. Our conviction in our position has not wavered, as we believe Taubman by far has the stronger case for several reasons—including the fact that the merger agreement specifically carves out pandemics as a reason by which a material adverse change (MAC) may be claimed. Furthermore, there are no financing contingencies on this deal, which is being funded solely from Simon’s balance sheet. While there is a chance the lawsuit is an attempt by Simon to convince Taubman to accept a price cut rather than endure lengthy, costly litigation, if the case does go to trial, we are confident that Taubman can emerge victorious and require Simon to complete the deal on its original terms.
In the months ahead, we expect to continue to encounter bouts of volatility—both in broader markets and our event-driven strategies. Not only has the ultimate outcome of the COVID-19 pandemic yet to be written, but we have the added wrinkle of a presidential election year in the United States. Merger-arbitrage returns could be challenged in the short term as interest rates are subdued, the pace of newly announced mergers and acquisitions (M&A) is likely to abate before it picks up again, and M&A targets and acquirers are more likely to attempt to abandon a definitive transaction during a time of economic distress and uncertainty.
Despite potential headwinds for merger arb, we also have reason to be optimistic. Following a period in which asset prices have been depressed, after an initial slowdown in M&A, consolidation activity typically resumes quickly. Companies in a position of strength seek to make opportunistic acquisitions while companies in a position of weakness must combine to survive. We may also see an increase in competitive bidding situations, as multiple topping bids could still result in a takeout price far below where a target had been trading mere months prior. Outside of our merger-arbitrage strategy, we intend to remain focused on the types of catalysts that can best help isolate portfolios from broader market moves (i.e., shorter duration investments with more definitive outcomes). This includes a robust pipeline of spin-offs as well as speculative M&A opportunities in several transactions that were rumored to have been underway yet were called off in light of the pandemic, but which we now believe are more likely to resume.
Fund Summary | 43 |
Table of Contents
Regardless of the specific makeup of the portfolio—merger arbitrage or special situations, hard or soft catalyst—we will continue to maintain our focus on risk management as we seek to generate returns from the outcomes of idiosyncratic corporate catalysts rather than broad market direction, striving to preserve capital during times of market stress.
Sub-Advisor Portfolio Composition as of June 30, 2020
(Exposures may not add up to total due to rounding.)
DCI Long-Short Credit Strategy
Bond Portfolio Top Five Sector Exposures
Consumer Discretionary | 17.6% | |||
Consumer Non-Discretionary | 10.2% | |||
Energy | 10.1% | |||
High Tech | 9.2% | |||
Media | 6.1% |
CDS Portfolio Statistics
Long | Short | |||||||
Number of Issuers | 95 | 72 | ||||||
Average Credit Duration | 4.8 | 4.8 | ||||||
Spread | 162 bps | 179 bps |
DoubleLine Opportunistic Income Strategy
Sector Exposures
Cash | 3.8% | |||
Agency Inverse Floaters | 2.0% | |||
Agency Inverse Interest-Only | 10.3% | |||
Agency CMO | 1.3% | |||
Agency PO | 3.7% | |||
Collateralized Loan Obligations | 7.2% | |||
Commercial MBS | 9.4% | |||
ABS | 5.4% | |||
Bank Loan | 3.8% | |||
Emerging Markets | 5.6% | |||
Non-Agency Residential MBS | 46.8% | |||
Other | 0.7% | |||
|
| |||
TOTAL | 100.0% | |||
|
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FPA Contrarian Opportunity Strategy
Asset Class Exposures
U.S. Stocks | 44.7% | |||
Foreign Stocks | 27.8% | |||
Bonds | 8.2% | |||
Limited Partnerships | 1.1% | |||
Short Sales | -2.7% | |||
Cash | 20.9% | |||
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TOTAL | 100.0% | |||
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Loomis Sayles Absolute Return Strategy
Strategy Exposures
Long Total | Short Total | Net Exposure | ||||||||||
High-Yield Corporate | 50.1% | -2.6% | 47.5% | |||||||||
Securitized | 28.1% | -0.3% | 27.8% | |||||||||
Investment-Grade Corp. | 17.5% | -0.7% | 16.8% | |||||||||
Dividend Equity | 5.3% | -0.2% | 5.1% | |||||||||
Emerging Market | 4.5% | -3.9% | 0.6% | |||||||||
Convertibles | 2.0% | 0.0% | 2.0% | |||||||||
Bank Loans | 1.2% | -0.2% | 1.0% | |||||||||
Global Credit | 0.8% | -0.6% | 0.2% | |||||||||
Global Rates | 0.3% | 0.0% | 0.3% | |||||||||
Risk Management | 0.0% | 0.0% | 0.0% | |||||||||
Subtotal | 109.7% | -8.5% | 101.2% | |||||||||
Cash & Equivalents | 14.9% | 0.0% | 14.9% |
Water Island Arbitrage and Event-Driven Strategy
Sub-Strategy Exposures
Long | Short | Net | ||||||||||
Merger Arbitrage – Equity | 76.3% | -23.7% | 52.6% | |||||||||
Merger Arbitrage – Credit | 5.1% | -0.7% | 4.4% | |||||||||
Total Merger-Related | 81.5% | -24.4% | 57.0% | |||||||||
Special Situations – Equity | 6.9% | -2.0% | 4.9% | |||||||||
Special Situations – Credit | 4.5% | 0.0% | 4.5% | |||||||||
Total Special Situations | 11.4% | -2.0% | 9.4% | |||||||||
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Total | 92.8% | -26.4% | 66.4% | |||||||||
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44 | Litman Gregory Funds Trust |
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PartnerSelect Alternative Strategies Fund Managers
INVESTMENT MANAGER | FIRM | TARGET MANAGER ALLOCATION | Strategy | |||
Stephen Kealhofer Paul Harrison Adam Dwinells | DCI, LLC | 19% | Long-Short Credit | |||
Jeffrey Gundlach Jeffrey Sherman | DoubleLine Capital LP | 25% | Opportunistic Income | |||
Steven Romick Brian Selmo Mark Landecker | First Pacific Advisors, LLC | 18% | Contrarian Opportunity | |||
Matt Eagan Kevin Kearns Todd Vandam | Loomis Sayles & Company, LP | 19% | Absolute-Return | |||
John Orrico Todd Munn Roger Foltynowicz Gregg Loprete | Water Island Capital, LLP | 19% | Arbitrage |
Alternative Strategies Fund Value of Hypothetical $100,000
The value of a hypothetical $100,000 investment in the PartnerSelect Alternative Strategies Fund from September 30, 2011 to June 30, 2020 compared with the 3-Month LIBOR and Morningstar Multialternative Category.
The hypothetical $100,000 investment at fund inception includes changes due to share price and reinvestment of dividends and capital gains. The chart does not imply future performance. Indexes are unmanaged, do not incur fees, expenses or taxes, and cannot be invested in directly.
Fund Summary | 45 |
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PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited)
Shares | Value | |||||||
COMMON STOCKS: 28.8% | ||||||||
Communication Services: 4.1% | ||||||||
645 | Activision Blizzard, Inc. | $ | 48,956 | |||||
5,219 | Alphabet, Inc. - Class A* | 7,400,803 | ||||||
4,593 | Alphabet, Inc. - Class C*(a) | 6,492,711 | ||||||
76,593 | AT&T, Inc. | 2,315,406 | ||||||
39,140 | Baidu, Inc. - ADR* | 4,692,495 | ||||||
12,625 | Charter Communications, Inc. - Class A* | 6,439,255 | ||||||
332,510 | Cincinnati Bell, Inc.*(a) | 4,937,773 | ||||||
118,870 | Cineplex, Inc. | 701,931 | ||||||
63,157 | Clear Channel Outdoor Holdings, Inc.* | 65,683 | ||||||
220,859 | Comcast Corp. - Class A(a) | 8,609,084 | ||||||
114,390 | Escrow Altegrity, Inc.*(b) | 2,344,995 | ||||||
29,411 | Facebook, Inc. - Class A*(a) | 6,678,356 | ||||||
809 | Fox Corp. - Class A | 21,697 | ||||||
10,549 | IAC / InterActive Corp.*(a) | 3,411,547 | ||||||
26,858 | iHeartMedia, Inc. - Class A* | 224,264 | ||||||
37,505 | Masmovil Ibercom S.A.* | 956,762 | ||||||
128,500 | Nexon Co. Ltd. | 2,904,824 | ||||||
662 | Omnicom Group, Inc. | 36,145 | ||||||
36,600 | SoftBank Group Corp. | 1,850,285 | ||||||
813 | Verizon Communications, Inc. | 44,821 | ||||||
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60,177,793 | ||||||||
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Consumer Discretionary: 5.5% | ||||||||
8,528 | Alibaba Group Holding Ltd. - ADR* | 1,839,490 | ||||||
591 | Best Buy Co., Inc. | 51,577 | ||||||
2,846 | Booking Holdings, Inc.* | 4,531,800 | ||||||
2,267,575 | Caesars Entertainment Corp.* | 27,505,685 | ||||||
32,730 | Cie Financiere Richemont S.A. | 2,089,465 | ||||||
509,959 | Delphi Technologies Plc*(a) | 7,246,517 | ||||||
241 | Dollar General Corp. | 45,913 | ||||||
116 | Domino’s Pizza, Inc. | 42,855 | ||||||
797 | DR Horton, Inc. | 44,194 | ||||||
945 | eBay, Inc. | 49,565 | ||||||
68,362 | Grubhub, Inc.*(a) | 4,805,849 | ||||||
185 | Home Depot, Inc. (The) | 46,344 | ||||||
340 | Lowe’s Cos., Inc. | 45,941 | ||||||
387 | LVMH Moet Hennessy Louis Vuitton SE | 169,833 | ||||||
21,923 | Marriott International, Inc. - Class A | 1,879,459 | ||||||
3,813 | McDonald’s Corp. | 703,384 | ||||||
29,862 | Naspers Ltd. - Class N | 5,441,059 | ||||||
96,109 | NetEnt AB | 735,229 | ||||||
1,773 | NIKE, Inc. - Class B | 173,843 | ||||||
27,320 | Porsche Automobil Holding SE - (Preference Shares) | 1,570,725 | ||||||
30,130 | Prosus N.V.* | 2,801,584 | ||||||
1,835 | Starbucks Corp. | 135,038 | ||||||
117 | Target Corp. | 14,032 | ||||||
160,824 | Tiffany & Co.(a) | 19,610,878 | ||||||
394 | Yum! Brands, Inc. | 34,242 | ||||||
|
| |||||||
81,614,501 | ||||||||
|
| |||||||
Consumer Staples: 0.2% | ||||||||
1,115 | Altria Group, Inc. | 43,764 | ||||||
11,560 | Coca-Cola Co. (The) | 516,501 | ||||||
1,819 | Costco Wholesale Corp. | 551,539 | ||||||
844 | Estee Lauder Cos., Inc. (The) - Class A | 159,246 | ||||||
303 | Kimberly-Clark Corp. | 42,829 | ||||||
164 | PepsiCo, Inc. | 21,690 | ||||||
600 | Philip Morris International, Inc. | 42,036 |
Shares | Value | |||||||
Consumer Staples (continued) | ||||||||
5,126 | Procter & Gamble Co. (The) | $ | 612,916 | |||||
5,095 | Walmart, Inc. | 610,279 | ||||||
101,310 | Whole Earth Brands, Inc.* | 817,572 | ||||||
|
| |||||||
3,418,372 | ||||||||
|
| |||||||
Energy: 0.4% | ||||||||
18,829 | Battalion Oil Corp.* | 178,876 | ||||||
131,897 | ChampionX Corp.*(a) | 1,287,315 | ||||||
220 | Dommo Energia S.A. - ADR*(b) | 639 | ||||||
2,380 | Enterprise Products Partners L.P. | 43,245 | ||||||
279,766 | Kinder Morgan, Inc. | 4,244,050 | ||||||
1,578 | McDermott International, Inc.*(b) | 0 | ||||||
2,363 | Williams Cos., Inc. (The) | 44,944 | ||||||
|
| |||||||
5,799,069 | ||||||||
|
| |||||||
Financials: 7.0% | ||||||||
469 | Allstate Corp. (The) | 45,488 | ||||||
253,240 | American International Group, Inc.(a) | 7,896,023 | ||||||
18,080 | Aon Plc - Class A | 3,482,208 | ||||||
104,050 | Bank of America Corp. | 2,471,188 | ||||||
68,880 | CIT Group, Inc.(a) | 1,427,882 | ||||||
104,700 | Citigroup, Inc.(a) | 5,350,170 | ||||||
224 | CME Group, Inc. | 36,409 | ||||||
37,424 | Collier Creek Holdings - Class A*(a) | 512,709 | ||||||
14,099 | DiamondPeak Holdings Corp. | 145,220 | ||||||
366,078 | E*TRADE Financial Corp.(a) | 18,205,059 | ||||||
70,340 | Foley Trasimene Acquisition Corp.*(a) | 750,528 | ||||||
74,700 | Fortress Value Acquisition Corp.* | 769,410 | ||||||
74,721 | GigCapital3, Inc.*(a) | 750,199 | ||||||
85,102 | Graf Industrial Corp.*(a) | 1,182,918 | ||||||
73,460 | Groupe Bruxelles Lambert S.A. | 6,165,159 | ||||||
178,817 | Hennessy Capital Acquisition Corp. - Class A* | 1,922,283 | ||||||
142,285 | Hudson Executive Investment Corp.* | 1,451,307 | ||||||
487 | Intercontinental Exchange, Inc. | 44,609 | ||||||
198,940 | Jefferies Financial Group, Inc.(a) | 3,093,517 | ||||||
295,034 | Legg Mason, Inc.(a) | 14,677,941 | ||||||
391 | Lincoln National Corp. | 14,385 | ||||||
72,602 | Live Oak Acquisition Corp. - Class A* | 711,500 | ||||||
16,500 | LPL Financial Holdings, Inc. | 1,293,600 | ||||||
1,200 | MetLife, Inc. | 43,824 | ||||||
35,720 | Pivotal Investment Corp. II - Class A* | 362,558 | ||||||
525 | Progressive Corp. (The) | 42,058 | ||||||
141 | S&P Global, Inc. | 46,457 | ||||||
9,650 | Signature Bank | 1,031,778 | ||||||
106,020 | Sustainable Opportunities Acquisition Corp.* | 1,070,802 | ||||||
436,225 | TD Ameritrade Holding Corp. | 15,869,865 | ||||||
85,496 | Trebia Acquisition Corp.* | 893,433 | ||||||
1,136 | Truist Financial Corp. | 42,657 | ||||||
2,670 | Unum Group | 44,295 | ||||||
143,600 | Wells Fargo & Co.(a) | 3,676,160 | ||||||
36,392 | Willis Towers Watson Plc(a) | 7,167,404 | ||||||
|
| |||||||
102,691,003 | ||||||||
|
| |||||||
Health Care: 2.5% | ||||||||
481 | AbbVie, Inc. | 47,225 | ||||||
477 | AmerisourceBergen Corp. | 48,067 | ||||||
189 | Amgen, Inc. | 44,578 | ||||||
174 | Anthem, Inc. | 45,758 | ||||||
823 | Bristol-Myers Squibb Co. | 48,392 | ||||||
243 | Cigna Corp.* | 45,599 | ||||||
9,763 | CVS Health Corp. | 634,302 |
The accompanying notes are an integral part of these financial statements.
46 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Shares | Value | |||||||
COMMON STOCKS (CONTINUED) | ||||||||
Health Care (continued) | ||||||||
276 | Eli Lilly & Co. | $ | 45,314 | |||||
119 | Humana, Inc. | 46,142 | ||||||
4,386 | Johnson & Johnson | 616,803 | ||||||
609 | Merck & Co., Inc. | 47,094 | ||||||
136,897 | Metlifecare Ltd. | 453,503 | ||||||
150,400 | Olympus Corp. | 2,895,554 | ||||||
1,267,973 | Pacific Biosciences of California, Inc.*(a) | 4,374,507 | ||||||
137,303 | Paratek Pharmaceuticals, Inc.*(a) | 716,722 | ||||||
434,197 | Portola Pharmaceuticals, Inc.* | 7,811,204 | ||||||
326,095 | Stemline Therapeutics, Inc.(b) | 108,198 | ||||||
150 | UnitedHealth Group, Inc. | 44,242 | ||||||
642,101 | Wright Medical Group N.V.* | 19,083,242 | ||||||
|
| |||||||
37,156,446 | ||||||||
|
| |||||||
Industrials: 2.2% | ||||||||
386,297 | Advanced Disposal Services, Inc.* | 11,654,580 | ||||||
20,208 | AECOM*(a) | 759,417 | ||||||
14,100 | Bureau Veritas S.A.* | 297,580 | ||||||
11,035 | CoreLogic, Inc. | 741,773 | ||||||
444 | CSX Corp. | 30,965 | ||||||
2,405 | Expeditors International of Washington, Inc. | 182,876 | ||||||
13,410 | GEA Group AG | 424,225 | ||||||
303 | Honeywell International, Inc. | 43,811 | ||||||
245,990 | Howmet Aerospace, Inc. | 3,898,942 | ||||||
63,670 | Jardine Strategic Holdings Ltd. | 1,372,089 | ||||||
1,309 | Johnson Controls International Plc | 44,689 | ||||||
46,010 | LG Corp. | 2,723,458 | ||||||
112 | Lockheed Martin Corp. | 40,871 | ||||||
252,570 | Meggitt Plc | 919,442 | ||||||
57 | Northrop Grumman Corp. | 17,524 | ||||||
22,590 | Otis Worldwide Corp. | 1,284,467 | ||||||
28,613 | Rush Enterprises, Inc. - Class A(a) | 1,186,295 | ||||||
22,310 | Samsung C&T Corp. | 2,151,523 | ||||||
17,500 | Sound Holding FP Luxemburg*(b) | 312,548 | ||||||
263 | Union Pacific Corp. | 44,465 | ||||||
100,600 | Univar, Inc.* | 1,696,116 | ||||||
56,140 | Westinghouse Air Brake Technologies Corp. | 3,231,980 | ||||||
|
| |||||||
33,059,636 | ||||||||
|
| |||||||
Information Technology: 4.8% | ||||||||
228 | Accenture Plc - Class A | 48,956 | ||||||
60,290 | Analog Devices, Inc. | 7,393,966 | ||||||
730 | Apple, Inc. | 266,304 | ||||||
789 | Applied Materials, Inc. | 47,695 | ||||||
25,550 | Broadcom, Inc. | 8,063,835 | ||||||
1,007 | Cisco Systems, Inc. | 46,966 | ||||||
23,630 | Cloudera, Inc.* | 300,574 | ||||||
219,134 | Fitbit, Inc. - Class A* | 1,415,606 | ||||||
10,500 | ForeScout Technologies, Inc.* | 222,600 | ||||||
358,771 | Gilat Satellite Networks Ltd.*(a) | 2,285,371 | ||||||
2,749 | HP, Inc. | 47,915 | ||||||
763 | Intel Corp. | 45,650 | ||||||
7,911 | International Business Machines Corp. | 955,411 | ||||||
162 | Intuit, Inc. | 47,983 | ||||||
966 | KLA-Tencor Corp. | 187,868 | ||||||
145 | Lam Research Corp. | 46,902 |
Shares | Value | |||||||
Information Technology (continued) | ||||||||
433 | Leidos Holdings, Inc. | $ | 40,559 | |||||
300,962 | LogMeIn, Inc. | 25,512,549 | ||||||
758 | MasterCard, Inc. - Class A | 224,141 | ||||||
24,755 | Microsoft Corp. | 5,037,890 | ||||||
159,124 | MINDBODY, Inc. - Class A* | 5,808,026 | ||||||
1,744 | NortonLifeLock, Inc. | 34,583 | ||||||
125 | NVIDIA Corp. | 47,489 | ||||||
14,770 | NXP Semiconductors N.V. | 1,684,371 | ||||||
869 | Oracle Corp. | 48,030 | ||||||
40,293 | Perspecta, Inc.(a) | 936,006 | ||||||
2,329 | Qualcomm, Inc. | 212,428 | ||||||
88,519 | RIB Software SE | 2,884,852 | ||||||
77,760 | TE Connectivity Ltd.(a) | 6,341,328 | ||||||
1,007 | Visa, Inc. - Class A | 194,522 | ||||||
|
| |||||||
70,430,376 | ||||||||
|
| |||||||
Materials: 1.0% | ||||||||
357,443 | Cemex SAB de C.V. - ADR | 1,029,436 | ||||||
1,865,150 | Glencore Plc* | 3,950,213 | ||||||
48,370 | HeidelbergCement AG | 2,584,189 | ||||||
58,729 | Hexion Holdings Corp. - Class B* | 414,803 | ||||||
149,290 | LafargeHolcim Ltd. | 6,545,580 | ||||||
722 | Newmont Mining Corp. | 44,576 | ||||||
|
| |||||||
14,568,797 | ||||||||
|
| |||||||
Real Estate: 1.0% | ||||||||
178 | American Tower Corp. | 46,020 | ||||||
72,528 | Front Yard Residential Corp. | 630,994 | ||||||
263,550 | Swire Pacific Ltd. - Class A | 1,397,638 | ||||||
345,676 | Taubman Centers, Inc.(a) | 13,052,726 | ||||||
|
| |||||||
15,127,378 | ||||||||
|
| |||||||
Utilities: 0.1% | ||||||||
2,167 | AES Corp. (The) | 31,400 | ||||||
7,283 | Dominion Energy, Inc. | 591,234 | ||||||
7,138 | Duke Energy Corp. | 570,255 | ||||||
162 | Entergy Corp. | 15,197 | ||||||
47,250 | PG&E Corp.* | 419,107 | ||||||
|
| |||||||
1,627,193 | ||||||||
|
| |||||||
| TOTAL COMMON STOCKS | 425,670,564 | ||||||
|
| |||||||
RIGHTS/WARRANTS: 0.0% | ||||||||
17,471 | Avaya Holdings Corp. (Expiration date 12/15/22)* | 21,227 | ||||||
109,752 | Graf Industrial Corp. (Expiration date 12/31/25)* | 250,235 | ||||||
70,679 | Live Oak Acquisition Corp. (Expiration date 05/08/27)*(a) | 53,016 | ||||||
69,237 | Spartan Energy Acquisition Corp. (Expiration date 10/01/23)*(a) | 124,620 | ||||||
|
| |||||||
| TOTAL RIGHTS/WARRANTS | 449,098 | ||||||
|
| |||||||
PREFERRED STOCKS: 0.1% | ||||||||
Consumer Staples: 0.1% | ||||||||
Bunge Ltd. |
| |||||||
16,579 | 4.875%, 12/20/2165(c) | 1,525,102 | ||||||
|
|
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 47 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Shares | Value | |||||||
PREFERRED STOCKS (CONTINUED) | ||||||||
Energy: 0.0% | ||||||||
Chesapeake Energy Corp. |
| |||||||
506 | 5.750%, 08/15/2166(b)(c) | $ | 0 | |||||
El Paso Energy Capital Trust I |
| |||||||
528 | 4.750%, 03/31/2028 | 23,475 | ||||||
|
| |||||||
23,475 | ||||||||
|
| |||||||
Financials: 0.0% | ||||||||
Bank of America Corp. |
| |||||||
214 | 7.250%, 07/31/2168(c) | 287,231 | ||||||
|
| |||||||
Industrials: 0.0% | ||||||||
Element Communication Aviation |
| |||||||
170 | 12.000%, 03/16/2040(b) | 213,350 | ||||||
|
| |||||||
| TOTAL PREFERRED STOCKS | 2,049,158 | ||||||
|
| |||||||
Principal Amount^ | ||||||||
ASSET-BACKED SECURITIES: 9.2% | ||||||||
Accelerated Assets LLC | ||||||||
$208,586 | Series 2018-1-B | 205,600 | ||||||
Adams Outdoor Advertising L.P. | ||||||||
907,970 | Series 2018-1-A | 926,344 | ||||||
AGL CLO 3 Ltd. | ||||||||
320,000 | Series 2020-3A-C | 303,418 | ||||||
470,000 | Series 2020-3A-D | 436,418 | ||||||
AIM Aviation Finance Ltd. | ||||||||
637,452 | Series 2015-1A-B1 | 207,450 | ||||||
Ajax Mortgage Loan Trust | ||||||||
322,894 | Series 2017-B-A | 324,061 | ||||||
American Homes 4 Rent | ||||||||
875,000 | Series 2014-SFR2-E | 976,740 | ||||||
600,000 | Series 2014-SFR3-E | 674,155 | ||||||
845,000 | Series 2015-SFR1-E | 936,352 | ||||||
Americredit Automobile Receivables Trust | ||||||||
1,010,000 | Series 2018-3-D | 1,048,304 | ||||||
AMSR Trust | ||||||||
335,000 | Series 2019-SFR1-B | 344,021 | ||||||
Anchorage Capital CLO 9 Ltd. | ||||||||
1,800,000 | Series 2016-9A-DR | 1,741,532 |
Principal Amount^ | Value | |||||||
Apidos CLO XX | ||||||||
$265,000 | Series 2015-20A-BRR | $ | 255,719 | |||||
Apidos CLO XXI | ||||||||
500,000 | Series 2015-21A-ER | 379,855 | ||||||
Apidos CLO XXIII | ||||||||
855,000 | Series 2015-23A-CR | 813,587 | ||||||
Apidos CLO XXIV | ||||||||
1,000,000 | Series 2016-24A-DR | 872,252 | ||||||
Apres Static CLO 2 Ltd. | ||||||||
500,000 | Series 2020-1A-D | 502,500 | ||||||
ARES LI CLO Ltd. | ||||||||
520,000 | Series 2019-51A-C | 519,806 | ||||||
Ascentium Equipment Receivables Trust | ||||||||
95,000 | Series 2017-2A-C | 96,148 | ||||||
Atrium XIII | ||||||||
500,000 | Series 13A-E | 442,940 | ||||||
Atrium XIV LLC | ||||||||
750,000 | Series 14A-E | 669,768 | ||||||
Avid Automobile Receivables Trust | ||||||||
180,000 | Series 2019-1-C | 182,006 | ||||||
Barings CLO Ltd. | ||||||||
1,000,000 | Series 2018-3A-E | 852,752 | ||||||
500,000 | Series 2018-4A-E | 439,717 | ||||||
1,100,000 | Series 2019-4A-C | 1,095,328 | ||||||
Blackbird Capital Aircraft Lease Securitization Ltd. | ||||||||
277,249 | Series 2016-1A-A | 236,868 | ||||||
260,677 | Series 2016-1A-B | 163,555 | ||||||
BlueMountain CLO XXIV Ltd. | ||||||||
510,000 | Series 2019-24A-C | 500,118 | ||||||
Bristol Park CLO Ltd. | ||||||||
260,000 | Series 2016-1A-CR | 252,577 |
The accompanying notes are an integral part of these financial statements.
48 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
ASSET-BACKED SECURITIES (CONTINUED) | ||||||||
Buttermilk Park CLO Ltd. | ||||||||
$ 750,000 | Series 2018-1A-E | $ | 656,134 | |||||
California Republic Auto Receivables Trust | ||||||||
520,000 | Series 2018-1-D | 532,297 | ||||||
Canyon Capital CLO Ltd. | ||||||||
1,000,000 | Series 2016-1A-ER | 839,792 | ||||||
500,000 | Series 2018-1A-E | 394,890 | ||||||
Carlyle Global Market Strategies CLO Ltd. | ||||||||
508,509 | Series 2014-2RA-D | 378,715 | ||||||
CarMax Auto Owner Trust | ||||||||
445,000 | Series 2018-2-D | 454,964 | ||||||
305,000 | Series 2018-4-D | 311,189 | ||||||
Castlelake Aircraft Securitization Trust | ||||||||
3,646,053 | Series 2018-1-C | 1,550,712 | ||||||
Castlelake Aircraft Structured Trust | ||||||||
3,000,000 | Series 2019-1A-E | 1,190,272 | ||||||
Catskill Park CLO Ltd. | ||||||||
1,000,000 | Series 2017-1A-D | 894,275 | ||||||
CCG Receivables Trust | ||||||||
100,000 | Series 2018-1-C | 100,696 | ||||||
Chenango Park CLO Ltd. | ||||||||
500,000 | Series 2018-1A-D | 436,956 | ||||||
Chesapeake Funding II LLC | ||||||||
180,000 | Series 2017-2A-D | 181,684 | ||||||
250,000 | Series 2018-1A-C | 254,848 | ||||||
640,000 | Series 2018-1A-D | 646,252 | ||||||
CIFC Funding 2013-II Ltd. | ||||||||
205,000 | Series 2013-2A-A3LR | 192,819 | ||||||
CIG Auto Receivables Trust | ||||||||
6,951 | Series 2017-1A-A | 6,963 | ||||||
Citigroup Mortgage Loan Trust, Inc. | ||||||||
1,000,502 | Series 2019-E-A1 | 1,012,864 |
Principal Amount^ | Value | |||||||
Coinstar Funding LLC | ||||||||
$ 1,028,200 | Series 2017-1A-A2 | $ | 986,247 | |||||
Colony American Finance Ltd. | ||||||||
480,000 | Series 2015-1-D | 486,891 | ||||||
230,000 | Series 2016-1-C | 230,804 | ||||||
Cook Park CLO Ltd. | ||||||||
1,000,000 | Series 2018-1A-E | 870,130 | ||||||
CPS Auto Receivables Trust | ||||||||
105,000 | Series 2018-A-C | 105,657 | ||||||
Credit Acceptance Auto Loan Trust | ||||||||
605,000 | Series 2020-1A-C | 605,915 | ||||||
CSAB Mortgage-Backed Trust | ||||||||
1,857,684 | Series 2006-2-A6B | 212,519 | ||||||
DB Master Finance LLC | ||||||||
329,510 | Series 2019-1A-A23 | 358,019 | ||||||
Diamond Resorts Owner Trust | ||||||||
84,096 | Series 2017-1A-C | 84,052 | ||||||
361,867 | Series 2018-1-C | 340,179 | ||||||
291,576 | Series 2019-1A-B | 280,277 | ||||||
Domino’s Pizza Master Issuer LLC | ||||||||
716,625 | Series 2017-1A-A23 | 775,810 | ||||||
58,950 | Series 2018-1A-A2I | 63,017 | ||||||
324,225 | Series 2018-1A-A2II | 353,964 | ||||||
497,500 | Series 2019-1A-A2 | 521,798 | ||||||
Dorchester Park CLO Ltd. | ||||||||
500,000 | Series 2015-1A-ER | 443,365 | ||||||
Driven Brands Funding LLC | ||||||||
230,300 | Series 2018-1A-A2 | 244,734 | ||||||
Dryden 40 Senior Loan Fund | ||||||||
1,000,000 | Series 2015-40A-ER | 873,511 | ||||||
Dryden 45 Senior Loan Fund | ||||||||
275,000 | Series 2016-45A-ER | 237,191 | ||||||
Dryden 55 CLO Ltd. | ||||||||
500,000 | Series 2018-55A-F | 331,162 | ||||||
DT Auto Owner Trust | ||||||||
410,000 | Series 2018-2A-D | 419,350 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 49 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
ASSET-BACKED SECURITIES (CONTINUED) | ||||||||
Earnest Student Loan Program LLC | ||||||||
$ 13,000 | Series 2016-D-R | $ | 186,604 | |||||
Education Funding Trust | ||||||||
802,866 | Series 2020-A-A | 809,310 | ||||||
Fairstone Financial Issuance Trust | ||||||||
670,000 (CAD) | Series 2019-1A-A | 483,529 | ||||||
Fillmore Park CLO Ltd. | ||||||||
500,000 | Series 2018-1A-E | 434,887 | ||||||
First Investors Auto Owner Trust | ||||||||
160,000 | Series 2019-2A-D | 160,336 | ||||||
365,000 | Series 2019-2A-E | 359,589 | ||||||
Flagship Credit Auto Trust | ||||||||
300,000 | Series 2016-3-E | 309,032 | ||||||
700,000 | Series 2019-2-D | 716,618 | ||||||
595,000 | Series 2020-1-D | 589,232 | ||||||
Galaxy XXVI CLO Ltd. | ||||||||
715,000 | Series 2018-26A-E | 616,104 | ||||||
Genesis Sales Finance Master Trust | ||||||||
145,000 | Series 2019-AA-A | 144,360 | ||||||
Gilbert Park CLO Ltd. | ||||||||
500,000 | Series 2017-1A-E | 456,841 | ||||||
Global Container Assets 2014 Holdings Ltd. | ||||||||
770,150 | Series 2014-1-C | 237,791 | ||||||
349,318 | Series 2014-1-D | 35,679 | ||||||
1,185,000 | Series 2014-1-E | 0 | ||||||
Global Container Assets Ltd. | ||||||||
148,195 | Series 2015-1A-B | 146,704 | ||||||
Goldentree Loan Management US CLO 3 Ltd. | ||||||||
500,000 | Series 2018-3A-D | 462,676 | ||||||
GSAA Home Equity Trust | ||||||||
640,337 | Series 2006-10-AF5 | 267,464 | ||||||
Harbour Aircraft Investments Ltd. | ||||||||
294,855 | Series 2017-1-C | 170,678 |
Principal Amount^ | Value | |||||||
Harley Marine Financing LLC | ||||||||
$ 931,973 | Series 2018-1A-A2 | $ | 772,128 | |||||
Highbridge Loan Management Ltd. | ||||||||
500,000 | Series 2013-2A-DR | 443,354 | ||||||
2,000,000 | Series 6A-2015-DR | 1,673,539 | ||||||
Horizon Aircraft Finance I Ltd. | ||||||||
2,612,546 | Series 2018-1-C | 1,101,007 | ||||||
HPEFS Equipment Trust | ||||||||
265,000 | Series 2020-1A-D | 256,060 | ||||||
InSite Issuer LLC | ||||||||
3,500,000 | Series 2016-1A-C | 3,506,720 | ||||||
Invitation Homes Trust | ||||||||
714,902 | Series 2018-SFR1-E | 695,213 | ||||||
1,225,000 | Series 2018-SFR2-E | 1,190,245 | ||||||
JP Morgan Mortgage Acquisition Trust | ||||||||
1,000,000 | Series 2007-CH1-AF5 | 1,053,815 | ||||||
Kestrel Aircraft Funding Ltd. | ||||||||
530,944 | Series 2018-1A-A | 451,307 | ||||||
LCM 26 Ltd. | ||||||||
500,000 | Series 26A-E | 400,930 | ||||||
LCM 30 Ltd. | ||||||||
300,000 | Series 30A-D | 285,163 | ||||||
LCM Loan Income Fund I Income Note Issuer Ltd. | ||||||||
500,000 | Series 27A-E | 405,399 | ||||||
LCM XVII L.P. | ||||||||
1,000,000 | Series 17A-ER | 776,447 | ||||||
LCM XX L.P. | ||||||||
500,000 | Series 20A-ER | 374,008 | ||||||
Lehman XS Trust | ||||||||
2,551,315 | Series 2005-6-3A3A | 1,646,071 | ||||||
415,731 | Series 2006-8-3A3 | 423,552 | ||||||
Madison Park Funding XIV Ltd. | ||||||||
1,000,000 | Series 2014-14A-ER | 858,412 |
The accompanying notes are an integral part of these financial statements.
50 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
ASSET-BACKED SECURITIES (CONTINUED) | ||||||||
Madison Park Funding XXII Ltd. | ||||||||
$1,000,000 | Series 2016-22A-ER | $ | 893,407 | |||||
Madison Park Funding XXXI Ltd. | ||||||||
270,000 | Series 2018-31A-C | 259,308 | ||||||
MAPS Ltd. | ||||||||
625,132 | Series 2018-1A-A | 552,680 | ||||||
284,314 | Series 2019-1A-A | 252,994 | ||||||
Marlette Funding Trust | ||||||||
132,278 | Series 2019-1A-A | 133,561 | ||||||
225,106 | Series 2019-3A-A | 226,574 | ||||||
Mosaic Solar Loans LLC | ||||||||
1,673,979 | Series 2017-2A-B | 1,718,050 | ||||||
Motor Plc | ||||||||
52,188 | Series 2017-1A-A1 | 52,178 | ||||||
MVW Owner Trust | ||||||||
127,038 | Series 2019-1A-C | 118,586 | ||||||
Myers Park CLO Ltd. | ||||||||
1,000,000 | Series 2018-1A-E | 868,407 | ||||||
Navient Private Education Refi Loan Trust | ||||||||
260,000 | Series 2018-A-B | 264,821 | ||||||
855,000 | Series 2019-FA-B | 836,586 | ||||||
180,000 | Series 2019-GA-B | 174,438 | ||||||
Navistar Financial Dealer Note Master Owner Trust | ||||||||
310,000 | Series 2018-1-A | 308,916 | ||||||
Neuberger Berman CLO XVI-S Ltd. | ||||||||
500,000 | Series 2017-16SA-E | 449,941 | ||||||
Neuberger Berman CLO XXIII Ltd. | ||||||||
1,000,000 | Series 2016-23A-ER | 912,345 | ||||||
Neuberger Berman Loan Advisers CLO 24 Ltd. | ||||||||
1,000,000 | Series 2017-24A-E | 901,209 |
Principal Amount^ | Value | |||||||
Neuberger Berman Loan Advisers CLO 26 Ltd. | ||||||||
$ 1,000,000 | Series 2017-26A-INC | $ | 560,166 | |||||
Neuberger Berman Loan Advisers CLO 30 Ltd. | ||||||||
2,210,000 | Series 2018-30A-E | 2,070,358 | ||||||
NextGear Floorplan Master Owner Trust | ||||||||
845,000 | Series 2018-1A-A1 | 838,628 | ||||||
NRZ Excess Spread-Collateralized Notes | ||||||||
1,622,154 | Series 2018-PLS2-D | 1,639,311 | ||||||
OCP CLO Ltd. | ||||||||
520,000 | Series 2015-8A-CR | 511,393 | ||||||
Octagon Investment Partners 26 Ltd. | ||||||||
1,000,000 | Series 2016-1A-FR | 623,894 | ||||||
Octagon Investment Partners 29 Ltd. | ||||||||
1,000,000 | Series 2016-1A-ER | 896,912 | ||||||
Octagon Investment Partners 39 Ltd. | ||||||||
275,000 | Series 2018-3A-E | 242,875 | ||||||
Octagon Investment Partners XVI Ltd. | ||||||||
1,000,000 | Series 2013-1A-ER | 852,599 | ||||||
1,500,000 | Series 2013-1A-SUB | 386,579 | ||||||
Octagon Investment Partners XXI Ltd. | ||||||||
500,000 | Series 2014-1A-DRR | 449,553 | ||||||
Octagon Investment Partners XXII Ltd. | ||||||||
835,000 | Series 2014-1A-CRR | 785,656 | ||||||
OHA Credit Funding 5 Ltd. | ||||||||
475,000 | Series 2020-5A-C | 454,897 | ||||||
OneMain Financial Issuance Trust | ||||||||
675,000 | Series 2015-3A-B | 673,443 | ||||||
1,000,000 | Series 2016-1A-C | 1,004,223 | ||||||
390,000 | Series 2020-1A-B | 407,441 | ||||||
Oxford Finance Funding LLC | ||||||||
180,000 | Series 2019-1A-A2 | 185,640 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 51 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
ASSET-BACKED SECURITIES (CONTINUED) | ||||||||
Palmer Square CLO Ltd. | ||||||||
$260,000 | Series 2015-2A-BR2 | $ | 252,230 | |||||
Parallel Ltd. | ||||||||
700,000 | Series 2017-1A-CR | 651,845 | ||||||
1,005,000 | Series 2018-2A-B | 920,608 | ||||||
Park Place Securities, Inc. Asset-Backed Pass-Through Certificates | ||||||||
8,000,000 | Series 2005-WHQ1-M5 | 7,722,331 | ||||||
Planet Fitness Master Issuer LLC | ||||||||
849,863 | Series 2018-1A-A2I | 857,898 | ||||||
676,600 | Series 2019-1A-A2 | 585,767 | ||||||
PNMAC FMSR Issuer Trust | ||||||||
7,300,000 | Series 2018-FT1-A | 7,042,088 | ||||||
Prestige Auto Receivables Trust | ||||||||
330,000 | Series 2019-1A-E | 319,863 | ||||||
Preston Ridge Partners Mortgage LLC | ||||||||
275,000 | Series 2018-1A-A2 | 265,485 | ||||||
455,866 | Series 2019-4A-A1 | 458,198 | ||||||
Progress Residential Trust | ||||||||
210,000 | Series 2017-SFR2-E | 212,884 | ||||||
125,000 | Series 2018-SFR2-E | 128,516 | ||||||
530,000 | Series 2019-SFR1-E | 548,727 | ||||||
235,000 | Series 2019-SFR3-D | 236,586 | ||||||
PRPM LLC | ||||||||
322,004 | Series 2020-1A-A1 | 321,577 | ||||||
Republic FInance Issuance Trust | ||||||||
1,000,000 | Series 2019-A-A | 995,837 | ||||||
Rockford Tower CLO Ltd. | ||||||||
700,000 | Series 2017-2A-CR | 674,101 | ||||||
S-Jets Ltd. | ||||||||
1,138,115 | Series 2017-1-A | 1,018,289 | ||||||
Santander Drive Auto Receivables Trust | ||||||||
875,000 | Series 2019-2-D | 898,665 |
Principal Amount^ | Value | |||||||
$ 885,000 | Series 2020-1-D | $ | 940,872 | |||||
SCF Equipment Leasing LLC | ||||||||
1,135,000 | Series 2018-1A-C | 1,157,776 | ||||||
SLM Private Credit Student Loan Trust | ||||||||
256,000 | Series 2003-A-A3 | 244,093 | ||||||
720,000 | Series 2003-B-A3 | 712,897 | ||||||
67,000 | Series 2003-B-A4 | 63,899 | ||||||
SoFi Consumer Loan Program Trust | ||||||||
435,000 | Series 2018-2-B | 448,481 | ||||||
380,000 | Series 2019-4-C | 365,856 | ||||||
SoFi Professional Loan Program LLC | ||||||||
181,613 | Series 2016-A-B | 184,705 | ||||||
133,000 | Series 2017-F-R1 | 4,978,377 | ||||||
63,855 | Series 2019-B-R1 | 2,071,665 | ||||||
SoFi Professional Loan Program Trust | ||||||||
360,000 | Series 2020-A-BFX | 354,300 | ||||||
45,000 | Series 2020-A-R1 | 2,344,018 | ||||||
Soundview Home Loan Trust | ||||||||
5,098,706 | Series 2007-OPT3-2A3 | 4,871,957 | ||||||
SpringCastle Funding Asset-Backed Notes | ||||||||
94,291 | Series 2019-AA-A | 95,484 | ||||||
Sprite Ltd. | ||||||||
292,457 | Series 2017-1-B | 172,783 | ||||||
Stewart Park CLO Ltd. | ||||||||
500,000 | Series 2015-1A-ER | 417,038 | ||||||
Taco Bell Funding LLC | ||||||||
704,275 | Series 2018-1A-A2II | 764,240 | ||||||
Terwin Mortgage Trust | ||||||||
702,508 | Series 2006-3-2A2 | 684,012 | ||||||
THL Credit Wind River CLO Ltd. | ||||||||
2,000,000 | Series 2014-2A-INC | 388,182 | ||||||
500,000 | Series 2018-2A-E | 409,345 |
The accompanying notes are an integral part of these financial statements.
52 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
ASSET-BACKED SECURITIES (CONTINUED) | ||||||||
TICP CLO VII Ltd. | ||||||||
$280,000 | Series 2017-7A-CR | $ | 270,055 | |||||
TICP CLO XV Ltd. | ||||||||
250,000 | Series 2020-15A-C | 242,607 | ||||||
Tidewater Auto Receivables Trust | ||||||||
110,000 | Series 2018-AA-D | 112,738 | ||||||
Trestles CLO II Ltd. | ||||||||
335,000 | Series 2018-2A-D | 288,765 | ||||||
Tryon Park CLO Ltd. | ||||||||
1,000,000 | Series 2013-1A-DR | 906,404 | ||||||
Vericrest Opportunity Loan Trust | ||||||||
1,298,574 | Series 2019-NPL5-A1A | 1,305,523 | ||||||
Volkswagen Auto Loan Enhanced Trust | ||||||||
2,950 | Series 2018-1-A2B | 2,950 | ||||||
VOLT LXXXIII LLC | ||||||||
367,620 | Series 2019-NPL9-A1A | 368,811 | ||||||
Voya CLO Ltd. | ||||||||
500,000 | Series 2018-2A-E | 415,198 | ||||||
WAVE Trust | ||||||||
282,273 | Series 2017-1A-B | 150,017 | ||||||
Webster Park CLO Ltd. | ||||||||
1,000,000 | Series 2015-1A-DR | 864,379 | ||||||
Wendy’s Funding LLC | ||||||||
867,750 | Series 2018-1A-A2II | 917,568 | ||||||
186,200 | Series 2019-1A-A2II | 196,355 | ||||||
Wingstop Funding LLC | ||||||||
237,600 | Series 2018-1-A2 | 247,971 | ||||||
World Financial Network Credit Card Master Trust | ||||||||
1,765,000 | Series 2019-C-M | 1,753,629 | ||||||
York CLO Ltd. | ||||||||
1,783,000 | Series 2019-1A-D | 1,712,719 | ||||||
|
| |||||||
| TOTAL ASSET-BACKED SECURITIES | 135,206,342 | ||||||
|
|
Principal Amount^ | Value | |||||||
BANK LOANS: 2.1% | ||||||||
Air Methods Corp. | ||||||||
$1,182,806 | 4.500%, 04/22/2024(e) | $ | 981,481 | |||||
American Tire Distributors Holdings, Inc. | ||||||||
1,148,393 | 8.500%, 09/02/2024(e) | 767,781 | ||||||
Avaya, Inc. | ||||||||
535,000 | 4.435%, 12/15/2024(e) | 495,677 | ||||||
BI-LO Holding LLC | ||||||||
841,354 | 9.000%, 05/31/2024(e) | 837,497 | ||||||
BJ Services LLC | ||||||||
3,135,000 | 8.500%, 01/03/2023(b)(e) | 2,646,121 | ||||||
California Resources Corp. | ||||||||
4,092,000 | 0.000%, 12/31/2022(e) | 1,506,367 | ||||||
Cardtronics USA, Inc. | ||||||||
970,000 | 0.000%, 06/25/2027(h) | 955,450 | ||||||
Cengage Learning, Inc. | ||||||||
1,039,175 | 5.250%, 06/07/2023(e) | 846,928 | ||||||
Colorado Buyer, Inc. | ||||||||
472,254 | 4.000%, 05/01/2024(e) | 362,996 | ||||||
Cvent, Inc. | ||||||||
452,349 | 3.928%, 11/29/2024(e) | 392,413 | ||||||
Dell International LLC | ||||||||
445,489 | 2.750%, 09/19/2025(e) | 434,888 | ||||||
Dhanani Group, Inc. | ||||||||
108,157 | 3.928%, 07/20/2025(e) | 100,721 | ||||||
Finastra USA, Inc. | ||||||||
465,263 | 4.500%, 06/13/2024(e) | 408,903 | ||||||
Flexential Intermediate Corp. | ||||||||
441,594 | 3.808%, 08/01/2024(e) | 357,139 | ||||||
Gavilan Resources LLC | ||||||||
1,025,000 | 0.000%, 03/01/2024(e) | 12,813 | ||||||
Global Medical Response, Inc. | ||||||||
248,092 | 5.250%, 03/14/2025(e) | 238,013 | ||||||
Granite Holdings US Acquisition Co. | ||||||||
456,550 | 6.322%, 09/30/2026(e) | 401,764 | ||||||
Gray Television, Inc. | ||||||||
556,000 | 2.423%, 02/07/2024(e) | 540,293 | ||||||
362,000 | 2.673%, 01/02/2026(e) | 351,616 | ||||||
Gulf Finance LLC | ||||||||
1,301,813 | 6.250%, 08/25/2023(e) | 851,600 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 53 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
BANK LOANS (CONTINUED) | ||||||||
Hof Village LLC | ||||||||
$ 387,300 | 12.000%, 10/31/2020(e) | $ | 329,205 | |||||
ION Trading Technologies S.A.R.L. | ||||||||
362,183 | 5.072%, 11/21/2024(e) | 350,153 | ||||||
Klockner-Pentaplast of America, Inc. | ||||||||
252,794 | 5.250%, 06/30/2022(e) | 237,988 | ||||||
Kronos Acquisition Holdings, Inc. | ||||||||
530,000 | 5.000%, 05/15/2023(e) | 506,449 | ||||||
Lower Cadence Holdings LLC | ||||||||
287,100 | 4.178%, 05/22/2026(e) | 256,955 | ||||||
McDermott International, Inc. | ||||||||
4,165,000 | 0.000%, 05/10/2023(h) | 1,874,250 | ||||||
420,000 | 0.000%, 05/10/2023(h) | 300,300 | ||||||
McDermott Technology Americas, Inc. | ||||||||
324,634 | 0.500%, 10/21/2020(e) | 323,498 | ||||||
894,806 | 10.000%, 10/21/2020(e) | 891,674 | ||||||
100,373 | 10.000%, 10/21/2020(e) | 100,022 | ||||||
4,515,073 | 7.250%, 05/09/2025(e) | 1,656,490 | ||||||
Mediaco Holding, Inc. | ||||||||
2,189,012 | 8.400%, 11/21/2024(e) | 1,952,777 | ||||||
Minotaur Acquisition, Inc. | ||||||||
1,084,023 | 5.178%, 03/27/2026(e) | 1,007,236 | ||||||
Mitchell International, Inc. | ||||||||
845,000 | 7.428%, 12/01/2025(e) | 756,275 | ||||||
MLN U.S. Holding Co. LLC | ||||||||
468,395 | 4.678%, 11/30/2025(e) | 386,721 | ||||||
MPH Acquisition Holdings LLC | ||||||||
1,094,041 | 3.750%, 06/07/2023(e) | 1,043,289 | ||||||
Murray Energy Corp. | ||||||||
1,005,435 | 9.678%, 02/12/2021(b)(e) | 854,620 | ||||||
Radiology Partners, Inc. | ||||||||
508,265 | 5.295%-5.990%, 07/09/2025(e) | 474,867 | ||||||
Solenis Holdings LLC | ||||||||
540,861 | 4.363%, 06/26/2025(e) | 521,706 | ||||||
170,000 | 8.863%, 06/26/2026(e) | 148,709 | ||||||
T-Mobile USA, Inc. | ||||||||
430,000 | 3.178%, 04/01/2027(e) | 429,804 | ||||||
Team Health Holdings, Inc. | �� | |||||||
838,500 | 3.750%, 02/06/2024(e) | 647,745 |
Principal Amount^ | Value | |||||||
Tibco Software, Inc. | ||||||||
$ 195,000 | 7.430%, 03/03/2028(e) | $ | 189,029 | |||||
Titan Acquisition Ltd. | ||||||||
314,193 | 3.361%, 03/28/2025(e) | 288,667 | ||||||
Travelport Finance (Luxembourg) S.A.R.L. | ||||||||
530,988 | 6.072%, 05/29/2026(e) | 354,193 | ||||||
Western Digital Corp. | ||||||||
848,000 | 1.924%, 04/29/2023(e) | 829,717 | ||||||
Ziggo B.V. | ||||||||
490,000 (EUR) | 3.000%, 01/31/2029(e) | 533,770 | ||||||
|
| |||||||
| TOTAL BANK LOANS | 30,736,570 | ||||||
|
| |||||||
CONVERTIBLE BONDS: 0.7% | ||||||||
Communications: 0.2% | ||||||||
CalAmp Corp. | ||||||||
985,000 | 2.000%, 08/01/2025 | 779,066 | ||||||
DISH Network Corp. | ||||||||
2,780,000 | 3.375%, 08/15/2026 | 2,560,699 | ||||||
|
| |||||||
3,339,765 | ||||||||
|
| |||||||
Consumer, Non-cyclical: 0.3% | ||||||||
BioMarin Pharmaceutical, Inc. | ||||||||
460,000 | 1.250%, 05/15/2027(d) | 537,635 | ||||||
Dermira, Inc. | ||||||||
3,806,000 | 3.000%, 05/15/2022(a) | 3,858,332 | ||||||
|
| |||||||
4,395,967 | ||||||||
|
| |||||||
Energy: 0.0% | ||||||||
Chesapeake Energy Corp. | ||||||||
440,000 | 5.500%, 09/15/2026(i) | 17,600 | ||||||
|
| |||||||
Industrial: 0.0% | ||||||||
Greenbrier Cos., Inc. (The) | ||||||||
180,000 | 2.875%, 02/01/2024 | 148,810 | ||||||
|
| |||||||
Technology: 0.2% | ||||||||
Adesto Technologies Corp. | ||||||||
1,850,000 | 4.250%, 09/15/2024(d) | 2,232,950 | ||||||
|
| |||||||
| TOTAL CONVERTIBLE BONDS | 10,135,092 | ||||||
|
| |||||||
CORPORATE BONDS: 28.0% | ||||||||
Basic Materials: 1.6% | ||||||||
ABJA Investment Co. Pte Ltd. | ||||||||
210,000 | 5.450%, 01/24/2028 | 195,298 | ||||||
Allegheny Technologies, Inc. | ||||||||
555,000 | 5.875%, 12/01/2027 | 515,803 | ||||||
Braskem Idesa SAPI | ||||||||
200,000 | 7.450%, 11/15/2029 | 187,562 | ||||||
300,000 | 7.450%, 11/15/2029(d) | 281,343 | ||||||
Braskem Netherlands Finance B.V. | ||||||||
600,000 | 4.500%, 01/31/2030(d) | 550,050 | ||||||
400,000 | 5.875%, 01/31/2050 | 353,100 |
The accompanying notes are an integral part of these financial statements.
54 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
CORPORATE BONDS (CONTINUED) | ||||||||
Basic Materials (continued) | ||||||||
Compass Minerals International, Inc. | ||||||||
$ 462,000 | 6.750%, 12/01/2027(d) | $ | 485,881 | |||||
CSN Islands XII Corp. | ||||||||
600,000 | 7.000%, 09/23/2020(c) | 449,577 | ||||||
First Quantum Minerals Ltd. | ||||||||
600,000 | 7.500%, 04/01/2025(d) | 575,469 | ||||||
1,445,000 | 6.875%, 03/01/2026(d) | 1,372,483 | ||||||
FMG Resources August 2006 Pty Ltd. | ||||||||
3,500,000 | 5.125%, 03/15/2023(d) | 3,607,152 | ||||||
810,000 | 4.500%, 09/15/2027(d) | 811,669 | ||||||
Freeport-McMoRan, Inc. | ||||||||
130,000 | 3.875%, 03/15/2023 | 130,260 | ||||||
95,000 | 5.000%, 09/01/2027 | 95,542 | ||||||
655,000 | 4.125%, 03/01/2028 | 636,879 | ||||||
450,000 | 4.250%, 03/01/2030 | 436,923 | ||||||
400,000 | 5.450%, 03/15/2043 | 393,354 | ||||||
Hecla Mining Co. | ||||||||
2,524,000 | 7.250%, 02/15/2028 | 2,568,170 | ||||||
Illuminate Buyer LLC / Illuminate Holdings IV, Inc. | ||||||||
410,000 | 9.000%, 07/01/2028(d) | 428,450 | ||||||
Metinvest B.V. | ||||||||
200,000 | 8.500%, 04/23/2026 | 196,770 | ||||||
200,000 | 7.750%, 10/17/2029 | 187,823 | ||||||
Mineral Resources Ltd. | ||||||||
3,888,000 | 8.125%, 05/01/2027(d) | 4,142,295 | ||||||
Newcrest Finance Pty Ltd. | ||||||||
305,000 | 3.250%, 05/13/2030(d) | 328,282 | ||||||
Nexa Resources S.A. | ||||||||
500,000 | 6.500%, 01/18/2028(d) | 507,750 | ||||||
Sasol Financing USA LLC | ||||||||
400,000 | 5.875%, 03/27/2024 | 358,000 | ||||||
Schweitzer-Mauduit International, Inc. | ||||||||
2,430,000 | 6.875%, 10/01/2026(d) | 2,493,326 | ||||||
Steel Dynamics, Inc. | ||||||||
510,000 | 3.250%, 01/15/2031 | 521,307 | ||||||
Unigel Luxembourg S.A. | ||||||||
500,000 | 8.750%, 10/01/2026 | 405,000 | ||||||
United States Steel Corp. | ||||||||
128,000 | 6.250%, 03/15/2026 | 81,256 | ||||||
UPL Corp. Ltd. | ||||||||
600,000 | 5.250%, 02/27/2025(c)(g) | 547,500 | ||||||
Vedanta Resources Finance II Plc | ||||||||
250,000 | 9.250%, 04/23/2026(d) | 180,625 | ||||||
200,000 | 9.250%, 04/23/2026 | 144,500 | ||||||
|
| |||||||
24,169,399 | ||||||||
|
| |||||||
Communications: 5.0% | ||||||||
Altice France Holding S.A. | ||||||||
3,100,000 | 10.500%, 05/15/2027(d) | 3,428,367 | ||||||
593,000 | 6.000%, 02/15/2028(d) | 564,094 | ||||||
Bharti Airtel Ltd. | ||||||||
265,000 | 4.375%, 06/10/2025 | 274,320 | ||||||
Block Communications, Inc. | ||||||||
220,000 | 4.875%, 03/01/2028(d) | 217,830 | ||||||
CCO Holdings LLC / CCO Holdings Capital Corp. | ||||||||
515,000 | 4.500%, 08/15/2030(d) | 527,182 |
Principal Amount^ | Value | |||||||
Communications (continued) | ||||||||
Cincinnati Bell, Inc. | ||||||||
$ 3,484,000 | 7.000%, 07/15/2024(d) | $ | 3,564,533 | |||||
Clear Channel Worldwide Holdings, Inc. | ||||||||
685,000 | 5.125%, 08/15/2027(d) | 658,806 | ||||||
CommScope, Inc. | ||||||||
410,000 | 6.000%, 03/01/2026(d) | 421,328 | ||||||
1,430,000 | 7.125%, 07/01/2028(d)(j) | 1,433,718 | ||||||
CSC Holdings LLC | ||||||||
630,000 | 6.500%, 02/01/2029(d) | 690,244 | ||||||
680,000 | 4.125%, 12/01/2030(d) | 674,900 | ||||||
1,180,000 | 4.625%, 12/01/2030(d) | 1,152,105 | ||||||
DISH DBS Corp. | ||||||||
2,289,000 | 7.750%, 07/01/2026 | 2,430,620 | ||||||
eBay, Inc. | ||||||||
65,000 | 4.000%, 07/15/2042 | 70,852 | ||||||
Expedia Group, Inc. | ||||||||
1,175,000 | 6.250%, 05/01/2025(d) | 1,254,190 | ||||||
600,000 | 7.000%, 05/01/2025(d) | 625,236 | ||||||
1,035,000 | 3.250%, 02/15/2030 | 966,937 | ||||||
GrubHub Holdings, Inc. | ||||||||
2,100,000 | 5.500%, 07/01/2027(d) | 2,151,985 | ||||||
GTT Communications, Inc. | ||||||||
400,000 | 7.875%, 12/31/2024(d) | 211,250 | ||||||
iHeartCommunications, Inc. | ||||||||
165,000 | 6.375%, 05/01/2026 | 163,736 | ||||||
2,895,000 | 8.375%, 05/01/2027 | 2,658,146 | ||||||
305,000 | 5.250%, 08/15/2027(d) | 292,553 | ||||||
735,000 | 4.750%, 01/15/2028(d) | 679,280 | ||||||
Intelsat Jackson Holdings S.A. | ||||||||
825,000 | 8.500%, 10/15/2024(d)(i) | 498,667 | ||||||
Kenbourne Invest S.A. | ||||||||
825,000 | 6.875%, 11/26/2024(d) | 835,007 | ||||||
Match Group, Inc. | ||||||||
2,300,000 | 5.000%, 12/15/2027(d) | 2,401,453 | ||||||
2,520,000 | 5.625%, 02/15/2029(d) | 2,665,379 | ||||||
300,000 | 4.125%, 08/01/2030(d) | 294,234 | ||||||
MDC Partners, Inc. | ||||||||
651,000 | 6.500%, 05/01/2024(d) | 607,464 | ||||||
NBCUniversal Enterprise, Inc. | ||||||||
520,000 | 5.250%, 03/19/2021(c)(d) | 521,370 | ||||||
Netflix, Inc. | ||||||||
75,000 | 4.875%, 04/15/2028 | 80,318 | ||||||
2,546,000 | 5.875%, 11/15/2028 | 2,903,802 | ||||||
2,766,000 | 4.875%, 06/15/2030(d) | 2,973,976 | ||||||
Network i2i Ltd. | ||||||||
550,000 | 5.650%, 01/15/2025(c)(d)(g) | 535,150 | ||||||
Nokia Oyj | ||||||||
480,000 (EUR) | 2.000%, 03/11/2026 | 536,813 | ||||||
Oi S.A. | ||||||||
550,000 | 10.000%, 07/27/2025(k) | 459,387 | ||||||
Outfront Media Capital LLC / Outfront Media Capital Corp. | ||||||||
280,000 | 4.625%, 03/15/2030(d) | 253,873 | ||||||
Sirius XM Radio, Inc. | ||||||||
145,000 | 4.625%, 07/15/2024(d) | 148,895 | ||||||
3,063,000 | 5.000%, 08/01/2027(d) | 3,135,088 | ||||||
2,613,000 | 5.500%, 07/01/2029(d) | 2,756,401 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 55 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
CORPORATE BONDS (CONTINUED) | ||||||||
Communications (continued) | ||||||||
Telecom Italia SpA | ||||||||
$ 5,162,000 | 5.303%, 05/30/2024(d) | $ | 5,402,988 | |||||
TV Azteca SAB de C.V. | ||||||||
400,000 | 8.250%, 08/09/2024 | 176,458 | ||||||
Twitter, Inc. | ||||||||
995,000 | 3.875%, 12/15/2027(d) | 997,587 | ||||||
Uber Technologies, Inc. | ||||||||
220,000 | 7.500%, 05/15/2025(d) | 222,613 | ||||||
4,654,000 | 8.000%, 11/01/2026(d) | 4,740,099 | ||||||
4,938,000 | 7.500%, 09/15/2027(d) | 4,961,678 | ||||||
VeriSign, Inc. | ||||||||
5,140,000 | 4.750%, 07/15/2027 | 5,411,418 | ||||||
ViacomCBS, Inc. | ||||||||
1,125,000 | 4.950%, 01/15/2031 | 1,331,224 | ||||||
935,000 | 4.200%, 05/19/2032 | 1,053,765 | ||||||
325,000 | 4.375%, 03/15/2043 | 340,348 | ||||||
ViaSat, Inc. | ||||||||
460,000 | 5.625%, 09/15/2025(d) | 441,648 | ||||||
Virgin Media Finance Plc | ||||||||
285,000 | 5.000%, 07/15/2030(d) | 280,072 | ||||||
Virgin Media Secured Finance Plc | ||||||||
680,000 | 5.500%, 08/15/2026(d) | 697,575 | ||||||
Ziggo B.V. | ||||||||
300,000 | 5.500%, 01/15/2027(d) | 304,321 | ||||||
440,000 | 4.875%, 01/15/2030(d) | 443,388 | ||||||
|
| |||||||
73,524,671 | ||||||||
|
| |||||||
Consumer, Cyclical: 5.4% | ||||||||
1011778 BC ULC / New Red Finance, Inc. | ||||||||
120,000 | 3.875%, 01/15/2028(d) | 116,623 | ||||||
1,500,000 | 4.375%, 01/15/2028(d) | 1,472,820 | ||||||
Allison Transmission, Inc. | ||||||||
3,317,000 | 4.750%, 10/01/2027(d) | 3,303,931 | ||||||
587,000 | 5.875%, 06/01/2029(d) | 612,185 | ||||||
AutoNation, Inc. | ||||||||
135,000 | 4.750%, 06/01/2030 | 146,567 | ||||||
Boyd Gaming Corp. | ||||||||
990,000 | 4.750%, 12/01/2027(d) | 853,538 | ||||||
Carnival Corp. | ||||||||
622,000 | 11.500%, 04/01/2023(d) | 676,425 | ||||||
Carvana Co. | ||||||||
3,400,000 | 8.875%, 10/01/2023(d) | 3,420,179 | ||||||
Century Communities, Inc. | ||||||||
1,400,000 | 6.750%, 06/01/2027 | 1,411,067 | ||||||
Churchill Downs, Inc. | ||||||||
948,000 | 5.500%, 04/01/2027(d) | 930,097 | ||||||
4,669,000 | 4.750%, 01/15/2028(d) | 4,516,394 | ||||||
FCE Bank Plc | ||||||||
3,195,000 (EUR) | 1.134%, 02/10/2022 | 3,467,565 | ||||||
Ford Motor Co. | ||||||||
850,000 | 8.500%, 04/21/2023 | 900,469 | ||||||
1,000,000 | 9.000%, 04/22/2025 | 1,084,075 | ||||||
220,000 | 9.625%, 04/22/2030 | 260,958 | ||||||
General Motors Co. | ||||||||
615,000 | 6.800%, 10/01/2027 | 717,663 | ||||||
Hilton Domestic Operating Co., Inc. | ||||||||
4,423,000 | 4.875%, 01/15/2030 | 4,366,739 |
Principal Amount^ | Value | |||||||
Consumer, Cyclical (continued) | ||||||||
Hyatt Hotels Corp. | ||||||||
$ 195,000 | 5.375%, 04/23/2025 | $ | 206,849 | |||||
355,000 | 5.750%, 04/23/2030 | 391,056 | ||||||
Hyundai Capital America | ||||||||
1,730,000 | 3.950%, 02/01/2022(d) | 1,780,266 | ||||||
710,000 | 2.375%, 02/10/2023(d) | 716,184 | ||||||
Installed Building Products, Inc. | ||||||||
1,100,000 | 5.750%, 02/01/2028(d) | 1,103,916 | ||||||
KB Home | ||||||||
1,563,000 | 6.875%, 06/15/2027 | 1,709,234 | ||||||
979,000 | 4.800%, 11/15/2029 | 964,927 | ||||||
KFC Holding Co. / Pizza Hut Holdings LLC / Taco Bell of America LLC | ||||||||
2,406,000 | 4.750%, 06/01/2027(d) | 2,473,139 | ||||||
Latam Airlines 2015-1 Pass Through Trust | ||||||||
1,435,309 | 4.500%, 11/15/2023 | 742,772 | ||||||
Latam Finance Ltd. | ||||||||
550,000 | 7.000%, 03/01/2026(i) | 152,625 | ||||||
Levi Strauss & Co. | ||||||||
565,000 | 5.000%, 05/01/2025(d) | 569,184 | ||||||
M/I Homes, Inc. | ||||||||
1,802,000 | 4.950%, 02/01/2028 | 1,796,369 | ||||||
Marriott International, Inc. | ||||||||
165,000 | 5.750%, 05/01/2025 | 179,436 | ||||||
275,000 | 4.625%, 06/15/2030 | 285,902 | ||||||
Mobile Mini, Inc. | ||||||||
2,685,000 | 5.875%, 07/01/2024 | 2,765,349 | ||||||
Murphy Oil USA, Inc. | ||||||||
2,780,000 | 4.750%, 09/15/2029 | 2,848,986 | ||||||
Nissan Motor Acceptance Corp. | ||||||||
960,000 | 3.650%, 09/21/2021(d) | 962,705 | ||||||
Penn National Gaming, Inc. | ||||||||
1,480,000 | 5.625%, 01/15/2027(d) | 1,385,931 | ||||||
PulteGroup, Inc. | ||||||||
2,550,000 | 5.000%, 01/15/2027 | 2,735,908 | ||||||
Royal Caribbean Cruises Ltd. | ||||||||
814,000 | 11.500%, 06/01/2025(d) | 850,030 | ||||||
Sabre GLBL, Inc. | ||||||||
130,000 | 9.250%, 04/15/2025(d) | 137,556 | ||||||
Scientific Games International, Inc. | ||||||||
5,024,000 | 6.625%, 05/15/2021 | 5,048,241 | ||||||
Scotts Miracle-Gro Co. (The) | ||||||||
1,572,000 | 4.500%, 10/15/2029 | 1,622,155 | ||||||
Stars Group Holdings B.V. / Stars Group US Co-Borrower LLC | ||||||||
4,194,000 | 7.000%, 07/15/2026(d) | 4,430,688 | ||||||
Taylor Morrison Communities, Inc. | ||||||||
2,031,000 | 5.875%, 06/15/2027(d) | 2,108,219 | ||||||
1,695,000 | 6.625%, 07/15/2027(d) | 1,753,800 | ||||||
637,000 | 5.750%, 01/15/2028(d) | 658,378 | ||||||
Tesla, Inc. | ||||||||
5,365,000 | 5.300%, 08/15/2025(d) | 5,371,143 | ||||||
United Airlines Pass Through Trust | ||||||||
1,755,000 | Series 2019-2-B | 1,254,413 | ||||||
Vista Outdoor, Inc. | ||||||||
769,000 | 5.875%, 10/01/2023 | 754,501 | ||||||
Yum! Brands, Inc. | ||||||||
1,000,000 | 3.875%, 11/01/2023 | 1,027,645 | ||||||
220,000 | 7.750%, 04/01/2025(d) | 237,737 | ||||||
2,546,000 | 4.750%, 01/15/2030(d) | 2,591,102 | ||||||
|
| |||||||
79,873,641 | ||||||||
|
|
The accompanying notes are an integral part of these financial statements.
56 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
CORPORATE BONDS (CONTINUED) | ||||||||
Consumer, Non-cyclical: 4.6% | ||||||||
Ajecorp B.V. | ||||||||
$ 150,000 | 6.500%, 05/14/2022 | $ | 148,277 | |||||
AMN Healthcare, Inc. | ||||||||
1,500,000 | 4.625%, 10/01/2027(d) | 1,465,027 | ||||||
Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide, Inc. | ||||||||
125,000 | 4.900%, 02/01/2046 | 153,435 | ||||||
Anheuser-Busch InBev Worldwide, Inc. | ||||||||
240,000 | 4.600%, 04/15/2048 | 281,410 | ||||||
ASGN, Inc. | ||||||||
1,560,000 | 4.625%, 05/15/2028(d) | 1,526,164 | ||||||
B&G Foods, Inc. | ||||||||
1,250,000 | 5.250%, 09/15/2027 | 1,254,300 | ||||||
Bausch Health Cos., Inc. | ||||||||
2,185,000 (EUR) | 4.500%, 05/15/2023 | 2,437,824 | ||||||
320,000 | 6.250%, 02/15/2029(d) | 322,200 | ||||||
352,000 | 7.250%, 05/30/2029(d) | 370,193 | ||||||
868,000 | 5.250%, 01/30/2030(d) | 824,487 | ||||||
Carriage Services, Inc. | ||||||||
1,090,000 | 6.625%, 06/01/2026(d) | 1,149,743 | ||||||
Charles River Laboratories International, Inc. | ||||||||
1,500,000 | 4.250%, 05/01/2028(d) | 1,501,770 | ||||||
Cott Holdings, Inc. | ||||||||
500,000 | 5.500%, 04/01/2025(d) | 503,847 | ||||||
Encompass Health Corp. | ||||||||
4,069,000 | 4.750%, 02/01/2030 | 3,892,772 | ||||||
Fomento Economico Mexicano SAB de C.V. | ||||||||
858,000 | 3.500%, 01/16/2050 | 888,305 | ||||||
HCA, Inc. | ||||||||
870,000 | 3.500%, 09/01/2030 | 839,021 | ||||||
Herbalife Nutrition Ltd. / HLF Financing, Inc. | ||||||||
1,630,000 | 7.875%, 09/01/2025(d) | 1,686,031 | ||||||
Hologic, Inc. | ||||||||
3,750,000 | 4.625%, 02/01/2028(d) | 3,903,975 | ||||||
Horizon Therapeutics USA, Inc. | ||||||||
2,780,000 | 5.500%, 08/01/2027(d) | 2,896,927 | ||||||
JBS USA LUX S.A. / JBS USA Food Co. / JBS USA Finance, Inc. | ||||||||
95,000 | 5.500%, 01/15/2030(d) | 97,536 | ||||||
Kimberly-Clark de Mexico SAB de C.V. | ||||||||
245,000 | 2.431%, 07/01/2031(d)(j) | 248,553 | ||||||
Kraft Heinz Foods Co. | ||||||||
195,000 | 5.000%, 06/04/2042 | 205,730 | ||||||
750,000 | 5.200%, 07/15/2045 | 814,511 | ||||||
400,000 | 4.375%, 06/01/2046 | 393,840 | ||||||
1,885,000 | 4.875%, 10/01/2049(d) | 1,922,504 | ||||||
NBM US Holdings, Inc. | ||||||||
1,200,000 | 7.000%, 05/14/2026(d) | 1,204,980 | ||||||
Nielsen Co. Luxembourg S.A.R.L. (The) | ||||||||
3,174,000 | 5.500%, 10/01/2021(a)(d) | 3,185,157 | ||||||
Ortho-Clinical Diagnostics, Inc. / Ortho-Clinical Diagnostics S.A. | ||||||||
85,000 | 7.375%, 06/01/2025(d) | 86,647 | ||||||
275,000 | 7.250%, 02/01/2028(d) | 280,220 |
Principal Amount^ | Value | |||||||
Consumer, Non-cyclical (continued) | ||||||||
Perrigo Finance Unlimited Co. | ||||||||
$ 265,000 | 3.150%, 06/15/2030 | $ | 268,397 | |||||
Post Holdings, Inc. | ||||||||
1,650,000 | 5.750%, 03/01/2027(d) | 1,708,418 | ||||||
1,600,000 | 5.625%, 01/15/2028(d) | 1,659,704 | ||||||
1,850,000 | 5.500%, 12/15/2029(d) | 1,916,248 | ||||||
Prestige Brands, Inc. | ||||||||
209,000 | 5.125%, 01/15/2028(d) | 206,388 | ||||||
Pyxus International, Inc. | ||||||||
240,000 | 8.500%, 04/15/2021(d)(i) | 231,600 | ||||||
Radiology Partners, Inc. | ||||||||
590,000 | 9.250%, 02/01/2028(d) | 557,550 | ||||||
Rede D’or Finance S.A.R.L. | ||||||||
950,000 | 4.500%, 01/22/2030(d) | 837,482 | ||||||
Refinitiv US Holdings, Inc. | ||||||||
1,568,000 | 6.250%, 05/15/2026(d) | 1,665,710 | ||||||
Service Corp. International | ||||||||
3,080,000 | 4.625%, 12/15/2027 | 3,219,847 | ||||||
1,000,000 | 5.125%, 06/01/2029 | 1,077,690 | ||||||
Teleflex, Inc. | ||||||||
3,700,000 | 4.625%, 11/15/2027 | 3,920,242 | ||||||
Tenet Healthcare Corp. | ||||||||
2,905,000 | 5.125%, 05/01/2025 | 2,806,840 | ||||||
Teva Pharmaceutical Finance Netherlands II B.V. | ||||||||
805,000 (EUR) | 6.000%, 01/31/2025 | 958,294 | ||||||
650,000 (EUR) | 6.000%, 01/31/2025(d) | 773,778 | ||||||
Teva Pharmaceutical Finance Netherlands III B.V. | ||||||||
725,000 | 7.125%, 01/31/2025(d) | 773,191 | ||||||
925,000 | 3.150%, 10/01/2026 | 829,383 | ||||||
4,795,000 | 4.100%, 10/01/2046 | 4,043,384 | ||||||
United Rentals North America, Inc. | ||||||||
2,990,000 | 4.000%, 07/15/2030 | 2,895,710 | ||||||
Upjohn, Inc. | ||||||||
655,000 | 4.000%, 06/22/2050(d) | 699,727 | ||||||
Vector Group Ltd. | ||||||||
1,791,000 | 10.500%, 11/01/2026(d) | 1,802,525 | ||||||
Walnut Bidco Plc | ||||||||
200,000 | 9.125%, 08/01/2024 | 204,432 | ||||||
|
| |||||||
67,541,926 | ||||||||
|
| |||||||
Energy: 2.5% | ||||||||
AI Candelaria Spain SLU | ||||||||
500,000 | 7.500%, 12/15/2028 | 506,780 | ||||||
Aker BP ASA | ||||||||
1,175,000 | 3.750%, 01/15/2030(d) | 1,107,941 | ||||||
Bayan Resources Tbk PT | ||||||||
400,000 | 6.125%, 01/24/2023 | 376,781 | ||||||
Bruin E&P Partners LLC | ||||||||
2,820,000 | 8.875%, 08/01/2023(d) | 98,700 | ||||||
California Resources Corp. | ||||||||
4,067,000 | 8.000%, 12/15/2022(d) | 152,533 | ||||||
23,000 | 6.000%, 11/15/2024 | 311 | ||||||
Canacol Energy Ltd. | ||||||||
300,000 | 7.250%, 05/03/2025 | 304,096 | ||||||
Cheniere Corpus Christi Holdings LLC | ||||||||
1,405,000 | 3.700%, 11/15/2029(d) | 1,436,185 | ||||||
CNX Resources Corp. | ||||||||
1,530,000 | 7.250%, 03/14/2027(d) | 1,409,543 | ||||||
Energy Transfer Operating L.P. | ||||||||
1,225,000 | 5.000%, 05/15/2050 | 1,167,850 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 57 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
CORPORATE BONDS (CONTINUED) | ||||||||
Energy (continued) | ||||||||
Enviva Partners L.P. / Enviva Partners Finance Corp. | ||||||||
$ 1,710,000 | 6.500%, 01/15/2026(d) | $ | 1,781,606 | |||||
EQT Corp. | ||||||||
230,000 | 3.900%, 10/01/2027 | 187,796 | ||||||
Geopark Ltd. | ||||||||
550,000 | 6.500%, 09/21/2024 | 507,675 | ||||||
Gran Tierra Energy, Inc. | ||||||||
550,000 | 7.750%, 05/23/2027(d) | 249,906 | ||||||
Gulfport Energy Corp. | ||||||||
145,000 | 6.625%, 05/01/2023 | 86,784 | ||||||
287,000 | 6.000%, 10/15/2024 | 147,267 | ||||||
137,000 | 6.375%, 05/15/2025 | 68,836 | ||||||
144,000 | 6.375%, 01/15/2026 | 69,813 | ||||||
Hess Midstream Operations L.P. | ||||||||
750,000 | 5.625%, 02/15/2026(d) | 743,827 | ||||||
Hunt Oil Co. of Peru LLC Sucursal Del Peru | ||||||||
450,000 | 6.375%, 06/01/2028 | 438,750 | ||||||
Indo Energy Finance II B.V. | ||||||||
228,000 | 6.375%, 01/24/2023 | 214,229 | ||||||
Kinder Morgan, Inc. | ||||||||
2,000,000 | 4.300%, 03/01/2028 | 2,269,540 | ||||||
165,000 | 5.050%, 02/15/2046 | 189,663 | ||||||
Kosmos Energy Ltd. | ||||||||
400,000 | 7.125%, 04/04/2026 | 352,936 | ||||||
Lonestar Resources America, Inc. | ||||||||
380,000 | 11.250%, 01/01/2023(d) | 39,900 | ||||||
Matador Resources Co. | ||||||||
1,880,000 | 5.875%, 09/15/2026 | 1,395,656 | ||||||
Medco Oak Tree Pte Ltd. | ||||||||
550,000 | 7.375%, 05/14/2026 | 513,805 | ||||||
MEG Energy Corp. | ||||||||
1,010,000 | 7.125%, 02/01/2027(d) | 842,087 | ||||||
Montage Resources Corp. | ||||||||
1,990,000 | 8.875%, 07/15/2023 | 1,578,299 | ||||||
Northern Oil and Gas, Inc. | ||||||||
971,000 | 8.500%, 05/15/2023(k) | 832,948 | ||||||
NuStar Logistics L.P. | ||||||||
1,240,000 | 6.000%, 06/01/2026 | 1,204,927 | ||||||
Parkland Fuel Corp. | ||||||||
3,137,000 | 5.875%, 07/15/2027(d) | 3,261,900 | ||||||
PBF Holding Co. LLC / PBF Finance Corp. | ||||||||
160,000 | 9.250%, 05/15/2025(d) | 171,100 | ||||||
Peru LNG Srl | ||||||||
700,000 | 5.375%, 03/22/2030 | 552,867 | ||||||
Petroleos Mexicanos | ||||||||
3,235,000 | 5.950%, 01/28/2031(d) | 2,673,582 | ||||||
1,420,000 | 6.625%, 06/15/2035 | 1,159,522 | ||||||
Range Resources Corp. | ||||||||
746,000 | 9.250%, 02/01/2026(d) | 671,982 | ||||||
Sabine Pass Liquefaction LLC | ||||||||
985,000 | 4.500%, 05/15/2030(d) | 1,095,666 | ||||||
Southwestern Energy Co. | ||||||||
1,850,000 | 7.750%, 10/01/2027 | 1,615,337 |
Principal Amount^ | Value | |||||||
Energy (continued) | ||||||||
Sunoco L.P. / Sunoco Finance Corp. | ||||||||
$ 3,400,000 | 6.000%, 04/15/2027 | $ | 3,373,752 | |||||
Targa Resources Partners L.P. / Targa Resources Partners Finance Corp. | ||||||||
750,000 | 6.875%, 01/15/2029 | 787,969 | ||||||
Tennessee Gas Pipeline Co. LLC | ||||||||
325,000 | 7.000%, 03/15/2027 | 397,336 | ||||||
Whiting Petroleum Corp. | ||||||||
2,260,000 | 6.625%, 01/15/2026(i) | 405,161 | ||||||
YPF S.A. | ||||||||
780,000 | 32.229%, 07/07/2020(d)(e) | 163,870 | ||||||
450,000 | 6.950%, 07/21/2027(d) | 316,602 | ||||||
|
| |||||||
36,923,616 | ||||||||
|
| |||||||
Financial: 4.5% | ||||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | ||||||||
705,000 | 4.500%, 09/15/2023(j) | 705,603 | ||||||
300,000 | 6.500%, 07/15/2025 | 314,884 | ||||||
245,000 | 3.650%, 07/21/2027 | 217,064 | ||||||
665,000 | 3.875%, 01/23/2028 | 601,029 | ||||||
Agile Group Holdings Ltd. | ||||||||
200,000 | 6.875%, 03/07/2023(c)(g) | 193,492 | ||||||
200,000 | 7.750%, 05/25/2025(c)(g) | 194,464 | ||||||
Air Lease Corp. | ||||||||
740,000 | 3.375%, 07/01/2025 | 742,099 | ||||||
Aircastle Ltd. | ||||||||
1,295,000 | 4.250%, 06/15/2026 | 1,190,330 | ||||||
Ally Financial, Inc. | ||||||||
125,000 | 4.625%, 03/30/2025 | 133,557 | ||||||
1,170,000 | 5.800%, 05/01/2025 | 1,304,930 | ||||||
Alpha Holding S.A. de C.V. | ||||||||
600,000 | 9.000%, 02/10/2025(d) | 537,000 | ||||||
American International Group, Inc. | ||||||||
1,380,000 | 4.375%, 06/30/2050 | 1,602,872 | ||||||
American Tower Corp. | ||||||||
620,000 | 2.100%, 06/15/2030 | 622,884 | ||||||
Ares Capital Corp. | ||||||||
1,260,000 | 3.250%, 07/15/2025 | 1,224,249 | ||||||
Assurant, Inc. | ||||||||
1,960,000 | 3.700%, 02/22/2030 | 1,978,133 | ||||||
Banco BTG Pactual S.A. | ||||||||
550,000 | 7.750%, 02/15/2029(g) | 558,256 | ||||||
Banco Hipotecario S.A. | ||||||||
| 12,020,000 (ARS) | | 33.625%, 11/07/2022(d)(e) | 137,900 | ||||
Banco Macro S.A. | ||||||||
| 7,805,000 (ARS) | | 17.500%, 05/08/2022(d) | 72,562 | ||||
250,000 | 6.750%, 11/04/2026(g) | 205,163 | ||||||
Banco Mercantil del Norte S.A. | ||||||||
500,000 | 7.625%, 01/10/2028(c)(g) | 477,820 | ||||||
Banco Santander Mexico S.A. | ||||||||
500,000 | 8.500%, 01/20/2022(c)(g) | 481,765 |
The accompanying notes are an integral part of these financial statements.
58 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
CORPORATE BONDS (CONTINUED) | ||||||||
Financial (continued) | ||||||||
Banco Supervielle S.A. | ||||||||
| $ 7,500,000 (ARS) |
| 24.833%, 08/09/2020(d)(e) | $ | 104,918 | |||
Barclays Plc | ||||||||
400,000 | 5.088%, 06/20/2030(g) | 454,418 | ||||||
Brixmor Operating Partnership L.P. | ||||||||
1,475,000 | 4.050%, 07/01/2030 | 1,511,605 | ||||||
Central China Real Estate Ltd. | ||||||||
200,000 | 7.250%, 07/16/2024 | 193,225 | ||||||
CIFI Holdings Group Co. Ltd. | ||||||||
450,000 | 5.375%, 08/24/2022(c)(g) | 440,419 | ||||||
Credito Real SAB de C.V. | ||||||||
550,000 | 9.125%, 11/29/2022(c)(g) | 471,900 | ||||||
Credivalores-Crediservicios SAS | ||||||||
300,000 | 9.750%, 07/27/2022 | 246,371 | ||||||
300,000 | 8.875%, 02/07/2025(d) | 239,250 | ||||||
Crown Castle International Corp. | ||||||||
1,905,000 | 2.250%, 01/15/2031 | 1,926,777 | ||||||
35,000 | 4.150%, 07/01/2050 | 41,202 | ||||||
Deutsche Bank AG | ||||||||
500,000 | 4.500%, 04/01/2025 | 490,750 | ||||||
Docuformas SAPI de C.V. | ||||||||
550,000 | 10.250%, 07/24/2024(d) | 469,568 | ||||||
Enova International, Inc. | ||||||||
1,120,000 | 8.500%, 09/01/2024(d) | 1,003,682 | ||||||
580,000 | 8.500%, 09/15/2025(d) | 525,263 | ||||||
Equinix, Inc. | ||||||||
1,015,000 | 2.150%, 07/15/2030 | 1,009,905 | ||||||
Financiera de Desarrollo Territorial S.A. | ||||||||
| 6,675,000,000 (COP) | | 7.875%, 08/12/2024(d) | 1,897,702 | ||||
GE Capital Funding LLC | ||||||||
1,485,000 | 4.400%, 05/15/2030(d) | 1,547,115 | ||||||
Gilex Holding S.A.R.L. | ||||||||
510,000 | 8.500%, 05/02/2023 | 503,449 | ||||||
goeasy Ltd. | ||||||||
2,100,000 | 5.375%, 12/01/2024(d) | 2,041,158 | ||||||
Icahn Enterprises L.P. / Icahn Enterprises Finance Corp. | ||||||||
3,569,000 | 4.750%, 09/15/2024 | 3,361,159 | ||||||
3,575,000 | 6.250%, 05/15/2026 | 3,585,868 | ||||||
1,037,000 | 5.250%, 05/15/2027 | 1,003,946 | ||||||
Intesa Sanpaolo SpA | ||||||||
368,000 | 5.710%, 01/15/2026(d) | 388,058 | ||||||
Iron Mountain, Inc. | ||||||||
740,000 | 5.000%, 07/15/2028(d) | 727,290 | ||||||
740,000 | 5.250%, 07/15/2030(d) | 731,212 | ||||||
iStar, Inc. | ||||||||
5,272,000 | 4.750%, 10/01/2024 | 4,933,169 | ||||||
750,000 | 4.250%, 08/01/2025 | 680,625 | ||||||
Kaisa Group Holdings Ltd. | ||||||||
390,000 | 11.950%, 10/22/2022(d) | 405,980 | ||||||
Kennedy-Wilson, Inc. | ||||||||
370,000 | 5.875%, 04/01/2024 | 369,303 |
Principal Amount^ | Value | |||||||
Financial (continued) | ||||||||
Ladder Capital Finance Holdings LLLP / Ladder Capital Finance Corp. | ||||||||
$ 165,000 | 5.250%, 03/15/2022(d) | $ | 157,264 | |||||
450,000 | 5.250%, 10/01/2025(d) | 389,630 | ||||||
1,755,000 | 4.250%, 02/01/2027(d) | 1,408,387 | ||||||
MGM Growth Properties Operating Partnership L.P. / MGP Finance Co-Issuer, Inc. | ||||||||
1,390,000 | 5.625%, 05/01/2024 | 1,442,299 | ||||||
2,069,000 | 5.750%, 02/01/2027 | 2,123,963 | ||||||
MPT Operating Partnership L.P. / MPT Finance Corp. | ||||||||
3,325,000 | 5.000%, 10/15/2027 | 3,426,928 | ||||||
1,000,000 | 4.625%, 08/01/2029 | 1,006,720 | ||||||
Navient Corp. | ||||||||
45,000 | 7.250%, 01/25/2022 | 45,213 | ||||||
10,000 | 6.500%, 06/15/2022 | 9,856 | ||||||
105,000 | 7.250%, 09/25/2023 | 102,953 | ||||||
5,000 | 6.125%, 03/25/2024 | 4,766 | ||||||
15,000 | 5.875%, 10/25/2024 | 14,137 | ||||||
35,000 | 6.750%, 06/15/2026 | 32,456 | ||||||
860,000 | 5.000%, 03/15/2027 | 724,288 | ||||||
Operadora de Servicios Mega S.A. de C.V. Sofom ER | ||||||||
400,000 | 8.250%, 02/11/2025(d) | 371,550 | ||||||
Quicken Loans LLC | ||||||||
2,015,000 | 5.250%, 01/15/2028(d) | 2,085,092 | ||||||
Radian Group, Inc. | ||||||||
2,000,000 | 4.875%, 03/15/2027 | 1,885,870 | ||||||
RKP Overseas Finance 2016 A Ltd. | ||||||||
200,000 | 7.950%, 02/17/2022(c) | 182,906 | ||||||
RKPF Overseas 2019 E Ltd. | ||||||||
300,000 | 7.750%, 11/18/2024(c)(g) | 285,000 | ||||||
SBA Communications Corp. | ||||||||
1,057,000 | 3.875%, 02/15/2027(d) | 1,055,367 | ||||||
Springleaf Finance Corp. | ||||||||
50,000 | 6.875%, 03/15/2025 | 51,413 | ||||||
545,000 | 8.875%, 06/01/2025 | 583,654 | ||||||
445,000 | 7.125%, 03/15/2026 | 461,129 | ||||||
205,000 | 6.625%, 01/15/2028 | 203,296 | ||||||
1,055,000 | 5.375%, 11/15/2029 | 992,966 | ||||||
Starwood Property Trust, Inc. | ||||||||
2,100,000 | 4.750%, 03/15/2025 | 1,918,654 | ||||||
Unifin Financiera SAB de C.V. | ||||||||
600,000 | 8.875%, 01/29/2025(c)(g) | 394,506 | ||||||
Yuzhou Properties Co. Ltd. | ||||||||
300,000 | 8.300%, 05/27/2025 | 297,749 | ||||||
200,000 | 7.375%, 01/13/2026 | 188,461 | ||||||
|
| |||||||
66,647,816 | ||||||||
|
| |||||||
Industrial: 2.2% | ||||||||
Aeropuertos Dominicanos Siglo XXI S.A. | ||||||||
350,000 | 6.750%, 03/30/2029 | 316,841 | ||||||
Ball Corp. | ||||||||
3,888,000 | 4.875%, 03/15/2026 | 4,234,693 | ||||||
Boeing Co. (The) | ||||||||
640,000 | 2.700%, 05/01/2022 | 648,177 | ||||||
460,000 | 2.250%, 06/15/2026 | 444,953 | ||||||
195,000 | 2.950%, 02/01/2030 | 192,343 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 59 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
CORPORATE BONDS (CONTINUED) | ||||||||
Industrial (continued) | ||||||||
Boeing Co. (The) (Continued) | ||||||||
$ 850,000 | 5.150%, 05/01/2030 | $ | 949,592 | |||||
5,000 | 3.500%, 03/01/2039 | 4,459 | ||||||
5,000 | 3.375%, 06/15/2046 | 4,165 | ||||||
70,000 | 3.750%, 02/01/2050 | 62,961 | ||||||
850,000 | 5.805%, 05/01/2050 | 1,006,132 | ||||||
455,000 | 3.950%, 08/01/2059 | 399,466 | ||||||
Bombardier, Inc. | ||||||||
768,000 | 7.500%, 03/15/2025(d) | 503,597 | ||||||
Builders FirstSource, Inc. | ||||||||
410,000 | 6.750%, 06/01/2027(d) | 420,941 | ||||||
C10 Capital SPV Ltd. | ||||||||
300,000 | 5.018%, 09/30/2020(c)(g) | 277,800 | ||||||
C5 Capital SPV Ltd. | ||||||||
200,000 | 4.585%, 09/30/2020(c)(g) | 155,000 | ||||||
Cemex SAB de C.V. | ||||||||
400,000 | 5.450%, 11/19/2029(d) | 369,856 | ||||||
Embraer Netherlands Finance B.V. | ||||||||
340,000 | 5.050%, 06/15/2025 | 302,309 | ||||||
FedEx Corp. | ||||||||
265,000 | 4.100%, 02/01/2045 | 270,327 | ||||||
30,000 | 4.050%, 02/15/2048 | 30,883 | ||||||
330,000 | 5.250%, 05/15/2050 | 406,346 | ||||||
General Electric Co. | ||||||||
363,000 | 5.000%, 01/21/2021(c)(g) | 284,088 | ||||||
420,000 | 3.625%, 05/01/2030 | 421,339 | ||||||
200,000 | 4.350%, 05/01/2050 | 198,128 | ||||||
GMR Hyderabad International Airport Ltd. | ||||||||
735,000 | 5.375%, 04/10/2024 | 716,542 | ||||||
Hornbeck Offshore Services, Inc. | ||||||||
186,000 | 5.875%, 04/01/2020(i) | 5,115 | ||||||
HTA Group Ltd. | ||||||||
1,030,000 | 7.000%, 12/18/2025(d) | 1,045,404 | ||||||
IHS Netherlands Holdco B.V. | ||||||||
500,000 | 7.125%, 03/18/2025(d) | 508,795 | ||||||
JSL Europe S.A. | ||||||||
550,000 | 7.750%, 07/26/2024 | 547,525 | ||||||
Leonardo US Holdings, Inc. | ||||||||
438,000 | 6.250%, 01/15/2040(d) | 511,212 | ||||||
Masonite International Corp. | ||||||||
40,000 | 5.375%, 02/01/2028(d) | 40,968 | ||||||
Patrick Industries, Inc. | ||||||||
250,000 | 7.500%, 10/15/2027(d) | 258,234 | ||||||
Sensata Technologies, Inc. | ||||||||
3,191,000 | 4.375%, 02/15/2030(d) | 3,167,163 | ||||||
Silgan Holdings, Inc. | ||||||||
4,261,000 | 4.125%, 02/01/2028(d) | 4,234,369 | ||||||
Spirit AeroSystems, Inc. | ||||||||
1,465,000 | 7.500%, 04/15/2025(d) | 1,451,266 | ||||||
80,000 | 4.600%, 06/15/2028 | 64,906 | ||||||
Standard Industries, Inc. | ||||||||
1,065,000 | 4.375%, 07/15/2030(d) | 1,065,000 | ||||||
Stericycle, Inc. | ||||||||
419,000 | 5.375%, 07/15/2024(d) | 430,522 |
Principal Amount^ | Value | |||||||
Industrial (continued) | ||||||||
Stoneway Capital Corp. | ||||||||
$ 177,117 | 10.000%, 03/01/2027(i) | $ | 60,662 | |||||
Tecnoglass, Inc. | ||||||||
200,000 | 8.200%, 01/31/2022 | 195,103 | ||||||
TransDigm, Inc. | ||||||||
1,300,000 | 6.250%, 03/15/2026(d) | 1,299,018 | ||||||
2,401,000 | 7.500%, 03/15/2027 | 2,307,817 | ||||||
3,002,000 | 5.500%, 11/15/2027 | 2,628,176 | ||||||
Vulcan Materials Co. | ||||||||
210,000 | 3.500%, 06/01/2030 | 229,042 | ||||||
|
| |||||||
32,671,235 | ||||||||
|
| |||||||
Technology: 1.5% | ||||||||
Amkor Technology, Inc. | ||||||||
1,900,000 | 6.625%, 09/15/2027(d) | 2,038,102 | ||||||
Broadcom Corp. / Broadcom Cayman Finance Ltd. | ||||||||
70,000 | 3.875%, 01/15/2027 | 75,707 | ||||||
20,000 | 3.500%, 01/15/2028 | 21,185 | ||||||
Broadcom, Inc. | ||||||||
25,000 | 4.250%, 04/15/2026(d) | 27,844 | ||||||
1,640,000 | 4.750%, 04/15/2029(d) | 1,862,946 | ||||||
470,000 | 5.000%, 04/15/2030(d) | 541,250 | ||||||
1,735,000 | 4.300%, 11/15/2032(d) | 1,908,156 | ||||||
CDW LLC / CDW Finance Corp. | ||||||||
500,000 | 4.125%, 05/01/2025 | 502,813 | ||||||
Entegris, Inc. | ||||||||
1,000,000 | 4.625%, 02/10/2026(d) | 1,017,310 | ||||||
Fair Isaac Corp. | ||||||||
4,061,000 | 5.250%, 05/15/2026(d) | 4,440,947 | ||||||
160,000 | 4.000%, 06/15/2028(d) | 160,800 | ||||||
Flexential Intermediate Corp. | ||||||||
585,000 | 11.250%, 08/01/2024(d) | 583,903 | ||||||
MSCI, Inc. | ||||||||
4,096,000 | 4.000%, 11/15/2029(d) | 4,184,842 | ||||||
140,000 | 3.625%, 09/01/2030(d) | 139,541 | ||||||
Nuance Communications, Inc. | ||||||||
1,870,000 | 5.625%, 12/15/2026 | 1,950,232 | ||||||
NXP B.V. / NXP Funding LLC / NXP USA, Inc. | ||||||||
155,000 | 3.150%, 05/01/2027(d) | 164,659 | ||||||
90,000 | 3.400%, 05/01/2030(d) | 97,034 | ||||||
PTC, Inc. | ||||||||
796,000 | 4.000%, 02/15/2028(d) | 790,126 | ||||||
Seagate HDD Cayman | ||||||||
285,000 | 4.125%, 01/15/2031(d) | 300,100 | ||||||
SS&C Technologies, Inc. | ||||||||
750,000 | 5.500%, 09/30/2027(d) | 764,396 | ||||||
|
| |||||||
21,571,893 | ||||||||
|
| |||||||
Utilities: 0.7% | ||||||||
AES Andres B.V. / Dominican Power Partners / Empresa Generadora de Electricidad It | ||||||||
450,000 | 7.950%, 05/11/2026 | 456,750 | ||||||
AES Argentina Generacion S.A. | ||||||||
150,000 | 7.750%, 02/02/2024 | 109,125 | ||||||
AES Corp. (The) | ||||||||
60,000 | 6.000%, 05/15/2026 | 62,464 | ||||||
260,000 | 3.950%, 07/15/2030(d) | 275,438 |
The accompanying notes are an integral part of these financial statements.
60 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
CORPORATE BONDS (CONTINUED) | ||||||||
Utilities (continued) | ||||||||
AES Gener S.A. | ||||||||
$ 200,000 | 7.125%, 03/26/2079(g) | $ | 207,250 | |||||
400,000 | 6.350%, 10/07/2079(d)(g) | 400,250 | ||||||
Calpine Corp. | ||||||||
260,000 | 4.500%, 02/15/2028(d) | 253,937 | ||||||
65,000 | 5.125%, 03/15/2028(d) | 63,838 | ||||||
Capex S.A. | ||||||||
150,000 | 6.875%, 05/15/2024 | 111,172 | ||||||
Edison International | ||||||||
75,000 | 4.950%, 04/15/2025 | 82,326 | ||||||
Empresa Electrica Guacolda S.A. | ||||||||
300,000 | 4.560%, 04/30/2025 | 248,543 | ||||||
Enel SpA | ||||||||
740,000 | 8.750%, 09/24/2073(d)(g) | 843,200 | ||||||
IPALCO Enterprises, Inc. | ||||||||
110,000 | 4.250%, 05/01/2030(d) | 119,645 | ||||||
NextEra Energy Operating Partners L.P. | ||||||||
3,748,000 | 3.875%, 10/15/2026(d) | 3,751,354 | ||||||
Pacific Gas and Electric Co. | ||||||||
685,000 | 3.500%, 08/01/2050 | 663,751 | ||||||
Pampa Energia S.A. | ||||||||
150,000 | 9.125%, 04/15/2029(d) | 121,811 | ||||||
Vistra Operations Co. LLC | ||||||||
2,845,000 | 3.700%, 01/30/2027(d) | 2,931,414 | ||||||
|
| |||||||
10,702,268 | ||||||||
|
| |||||||
| TOTAL CORPORATE BONDS | 413,626,465 | ||||||
|
| |||||||
GOVERNMENT SECURITIES & AGENCY ISSUE: 0.6% | ||||||||
Dominican Republic International Bond | ||||||||
550,000 | 6.400%, 06/05/2049(d) | 506,000 | ||||||
Export-Import Bank of Korea | ||||||||
895,000 | 0.822%, 06/25/2022(e) | 894,084 | ||||||
Provincia de Buenos Aires Government Bonds | ||||||||
| 72,825,000 (ARS) | | 32.817%, 05/31/2022(e) | 882,514 | ||||
| 15,545,000 (ARS) | | 28.192%, 04/12/2025(d)(e) | 173,656 | ||||
United States Treasury Note | ||||||||
6,500,000 | 2.750%, 09/30/2020(a) | 6,541,659 | ||||||
|
| |||||||
| TOTAL GOVERNMENT SECURITIES & AGENCY ISSUE | 8,997,913 | ||||||
|
| |||||||
LIMITED PARTNERSHIPS: 0.2% | ||||||||
35,594 | GACP II L.P. | 1,707,999 | ||||||
1,300,000 | U.S. Farming Realty Trust II L.P.(b) | 896,626 | ||||||
|
| |||||||
| TOTAL LIMITED PARTNERSHIPS | 2,604,625 | ||||||
|
|
Principal Amount^ | Value | |||||||
MORTGAGE-BACKED SECURITIES: 18.4% | ||||||||
Adjustable Rate Mortgage Trust | ||||||||
$ 1,886,706 | Series 2005-2-6M2 | $ | 1,839,747 | |||||
322,024 | Series 2006-1-2A1 | 230,475 | ||||||
American Home Mortgage Investment Trust | ||||||||
324,831 | Series 2006-1-11A1 | 281,183 | ||||||
AREIT Trust | ||||||||
1,000,000 | Series 2019-CRE3-D | 833,860 | ||||||
Banc of America Alternative Loan Trust | ||||||||
66,227 | Series 2003-8-1CB1 | 66,721 | ||||||
625,530 | Series 2006-7-A4 | 284,186 | ||||||
Banc of America Funding Trust | ||||||||
61,976 | Series 2005-7-3A1 | 67,236 | ||||||
111,228 | Series 2006-6-1A2 | 108,033 | ||||||
669,475 | Series 2006-7-T2A3 | 646,957 | ||||||
350,835 | Series 2006-B-7A1 | 313,143 | ||||||
3,135,877 | Series 2007-1-TA4 | 3,237,576 | ||||||
59,553 | Series 2007-4-5A1 | 58,844 | ||||||
2,658,345 | Series 2010-R5-1A3 | 2,557,711 | ||||||
Banc of America Merrill Lynch Commercial Mortgage Securities Trust | ||||||||
1,474,000 | Series 2019-AHT-D | 1,281,689 | ||||||
Banc of America Mortgage Trust | ||||||||
19,610 | Series 2005-A-2A1 | 18,844 | ||||||
Bancorp Commercial Mortgage Trust | ||||||||
665,000 | Series 2019-CRE5-D | 590,377 | ||||||
BBCMS Trust | ||||||||
750,000 | Series 2018-CBM-E | 612,025 | ||||||
BCAP LLC Trust | ||||||||
210,727 | Series 2010-RR6-6A2 | 165,339 | ||||||
2,871,586 | Series 2011-R11-2A4 | 2,444,391 | ||||||
Bear Stearns Adjustable Rate Mortgage Trust | ||||||||
3,856,042 | Series 2005-12-25A1 | 2,987,289 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 61 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
MORTGAGE-BACKED SECURITIES (CONTINUED) | ||||||||
Bear Stearns Asset-Backed Securities I Trust | ||||||||
$ 516,552 | Series 2006-AC1-1A1 | $ | 355,671 | |||||
BF Mortgage Trust | ||||||||
666,000 | Series 2019-NYT-F | 580,324 | ||||||
BHP Trust | ||||||||
710,000 | Series 2019-BXHP-E | 590,618 | ||||||
BX Commercial Mortgage Trust | ||||||||
1,517,000 | Series 2019-IMC-G | 1,113,012 | ||||||
BX Trust | ||||||||
709,000 | Series 2019-MMP-F | 663,059 | ||||||
Carbon Capital VI Commercial Mortgage Trust | ||||||||
649,000 | Series 2019-FL2-B | 559,350 | ||||||
CF Trust | ||||||||
1,420,000 | Series 2019-MF1-F | 1,270,250 | ||||||
CFCRE Commercial Mortgage Trust | ||||||||
16,323,000 | Series 2016-C7-XE | 900,656 | ||||||
7,346,000 | Series 2016-C7-XF | 392,592 | ||||||
CG-CCRE Commercial Mortgage Trust | ||||||||
105,000 | Series 2014-FL2-COL1 | 73,735 | ||||||
205,000 | Series 2014-FL2-COL2 | 128,828 | ||||||
Chase Mortgage Finance Trust | ||||||||
3,270,029 | Series 2007-S2-1A9 | 2,494,617 | ||||||
1,616,828 | Series 2007-S3-1A15 | 1,151,153 | ||||||
ChaseFlex Trust | ||||||||
1,172,086 | Series 2007-3-2A1 | 999,685 | ||||||
CIM Trust | ||||||||
6,000,000 | Series 2016-1RR-B2 | 5,482,772 | ||||||
10,000,000 | Series 2016-2RR-B2 | 9,199,200 | ||||||
10,000,000 | Series 2016-3RR-B2 | 9,147,099 | ||||||
7,860,000 | Series 2017-3RR-B2 | 7,693,296 |
Principal Amount^ | Value | |||||||
Citicorp Mortgage Securities Trust | ||||||||
$ 2,447,880 | Series 2006-7-1A1 | $ | 2,323,190 | |||||
Citigroup Commercial Mortgage Trust | ||||||||
668,000 | Series 2015-GC27-D | 441,927 | ||||||
Citigroup COmmercial Mortgage Trust | ||||||||
800,000 | Series 2018-C6-D | 701,810 | ||||||
Citigroup Commercial Mortgage Trust | ||||||||
1,497,000 | Series 2018-TBR-F | 1,216,758 | ||||||
Citigroup Mortgage Loan Trust, Inc. | ||||||||
206,296 | Series 2005-5-2A2 | 166,637 | ||||||
2,912,832 | Series 2005-5-3A2A | 2,038,970 | ||||||
299,319 | Series 2009-6-8A2 | 311,111 | ||||||
2,916,636 | Series 2011-12-1A2 | 2,122,366 | ||||||
325,377 | Series 2018-A-A1 | 330,968 | ||||||
751,845 | Series 2018-C-A1 | 761,366 | ||||||
CitiMortgage Alternative Loan Trust | ||||||||
258,182 | Series 2006-A5-1A13 | 199,617 | ||||||
254,076 | Series 2006-A5-1A2 | 41,853 | ||||||
451,034 | Series 2007-A4-1A13 | 435,843 | ||||||
230,943 | Series 2007-A4-1A6 | 222,931 | ||||||
2,232,080 | Series 2007-A6-1A5 | 2,188,853 | ||||||
COMM Mortgage Trust | ||||||||
40,000 | Series 2012-LC4-C | 32,996 | ||||||
1,868,035 | Series 2014-UBS4-F | 436,302 | ||||||
3,345,369 | Series 2014-UBS4-G | 344,021 | ||||||
7,000 | Series 2014-UBS4-V | 1 | ||||||
537,000 | Series 2015-CR25-C | 503,287 | ||||||
1,989,000 | Series 2018-HCLV-D | 1,805,130 | ||||||
Connecticut Avenue Securities Trust | ||||||||
345,000 | Series 2020-R01-1M2 | 331,947 | ||||||
Countrywide Alternative Loan Trust | ||||||||
123,522 | Series 2003-22CB-1A1 | 129,236 | ||||||
479,984 | Series 2004-13CB-A4 | 404,019 |
The accompanying notes are an integral part of these financial statements.
62 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
MORTGAGE-BACKED SECURITIES (CONTINUED) | ||||||||
Countrywide Alternative Loan Trust (Continued) | ||||||||
$ 89,734 | Series 2004-16CB-1A1 | $ | 93,193 | |||||
97,042 | Series 2004-16CB-3A1 | 100,904 | ||||||
216,766 | Series 2004-J10-2CB1 | 228,814 | ||||||
4,782,567 | Series 2005-64CB-1A10 | 4,696,345 | ||||||
69,107 | Series 2005-J1-2A1 | 70,524 | ||||||
2,452,832 | Series 2006-13T1-A13 | 1,766,289 | ||||||
412,352 | Series 2006-31CB-A7 | 335,617 | ||||||
4,106,343 | Series 2006-36T2-2A1 | 2,690,720 | ||||||
435,746 | Series 2006-J1-2A1 | 99,533 | ||||||
215,510 | Series 2007-16CB-2A1 | 79,765 | ||||||
62,406 | Series 2007-16CB-2A2 | 171,300 | ||||||
411,349 | Series 2007-19-1A34 | 307,975 | ||||||
1,217,217 | Series 2007-20-A12 | 953,163 | ||||||
423,765 | Series 2007-22-2A16 | 256,559 | ||||||
2,743,865 | Series 2007-HY2-1A | 2,564,965 | ||||||
1,897,366 | Series 2007-HY7C-A4 | 1,547,620 | ||||||
Countrywide Alternative Loan Trust Resecuritization | ||||||||
532,291 | Series 2008-2R-2A1 | 352,910 | ||||||
3,703,627 | Series 2008-2R-4A1 | 3,060,433 | ||||||
Countrywide Home Loan GMSR Issuer Trust | ||||||||
1,980,000 | Series 2018-GT1-A | 1,912,437 | ||||||
Countrywide Home Loan Mortgage Pass-Through Trust | ||||||||
8,126 | Series 2004-HYB4-2A1 | 7,567 | ||||||
607,937 | Series 2005-23-A1 | 481,896 | ||||||
356,895 | Series 2005-HYB8-4A1 | 330,483 | ||||||
3,014,449 | Series 2006-9-A1 | 2,191,140 | ||||||
172,494 | Series 2007-10-A5 | 133,407 |
Principal Amount^ | Value | |||||||
$ 685,098 | Series 2007-13-A5 | $ | 534,944 | |||||
Credit Suisse Commercial Mortgage Securities Corp. | ||||||||
175,000 | Series 2019-SKLZ-D | 156,101 | ||||||
Credit Suisse First Boston Mortgage Securities Corp. | ||||||||
1,269,766 | Series 2005-11-7A1 | 971,664 | ||||||
Credit Suisse First Boston Mortgage- Backed Pass-Through Certificates | ||||||||
48,779 | Series 2003-27-4A4 | 51,259 | ||||||
2,454,184 | Series 2005-10-10A3 | 1,122,014 | ||||||
Credit Suisse Mortgage-Backed Trust | ||||||||
780,472 | Series 2006-6-1A10 | 627,262 | ||||||
653,008 | Series 2007-1-4A1 | 139,763 | ||||||
65,027 | Series 2007-2-2A5 | 62,477 | ||||||
1,580,779 | Series 2011-17R-1A2 | 1,532,928 | ||||||
630,000 | Series 2014-USA-A2 | 619,156 | ||||||
635,000 | Series 2014-USA-D | 502,580 | ||||||
1,475,000 | Series 2014-USA-E | 1,137,954 | ||||||
770,272 | Series 2018-RPL2-A1 | 783,096 | ||||||
302,031 | Series 2018-RPL7-A1 | 307,514 | ||||||
662,484 | Series 2019-RP10-A1 | 685,426 | ||||||
DBUBS Mortgage Trust | ||||||||
310,000 | Series 2017-BRBK-D | 316,862 | ||||||
Deutsche Mortgage and Asset Receiving Corp. | ||||||||
2,916,218 | Series 2014-RS1-1A2 | 2,877,229 | ||||||
Deutsche Mortgage Securities, Inc. Mortgage Loan Trust | ||||||||
101,629 | Series 2006-PR1-3A1 | 95,180 | ||||||
DSLA Mortgage Loan Trust | ||||||||
126,099 | Series 2005-AR5-2A1A | 93,004 | ||||||
Dukinfield II Plc | ||||||||
372,336 (GBP) | Series 2-A | 460,636 | ||||||
Federal Home Loan Mortgage Corp. REMICS | ||||||||
584,021 | Series 3118-SD | 110,493 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 63 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
MORTGAGE-BACKED SECURITIES (CONTINUED) | ||||||||
Federal Home Loan Mortgage Corp. REMICS (Continued) | ||||||||
$ 241,471 | Series 3301-MS | $ | 49,196 | |||||
298,577 | Series 3303-SE | 57,656 | ||||||
194,075 | Series 3303-SG | 41,513 | ||||||
61,753 | Series 3382-SB | 9,511 | ||||||
268,224 | Series 3382-SW | 54,202 | ||||||
83,450 | Series 3384-S | 9,417 | ||||||
172,802 | Series 3384-SG | 37,477 | ||||||
1,989,277 | Series 3404-SA | 423,512 | ||||||
105,227 | Series 3417-SX | 14,279 | ||||||
59,529 | Series 3423-GS | 7,353 | ||||||
525,857 | Series 3423-TG | 4,309 | ||||||
2,541,922 | Series 3435-S | 562,738 | ||||||
80,727 | Series 3445-ES | 11,376 | ||||||
353,418 | Series 3523-SM | 66,512 | ||||||
205,516 | Series 3560-KS | 32,342 | ||||||
118,390 | Series 3598-SA | 19,221 | ||||||
150,498 | Series 3641-TB | 171,910 | ||||||
513,794 | Series 3728-SV | 68,111 | ||||||
213,111 | Series 3758-S | 41,185 | ||||||
714,495 | Series 3770-SP | 79,994 |
Principal Amount^ | Value | |||||||
$ 274,194 | Series 3815-ST | $ | 55,513 | |||||
596,637 | Series 3859-SI | 142,458 | ||||||
182,244 | Series 3872-SL | 31,932 | ||||||
144,345 | Series 3900-SB | 23,867 | ||||||
30,651 | Series 3946-SM | 52,224 | ||||||
1,044,970 | Series 3957-DZ | 1,097,807 | ||||||
1,007,796 | Series 3972-AZ | 1,100,103 | ||||||
2,847,360 | Series 3984-DS | 530,469 | ||||||
6,808,992 | Series 4080-DS | 989,417 | ||||||
1,870,008 | Series 4229-MS | 2,049,655 | ||||||
4,253,505 | Series 4239-OU | 3,876,570 | ||||||
2,885,321 | Series 4291-MS | 598,509 | ||||||
2,606,325 | Series 4314-MS | 296,400 | ||||||
Federal Home Loan Mortgage Corp. Structured Agency Credit Risk Debt Notes | ||||||||
131,643 | Series 2015-DNA1-M2 | 131,604 | ||||||
35,148 | Series 2018-DNA1-M2 | 34,687 | ||||||
Federal National Mortgage Association | ||||||||
22,370,489 | Series 2020-M6-X | 1,043,449 | ||||||
Federal National Mortgage Association Connecticut Avenue Securities | ||||||||
370,763 | Series 2017-C05-1M2 | 366,289 | ||||||
Federal National Mortgage Association REMICS | ||||||||
302,915 | Series 2003-84-PZ | 348,605 | ||||||
590,505 | Series 2005-42-SA | 69,591 | ||||||
2,186,858 | Series 2006-92-LI | 467,250 |
The accompanying notes are an integral part of these financial statements.
64 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
MORTGAGE-BACKED SECURITIES (CONTINUED) | ||||||||
Federal National Mortgage Association REMICS (Continued) | ||||||||
$ 553,654 | Series 2007-39-AI | $ | 127,961 | |||||
162,810 | Series 2007-57-SX | 33,702 | ||||||
28,203 | Series 2007-68-SA | 4,614 | ||||||
31,834 | Series 2008-1-CI | 5,069 | ||||||
1,623,453 | Series 2008-33-SA | 345,180 | ||||||
53,492 | Series 2008-56-SB | 7,283 | ||||||
3,392,811 | Series 2009-110-SD | 653,756 | ||||||
41,945 | Series 2009-111-SE | 6,655 | ||||||
231,426 | Series 2009-86-CI | 32,555 | ||||||
145,742 | Series 2009-87-SA | 27,651 | ||||||
63,055 | Series 2009-90-IB | 9,671 | ||||||
56,132 | Series 2010-11-SC | 7,134 | ||||||
38,545 | Series 2010-115-SD | 5,114 | ||||||
3,448,701 | Series 2010-123-SK | 721,595 | ||||||
765,226 | Series 2010-134-SE | 72,423 | ||||||
214,996 | Series 2010-15-SL | 33,365 | ||||||
65,809 | Series 2010-9-GS | 6,933 | ||||||
6,420 | Series 2011-110-LS | 9,613 | ||||||
264,246 | Series 2011-111-VZ | 293,716 | ||||||
1,123,596 | Series 2011-141-PZ | 1,215,230 |
Principal Amount^ | Value | |||||||
$ 116,281 | Series 2011-5-PS | $ | 11,093 | |||||
2,038,513 | Series 2011-93-ES | 435,187 | ||||||
1,383,572 | Series 2012-106-SA | 295,447 | ||||||
2,994,607 | Series 2012-131-BS | 3,207,230 | ||||||
11,100,940 | Series 2013-109-BO | 10,097,860 | ||||||
1,954,279 | Series 2013-15-SC | 2,151,287 | ||||||
3,388,108 | Series 2014-50-WS | 612,745 | ||||||
First Horizon Alternative Mortgage Securities Trust | ||||||||
767,796 | Series 2006-FA6-1A4 | 531,179 | ||||||
292,235 | Series 2007-FA4-1A7 | 196,231 | ||||||
First Horizon Mortgage Pass-Through Trust | ||||||||
164,237 | Series 2006-1-1A10 | 124,376 | ||||||
Fontainebleau Miami Beach Trust | ||||||||
693,000 | Series 2019-FBLU H | 516,587 | ||||||
GCAT LLC | ||||||||
365,503 | Series 2020-1-A1 | 357,004 | ||||||
Government National Mortgage Association | ||||||||
611,718 | Series 2007-21-S | 112,899 | ||||||
220,046 | Series 2008-69-SB | 50,951 | ||||||
254,982 | Series 2009-104-SD | 52,167 | ||||||
876,385 | Series 2010-134-EI | 39,922 | ||||||
37,103 | Series 2010-98-IA | 4,364 | ||||||
579,816 | Series 2011-45-GZ | 621,857 | ||||||
148,281 | Series 2011-69-OC | 145,284 | ||||||
3,009,586 | Series 2011-69-SC | 519,586 | ||||||
507,177 | Series 2011-89-SA | 86,814 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 65 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
MORTGAGE-BACKED SECURITIES (CONTINUED) | ||||||||
Government National Mortgage Association (Continued) | ||||||||
$ 2,390,419 | Series 2013-102-BS | $ | 374,333 | |||||
40,501,831 | Series 2013-155-IB | 414,164 | ||||||
4,042,428 | Series 2014-145-CS | 710,315 | ||||||
2,610,166 | Series 2014-156-PS | 489,893 | ||||||
5,764,426 | Series 2014-4-SA | 1,145,944 | ||||||
10,175,589 | Series 2014-41-SA | 2,129,547 | ||||||
4,325,333 | Series 2014-5-SA | 790,007 | ||||||
4,443,018 | Series 2014-58-SG | 780,231 | ||||||
4,312,274 | Series 2014-76-SA | 789,563 | ||||||
4,926,266 | Series 2014-95-CS | 1,040,767 | ||||||
5,711,863 | Series 2018-105-SH | 805,894 | ||||||
72,973,231 | Series 2018-111-SA | 7,565,106 | ||||||
23,267,125 | Series 2018-134-CS | 3,384,466 | ||||||
12,907,516 | Series 2019-22-SA | 2,661,197 | ||||||
7,965,974 | Series 2019-61-NS | 1,523,879 | ||||||
19,176,644 | Series 2020-47-SA | 3,654,710 | ||||||
11,479,902 | Series 2020-47-SL | 1,981,545 | ||||||
GPMT Ltd. | ||||||||
1,507,000 | Series 2018-FL1-D | 1,240,740 | ||||||
GS Mortgage Securities Corp. Trust | ||||||||
1,503,000 | Series 2018-TWR-G | 1,311,223 |
Principal Amount^ | Value | |||||||
GS Mortgage Securities Trust | ||||||||
$ 1,010,000 | Series 2011-GC5-D | $ | 753,037 | |||||
2,216,000 | Series 2014-GC26-D | 1,410,215 | ||||||
GSCG Trust | ||||||||
710,000 | Series 2019-600C-H | 535,505 | ||||||
GSR Mortgage Loan Trust | ||||||||
41,103 | Series 2005-4F-6A1 | 40,746 | ||||||
724,832 | Series 2005-9F-2A1 | 538,264 | ||||||
107,526 | Series 2005-AR4-6A1 | 105,852 | ||||||
172,044 | Series 2005-AR6-4A5 | 169,785 | ||||||
265,942 | Series 2006-7F-3A4 | 145,825 | ||||||
HarborView Mortgage Loan Trust | ||||||||
282,560 | Series 2004-11-2A2A | 253,090 | ||||||
4,247,591 | Series 2007-7-2A1B | 3,302,346 | ||||||
Hawaii Hotel Trust | ||||||||
1,297,000 | Series 2019-MAUI-F | 1,080,302 | ||||||
Hilton USA Trust | ||||||||
1,073,000 | Series 2016-SFP-E | 1,030,296 | ||||||
Hospitality Mortgage Trust | ||||||||
1,063,012 | Series 2019-HIT-G | 708,673 | ||||||
Impac Secured Assets Trust | ||||||||
6,829,818 | Series 2007-2-1A1C | 5,673,676 | ||||||
IndyMac INDA Mortgage Loan Trust | ||||||||
261,901 | Series 2006-AR3-1A1 | 233,492 | ||||||
IndyMac INDX Mortgage Loan Trust | ||||||||
183,535 | Series 2004-AR7-A5 | 164,714 | ||||||
297,810 | Series 2005-AR11-A3 | 258,321 | ||||||
691,780 | Series 2006-AR2-2A1 | 550,513 | ||||||
2,150,334 | Series 2006-AR5-2A1 | 1,909,634 | ||||||
3,881,979 | Series 2006-R1-A3 | 3,439,732 | ||||||
1,409,530 | Series 2007-AR5-2A1 | 1,265,522 | ||||||
JP Morgan Chase Commercial Mortgage Securities Trust | ||||||||
1,285,000 | Series 2011-C3-E | 490,362 |
The accompanying notes are an integral part of these financial statements.
66 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
MORTGAGE-BACKED SECURITIES (CONTINUED) | ||||||||
JP Morgan Chase Commercial Mortgage Securities Trust (Continued) | ||||||||
$ 1,531,000 | Series 2019-MFP-F | $ | 1,379,677 | |||||
219,000 | Series 2019-UES-C | 217,249 | ||||||
224,000 | Series 2019-UES-D | 216,957 | ||||||
261,000 | Series 2019-UES-E | 248,913 | ||||||
274,000 | Series 2019-UES-F | 244,499 | ||||||
299,000 | Series 2019-UES-G | 248,946 | ||||||
JP Morgan Mortgage Trust | ||||||||
369,387 | Series 2004-S1-2A1 | 393,626 | ||||||
2,401,126 | Series 2005-ALT1-3A1 | 2,007,782 | ||||||
50,269 | Series 2007-A1-4A2 | 48,092 | ||||||
14,994 | Series 2007-S1-1A2 | 14,028 | ||||||
751,252 | Series 2007-S3-1A97 | 561,558 | ||||||
353,483 | Series 2008-R2-2A | 355,818 | ||||||
JP Morgan Resecuritization Trust | ||||||||
7,314,074 | Series 2015-4-1A7 | 4,769,347 | ||||||
JPMBB Commercial Mortgage Securities Trust | ||||||||
1,616,000 | Series 2014-C23-D | 1,304,357 | ||||||
300,000 | Series 2014-C23-E | 172,310 | ||||||
78,000 | Series 2015-C27-D | 61,309 | ||||||
4,749,500 | Series 2015-C27-XFG | 249,353 | ||||||
Legacy Mortgage Asset Trust | ||||||||
1,091,773 | Series 2020-GS1-A1 | 1,092,273 | ||||||
Lehman Mortgage Trust | ||||||||
1,679,833 | Series 2006-2-2A3 | 1,764,147 | ||||||
Lehman XS Trust | ||||||||
124,219 | Series 2006-2N-1A1 | 107,733 | ||||||
LoanCore Issuer Ltd. | ||||||||
1,296,000 | Series 2019-CRE3-D | 1,190,450 | ||||||
Master Alternative Loan Trust | ||||||||
33,220 | Series 2003-9-4A1 | 34,423 | ||||||
29,396 | Series 2004-5-1A1 | 30,422 |
Principal Amount^ | Value | |||||||
$ 35,952 | Series 2004-5-2A1 | $ | 37,580 | |||||
158,820 | Series 2004-8-2A1 | 165,090 | ||||||
Merrill Lynch Alternative Note Asset Trust | ||||||||
387,588 | Series 2007-AF1-1AF2 | 372,020 | ||||||
Merrill Lynch Mortgage Investors Trust | ||||||||
9,550 | Series 2006-2-2A | 9,139 | ||||||
Morgan Stanley Capital Barclays Bank Trust | ||||||||
551,000 | Series 2016-MART-D | 522,209 | ||||||
Morgan Stanley Capital I Trust | ||||||||
687,000 | Series 2007-IQ15-C | 677,703 | ||||||
285,000 | Series 2011-C2-D | 198,191 | ||||||
235,000 | Series 2011-C2-E | 142,486 | ||||||
1,508,000 | Series 2019-PLND-F | 1,254,121 | ||||||
Morgan Stanley Mortgage Loan Trust | ||||||||
2,414,205 | Series 2005-9AR-2A | 2,226,805 | ||||||
2,915,625 | Series 2006-11-2A2 | 2,093,011 | ||||||
367,722 | Series 2006-7-3A | 304,578 | ||||||
260,618 | Series 2007-13-6A1 | 207,159 | ||||||
Morgan Stanley Re-REMIC Trust | ||||||||
351,211 | Series 2010-R9-3C | 360,939 | ||||||
Motel 6 Trust | ||||||||
1,018,209 | Series 2017-M6MZ-M | 807,014 | ||||||
Prime Mortgage Trust | ||||||||
1,342,071 | Series 2006-DR1-2A1 | 1,105,093 | ||||||
Residential Accredit Loans, Inc. | ||||||||
938,999 | Series 2006-QS10-A9 | 942,686 | ||||||
591,091 | Series 2006-QS14-A18 | 526,250 | ||||||
443,233 | Series 2006-QS17-A5 | 406,607 | ||||||
454,910 | Series 2006-QS2-1A4 | 435,758 | ||||||
526,096 | Series 2006-QS7-A3 | 483,576 | ||||||
573,269 | Series 2007-QS1-2A10 | 523,916 | ||||||
876,823 | Series 2007-QS3-A1 | 823,004 | ||||||
1,998,786 | Series 2007-QS6-A6 | 1,913,463 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 67 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
MORTGAGE-BACKED SECURITIES (CONTINUED) | ||||||||
Residential Accredit Loans, Inc. (Continued) | ||||||||
$ 498,364 | Series 2007-QS8-A8 | $ | 456,885 | |||||
1,506,430 | Series 2007-QS9-A33 | 1,365,387 | ||||||
Residential Asset Securitization Trust | ||||||||
169,631 | Series 2005-A8CB-A9 | 143,204 | ||||||
286,380 | Series 2006-A8-1A1 | 237,471 | ||||||
253,007 | Series 2007-A1-A8 | 145,055 | ||||||
482,714 | Series 2007-A5-2A5 | 390,580 | ||||||
16,143,476 | Series 2007-A9-A1 | 3,631,034 | ||||||
16,143,476 | Series 2007-A9-A2 | 6,129,767 | ||||||
Residential Funding Mortgage Securities I Trust | ||||||||
528,860 | Series 2006-S4-A5 | 506,641 | ||||||
Starwood Retail Property Trust | ||||||||
235,000 | Series 2014-STAR-C | 161,715 | ||||||
980,000 | Series 2014-STAR-D | 620,216 | ||||||
950,000 | Series 2014-STAR-E | 431,322 | ||||||
Structured Adjustable Rate Mortgage Loan Trust | ||||||||
747,169 | Series 2005-14-A1 | 542,775 | ||||||
316,642 | Series 2005-15-1A1 | 233,254 | ||||||
415,274 | Series 2005-22-3A1 | 343,654 | ||||||
887,838 | Series 2008-1-A2 | 758,504 | ||||||
Structured Asset Securities Corp. Trust | ||||||||
662,332 | Series 2005-5-2A2 | 636,963 | ||||||
8,441,270 | Series 2007-4-1A3 | 1,609,651 | ||||||
Tharaldson Hotel Portfolio Trust | ||||||||
1,382,807 | Series 2018-THL-F | 1,019,034 | ||||||
UBS-Barclays Commercial Mortgage Trust | ||||||||
305,000 | Series 2012-C2-E | 114,761 |
Principal Amount^ | Value | |||||||
Washington Mutual Mortgage Pass-Through Certificates Trust | ||||||||
$ 416,257 | Series 2005-1-5A1 | $ | 419,563 | |||||
607,069 | Series 2006-5-1A5 | 564,984 | ||||||
460,253 | Series 2006-8-A6 | 243,985 | ||||||
2,750,437 | Series 2007-5-A3 | 1,910,782 | ||||||
Wells Fargo Alternative Loan Trust | ||||||||
109,677 | Series 2007-PA2-3A1 | 147,964 | ||||||
256,716 | Series 2007-PA2-3A2 | 41,099 | ||||||
Wells Fargo Commercial Mortgage Trust | ||||||||
19,971,000 | Series 2015-C28-XE | 967,229 | ||||||
398,000 | Series 2015-NXS4-D | 332,819 | ||||||
750,000 | Series 2016-C33-D | 527,065 | ||||||
1,225,000 | Series 2019-JWDR-C | 1,150,910 | ||||||
Wells Fargo Mortgage-Backed Securities Trust | ||||||||
174,263 | Series 2006-AR19-A1 | 100,679 | ||||||
WFRBS Commercial Mortgage Trust | ||||||||
155,000 | Series 2011-C2-D | 152,372 | ||||||
510,000 | Series 2011-C3-D | 247,784 | ||||||
500,000 | Series 2012-C6-D | 486,871 | ||||||
160,000 | Series 2012-C7-C | 111,275 | ||||||
290,000 | Series 2012-C7-E | 121,526 | ||||||
|
| |||||||
| TOTAL MORTGAGE-BACKED SECURITIES | 272,501,159 | ||||||
|
| |||||||
MUNICIPAL BONDS: 0.2% | ||||||||
Puerto Rico: 0.2% | ||||||||
Commonwealth of Puerto Rico | ||||||||
1,330,000 | Series A | 801,325 | ||||||
Puerto Rico Commonwealth Aqueduct & Sewer Authority | ||||||||
100,000 | Series A | 104,250 | ||||||
311,000 | Series A | 317,997 | ||||||
280,000 | Series A | 291,200 | ||||||
Puerto Rico Public Buildings Authority | ||||||||
675,000 | Series U | 469,125 |
The accompanying notes are an integral part of these financial statements.
68 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
MUNICIPAL BONDS(CONTINUED) | ||||||||
Puerto Rico (continued) | ||||||||
Puerto Rico Sales Tax Financing Corp. Sales Tax Revenue | ||||||||
$ 21,000 | Series A-1 | $ | 18,948 | |||||
40,000 | Series A-1 | 32,972 | ||||||
39,000 | Series A-1 | 29,820 | ||||||
50,000 | Series A-1 | 35,265 | ||||||
56,000 | Series A-1 | 36,270 | ||||||
41,000 | Series A-1 | 42,807 | ||||||
21,000 | Series A-1 | 21,462 | ||||||
536,000 | Series A-1 | 151,849 | ||||||
437,000 | Series A-1 | 89,253 | ||||||
151,000 | Series A-1 | 155,554 | ||||||
383,000 | Series A-1 | 401,403 | ||||||
210,000 | Series A-2 | 211,497 | ||||||
7,000 | Series A-2 | 7,111 | ||||||
84,000 | Series A-2 | 86,818 | ||||||
|
| |||||||
| TOTAL MUNICIPAL BONDS | 3,304,926 | ||||||
|
| |||||||
SHORT-TERM INVESTMENTS: 10.9% | ||||||||
TREASURY BILLS: 3.0% | ||||||||
United States Treasury Bill | ||||||||
2,190,000 | 1.986%, 07/16/2020(a)(o) | 2,188,246 | ||||||
2,000,000 | 0.094%, 08/13/2020(a)(o) | 1,999,701 | ||||||
27,050,000 | 1.398%, 11/05/2020(a)(o) | 27,035,686 | ||||||
5,670,000 | 0.163%, 11/27/2020(o) | 5,666,222 | ||||||
7,000,000 | 0.165%, 02/25/2021(o) | 6,993,029 | ||||||
|
| |||||||
| TOTAL TREASURY BILLS | 43,882,884 | ||||||
|
|
Principal Amount^ | Value | |||||||
REPURCHASE AGREEMENTS: 7.9% | ||||||||
$115,969,000 | Fixed Income Clearing Corp. 0.000%, 6/30/2020, due 07/01/2020 [collateral: par value $40,000,000 U.S. Treasury Bond, 3.000%, due 05/15/2047, value $54,898,599; par value $21,023,000 U.S. Treasury Note, 2.250%, due 11/15/2027, value $23,761,392; par value $2,187,400 U.S. Treasury Note, 0.500%, due 03/15/2023, value $2,210,432; par value $34,803,300 U.S. Treasury Note, 0.625%, due 04/15/2023, value $37,423,445] (proceeds $115,969,000) | $ | 115,969,000 | |||||
|
| |||||||
| TOTAL REPURCHASE AGREEMENTS | 115,969,000 | ||||||
|
| |||||||
| TOTAL SHORT-TERM INVESTMENTS | 159,851,884 | ||||||
|
| |||||||
| TOTAL PURCHASED OPTIONS | 38,663 | ||||||
|
| |||||||
| TOTAL INVESTMENTS BEFORE INVESTMENTS | 1,465,172,459 | ||||||
|
| |||||||
Other Assets in Excess of Liabilities: 0.8% | 12,416,047 | |||||||
|
| |||||||
NET ASSETS: 100.0% | $ | 1,477,588,506 | ||||||
|
|
Percentages are stated as a percent of net assets.
ADR | American Depositary Receipt |
BADLARPP | Argentina Badlar Floating Rate Notes |
CLO | Collateralized Loan Obligation |
CMT | Constant Maturity Treasury Index |
ETF | Exchange Traded Fund |
EURIBOR | Euro Interbank Offered Rate |
LIBOR | London Interbank Offered Rate |
L.P. | Limited Partnership |
PIK | Payment-in-kind |
REMICS | Real Estate Mortgage Investment Conduit |
* | Non-Income Producing Security. |
^ | The principal amount is stated in U.S. Dollars unless otherwise indicated. |
(a) | Securities with an aggregate fair value of $161,495,830 have been pledged as collateral for options, total return swaps, credit default swaps, securities sold short and futures positions. |
(b) | Security is valued using significant unobservable inputs in good faith in accordance with procedures approved by the Board of Trustees. |
(c) | Perpetual Call. |
(d) | Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under Securities Act of 1933. |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 69 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
(e) | Floating Interest Rate at June 30, 2020. |
(f) | Coupon increases periodically based upon a predetermined schedule. Stated interest rate in effect at June 30, 2020. |
(g) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect at June 30, 2020. |
(h) | This position represents an unsettled loan commitment at period end. Certain details associated with this purchase are not known prior to the settlement date, including coupon rate, which will be adjusted on settlement date. |
(i) | Security is currently in default and/or non-income producing. |
(j) | When issued security. |
(k) | Pay-in-kind securities. |
(l) | Interest Only security. Security with a notional or nominal principal amount. |
(m) | Principal Only security. |
(n) | Issued with a zero coupon. Income is recognized through the accretion of discount. |
(o) | The rate shown represents yield-to-maturity. |
CURRENCY ABBREVIATIONS:
ARS | Argentine Peso |
CAD | Canadian Dollar |
COP | Colombian Peso |
EUR | Euro |
GBP | British Pound |
NZD | New Zealand Dollar |
SEK | Swedish Krona |
THB | Thai Baht |
USD | U.S. Dollar |
UNFUNDED LOAN COMMITMENTS—At June 30, 2020, the Fund had unfunded loan commitments which could be extended at the option of the borrowers, pursuant to the following agreements:
Borrower | Principal Amount | Current Value | Unrealized Gain (Loss) | |||||||||
McDermott Technology Americas, Inc., 0.500%, 10/23/2020 | $ | 294,000 | $ | 292,530 | $ | (1,470 | ) |
The accompanying notes are an integral part of these financial statements.
70 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF PURCHASED OPTIONS at June 30, 2020 (Unaudited)
Description | Counterparty | Exercise Price | Expiration Date | Number of Contracts | Notional Amount | Market Value | Premiums Paid | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||
COMMON STOCKS |
| |||||||||||||||||||||||||||||
Call |
| |||||||||||||||||||||||||||||
Cincinnati Bell, Inc. | Goldman Sachs & Co. | $ | 12.50 | 8/21/2020 | 151 | $ | 224,235 | $ | 22,650 | $ | 5,707 | $ | 16,943 | |||||||||||||||||
Put |
| |||||||||||||||||||||||||||||
Forescout Technologies, Inc. | Goldman Sachs & Co. | 20.00 | 8/21/2020 | 105 | 222,600 | 16,013 | 23,980 | (7,967 | ) | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Total Purchased Options | $ | 38,663 | $ | 29,687 | $ | 8,976 | ||||||||||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 71 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF SECURITIES SOLD SHORT at June 30, 2020 (Unaudited)
Shares | Value | |||||||
COMMON STOCKS: (4.2)% | ||||||||
(3,596) | American Homes 4 Rent Class A | $ | (96,732 | ) | ||||
(39,242) | ANGI Homeservices, Inc. Class A* | (476,790 | ) | |||||
(39,302) | Aon Plc Class A | (7,569,565 | ) | |||||
(4,312) | Bayerische Motoren Werke AG | (275,340 | ) | |||||
(2,108) | Booz Allen Hamilton Holding Corp. | (163,981 | ) | |||||
(16,366) | BorgWarner, Inc. | (577,720 | ) | |||||
(601) | CACI International, Inc. Class A* | (130,345 | ) | |||||
(472,753) | Charles Schwab Corp. (The) | (15,950,686 | ) | |||||
(47,034) | Cincinnati Bell, Inc.* | (698,455 | ) | |||||
(5,517) | Daimler AG | (224,099 | ) | |||||
(44,418) | El Paso Electric Co. | (2,976,006 | ) | |||||
(204,412) | Eldorado Resorts, Inc.* | (8,188,745 | ) | |||||
(12,551) | Evolution Gaming Group AB(d) | (749,237 | ) | |||||
(16,825) | Fiat Chrysler Automobiles N.V.* | (169,113 | ) | |||||
(34,023) | Ford Motor Co. | (206,860 | ) | |||||
(10,301) | General Motors Co. | (260,615 | ) | |||||
(2,405) | Jacobs Engineering Group, Inc. | (203,944 | ) | |||||
(22,936) | Just Eat Takeaway.com N.V.*(d) | (2,390,933 | ) | |||||
(381,916) | Morgan Stanley | (18,446,543 | ) | |||||
(1,749) | Science Applications International Corp. | (135,862 | ) | |||||
(20,860) | Softbank Corp. | (266,059 | ) | |||||
(7,598) | Stantec, Inc. | (234,398 | ) | |||||
(618) | Tesla, Inc.* | (667,323 | ) | |||||
(2,546) | Tetra Tech, Inc. | (201,440 | ) | |||||
(7,260) | Toyota Motor Corp. | (455,379 | ) | |||||
(5,321) | Uber Technologies, Inc.* | (165,377 | ) | |||||
(3,156) | WSP Global, Inc. | (192,992 | ) | |||||
(195) | WW Grainger, Inc. | (61,261 | ) | |||||
|
| |||||||
| TOTAL COMMON STOCKS | (62,135,800 | ) | |||||
|
| |||||||
EXCHANGE-TRADED FUNDS: (0.2)% | ||||||||
(1,175) | Consumer Discretionary Select Sector SPDR Fund | (150,059 | ) | |||||
(68,630) | Financial Select Sector SPDR Fund | (1,588,098 | ) | |||||
(1,827) | iShares Russell Mid-Cap Growth ETF | (288,885 | ) | |||||
(2,219) | iShares U.S. Real Estate ETF | (174,880 | ) | |||||
(9,629) | VanEck Vectors Oil Services ETF | (1,173,583 | ) | |||||
|
| |||||||
| TOTAL EXCHANGE-TRADED FUNDS | (3,375,505 | ) | |||||
|
|
Principal Amount^ | Value | |||||||
CORPORATE BONDS: (0.2)% | ||||||||
Dell International LLC / EMC Corp. | ||||||||
$(450,000) | 7.125%, 06/15/2024(d) | $ | (466,622 | ) | ||||
Gray Television, Inc. | ||||||||
(556,000) | 5.125%, 10/15/2024(d) | (557,448 | ) | |||||
Gray Television, Inc. | ||||||||
(362,000) | 5.875%, 07/15/2026(d) | (361,162 | ) | |||||
Western Digital Corp. | ||||||||
(848,000) | 4.750%, 02/15/2026 | (877,672 | ) | |||||
|
| |||||||
| TOTAL CORPORATE BONDS | (2,262,904 | ) | |||||
|
| |||||||
| TOTAL SECURITIES SOLD SHORT | $ | (67,774,209 | ) | ||||
|
|
The accompanying notes are an integral part of these financial statements.
72 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS at June 30, 2020 (Unaudited)
At June 30, 2020, the Fund had the following forward foreign currency exchange contracts:
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||||
Counterparty | Settlement Date | Fund Receiving | U.S. $ Value at June 30, 2020 | Fund Delivering | U.S. $ Value at June 30, 2020 | Unrealized Appreciation | Unrealized Depreciation | |||||||||||||||||||||
Bank of America N.A. | 7/23/2020 | USD | $ | 461,188 | CAD | $ | 481,097 | $ | — | $ | (19,909 | ) | ||||||||||||||||
7/23/2020 | USD | 1,597,305 | EUR | 1,652,732 | — | (55,427 | ) | |||||||||||||||||||||
Barclays Bank Plc | 7/23/2020 | USD | 537,871 | EUR | 556,532 | — | (18,661 | ) | ||||||||||||||||||||
Deutsche Bank AG | 7/31/2020 | USD | 501,288 | GBP | 498,586 | 2,702 | — | |||||||||||||||||||||
Goldman Sachs & Co. | 9/15/2020 | CAD | 21,449 | USD | 21,364 | 85 | — | |||||||||||||||||||||
9/15/2020 | CAD | 5,069 | USD | 5,054 | 15 | — | ||||||||||||||||||||||
9/15/2020 | CAD | 6,097 | USD | 6,082 | 15 | — | ||||||||||||||||||||||
9/15/2020 | CAD | 8,815 | USD | 8,823 | — | (8 | ) | |||||||||||||||||||||
9/15/2020 | CAD | 3,159 | USD | 3,171 | — | (12 | ) | |||||||||||||||||||||
9/15/2020 | CAD | 43,046 | USD | 43,116 | — | (70 | ) | |||||||||||||||||||||
9/15/2020 | CAD | 36,214 | USD | 36,389 | — | (175 | ) | |||||||||||||||||||||
9/15/2020 | CAD | 34,965 | USD | 35,165 | — | (200 | ) | |||||||||||||||||||||
9/15/2020 | CAD | 200,684 | USD | 202,410 | — | (1,726 | ) | |||||||||||||||||||||
9/15/2020 | EUR | 1,482,266 | USD | 1,476,625 | 5,641 | — | ||||||||||||||||||||||
9/15/2020 | EUR | 1,996,917 | USD | 1,996,908 | 9 | — | ||||||||||||||||||||||
9/15/2020 | NZD | 4,447 | USD | 4,437 | 10 | — | ||||||||||||||||||||||
9/15/2020 | NZD | 157,698 | USD | 158,762 | — | (1,064 | ) | |||||||||||||||||||||
9/15/2020 | SEK | 7,646 | USD | 7,634 | 12 | — | ||||||||||||||||||||||
9/15/2020 | SEK | 1,720 | USD | 1,718 | 2 | — | ||||||||||||||||||||||
9/15/2020 | SEK | 1,237 | USD | 1,236 | 1 | — | ||||||||||||||||||||||
9/15/2020 | SEK | 2,872 | USD | 2,875 | — | (3 | ) | |||||||||||||||||||||
9/15/2020 | USD | 640,350 | CAD | 638,119 | 2,231 | — | ||||||||||||||||||||||
9/15/2020 | USD | 18,725 | CAD | 18,585 | 140 | — | ||||||||||||||||||||||
9/15/2020 | USD | 19,863 | CAD | 19,833 | 30 | — | ||||||||||||||||||||||
9/15/2020 | USD | 6,559 | CAD | 6,538 | 21 | — | ||||||||||||||||||||||
9/15/2020 | USD | 1,985 | CAD | 1,983 | 2 | — | ||||||||||||||||||||||
9/15/2020 | USD | 72,206 | CAD | 72,208 | — | (2 | ) | |||||||||||||||||||||
9/15/2020 | USD | 7,242,344 | EUR | 7,158,509 | 83,835 | — | ||||||||||||||||||||||
9/15/2020 | USD | 98,577 | EUR | 98,045 | 532 | — | ||||||||||||||||||||||
9/15/2020 | USD | 79,828 | EUR | 79,471 | 357 | — | ||||||||||||||||||||||
9/15/2020 | USD | 565,117 | NZD | 562,866 | 2,251 | — | ||||||||||||||||||||||
9/15/2020 | USD | 7,992 | NZD | 7,991 | 1 | — | ||||||||||||||||||||||
9/15/2020 | USD | 9,593 | NZD | 9,602 | — | (9 | ) | |||||||||||||||||||||
9/15/2020 | USD | 5,972 | NZD | 5,993 | — | (21 | ) | |||||||||||||||||||||
9/15/2020 | USD | 8,793 | NZD | 8,829 | — | (36 | ) | |||||||||||||||||||||
9/15/2020 | USD | 20,305 | NZD | 20,365 | — | (60 | ) | |||||||||||||||||||||
HSBC Holdings Plc | 8/13/2020 | USD | 178,742 | EUR | 185,596 | — | (6,854 | ) | ||||||||||||||||||||
JPMorgan Chase Bank N.A. | 8/25/2020 | EUR | 460,749 | USD | 454,263 | 6,486 | — | |||||||||||||||||||||
8/25/2020 | EUR | 679,482 | USD | 677,733 | 1,749 | — | ||||||||||||||||||||||
8/25/2020 | EUR | 403,111 | USD | 403,396 | — | (285 | ) | |||||||||||||||||||||
8/25/2020 | EUR | 544,094 | USD | 545,029 | — | (935 | ) | |||||||||||||||||||||
8/25/2020 | USD | 7,861,658 | EUR | 7,816,391 | 45,267 | — | ||||||||||||||||||||||
Morgan Stanley & Co. | 7/8/2020 | USD | 1,619,423 | COP | 1,753,049 | — | (133,626 | ) | ||||||||||||||||||||
9/16/2020 | USD | 2,287,691 | EUR | 2,273,882 | 13,809 | — | ||||||||||||||||||||||
9/30/2020 | USD | 483,243 | EUR | 484,201 | — | (958 | ) | |||||||||||||||||||||
Standard Chartered Bank | 7/2/2020 | EUR | 3,079,212 | USD | 3,074,554 | 4,658 | — | |||||||||||||||||||||
7/2/2020 | USD | 3,028,330 | EUR | 3,079,212 | — | (50,882 | ) | |||||||||||||||||||||
10/2/2020 | USD | 3,080,787 | EUR | 3,085,514 | — | (4,727 | ) | |||||||||||||||||||||
UBS AG | 7/22/2020 | THB | 3,529,063 | USD | 3,402,371 | 126,692 | — | |||||||||||||||||||||
7/22/2020 | USD | 3,352,903 | THB | 3,529,062 | — | (176,159 | ) | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
$ | 46,498,650 | $ | 46,673,906 | $ | 296,553 | $ | (471,809 | ) | ||||||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 73 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF FINANCIAL FUTURES CONTRACTS at June 30, 2020 (Unaudited)
Description | Number of Contracts | Notional Amount | Notional Value | Expiration Date | Unrealized Appreciation/ (Depreciation) | |||||||||||||||
Futures Contracts – Long | ||||||||||||||||||||
2YR U.S. Treasury Notes | 604 | $ | 120,800,000 | $ | 133,380,188 | 9/30/2020 | $ | 22,943 | ||||||||||||
|
| |||||||||||||||||||
Total Long | $ | 22,943 | ||||||||||||||||||
|
| |||||||||||||||||||
Futures Contracts – Short | ||||||||||||||||||||
5YR U.S. Treasury Notes | (617 | ) | $ | (61,700,000 | ) | $ | (77,582,930 | ) | 9/30/2020 | $ | (176,168 | ) | ||||||||
10YR U.S. Treasury Notes | (114 | ) | (11,400,000 | ) | (15,865,594 | ) | 9/21/2020 | (54,598 | ) | |||||||||||
Ultra-Long U.S. Treasury Bonds | (19 | ) | (1,900,000 | ) | (4,144,969 | ) | 9/21/2020 | (750 | ) | |||||||||||
Ultra 10YR U.S. Treasury Notes | (148 | ) | (14,800,000 | ) | (23,307,687 | ) | 9/21/2020 | (144,146 | ) | |||||||||||
|
| |||||||||||||||||||
Total Short | $ | (375,662 | ) | |||||||||||||||||
|
| |||||||||||||||||||
Total Futures Contracts | $ | (352,719 | ) | |||||||||||||||||
|
|
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited)
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS (1)(2)(3) | ||||||||||||||||||||||||||||||||
Description | Maturity Date | Fixed Deal (Pay) Rate | Implied Credit Spread at June 30, 2020 | Notional Amount(4) | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid / (Received) | Unrealized Appreciation / (Depreciation) | ||||||||||||||||||||||||
Buy Protection |
| |||||||||||||||||||||||||||||||
Accor S.A. | 6/20/2025 | (1.000 | %) | 2.188 | % | EUR | (5,850,000 | ) | Quarterly | $ | 363,233 | $ | 482,601 | $ | (119,368 | ) | ||||||||||||||||
Aegon N.V. | 6/20/2025 | (1.000 | %) | 0.854 | % | (2,950,000 | ) | Quarterly | (23,859 | ) | 47,741 | (71,600 | ) | |||||||||||||||||||
AES Corp. (The) | 12/20/2024 | (5.000 | %) | 2.000 | % | $ | (5,550,000 | ) | Quarterly | (696,856 | ) | (828,098 | ) | 131,242 | ||||||||||||||||||
Airbus Finance B.V. | 6/20/2025 | (1.000 | %) | 1.150 | % | EUR | (6,600,000 | ) | Quarterly | 53,845 | 448,506 | (394,661 | ) | |||||||||||||||||||
American Axle & Manufacturing, Inc. | 6/20/2025 | (5.000 | %) | 5.010 | % | $ | (10,200,000 | ) | Quarterly | 4,070 | 1,938,000 | (1,933,930 | ) | |||||||||||||||||||
American International Group, Inc. | 6/20/2025 | (1.000 | %) | 0.793 | % | (1,950,000 | ) | Quarterly | (19,550 | ) | — | (19,550 | ) | |||||||||||||||||||
Amgen, Inc. | 6/20/2025 | (1.000 | %) | 0.313 | % | (2,700,000 | ) | Quarterly | (91,652 | ) | (86,105 | ) | (5,547 | ) | ||||||||||||||||||
Anglo American Capital Plc | 6/20/2025 | (5.000 | %) | 1.211 | % | EUR | (2,350,000 | ) | Quarterly | (484,470 | ) | (435,739 | ) | (48,731 | ) | |||||||||||||||||
Anheuser-Busch InBev S.A. | 6/20/2025 | (1.000 | %) | 0.768 | % | (6,250,000 | ) | Quarterly | (80,444 | ) | 26,184 | (106,628 | ) | |||||||||||||||||||
ArcelorMittal S.A. | 6/20/2025 | (5.000 | %) | 2.658 | % | (4,600,000 | ) | Quarterly | (552,532 | ) | (340,152 | ) | (212,380 | ) | ||||||||||||||||||
Assicurazioni Generali SpA | 6/20/2025 | (1.000 | %) | 0.882 | % | (2,900,000 | ) | Quarterly | (18,810 | ) | 65,042 | (83,852 | ) | |||||||||||||||||||
AT&T, Inc. | 6/20/2025 | (1.000 | %) | 1.146 | % | $ | (3,600,000 | ) | Quarterly | 25,159 | 134,017 | (108,858 | ) | |||||||||||||||||||
AutoZone, Inc. | 6/20/2025 | (1.000 | %) | 0.270 | % | (2,150,000 | ) | Quarterly | (77,710 | ) | (80,049 | ) | 2,339 | |||||||||||||||||||
Avnet, Inc. | 6/20/2025 | (1.000 | %) | 0.600 | % | (8,050,000 | ) | Quarterly | (157,459 | ) | (204,132 | ) | 46,673 | |||||||||||||||||||
Banco Santander S.A. | 6/20/2025 | (1.000 | %) | 1.007 | % | EUR | (6,450,000 | ) | Quarterly | 2,537 | 126,545 | (124,008 | ) |
The accompanying notes are an integral part of these financial statements.
74 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited) (Continued)
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS (1)(2)(3) (CONTINUED) | ||||||||||||||||||||||||||||||||
Description | Maturity Date | Fixed Deal (Pay) Rate | Implied Credit Spread at June 30, 2020 | Notional Amount(4) | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid / (Received) | Unrealized Appreciation / (Depreciation) | ||||||||||||||||||||||||
Buy Protection (Continued) |
| |||||||||||||||||||||||||||||||
BAT International Finance Plc | 6/20/2025 | (1.000 | %) | 0.758 | % | EUR | (2,850,000 | ) | Quarterly | $ | (38,276 | ) | $ | 12,536 | $ | (50,812 | ) | |||||||||||||||
Bayer AG | 6/20/2025 | (1.000 | %) | 0.549 | % | (150,000 | ) | Quarterly | (3,781 | ) | (3,796 | ) | 15 | |||||||||||||||||||
Block Financial LLC | 6/20/2025 | (5.000 | %) | 0.855 | % | $ | (8,500,000 | ) | Quarterly | (1,702,389 | ) | (1,660,639 | ) | (41,750 | ) | |||||||||||||||||
BMW Finance N.V. | 6/20/2025 | (1.000 | %) | 0.721 | % | EUR | (2,550,000 | ) | Quarterly | (39,458 | ) | 7,232 | (46,690 | ) | ||||||||||||||||||
Bouygues S.A. | 6/20/2025 | (1.000 | %) | 0.384 | % | (5,950,000 | ) | Quarterly | (206,377 | ) | (188,063 | ) | (18,314 | ) | ||||||||||||||||||
BP Capital Markets Plc | 6/20/2025 | (1.000 | %) | 0.886 | % | (950,000 | ) | Quarterly | (5,959 | ) | (4,710 | ) | (1,249 | ) | ||||||||||||||||||
British Telecommunications Plc | 6/20/2025 | (1.000 | %) | 0.992 | % | (8,900,000 | ) | Quarterly | (4,114 | ) | 73,693 | (77,807 | ) | |||||||||||||||||||
Campbell Soup Co. | 6/20/2025 | (1.000 | %) | 0.331 | % | $ | (2,600,000 | ) | Quarterly | (85,872 | ) | (104,289 | ) | 18,417 | ||||||||||||||||||
Carrefour S.A. | 6/20/2025 | (1.000 | %) | 0.683 | % | EUR | (2,350,000 | ) | Quarterly | (41,485 | ) | (21,401 | ) | (20,084 | ) | |||||||||||||||||
CDX North America HIgh Yield Index Series 34 | 6/20/2025 | (5.000 | %) | 5.165 | % | $ | (73,150,000 | ) | Quarterly | 532,876 | 6,729,800 | (6,196,924 | ) | |||||||||||||||||||
Centrica Plc | 6/20/2025 | (1.000 | %) | 1.512 | % | EUR | (9,750,000 | ) | Quarterly | 268,330 | 490,506 | (222,176 | ) | |||||||||||||||||||
CenturyLink, Inc. | 6/20/2025 | (1.000 | %) | 3.661 | % | $ | (650,000 | ) | Quarterly | 74,583 | 73,384 | 1,199 | ||||||||||||||||||||
CIT Group, Inc. | 6/20/2025 | (5.000 | %) | 2.498 | % | (8,700,000 | ) | Quarterly | (983,330 | ) | (593,223 | ) | (390,107 | ) | ||||||||||||||||||
Citigroup, Inc. | 6/20/2025 | (1.000 | %) | 0.723 | % | (3,750,000 | ) | Quarterly | (50,536 | ) | (22,087 | ) | (28,449 | ) | ||||||||||||||||||
Clariant AG | 6/20/2025 | (1.000 | %) | 0.696 | % | EUR | (2,800,000 | ) | Quarterly | (47,389 | ) | (18,455 | ) | (28,934 | ) | |||||||||||||||||
Compass Group Plc | 6/20/2025 | (1.000 | %) | 0.574 | % | (5,300,000 | ) | Quarterly | (126,219 | ) | (65,431 | ) | (60,788 | ) | ||||||||||||||||||
Credit Agricole S.A. | 6/20/2025 | (1.000 | %) | 0.658 | % | (4,150,000 | ) | Quarterly | (79,099 | ) | (20,590 | ) | (58,509 | ) | ||||||||||||||||||
CSC Holdings LLC | 6/20/2025 | (5.000 | %) | 1.888 | % | $ | (850,000 | ) | Quarterly | (122,536 | ) | (117,703 | ) | (4,833 | ) | |||||||||||||||||
CVS Health Corp. | 6/20/2025 | (1.000 | %) | 0.460 | % | (2,250,000 | ) | Quarterly | (59,685 | ) | (49,624 | ) | (10,061 | ) | ||||||||||||||||||
Darden Restaurants, Inc. | 6/20/2025 | (1.000 | %) | 0.813 | % | (10,000,000 | ) | Quarterly | (90,537 | ) | 242,490 | (333,027 | ) | |||||||||||||||||||
Deutsche Bank AG | 6/20/2025 | (1.000 | %) | 1.739 | % | EUR | (3,500,000 | ) | Quarterly | 137,760 | 253,992 | (116,232 | ) | |||||||||||||||||||
Devon Energy Corp. | 6/20/2025 | (1.000 | %) | 1.591 | % | $ | (11,200,000 | ) | Quarterly | 310,358 | 1,138,930 | (828,572 | ) | |||||||||||||||||||
DISH DBS Corp. | 6/20/2025 | (5.000 | %) | 4.405 | % | (350,000 | ) | Quarterly | (8,727 | ) | (15,003 | ) | 6,276 | |||||||||||||||||||
Domtar Corp. | 6/20/2025 | (1.000 | %) | 0.618 | % | (9,750,000 | ) | Quarterly | (181,906 | ) | (97,444 | ) | (84,462 | ) |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 75 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited) (Continued)
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS (1)(2)(3) (CONTINUED) | ||||||||||||||||||||||||||||||||
Description | Maturity Date | Fixed Deal (Pay) Rate | Implied Credit Spread at June 30, 2020 | Notional Amount(4) | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid / (Received) | Unrealized Appreciation / (Depreciation) | ||||||||||||||||||||||||
Buy Protection (Continued) |
| |||||||||||||||||||||||||||||||
DR Horton, Inc. | 6/20/2025 | (1.000 | %) | 0.332 | % | $ | (3,450,000 | ) | Quarterly | $ | (113,871 | ) | $ | (81,687 | ) | $ | (32,184 | ) | ||||||||||||||
Electrolux AB | 6/20/2025 | (1.000 | %) | 0.308 | % | EUR | (8,800,000 | ) | Quarterly | (344,180 | ) | (338,446 | ) | (5,734 | ) | |||||||||||||||||
Enbridge, Inc. | 6/20/2025 | (1.000 | %) | 0.980 | % | $ | (5,100,000 | ) | Quarterly | (5,024 | ) | 39,340 | (44,364 | ) | ||||||||||||||||||
Eni SpA | 6/20/2025 | (1.000 | %) | 0.881 | % | EUR | (1,000,000 | ) | Quarterly | (6,552 | ) | (10,628 | ) | 4,076 | ||||||||||||||||||
Expedia Group, Inc. | 6/20/2025 | (1.000 | %) | 2.315 | % | $ | (200,000 | ) | Quarterly | 11,974 | 8,560 | 3,414 | ||||||||||||||||||||
Experian Finance Plc | 6/20/2025 | (1.000 | %) | 0.288 | % | EUR | (2,800,000 | ) | Quarterly | (112,685 | ) | (108,251 | ) | (4,434 | ) | |||||||||||||||||
Fiat Chrysler Automobiles N.V. | 6/20/2025 | (5.000 | %) | 3.250 | % | (5,950,000 | ) | Quarterly | (521,281 | ) | (264,524 | ) | (256,757 | ) | ||||||||||||||||||
Ford Motor Co. | 6/20/2025 | (5.000 | %) | 5.303 | % | $ | (4,800,000 | ) | Quarterly | 58,790 | 691,125 | (632,335 | ) | |||||||||||||||||||
General Electric Co. | 6/20/2025 | (1.000 | %) | 1.792 | % | (7,050,000 | ) | Quarterly | 259,490 | 399,817 | (140,327 | ) | ||||||||||||||||||||
Glencore Finance Europe Ltd. | 6/20/2025 | (5.000 | %) | 1.823 | % | EUR | (8,300,000 | ) | Quarterly | (1,398,783 | ) | (710,912 | ) | (687,871 | ) | |||||||||||||||||
Goldman Sachs Group, Inc. (The) | 6/20/2025 | (1.000 | %) | 0.815 | % | $ | (3,250,000 | ) | Quarterly | (29,086 | ) | (6,423 | ) | (22,663 | ) | |||||||||||||||||
Goodyear Tire & Rubber Co. (The) | 6/20/2025 | (5.000 | %) | 4.647 | % | (9,650,000 | ) | Quarterly | (141,257 | ) | 499,361 | (640,618 | ) | |||||||||||||||||||
Halliburton Co. | 6/20/2025 | (1.000 | %) | 1.266 | % | (9,600,000 | ) | Quarterly | 121,427 | 876,112 | (754,685 | ) | ||||||||||||||||||||
HCA, Inc. | 6/20/2025 | (5.000 | %) | 2.148 | % | (5,150,000 | ) | Quarterly | (673,092 | ) | (881,011 | ) | 207,919 | |||||||||||||||||||
Host Hotels & Resorts L.P. | 6/20/2025 | (1.000 | %) | 1.426 | % | (6,100,000 | ) | Quarterly | 122,664 | 276,882 | (154,218 | ) | ||||||||||||||||||||
Howmet Aerospace, Inc. | 12/20/2024 | (1.000 | %) | 2.714 | % | (3,500,000 | ) | Quarterly | 244,629 | 361,758 | (117,129 | ) | ||||||||||||||||||||
HP, Inc. | 6/20/2025 | (1.000 | %) | 0.513 | % | (6,550,000 | ) | Quarterly | (156,514 | ) | (165,308 | ) | 8,794 | |||||||||||||||||||
HSBC Holdings Plc | 6/20/2025 | (1.000 | %) | 0.635 | % | EUR | (9,300,000 | ) | Quarterly | (189,303 | ) | (25,709 | ) | (163,594 | ) | |||||||||||||||||
ING Groep N.V. | 6/20/2025 | (1.000 | %) | 0.637 | % | (9,500,000 | ) | Quarterly | (191,992 | ) | 41,684 | (233,676 | ) | |||||||||||||||||||
International Lease Finance Corp. | 6/20/2025 | (5.000 | %) | 1.493 | % | $ | (700,000 | ) | Quarterly | (115,533 | ) | (113,543 | ) | (1,990 | ) | |||||||||||||||||
International Paper Co. | 6/20/2025 | (1.000 | %) | 0.380 | % | (7,950,000 | ) | Quarterly | (242,937 | ) | (242,509 | ) | (428 | ) | ||||||||||||||||||
ITV Plc | 6/20/2025 | (5.000 | %) | 1.737 | % | EUR | (2,450,000 | ) | Quarterly | (425,680 | ) | (346,686 | ) | (78,994 | ) | |||||||||||||||||
Kinder Morgan, Inc. | 6/20/2025 | (1.000 | %) | 0.616 | % | $ | (3,300,000 | ) | Quarterly | (61,790 | ) | (96,106 | ) | 34,316 | ||||||||||||||||||
Kohl’s Corp. | 6/20/2025 | (1.000 | %) | 3.599 | % | (11,000,000 | ) | Quarterly | 1,235,923 | 1,845,763 | (609,840 | ) |
The accompanying notes are an integral part of these financial statements.
76 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited) (Continued)
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS (1)(2)(3) (CONTINUED) | ||||||||||||||||||||||||||||||||
Description | Maturity Date | Fixed Deal (Pay) Rate | Implied Credit Spread at June 30, 2020 | Notional Amount(4) | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid / (Received) | Unrealized Appreciation / (Depreciation) | ||||||||||||||||||||||||
Buy Protection (Continued) |
| |||||||||||||||||||||||||||||||
Koninklijke KPN N.V. | 6/20/2025 | (1.000 | %) | 0.751 | % | EUR | (2,300,000 | ) | Quarterly | $ | (31,719 | ) | $ | (40,175 | ) | $ | 8,456 | |||||||||||||||
LafargeHolcim Ltd. | 6/20/2025 | (1.000 | %) | 0.815 | % | (2,800,000 | ) | Quarterly | (28,714 | ) | 18,229 | (46,943 | ) | |||||||||||||||||||
Lennar Corp. | 6/20/2025 | (5.000 | %) | 1.570 | % | $ | (2,500,000 | ) | Quarterly | (402,382 | ) | (401,385 | ) | (997 | ) | |||||||||||||||||
Lloyds Banking Group Plc | 6/20/2025 | (1.000 | %) | 0.739 | % | EUR | (8,100,000 | ) | Quarterly | (117,442 | ) | 21,807 | (139,249 | ) | ||||||||||||||||||
Loews Corp. | 6/20/2025 | (1.000 | %) | 0.229 | % | $ | (3,600,000 | ) | Quarterly | (137,623 | ) | (117,819 | ) | (19,804 | ) | |||||||||||||||||
Macy’s Retail Holdings, Inc. | 6/20/2025 | (1.000 | %) | 11.186 | % | (10,000,000 | ) | Quarterly | 3,310,338 | 3,100,000 | 210,338 | |||||||||||||||||||||
Marks & Spencer Plc | 6/20/2025 | (1.000 | %) | 3.271 | % | EUR | (10,350,000 | ) | Quarterly | 1,175,912 | 1,800,011 | (624,099 | ) | |||||||||||||||||||
Marriott International, Inc. | 6/20/2025 | (1.000 | %) | 1.733 | % | $ | (750,000 | ) | Quarterly | 25,611 | 29,606 | (3,995 | ) | |||||||||||||||||||
MBIA, Inc. | 6/20/2025 | (5.000 | %) | 5.450 | % | (1,600,000 | ) | Quarterly | 28,940 | 19,449 | 9,491 | |||||||||||||||||||||
McKesson Corp. | 6/20/2025 | (1.000 | %) | 0.483 | % | (9,200,000 | ) | Quarterly | (233,660 | ) | (305,390 | ) | 71,730 | |||||||||||||||||||
METRO AG | 6/20/2025 | (1.000 | %) | 1.833 | % | EUR | (9,950,000 | ) | Quarterly | 439,476 | 1,001,748 | (562,272 | ) | |||||||||||||||||||
MGIC Investment Corp. | 6/20/2025 | (5.000 | %) | 2.957 | % | $ | (4,650,000 | ) | Quarterly | (421,432 | ) | (319,056 | ) | (102,376 | ) | |||||||||||||||||
Motorola Solutions, Inc. | 6/20/2025 | (1.000 | %) | 0.408 | % | (4,100,000 | ) | Quarterly | (119,422 | ) | (130,809 | ) | 11,387 | |||||||||||||||||||
Naturgy Capital Markets S.A. | 6/20/2025 | (1.000 | %) | 0.576 | % | EUR | (4,050,000 | ) | Quarterly | (96,019 | ) | (103,253 | ) | 7,234 | ||||||||||||||||||
Navient Corp. | 6/20/2025 | (5.000 | %) | 5.917 | % | $ | (2,850,000 | ) | Quarterly | 103,143 | 97,112 | 6,031 | ||||||||||||||||||||
Next Group Plc | 6/20/2025 | (1.000 | %) | 1.989 | % | EUR | (3,100,000 | ) | Quarterly | 161,602 | 279,131 | (117,529 | ) | |||||||||||||||||||
Nokia Oyj | 6/20/2025 | (5.000 | %) | 1.195 | % | (100,000 | ) | Quarterly | (20,717 | ) | (20,872 | ) | 155 | |||||||||||||||||||
Nordstrom, Inc. | 6/20/2025 | (1.000 | %) | 5.116 | % | $ | (7,550,000 | ) | Quarterly | 1,265,523 | 1,160,159 | 105,364 | ||||||||||||||||||||
NRG Energy, Inc. | 6/20/2025 | (5.000 | %) | 2.030 | % | (2,100,000 | ) | Quarterly | (287,203 | ) | (328,574 | ) | 41,371 | |||||||||||||||||||
Olin Corp. | 6/20/2025 | (1.000 | %) | 4.291 | % | (8,900,000 | ) | Quarterly | 1,232,011 | 850,472 | 381,539 | |||||||||||||||||||||
Omnicom Group, Inc. / Omnicom Capital, Inc. | 6/20/2025 | (1.000 | %) | 0.343 | % | (8,650,000 | ) | Quarterly | (280,382 | ) | (301,095 | ) | 20,713 | |||||||||||||||||||
Pearson Funding Plc | 6/20/2025 | (1.000 | %) | 0.962 | % | EUR | (1,700,000 | ) | Quarterly | (3,537 | ) | 2,783 | (6,320 | ) | ||||||||||||||||||
Peugeot S.A. | 6/20/2025 | (5.000 | %) | 2.322 | % | (3,150,000 | ) | Quarterly | (438,562 | ) | (394,165 | ) | (44,397 | ) | ||||||||||||||||||
PostNL N.V. | 6/20/2025 | (1.000 | %) | 0.576 | % | (9,000,000 | ) | Quarterly | (213,039 | ) | (57,299 | ) | (155,740 | ) | ||||||||||||||||||
Publicis Groupe S.A. | 6/20/2025 | (1.000 | %) | 1.252 | % | (8,000,000 | ) | Quarterly | 109,370 | 215,656 | (106,286 | ) |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 77 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited) (Continued)
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS (1)(2)(3) (CONTINUED) | ||||||||||||||||||||||||||||||||
Description | Maturity Date | Fixed Deal (Pay) Rate | Implied Credit Spread at June 30, 2020 | Notional Amount(4) | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid / (Received) | Unrealized Appreciation / (Depreciation) | ||||||||||||||||||||||||
Buy Protection (Continued) |
| |||||||||||||||||||||||||||||||
PulteGroup, Inc. | 6/20/2025 | (5.000 | %) | 1.363 | % | $ | (2,050,000 | ) | Quarterly | $ | (352,845 | ) | $ | (307,632 | ) | $ | (45,213 | ) | ||||||||||||||
Renault S.A. | 6/20/2025 | (1.000 | %) | 2.722 | % | EUR | (9,950,000 | ) | Quarterly | 876,213 | 1,153,027 | (276,814 | ) | |||||||||||||||||||
Repsol International Finance B.V. | 6/20/2025 | (1.000 | %) | 0.958 | % | (4,400,000 | ) | Quarterly | (10,247 | ) | 129,078 | (139,325 | ) | |||||||||||||||||||
Rexel S.A. | 6/20/2025 | (5.000 | %) | 1.576 | % | (1,250,000 | ) | Quarterly | (229,395 | ) | (138,072 | ) | (91,323 | ) | ||||||||||||||||||
Rolls-Royce Plc | 6/20/2025 | (1.000 | %) | 4.279 | % | (10,050,000 | ) | Quarterly | 1,583,420 | 1,753,772 | (170,352 | ) | ||||||||||||||||||||
Royal Bank of Scotland Group Plc | 6/20/2025 | (1.000 | %) | 0.829 | % | (9,450,000 | ) | Quarterly | (89,534 | ) | 181,601 | (271,135 | ) | |||||||||||||||||||
RR Donnelley & Sons Co. | 6/20/2025 | �� | (5.000 | %) | 11.392 | % | $ | (6,000,000 | ) | Quarterly | 1,237,260 | 1,347,500 | (110,240 | ) | ||||||||||||||||||
Ryder System, Inc. | 6/20/2025 | (1.000 | %) | 0.836 | % | (10,000,000 | ) | Quarterly | (79,271 | ) | 336,614 | (415,885 | ) | |||||||||||||||||||
SES S.A. | 6/20/2025 | (1.000 | %) | 1.251 | % | EUR | (6,700,000 | ) | Quarterly | 91,492 | 195,867 | (104,375 | ) | |||||||||||||||||||
Shell International Finance B.V. | 6/20/2025 | (1.000 | %) | 0.675 | % | (6,400,000 | ) | Quarterly | (115,731 | ) | 21,464 | (137,195 | ) | |||||||||||||||||||
Sherwin-Williams Co. (The) | 6/20/2025 | (1.000 | %) | 0.385 | % | $ | (2,600,000 | ) | Quarterly | (78,794 | ) | (76,172 | ) | (2,622 | ) | |||||||||||||||||
Simon Property Group L.P. | 6/20/2025 | (1.000 | %) | 1.645 | % | (10,500,000 | ) | Quarterly | 316,774 | 822,335 | (505,561 | ) | ||||||||||||||||||||
Societe Generale S.A. | 6/20/2025 | (1.000 | %) | 0.894 | % | EUR | (5,250,000 | ) | Quarterly | (30,549 | ) | 7,753 | (38,302 | ) | ||||||||||||||||||
Springleaf Finance Corp. | 6/20/2025 | (5.000 | %) | 4.331 | % | $ | (1,350,000 | ) | Quarterly | (37,954 | ) | (33,924 | ) | (4,030 | ) | |||||||||||||||||
Standard Chartered Plc | 6/20/2025 | (1.000 | %) | 0.682 | % | EUR | (4,300,000 | ) | Quarterly | (76,013 | ) | 47,601 | (123,614 | ) | ||||||||||||||||||
Standard Chartered Plc | 6/20/2025 | (1.000 | %) | 0.682 | % | (1,900,000 | ) | Quarterly | (33,587 | ) | (4,157 | ) | (29,430 | ) | ||||||||||||||||||
Stora Enso Oyj | 6/20/2025 | (5.000 | %) | 0.789 | % | (200,000 | ) | Quarterly | (46,642 | ) | (47,711 | ) | 1,069 | |||||||||||||||||||
Sudzucker International Finance B.V. | 6/20/2025 | (1.000 | %) | 1.052 | % | (2,950,000 | ) | Quarterly | 8,463 | 76,865 | (68,402 | ) | ||||||||||||||||||||
Teck Resources Ltd. | 6/20/2025 | (5.000 | %) | 1.414 | % | $ | (7,100,000 | ) | Quarterly | (1,202,398 | ) | (800,436 | ) | (401,962 | ) | |||||||||||||||||
Telecom Italia SpA | 6/20/2025 | (1.000 | %) | 2.126 | % | EUR | (3,050,000 | ) | Quarterly | 179,955 | 267,932 | (87,977 | ) | |||||||||||||||||||
Telefonaktiebolaget LM Ericsson | 6/20/2025 | (1.000 | %) | 0.876 | % | (250,000 | ) | Quarterly | (1,705 | ) | (689 | ) | (1,016 | ) | ||||||||||||||||||
Telefonica Emisiones S.A. | 6/20/2025 | (1.000 | %) | 0.884 | % | (8,350,000 | ) | Quarterly | (53,249 | ) | 107,553 | (160,802 | ) | |||||||||||||||||||
Tesco Plc | 6/20/2025 | (1.000 | %) | 0.822 | % | (3,050,000 | ) | Quarterly | (29,997 | ) | 1,799 | (31,796 | ) | |||||||||||||||||||
Teva Pharmaceutical Finance Co. B.V. | 6/20/2025 | (1.000 | %) | 4.146 | % | $ | (250,000 | ) | Quarterly | 33,265 | 35,000 | (1,735 | ) |
The accompanying notes are an integral part of these financial statements.
78 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited) (Continued)
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS (1)(2)(3) (CONTINUED) | ||||||||||||||||||||||||||||||||
Description | Maturity Date | Fixed Deal (Pay) Rate | Implied Credit Spread at June 30, 2020 | Notional Amount(4) | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid / (Received) | Unrealized Appreciation / (Depreciation) | ||||||||||||||||||||||||
Buy Protection (Continued) |
| |||||||||||||||||||||||||||||||
thyssenkrupp AG | 6/20/2025 | (1.000 | %) | 3.431 | % | EUR | (11,250,000 | ) | Quarterly | $ | 1,359,452 | $ | 2,141,541 | $ | (782,089 | ) | ||||||||||||||||
UniCredit SpA | 6/20/2025 | (1.000 | %) | 1.253 | % | (6,600,000 | ) | Quarterly | 90,764 | 251,474 | (160,710 | ) | ||||||||||||||||||||
Universal Health Services, Inc. | 6/20/2025 | (5.000 | %) | 0.756 | % | $ | (1,050,000 | ) | Quarterly | (216,240 | ) | (227,020 | ) | 10,780 | ||||||||||||||||||
Valeo S.A. | 6/20/2025 | (1.000 | %) | 2.093 | % | EUR | (300,000 | ) | Quarterly | 17,207 | 17,439 | (232 | ) | |||||||||||||||||||
Verizon Communications, Inc. | 6/20/2025 | (1.000 | %) | 0.690 | % | $ | (2,500,000 | ) | Quarterly | (37,729 | ) | (9,889 | ) | (27,840 | ) | |||||||||||||||||
Volkswagen International Finance N.V. | 6/20/2025 | (1.000 | %) | 1.247 | % | EUR | (3,900,000 | ) | Quarterly | 52,298 | 126,322 | (74,024 | ) | |||||||||||||||||||
Wells Fargo & Co. | 6/20/2025 | (1.000 | %) | 0.750 | % | $ | (6,800,000 | ) | Quarterly | (82,375 | ) | (55,151 | ) | (27,224 | ) | |||||||||||||||||
Wendel SE | 6/20/2025 | (5.000 | %) | 0.729 | % | EUR | (900,000 | ) | Quarterly | (213,397 | ) | (214,558 | ) | 1,161 | ||||||||||||||||||
Weyerhaeuser Co. | 6/20/2025 | (1.000 | %) | 0.343 | % | $ | (1,500,000 | ) | Quarterly | (48,680 | ) | (37,588 | ) | (11,092 | ) | |||||||||||||||||
WPP Finance S.A. | 6/20/2025 | (1.000 | %) | 1.216 | % | EUR | (4,100,000) | Quarterly | 48,107 | 228,775 | (180,668 | ) | ||||||||||||||||||||
Xerox Corp. | 6/20/2025 | (1.000 | %) | 3.463 | % | $ | (4,800,000) | Quarterly | 513,713 | 405,063 | 108,650 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Total Buy Protection |
| $ | 1,379,195 | $ | 22,762,772 | $ | (21,383,577 | ) | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Sell Protection |
| |||||||||||||||||||||||||||||||
Accor S.A. | 6/20/2025 | 1.000 | % | 2.188 | % | EUR | 9,850,000 | Quarterly | $ | (611,598 | ) | $ | (787,162 | ) | $ | 175,564 | ||||||||||||||||
Aegon N.V. | 6/20/2025 | 1.000 | % | 0.854 | % | 9,200,000 | Quarterly | 74,410 | (169,339 | ) | 243,749 | |||||||||||||||||||||
AES Corp. (The) | 12/20/2024 | 5.000 | % | 2.000 | % | $ | 6,250,000 | Quarterly | 784,747 | 1,311,626 | (526,879 | ) | ||||||||||||||||||||
Airbus Finance B.V. | 6/20/2025 | 1.000 | % | 1.150 | % | EUR | 250,000 | Quarterly | (2,039 | ) | (1,377 | ) | (662 | ) | ||||||||||||||||||
American Axle & Manufacturing, Inc. | 6/20/2025 | 5.000 | % | 5.010 | % | $ | 3,050,000 | Quarterly | (1,216 | ) | (224,718 | ) | 223,502 | |||||||||||||||||||
Amgen, Inc. | 6/20/2025 | 1.000 | % | 0.313 | % | 9,550,000 | Quarterly | 324,178 | 321,168 | 3,010 | ||||||||||||||||||||||
Amkor Technology, Inc. | 6/20/2025 | 5.000 | % | 1.140 | % | 1,000,000 | Quarterly | 184,327 | 176,882 | 7,445 | ||||||||||||||||||||||
Anglo American Capital Plc | 6/20/2025 | 5.000 | % | 1.211 | % | EUR | 7,700,000 | Quarterly | 1,587,412 | 1,322,696 | 264,716 | |||||||||||||||||||||
Apache Corp. | 6/20/2025 | 1.000 | % | 3.118 | % | $ | 7,050,000 | Quarterly | (657,947 | ) | (705,500 | ) | 47,553 | |||||||||||||||||||
ArcelorMittal S.A. | 6/20/2025 | 5.000 | % | 2.658 | % | EUR | 6,350,000 | Quarterly | 762,735 | (49,831 | ) | 812,566 | ||||||||||||||||||||
Assicurazioni Generali SpA | 6/20/2025 | 1.000 | % | 0.882 | % | 9,250,000 | Quarterly | 59,999 | (224,182 | ) | 284,181 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 79 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited) (Continued)
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS (1)(2)(3) (CONTINUED) | ||||||||||||||||||||||||||||||||
Description | Maturity Date | Fixed Deal (Pay) Rate | Implied Credit Spread at June 30, 2020 | Notional Amount(4) | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid / (Received) | Unrealized Appreciation / (Depreciation) | ||||||||||||||||||||||||
Sell Protection (Continued) |
| |||||||||||||||||||||||||||||||
AT&T, Inc. | 6/20/2025 | 1.000 | % | 1.146 | % | $ | 10,700,000 | Quarterly | $ | (74,778 | ) | $ | (534,032 | ) | $ | 459,254 | ||||||||||||||||
AutoZone, Inc. | 6/20/2025 | 1.000 | % | 0.270 | % | 4,400,000 | Quarterly | 159,036 | 90,003 | 69,033 | ||||||||||||||||||||||
Avnet, Inc. | 6/20/2025 | 1.000 | % | 0.600 | % | 1,500,000 | Quarterly | 29,341 | 39,032 | (9,691 | ) | |||||||||||||||||||||
Banco Santander S.A. | 6/20/2025 | 1.000 | % | 1.007 | % | EUR | 100,000 | Quarterly | (39 | ) | 831 | (870 | ) | |||||||||||||||||||
Barclays Plc | 6/20/2025 | 1.000 | % | 0.937 | % | 1,650,000 | Quarterly | 5,731 | (2,721 | ) | 8,452 | |||||||||||||||||||||
BAT International Finance Plc | 6/20/2025 | 1.000 | % | 0.758 | % | 9,150,000 | Quarterly | 122,887 | (117,121 | ) | 240,008 | |||||||||||||||||||||
Bayer AG | 6/20/2025 | 1.000 | % | 0.549 | % | 6,400,000 | Quarterly | 161,338 | 86,905 | 74,433 | ||||||||||||||||||||||
Beazer Homes USA, Inc. | 6/20/2025 | 5.000 | % | 4.407 | % | $ | 5,400,000 | Quarterly | 134,034 | (999,000 | ) | 1,133,034 | ||||||||||||||||||||
Best Buy Co., Inc. | 6/20/2025 | 5.000 | % | 0.606 | % | 5,800,000 | Quarterly | 1,244,206 | 1,208,440 | 35,766 | ||||||||||||||||||||||
Block Financial LLC | 6/20/2025 | 5.000 | % | 0.855 | % | 2,600,000 | Quarterly | 520,730 | 550,715 | (29,985 | ) | |||||||||||||||||||||
BMW Finance N.V. | 6/20/2025 | 1.000 | % | 0.721 | % | EUR | 8,350,000 | Quarterly | 129,207 | (122,358 | ) | 251,565 | ||||||||||||||||||||
Boston Scientific Corp. | 6/20/2025 | 1.000 | % | 0.376 | % | $ | 1,500,000 | Quarterly | 46,140 | 43,048 | 3,092 | |||||||||||||||||||||
British Telecommunications Plc | 6/20/2025 | 1.000 | % | 0.992 | % | EUR | 2,550,000 | Quarterly | 1,179 | (20,363 | ) | 21,542 | ||||||||||||||||||||
Campbell Soup Co. | 6/20/2025 | 1.000 | % | 0.331 | % | $ | 9,500,000 | Quarterly | 313,762 | 309,537 | 4,225 | |||||||||||||||||||||
Canadian Natural Resources Ltd. | 6/20/2025 | 1.000 | % | 0.931 | % | 6,050,000 | Quarterly | 20,043 | (574,212 | ) | 594,255 | |||||||||||||||||||||
Carrefour S.A. | 6/20/2025 | 1.000 | % | 0.683 | % | EUR | 8,600,000 | Quarterly | 151,820 | (9,833 | ) | 161,653 | ||||||||||||||||||||
CDX North America HIgh Yield Index Series 34 | 6/20/2025 | 5.000 | % | 5.165 | % | $ | 89,813,000 | Quarterly | (632,094 | ) | (5,797,128 | ) | 5,165,034 | |||||||||||||||||||
Centrica Plc | 6/20/2025 | 1.000 | % | 1.512 | % | EUR | 3,200,000 | Quarterly | (88,068 | ) | (138,474 | ) | 50,406 | |||||||||||||||||||
CenturyLink, Inc. | 6/20/2025 | 1.000 | % | 3.661 | % | $ | 3,300,000 | Quarterly | (378,653 | ) | (420,805 | ) | 42,152 | |||||||||||||||||||
Cie de Saint-Gobain | 6/20/2025 | 1.000 | % | 0.605 | % | EUR | 1,600,000 | Quarterly | 35,231 | 13,153 | 22,078 | |||||||||||||||||||||
CIT Group, Inc. | 6/20/2025 | 5.000 | % | 2.498 | % | $ | 2,400,000 | Quarterly | 271,263 | 189,123 | 82,140 | |||||||||||||||||||||
Clariant AG | 6/20/2025 | 1.000 | % | 0.696 | % | EUR | 9,050,000 | Quarterly | 153,170 | 61,385 | 91,785 | |||||||||||||||||||||
Conagra Brands, Inc. | 6/20/2025 | 1.000 | % | 0.364 | % | $ | 2,050,000 | Quarterly | 64,329 | 61,246 | 3,083 | |||||||||||||||||||||
CSC Holdings LLC | 6/20/2025 | 5.000 | % | 1.888 | % | 850,000 | Quarterly | 122,537 | 125,229 | (2,692 | ) |
The accompanying notes are an integral part of these financial statements.
80 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited) (Continued)
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS (1)(2)(3) (CONTINUED) | ||||||||||||||||||||||||||||||||
Description | Maturity Date | Fixed Deal (Pay) Rate | Implied Credit Spread at June 30, 2020 | Notional Amount(4) | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid / (Received) | Unrealized Appreciation / (Depreciation) | ||||||||||||||||||||||||
Sell Protection (Continued) |
| |||||||||||||||||||||||||||||||
CVS Health Corp. | 6/20/2025 | 1.000 | % | 0.460 | % | $ | 8,700,000 | Quarterly | $ | 230,781 | $ | 175,343 | $ | 55,438 | ||||||||||||||||||
Daimler AG | 6/20/2025 | 1.000 | % | 1.014 | % | EUR | 5,150,000 | Quarterly | (4,026 | ) | (129,345 | ) | 125,319 | |||||||||||||||||||
Danske Bank A/S | 6/20/2025 | 1.000 | % | 0.867 | % | 950,000 | Quarterly | 6,952 | 4,709 | 2,243 | ||||||||||||||||||||||
Darden Restaurants, Inc. | 6/20/2025 | 1.000 | % | 0.813 | % | $ | 4,600,000 | Quarterly | 41,647 | (22,621 | ) | 64,268 | ||||||||||||||||||||
Deutsche Bank AG | 6/20/2025 | 1.000 | % | 1.739 | % | EUR | 10,100,000 | Quarterly | (397,538 | ) | (871,089 | ) | 473,551 | |||||||||||||||||||
Devon Energy Corp. | 6/20/2025 | 1.000 | % | 1.591 | % | $ | 6,650,000 | Quarterly | (184,275 | ) | (293,503 | ) | 109,228 | |||||||||||||||||||
DISH DBS Corp. | 6/20/2025 | 5.000 | % | 4.405 | % | 7,000,000 | Quarterly | 174,530 | (168,616 | ) | 343,146 | |||||||||||||||||||||
Domtar Corp. | 6/20/2025 | 1.000 | % | 0.618 | % | 2,950,000 | Quarterly | 55,038 | 66,750 | (11,712 | ) | |||||||||||||||||||||
Dow Chemical Co. (The) | 6/20/2025 | 1.000 | % | 0.901 | % | 2,150,000 | Quarterly | 10,250 | 7,073 | 3,177 | ||||||||||||||||||||||
DR Horton, Inc. | 6/20/2025 | 1.000 | % | 0.332 | % | 9,700,000 | Quarterly | 320,160 | 175,645 | 144,515 | ||||||||||||||||||||||
Electricite de France S.A. | 6/20/2025 | 1.000 | % | 0.592 | % | EUR | 6,200,000 | Quarterly | 141,405 | 100,919 | 40,486 | |||||||||||||||||||||
Electrolux AB | 6/20/2025 | 1.000 | % | 0.308 | % | 2,750,000 | Quarterly | 107,556 | 112,215 | (4,659 | ) | |||||||||||||||||||||
Enbridge, Inc. | 6/20/2025 | 1.000 | % | 0.980 | % | $ | 10,300,000 | Quarterly | 10,147 | (521,580 | ) | 531,727 | ||||||||||||||||||||
Enel SpA | 6/20/2025 | 1.000 | % | 0.642 | % | EUR | 1,850,000 | Quarterly | 36,942 | 26,578 | 10,364 | |||||||||||||||||||||
Eni SpA | 6/20/2025 | 1.000 | % | 0.881 | % | 5,300,000 | Quarterly | 34,724 | (112,624 | ) | 147,348 | |||||||||||||||||||||
Expedia Group, Inc. | 6/20/2025 | 1.000 | % | 2.315 | % | $ | 7,750,000 | Quarterly | (463,979 | ) | (855,583 | ) | 391,604 | |||||||||||||||||||
Experian Finance Plc | 6/20/2025 | 1.000 | % | 0.288 | % | EUR | 8,100,000 | Quarterly | 325,980 | 330,696 | (4,716 | ) | ||||||||||||||||||||
Fiat Chrysler Automobiles N.V. | 6/20/2025 | 5.000 | % | 3.250 | % | 300,000 | Quarterly | 26,283 | 37,973 | (11,690 | ) | |||||||||||||||||||||
Freeport-McMoRan, Inc. | 6/20/2025 | 1.000 | % | 2.719 | % | $ | 3,250,000 | Quarterly | (250,097 | ) | (321,885 | ) | 71,788 | |||||||||||||||||||
General Electric Co. | 6/20/2025 | 1.000 | % | 1.792 | % | 9,350,000 | Quarterly | (344,146 | ) | (349,471 | ) | 5,325 | ||||||||||||||||||||
General Motors Co. | 6/20/2025 | 5.000 | % | 2.014 | % | 3,600,000 | Quarterly | 495,216 | 254,626 | 240,590 | ||||||||||||||||||||||
Glencore Finance Europe Ltd. | 6/20/2025 | 5.000 | % | 1.823 | % | EUR | 2,700,000 | Quarterly | 455,026 | 346,341 | 108,685 | |||||||||||||||||||||
Goldman Sachs Group, Inc. (The) | 6/20/2025 | 1.000 | % | 0.815 | % | $ | 10,100,000 | Quarterly | 90,390 | (198,721 | ) | 289,111 | ||||||||||||||||||||
Goodyear Tire & Rubber Co. (The) | 6/20/2025 | 5.000 | % | 4.647 | % | 5,750,000 | Quarterly | 84,169 | (104,109 | ) | 188,278 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 81 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited) (Continued)
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS (1)(2)(3) (CONTINUED) | ||||||||||||||||||||||||||||||||
Description | Maturity Date | Fixed Deal (Pay) Rate | Implied Credit Spread at June 30, 2020 | Notional Amount(4) | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid / (Received) | Unrealized Appreciation / (Depreciation) | ||||||||||||||||||||||||
Sell Protection (Continued) |
| |||||||||||||||||||||||||||||||
Halliburton Co. | 6/20/2025 | 1.000 | % | 1.266 | % | $ | 11,450,000 | Quarterly | $ | (144,830 | ) | $ | (460,693 | ) | $ | 315,863 | ||||||||||||||||
Hess Corp. | 6/20/2025 | 1.000 | % | 1.394 | % | 5,600,000 | Quarterly | (104,343 | ) | (490,965 | ) | 386,622 | ||||||||||||||||||||
Howmet Aerospace, Inc. | 12/20/2024 | 1.000 | % | 2.714 | % | 8,400,000 | Quarterly | (587,113 | ) | (7,798 | ) | (579,315 | ) | |||||||||||||||||||
HSBC Holdings Plc | 6/20/2025 | 1.000 | % | 0.635 | % | EUR | 3,000,000 | Quarterly | 61,065 | 29,830 | 31,235 | |||||||||||||||||||||
Iberdrola International B.V. | 6/20/2025 | 1.000 | % | 0.459 | % | 1,500,000 | Quarterly | 45,585 | 43,093 | 2,492 | ||||||||||||||||||||||
Imperial Brands Finance Plc | 6/20/2025 | 1.000 | % | 0.866 | % | 6,350,000 | Quarterly | 46,881 | (8,650 | ) | 55,531 | |||||||||||||||||||||
ING Groep N.V. | 6/20/2025 | 1.000 | % | 0.637 | % | 3,600,000 | Quarterly | 72,755 | 64,268 | 8,487 | ||||||||||||||||||||||
International Paper Co. | 6/20/2025 | 1.000 | % | 0.380 | % | $ | 1,100,000 | Quarterly | 33,614 | 39,095 | (5,481 | ) | ||||||||||||||||||||
Intesa Sanpaolo SpA | 6/20/2025 | 1.000 | % | 1.204 | % | EUR | 900,000 | Quarterly | (10,006 | ) | (6,009 | ) | (3,997 | ) | ||||||||||||||||||
KB Home | 6/20/2025 | 5.000 | % | 2.375 | % | $ | 3,750,000 | Quarterly | 446,974 | 388,343 | 58,631 | |||||||||||||||||||||
Kohl’s Corp. | 6/20/2025 | 1.000 | % | 3.599 | % | 3,000,000 | Quarterly | (337,070 | ) | (278,481 | ) | (58,589 | ) | |||||||||||||||||||
Koninklijke KPN N.V. | 6/20/2025 | 1.000 | % | 0.751 | % | EUR | 8,250,000 | Quarterly | 113,778 | 186,555 | (72,777 | ) | ||||||||||||||||||||
Kraft Heinz Foods Co. | 6/20/2025 | 1.000 | % | 1.129 | % | $ | 6,850,000 | Quarterly | (42,186 | ) | 28,348 | (70,534 | ) | |||||||||||||||||||
LafargeHolcim Ltd. | 6/20/2025 | 1.000 | % | 0.815 | % | EUR | 9,100,000 | Quarterly | 93,323 | (148,117 | ) | 241,440 | ||||||||||||||||||||
Lennar Corp. | 6/20/2025 | 5.000 | % | 1.570 | % | $ | 8,200,000 | Quarterly | 1,319,811 | 952,809 | 367,002 | |||||||||||||||||||||
Lloyds Banking Group Plc | 6/20/2025 | 1.000 | % | 0.739 | % | EUR | 1,800,000 | Quarterly | 26,098 | 4,949 | 21,149 | |||||||||||||||||||||
Macy’s Retail Holdings, Inc. | 6/20/2025 | 1.000 | % | 11.186 | % | $ | 5,750,000 | Quarterly | (1,903,443 | ) | (1,809,000 | ) | (94,443 | ) | ||||||||||||||||||
Marathon Petroleum Corp. | 6/20/2025 | 5.000 | % | 0.899 | % | 5,850,000 | Quarterly | 1,157,338 | 824,281 | 333,057 | ||||||||||||||||||||||
Marks & Spencer Plc | 6/20/2025 | 1.000 | % | 3.271 | % | EUR | 3,500,000 | Quarterly | (397,652 | ) | (540,233 | ) | 142,581 | |||||||||||||||||||
Marriott International, Inc. | 6/20/2025 | 1.000 | % | 1.733 | % | $ | 5,850,000 | Quarterly | (199,771 | ) | (358,422 | ) | 158,651 | |||||||||||||||||||
MBIA, Inc. | 6/20/2025 | 5.000 | % | 5.450 | % | 8,800,000 | Quarterly | (159,168 | ) | 868,039 | (1,027,207 | ) | ||||||||||||||||||||
McDonald’s Corp. | 6/20/2025 | 1.000 | % | 0.260 | % | 4,350,000 | Quarterly | 159,448 | 115,785 | 43,663 | ||||||||||||||||||||||
McKesson Corp. | 6/20/2025 | 1.000 | % | 0.483 | % | 2,300,000 | Quarterly | 58,415 | 78,140 | (19,725 | ) | |||||||||||||||||||||
MDC Holdings, Inc. | 6/20/2025 | 1.000 | % | 1.282 | % | 1,750,000 | Quarterly | (23,440 | ) | (58,560 | ) | 35,120 |
The accompanying notes are an integral part of these financial statements.
82 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited) (Continued)
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS (1)(2)(3) (CONTINUED) | ||||||||||||||||||||||||||||||||
Description | Maturity Date | Fixed Deal (Pay) Rate | Implied Credit Spread at June 30, 2020 | Notional Amount(4) | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid / (Received) | Unrealized Appreciation / (Depreciation) | ||||||||||||||||||||||||
Sell Protection (Continued) |
| |||||||||||||||||||||||||||||||
Meritor, Inc. | 6/20/2025 | 5.000 | % | 2.667 | % | $ | 4,950,000 | Quarterly | $ | 518,308 | $ | 483,008 | $ | 35,300 | ||||||||||||||||||
METRO AG | 6/20/2025 | 1.000 | % | 1.833 | % | EUR | 3,250,000 | Quarterly | (143,547 | ) | (267,034 | ) | 123,487 | |||||||||||||||||||
Michelin Luxembourg SCS | 6/20/2025 | 1.000 | % | 0.444 | % | 4,200,000 | Quarterly | 131,152 | 67,765 | 63,387 | ||||||||||||||||||||||
Motorola Solutions, Inc. | 6/20/2025 | 1.000 | % | 0.408 | % | $ | 9,200,000 | Quarterly | 267,969 | 305,390 | (37,421 | ) | ||||||||||||||||||||
Next Group Plc | 6/20/2025 | 1.000 | % | 1.989 | % | EUR | 9,800,000 | Quarterly | (510,870 | ) | (1,000,003 | ) | 489,133 | |||||||||||||||||||
Nokia Oyj | 6/20/2025 | 5.000 | % | 1.195 | % | 5,400,000 | Quarterly | 1,118,700 | 993,523 | 125,177 | ||||||||||||||||||||||
NRG Energy, Inc. | 6/20/2025 | 5.000 | % | 2.030 | % | $ | 5,100,000 | Quarterly | 697,494 | 796,410 | (98,916 | ) | ||||||||||||||||||||
Occidental Petroleum Corp. | 6/20/2025 | 1.000 | % | 6.454 | % | 1,150,000 | Quarterly | (242,573 | ) | (327,750 | ) | 85,177 | ||||||||||||||||||||
Olin Corp. | 6/20/2025 | 1.000 | % | 4.291 | % | 1,800,000 | Quarterly | (249,170 | ) | (232,380 | ) | (16,790 | ) | |||||||||||||||||||
Omnicom Group, Inc. / Omnicom Capital, Inc. | 6/20/2025 | 1.000 | % | 0.343 | % | 2,000,000 | Quarterly | 64,828 | 74,791 | (9,963 | ) | |||||||||||||||||||||
Ovintiv, Inc. | 6/20/2025 | 1.000 | % | 3.258 | % | 4,950,000 | Quarterly | (489,860 | ) | (809,375 | ) | 319,515 | ||||||||||||||||||||
Peugeot S.A. | 6/20/2025 | 5.000 | % | 2.322 | % | EUR | 5,400,000 | Quarterly | 751,822 | 586,909 | 164,913 | |||||||||||||||||||||
PostNL N.V. | 6/20/2025 | 1.000 | % | 0.576 | % | 6,200,000 | Quarterly | 146,761 | 133,961 | 12,800 | ||||||||||||||||||||||
Publicis Groupe S.A. | 6/20/2025 | 1.000 | % | 1.252 | % | 1,500,000 | Quarterly | (20,507 | ) | (51,394 | ) | 30,887 | ||||||||||||||||||||
Renault S.A. | 6/20/2025 | 1.000 | % | 2.722 | % | 3,200,000 | Quarterly | (281,798 | ) | (318,515 | ) | 36,717 | ||||||||||||||||||||
Rite Aid Corp. | 6/20/2025 | 5.000 | % | 7.307 | % | $ | 4,550,000 | Quarterly | (393,001 | ) | (819,000 | ) | 425,999 | |||||||||||||||||||
Rolls-Royce Plc | 6/20/2025 | 1.000 | % | 4.279 | % | EUR | 2,700,000 | Quarterly | (425,396 | ) | (485,630 | ) | 60,234 | |||||||||||||||||||
Royal Bank of Scotland Group Plc | 6/20/2025 | 1.000 | % | 0.829 | % | 3,150,000 | Quarterly | 29,846 | (11,441 | ) | 41,287 | |||||||||||||||||||||
RR Donnelley & Sons Co. | 6/20/2025 | 5.000 | % | 11.392 | % | $ | 1,250,000 | Quarterly | (257,763 | ) | (381,250 | ) | 123,487 | |||||||||||||||||||
Ryder System, Inc. | 6/20/2025 | 1.000 | % | 0.836 | % | 4,350,000 | Quarterly | 34,482 | (63,516 | ) | 97,998 | |||||||||||||||||||||
SES S.A. | 6/20/2025 | 1.000 | % | 1.251 | % | EUR | 250,000 | Quarterly | (3,414 | ) | (4,103 | ) | 689 | |||||||||||||||||||
Shell International Finance B.V. | 6/20/2025 | 1.000 | % | 0.675 | % | 150,000 | Quarterly | 2,712 | 3,524 | (812 | ) | |||||||||||||||||||||
Sherwin-Williams Co. (The) | 6/20/2025 | 1.000 | % | 0.385 | % | $ | 9,500,000 | Quarterly | 287,899 | 250,285 | 37,614 | |||||||||||||||||||||
Simon Property Group L.P. | 6/20/2025 | 1.000 | % | 1.645 | % | 3,100,000 | Quarterly | (93,524 | ) | (228,716 | ) | 135,192 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 83 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited) (Continued)
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS (1)(2)(3) (CONTINUED) | ||||||||||||||||||||||||||||||||
Description | Maturity Date | Fixed Deal (Pay) Rate | Implied Credit Spread at June 30, 2020 | Notional Amount(4) | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid / (Received) | Unrealized Appreciation / (Depreciation) | ||||||||||||||||||||||||
Sell Protection (Continued) |
| |||||||||||||||||||||||||||||||
Southwest Airlines Co. | 6/20/2025 | 1.000 | % | 2.194 | % | $ | 750,000 | Quarterly | $ | (40,964 | ) | $ | (64,167 | ) | $ | 23,203 | ||||||||||||||||
Springleaf Finance Corp. | 6/20/2025 | 5.000 | % | 4.331 | % | 6,000,000 | Quarterly | 168,686 | (570,000 | ) | 738,686 | |||||||||||||||||||||
Stora Enso Oyj | 6/20/2025 | 5.000 | % | 0.789 | % | EUR | 5,400,000 | Quarterly | 1,259,332 | 1,103,461 | 155,871 | |||||||||||||||||||||
Sudzucker International Finance B.V. | 6/20/2025 | 1.000 | % | 1.052 | % | 9,350,000 | Quarterly | (26,821 | ) | (249,581 | ) | 222,760 | ||||||||||||||||||||
Teck Resources Ltd. | 6/20/2025 | 5.000 | % | 1.414 | % | $ | 2,950,000 | Quarterly | 499,588 | 496,595 | 2,993 | |||||||||||||||||||||
Telecom Italia SpA | 6/20/2025 | 1.000 | % | 2.126 | % | EUR | 9,700,000 | Quarterly | (572,319 | ) | (702,348 | ) | 130,029 | |||||||||||||||||||
Telefonaktiebolaget LM Ericsson | 6/20/2025 | 1.000 | % | 0.876 | % | 6,450,000 | Quarterly | 43,996 | (130,599 | ) | 174,595 | |||||||||||||||||||||
Telefonica Emisiones S.A. | 6/20/2025 | 1.000 | % | 0.884 | % | 2,100,000 | Quarterly | 13,392 | 3,438 | 9,954 | ||||||||||||||||||||||
Tesco Plc | 6/20/2025 | 1.000 | % | 0.822 | % | 9,300,000 | Quarterly | 91,467 | (51,354 | ) | 142,821 | |||||||||||||||||||||
thyssenkrupp AG | 6/20/2025 | 1.000 | % | 3.431 | % | 4,250,000 | Quarterly | (513,571 | ) | (770,408 | ) | 256,837 | ||||||||||||||||||||
Toll Brothers Finance Corp. | 6/20/2025 | 1.000 | % | 1.825 | % | $ | 4,500,000 | Quarterly | (172,372 | ) | (360,765 | ) | 188,393 | |||||||||||||||||||
UniCredit SpA | 6/20/2025 | 1.000 | % | 1.253 | % | EUR | 400,000 | Quarterly | (5,501 | ) | (2,431 | ) | (3,070 | ) | ||||||||||||||||||
United Rentals North America, Inc. | 6/20/2025 | 5.000 | % | 1.465 | % | $ | 1,000,000 | Quarterly | 166,582 | 167,398 | (816 | ) | ||||||||||||||||||||
United States Steel Corp. | 6/20/2025 | 5.000 | % | 16.480 | % | 3,300,000 | Quarterly | (1,028,482 | ) | (862,188 | ) | (166,294 | ) | |||||||||||||||||||
Valeo S.A. | 6/20/2025 | 1.000 | % | 2.093 | % | EUR | 6,950,000 | Quarterly | (398,642 | ) | (743,460 | ) | 344,818 | |||||||||||||||||||
Verizon Communications, Inc. | 6/20/2025 | 1.000 | % | 0.690 | % | $ | 9,500,000 | Quarterly | 143,369 | 119,207 | 24,162 | |||||||||||||||||||||
Vivendi S.A. | 6/20/2025 | 1.000 | % | 0.566 | % | EUR | 1,150,000 | Quarterly | 27,874 | 27,659 | 215 | |||||||||||||||||||||
Vodafone Group Plc | 6/20/2025 | 1.000 | % | 0.687 | % | 6,200,000 | Quarterly | 107,814 | 57,166 | 50,648 | ||||||||||||||||||||||
Volkswagen International Finance N.V. | 6/20/2025 | 1.000 | % | 1.247 | % | 9,900,000 | Quarterly | (132,754 | ) | (720,028 | ) | 587,274 | ||||||||||||||||||||
Volvo Treasury AB | 6/20/2025 | 1.000 | % | 0.617 | % | 1,950,000 | Quarterly | 41,705 | 32,511 | 9,194 | ||||||||||||||||||||||
Williams Cos., Inc. (The) | 6/20/2025 | 1.000 | % | 0.848 | % | $ | 2,150,000 | Quarterly | 15,854 | (117,028 | ) | 132,882 | ||||||||||||||||||||
Yum! Brands, Inc. | 6/20/2025 | 1.000 | % | 1.342 | % | 1,250,000 | Quarterly | (20,224 | ) | (30,283 | ) | 10,059 | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Total Sell Protection |
| $ | 6,355,117 | $ | (12,512,555 | ) | $ | 18,867,672 | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Total | $ | 7,734,312 | $ | 10,250,217 | $ | (2,515,905 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
(1) | For centrally cleared swaps, when a credit event occurs as defined under the terms of the swap contract, the Fund as a seller of credit protection will either (i) pay a net amount equal to the par value of the defaulted reference entity and deliver the reference entity or (ii) pay a net amount equal to the par value of the defaulted reference entity less its recovery value. |
The accompanying notes are an integral part of these financial statements.
84 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited) (Continued)
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS (1)(2)(3) (CONTINUED)
(2) | For centrally cleared swaps, implied credit spread, represented in absolute terms, utilized in determining the fair value of the credit default swap contracts as of period will serve as an indicator of the payment/ performance risk and represent the likelihood of risk of default for the credit derivative. The implied credit spread of a referenced entity reflects the cost of buying/ selling protection and may include upfront payments required to be made to enter into the contract. Generally, wider credit spreads represent a perceived deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the swap contract. |
(3) | For centrally cleared swaps, the notional amount represents the maximum potential the Fund may receive as a buyer of credit protection if a credit event occurs, as defined under the terms of the swap contract, for each security included in the CDX North America High Yield Index Series 34. |
(4) | Notional amounts are denominated in foreign currency where indicated. |
OVER THE COUNTER CREDIT DEFAULT SWAP CONTRACTS | ||||||||||||||||||||||||||||||||
Description | Maturity Date | Counterparty | Fixed Deal (Pay) Rate | Implied Credit Spread at June 30, 2020 | Notional Amount(1) | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid / (Received) | Unrealized Appreciation / (Depreciation) | |||||||||||||||||||||||
Buy Protection |
| |||||||||||||||||||||||||||||||
Mexico Government International Bond | 6/20/2025 | Bank of America N.A. | (1.000 | %) | 1.547 | % | $ | (5,710,000 | ) | Quarterly | $ | 155,738 | $ | 534,002 | $ | (378,264 | ) | |||||||||||||||
China Government International Bond | 6/20/2025 | Morgan Stanley & Co. | (1.000 | %) | 0.499 | % | (5,600,000 | ) | Quarterly | (138,723 | ) | (120,342 | ) | (18,381 | ) | |||||||||||||||||
Enel SpA | 12/20/2023 | Morgan Stanley & Co. | (1.000 | %) | 0.480 | % | EUR | (1,660,000 | ) | Quarterly | (34,094 | ) | 11,424 | (45,518 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Total Buy Protection |
| $ | (17,079 | ) | $ | 425,084 | $ | (442,163 | ) | |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Sell Protection |
| |||||||||||||||||||||||||||||||
ADLER Real Estate AG | 6/20/2025 | JPMorgan Chase Bank N.A. | 5.000 | % | 2.664 | % | EUR | 3,600,000 | Quarterly | $ | 431,075 | $ | 268,363 | $ | 162,712 | |||||||||||||||||
Altice Finco S.A. | 6/20/2025 | JPMorgan Chase Bank N.A. | 5.000 | % | 3.799 | % | 5,950,000 | Quarterly | 349,878 | 184,101 | 165,777 | |||||||||||||||||||||
EDP Finance B.V. | 6/20/2025 | JPMorgan Chase Bank N.A. | 1.000 | % | 0.623 | % | 6,100,000 | Quarterly | 128,265 | 101,891 | 26,374 | |||||||||||||||||||||
Elis S.A. | 6/20/2025 | JPMorgan Chase Bank N.A. | 5.000 | % | 3.387 | % | 4,650,000 | Quarterly | 373,319 | 61,216 | 312,103 | |||||||||||||||||||||
Intrum AB | 6/20/2025 | JPMorgan Chase Bank N.A. | 5.000 | % | 7.228 | % | 1,950,000 | Quarterly | (186,138 | ) | (301,090 | ) | 114,952 | |||||||||||||||||||
Netflix, Inc. | 6/20/2025 | JPMorgan Chase Bank N.A. | 5.000 | % | 1.487 | % | $ | 5,800,000 | Quarterly | 959,267 | 1,198,753 | (239,486 | ) | |||||||||||||||||||
Premier Foods Finance Plc | 6/20/2025 | JPMorgan Chase Bank N.A. | 5.000 | % | 1.775 | % | EUR | 800,000 | Quarterly | 137,169 | 102,339 | 34,830 | ||||||||||||||||||||
Teva Pharmaceutical Finance Co. B.V. | 6/20/2025 | JPMorgan Chase Bank N.A. | 1.000 | % | 4.146 | % | $ | 5,450,000 | Quarterly | (725,182 | ) | (763,000 | ) | 37,818 | ||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Total Sell Protection |
| $ | 1,467,653 | $ | 852,573 | $ | 615,080 | |||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Total | $ | 1,450,574 | $ | 1,277,657 | $ | 172,917 | ||||||||||||||||||||||||||
|
|
(1) | Notional amounts are denominated in foreign currency where indicated. |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 85 |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited) (Continued)
OVER THE COUNTER TOTAL RETURN SWAP CONTRACTS
Referenced Obligation | Maturity Date | Counterparty | Fund Pays/ Receives Floating Rate | Floating Rate Index and Spread | Notional Amount | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid (Received) | Unrealized Apreciation | |||||||||||||||||||||
iBoxx USD Liquid High Yield Index USD | 9/20/2020 | JPMorgan Chase Bank N.A. | Receives | 3 Month USD LIBOR + 0.000% | $ | 140,000,000 | Quarterly | $ | 3,340,202 | $ | — | $ | 3,340,202 | |||||||||||||||||
BorgWarner, Inc. USD | 1/31/2021 | Morgan Stanley & Co. | Receives | 1 Month USD LIBOR - 0.400% | 7,184,327 | Monthly | — | — | — | |||||||||||||||||||||
Match Group, Inc. USD | 5/31/2021 | Morgan Stanley & Co. | Receives | 1 Month USD LIBOR - 0.400% | 2,688,775 | Monthly | — | — | — | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Total | $ | 3,340,202 | $ | — | $ | 3,340,202 | ||||||||||||||||||||||||
|
|
SCHEDULE OF WRITTEN OPTIONS at June 30, 2020 (Unaudited) | ||||||||||||||||||||||||||||||
Description | Counterparty | Exercise Price | Expiration Date | Number of Contracts | Notional Amount | Market Value | Premiums Received | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||
COMMON STOCKS |
| |||||||||||||||||||||||||||||
Call |
| |||||||||||||||||||||||||||||
Abbvie, Inc. | Morgan Stanley & Co. | $ | 105.00 | 8/21/2020 | (3 | ) | $ | (29,454 | ) | $ | (456 | ) | $ | (392 | ) | $ | (64 | ) | ||||||||||||
Accenture Plc | Morgan Stanley & Co. | 215.00 | 8/21/2020 | (1 | ) | (21,472 | ) | (850 | ) | (423 | ) | (427 | ) | |||||||||||||||||
Activision Blizzard, Inc. | Morgan Stanley & Co. | 82.50 | 8/21/2020 | (4 | ) | (30,360 | ) | (696 | ) | (955 | ) | 259 | ||||||||||||||||||
AES Corp. (The) | Morgan Stanley & Co. | 16.00 | 8/21/2020 | (8 | ) | (11,592 | ) | (320 | ) | (196 | ) | (124 | ) | |||||||||||||||||
Allstate Corp. (The) | Morgan Stanley & Co. | 105.00 | 8/21/2020 | (2 | ) | (19,398 | ) | (340 | ) | (495 | ) | 155 | ||||||||||||||||||
Altria Group, Inc. | Morgan Stanley & Co. | 45.00 | 8/21/2020 | (4 | ) | (15,700 | ) | (132 | ) | (231 | ) | 99 | ||||||||||||||||||
American Tower Corp. | Morgan Stanley & Co. | 280.00 | 8/21/2020 | (1 | ) | (25,854 | ) | (428 | ) | (707 | ) | 279 | ||||||||||||||||||
Amerisourcebergen Corp. | Morgan Stanley & Co. | 110.00 | 8/21/2020 | (2 | ) | (20,154 | ) | (330 | ) | (433 | ) | 103 | ||||||||||||||||||
Amgen, Inc. | Morgan Stanley & Co. | 250.00 | 8/21/2020 | (1 | ) | (23,586 | ) | (515 | ) | (587 | ) | 72 | ||||||||||||||||||
Anthem, Inc. | Morgan Stanley & Co. | 300.00 | 8/21/2020 | (1 | ) | (26,298 | ) | (310 | ) | (387 | ) | 77 | ||||||||||||||||||
Applied Materials, Inc. | Morgan Stanley & Co. | 70.00 | 8/21/2020 | (6 | ) | (36,270 | ) | (504 | ) | (772 | ) | 268 | ||||||||||||||||||
AT&T, Inc. | Morgan Stanley & Co. | 33.00 | 8/21/2020 | (9 | ) | (27,207 | ) | (315 | ) | (375 | ) | 60 | ||||||||||||||||||
Best Buy Co., Inc. | Morgan Stanley & Co. | 90.00 | 8/21/2020 | (4 | ) | (34,908 | ) | (1,740 | ) | (1,123 | ) | (617 | ) | |||||||||||||||||
Bristol-Myers Squibb Co. | Morgan Stanley & Co. | 62.50 | 8/21/2020 | (3 | ) | (17,640 | ) | (396 | ) | (245 | ) | (151 | ) | |||||||||||||||||
Broadcom, Inc. | Morgan Stanley & Co. | 350.00 | 8/21/2020 | (1 | ) | (31,561 | ) | (354 | ) | (387 | ) | 33 | ||||||||||||||||||
Cisco Systems, Inc. | Morgan Stanley & Co. | 50.00 | 8/21/2020 | (4 | ) | (18,656 | ) | (336 | ) | (267 | ) | (69 | ) | |||||||||||||||||
CSX Corp. | Morgan Stanley & Co. | 80.00 | 8/21/2020 | (2 | ) | (13,948 | ) | (128 | ) | (91 | ) | (37 | ) | |||||||||||||||||
Dollar General Corp. | Morgan Stanley & Co. | 200.00 | 8/21/2020 | (1 | ) | (19,051 | ) | (279 | ) | (367 | ) | 88 | ||||||||||||||||||
DR Horton, Inc. | Morgan Stanley & Co. | 65.00 | 8/21/2020 | (6 | ) | (33,270 | ) | (468 | ) | (616 | ) | 148 | ||||||||||||||||||
Duke Energy Corp. | Morgan Stanley & Co. | 92.50 | 8/21/2020 | (2 | ) | (15,978 | ) | (32 | ) | (117 | ) | 85 | ||||||||||||||||||
Ebay, Inc. | Morgan Stanley & Co. | 50.00 | 8/21/2020 | (3 | ) | (15,735 | ) | (1,320 | ) | (704 | ) | (616 | ) | |||||||||||||||||
Eli Lilly And Co. | Morgan Stanley & Co. | 170.00 | 8/21/2020 | (1 | ) | (16,418 | ) | (535 | ) | (382 | ) | (153 | ) | |||||||||||||||||
Fox Corp. | Morgan Stanley & Co. | 33.00 | 8/21/2020 | (4 | ) | (10,728 | ) | (110 | ) | (155 | ) | 45 | ||||||||||||||||||
Home Depot Inc. (The) | Morgan Stanley & Co. | 275.00 | 8/21/2020 | (1 | ) | (25,051 | ) | (255 | ) | (302 | ) | 47 | ||||||||||||||||||
Honeywell International, Inc. | Morgan Stanley & Co. | 165.00 | 8/21/2020 | (1 | ) | (14,459 | ) | (100 | ) | (89 | ) | (11 | ) | |||||||||||||||||
HP, Inc. | Morgan Stanley & Co. | 20.00 | 8/21/2020 | (21 | ) | (36,603 | ) | (735 | ) | (609 | ) | (126 | ) | |||||||||||||||||
Intel Corp. | Morgan Stanley & Co. | 67.50 | 8/21/2020 | (3 | ) | (17,949 | ) | (165 | ) | (248 | ) | 83 | ||||||||||||||||||
Intercontinental Exchange, Inc. | Morgan Stanley & Co. | 100.00 | 8/21/2020 | (3 | ) | (27,480 | ) | (240 | ) | (563 | ) | 323 | ||||||||||||||||||
Intuit, Inc. | Morgan Stanley & Co. | 310.00 | 8/21/2020 | (1 | ) | (29,619 | ) | (895 | ) | (717 | ) | (178 | ) | |||||||||||||||||
Johnson & Johnson | Morgan Stanley & Co. | 155.00 | 8/21/2020 | (2 | ) | (28,126 | ) | (150 | ) | (281 | ) | 131 | ||||||||||||||||||
Johnson Controls International | Morgan Stanley & Co. | 39.00 | 8/21/2020 | (7 | ) | (23,898 | ) | (326 | ) | (376 | ) | 50 |
The accompanying notes are an integral part of these financial statements.
86 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund)
SCHEDULE OF WRITTEN OPTIONS at June 30, 2020 (Unaudited) (Continued)
Description | Counterparty | Exercise Price | Expiration Date | Number of Contracts | Notional Amount | Market Value | Premiums Received | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||
Kimberly-Clark Corp. | Morgan Stanley & Co. | $ | 150.00 | 8/21/2020 | (1 | ) | $ | (14,135 | ) | $ | (175 | ) | $ | (252 | ) | $ | 77 | |||||||||||||
Kinder Morgan, Inc. | Morgan Stanley & Co. | 18.00 | 8/21/2020 | (11 | ) | (16,687 | ) | (66 | ) | (140 | ) | 74 | ||||||||||||||||||
Lam Research Corp. | Morgan Stanley & Co. | 375.00 | 8/21/2020 | (1 | ) | (32,346 | ) | (600 | ) | (617 | ) | 17 | ||||||||||||||||||
Leidos Holdings, Inc. | Morgan Stanley & Co. | 110.00 | 8/21/2020 | (1 | ) | (9,367 | ) | (62 | ) | (138 | ) | 76 | ||||||||||||||||||
Lincoln National Corp. | Morgan Stanley & Co. | 50.00 | 8/21/2020 | (2 | ) | (7,358 | ) | (78 | ) | (177 | ) | 99 | ||||||||||||||||||
Lowe’s Cos., Inc. | Morgan Stanley & Co. | 150.00 | 8/21/2020 | (3 | ) | (40,536 | ) | (489 | ) | (551 | ) | 62 | ||||||||||||||||||
Mastercard, Inc. | Morgan Stanley & Co. | 340.00 | 8/21/2020 | (1 | ) | (29,570 | ) | (120 | ) | (337 | ) | 217 | ||||||||||||||||||
Merck & Co., Inc. | Morgan Stanley & Co. | 82.50 | 8/21/2020 | (3 | ) | (23,199 | ) | (372 | ) | (386 | ) | 14 | ||||||||||||||||||
Microsoft Corp. | Morgan Stanley & Co. | 220.00 | 8/21/2020 | (1 | ) | (20,351 | ) | (320 | ) | (273 | ) | (47 | ) | |||||||||||||||||
Newmont Corp. | Morgan Stanley & Co. | 65.00 | 8/21/2020 | (4 | ) | (24,696 | ) | (1,176 | ) | (851 | ) | (325 | ) | |||||||||||||||||
NVIDIA Corp. | Morgan Stanley & Co. | 435.00 | 8/21/2020 | (1 | ) | (37,991 | ) | (825 | ) | (932 | ) | 107 | ||||||||||||||||||
Omnicom Group, Inc. | Morgan Stanley & Co. | 62.50 | 8/21/2020 | (3 | ) | (16,380 | ) | (300 | ) | (161 | ) | (139 | ) | |||||||||||||||||
Oracle Corp. | Morgan Stanley & Co. | 57.50 | 8/21/2020 | (6 | ) | (33,162 | ) | (750 | ) | (628 | ) | (122 | ) | |||||||||||||||||
Philip Morris International, Inc. | Morgan Stanley & Co. | 80.00 | 8/21/2020 | (3 | ) | (21,018 | ) | (138 | ) | (266 | ) | 128 | ||||||||||||||||||
Procter & Gamble Co. (The) | Morgan Stanley & Co. | 130.00 | 8/21/2020 | (3 | ) | (35,871 | ) | (225 | ) | (218 | ) | (7 | ) | |||||||||||||||||
Progressive Corp. (The) | Morgan Stanley & Co. | 85.00 | 8/21/2020 | (3 | ) | (24,033 | ) | (480 | ) | (770 | ) | 290 | ||||||||||||||||||
Qualcomm, Inc. | Morgan Stanley & Co. | 100.00 | 8/21/2020 | (4 | ) | (36,484 | ) | (840 | ) | (739 | ) | (101 | ) | |||||||||||||||||
Truist Financial Corp. | Morgan Stanley & Co. | 47.50 | 8/21/2020 | (5 | ) | (18,775 | ) | (125 | ) | (368 | ) | 243 | ||||||||||||||||||
Union Pacific Corp. | Morgan Stanley & Co. | 185.00 | 8/21/2020 | (1 | ) | (16,907 | ) | (260 | ) | (327 | ) | 67 | ||||||||||||||||||
Unum Group | Morgan Stanley & Co. | 20.00 | 8/21/2020 | (10 | ) | (16,590 | ) | (370 | ) | (387 | ) | 17 | ||||||||||||||||||
Verizon Communications, Inc. | Morgan Stanley & Co. | 60.00 | 8/21/2020 | (5 | ) | (27,565 | ) | (125 | ) | (203 | ) | 78 | ||||||||||||||||||
Williams Cos., Inc. (The) | Morgan Stanley & Co. | 23.00 | 8/21/2020 | (9 | ) | (17,118 | ) | (135 | ) | (213 | ) | 78 | ||||||||||||||||||
Yum! Brands, Inc. | Morgan Stanley & Co. | 100.00 | 8/21/2020 | (1 | ) | (8,691 | ) | (47 | ) | (89 | ) | 42 | ||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Total Written Options | $ | (21,838 | ) | $ | (22,615 | ) | $ | 777 | ||||||||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 87 |
Table of Contents
PartnerSelect High Income Alternatives Fund
The PartnerSelect High Income Alternatives Fund declined 5.05% in the six-month period, compared to the 6.14% gain for the Bloomberg Barclays U.S. Aggregate Bond Index (Agg) and 4.78% loss for high-yield bonds (BofA Merrill Lynch U.S. High-Yield Cash Pay Index). Since the fund’s inception in September 2018, the fund is essentially flat (-0.15%) compared to a 9.50% gain for the Agg and a 2.20% gain for high-yield bonds.
QUARTER END PERFORMANCE – 6/30/2020 | ||||||||||||||||||||
One- Month | Three- Month | Year-to- Date | One Year | Since Inception | ||||||||||||||||
PartnerSelect High Income Alternatives Fund INSTITUTIONAL | 2.04% | 10.14% | -5.05% | -2.65% | -0.15% | |||||||||||||||
PartnerSelect High Income Alternatives Fund INVESTOR | 2.02% | 10.07% | -5.25% | -2.92% | -0.38% | |||||||||||||||
Barclays Aggregate Bond Index | 0.63% | 2.90% | 6.14% | 8.74% | 9.50% | |||||||||||||||
ICE BofAML U.S. High Yield TR USD Index | 0.97% | 9.61% | -4.78% | -1.10% | 2.20% | |||||||||||||||
HFRX Fixed Income – Credit Index | 2.06% | 8.61% | 1.67% | 4.98% | 2.66% | |||||||||||||||
SEC 30-Day Yield1 as of 6/30/2020 Institutional: 3.67% Investor: 3.42% |
| |||||||||||||||||||
Unsubsidized SEC 30-Day Yield2 as of 6/30/2020 Institutional: 3.04% Investor: 2.79% |
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1. The 30-day SEC Yield is computed under an SEC standardized formula based on net income earned over the past 30 days. It is a “subsidized” yield, which means it includes contractual expense reimbursements, and it would be lower without those reimbursements. |
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2. The unsubsidized 30-day SEC Yield is computed under an SEC standardized formula based on net income earned over the past 30 days. It excludes contractual expense reimbursements, resulting in a lower yield. |
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Distribution Yield: Trailing 12-Month as of 6/30/2020 Institutional: 3.91% Investor: 3.65% |
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The trailing twelve month (TTM) distribution yield is the sum of a fund’s total trailing 12-month interest and dividend payments divided by the last month’s ending share price (NAV) plus any capital gains distributed over the same period. 12-Month Yield gives you a good idea of the yield (interest and dividend payments) the fund is currently paying. |
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Expense Ratios | MAHIX | MAHNX | ||||||
Gross Expense Ratio | 1.98% | 2.17% | ||||||
Net Expense Ratio | 1.48% | 1.73% | ||||||
The Net Expense Ratio reflects a contractual fee waiver and/or expense reimbursement, which is in place through 4/30/2021. See the Fund’s prospectus for more information. | ||||||||
Adjusted Expense Ratio | 0.98% | 1.23% | ||||||
The Adjusted Expense Ratio is the same as the Net Expense Ratio exclusive of certain investment expenses, such as interest expense from borrowings and repurchase agreements, dividend expense from investments on short sales, and acquired fund fees and expenses. | ||||||||
Past performance does not guarantee future results. Index performance is not illustrative of fund performance. An investment cannot be made directly in an index. Short-term performance in particular is not a good indication of the fund’s future performance, and an investment should not be made based solely on 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 of the funds as of the most recently completed calendar month, please visit www.partnerselectfunds.com. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. |
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Semi-Annual Review
The first six months of 2020 were eventful and turbulent to say the least. After entering the year with arguably rich credit valuations, COVID-19 fears resulted in a sharp and indiscriminate selloff of most assets, even short-term high-quality assets. But prompt and aggressive actions by the Federal Reserve and Congress helped to push risky assets higher, almost as fast as they declined.
Although the fund’s managers had a relatively conservative posture prior to COVID-19, the portfolio’s safer, higher-quality assets were not insulated from the selloff. But in the second quarter, we are pleased to report a strong gain. The fund rose more than 10% in the three-month period, edging out high-yield (up 9.61%) and making up significant ground versus the Agg benchmark (up 2.90%).
Our flexible credit managers Brown Brothers Harriman and Guggenheim were down -1.91% and -1.08%, respectively, this year through June, beating the high-yield index, which declined -4.78%. This relative outperformance is consistent with our expectations of these managers protecting capital better than high-yield bonds on the downside. Both managers are also ahead for the trailing one-year period, up slightly, while high-yield is down close to 1%. Since inception (September 2018), Brown Brothers is ahead of high-yield, while Guggenheim slightly trails.
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Neuberger Berman’s strategy is down a shade more than 3% year to date, a very respectable result given the unprecedented volatility spike experienced in March of this year amid COVID-19. Their strategy is now benefiting from higher-than-average option premia in the aftermath of the stock market plunge, which should benefit future returns.
The Ares sleeve was down sharply (-20.36%) in the six-month period. The strategy invests primarily in business development companies (BDCs,) mortgage REITS, and master limited partnerships (MLPs)/midstream energy. That sleeve generated extremely strong performance in 2019 and during the rebound in the second quarter of this year but suffered a dramatic decline in the first quarter (down close to 40%) as the market worried about credit quality and leverage in mortgage REITs and BDCs, as well as the collapse in energy prices. Despite that result, we think Ares managed the portfolio well through the period, considering the environment and their mandate. They entered the year conservatively positioned relative to their mandate and outperformed their benchmark quite significantly. But even with double-digit levels of cash and a tilt toward higher quality, there was nowhere to hide. The market carnage in their target universe was reminiscent of the 2008 financial crisis, despite generally better fundamentals and more responsible use of leverage by the management teams of the companies in Ares’s portfolio.
During the fund’s brief life, it has lived through two sharp declines and two sharp rebounds. It was launched into a mini-meltdown in the fourth quarter of 2018 that saw high-yield down almost 5%. This was followed by a “risk-on” year of mid-teens gains for high-yield, leading into the meltdown in the first quarter of 2020 that saw high-yield lose essentially all of 2019’s gains (and significantly more than that) before a sharp rally in the last week of the quarter.
Throughout all of this, the Agg index has rallied pretty continuously (aside from a stretch of less than two weeks in March 2020 that saw it experience its own shocking drawdown of nearly 10 percentage points—truly a sign of how incredibly dysfunctional markets were during that period). The Agg’s high-teens gain during that time is a surprise to us given what seemed like an unattractive combination of high duration (about 6.0 years) and relatively low yield (3.5%) when the fund launched. Little did we (or anyone) know that owning as much duration as possible would be the winning formula for total return in fixed-income over the next six to eight quarters. All the features we thought would generate attractive returns relative to core investment-grade bonds—namely, partnering with managers who excel at credit selection, targeting less efficient and niche market segments, and diversifying beyond bonds for income—would prove ineffective in that pursuit. We are hard pressed to believe the current characteristics for core bonds—a 1.3% yield and duration of 5.5 years—will produce a similarly compelling relative performance story over the next 18–24 months. We could of course be wrong, but the odds seem stacked in the fund’s favor at this point.
As a reminder, the fund is intended to be a complement to traditional fixed-income allocations, seeking long-term returns that are significantly higher than core fixed-income with a low correlation to core bonds and less interest-rate sensitivity, but almost certainly higher volatility. Over the long term, we believe returns will be comparable to high-yield bonds, but with lower volatility and downside risk because of the diversified sources of return and manager flexibility.
Performance of Managers
During the first six months of the year, each of the four managers performed in line with our expectations. The fund’s two flexible credit managers Brown Brothers Harriman and Guggenheim were conservatively positioned heading into COVID-19, and both repositioned their portfolios, selectively adding to their credit exposure. Brown Brothers slipped 1.91%, and Guggenheim 1.08%, compared to a loss of 4.78% for high-yield. Ares Management’s Alternative Equity Income sleeve generated a 29.81% gain in the second quarter, benefiting from becoming more aggressively positioned during the market decline in March. Unfortunately, it was not enough to offset the sharp first quarter decline. Ares ended the first half of the year down 20.36%. Neuberger Berman’s Option Income strategy fell 3.29% this year through June. (These returns are net of the management fees that each sub-advisor charges the fund.)
Manager Commentaries
Ares: The Ares sleeve of the PartnerSelect High Income Alternatives Fund experienced significant volatility in the first half of 2020. In early 2020, the strategy continued strong 2019 performance until mid-February when valuation declines persisted through early April before rebounding significantly into mid-year. Our strategy focuses on stocks that generate strong current income from investments via consistent cash flows, such as private commercial loans, commercial and residential mortgages, and midstream energy assets. Year to date through June 30, 2020, performance of the strategy was approximately -20% versus the benchmark of -29.96%.
The biggest driver of outperformance versus the benchmark was our portfolio allocation to the three target asset classes: business development companies (“BDCs”), mortgage REITs, and midstream energy. In late 2019 and early 2020, strong performance resulted in our sale of investments that hit our target valuations; however, this also limited new investment opportunities. As a result, our cash balance continued to grow and as of February 19 (S&P 500 peak), the portfolio was sitting on 20% cash and the remaining portfolio was defensively positioned, including moving into preferred equity investments, especially in the mortgage REIT space. This defensive positioning, with the exception of mortgage REITs, which we will discuss in greater detail below, allowed the portfolio to outperform the benchmark during the historical market declines in February and March. During the third week of March, we deployed our cash balances and while we were a week ahead of the market bottom, we believe our active portfolio rotation helped generate meaningful alpha relative to the target benchmark.
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BDCs—The BDC market traded off sharply as the equity and credit markets declined in March. BDCs provide loans to private U.S. businesses and mark-to-market the value of their loans each quarter. A full economic shutdown and historically wide credit spreads at the March 31 fair value date resulted in BDC book values declining 15% on average for the first quarter. In addition to book values declining, BDC valuation multiples went from trading above book value (105% of book value in February) to 80% of book value at the end of June. While we believe that credit issues will continue to arise as the economy struggles to regain its footing, we believe mark-to-market book values and the current discount to those values have priced in more credit losses than we believe will be the long-term case. As a result, we are bullish on the BDC industry and increased our portfolio weighting from 35% BDCs in mid-February to 75% of the portfolio today. Given the improvements in the liquid credit markets in the second quarter and better than expected credit performance in the portfolios, we believe book values will improve c. 5% on average for the second quarter.
Mortgage REITs—The mortgage REIT market fared the worst during the downturn in March. Many of the companies used short-term repo debt for liabilities on their balance sheet. During the worst weeks of March, lenders began making margin calls on repo debt and forcing some mortgage REITs to fire-sale assets. As a result, we saw some instances where book values fell by 50% or more. While not all REITs experienced liability issues, we are still concerned about the long-term performance of commercial real estate as hotel, retail, and vertical office properties could be under pressure well into 2021 as the COVID-19 pandemic continues. The mortgage REIT portion of our portfolio was the most disappointing as we had previously viewed the real estate properties as more resilient in a typical downturn. Unfortunately, the impacts from COVID-19 are going to have a much more dramatic and deeper impact than what we were expecting from a traditional recession. In particular, we had roughly 10% of our portfolio in mortgage REIT preferred stocks, which we viewed as defensive and a more stable source of capital than common stock; however, in the midst of the market dislocation, fear and limited liquidity caused significant pressure on preferred stock and we experienced similar price declines in preferreds as we saw in common stock.
Midstream Energy—The first half of 2020 saw a whirlwind of expectations for midstream energy, and the industry continues to manage the shifting environment to meet customer needs. Entering the year, the United States was producing approximately 13 million barrels per day (MMBpd) of oil with modest growth expected to continue. Today, however, volumes are approximately 11 MMBpd as producers react to the one-two punch of both supply (e.g., Saudi-Russia oil price war) and demand shocks (e.g., global economic shutdown from COVID-19). We sought to actively manage our midstream investments during the first half of 2020 as we cut our exposure to midstream in half (now c. 10% of the portfolio) as the demand side of the equation began to erode in early March. We also “high-graded” our exposure to operators with large, diversified footprints that we believe can best benefit from geographical pricing differences. In addition, the larger, more diversified midstream operators have a broader customer base and thus are less exposed to contract renegotiation risk from struggling producers. While the near-term outlook remains uncertain for the pace of domestic energy production, we remain confident in both the cash flow generation and value of midstream assets (transportation-focused, not production). One of the added benefits from the drop in domestic production has been a significant cut in capex plans which, in turn, creates excess cash flow potential. Additionally, the regulatory hurdle for new projects remains elevated further providing value for existing assets in the ground. We highlight Berkshire Hathaway’s recent decision to acquire $9.7 billion of regulated natural gas pipelines in the Northeast as a sign of the long-term value for midstream assets. We anticipate the second half of 2020 will be volatile but look for continued focus on free cash flow while meeting the marketplace demand as domestic and global economies recover.
Brown Brothers Harriman: Entering the first quarter of this year, valuations for credit were quite expensive and there were few new ideas that met our valuation requirements. Opportunities began to slowly emerge as bond prices began to fall in the middle of February. The speed of the sell-off over the following 30 days was so severe that almost the entire credit universe would pass our valuation hurdles and be flagged as a “buy” in our valuation framework as we exited the quarter. Through this volatility we slowly added more corporate exposure to the portfolio.
The extraordinary drawdown in credit prices was driven by massive spread widening (amidst bond selling) at a speed that was worse than what occurred during the great financial crisis of 2008. For context, investment-grade BBB-rated credit suffered a -10.3% performance decline in March, with high-yield BB-rated credit falling a similar -9.7%.
As the spread widening storm of March became more intense, we continued to lean into the wind and add slowly to our existing credit positions at lower prices. We expect these additions will be additive to future performance as economic activity begins to recover, albeit with very uncertain timing. The market also gave us the ability to add new opportunities across floating-rate secured loans, corporate bonds, and ABS.
We purchased the secured term loan of Allen Media at a coupon of 562 bps over 3-month London Interbank Offering Rate (LIBOR) for a 7.1% yield. The company is a diversified media company that owns the Weather Channel, seven television networks, and 15 broadcast television stations that reach 150 million U.S. subscribers. The loan has low starting leverage, a significant unsecured debt cushion beneath our debt, plus an engaged CEO that owns 100% of the business.
We initiated a position in Kraft Heinz after the company was downgraded to high-yield in February. The company’s stable product portfolio of well-known brands in the packaged food category produces significant recurring revenues and industry leading margins. A new management team has been brought in to re-invigorate product innovation and lower the leverage on the business, with a target of regaining its investment-grade credit profile. We purchased long-dated 2039 bonds at a spread of 320 bps for a yield of 5.5%.
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Stericycle is an industrial services company whose primary business line is the collection and disposal of regulated medical waste. The company was seeking to reduce leverage via asset sales the past two quarters, with slow progress. We were able to purchase a secondary piece of the two-year senior secured term loan at discount to par, which offered 380 bps of spread over 3-month LIBOR or a 6.3% yield to maturity. Shortly thereafter, the company announced a large asset sale that was just completed after the end of this quarter and should significantly pay down the discounted term loan at par.
Trinity Capital is well-established venture debt lender that specializes in making loans to late-stage technology venture firms. With a conservative underwriting process as their foundation, the management team has a solid history of producing strong loan performance and low loss experience. The company also has a low leverage profile that will continue as it completes the process of shifting to a Business Development Company (“BDC”). The five-year notes were purchased at an attractive spread of 535 bps for a 7% yield.
In structured products, we purchased an aircraft engine lease ABS from seasoned Asian issuer Total Engine Asset Management. SUNBD 2020-1A B finances a portfolio of long-term spare engine leases to global airlines that are critical to the operation of aircraft fleets. Spare engines are utilized to keep aircraft flying when installed engines are removed for repair and overhaul. The engine collateral for this deal service the most popular and current generation of narrow-body aircraft. Aircraft engines are the most valuable part of an airframe and hold their value over time due to their constant refurbishment. We were able to purchase the 5.7-year BBB-rated bonds at a spread of 330 bps for a 5.2% yield.
Capital Automotive REIT is a specialty finance company investing in commercial real estate leased primarily to automobile dealerships. The company has issued multiple triple-net lease ABS over the years, which we have purchased across accounts at BBH. In January, the company brought another series of notes to market from its sizable $3 billion master trust. CAUTO 2020-1A B1 is a 4.4-year BBB-rated bond that was purchased at a spread of 260 bps for a 3.5% yield.
After the unprecedented first quarter sell-off in credit markets, the second quarter began a remarkable turnaround that combined strong performance for credit, with record issuance of new credit into the markets. As the tide turned through the quarter, we were pleased to see the recovery reflected in positive changes to the prices of our credits. Performance of the BBH sleeve in the second quarter was a solid 8.09%, which also pulled year-to-date performance up to -1.91%. Economic activity is increasing across the country in these first two weeks of July and the rebound in credit is continuing. We expect credit prices to remain firm and credit availability to incrementally improve as the economy begins to regain some momentum.
The second quarter began with attractive valuations across credit markets reflecting the pandemic risks roiling the economy exacerbated by a liquidity problem in short term credit. Noting these economic headwinds, we continued assessing attractive opportunities during the quarter anchored by our disciplined credit approach. The focus for the team was sifting through the broad opportunity set and adding positions in credits that would be capable of surviving an economic downcycle of this scale through business model flexibility, adequate liquidity buffers or collateral protection. Although the rebound in credit markets was strong during the quarter, there is still ground to be recovered over time as the market has not returned to normal levels. As the timing of a lasting economic rebound is far from a certainty at this juncture, we continue to invest at a measured pace. Fortunately, we still see ample opportunities to deploy capital in new issuance and the secondary markets, while being mindful that additional pandemic related volatility could still be on the horizon.
The Federal Reserve put an enormous and credible bid under the corporate bond market in the quarter. These governmental actions were assisted by a recovery in oil prices from the negative levels in early April, and a seeming stabilization of pandemic health risks. Such factors helped drive credit valuations significantly tighter in the quarter—but they were not a panacea for markets. ABS and CMBS compensation remain at or near the most attractive levels seen since the Great Financial Crisis of 2008–2009. As we look forward from today, we still see a broad opportunity set for disciplined investors to acquire durable credits at attractive valuations.
As the aerospace industry shook from the turbulence of COVID-19 airline disruptions we added exposure away from the center of the stress in an aircraft manufacturer and a lessor at attractive spreads in the second quarter. The Boeing Company has endured multiple business issues recently on different fronts. However, its formidable commercial aviation franchise, significant backlog, and nationally important business position allowed the company to issue $25 billion of notes for liquidity purposes in April. We participated in both the 3-year and 5-year tenors that were rated BBB and offered spreads of 425 bps and 450 bps, respectively, for yields of 4.4% and 4.9%. The bonds rallied quickly into our “Sell” zone and we began to exit the positions prior to the end of the quarter. We built a short-dated position in a leading aircraft lessor, AerCap. Aercap is a world-class lessor with significant multi-cycle experience dealing with both manufacturers and airlines customers. Although the management team of this company will be busy managing both new purchases with suppliers and leasing terms with customers for the next few months, the fact that the company retains broad options pertaining to accessing the capital markets supports our investment thesis in these short-dated bonds. Another travel-related credit we purchased in the quarter was Expedia, a global-scale online travel agent. Although the disruption to travel bookings was severe in the first quarter, an eventual return to travel is expected as countries lift pandemic restrictions. Expedia took swift action to shore up its capital base and liquidity by issuing equity and debt. With a significant equity injection and deep liquidity cushion, we felt very comfortable adding exposure to the new five-year BBB-rated bonds at a spread of 588 bps for a 6.25% yield.
We initiated a new position in the bonds of Austrian sensor manufacturer ams AG (“AMS”). The company is a world leader in sensors and photonics having completed the acquisition of OSRAM Licht AG. The combined business now has a more diversified product line and a
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flexible manufacturing model. The financial model is also a solid combination of low steady-state leverage bolstered by significant liquidity to support the company through this period of COVID-19 disruptions. The five-year senior notes are rated BB- and were priced at a very attractive spread level of 695 bps for a yield of 7.24%.
Another new credit to the portfolio is Hillenbrand, which is a diversified industrial business that derives sales from its three diverse segments of materials handling, deathcare, and plastic extrusion equipment. A high percentage of revenues is derived from repeatable aftermarket sales that produce stable and significant free cash flow to repay debt. The company issued five-year bonds with a rating of BB+ and at a solid spread level of 532 bps for a 5.75% yield.
Owl Rock Technology Finance is a private business development company (“BDC”) managed by the same experienced team at Owl Rock Capital that we have invested with before. This BDC is focused on originating first lien private credit loans to technology and software companies with business essential applications. The technology loan portfolio has a low loan-to-value at 35% and zero non-accruals since inception. The BDC has low leverage with a debt-to-asset ratio below 50% and benefits from being part of the larger $17 Billion credit platform at Owl Rock. The first-time issuance of five-year bonds from this entity was rated BBB- and came very attractively priced at 682 bps for a 7.1% yield.
The new-issue market for ABS was slower to re-open in April and May but returned to normal levels in June. Nonetheless, we added new structured product offerings from issuers we know well from previous investments. West River Group is a venture debt lender to late-stage biotech and technology firms. Loans are co-originated by Silicon Valley Bank (SVB), which has an impressive underwriting history, with minimal credit losses and high returns on lending. The 2.3-year BBB-rated privately-placed tranche has 32% credit enhancement and was issued at a spread of 642 bps to yield 6.6%.
We were pleased to see the strong rebound in portfolio performance during the 2nd quarter, with a strong basis for future performance. However, COVID-19 still weighs on the global economy, and we remain alert for second wave effects on our investments. We will be closely evaluating the second quarter financial reports of our investments in the coming weeks and assessing the continuing durability and valuations of each credit.
Guggenheim: The portfolio returned -1.08 percent for the six-month period ending 6/30/2020. Credit spreads widened to levels not seen since the financial crisis as COVID-19 spiraled into a global pandemic before partially retracing as the Federal Reserve cushioned the economy through massive asset purchases and launching an array of lending facilities.
The portfolio had roughly half the drawdown of below-investment-grade credit indices in the first quarter as our focus on downside mitigation limited mark-to-market losses, while also capturing upside from the rebound in risk assets during the second quarter. The portfolio returned +7.05% in the second quarter, aided by the portfolio’s re-risking trades that began in March.
Our conservative positioning before the downturn allowed us to aggressively take advantage of market dislocations and significantly add credit exposure beginning in March. This environment played into our long-term strategy to add to credit when sufficiently compensated for the risk.
While we acknowledge the long list of inherent unknowns in this current environment the resetting of valuations across most asset classes has presented significant opportunities and prompted us to meaningfully increase credit exposure. As spreads swung from cycle tights to near historical wide levels, the portfolio unwound its credit protection on the IG CDX index, which had added to performance over the period. The portfolio increased net exposure to corporate credit to over 60% at period’s end from nearly 0% at the beginning of the period given very attractive valuations and the total return upside from further spread normalization. This has been accretive to performance and further enhances our carry which helps drive long-term total returns.
Investment-grade corporate bonds, 18% of the portfolio at period’s end, positively contributed to performance as the IG index spread tightened 128 bps over the second quarter to 150 bps. The Federal Reserve’s Secondary Market Corporate Credit Facility (SMCCF) not only provided a backstop to further credit spread widening but spurred a substantial retracement in spreads over the second quarter, despite historic primary issuance over the first half of the year. The Fed’s transparency and follow through to their proposed purchase programs have increased liquidity and provided a sense of security in the corporate bond market.
High-yield corporate bonds, 24% of the portfolio at period’s end, was a top contributor to performance as index spreads tightened 254 bps over the second quarter to 626 bps. The Federal Reserve’s Secondary Market Corporate Credit Facility (SMCCF) began purchasing high-yield corporate credit ETFs in May and very limited HY corporate bonds in June, both of which have helped drive spreads tighter. June was one of the largest months of new issuance on record at $60 billion. Heading into July and August where primary new issuance is seasonally lighter, we are actively looking for attractive relative value opportunities in the secondary market.
Bank loans, 16% of the portfolio at period’s end, detracted over the period as spread widening outpaced carry, in line with broader loan indices. The primary market picked up in June, with net issuance more than double May’s total; however, issuance in the second quarter total was still down year over year.
Structured credit, which totaled approximately 50% of the portfolio at period’s end, detracted from performance over the period while significantly outperforming most corporate credit indices. The portfolio’s allocation in CLOs and non-Agency RMBS is mostly senior in the
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capital structure and should remain substantially loss remote even in a severe economic downturn. That did not mean the holdings were immune from broader spread widening, however. In March, we saw spreads widen and prices fall mainly as a function of liquidity as investors looked to convert shorter duration/higher credit quality securities to cash.
Aircraft ABS, an 8% allocation at period’s end, was the largest detractor as travel has been one of the hardest hit sectors of the economy. Consistent with our focus on preservation of capital, the majority of exposure is single-A rated, senior in the capital structure, and still returns full par even under very stringent stress tests that reflect a very prolonged impact on global travel resulting from COVID-19. With current prices reflecting some of the worst-case outcomes, we are optimistic about this sector’s total return potential going forward.
Spreads rallied across all sub-sectors in the second quarter following the announcement of the Fed’s expanded Term Asset-Backed Securities Loan Facility (TALF) helped further stabilize valuations across structured credit even though the facility has been largely unused since inception. There is a clear bifurcation between senior structures vs subordinated positions as subordinated positions may encounter credit losses not yet priced in should the economic impact of the COVID-19 disruption persist.
As such, we do not believe it is time to add significant subordinated risk, as negative credit performance and disruptions in cash flows are possible. We have opportunistically sourced senior CLOs and esoteric ABS via the secondary market. We expect the opportunity set to expand further should liquidity issues or downgrades create more forced selling in the market.
Duration positioning contributed to performance. Overall duration increased from 1.5 years to 3.4 years at period’s end. With the Fed set for a protracted period at the zero bound, Treasury yields may have room to fall further.
We have opportunistically rotated into securities that offer compelling risk/return profiles. Despite our substantial repositioning into credit, the portfolio still maintains dry powder to take advantage of any forthcoming opportunities.
Neuberger Berman: COVID-19 set fire to global volatility markets during the first three months of the year. Rich or poor, capitalist or socialist, efficient or dysfunctional, the modern global economy was not prepared for the scope and scale of what is required (or will be required) to contain a global contagion. Option markets simply reacted accordingly and VIX jumped to a record close of just over 82 on March 16, 2020. But it’s important to keep in mind that the sudden movement is actually a market defense mechanism. Although, once again, a move of this magnitude ended up wiping out some rather seasoned volatility strategies. March 2020 was the most volatile month on record for the S&P 500. Yes, all the way back to 1928. In contrast, during the next three months U.S. equity markets ended one of their best quarters dating back to 1998, which helped push global equity markets to their best quarter since 2009. Despite plenty of negative headlines, equity markets seem to be impervious to bad news, in our view likely due to the extraordinary commitments made by the U.S. Federal Reserve.
Year to date, U.S. equity markets finished the first half of the year having suffered only minor losses, while non-U.S. equity market indexes remain well behind their start of year levels. The S&P 500 Index (“S&P 500”) has lost -3.08% and the Russell 2000 Index (“R2000”) has fallen -12.98%. In conjunction, the CBOE S&P 500 2% OTM PutWrite (“PUTY”) has dropped -13.07%, outperforming the CBOE Russell 2000 PutWrite (“PUTR”) return of -17.84%.
In the first half of the year, our sleeve of the portfolio suffered a moderate loss of slightly more than 3%, substantially outperforming the benchmark return of -12.91%. Year to date, the S&P 500 Index put writing component of the strategy has lost -2.79%, avoiding most of the PUTY loss of -12.91% and holding up significantly better than the CBOE S&P 500 One-Week PutWrite Index (“WPUT”) return of -15.40%. Meanwhile, over the same time period the Russell 2000 Index put writing component of the strategy has dropped -8.38%, outperforming the PUTR return of -17.84% and more resilient than the CBOE Russell 2000 One-Week PutWrite Index (“WPTR”) return of -27.13%. Year to date, the CBOE S&P 500 Volatility Index (“VIX”) is up 16.7 pts with an average 30-day implied volatility premium of -7.3. Similarly, the CBOE Russell 2000 Volatility Index (“RVX”) is up 22.1 pts with an average 30-day implied volatility premium of -11.9.
Central banks around the world remain committed to their efforts to keep rates at or below zero for the foreseeable future. After dropping rates to zero, the U.S. Fed has gone as far as discussing further “yield curve” control measures in the event they need to address a prolonged recovery. After a rollercoaster-like start to the first six months of the year, short-term rates remain near zero. The collateral portfolio has generated a modestly positive 1.95%, surpassing the T-Bill Index return of 0.48% by 147 bps. 30-Day U.S. T-Bill rates decreased 133 bps while 2-Year U.S. Treasury rates rallied 142 bps.
Our closing point is simply that beyond a single observation period, we believe option-writing strategies require both time and volatility to deliver their structured return profiles. For years, our strategy has performed across long stretches of time that have lacked elevated levels of volatility—remember VIX’s long-term median is 17. The first half of 2020 has finally given us the prospect of sustained elevated levels of implied volatility. However, it has obviously been light on time (six months). So, with the calamity of the first six months of 2020 behind us, we believe that higher levels of volatility for longer will lead to either an attractive total return for 2020 in the event equity markets continue to rally or a hard fought relative excess return if equity markets end the year in the manner they started.
Strategy Allocations
The fund’s allocation across the four managers are as follows: 32.5% to both Brown Brothers Harriman and Guggenheim Investments, 20% to Neuberger Berman, and 15% to Ares Management. We use the fund’s daily cash flows to bring each manager’s allocation toward their targets should differences in shorter-term relative performance cause divergences.
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Sub-Advisor Portfolio Composition as of June 30, 2020
Ares Alternative Equity Income Strategy
BDCs | 70.5% | |||
MLPs/midstream | 9.8% | |||
Mortgage REITs | 13.4% | |||
CEFs | 0.0% | |||
Preferred/Other | 2.1% | |||
Cash & Equivalents | 4.3% |
Brown Brothers Harriman Credit Value Strategy
ABS | 27% | |||
Bank Loans | 27% | |||
Corporate Bonds | 36% | |||
CMBS | 5% | |||
Cash & Equivalents | 5% |
Guggenheim Multi-Credit Strategy
ABS | 31.6% | |||
Bank Loans | 16.2% | |||
Corporate Bonds | 43.4% | |||
CMBS | 4.2% | |||
RMBS | 16.1% | |||
Other | 5.6% | |||
Interest Rate Swap | -0.5% | |||
Reverse Repo | -8.1% | |||
Net Credit Derivatives | -9.7% | |||
Cash & Equivalents | 0.3% |
Neuberger Berman Option Income Strategy
Equity Index Put Writing | 100% |
CURRENT TARGET STRATEGY ALLOCATIONS AS OF JUNE 30, 2020
Source: Litman Gregory
PORTFOLIO CHARACTERISTICS – 6/30/2020
Total Net Assets: | $ | 81,997,091 | ||
Total Holdings: | 373 | |||
Weighted Average Duration: | 2.13 Years | |||
30-Day SEC Yield: | 3.67% | |||
TTM Distribution Yield: | 3.91% |
SECTOR EXPOSURE – 6/30/2020
Corporate | 24.0% | |||
Asset Backed | 22.6% | |||
Options & Swaps | 19.0% | |||
Bank Loan | 14.7% | |||
BDC | 8.9% | |||
CMO | 6.5% | |||
REIT | 1.6% | |||
Closed End Funds | 1.1% | |||
Preferred Stock | 0.9% | |||
MLP | 0.7% | |||
Governments | 0.1% | |||
Cash & Short Term | -0.1% |
CREDIT QUALITY BREAKDOWN* – 6/30/2020
AAA: | 24.6% | |||
AA: | 3.3% | |||
A: | 11.2% | |||
BBB: | 23.4% | |||
BB: | 10.7% | |||
B: | 14.3% | |||
CCC and Lower: | 8.5% | |||
Not Rated: | 3.9% | |||
Average Credit Quality: | BBB+ |
* | Does not include Neuberger Berman’s collateral |
All bond ratings shown are provided by Moody’s Investor Services, Inc. or Standard & Poor’s Corporation
Credit ratings apply the underlying holdings of the fund, and not to the fund itself. S&P and Moody s study the financial condition of an entity to ascertain its creditworthiness. The credit ratings reflect the rating agency’s opinion of the holdings financial condition and histories. The ratings shown are all considered investment grade.
94 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect High Income Alternatives Fund Managers
INVESTMENT MANAGER | FIRM | TARGET MANAGER ALLOCATION | Strategy | |||
Greg Mason Troy Ward | Ares Management, LLC | 15% | Equity Income | |||
Andrew P. Hofer Neil Hohmann Paul Kunz | Brown Brothers Harriman & Co. | 33% | Credit Value | |||
Scott Minerd Anne Walsh Steven Brown Adam Bloch | Guggenheim Partners Investment Management, LLC | 33% | Multi-Credit | |||
Derek Devens | Neuberger Berman Investment Advisers LLC | 20% | Option Income |
High Income Alternatives Fund Value of Hypothetical $100,000
The value of a hypothetical $100,000 investment in the PartnerSelect High Income Alternatives Fund from September 28, 2018 to June 30, 2020 compared with the Bloomberg Barclays U.S. Aggregate Bond Index.
The hypothetical $100,000 investment at fund inception includes changes due to share price and reinvestment of dividends and capital gains. The chart does not imply future performance. Indexes are unmanaged, do not incur fees, expenses or taxes, and cannot be invested in directly.
Fund Summary | 95 |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited)
Shares | Value | |||||||
COMMON STOCKS: 11.2% | ||||||||
Consumer Staples: 0.0% | ||||||||
648 | Moran Foods LLC | $ | 0 | |||||
|
| |||||||
Energy: 1.2% | ||||||||
31,777 | Energy Transfer L.P. | 226,252 | ||||||
20,187 | Enterprise Products Partners L.P. | 366,798 | ||||||
7,165 | Kinder Morgan, Inc. | 108,693 | ||||||
13,443 | Williams Cos., Inc. (The) | 255,686 | ||||||
|
| |||||||
957,429 | ||||||||
|
| |||||||
Financials: 10.0% | ||||||||
56,058 | Ares Capital Corp. | 810,038 | ||||||
5,636 | Bain Capital Specialty Finance, Inc. | 62,447 | ||||||
83,175 | Barings BDC, Inc. | 660,409 | ||||||
58,290 | BlackRock Capital Investment Corp. | 155,634 | ||||||
40,873 | Capital Southwest Corp. | 550,968 | ||||||
7,534 | Ellington Financial, Inc. | 88,750 | ||||||
18,053 | Ellington Residential Mortgage REIT | 185,946 | ||||||
1 | FS KKR Capital Corp. | 14 | ||||||
33,935 | FS KKR Capital Corp. II* | 437,422 | ||||||
76,558 | Golub Capital BDC, Inc. | 891,901 | ||||||
19,267 | Granite Point Mortgage Trust, Inc. | 138,337 | ||||||
1,729 | KKR Real Estate Finance Trust, Inc. | 28,667 | ||||||
31,085 | New Residential Investment Corp. | 230,962 | ||||||
133,156 | Oaktree Specialty Lending Corp. | 595,207 | ||||||
94,611 | Oaktree Strategic Income Corp. | 599,834 | ||||||
27,442 | Ready Capital Corp. | 238,471 | ||||||
7,942 | Saratoga Investment Corp. | 125,484 | ||||||
43,347 | Solar Capital Ltd. | 693,985 | ||||||
8,800 | Starwood Property Trust, Inc. | 131,648 | ||||||
10,856 | Stellus Capital Investment Corp. | 79,032 | ||||||
22,113 | TPG RE Finance Trust, Inc. | 190,172 | ||||||
66,673 | TriplePoint Venture Growth BDC Corp. - Class B | 685,398 | ||||||
15,703 | Two Harbors Investment Corp. | 79,143 | ||||||
54,892 | WhiteHorse Finance, Inc. | 565,388 | ||||||
|
| |||||||
8,225,257 | ||||||||
|
| |||||||
| TOTAL COMMON STOCKS | 9,182,686 | ||||||
|
| |||||||
PREFERRED STOCKS: 1.0% | ||||||||
Energy: 0.1% | ||||||||
NuStar Energy L.P. |
| |||||||
3,000 | 7.625%, 06/15/2022(a)(b) | 48,660 | ||||||
|
| |||||||
Financials: 0.7% | ||||||||
AG Mortgage Investment Trust, Inc. |
| |||||||
2,350 | 8.000%, 09/17/2024(a)(b) | 33,699 | ||||||
Federal Agricultural Mortgage Corp. |
| |||||||
2,000 | 5.750%, 07/17/2025(b) | 51,200 | ||||||
Investcorp Credit Management BDC, Inc. |
| |||||||
5,650 | 6.125%, 07/01/2023 | 123,339 | ||||||
Trinity Capital, Inc. |
| |||||||
17,000 | 7.000%, 01/16/2023(c) | 391,425 | ||||||
|
| |||||||
599,663 | ||||||||
|
| |||||||
Real Estate: 0.2% | ||||||||
Public Storage |
| |||||||
6,000 | 4.625%, 06/17/2025(b) | 152,520 | ||||||
|
| |||||||
| TOTAL PREFERRED STOCKS | 800,843 | ||||||
|
|
Shares | Value | |||||||
CLOSED-END FUNDS: 0.5% | ||||||||
2,794 | Ares Dynamic Credit Allocation Fund, Inc. | $ | 33,332 | |||||
15,974 | BlackRock Corporate High Yield Fund, Inc. | 162,456 | ||||||
5,180 | BlackRock Credit Allocation Income Trust | 68,376 | ||||||
2,112 | BlackRock Debt Strategies Fund, Inc. | 19,705 | ||||||
5,599 | Blackstone / GSO Strategic Credit Fund | 63,941 | ||||||
4,463 | Eaton Vance Ltd. Duration Income Fund | 50,298 | ||||||
3,370 | Guggenheim Strategic Opportunities Fund | 56,953 | ||||||
|
| |||||||
| TOTAL CLOSED-END FUNDS | 455,061 | ||||||
|
| |||||||
Principal Amount^ | ||||||||
ASSET-BACKED SECURITIES: 22.9% | ||||||||
AASET Trust | ||||||||
$241,088 | Series 2019-2-B | 140,930 | ||||||
244,877 | Series 2020-1A-B | 142,089 | ||||||
AASET US Ltd. | ||||||||
217,386 | Series 2018-2A-A | 197,111 | ||||||
Adams Outdoor Advertising L.P. | ||||||||
388,436 | Series 2018-1-A | 396,297 | ||||||
AIM Aviation Finance Ltd. | ||||||||
157,627 | Series 2015-1A-A1 | 116,171 | ||||||
Atlas Senior Loan Fund Ltd. | ||||||||
350,000 | Series 2018-9A-C | 325,136 | ||||||
Capital Automotive LLC | ||||||||
329,363 | Series 2017-1A-A1 | 330,369 | ||||||
CARS-DB4 L.P. | ||||||||
220,000 | Series 2020-1A-B1 | 207,362 | ||||||
100,000 | Series 2020-1A-B3 | 90,208 | ||||||
Castlelake Aircraft Securitization Trust | ||||||||
317,186 | Series 2017-1A | 286,484 | ||||||
202,723 | Series 2018-1-A | 191,277 | ||||||
CFG Investments Ltd. | ||||||||
400,000 | Series 2019-1-B | 364,652 | ||||||
Drug Royalty III L.P. | ||||||||
336,043 | Series 2018-1A-A1 | 330,229 | ||||||
Elm Trust | ||||||||
300,000 | Series 2018-2A-A2 | 300,012 | ||||||
100,000 | Series 2018-2A-B | 99,086 | ||||||
Falcon Aerospace Ltd. | ||||||||
366,115 | Series 2017-1-B | 274,593 |
The accompanying notes are an integral part of these financial statements.
96 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
ASSET-BACKED SECURITIES (CONTINUED) | ||||||||
Firstkey Revolving Trust | ||||||||
$ 250,000 | 5.470%, 07/31/2023 | $ | 249,475 | |||||
FREED ABS Trust | ||||||||
400,000 | Series 2018-2-B | 397,272 | ||||||
GAIA Aviation Ltd. | ||||||||
212,542 | Series 2019-1-A | 183,178 | ||||||
Global SC Finance II SRL | ||||||||
245,000 | Series 2014-1A-A1 | 244,355 | ||||||
GoldentTree Loan Management US CLO 1 Ltd. | ||||||||
250,000 | Series 2017-1A-CR | 243,380 | ||||||
GSAMP Trust | ||||||||
277,425 | Series 2007-NC1-A1 | 164,109 | ||||||
Hercules Capital Funding Trust | ||||||||
400,000 | Series 2018-1A-A | 404,455 | ||||||
100,000 | Series 2019-1A-A | 101,128 | ||||||
Highbridge Loan Management Ltd. | ||||||||
500,000 | Series 7A-2015-BR | 480,261 | ||||||
Hull Street CLO Ltd. | ||||||||
300,000 | Series 2014-1A-CR | 291,286 | ||||||
InSite Issuer LLC | ||||||||
480,000 | Series 2018-1A-C | 467,333 | ||||||
KREF Ltd. | ||||||||
400,000 | Series 2018-FL1-A | 395,835 | ||||||
LoanCore Issuer Ltd. | ||||||||
250,000 | Series 2018-CRE1-AS | 245,621 | ||||||
100,000 | Series 2019-CRE2-AS | 91,634 | ||||||
Marathon CLO V Ltd. | ||||||||
500,000 | Series 2013-5A-A2R | 465,755 | ||||||
252,216 | Series 2013-5A-BR | 234,115 | ||||||
Marathon CRE Ltd. | ||||||||
100,000 | Series 2018-FL1-C | 96,745 |
Principal Amount^ | Value | |||||||
MidOcean Credit CLO VII | ||||||||
$ 500,000 | Series 2017-7A-CR | $ | 471,444 | |||||
Monroe Capital CLO Ltd. | ||||||||
250,000 | Series 2014-1A-CR | 239,170 | ||||||
Morgan Stanley ABS Capital I, Inc. Trust | ||||||||
336,579 | Series 2006-HE8-A2D | 177,806 | ||||||
399,175 | Series 2007-HE4-A2C | 172,711 | ||||||
Morgan Stanley IXIS Real Estate Capital Trust | ||||||||
406,173 | Series 2006-2-A4 | 187,259 | ||||||
NADG NNN Operating L.P. | ||||||||
159,600 | Series 2019-1-A | 154,457 | ||||||
Nassau CFO LLC | ||||||||
235,959 | Series 2019-1-A | 223,422 | ||||||
Nationstar HECM Loan Trust | ||||||||
460,000 | Series 2018-3A-M1 | 460,363 | ||||||
Neuberger Berman CLO XVI-S Ltd. | ||||||||
500,000 | Series 2017-16SA-B | 491,220 | ||||||
Neuberger Berman Loan Advisers CLO 36 Ltd. | ||||||||
250,000 | Series 2020-36A-C | 245,107 | ||||||
New Residential Advance Receivables Trust | ||||||||
600,000 | Series 2019-T3-DT3 | 578,821 | ||||||
300,000 | Series 2019-T4-DT4 | 290,765 | ||||||
NewStar Clarendon Fund CLO LLC | ||||||||
250,000 | Series 2014-1A-BR | 244,865 | ||||||
300,000 | Series 2014-1A-CR | 292,209 | ||||||
Newtek Small Business Loan Trust | ||||||||
160,535 | Series 2018-1-A | 156,681 | ||||||
72,971 | Series 2018-1-B | 68,201 | ||||||
Ocwen Master Advance Receivables Trust | ||||||||
100,000 | Series 2019-T1-BT1 | 99,771 | ||||||
100,000 | Series 2019-T1-CT1 | 99,771 | ||||||
100,000 | Series 2019-T1-DT1 | 99,772 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 97 |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
ASSET-BACKED SECURITIES (CONTINUED) | ||||||||
Oportun Funding X LLC | ||||||||
$ 400,000 | Series 2018-C-B | $ | 385,530 | |||||
Oxford Finance Funding LLC | ||||||||
260,000 | Series 2019-1A-A2 | 268,147 | ||||||
430,000 | Series 2020-1A-B | 424,625 | ||||||
Raspro Trust | ||||||||
493,339 | Series 2005-1A-B | 470,258 | ||||||
ReadyCap Lending Small Business Loan Trust | ||||||||
188,873 | Series 2019-2-A | 175,981 | ||||||
Regional Management Issuance Trust | ||||||||
480,000 | Series 2018-2-B | 451,731 | ||||||
Republic FInance Issuance Trust | ||||||||
240,000 | Series 2019-A-A | 239,001 | ||||||
Saganaw Insurance Recievables LLC | ||||||||
145,370 | Series 2019-1A-A | 146,087 | ||||||
Sapphire Aviation Finance I Ltd. | ||||||||
182,034 | Series 2018-1A-A | 164,386 | ||||||
Sapphire Aviation Finance II Ltd. | ||||||||
250,000 | Series 2020-1A-B | 128,696 | ||||||
Secured Tenant Site Contract Revenue Notes | ||||||||
120,647 | Series 2018-1A-C | 121,357 | ||||||
SPS Servicer Advance Receivables Trust | ||||||||
150,000 | Series 2019-T1-DT1 | 149,250 | ||||||
Stack Infrastructure Issuer LLC | ||||||||
453,867 | Series 2019-1A-A2 | 476,889 | ||||||
STWD Ltd. | ||||||||
150,000 | Series 2019-FL1-B | 143,411 | ||||||
Sunbird Engine Finance LLC | ||||||||
$248,274 | Series 2020-1A-B | 166,382 | ||||||
Textainer Marine Containers V Ltd. | ||||||||
71,566 | Series 2017-1A-A | 71,203 | ||||||
TPG Real Estate Finance Issuer Ltd. | ||||||||
470,000 | Series 2018-FL2-A | 464,588 | ||||||
VB-S1 Issuer LLC | ||||||||
100,000 | Series 2020-1A-D | 101,360 | ||||||
150,000 | Series 2020-1A-F | 153,548 |
Principal Amount^ | Value | |||||||
Venture XIII CLO Ltd. | ||||||||
$ 250,000 | Series 2013-13A-SUB | $ | 30,000 | |||||
Veros Automobile Receivables Trust | ||||||||
2,695 | Series 2018-1-A | 2,697 | ||||||
Wachovia Asset Securitization Issuance II LLC Trust | ||||||||
263,644 | Series 2007-HE2A-A | 235,564 | ||||||
Wingstop Funding LLC | ||||||||
99,000 | Series 2018-1-A2 | 103,321 | ||||||
WRG Debt Funding IV LLC | ||||||||
400,000 | Series 2020-1-B | 399,818 | ||||||
|
| |||||||
| TOTAL ASSET-BACKED SECURITIES | 18,775,588 | ||||||
|
| |||||||
BANK LOANS: 14.5% | ||||||||
Accuride Corp. | ||||||||
49,235 | 6.250%, 11/17/2023(e) | 31,486 | ||||||
Allen Media LLC | ||||||||
528,591 | 5.808%, 02/10/2027(e) | 506,568 | ||||||
Alpha 3 B.V. | ||||||||
49,856 | 0.000%, 01/31/2024(f) | 48,180 | ||||||
Alterra Mountain Co. | ||||||||
99,750 | 5.500%, 08/01/2026(e) | 98,254 | ||||||
Amerilife Holdings LLC | ||||||||
40,000 | 4.173%, 03/18/2027(e) | 38,200 | ||||||
Anchor Packaging, Inc. | ||||||||
17,986 | 3.928%, 07/18/2026(e) | 17,311 | ||||||
81,603 | 3.928%, 07/18/2026(e) | 78,543 | ||||||
API Technologies Corp. | ||||||||
99,000 | 4.428%, 05/09/2026(e) | 87,120 | ||||||
Arctic Glacier U.S.A., Inc. | ||||||||
100,000 | 4.500%, 03/20/2024(e) | 85,094 | ||||||
Aria Energy Operating LLC | ||||||||
291,853 | 5.500%, 05/27/2022(e) | 275,801 | ||||||
Aston FinCo S.A.R.L. | ||||||||
$99,750 | 4.438%, 10/09/2026(e) | 95,479 | ||||||
Avolon TLB Borrower 1 (US) LLC | ||||||||
252,009 | 2.500%, 01/15/2025(e) | 235,455 | ||||||
BCP Renaissance Parent LLC | ||||||||
680,678 | 4.500%, 10/31/2024(e) | 574,203 | ||||||
BCPE Empire Holdings, Inc. | ||||||||
13,031 | 4.142%-4.180%, 06/11/2026(e) | 12,656 | ||||||
82,918 | 4.178%, 06/11/2026(e) | 80,534 |
The accompanying notes are an integral part of these financial statements.
98 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
BANK LOANS (CONTINUED) | ||||||||
Berlin Packaging LLC | ||||||||
$ 99,746 | 3.180%-3.310%, 11/07/2025(e) | $ | 94,883 | |||||
BIFM CA Buyer, Inc. | ||||||||
99,748 | 4.113%, 06/01/2026(e) | 96,257 | ||||||
Blue Ribbon LLC | ||||||||
10,000 | 5.000%, 11/15/2021(e) | 8,614 | ||||||
Bombardier Recreational Products, Inc. | ||||||||
150,000 | 6.000%, 05/24/2027(e) | 151,624 | ||||||
Buckeye Partners L.P. | ||||||||
299,250 | 2.923%, 11/01/2026(e) | 287,654 | ||||||
BWAY Holding Co. | ||||||||
58,433 | 4.561%, 04/03/2024(e) | 52,882 | ||||||
Cast and Crew Payroll LLC | ||||||||
99,622 | 3.930%, 02/09/2026(e) | 91,777 | ||||||
CD&R Hydra Buyer, Inc. | ||||||||
98,985 | 5.250%, 12/11/2024(e) | 91,999 | ||||||
CenturyLink, Inc. | ||||||||
316,875 | 2.178%, 01/31/2025(e) | 304,200 | ||||||
CHG Healthcare Services, Inc. | ||||||||
99,743 | 4.072%, 06/07/2023(e) | 96,431 | ||||||
Cologix, Inc. | ||||||||
100,000 | 4.750%, 03/20/2024(e) | 96,323 | ||||||
Comet Acquisition, Inc. | ||||||||
98,500 | 3.808%, 10/24/2025(e) | 92,098 | ||||||
CPM Holdings, Inc. | ||||||||
98,500 | 3.962%, 11/17/2025(e) | 90,140 | ||||||
Cvent, Inc. | ||||||||
88,267 | 3.928%, 11/29/2024(e) | 76,571 | ||||||
Deerfield Dakota Holding LLC | ||||||||
100,000 | 0.000%, 04/09/2027(f) | 97,458 | ||||||
Diamond (BC) B.V. | ||||||||
98,237 | 3.760%, 09/06/2024(e) | 90,705 | ||||||
Eastern Power LLC | ||||||||
680,516 | 4.750%, 10/02/2025(e) | 661,972 | ||||||
Emerald TopCo, Inc. | ||||||||
99,250 | 4.260%, 07/24/2026(e) | 96,273 | ||||||
EyeCare Partners LLC | ||||||||
80,878 | 4.058%, 02/18/2027(e) | 73,498 | ||||||
Frontera Generation Holdings LLC | ||||||||
491,228 | 5.385%, 05/02/2025(e) | 305,053 |
Principal Amount^ | Value | |||||||
Gardner Denver, Inc. | ||||||||
$ 100,000 | 0.000%, 03/01/2027(f) | $ | 97,438 | |||||
GlobalFoundries, Inc. | ||||||||
99,000 | 5.063%, 06/05/2026(e)(g) | 96,030 | ||||||
GrafTech Finance, Inc. | ||||||||
48,334 | 0.000%, 02/12/2025(f) | 47,226 | ||||||
Hamilton Projects Acquiror LLC | ||||||||
100,000 | 5.750%, 06/17/2027(e) | 98,166 | ||||||
Helix Gen Funding LLC | ||||||||
590,503 | 4.750%, 06/03/2024(e) | 570,621 | ||||||
IBC Capital Ltd. | ||||||||
80,300 | 4.058%, 09/11/2023(e) | 76,887 | ||||||
Illuminate Buyer LLC | ||||||||
50,000 | 0.000%, 06/16/2027(f) | 49,338 | ||||||
Informatica LLC | ||||||||
99,750 | 3.428%, 02/25/2027(e) | 95,810 | ||||||
Jefferies Finance LLC | ||||||||
99,497 | 3.188%, 06/03/2026(e) | 94,336 | ||||||
JetBlue Airways Corp. | ||||||||
50,000 | 6.250%, 06/12/2024(e) | 49,075 | ||||||
LTI Holdings, Inc. | ||||||||
98,250 | 3.678%, 09/06/2025(e) | 84,021 | ||||||
Mileage Plus Holdings LLC | ||||||||
100,000 | 0.000%, 06/25/2027(f) | 99,385 | ||||||
MMM Holdings, Inc. | ||||||||
760,500 | 6.750%, 12/24/2026(e) | 726,277 | ||||||
Moran Foods LLC | ||||||||
10,659 | 7.000%, 04/01/2024(e) | 9,659 | ||||||
12,741 | 12.183%, 10/01/2024(e) | 6,052 | ||||||
NFP Corp. | ||||||||
49,240 | 3.428%, 02/15/2027(e) | 46,040 | ||||||
NorthRiver Midstream Finance L.P. | ||||||||
589,746 | 4.683%, 10/01/2025(e) | 559,616 | ||||||
Panther BF Aggregator 2 L.P. | ||||||||
779,436 | 3.678%, 04/30/2026(e) | 745,336 | ||||||
Pelican Products, Inc. | ||||||||
49,873 | 0.000%, 05/01/2025(f) | 46,049 | ||||||
Playpower, Inc. | ||||||||
97,548 | 5.808%, 05/08/2026(e) | 86,574 | ||||||
Playtika Holding Corp. | ||||||||
49,367 | 7.072%, 12/10/2024(e) | 49,444 | ||||||
PQ Corp. | ||||||||
50,000 | 0.000%, 02/07/2027(f) | 48,406 | ||||||
Samsonite International S.A. | ||||||||
150,000 | 5.500%, 04/25/2025(e) | 146,062 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 99 |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
BANK LOANS (CONTINUED) | ||||||||
ScribeAmerica Intermediate Holdco LLC | ||||||||
$ 49,121 | 4.690%, 04/03/2025(e) | $ | 41,016 | |||||
Stericycle, Inc. | ||||||||
438,270 | 2.053%-2.070%, 11/17/2022(e) | 416,357 | ||||||
Summit Midstream Partners Holdings LLC | ||||||||
15,341 | 7.000%, 05/13/2022(e) | 3,728 | ||||||
Tech Data Corp. | ||||||||
100,000 | 0.000%, 06/30/2025(f) | 99,250 | ||||||
Teneo Holdings LLC | ||||||||
49,625 | 6.250%, 07/11/2025(e) | 47,330 | ||||||
Tibco Software, Inc. | ||||||||
100,000 | 3.930%, 06/30/2026(e) | 94,750 | ||||||
Tivity Health, Inc. | ||||||||
728,313 | 5.428%, 03/06/2026(e) | 660,227 | ||||||
TransDigm, Inc. | ||||||||
99,749 | 0.000%, 05/30/2025(f) | 90,286 | ||||||
TVC Albany, Inc. | ||||||||
98,250 | 3.680%, 07/23/2025(e) | 93,890 | ||||||
U.S. Foods, Inc. | ||||||||
149,063 | 4.250%, 04/21/2027(e) | 144,591 | ||||||
U.S. Renal Care, Inc. | ||||||||
471,438 | 5.178%, 06/26/2026(e) | 454,871 | ||||||
UGI Energy Services LLC | ||||||||
237,600 | 3.928%, 08/13/2026(e) | 230,769 | ||||||
USI, Inc. | ||||||||
50,000 | 4.500%, 12/02/2026(e) | 48,703 | ||||||
Vertical U.S. Newco, Inc. | ||||||||
100,000 | 0.000%, 07/01/2027(f) | 98,000 | ||||||
Xplornet Communications, Inc. | ||||||||
150,000 | 4.928%, 05/29/2027(e) | 143,775 | ||||||
Zayo Group Holdings, Inc. | ||||||||
99,750 | 3.178%, 03/09/2027(e) | 95,007 | ||||||
|
| |||||||
| TOTAL BANK LOANS | 11,911,694 | ||||||
|
| |||||||
CORPORATE BONDS: 24.0% | ||||||||
Basic Materials: 0.8% | ||||||||
Arconic Corp. | ||||||||
100,000 | 6.000%, 05/15/2025(c) | 103,563 | ||||||
Illuminate Buyer LLC / Illuminate Holdings IV, Inc. | ||||||||
50,000 | 9.000%, 07/01/2028(c) | 52,250 | ||||||
Kaiser Aluminum Corp. | ||||||||
50,000 | 6.500%, 05/01/2025(c) | 51,844 |
Principal Amount^ | Value | |||||||
Basic Materials (continued) | ||||||||
Minerals Technologies, Inc. | ||||||||
$ 75,000 | 5.000%, 07/01/2028(c) | $ | 76,313 | |||||
Neon Holdings, Inc. | ||||||||
16,000 | 10.125%, 04/01/2026(c) | 15,960 | ||||||
Newcrest Finance Pty Ltd. | ||||||||
100,000 | 3.250%, 05/13/2030(c) | 107,633 | ||||||
Steel Dynamics, Inc. | ||||||||
10,000 | 3.250%, 01/15/2031 | 10,222 | ||||||
United States Steel Corp. | ||||||||
140,000 | 12.000%, 06/01/2025(c) | 143,762 | ||||||
WR Grace & Co-Conn | ||||||||
75,000 | 4.875%, 06/15/2027(c) | 76,352 | ||||||
|
| |||||||
637,899 | ||||||||
|
| |||||||
Communications: 1.5% | ||||||||
Charter Communications Operating LLC / Charter Communications Operating Capital | ||||||||
50,000 | 2.800%, 04/01/2031 | 50,789 | ||||||
Dolya Holdco 18 DAC | ||||||||
200,000 | 5.000%, 07/15/2028(c) | 198,440 | ||||||
Lamar Media Corp. | ||||||||
30,000 | 4.875%, 01/15/2029(c) | 30,281 | ||||||
Level 3 Financing, Inc. | ||||||||
200,000 | 4.250%, 07/01/2028(c) | 200,770 | ||||||
Match Group, Inc. | ||||||||
50,000 | 4.625%, 06/01/2028(c) | 50,656 | ||||||
Sirius XM Radio, Inc. | ||||||||
80,000 | 4.125%, 07/01/2030(c) | 79,417 | ||||||
T-Mobile USA, Inc. | ||||||||
85,000 | 3.875%, 04/15/2030(c) | 94,761 | ||||||
TEGNA, Inc. | ||||||||
260,000 | 5.000%, 09/15/2029(c) | 243,649 | ||||||
ViacomCBS, Inc. | ||||||||
127,000 | 4.950%, 01/15/2031(h) | 150,281 | ||||||
60,000 | 4.950%, 05/19/2050 | 67,100 | ||||||
Walt Disney Co. (The) | ||||||||
50,000 | 3.800%, 05/13/2060 | 57,972 | ||||||
|
| |||||||
1,224,116 | ||||||||
|
| |||||||
Consumer, Cyclical: 2.1% | ||||||||
Aramark Services, Inc. | ||||||||
100,000 | 6.375%, 05/01/2025(c) | 103,450 | ||||||
5,000 | 5.000%, 02/01/2028(c) | 4,761 | ||||||
Boyd Gaming Corp. | ||||||||
25,000 | 8.625%, 06/01/2025(c) | 26,172 | ||||||
Boyne USA, Inc. | ||||||||
25,000 | 7.250%, 05/01/2025(c) | 26,279 | ||||||
CD&R Smokey Buyer, Inc. | ||||||||
25,000 | 6.750%, 07/15/2025(c)(i) | 26,055 | ||||||
Cedar Fair L.P. / Canada’s Wonderland Co. / Magnum Management Corp. / Millennium Corp. | ||||||||
$50,000 | 5.500%, 05/01/2025(c) | 50,469 | ||||||
Delta Air Lines, Inc. | ||||||||
350,000 | 7.000%, 05/01/2025(c)(h) | 361,662 | ||||||
Hanesbrands, Inc. | ||||||||
25,000 | 5.375%, 05/15/2025(c) | 25,328 | ||||||
Hyatt Hotels Corp. | ||||||||
95,000 | 5.750%, 04/23/2030 | 104,649 | ||||||
Live Nation Entertainment, Inc. | ||||||||
100,000 | 6.500%, 05/15/2027(c) | 103,187 |
The accompanying notes are an integral part of these financial statements.
100 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
CORPORATE BONDS (CONTINUED) | ||||||||
Consumer, Cyclical (continued) | ||||||||
Marriott International, Inc. | ||||||||
$ 50,000 | 5.750%, 05/01/2025 | $ | 54,375 | |||||
70,000 | 4.625%, 06/15/2030 | 72,775 | ||||||
Mileage Plus Holdings LLC / Mileage Plus Intellectual Property Assets Ltd. | ||||||||
100,000 | 6.500%, 06/20/2027(c)(i) | 100,282 | ||||||
Nordstrom, Inc. | ||||||||
160,000 | 4.375%, 04/01/2030 | 125,767 | ||||||
Panther BF Aggregator 2 L.P. / Panther Finance Co., Inc. | ||||||||
10,000 | 8.500%, 05/15/2027(c) | 10,075 | ||||||
Performance Food Group, Inc. | ||||||||
50,000 | 6.875%, 05/01/2025(c) | 51,844 | ||||||
Picasso Finance Sub, Inc. | ||||||||
100,000 | 6.125%, 06/15/2025(c) | 102,500 | ||||||
Six Flags Theme Parks, Inc. | ||||||||
55,000 | 7.000%, 07/01/2025(c) | 57,097 | ||||||
Suburban Propane Partners L.P. / Suburban Energy Finance Corp. | ||||||||
25,000 | 5.750%, 03/01/2025 | 25,091 | ||||||
Superior Plus L.P. / Superior General Partner, Inc. | ||||||||
20,000 | 7.000%, 07/15/2026(c) | 21,021 | ||||||
Walgreens Boots Alliance, Inc. | ||||||||
100,000 | 3.200%, 04/15/2030 | 103,608 | ||||||
Whirlpool Corp. | ||||||||
10,000 | 4.600%, 05/15/2050 | 11,433 | ||||||
Williams Scotsman International, Inc. | ||||||||
40,000 | 7.875%, 12/15/2022(c) | 41,575 | ||||||
10,000 | 6.875%, 08/15/2023(c) | 10,301 | ||||||
WMG Acquisition Corp. | ||||||||
30,000 | 3.875%, 07/15/2030(c) | 30,376 | ||||||
Wolverine World Wide, Inc. | ||||||||
100,000 | 6.375%, 05/15/2025(c) | 105,187 | ||||||
|
| |||||||
1,755,319 | ||||||||
|
| |||||||
Consumer, Non-cyclical: 3.1% | ||||||||
Acadia Healthcare Co., Inc. | ||||||||
50,000 | 5.500%, 07/01/2028(c) | 50,312 | ||||||
Altria Group, Inc. | ||||||||
40,000 | 3.400%, 05/06/2030 | 43,127 | ||||||
10,000 | 4.450%, 05/06/2050 | 10,985 | ||||||
Ashtead Capital, Inc. | ||||||||
260,000 | 4.250%, 11/01/2029(c) | 260,650 | ||||||
Avanos Medical, Inc. | ||||||||
32,000 | 6.250%, 10/15/2022 | 32,040 | ||||||
Carriage Services, Inc. | ||||||||
10,000 | 6.625%, 06/01/2026(c) | 10,548 | ||||||
Constellation Brands, Inc. | ||||||||
30,000 | 3.750%, 05/01/2050 | 32,936 | ||||||
CVS Pass-Through Trust | ||||||||
151,687 | 5.926%, 01/10/2034(c) | 169,743 | ||||||
DaVita, Inc. | ||||||||
160,000 | 4.625%, 06/01/2030(c) | 159,332 | ||||||
Gartner, Inc. | ||||||||
75,000 | 4.500%, 07/01/2028(c) | 76,065 | ||||||
Ingredion, Inc. | ||||||||
70,000 | 4.625%, 11/01/2020 | 70,781 |
Principal Amount^ | Value | |||||||
Consumer, Non-cyclical (continued) | ||||||||
Jaguar Holding Co. II / Pharmaceutical Product Development LLC | ||||||||
$ 75,000 | 4.625%, 06/15/2025(c) | $ | 76,468 | |||||
KeHE Distributors LLC / KeHE Finance Corp. | ||||||||
10,000 | 8.625%, 10/15/2026(c) | 10,673 | ||||||
Kraft Heinz Foods Co. | ||||||||
25,000 | 4.250%, 03/01/2031(c) | 26,563 | ||||||
160,000 | 4.625%, 10/01/2039(c) | 161,167 | ||||||
50,000 | 5.000%, 06/04/2042 | 52,751 | ||||||
80,000 | 4.375%, 06/01/2046 | 78,768 | ||||||
25,000 | 5.500%, 06/01/2050(c) | 26,749 | ||||||
MEDNAX, Inc. | ||||||||
450,000 | 6.250%, 01/15/2027(c) | 451,555 | ||||||
Nathan’s Famous, Inc. | ||||||||
50,000 | 6.625%, 11/01/2025(c) | 50,625 | ||||||
Sotheby’s | ||||||||
50,000 | 7.375%, 10/15/2027(c) | 47,335 | ||||||
Spectrum Brands, Inc. | ||||||||
50,000 | 5.500%, 07/15/2030(c) | 50,188 | ||||||
Sysco Corp. | ||||||||
260,000 | 5.950%, 04/01/2030(h) | 327,204 | ||||||
Tenet Healthcare Corp. | ||||||||
25,000 | 4.625%, 06/15/2028(c) | 24,418 | ||||||
US Foods, Inc. | ||||||||
100,000 | 6.250%, 04/15/2025(c) | 102,187 | ||||||
Vector Group Ltd. | ||||||||
50,000 | 6.125%, 02/01/2025(c) | 48,156 | ||||||
Zimmer Biomet Holdings, Inc. | ||||||||
50,000 | 3.550%, 03/20/2030 | 54,109 | ||||||
|
| |||||||
2,505,435 | ||||||||
|
| |||||||
Energy: 1.4% | ||||||||
Baker Hughes a GE Co. LLC / Baker Hughes Co-Obligor, Inc. | ||||||||
10,000 | 4.486%, 05/01/2030 | 11,558 | ||||||
Bayan Resources Tbk PT | ||||||||
200,000 | 6.125%, 01/24/2023 | 188,391 | ||||||
BP Capital Markets Plc | ||||||||
250,000 | 4.875%, 03/22/2030(a)(b) | 258,750 | ||||||
Enable Midstream Partners L.P. | ||||||||
405,000 | 4.150%, 09/15/2029 | 355,718 | ||||||
Energy Transfer Operating L.P. | ||||||||
320,000 | 6.250%, 02/15/2023(a)(b) | 246,158 | ||||||
Sabine Pass Liquefaction LLC | ||||||||
100,000 | 4.500%, 05/15/2030(c) | 111,235 | ||||||
|
| |||||||
1,171,810 | ||||||||
|
| |||||||
Financial: 12.3% | ||||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | ||||||||
560,000 | 4.500%, 09/15/2023(i) | 560,479 | ||||||
Alleghany Corp. | ||||||||
80,000 | 3.625%, 05/15/2030 | 85,064 | ||||||
Alliance Data Systems Corp. | ||||||||
375,000 | 4.750%, 12/15/2024(c) | 338,672 | ||||||
American Equity Investment Life Holding Co. | ||||||||
25,000 | 5.000%, 06/15/2027 | 27,182 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 101 |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
CORPORATE BONDS (CONTINUED) | ||||||||
Financial (continued) | ||||||||
American International Group, Inc. | ||||||||
$ 140,000 | 3.400%, 06/30/2030(h) | $ | 151,679 | |||||
120,000 | 4.375%, 06/30/2050(h) | 139,380 | ||||||
Apollo Management Holdings L.P. | ||||||||
500,000 | 4.950%, 01/14/2050(a)(c) | 449,955 | ||||||
Ares Finance Co. II LLC | ||||||||
50,000 | 3.250%, 06/15/2030(c) | 50,931 | ||||||
Assurant, Inc. | ||||||||
17,000 | 1.534%, 03/26/2021(e) | 17,000 | ||||||
Bank of New York Mellon Corp. (The) | ||||||||
30,000 | 4.700%, 09/20/2025(a)(b) | 31,275 | ||||||
Brazilian Merchant Voucher Receivables Ltd. | ||||||||
200,000 | 4.180%, 04/07/2028 | 201,716 | ||||||
Business Development Corp. of America | ||||||||
375,000 | 4.750%, 12/30/2022(c) | 336,525 | ||||||
225,000 | 4.850%, 12/15/2024(c) | 199,439 | ||||||
Charles Schwab Corp. (The) | ||||||||
100,000 | 5.375%, 06/01/2025(a)(b) | 107,082 | ||||||
CIT Group, Inc. | ||||||||
50,000 | 3.929%, 06/19/2024(a) | 48,568 | ||||||
Credit Acceptance Corp. | ||||||||
285,000 | 6.625%, 03/15/2026 | 287,401 | ||||||
Credit Suisse Group AG | ||||||||
250,000 | 4.194%, 04/01/2031(a)(c)(h) | 285,775 | ||||||
Cushman & Wakefield US Borrower LLC | ||||||||
150,000 | 6.750%, 05/15/2028(c) | 157,031 | ||||||
Drawbridge Special Opportunities Fund L.P. / Drawbridge Special Opportunities Finance | ||||||||
465,000 | 5.000%, 08/01/2021(c) | 465,373 | ||||||
Enstar Group Ltd. | ||||||||
500,000 | 4.950%, 06/01/2029 | 528,450 | ||||||
Fairfax Financial Holdings Ltd. | ||||||||
545,000 | 4.625%, 04/29/2030(c) | 588,438 | ||||||
Fidelis Insurance Holdings Ltd. | ||||||||
540,000 | 4.875%, 06/30/2030(c) | 535,945 | ||||||
Fidelity National Financial, Inc. | ||||||||
50,000 | 3.400%, 06/15/2030 | 52,160 | ||||||
First American Financial Corp. | ||||||||
70,000 | 4.000%, 05/15/2030 | 76,909 | ||||||
FS KKR Capital Corp. II | ||||||||
325,000 | 4.250%, 02/14/2025(c) | 290,623 | ||||||
GLP Capital L.P. / GLP Financing II, Inc. | ||||||||
90,000 | 4.000%, 01/15/2031 | 89,573 | ||||||
HSBC Holdings Plc | ||||||||
200,000 | 4.950%, 03/31/2030(h) | 240,886 | ||||||
Iron Mountain, Inc. | ||||||||
150,000 | 5.625%, 07/15/2032(c) | 150,154 | ||||||
Lincoln National Corp. | ||||||||
80,000 | 3.400%, 01/15/2031 | 87,022 | ||||||
30,000 | 4.375%, 06/15/2050 | 33,593 |
Principal Amount^ | Value | |||||||
Financial (continued) | ||||||||
Macquarie Bank Ltd. | ||||||||
$ 200,000 | 3.624%, 06/03/2030(c) | $ | 210,140 | |||||
Main Street Capital Corp. | ||||||||
200,000 | 5.200%, 05/01/2024 | 205,894 | ||||||
Markel Corp. | ||||||||
210,000 | 6.000%, 06/01/2025(a)(b) | 214,200 | ||||||
Nasdaq, Inc. | ||||||||
20,000 | 3.250%, 04/28/2050 | 21,035 | ||||||
Nationwide Mutual Insurance Co. | ||||||||
130,000 | 4.350%, 04/30/2050(c) | 139,000 | ||||||
NFP Corp. | ||||||||
100,000 | 7.000%, 05/15/2025(c) | 105,438 | ||||||
Owl Rock Capital Corp. | ||||||||
100,000 | 4.000%, 03/30/2025 | 98,891 | ||||||
Owl Rock Capital Corp. II | ||||||||
120,000 | 4.625%, 11/26/2024(c) | 118,564 | ||||||
Owl Rock Technology Finance Corp. | ||||||||
475,000 | 6.750%, 06/30/2025(c) | 490,374 | ||||||
Prudential Plc | ||||||||
44,000 | 3.125%, 04/14/2030 | 47,373 | ||||||
Reinsurance Group of America, Inc. | ||||||||
40,000 | 3.150%, 06/15/2030 | 41,586 | ||||||
SBA Communications Corp. | ||||||||
25,000 | 3.875%, 02/15/2027(c) | 24,961 | ||||||
Sirius International Group Ltd. | ||||||||
700,000 | 4.600%, 11/01/2026(c) | 634,568 | ||||||
Solar Capital Ltd. | ||||||||
400,000 | 4.500%, 01/20/2023 | 385,247 | ||||||
Standard Chartered Plc | ||||||||
200,000 | 4.644%, 04/01/2031(a)(c)(h) | 227,408 | ||||||
United Insurance Holdings Corp. | ||||||||
530,000 | 6.250%, 12/15/2027 | 508,800 | ||||||
Weyerhaeuser Co. | ||||||||
9,000 | 4.000%, 04/15/2030 | 10,197 | ||||||
|
| |||||||
10,097,956 | ||||||||
|
| |||||||
Industrial: 1.8% | ||||||||
BAE Systems Plc | ||||||||
200,000 | 3.400%, 04/15/2030(c)(h) | 218,280 | ||||||
Boeing Co. (The) | ||||||||
200,000 | 5.150%, 05/01/2030(h) | 223,433 | ||||||
100,000 | 5.705%, 05/01/2040(h) | 114,188 | ||||||
100,000 | 5.805%, 05/01/2050 | 118,368 | ||||||
BWX Technologies, Inc. | ||||||||
100,000 | 4.125%, 06/30/2028(c) | 100,125 | ||||||
Cleaver-Brooks, Inc. | ||||||||
25,000 | 7.875%, 03/01/2023(c) | 21,279 | ||||||
GATX Corp. | ||||||||
$20,000 | 4.000%, 06/30/2030 | 21,452 | ||||||
Great Lakes Dredge & Dock Corp. | ||||||||
50,000 | 8.000%, 05/15/2022 | 51,426 | ||||||
Grinding Media, Inc./ Moly-Cop AltaSteel Ltd. | ||||||||
50,000 | 7.375%, 12/15/2023(c) | 49,906 | ||||||
Hillenbrand, Inc. | ||||||||
190,000 | 5.750%, 06/15/2025 | 196,888 | ||||||
Howmet Aerospace, Inc. | ||||||||
25,000 | 6.875%, 05/01/2025 | 27,149 | ||||||
Mauser Packaging Solutions Holding Co. | ||||||||
50,000 | 8.500%, 04/15/2024(c) | 52,563 |
The accompanying notes are an integral part of these financial statements.
102 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
CORPORATE BONDS (CONTINUED) | ||||||||
Industrial (continued) | ||||||||
Owens Corning | ||||||||
$ 60,000 | 3.875%, 06/01/2030 | $ | 64,142 | |||||
PowerTeam Services LLC | ||||||||
60,000 | 9.033%, 12/04/2025(c) | 61,463 | ||||||
Ryder System, Inc. | ||||||||
35,000 | 3.350%, 09/01/2025 | 37,317 | ||||||
Standard Industries, Inc. | ||||||||
25,000 | 5.000%, 02/15/2027(c) | 25,385 | ||||||
50,000 | 4.375%, 07/15/2030(c) | 50,000 | ||||||
Textron, Inc. | ||||||||
10,000 | 3.000%, 06/01/2030 | 9,977 | ||||||
|
| |||||||
1,443,341 | ||||||||
|
| |||||||
Technology: 0.9% | ||||||||
AMS AG | ||||||||
265,000 | 7.000%, 07/31/2025 | 262,350 | ||||||
Boxer Parent Co., Inc. | ||||||||
50,000 | 7.125%, 10/02/2025(c) | 52,519 | ||||||
Broadcom, Inc. | ||||||||
110,000 | 4.150%, 11/15/2030(c)(h) | 119,784 | ||||||
Change Healthcare Holdings LLC / Change Healthcare Finance, Inc. | ||||||||
25,000 | 5.750%, 03/01/2025(c) | 24,746 | ||||||
Leidos, Inc. | ||||||||
50,000 | 4.375%, 05/15/2030(c) | 56,447 | ||||||
MSCI, Inc. | ||||||||
100,000 | 3.875%, 02/15/2031(c) | 102,187 | ||||||
NCR Corp. | ||||||||
50,000 | 8.125%, 04/15/2025(c) | 53,219 | ||||||
Qorvo, Inc. | ||||||||
70,000 | 4.375%, 10/15/2029(c) | 71,806 | ||||||
|
| |||||||
743,058 | ||||||||
|
| |||||||
Utilities: 0.1% | ||||||||
AES Corp. (The) | ||||||||
60,000 | 3.950%, 07/15/2030(c) | 63,562 | ||||||
Clearway Energy Operating LLC | ||||||||
25,000 | 4.750%, 03/15/2028(c) | 25,522 | ||||||
Terraform Global Operating LLC | ||||||||
25,000 | 6.125%, 03/01/2026(c) | 24,714 | ||||||
|
| |||||||
113,798 | ||||||||
|
| |||||||
| TOTAL CORPORATE BONDS | 19,692,732 | ||||||
|
| |||||||
GOVERNMENT SECURITIES & AGENCY ISSUE: 19.0% | ||||||||
United States Treasury Note | ||||||||
1,500,000 | 1.375%, 09/15/2020 | 1,503,729 | ||||||
1,800,000 | 1.875%, 12/15/2020 | 1,814,027 | ||||||
1,600,000 | 2.375%, 03/15/2021 | 1,624,813 | ||||||
1,600,000 | 2.625%, 06/15/2021 | 1,637,531 | ||||||
1,600,000 | 2.750%, 09/15/2021 | 1,649,813 | ||||||
1,800,000 | 2.625%, 12/15/2021 | 1,864,406 | ||||||
1,500,000 | 2.375%, 03/15/2022(j) | 1,556,397 | ||||||
1,500,000 | 1.750%, 06/15/2022(j) | 1,546,641 | ||||||
1,500,000 | 1.500%, 09/15/2022(j) | 1,544,443 | ||||||
800,000 | 1.625%, 12/15/2022(j) | 828,703 | ||||||
|
| |||||||
| TOTAL GOVERNMENT SECURITIES & AGENCY ISSUE | 15,570,503 | ||||||
|
|
Principal Amount^ | Value | |||||||
MORTGAGE-BACKED SECURITIES: 6.4% | ||||||||
Alternative Loan Trust | ||||||||
$ 186,840 | Series 2007-OA4-A1 | $ | 167,310 | |||||
201,235 | Series 2007-OA7-A1A | 175,701 | ||||||
BX Commercial Mortgage Trust | ||||||||
238,850 | Series 2019-XL-F | 230,902 | ||||||
238,850 | Series 2019-XL-G | 230,396 | ||||||
BXMT Ltd. | ||||||||
250,000 | Series 2020-FL2-D | 231,504 | ||||||
Cascade Funding Mortgage Trust | ||||||||
277,755 | Series 2018-RM2-A | 290,432 | ||||||
CD Mortgage Trust | ||||||||
1,019,988 | Series 2017-CD4-XA | 59,545 | ||||||
CGMS Commercial Mortgage Trust | ||||||||
260,000 | Series 2017-MDRC-E | 222,310 | ||||||
COLT Mortgage Loan Trust | ||||||||
86,112 | Series 2018-3-A1 | 88,015 | ||||||
Credit Suisse Mortgage Trust | ||||||||
144,172 | Series 2018-RPL9-A1 | 153,950 | ||||||
480,000 | Series 2018-SITE-C | 440,277 | ||||||
Exantas Capital Corp. Ltd. | ||||||||
150,000 | Series 2018-RSO6-B | 144,333 | ||||||
Freddie Mac Military Housing Bonds Resecuritization Trust Certificates | ||||||||
2,847,785 | Series 2015-R1-XA1 | 209,307 | ||||||
4,619,355 | Series 2015-R1-XA3 | 289,837 | ||||||
GPMT Ltd. | ||||||||
200,000 | Series 2018-FL1-C | 183,277 | ||||||
GS Mortgage Securities Corp. Trust | ||||||||
250,000 | Series 2020-DUNE-E | 213,946 | ||||||
250,000 | Series 2020-UPTN-E | 231,545 | ||||||
HarborView Mortgage Loan Trust | ||||||||
327,562 | Series 2006-12-2A2A | 290,376 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 103 |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
Principal Amount^ | Value | |||||||
MORTGAGE-BACKED SECURITIES (CONTINUED) | ||||||||
JP Morgan Chase Commercial Mortgage Securities Trust | ||||||||
$ 1,802,566 | Series 2016-JP2-XA | $ | 151,124 | |||||
JPMDB Commercial Mortgage Securities Trust | ||||||||
213,236 | Series 2017-C5-XA | 9,802 | ||||||
LSTAR Securities Investment Ltd. | ||||||||
780,242 | Series 2019-5-A1 | 772,453 | ||||||
LSTAR Securities Investment Trust | ||||||||
283,695 | Series 2019-1-A1 | 285,392 | ||||||
Residential Accredit Loans, Inc. Trust | ||||||||
429,733 | Series 2006-QO6-A1 | 150,904 | ||||||
Wells Fargo Commercial Mortgage Trust | ||||||||
956,533 | Series 2016-BNK1-XA | 75,775 | ||||||
|
| |||||||
| TOTAL MORTGAGE-BACKED SECURITIES | 5,298,413 | ||||||
|
| |||||||
MUNICIPAL BOND: 0.0% | ||||||||
Indiana: 0.0% | ||||||||
Knox County Industry Economic Development Revenue | ||||||||
5,000 | Series B | 4,904 | ||||||
|
| |||||||
| TOTAL MUNICIPAL BOND | 4,904 | ||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS: 2.7% | ||||||||
MONEY MARKET FUND: 0.6% | ||||||||
466,353 | State Street Institutional Treasury Money Market Fund - Premier Class, 0.110%(l) | 466,353 | ||||||
|
| |||||||
| TOTAL MONEY MARKET FUND | 466,353 | ||||||
|
| |||||||
Principal Amount^ | ||||||||
REPURCHASE AGREEMENTS: 2.0% | ||||||||
$1,611,000 | Fixed Income Clearing Corp. 0.000%, 6/30/2020, due 07/01/2020 [collateral: par value $1,528,400, U.S. Treasury Note, 0.625%, due 04/15/2023, value $1,643,465] (proceeds $1,611,000) | 1,611,000 | ||||||
|
| |||||||
| TOTAL REPURCHASE AGREEMENTS | 1,611,000 | ||||||
|
|
Principal Amount^ | Value | |||||||
TREASURY BILLS: 0.1% | ||||||||
United States Treasury Bill | ||||||||
$ 10,000 | 0.157%, 02/25/2021(j)(m) | $ | 9,990 | |||||
50,000 | 0.150%, 04/22/2021(j)(m) | 49,937 | ||||||
|
| |||||||
| TOTAL TREASURY BILLS | 59,927 | ||||||
|
| |||||||
| TOTAL SHORT-TERM INVESTMENTS | 2,137,280 | ||||||
|
| |||||||
| TOTAL INTEREST RATE SWAPTIONS | 80,750 | ||||||
|
| |||||||
| TOTAL INVESTMENTS | 83,910,454 | ||||||
|
| |||||||
Liabilities in Excess of Other Assets: (2.3)% | (1,867,115 | ) | ||||||
|
| |||||||
NET ASSETS: 100.0% | $ | 82,043,339 | ||||||
|
|
Percentages are stated as a percent of net assets.
CLO | Collateralized Loan Obligation |
CMT | Constant Maturity Treasury Index |
ETF | Exchange Traded Fund |
LIBOR | London Interbank Offered Rate |
L.P. | Limited Partnership |
SOFRRATE | Secured Overnight Financing Rate |
* | Non-Income Producing Security. |
^ | The principal amount is stated in U.S. Dollars unless otherwise indicated. |
(a) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect at June 30, 2020. |
(b) | Perpetual Call. |
(c) | Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under Securities Act of 1933. |
(d) | Coupon increases periodically based upon a predetermined schedule. Stated interest rate in effect at June 30, 2020. |
(e) | Floating Interest Rate at June 30, 2020. |
(f) | This position represents an unsettled loan commitment at period end. Certain details associated with this purchase are not known prior to the settlement date, including coupon rate, which will be adjusted on settlement date. |
(g) | Security is valued using significant unobservable inputs in good faith in accordance with procedures approved by the Board of Trustees. |
(h) | All or a portion of the security has been pledged as collateral against open reverse repurchase agreements. As of June 30, 2020 , the market value of securities pledged amounted to $2,430,481. |
(i) | When issued security. |
(j) | Securities with an aggregate fair value of $5,536,111 have been pledged as collateral for options, total return swaps, credit default swaps, interest rate swaps, and futures positions. |
(k) | Interest Only security. Security with a notional or nominal principal amount. |
The accompanying notes are an integral part of these financial statements.
104 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2020 (Unaudited) (Continued)
(l) | The rate disclosed is the 7 day net yield as of June 30, 2020. |
(m) | The rate shown represents yield-to-maturity. |
CURRENCY ABBREVIATIONS:
BRL | Brazilian Real |
EUR | Euro |
ILS | Israeli New Shekel |
USD | U.S. Dollar |
UNFUNDED LOAN COMMITMENTS — At June 30, 2020, the Fund had unfunded loan commitments which could be extended at the option of the borrowers, pursuant to the following agreements:
Borrower | Principal Amount | Current Value | Unrealized Gain (Loss) | |||||||||
BCPE Empire Holdings, Inc., 4.142%, 06/11/2026 | $ | 3,354 | $ | 3,258 | $ | (96 | ) | |||||
EyeCare Partners LLC, 3.750%, 02/18/2027 | 18,919 | 17,193 | (1,726 | ) | ||||||||
Amerilife Holdings LLC, 4.000%, 03/18/2027 | 10,000 | 9,550 | (450 | ) | ||||||||
TOTAL | $ | 30,001 | $ | (2,272 | ) |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 105 |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF PURCHASED OPTIONS at June 30, 2020 (Unaudited)
Description | Counterparty | Exercise Price | Expiration Date | Number of Contracts | Notional Amount | Market Value | Premiums Paid | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||
INTEREST RATE SWAPTIONS |
| |||||||||||||||||||||||||||||
Call |
| |||||||||||||||||||||||||||||
Two Year Ten Year USD Constant Maturity Swaption | Bank of America N.A. | $ | 0.40 | 7/29/2022 | 11,000,000 | $ | 11,000,000 | $ | 33,487 | $ | 25,410 | $ | 8,077 | |||||||||||||||||
Two Year Ten Year USD Constant Maturity Swaption | Goldman Sachs International | 0.40 | 7/29/2022 | 2,000,000 | 2,000,000 | 6,089 | 4,540 | 1,549 | ||||||||||||||||||||||
Two Year Ten Year USD Constant Maturity Swaption | Goldman Sachs International | 0.61 | 7/29/2022 | 7,000,000 | 7,000,000 | 13,775 | 10,150 | 3,625 | ||||||||||||||||||||||
Two Year Ten Year USD Constant Maturity Swaption | Morgan Stanley & Co. | 0.40 | 7/29/2022 | 9,000,000 | 9,000,000 | 27,399 | 21,600 | 5,799 | ||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Total Purchased Options | $ | 80,750 | $ | 61,700 | $ | 19,050 | ||||||||||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
106 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
REVERSE REPURCHASE AGREEMENTS at June 30, 2020 (Unaudited)
Principal Amount^ | Value | |||||||
$(1,022,250) | Barclays Capital Plc 0.850%, 5/26/2020, due 07/27/2020 | $ | (1,022,250 | ) | ||||
(404,469) | BMO Capital Markets Corp. 0.750%, 5/13/2020, due 07/13/2020 | (404,469 | ) | |||||
(222,309) | BMO Capital Markets Corp. 0.850%, 5/13/2020, due 08/13/2020 | (222,309 | ) | |||||
(425,744) | BNP Paribas 0.750%, 5/13/2020, due 07/13/2020 | (425,744 | ) | |||||
(215,896) | BNP Paribas 0.850%, 5/13/2020, due 08/13/2020 | (215,896 | ) | |||||
|
| |||||||
| TOTAL REVERSE REPURCHASE AGREEMENTS | $ | (2,290,668 | ) | ||||
|
|
Securities pledged as collateral against open reverse repurchase agreements are noted in the Schedule of Investments.
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 107 |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS at June 30, 2020 (Unaudited)
At June 30, 2020, the Fund had the following forward foreign currency exchange contracts:
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||||
Counterparty | Settlement Date | Fund Receiving | U.S. $ Value at June 30, 2020 | Fund Delivering | U.S. $ Value at June 30, 2020 | Unrealized Appreciation | Unrealized Depreciation | |||||||||||||||||||||
Bank of America N.A. | 2/1/2021 | USD | $ | 4,821 | ILS | $ | 4,799 | $ | 22 | $ | — | |||||||||||||||||
4/30/2021 | USD | 29,953 | ILS | 29,454 | 499 | — | ||||||||||||||||||||||
1/31/2022 | USD | 93,834 | ILS | 92,860 | 974 | — | ||||||||||||||||||||||
Citibank N.A. | 7/1/2020 | BRL | 364,654 | USD | 367,539 | — | (2,885 | ) | ||||||||||||||||||||
7/1/2020 | BRL | 182,327 | USD | 195,065 | — | (12,738 | ) | |||||||||||||||||||||
7/1/2020 | USD | 495,761 | BRL | 364,654 | 131,107 | — | ||||||||||||||||||||||
7/1/2020 | USD | 183,769 | BRL | 182,327 | 1,442 | — | ||||||||||||||||||||||
2/1/2021 | USD | 13 | ILS | 13 | — | — | ||||||||||||||||||||||
4/30/2021 | USD | 406,848 | ILS | 400,572 | 6,276 | — | ||||||||||||||||||||||
7/1/2021 | BRL | 35,908 | USD | 38,193 | — | (2,285 | ) | |||||||||||||||||||||
7/1/2021 | BRL | 35,908 | USD | 38,664 | — | (2,756 | ) | |||||||||||||||||||||
Goldman Sachs International | 7/30/2020 | USD | 1,450 | EUR | 1,434 | 16 | — | |||||||||||||||||||||
2/1/2021 | ILS | 343,463 | USD | 330,597 | 12,866 | — | ||||||||||||||||||||||
2/1/2021 | ILS | 343,463 | USD | 331,515 | 11,948 | — | ||||||||||||||||||||||
2/1/2021 | ILS | 5,534 | USD | 5,138 | 396 | — | ||||||||||||||||||||||
2/1/2021 | ILS | 5,534 | USD | 5,185 | 349 | — | ||||||||||||||||||||||
2/1/2021 | USD | 593,208 | ILS | 584,618 | 8,590 | — | ||||||||||||||||||||||
2/1/2021 | USD | 102,448 | ILS | 102,308 | 140 | — | ||||||||||||||||||||||
2/1/2021 | USD | 6,282 | ILS | 6,256 | 26 | — | ||||||||||||||||||||||
4/30/2021 | ILS | 310,738 | USD | 298,557 | 12,181 | — | ||||||||||||||||||||||
4/30/2021 | ILS | 310,738 | USD | 298,892 | 11,846 | — | ||||||||||||||||||||||
4/30/2021 | USD | 94,794 | ILS | 94,252 | 542 | — | ||||||||||||||||||||||
4/30/2021 | USD | 97,471 | ILS | 97,198 | 273 | — | ||||||||||||||||||||||
7/30/2021 | USD | 198,957 | EUR | 194,255 | 4,702 | — | ||||||||||||||||||||||
1/31/2022 | ILS | 106,789 | USD | 98,692 | 8,097 | — | ||||||||||||||||||||||
1/31/2022 | ILS | 106,789 | USD | 99,610 | 7,179 | — | ||||||||||||||||||||||
1/31/2022 | USD | 121,980 | ILS | 120,718 | 1,262 | — | ||||||||||||||||||||||
JPMorgan Chase Bank N.A. | 7/30/2020 | EUR | 2,952 | USD | 2,918 | 34 | — | |||||||||||||||||||||
7/30/2020 | USD | 1,525 | EUR | 1,518 | 7 | — | ||||||||||||||||||||||
7/1/2021 | USD | 95,023 | BRL | 71,817 | 23,206 | — | ||||||||||||||||||||||
7/30/2021 | EUR | 399,938 | USD | 399,948 | — | (10 | ) | |||||||||||||||||||||
7/30/2021 | USD | 209,308 | EUR | 205,682 | 3,626 | — | ||||||||||||||||||||||
Morgan Stanley & Co. | 7/1/2020 | BRL | 182,327 | USD | 199,489 | — | (17,162 | ) | ||||||||||||||||||||
7/1/2020 | USD | 183,769 | BRL | 182,327 | 1,442 | — | ||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
$ | 5,658,276 | $ | 5,447,064 | $ | 249,048 | $ | (37,836 | ) | ||||||||||||||||||||
|
|
SCHEDULE OF FINANCIAL FUTURES CONTRACTS at June 30, 2020 (Unaudited)
Description | Number of Contracts | Notional Amount | Notional Value | Expiration Date | Unrealized Appreciation/ (Depreciation) | |||||||||||||||
Futures Contracts – Long | ||||||||||||||||||||
Ultra 10YR U.S. Treasury Notes | 1 | $ | 100,000 | $ | 157,484 | 9/21/2020 | $ | 310 | ||||||||||||
|
| |||||||||||||||||||
Total Long | $ | 310 | ||||||||||||||||||
|
| |||||||||||||||||||
Futures Contracts – Short | ||||||||||||||||||||
5YR U.S. Treasury Notes | (16 | ) | $ | (1,600,000 | ) | $ | (2,011,875 | ) | 9/30/2020 | $ | (4,258 | ) | ||||||||
10YR U.S. Treasury Notes | (12 | ) | (1,200,000 | ) | (1,670,062 | ) | 9/21/2020 | (3,406 | ) | |||||||||||
|
| |||||||||||||||||||
Total Short | $ | (7,664 | ) | |||||||||||||||||
|
| |||||||||||||||||||
Total Futures Contracts | $ | (7,354 | ) | |||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
108 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF SWAPS at June 30, 2020 (Unaudited)
CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS |
| |||||||||||||||||||||||||||
Rates Exchanged | ||||||||||||||||||||||||||||
Notional Amount | Maturity Date | Payment Received | Payment Made | Periodic Payment Frequency | Fair Value | Upfront Payment Made (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||
$2,600,000 | 11/06/2021 | 3 Month LIBOR | 3.144 | % | Quarterly | $ | (101,831 | ) | $ | 965 | $ | (102,796 | ) | |||||||||||||||
$350,000 | 11/07/2023 | 3 Month LIBOR | 3.180 | % | Quarterly | (34,349 | ) | 80 | (34,429 | ) | ||||||||||||||||||
|
| |||||||||||||||||||||||||||
$ | (136,180 | ) | $ | 1,045 | $ | (137,225 | ) | |||||||||||||||||||||
|
|
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS (1)(2)(3) | ||||||||||||||||||||||||||||||||
Description | Maturity Date | Fixed Deal (Pay) Rate | Implied Credit Spread at June 30, 2020 | Notional Amount | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid | Unrealized Depreciation | ||||||||||||||||||||||||
Sell Protection |
| |||||||||||||||||||||||||||||||
CDX North America HIgh Yield Index Series 34 | 6/20/2025 | 5.000 | % | 4.720 | % | $ | 1,102,000 | Quarterly | $ | (7,602 | ) | $ | 9,690 | $ | (17,292 | ) | ||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Total Sell Protection |
| $ | (7,602 | ) | $ | 9,690 | $ | (17,292 | ) | |||||||||||||||||||||||
|
|
(1) | For centrally cleared swaps, when a credit event occurs as defined under the terms of the swap contract, the Fund as a seller of credit protection will either (i) pay a net amount equal to the par value of the defaulted reference entity and deliver the reference entity or (ii) pay a net amount equal to the par value of the defaulted reference entity less its recovery value. |
(2) | For centrally cleared swaps, implied credit spread, represented in absolute terms, utilized in determining the fair value of the credit default swap contracts as of period will serve as an indicator of the payment/ performance risk and represent the likelihood of risk of default for the credit derivative. The implied credit spread of a referenced entity reflects the cost of buying/ selling protection and may include upfront payments required to be made to enter into the contract. Generally, wider credit spreads represent a perceived deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the swap contract. |
(3) | For centrally cleared swaps, the notional amount represents the maximum potential the Fund may receive as a buyer of credit protection if a credit event occurs, as defined under the terms of the swap contract, for each security included in the CDX North America High Yield Index Series 34. |
OVER THE COUNTER TOTAL RETURN SWAP CONTRACTS | ||||||||||||||||||||||||||||||
Referenced Obligation | Maturity Date | Counterparty | Fund Pays/ Receives Floating Rate | Floating Rate Index and Spread | Notional Amount | Periodic Payment Frequency | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation | |||||||||||||||||||||
iShares iBoxx High Yield Corporate Bond ETF USD | 8/3/2020 | Goldman Sachs International | Pays | 3 Month USD LIBOR + 0.000% | $ | (1,645,199 | ) | Quarterly | $ | 61,475 | $ | — | $ | 61,475 |
The accompanying notes are an integral part of these financial statements.
Schedule of Investments | 109 |
Table of Contents
PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund)
SCHEDULE OF WRITTEN OPTIONS at June 30, 2020 (Unaudited)
Description | Counterparty | Exercise Price | Expiration Date | Number of Contracts | Notional Amount | Market Value | Premiums Received | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||
INDEX OPTIONS |
| |||||||||||||||||||||||||||||
Put |
| |||||||||||||||||||||||||||||
Russell 2000 Index | UBS Securities LLC | $ | 1,380.00 | 7/2/2020 | (3 | ) | $ | (432,411 | ) | $ | (1,050 | ) | $ | (14,098 | ) | $ | 13,048 | |||||||||||||
Russell 2000 Index | UBS Securities LLC | 1,385.00 | 7/2/2020 | (1 | ) | (144,137 | ) | (406 | ) | (4,609 | ) | 4,203 | ||||||||||||||||||
Russell 2000 Index | UBS Securities LLC | 1,420.00 | 7/2/2020 | (1 | ) | (144,137 | ) | (1,067 | ) | (4,270 | ) | 3,203 | ||||||||||||||||||
Russell 2000 Index | UBS Securities LLC | 1,350.00 | 7/10/2020 | (1 | ) | (144,137 | ) | (943 | ) | (3,590 | ) | 2,647 | ||||||||||||||||||
Russell 2000 Index | UBS Securities LLC | 1,410.00 | 7/10/2020 | (2 | ) | (288,274 | ) | (4,442 | ) | (9,729 | ) | 5,287 | ||||||||||||||||||
Russell 2000 Index | UBS Securities LLC | 1,420.00 | 7/10/2020 | (1 | ) | (144,137 | ) | (2,462 | ) | (4,859 | ) | 2,397 | ||||||||||||||||||
Russell 2000 Index | UBS Securities LLC | 1,340.00 | 7/17/2020 | (1 | ) | (144,137 | ) | (1,447 | ) | (6,809 | ) | 5,362 | ||||||||||||||||||
Russell 2000 Index | UBS Securities LLC | 1,350.00 | 7/17/2020 | (1 | ) | (144,137 | ) | (1,584 | ) | (6,549 | ) | 4,965 | ||||||||||||||||||
Russell 2000 Index | UBS Securities LLC | 1,385.00 | 7/17/2020 | (2 | ) | (288,274 | ) | (6,442 | ) | (11,459 | ) | 5,017 | ||||||||||||||||||
Russell 2000 Index | UBS Securities LLC | 1,350.00 | 7/24/2020 | (4 | ) | (576,548 | ) | (9,572 | ) | (20,248 | ) | 10,676 | ||||||||||||||||||
Russell 2000 Index | UBS Securities LLC | 1,385.00 | 7/24/2020 | (1 | ) | (144,137 | ) | (3,770 | ) | (4,519 | ) | 749 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 2,935.00 | 7/2/2020 | (1 | ) | (310,029 | ) | (155 | ) | (6,755 | ) | 6,600 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 2,980.00 | 7/2/2020 | (7 | ) | (2,170,203 | ) | (2,275 | ) | (43,571 | ) | 41,296 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 2,990.00 | 7/2/2020 | (3 | ) | (930,087 | ) | (1,200 | ) | (16,914 | ) | 15,714 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 3,040.00 | 7/2/2020 | (1 | ) | (310,029 | ) | (1,013 | ) | (5,193 | ) | 4,180 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 2,950.00 | 7/10/2020 | (2 | ) | (620,058 | ) | (3,132 | ) | (9,279 | ) | 6,147 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 3,030.00 | 7/10/2020 | (3 | ) | (930,087 | ) | (9,060 | ) | (17,876 | ) | 8,816 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 3,040.00 | 7/10/2020 | (6 | ) | (1,860,174 | ) | (18,720 | ) | (37,358 | ) | 18,638 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 3,120.00 | 7/10/2020 | (1 | ) | (310,029 | ) | (5,900 | ) | (5,415 | ) | (485 | ) | |||||||||||||||||
S&P 500 Index | UBS Securities LLC | 2,950.00 | 7/17/2020 | (2 | ) | (620,058 | ) | (5,600 | ) | (12,099 | ) | 6,499 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 2,955.00 | 7/17/2020 | (3 | ) | (930,087 | ) | (9,966 | ) | (30,650 | ) | 20,684 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 3,020.00 | 7/17/2020 | (3 | ) | (930,087 | ) | (12,150 | ) | (20,298 | ) | 8,148 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 3,120.00 | 7/17/2020 | (1 | ) | (310,029 | ) | (7,700 | ) | (6,543 | ) | (1,157 | ) | |||||||||||||||||
S&P 500 Index | UBS Securities LLC | 3,130.00 | 7/17/2020 | (2 | ) | (620,058 | ) | (16,378 | ) | (11,928 | ) | (4,450 | ) | |||||||||||||||||
S&P 500 Index | UBS Securities LLC | 2,950.00 | 7/24/2020 | (2 | ) | (620,058 | ) | (6,960 | ) | (14,759 | ) | 7,799 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 2,970.00 | 7/24/2020 | (2 | ) | (620,058 | ) | (8,934 | ) | (14,469 | ) | 5,535 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 3,035.00 | 7/24/2020 | (2 | ) | (620,058 | ) | (11,700 | ) | (14,705 | ) | 3,005 | ||||||||||||||||||
S&P 500 Index | UBS Securities LLC | 3,070.00 | 7/24/2020 | (5 | ) | (1,550,145 | ) | (40,050 | ) | (32,285 | ) | (7,765 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||||||||
Total Written Options | $ | (194,078 | ) | $ | (390,836 | ) | $ | 196,758 | ||||||||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
110 | Litman Gregory Funds Trust |
Table of Contents
Litman Gregory Funds Trust
EXPENSE EXAMPLES – (Unaudited)
As a shareholder of the Funds, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including advisory fees, and other fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period shown and held for the entire period from January 1, 2020 to June 30, 2020.
Actual Expenses
For each Fund, the first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
For each Fund, the second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line for each Fund of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Beginning Account Value (1/1/20) | Ending Account Value (6/30/20) | Expenses Paid During Period* (1/1/20 to 6/30/20) | Expenses Ratio During Period* (1/1/20 to 6/30/20) | |||||||||||||
PartnerSelect Equity Fund ** – Institutional Actual | $ | 1,000.00 | $ | 924.80 | $ | 5.84 | 1.22% | |||||||||
PartnerSelect Equity Fund** – Institutional Hypothetical – (5% return before expenses) | $ | 1,000.00 | $ | 1,018.83 | $ | 6.12 | 1.22% | |||||||||
PartnerSelect International Fund** – Institutional Actual | $ | 1,000.00 | $ | 771.70 | $ | 5.15 | 1.17% | |||||||||
PartnerSelect International Fund** – Institutional Hypothetical – (5% return before expenses) | $ | 1,000.00 | $ | 1,019.08 | $ | 5.87 | 1.17% | |||||||||
PartnerSelect Smaller Companies Fund** – Institutional Actual | $ | 1,000.00 | $ | 813.40 | $ | 7.48 | 1.66% | |||||||||
PartnerSelect Smaller Companies Fund** – Institutional Hypothetical – (5% return before expenses) | $ | 1,000.00 | $ | 1,016.65 | $ | 8.32 | 1.66% | |||||||||
PartnerSelect Alternative Strategies Fund** – Institutional Actual | $ | 1,000.00 | $ | 975.70 | $ | 7.12 | 1.45% | |||||||||
PartnerSelect Alternative Strategies Fund** – Investor Actual | $ | 1,000.00 | $ | 974.90 | $ | 8.30 | 1.69% | |||||||||
PartnerSelect Alternative Strategies Fund** – Institutional Hypothetical – (5% return before expenses) | $ | 1,000.00 | $ | 1,017.69 | $ | 7.27 | 1.45% | |||||||||
PartnerSelect Alternative Strategies Fund** – Investor Hypothetical – (5% return before expenses) | $ | 1,000.00 | $ | 1,016.50 | $ | 8.47 | 1.69% | |||||||||
PartnerSelect High Income Alternatives Fund** – Institutional Actual | $ | 1,000.00 | $ | 949.50 | $ | 4.85 | 1.00% | |||||||||
PartnerSelect High Income Alternatives Fund** – Investor Actual | $ | 1,000.00 | $ | 947.50 | $ | 6.05 | 1.25% | |||||||||
PartnerSelect High Income Alternatives Fund** – Institutional Hypothetical – (5% return before expenses) | $ | 1,000.00 | $ | 1,019.93 | $ | 5.02 | 1.00% | |||||||||
PartnerSelect High Income Alternatives Fund** – Investor Hypothetical – (5% return before expenses) | $ | 1,000.00 | $ | 1,018.68 | $ | 6.27 | 1.25% |
* Expenses are equal to the Funds’ annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by the number of days in most recent fiscal half-year period (182), then divided by the number of days in the fiscal year (366) (to reflect the one-half-year period).
** Formerly Litman Gregory Masters Equity Fund, Litman Gregory Masters International Fund, Litman Gregory Masters Smaller Companies Fund, Litman Gregory Masters Alternative Strategies Fund, and Litman Gregory Masters High Income Alternatives Fund, respectively.
Expense Examples | 111 |
Table of Contents
Litman Gregory Funds Trust
STATEMENTS OF ASSETS AND LIABILITIES at June 30, 2020 – (Unaudited)
Equity Fund | International Fund | Smaller Companies Fund | Alternative Strategies Fund | High Income Alternatives Fund | ||||||||||||||||
ASSETS: | ||||||||||||||||||||
Investments in securities at cost | $ | 161,123,909 | $ | 287,966,089 | $ | 19,577,387 | $ | 1,353,451,624 | $ | 84,402,197 | ||||||||||
Repurchase agreements at cost | 6,566,000 | 3,559,000 | 1,511,000 | 115,969,000 | 1,611,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investments at cost | $ | 167,689,909 | $ | 291,525,089 | $ | 21,088,387 | $ | 1,469,420,624 | $ | 86,013,197 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Investments in securities at value | $ | 218,186,386 | $ | 264,950,148 | $ | 17,465,327 | $ | 1,349,203,459 | $ | 82,299,454 | ||||||||||
Repurchase agreements at value | 6,566,000 | 3,559,000 | 1,511,000 | 115,969,000 | 1,611,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investments at value | $ | 224,752,386 | $ | 268,509,148 | $ | 18,976,327 | $ | 1,465,172,459 | $ | 83,910,454 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cash | 5,564 | 42,930 | 5,955 | — | 364,658 | |||||||||||||||
Cash, denominated in foreign currency (cost of $323,780, $90,305, $0, $6,512,525 and $0, respectively) | 314,748 | 91,260 | — | 6,518,435 | — | |||||||||||||||
Deposits at brokers for securities sold short | — | — | — | 59,256,494 | — | |||||||||||||||
Deposits at brokers for futures | — | — | — | 425,000 | 2,376 | |||||||||||||||
Deposits at brokers for written options | — | — | — | 3,282,471 | — | |||||||||||||||
Deposits at brokers for swaps | — | — | — | 19,890,012 | 117,968 | |||||||||||||||
Receivables: | ||||||||||||||||||||
Securities sold | 506,228 | — | 142,310 | 14,100,307 | 2,095,405 | |||||||||||||||
Dividends and interest | 148,950 | 198,961 | 2,099 | 9,824,867 | 397,505 | |||||||||||||||
Fund shares sold | 979 | 36,180 | 686 | 5,245,161 | 131,303 | |||||||||||||||
Foreign tax reclaims | 28,461 | 805,700 | — | 195,902 | — | |||||||||||||||
Variation margin - Centrally Cleared Swaps | — | — | — | 581,752 | — | |||||||||||||||
Other Receivables | — | — | — | 141,418 | — | |||||||||||||||
Dividend and interest for swap resets | — | — | — | 101,875 | — | |||||||||||||||
Variation margin - Futures | — | — | — | 82,272 | 2,110 | |||||||||||||||
Net swap premiums paid | — | — | — | 1,277,657 | — | |||||||||||||||
Unrealized gain on forward foreign currency exchange contracts | — | — | — | 296,553 | 249,048 | |||||||||||||||
Unrealized gain on swaps | — | — | — | 4,194,768 | 61,475 | |||||||||||||||
Prepaid expenses | 11,131 | 7,108 | 15,923 | 10,502 | 69,899 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Assets | 225,768,447 | 269,691,287 | 19,143,300 | 1,590,597,905 | 87,402,201 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
LIABILITIES: | ||||||||||||||||||||
Written options (premium received, $0, $0, $0, $22,615 and $390,836, respectively) | — | — | — | 21,838 | 194,078 | |||||||||||||||
Securities sold short (proceeds, $0, $0, $0, $62,851,858 and $0, respectively) | — | — | — | 67,774,209 | — | |||||||||||||||
Reverse repurchase agreements | — | — | — | — | 2,290,668 | |||||||||||||||
Payables: | ||||||||||||||||||||
Advisory fees | 188,007 | 201,347 | 11,673 | 1,372,589 | 21,370 | |||||||||||||||
Securities purchased | 528,733 | — | 12,475 | 22,551,981 | 2,342,513 | |||||||||||||||
Fund shares redeemed | 649,738 | 255,982 | 125,351 | 9,327,687 | 348,166 | |||||||||||||||
Foreign taxes withheld | — | 22,979 | — | 4,366 | — | |||||||||||||||
Trustees fees | 1,772 | 2,283 | 1,746 | 858 | 620 | |||||||||||||||
Professional fees | 8,709 | 18,356 | 6,591 | — | 5,917 | |||||||||||||||
Custodian | — | — | — | 9,394,087 | — | |||||||||||||||
Distributions payable | — | — | — | 468,439 | 646 | |||||||||||||||
Line of credit interest | — | 1,064 | — | 1,026 | 389 | |||||||||||||||
Dividend and interest for swap resets | — | — | — | 6,001 | 1,353 | |||||||||||||||
Variation margin – Centrally Cleared Swaps | — | — | — | 180,899 | 106 | |||||||||||||||
Variation margin – Futures | — | — | — | 25,561 | — | |||||||||||||||
Short dividend | — | — | — | 33,337 | 2,293 | |||||||||||||||
Chief Compliance Officer fees | 6,824 | 6,824 | 6,824 | 6,824 | 6,824 | |||||||||||||||
Unrealized loss on unfunded loan commitment | — | — | — | 1,470 | 2,272 | |||||||||||||||
Unrealized loss on forward foreign currency exchange contracts | — | 3,015 | — | 471,809 | 37,836 | |||||||||||||||
Unrealized loss on swaps | — | — | — | 681,649 | — | |||||||||||||||
Distribution fees payable for investor class (see Note 4) | — | — | — | 16,571 | 192 | |||||||||||||||
Accrued other expenses | 125,931 | 261,583 | 32,623 | 668,198 | 103,619 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Liabilities | 1,509,714 | 773,433 | 197,283 | 113,009,399 | 5,358,862 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
NET ASSETS | $ | 224,258,733 | $ | 268,917,854 | $ | 18,946,017 | $ | 1,477,588,506 | $ | 82,043,339 | ||||||||||
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
112 | Litman Gregory Funds Trust |
Table of Contents
Litman Gregory Funds Trust
STATEMENTS OF ASSETS AND LIABILITIES at June 30, 2020 – (Unaudited) (Continued)
Equity Fund | International Fund | Smaller Companies Fund | Alternative Strategies Fund | High Income Alternatives Fund | ||||||||||||||||
Institutional Class: |
| |||||||||||||||||||
Net Assets | $ | 224,258,733 | $ | 268,917,854 | $ | 18,946,017 | $ | 1,399,095,948 | $ | 81,113,091 | ||||||||||
Number of shares issued and outstanding (unlimited number of shares authorized, $0.01 par value) | 13,818,178 | 19,742,833 | 983,090 | 124,799,078 | 8,650,539 | |||||||||||||||
Net asset value, offering price and redemption price per share | $ | 16.23 | $ | 13.62 | $ | 19.27 | $ | 11.21 | $ | 9.38 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Investor Class: |
| |||||||||||||||||||
Net Assets | $ | — | $ | — | $ | — | $ | 78,492,558 | $ | 930,248 | ||||||||||
Number of shares issued and outstanding (unlimited number of shares authorized, $0.01 par value) | — | — | — | 6,988,010 | 99,176 | |||||||||||||||
Net asset value, offering price and redemption price per share | $ | — | $ | — | $ | — | $ | 11.23 | $ | 9.38 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
COMPONENTS OF NET ASSETS |
| |||||||||||||||||||
Paid-in capital | $ | 146,549,707 | $ | 352,486,891 | $ | 23,359,585 | $ | 1,505,086,029 | $ | 88,320,888 | ||||||||||
Accumulated distributable earnings (deficit) | 77,709,026 | (83,569,037 | ) | (4,413,568 | ) | (27,497,523 | ) | (6,277,549 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net assets | $ | 224,258,733 | $ | 268,917,854 | $ | 18,946,017 | $ | 1,477,588,506 | $ | 82,043,339 | ||||||||||
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Statements of Assets and Liabilities | 113 |
Table of Contents
Litman Gregory Funds Trust
STATEMENTS OF OPERATIONS For the Six Months Ended June 30, 2020 – (Unaudited)
Equity Fund | International Fund | Smaller Companies Fund | Alternative Strategies Fund | High Income Alternatives Fund | ||||||||||||||||
INVESTMENT INCOME: | ||||||||||||||||||||
Income |
| |||||||||||||||||||
Dividends (net of foreign taxes withheld of $22,969, $292,293, $457, $79,320 and $0, respectively) | $ | 1,365,149 | $ | 3,538,458 | $ | 144,822 | $ | 5,423,355 | $ | 561,856 | ||||||||||
Interest | 2,035 | 6,220 | 734 | 29,858,769 | 1,481,383 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total income | 1,367,184 | 3,544,678 | 145,556 | 35,282,124 | 2,043,239 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Expenses |
| |||||||||||||||||||
Advisory fees | 1,321,105 | 1,664,329 | �� | 123,808 | 11,479,375 | 414,285 | ||||||||||||||
Transfer agent fees | 77,102 | 94,491 | 24,526 | 515,712 | 43,097 | |||||||||||||||
Fund accounting fees | 49,232 | 41,957 | 17,080 | 111,432 | 62,575 | |||||||||||||||
Administration fees | 31,167 | 40,151 | 5,072 | 178,628 | 16,880 | |||||||||||||||
Professional fees | 18,184 | 23,033 | 7,441 | 98,926 | 21,488 | |||||||||||||||
Trustee fees | 25,474 | 27,708 | 19,708 | 61,027 | 20,884 | |||||||||||||||
Custody fees | 25,765 | 163,742 | 3,200 | 328,803 | 55,855 | |||||||||||||||
Reports to shareholders | 22,084 | 26,226 | 5,478 | 80,951 | 3,060 | |||||||||||||||
Registration expense | 12,319 | 13,084 | 10,665 | 37,404 | 17,396 | |||||||||||||||
Miscellaneous | 6,613 | 8,994 | 1,202 | 35,187 | 1,009 | |||||||||||||||
Insurance expense | 1,616 | 2,194 | 16 | 10,553 | 546 | |||||||||||||||
Dividend & interest expense | 4,454 | 13,860 | 460 | 1,169,283 | 8,832 | |||||||||||||||
Chief Compliance Officer fees | 6,824 | 6,824 | 6,824 | 6,824 | 6,824 | |||||||||||||||
Distribution fees for investor class (see Note 4) | — | — | — | 141,111 | 1,364 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total expenses | 1,601,939 | 2,126,593 | 225,480 | 14,255,216 | 674,095 | |||||||||||||||
Less: fees waived (see Note 3) | (134,262 | ) | (352,559 | ) | (45,177 | ) | (2,261,294 | ) | (237,795 | ) | ||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||
Net expenses | 1,467,677 | 1,774,034 | 180,303 | 11,993,922 | 436,300 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) | (100,493 | ) | 1,770,644 | (34,747 | ) | 23,288,202 | 1,606,939 | |||||||||||||
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|
|
|
|
|
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|
|
| |||||||||||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||||||||||||||
Net realized gain (loss) on: | ||||||||||||||||||||
Investments, excluding purchased options | 13,853,876 | (24,585,503 | ) | (2,231,787 | ) | (20,684,603 | ) | (3,412,734 | ) | |||||||||||
Purchased options | — | — | — | (123,058 | ) | — | ||||||||||||||
Short sales | — | — | — | 5,321,646 | — | |||||||||||||||
Written options | — | — | — | 10,051 | (1,371,811 | ) | ||||||||||||||
Forward foreign currency exchange contracts | — | (543,048 | ) | — | 566,706 | 54,886 | ||||||||||||||
Foreign currency transactions | 4,499 | (181,645 | ) | (151 | ) | (36,414 | ) | 4,846 | ||||||||||||
Futures | — | — | — | (4,508,458 | ) | 17,241 | ||||||||||||||
Swap contracts | — | — | — | 28,082,884 | (42,982 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized gain (loss) | 13,858,375 | (25,310,196 | ) | (2,231,938 | ) | 8,628,754 | (4,750,554 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net change in unrealized appreciation/depreciation on: | ||||||||||||||||||||
Investments, excluding purchased options | (38,708,886 | ) | (68,922,619 | ) | (3,395,412 | ) | (101,866,248 | ) | (2,955,628 | ) | ||||||||||
Purchased options | — | — | — | 115,504 | 41,263 | |||||||||||||||
Unfunded loan commitment | — | — | — | (2,930 | ) | (2,330 | ) | |||||||||||||
Short sales | — | — | — | 934,959 | — | |||||||||||||||
Written options | — | — | — | (1,233 | ) | 160,856 | ||||||||||||||
Forward foreign currency exchange contracts | — | 793,827 | — | 438,238 | 185,786 | |||||||||||||||
Foreign currency transactions | 534 | 2,782 | — | (127,596 | ) | (342 | ) | |||||||||||||
Futures | — | — | — | (865,023 | ) | (5,464 | ) | |||||||||||||
Swap contracts | — | — | — | 6,293,276 | 76,006 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net change in unrealized appreciation/depreciation | (38,708,352 | ) | (68,126,010 | ) | (3,395,412 | ) | (95,081,053 | ) | (2,499,853 | ) | ||||||||||
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|
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|
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|
|
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| |||||||||||
Net realized and unrealized gain (loss) on investments, short sales, purchased options, written options, foreign currency transactions, futures and swap contracts | (24,849,977 | ) | (93,436,206 | ) | (5,627,350 | ) | (86,452,299 | ) | (7,250,407 | ) | ||||||||||
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| |||||||||||
Net decrease in net assets resulting from operations | $ | (24,950,470 | ) | $ | (91,665,562 | ) | $ | (5,662,097 | ) | $ | (63,164,097 | ) | $ | (5,643,468 | ) | |||||
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|
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The accompanying notes are an integral part of these financial statements.
114 | Litman Gregory Funds Trust |
Table of Contents
Litman Gregory Funds Trust
STATEMENTS OF CHANGES IN NET ASSETS June 30, 2020
# | Unaudited. |
1 | Investor Class shares were converted into Institutional Class shares at the close of business on April 29, 2019. |
The accompanying notes are an integral part of these financial statements.
Statements of Changes in Net Assets | 115 |
Table of Contents
Litman Gregory Funds Trust
STATEMENTS OF CHANGES IN NET ASSETS June 30, 2020 – (Continued)
# | Unaudited. |
The accompanying notes are an integral part of these financial statements.
116 | Litman Gregory Funds Trust |
Table of Contents
Litman Gregory Funds Trust
STATEMENTS OF CHANGES IN NET ASSETS June 30, 2020 – (Continued)
# | Unaudited. |
The accompanying notes are an integral part of these financial statements.
Statements of Changes in Net Assets | 117 |
Table of Contents
PartnerSelect Equity Fund – Institutional Class (formerly Litman Gregory Masters Equity Fund – Institutional Class)
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
Six Months June 30, 2020# | Year Ended December 31, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||
Net asset value, beginning of period | $ | 17.54 | $ | 15.02 | $ | 19.10 | $ | 17.02 | $ | 16.08 | $ | 18.01 | ||||||||||||
|
| |||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)1 | (0.01 | ) | 0.08 | 2 | (0.01 | ) | (0.01 | ) | 0.13 | 0.07 | ||||||||||||||
Net realized gain (loss) and net change in unrealized | (1.30 | ) | 4.03 | (1.90 | ) | 3.61 | 1.81 | (0.41 | ) | |||||||||||||||
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| |||||||||||||||||||||||
Total income (loss) from investment operations | (1.31 | ) | 4.11 | (1.91 | ) | 3.60 | 1.94 | (0.34 | ) | |||||||||||||||
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| |||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||
From net investment income | — | (0.08 | ) | — | — | (0.14 | ) | (0.06 | ) | |||||||||||||||
From net realized gains | — | (1.51 | ) | (2.17 | ) | (1.52 | ) | (0.86 | ) | (1.53 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | — | (1.59 | ) | (2.17 | ) | (1.52 | ) | (1.00 | ) | (1.59 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 16.23 | $ | 17.54 | $ | 15.02 | $ | 19.10 | $ | 17.02 | $ | 16.08 | ||||||||||||
|
| |||||||||||||||||||||||
Total return | (7.52 | )%+ | 27.55 | % | (9.91 | )% | 21.15 | % | 11.98 | % | (1.87 | )% | ||||||||||||
|
| |||||||||||||||||||||||
Ratios/supplemental data: |
| |||||||||||||||||||||||
Net assets, end of period (millions) | $ | 224.3 | $ | 286.3 | $ | 259.8 | $ | 339.5 | $ | 313.5 | $ | 321.2 | ||||||||||||
|
| |||||||||||||||||||||||
Ratios of total expenses to average net assets: | ||||||||||||||||||||||||
Before fees waived | 1.33 | %*,3 | 1.35 | %4 | 1.29 | %3 | 1.27 | %3 | 1.27 | %3 | 1.28 | %3 | ||||||||||||
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| |||||||||||||||||||||||
After fees waived | 1.22 | %*,3,5 | 1.24 | %4,5 | 1.17 | %3,5 | 1.15 | %3,5 | 1.17 | %3,5 | 1.18 | %3,5 | ||||||||||||
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| |||||||||||||||||||||||
Ratio of net investment income (loss) to average net assets | (0.08 | )%*,3 | 0.44 | %2,4 | (0.08 | )%3 | (0.07 | )%3 | 0.78 | %3 | 0.37 | %3 | ||||||||||||
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| |||||||||||||||||||||||
Portfolio turnover rate | 28.87 | %+ | 25.02 | %6 | 41.68 | %6 | 33.49 | %6 | 26.98 | %6 | 33.94 | %6 | ||||||||||||
|
|
# | Unaudited. |
+ | Not annualized. |
* | Annualized. |
1 | Calculated based on the average shares outstanding methodology. |
2 | Include non-cash distributions amounting to $0.06 per share and 0.33% of average daily net assets. |
3 | Includes Interest & Dividend expense of 0.00% of average net assets. |
4 | Includes Interest & Dividend expense of 0.03% of average net assets. |
5 | Includes the impact of the voluntary waiver of less than 0.01% of average net assets. |
6 | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
118 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect International Fund—Institutional Class
(formerly Litman Gregory Masters International Fund – Institutional Class)
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
Six Months June 30, 2020# | Year Ended December 31, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||
Net asset value, beginning of period | $ | 17.65 | $ | 13.94 | $ | 17.73 | $ | 14.77 | $ | 16.13 | $ | 17.36 | ||||||||||||
|
| |||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income1 | 0.08 | 0.27 | 4 | 0.30 | 3 | 0.20 | 2 | 0.23 | 0.22 | |||||||||||||||
Net realized gain (loss) and net change in unrealized appreciation/depreciation on investments and foreign currency | (4.11 | ) | 3.97 | (3.99 | ) | 3.28 | (0.98 | ) | (1.18 | ) | ||||||||||||||
|
| |||||||||||||||||||||||
Total income (loss) from investment operations | (4.03 | ) | 4.24 | (3.69 | ) | 3.48 | (0.75 | ) | (0.96 | ) | ||||||||||||||
|
| |||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||
From net investment income | — | (0.53 | ) | (0.10 | ) | (0.52 | ) | (0.61 | ) | (0.27 | ) | |||||||||||||
From net realized gains | — | — | — | — | — | — | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | — | (0.53 | ) | (0.10 | ) | (0.52 | ) | (0.61 | ) | (0.27 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Redemption fee proceeds | — | — | — | — | — | — | ^ | |||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 13.62 | $ | 17.65 | $ | 13.94 | $ | 17.73 | $ | 14.77 | $ | 16.13 | ||||||||||||
|
| |||||||||||||||||||||||
Total return | (22.83 | )%+ | 30.45 | % | (20.80 | )% | 23.61 | % | (4.61 | )% | (5.52 | )% | ||||||||||||
|
| |||||||||||||||||||||||
Ratios/supplemental data: |
| |||||||||||||||||||||||
Net assets, end of period (millions) | $ | 268.9 | $ | 401.5 | $ | 368.6 | $ | 681.1 | $ | 621.3 | $ | 1,021.1 | ||||||||||||
|
| |||||||||||||||||||||||
Ratios of total expenses to average net assets: | ||||||||||||||||||||||||
Before fees waived | 1.41 | %*,6 | 1.36 | %6 | 1.33 | %6 | 1.26 | %5 | 1.28 | %6 | 1.24 | %5 | ||||||||||||
|
| |||||||||||||||||||||||
After fees waived | 1.17 | %*,6,7 | 1.12 | %6,7 | 1.09 | %6,7 | 0.98 | %5,7 | 1.00 | %6,7 | 0.99 | %5,7 | ||||||||||||
|
| |||||||||||||||||||||||
Ratio of net investment income to average net assets | 1.17 | %*,6 | 1.65 | %4,6 | 1.74 | %3,6 | 1.18 | %2,5 | 1.51 | %6 | 1.22 | %5 | ||||||||||||
|
| |||||||||||||||||||||||
Portfolio turnover rate | 43.08 | %+ | 45.48 | %8 | 35.15 | %8 | 41.90 | %8 | 43.84 | %8 | 51.68 | %8 | ||||||||||||
|
|
# | Unaudited. |
^ | Amount represents less than $0.01 per share. |
+ | Not annualized. |
* | Annualized. |
1 | Calculated based on the average shares outstanding methodology. |
2 | Include non-cash distributions amounting to $0.06 per share and 0.35% of average daily net assets. |
3 | Include non-cash distributions amounting to $0.05 per share and 0.29% of average daily net assets. |
4 | Include non-cash distributions amounting to $0.10 per share and 0.60% of average daily net assets. |
5 | Includes Interest & Dividend expense of 0.00% of average net assets. |
6 | Includes Interest & Dividend expense of 0.01% of average net assets. |
7 | Includes the impact of the voluntary waiver of less than 0.01% of average net assets. |
8 | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Financial Highlights | 119 |
Table of Contents
PartnerSelect Smaller Companies Fund – Institutional Class (formerly Litman Gregory Masters Smaller Companies Fund – Institutional Class)
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
Six Months June 30, 2020# | Year Ended December 31, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||
Net asset value, beginning of period | $ | 23.69 | $ | 21.21 | $ | 23.70 | $ | 20.71 | $ | 17.43 | $ | 20.09 | ||||||||||||
|
| |||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)1 | (0.03 | ) | (0.01 | ) | 0.02 | (0.07 | ) | (0.01 | ) | (0.15 | ) | |||||||||||||
Net realized gain (loss) and net change in unrealized | (4.39 | ) | 5.01 | (2.51 | ) | 3.06 | 3.29 | (2.51 | ) | |||||||||||||||
|
| |||||||||||||||||||||||
Total income (loss) from investment operations | (4.42 | ) | 5.00 | (2.49 | ) | 2.99 | 3.28 | (2.66 | ) | |||||||||||||||
|
| |||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||
From net investment income | — | — | ^ | — | — | — | — | |||||||||||||||||
From net realized gains | — | (2.52 | ) | — | — | — | — | |||||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | — | (2.52 | ) | — | — | — | — | |||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 19.27 | $ | 23.69 | $ | 21.21 | $ | 23.70 | $ | 20.71 | $ | 17.43 | ||||||||||||
|
| |||||||||||||||||||||||
Total return | (18.66 | )%+ | 23.72 | % | (10.51 | )% | 14.44 | % | 18.82 | % | (13.24 | )% | ||||||||||||
|
| |||||||||||||||||||||||
Ratios/supplemental data: |
| |||||||||||||||||||||||
Net assets, end of period (millions) | $ | 18.9 | $ | 28.7 | $ | 26.6 | $ | 33.4 | $ | 37.2 | $ | 41.0 | ||||||||||||
|
| |||||||||||||||||||||||
Ratios of total expenses to average net assets: | ||||||||||||||||||||||||
Before fees waived | 2.08 | %*,2 | 1.88 | %2 | 1.80 | %2 | 1.74 | %2 | 1.66 | %2 | 1.69 | %2 | ||||||||||||
|
| |||||||||||||||||||||||
After fees waived | 1.66 | %*,2,3 | 1.46 | %2,3 | 1.38 | %2,3 | 1.32 | %2,3 | 1.24 | %2,3 | 1.59 | %2,3 | ||||||||||||
|
| |||||||||||||||||||||||
Ratio of net investment income (loss) to average net assets | (0.32 | )%*,2 | (0.04 | )%2 | 0.10 | %2 | (0.30 | )%2 | (0.06 | )%2 | (0.75 | )%2 | ||||||||||||
|
| |||||||||||||||||||||||
Portfolio turnover rate | 59.89 | %+ | 64.88 | % | 75.00 | % | 107.51 | % | 51.32 | % | 60.73 | % | ||||||||||||
|
|
# | Unaudited. |
^ | Amount represents less than $0.01 per share. |
+ | Not annualized. |
* | Annualized. |
1 | Calculated based on the average shares outstanding methodology. |
2 | Includes Interest & Dividend expense of 0.00% of average net assets. |
3 | Includes the impact of the voluntary waiver of less than 0.01% of average net assets. |
The accompanying notes are an integral part of these financial statements.
120 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect Alternative Strategies Fund – Institutional Class (formerly Litman Gregory Masters Alternative Strategies Fund – Institutional Class)
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
Six Months June 30, 2020# | Year Ended December 31, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||
Net asset value, beginning of period | $ | 11.70 | $ | 11.08 | $ | 11.69 | $ | 11.45 | $ | 10.99 | $ | 11.44 | ||||||||||||
|
| |||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income1 | 0.16 | 0.31 | 2 | 0.26 | 0.26 | 0.31 | 0.30 | |||||||||||||||||
Net realized gain (loss) and net change in unrealized appreciation/depreciation on investments, foreign currency, short sales, options, futures and swap contracts | (0.45 | ) | 0.64 | (0.51 | ) | 0.25 | 0.44 | (0.40 | ) | |||||||||||||||
|
| |||||||||||||||||||||||
Total income (loss) from investment operations | (0.29 | ) | 0.95 | (0.25 | ) | 0.51 | 0.75 | (0.10 | ) | |||||||||||||||
|
| |||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||
From net investment income | (0.20 | ) | (0.33 | ) | (0.36 | ) | (0.27 | ) | (0.29 | ) | (0.32 | ) | ||||||||||||
From net realized gains | — | — | — | — | — | (0.03 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.20 | ) | (0.33 | ) | (0.36 | ) | (0.27 | ) | (0.29 | ) | (0.35 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 11.21 | $ | 11.70 | $ | 11.08 | $ | 11.69 | $ | 11.45 | $ | 10.99 | ||||||||||||
|
| |||||||||||||||||||||||
Total return | (2.43 | )%+ | 8.52 | % | (2.08 | )% | 4.51 | % | 6.87 | % | (0.77 | )% | ||||||||||||
|
| |||||||||||||||||||||||
Ratios/supplemental data: |
| |||||||||||||||||||||||
Net assets, end of period (millions) | $ | 1,399.1 | $ | 1,724.2 | $ | 1,663.7 | $ | 1,828.1 | $ | 1,368.9 | $ | 1,176.9 | ||||||||||||
|
| |||||||||||||||||||||||
Ratios of total expenses to average net assets: | ||||||||||||||||||||||||
Before fees waived | 1.72 | %*,8 | 1.63 | %7 | 1.63 | %6 | 1.75 | %5 | 1.83 | %4 | 1.94 | %3 | ||||||||||||
|
| |||||||||||||||||||||||
After fees waived | 1.45 | %*,8,9 | 1.51 | %7,9 | 1.53 | %6,9 | 1.66 | %5,9 | 1.75 | %4,9 | 1.85 | %3,9 | ||||||||||||
|
| |||||||||||||||||||||||
Ratio of net investment income to average net assets | 2.86 | %*,8 | 2.70 | %2,7 | 2.26 | %6 | 2.25 | %5 | 2.78 | %4 | 2.62 | %3 | ||||||||||||
|
| |||||||||||||||||||||||
Portfolio turnover rate10 | 96.23 | %+ | 190.21 | % | 197.04 | % | 169.34 | % | 142.24 | % | 145.97 | % | ||||||||||||
|
|
# | Unaudited. |
+ | Not annualized. |
* | Annualized. |
1 | Calculated based on the average shares outstanding methodology. |
2 | Include non-cash distributions amounting to $0.02 per share and 0.20% of average daily net assets. |
3 | Includes Interest & Dividend expense of 0.36% of average net assets. |
4 | Includes Interest & Dividend expense of 0.28% of average net assets. |
5 | Includes Interest & Dividend expense of 0.20% of average net assets. |
6 | Includes Interest & Dividend expense of 0.07% of average net assets. |
7 | Includes Interest & Dividend expense of 0.05% of average net assets. |
8 | Includes Interest & Dividend expense of 0.14% of average net assets. |
9 | Includes the impact of the voluntary waiver of less than 0.01% of average net assets. |
10 | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Financial Highlights | 121 |
Table of Contents
PartnerSelect Alternative Strategies Fund – Investor Class (formerly Litman Gregory Masters Alternative Strategies Fund – Investor Class)
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
Six Months June 30, 2020# | Year Ended December 31, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||
Net asset value, beginning of period | $ | 11.71 | $ | 11.10 | $ | 11.70 | $ | 11.46 | $ | 11.00 | $ | 11.45 | ||||||||||||
|
| |||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income1 | 0.15 | 0.28 | 2 | 0.23 | 0.23 | 0.28 | 0.28 | |||||||||||||||||
Net realized gain (loss) and net change in unrealized | (0.45 | ) | 0.63 | (0.50 | ) | 0.25 | 0.44 | (0.40 | ) | |||||||||||||||
|
| |||||||||||||||||||||||
Total income (loss) from investment operations | (0.30 | ) | 0.91 | (0.27 | ) | 0.48 | 0.72 | (0.12 | ) | |||||||||||||||
|
| |||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||
From net investment income | (0.18 | ) | (0.30 | ) | (0.33 | ) | (0.24 | ) | (0.26 | ) | (0.30 | ) | ||||||||||||
From net realized gains | — | — | — | — | — | (0.03 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.18 | ) | (0.30 | ) | (0.33 | ) | (0.24 | ) | (0.26 | ) | (0.33 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 11.23 | $ | 11.71 | $ | 11.10 | $ | 11.70 | $ | 11.46 | $ | 11.00 | ||||||||||||
|
| |||||||||||||||||||||||
Total return | (2.51 | )%+ | 8.22 | % | (2.32 | )% | 4.14 | % | 6.67 | % | (0.95 | )% | ||||||||||||
|
| |||||||||||||||||||||||
Ratios/supplemental data: |
| |||||||||||||||||||||||
Net assets, end of period (millions) | $ | 78.5 | $ | 144.1 | $ | 175.3 | $ | 206.0 | $ | 179.8 | $ | 190.6 | ||||||||||||
|
| |||||||||||||||||||||||
Ratios of total expenses to average net assets: | ||||||||||||||||||||||||
Before fees waived | 1.96 | %*,8 | 1.88 | %7 | 1.88 | %6 | 2.00 | %5 | 2.08 | %4 | 2.18 | %3 | ||||||||||||
|
| |||||||||||||||||||||||
After fees waived | 1.69 | %*,8,9 | 1.76 | %7,9 | 1.78 | %6,9 | 1.90 | %5,9 | 2.00 | %4,9 | 2.03 | %3,9 | ||||||||||||
|
| |||||||||||||||||||||||
Ratio of net investment income to average net assets | 2.59 | %*,8 | 2.44 | %2,7 | 2.01 | %6 | 2.01 | %5 | 2.54 | %4 | 2.44 | %3 | ||||||||||||
|
| |||||||||||||||||||||||
Portfolio turnover rate10 | 96.23 | %+ | 190.21 | % | 197.04 | % | 169.34 | % | 142.24 | % | 145.97 | % | ||||||||||||
|
|
# | Unaudited. |
+ | Not annualized. |
* | Annualized. |
1 | Calculated based on the average shares outstanding methodology. |
2 | Include non-cash distributions amounting to $0.02 per share and 0.20% of average daily net assets. |
3 | Includes Interest & Dividend expense of 0.36% of average net assets. |
4 | Includes Interest & Dividend expense of 0.28% of average net assets. |
5 | Includes Interest & Dividend expense of 0.20% of average net assets. |
6 | Includes Interest & Dividend expense of 0.07% of average net assets. |
7 | Includes Interest & Dividend expense of 0.05% of average net assets. |
8 | Includes Interest & Dividend expense of 0.14% of average net assets. |
9 | Includes the impact of the voluntary waiver of less than 0.01% of average net assets. |
10 | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
122 | Litman Gregory Funds Trust |
Table of Contents
PartnerSelect High Income Alternatives Fund – Institutional Class (formerly Litman Gregory Masters High Income Alternatives Fund – Institutional Class)
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
Six Months June 30, 2020# | Year Ended December 31, 2019 | Period Ended December 31, 2018** | ||||||||||
Net asset value, beginning of period | $ | 10.06 | $ | 9.63 | $ | 10.00 | ||||||
|
| |||||||||||
Income from investment operations: | ||||||||||||
Net investment income1 | 0.17 | 0.36 | 0.07 | |||||||||
Net realized gain (loss) and net change in unrealized | (0.68 | ) | 0.44 | (0.38 | ) | |||||||
|
| |||||||||||
Total income (loss) from investment operations | (0.51 | ) | 0.80 | (0.31 | ) | |||||||
|
| |||||||||||
Less distributions: | ||||||||||||
From net investment income | (0.17 | ) | (0.33 | ) | (0.06 | ) | ||||||
From net realized gains | — | (0.04 | ) | — | ||||||||
|
| |||||||||||
Total distributions | (0.17 | ) | (0.37 | ) | (0.06 | ) | ||||||
|
| |||||||||||
Net asset value, end of period | $ | 9.38 | $ | 10.06 | $ | 9.63 | ||||||
|
| |||||||||||
Total return | (5.05 | )%+ | 8.37 | % | (3.08 | )%+ | ||||||
|
| |||||||||||
Ratios/supplemental data: | ||||||||||||
Net assets, end of period (millions) | $ | 81.1 | $ | 93.8 | $ | 77.2 | ||||||
|
| |||||||||||
Ratios of total expenses to average net assets: | ||||||||||||
Before fees waived | 1.54 | %*,3 | 1.39 | %2 | 1.34 | %* | ||||||
|
| |||||||||||
After fees waived | 1.00 | %*,3,4 | 0.98 | %2,4 | 0.98 | %*,4 | ||||||
|
| |||||||||||
Ratio of net investment income to average net assets | 3.69 | %*,3 | 3.56 | %2 | 2.89 | %* | ||||||
|
| |||||||||||
Portfolio turnover rate5 | 69.22 | %+ | 90.51 | % | 125.92 | %+ | ||||||
|
|
# | Unaudited. |
** | Commenced operations on September 28, 2018. |
+ | Not annualized. |
* | Annualized. |
1 | Calculated based on the average shares outstanding methodology. |
2 | Includes Interest & Dividend expense of 0.00% of average net assets. |
3 | Includes Interest & Dividend expense of 0.02% of average net assets. |
4 | Includes the impact of the voluntary waiver of less than 0.01% of average net assets. |
5 | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Financial Highlights | 123 |
Table of Contents
PartnerSelect High Income Alternatives Fund – Investor Class (formerly Litman Gregory Masters High Income Alternatives Fund – Investor Class)
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
Six Months June 30, 2020# | Year Ended December 31, 2019 | Period Ended December 31, 2018** | ||||||||||
Net asset value, beginning of period | $ | 10.07 | $ | 9.63 | $ | 10.00 | ||||||
|
| |||||||||||
Income from investment operations: | ||||||||||||
Net investment income1 | 0.16 | 0.34 | 0.08 | |||||||||
Net realized gain (loss) and net change in unrealzied appreciation/depreciation on investments, foreign currency, futures, options and swap contracts | (0.69 | ) | 0.44 | (0.39 | ) | |||||||
|
| |||||||||||
Total income (loss) from investment operations | (0.53 | ) | 0.78 | (0.31 | ) | |||||||
|
| |||||||||||
Less distributions: | ||||||||||||
From net investment income | (0.16 | ) | (0.30 | ) | (0.06 | ) | ||||||
From net realized gains | — | (0.04 | ) | — | ||||||||
|
| |||||||||||
Total distributions | (0.16 | ) | (0.34 | ) | (0.06 | ) | ||||||
|
| |||||||||||
Net asset value, end of period | $ | 9.38 | $ | 10.07 | $ | 9.63 | ||||||
|
| |||||||||||
Total return | (5.25 | )%+ | 8.18 | % | (3.09 | )%+ | ||||||
|
| |||||||||||
Ratios/supplemental data: | ||||||||||||
Net assets, end of period (millions) | $ | 0.9 | $ | 1.4 | $ | 0.5 | ||||||
|
| |||||||||||
Ratios of total expenses to average net assets: | ||||||||||||
Before fees waived | 1.78 | %*,3 | 1.67 | %2 | 1.62 | %* | ||||||
|
| |||||||||||
After fees waived | 1.25 | %*,3,4 | 1.23 | %2,4 | 1.23 | %*,4 | ||||||
|
| |||||||||||
Ratio of net investment income to average net assets | 3.35 | %*,3 | 3.36 | %2 | 3.25 | %* | ||||||
|
| |||||||||||
Portfolio turnover rate5 | 69.22 | %+ | 90.51 | % | 125.92 | %+ | ||||||
|
|
# | Unaudited. |
** | Commenced operations on September 28, 2018. |
+ | Not annualized. |
* | Annualized. |
1 | Calculated based on the average shares outstanding methodology. |
2 | Includes Interest & Dividend expense of 0.00% of average net assets. |
3 | Includes Interest & Dividend expense of 0.02% of average net assets. |
4 | Includes the impact of the voluntary waiver of less than 0.01% of average net assets. |
5 | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
124 | Litman Gregory Funds Trust |
Table of Contents
Litman Gregory Funds Trust
NOTES TO FINANCIAL STATEMENTS – (Unaudited)
Note 1 – Organization
Litman Gregory Funds Trust (the “Trust”) was organized as a Delaware business trust on August 1, 1996, and is registered under the Investment Company Act of 1940 (the “1940 Act”) as an open-end management investment company. Effective August 1, 2011, The Masters’ Select Funds Trust changed its name to the Litman Gregory Funds Trust. The Trust consists of five separate series: PartnerSelect Equity Fund (formerly Litman Gregory Masters Equity Fund), PartnerSelect International Fund (formerly Litman Gregory Masters International Fund), PartnerSelect Smaller Companies Fund (formerly Litman Gregory Masters Smaller Companies Fund), PartnerSelect Alternative Strategies Fund (formerly Litman Gregory Masters Alternative Strategies Fund), and PartnerSelect High Income Alternatives Fund (formerly Litman Gregory Masters High Income Alternatives Fund) (each a “Fund” and collectively the “Funds”). Each Fund is diversified.
PartnerSelect Equity Fund (“Equity Fund”) seeks to increase the value of an investment in the Fund over the long-term by using the combined talents and favorite stock-picking ideas of six highly regarded portfolio managers (each “Managers” or “Sub-Advisors”). The Equity Fund offers one class of shares: Institutional Class. Investor Class shares were converted into Institutional Class shares at the close of business on April 29, 2019.
PartnerSelect International Fund (“International Fund”) seeks to increase the value of an investment in the Fund over the long-term by using the combined talents and favorite stock-picking ideas of five highly regarded international portfolio managers. The International Fund offers one class of shares: Institutional Class. Investor Class shares were converted into Institutional Class shares at the close of business on April 29, 2019.
PartnerSelect Smaller Companies Fund (“Smaller Companies Fund”) seeks to increase the value of an investment in the Fund over the long-term by using the combined talents and favorite stock-picking ideas of three highly regarded smaller company portfolio managers. The Smaller Companies Fund offers one class of shares: Institutional Class.
PartnerSelect Alternative Strategies Fund (“Alternative Strategies Fund”) seeks to achieve long-term returns with lower risk and lower volatility than the stock market, and with relatively low correlation to stock and bond market indexes by using the combined talents and favorite stock and bond market indexes-picking ideas of five highly regarded portfolio managers. The Alternative Strategies Fund offers two classes of shares: Institutional Class and Investor Class shares. The Investor Class shares charge a 0.25% 12b-1 distribution fee to the shareholders of this class (see Note 4).
PartnerSelect High Income Alternatives Fund (“High Income Alternatives Fund”) seeks to generate a high level of current income from diverse sources, consistent with capital preservation over time, with capital appreciation a secondary objective, by using the combined talents and favorite stock and bond market indexes-picking ideas of four highly regarded portfolio managers. The High Income Alternatives Fund offers two classes of shares: Institutional Class and Investor Class shares. The Investor Class shares charge a 0.25% 12b-1 distribution fee to the shareholders of this class (see Note 4).
Note 2 – Significant Accounting Policies
The following is a summary of the significant accounting policies followed by the Funds. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
A | Accounting Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. |
The Funds are investment companies and accordingly follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 Financial Services – Investment Companies.
B | Security Valuation. Investments in securities and derivatives traded on a national securities exchange are valued at the last reported sales price at the close of regular trading on each day that the exchanges are open for trading. Securities listed on the NASDAQ Global Market, the NASDAQ Global Select Market and the NASDAQ Capital Market are valued using the NASDAQ Official Closing Price. Securities traded on an exchange for which there have been no sales are valued at the mean between the closing bid and asked prices. Debt securities maturing within 60 days or less are valued at amortized cost unless the Valuation Committee determines that amortized cost does not represent fair value. Securities for which market prices are not readily available or if a security’s value has materially changed after the close of the security’s primary market but before the close of trading on the New York Stock Exchange (“NYSE”), the securities are valued at fair value as determined in good faith by the Managers that selected the security for the Funds’ portfolio and the Trust’s Valuation Committee in accordance with procedures approved by the Board of Trustees (the “Board”). In determining fair value, the Funds take into account all relevant factors and available information. Consequently, the price of the security used by a Fund to calculate its net asset value may differ from quoted or published prices for the same security. Fair value pricing involves subjective judgments and there is no single standard for determining the fair value of a security. As a result, different |
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mutual funds could reasonably arrive at a different value for the same security. For securities that do not trade during NYSE hours, fair value determinations are based on analyses of market movements after the close of those securities’ primary markets, and include reviews of developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. Pricing services are used to obtain closing market prices and to compute certain fair value adjustments utilizing computerized pricing models. It is possible that the fair value determined for a security is materially different from the value that could be realized upon the sale of that security or from the values that other mutual funds may determine. |
Investments in other funds are valued at their respective net asset values as determined by those funds in accordance with the 1940 Act.
Debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Funds’ pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the date that the values of the foreign debt securities are determined. Repurchase agreements are valued at cost, which approximates fair value.
Certain derivatives trade in the over-the-counter market. The Funds’ pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Funds’ net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.
The Funds have procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Funds primarily employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Funds may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
C | Senior Term Loans. The Alternative Strategies Fund and the High Income Alternatives Fund may invest in bank debt, which includes interests in loans to companies or their affiliates undertaken to finance a capital restructuring or in connection with recapitalizations, acquisitions, leveraged buyouts, refinancings or other financially leveraged transactions and may include loans which are designed to provide temporary or bridge financing to a borrower pending the sale of identified assets, the arrangement of longer-term loans or the issuance and sale of debt obligations. These loans, which may bear fixed or floating rates, have generally been arranged through private negotiations between a corporate borrower and one or more financial institutions (“Lenders”), including banks. The Alternative Strategies Fund’s and the High Income Alternatives Fund’s investments may be in the form of participations in loans (“Participations”) or of assignments of all or a portion of loans from third parties (“Assignments”). |
D | Unfunded Loan Commitments. The Alternative Strategies Fund and the High Income Alternatives Fund may enter into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. These commitments, if any, are disclosed in the Schedule of Investments. |
E | Short Sales. Each Fund may sell a security it does not own in anticipation of a decline in the fair value of that security. When each Fund sells a security short, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale. In addition, cash and certain investments in securities may be used to collateralize the securities sold short. Each day the securities sold short transaction is open, the liability to replace the borrowed security is marked to market and an unrealized gain or loss is recorded. While the transaction remains open, the Fund may also incur expenses for any dividends or interest which will be paid to the lender of the securities as well as a fee to borrow the delivered security. During the term of the short sale, the value of the securities pledged as collateral on short sales is required to exceed the value of the securities sold short. A gain, limited to the price at which each Fund sold the security short, or a loss, unlimited in size, will be recognized upon the termination of a short sale. Each Fund is also subject to the risk that it may be unable to reacquire a security to terminate a short position except at a price substantially in excess of the last quoted price. |
F | Repurchase Agreements. Each Fund may enter into repurchase agreements through which the Fund acquires a security (the “underlying security”) from a seller, a well-established securities dealer or a bank that is a member of the Federal Reserve System. The bank or securities dealer agrees to repurchase the underlying security at the same price, plus a specified amount of interest, at a later |
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date, generally for a period of less than one week. It is the Trust’s policy that its Custodian takes possession of securities as collateral under repurchase agreements and to determine on a daily basis that the value of such securities, including recorded interest, is sufficient to cover the value of the repurchase agreements. The Trust’s policy states that the value of the collateral is at least 102% of the value of the repurchase agreement. If the counterparty defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the counterparty of the security, realization of the collateral by a Fund may be delayed or limited. At June 30, 2020, the Funds’ ongoing exposure to the economic return on repurchase agreements is shown on the Schedules of Investments. |
G | Reverse repurchase agreements. The High Income Alternatives Fund may enter into reverse repurchase agreements with banks and brokers to enhance return. Under a reverse repurchase agreement a Fund sells portfolio assets subject to an agreement by that Fund to repurchase the same assets at an agreed upon price and date. The Fund can use the proceeds received from entering into a reverse repurchase agreement to make additional investments, which generally causes the Fund’s portfolio to behave as if it were leveraged. If the buyer in a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Fund may be unable to recover the securities it sold and as a result may realize a loss on the transaction if the securities it sold are worth more than the purchase price it originally received from the buyer. Reverse repurchase agreements outstanding at the end of the period, if any, are shown on the Schedules of Investments. Cash received in exchange for securities transferred under reverse repurchase agreements are reflected as reverse repurchase agreements on the Statements of Assets and Liabilities. |
H | Foreign Currency Translation. The Funds’ records are maintained in U.S. dollars. The value of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the reporting period. The currencies are translated into U.S. dollars by using the exchange rates quoted at the close of the London Stock Exchange prior to when each Fund’s net asset value is next determined. Purchases and sales of investment securities, income and expenses are translated on the respective dates of such transactions. |
The Funds do not isolate that portion of their net realized and unrealized gains and losses on investments resulting from changes in foreign exchange rates from the impact arising from changes in market prices. Such fluctuations are included with net realized and unrealized gain or loss from investments.
Net realized foreign currency transaction gains and losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the differences between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency transactions gains and losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in the exchange rates.
I | Forward Foreign Currency Exchange Contracts. The Funds may utilize forward foreign currency exchange contracts (“forward contracts”) under which they are obligated to exchange currencies on specified future dates at specified rates, and are subject to foreign exchange rates fluctuations. All contracts are “marked-to-market” daily and any resulting unrealized gains or losses are recorded as unrealized appreciation or depreciation on foreign currency transactions. The Funds record realized gains or losses at the time the forward contract is settled. These gains and losses are reflected on the Statements of Operations as realized gain (loss) on foreign currency transactions. Counterparties to these forward contracts are major U.S. financial institutions (see Note 7). |
J | Futures Contracts. The Alternative Strategies Fund and the High Income Alternatives Fund invest in financial futures contracts primarily for the purpose of hedging their existing portfolio securities, or securities that the Funds intend to purchase, against fluctuations in fair value caused by changes in prevailing market interest rates. Upon entering into a financial futures contract, a Fund is required to pledge to the broker an amount of cash, U.S. government securities, or other assets, equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as variation margin, are made or received by a Fund each day, depending on the daily fluctuations in the fair value of the underlying security. Each Fund recognizes a gain or loss equal to the daily variation margin. If market conditions move unexpectedly, a Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates, and the underlying hedged assets (see Note 7). |
K | Interest Rate Swaps. During the period ended June 30, 2020, the Alternative Strategies Fund and the High Income Alternatives Fund invested in interest rate swaps. An interest rate swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals, based upon or calculated by reference to changes in interest rates on a specified notional principal amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other. Bilateral swap contracts are agreements in which a Fund and a counterparty agree to exchange periodic payments on a specified notional amount or make a net payment upon termination. Bilateral swap transactions are privately negotiated in the OTC market and payments are settled through direct payments between a Fund and the counterparty. By contrast, certain swap transactions are subject to mandatory central clearing. These swaps are executed through a derivatives clearing member (“DCM”), acting in an agency capacity, and submitted to a central counterparty (“CCP”) (“centrally cleared swaps”), in which case all payments are settled with the CCP through |
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the DCM. Swaps are marked-to-market daily using pricing vendor quotations, counterparty or clearinghouse prices or model prices, and the change in value, if any, is recorded as an unrealized gain or loss. Upon entering into a swap contract, a Fund is required to satisfy an initial margin requirement by delivering cash or securities to the counterparty (or in some cases, segregated in a triparty account on behalf of the counterparty), which can be adjusted by any mark-to-market gains or losses pursuant to bilateral or centrally cleared arrangements. For centrally cleared swaps the daily change in valuation, and upfront payments, if any, are recorded as a receivable or payable for variation margin on the Statements of Assets and Liabilities (see Note 7). |
L | Credit Default Swaps. During the period ended June 30, 2020, the Alternative Strategies Fund and the High Income Alternatives Fund entered into credit default swaps to manage their exposure to the market or certain sectors of the market, to reduce their risk exposure to defaults of corporate issuers or indexes or to create exposure to corporate issuers or indexes to which they are not otherwise exposed. In a credit default swap, the protection buyer makes a stream of payments based on a fixed percentage applied to the contract notional amount to the protection seller in exchange for the right to receive a specified return upon the occurrence of a defined credit event on the reference obligation which may be either a single security or a basket of securities issued by corporate or sovereign issuers. Although contract-specific, credit events are generally defined as bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium. Upon the occurrence of a defined credit event, the difference between the value of the reference obligation and the swap’s notional amount is recorded as realized gain (for protection written) or loss (for protection sold) in the Statements of Operations. In the case of credit default swaps where a Fund is selling protection, the notional amount approximates the maximum loss (see Note 7). For centrally cleared swaps the daily change in valuation, and upfront payments, if any, are recorded as a receivable or payable for variation margin on the Statements of Assets and Liabilities (see Note 7). |
M | Total Return Swaps. During the period ended June 30, 2020, the Alternative Strategies Fund and the High Income Alternatives Fund invested in total return swaps. Total return swap is the generic name for any non-traditional swap where one party agrees to pay the other the “total return” of a defined underlying asset, usually in return for receiving a stream of London Interbank Offered Rate (“LIBOR”) based cash flows. A total return swap may be applied to any underlying asset but is most commonly used with equity indices, single stocks, bonds and defined portfolios of loans and mortgages. Total return swap is a mechanism for the user to accept the economic benefits of asset ownership without utilizing the Statement of Assets and Liabilities. The other leg of the swap, usually LIBOR, is a spread to reflect the non-Statement of Assets and Liabilities nature of the product. No notional amounts are exchanged with total return swaps. The total return receiver assumes the entire economic exposure—that is, both market and credit exposure—to the reference asset. The total return payer—often the owner of the reference obligation—gives up economic exposure to the performance of the reference asset and in return takes on counterparty credit exposure to the total return receiver in the event of a default or fall in value of the reference asset (see Note 7). |
N | Purchasing Put and Call Options. Each Fund may purchase covered “put” and “call” options with respect to securities which are otherwise eligible for purchase by a Fund and with respect to various stock indices subject to certain restrictions. Each Fund will engage in trading of such derivative securities primarily for hedging purposes. |
If a Fund purchases a put option, a Fund acquires the right to sell the underlying security at a specified price at any time during the term of the option (for “American-style” options) or on the option expiration date (for “European-style” options). Purchasing put options may be used as a portfolio investment strategy when a portfolio manager perceives significant short-term risk but substantial long-term appreciation for the underlying security. The put option acts as an insurance policy, as it protects against significant downward price movement while it allows full participation in any upward movement. If a Fund is holding a stock which it feels has strong fundamentals, but for some reason may be weak in the near term, a Fund may purchase a put option on such security, thereby giving itself the right to sell such security at a certain strike price throughout the term of the option. Consequently, a Fund will exercise the put only if the price of such security falls below the strike price of the put. The difference between the put’s strike price and the market price of the underlying security on the date a Fund exercises the put, less transaction costs, will be the amount by which a Fund will be able to hedge against a decline in the underlying security. If during the period of the option the market price for the underlying security remains at or above the put’s strike price, the put will expire worthless, representing a loss of the price a Fund paid for the put, plus transaction costs. If the price of the underlying security increases, the profit a Fund realizes on the sale of the security will be reduced by the premium paid for the put option less any amount for which the put may be sold.
If a Fund purchases a call option, it acquires the right to purchase the underlying security at a specified price at any time during the term of the option. The purchase of a call option is a type of insurance policy to hedge against losses that could occur if a Fund has a short position in the underlying security and the security thereafter increases in price. Each Fund will exercise a call option only if the price of the underlying security is above the strike price at the time of exercise. If during the option period the market price for the underlying security remains at or below the strike price of the call option, the option will expire worthless, representing a loss of the price paid for the option, plus transaction costs. If the call option has been purchased to hedge a short position of a Fund in the underlying security and the price of the underlying security thereafter falls, the profit a Fund realizes on the cover of the short position in the security will be reduced by the premium paid for the call option less any amount for which such option may be sold.
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Prior to exercise or expiration, an option may be sold when it has remaining value by a purchaser through a “closing sale transaction,” which is accomplished by selling an option of the same series as the option previously purchased. Each Fund generally will purchase only those options for which a Manager believes there is an active secondary market to facilitate closing transactions (see Note 7).
Writing Call Options. Each Fund may write covered call options. A call option is “covered” if a Fund owns the security underlying the call or has an absolute right to acquire the security without additional cash consideration (or, if additional cash consideration is required, cash or cash equivalents in such amount as are held in a segregated account by the Custodian). The writer of a call option receives a premium and gives the purchaser the right to buy the security underlying the option at the exercise price. The writer has the obligation upon exercise of the option to deliver the underlying security against payment of the exercise price during the option period. If the writer of an exchange-traded option wishes to terminate his obligation, he may effect a “closing purchase transaction.” This is accomplished by buying an option of the same series as the option previously written. A writer may not effect a closing purchase transaction after it has been notified of the exercise of an option.
Effecting a closing transaction in the case of a written call option will permit a Fund to write another call option on the underlying security with either a different exercise price, expiration date or both. Also, effecting a closing transaction will permit the cash or proceeds from the concurrent sale of any securities subject to the option to be used for other investments of a Fund. If a Fund desires to sell a particular security from its portfolio on which it has written a call option, it will effect a closing transaction prior to or concurrent with the sale of the security.
Each Fund will realize a gain from a closing transaction if the cost of the closing transaction is less than the premium received from writing the option or if the proceeds from the closing transaction are more than the premium paid to purchase the option. Each Fund will realize a loss from a closing transaction if the cost of the closing transaction is more than the premium received from writing the option or if the proceeds from the closing transaction are less than the premium paid to purchase the option. However, because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss to a Fund resulting from the repurchase of a call option is likely to be offset in whole or in part by appreciation of the underlying security owned by a Fund (see Note 7).
Writing Put Options. Each Fund may write put options. By writing put options, the Fund takes on the risk of declines in the value of the underlying instrument, including the possibility of a loss up to the entire strike price of each option it sells, but without the corresponding opportunity to benefit from potential increases in the value of the underlying instrument. When the Fund writes a put option, it assumes the risk that it must purchase the underlying instrument at a strike price that may be higher than the market price of the instrument. If there is a broad market decline and the Fund is able to close out its written put options, it may result in substantial losses to the Fund.
Risks of Investing in Options. There are several risks associated with transactions in options on securities. Options may be more volatile than the underlying instruments and, therefore, on a percentage basis, an investment in options may be subject to greater fluctuation than an investment in the underlying instruments themselves. There are also significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objective. In addition, a liquid secondary market for particular options may be absent for reasons which include the following: there may be insufficient trading interest in certain options; restrictions may be imposed by an exchange on opening transactions or closing transactions or both; trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of option of underlying securities; unusual or unforeseen circumstances may interrupt normal operations on an exchange; the facilities of an exchange or clearing corporation may not at all times be adequate to handle current trading volume; or one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms.
A decision as to whether, when and how to use options involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events. The extent to which a Fund may enter into options transactions may be limited by the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to qualification of a Fund as a regulated investment company.
O | Distributions to Shareholders. Distributions paid to shareholders are recorded on the ex-dividend date. Net realized gains from securities transactions (if any) are generally distributed annually to shareholders. The amount of dividends and distributions from net investment income and net realized capital gains is determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. To the extent these “book/tax” differences are permanent in nature (i.e., that they result from other than timing of recognition – “temporary differences”), such amounts are reclassified within the capital accounts based on their federal tax-basis. |
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P | Federal Income Taxes. The Funds intend to comply with the requirements of Subchapter M of the Code applicable to regulated investment companies and to distribute all of their taxable income to their shareholders. Accordingly, no provisions for federal income taxes are required. The Funds have reviewed the tax positions, taken on federal income tax returns, for each of the three open tax years (as applicable) and as of December 31, 2019, and have determined that no provision for income tax is required in the Funds’ financial statements. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expenses in the Statements of Operations. During the period ended June 30, 2020, the Funds did not incur any interest or penalties. Foreign securities held by the Funds may be subject to foreign taxation on dividend and interest income received. Foreign taxes, if any, net of any reclaims, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Funds’ invest. |
Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country’s tax treaty with the United States. The foreign withholding rates applicable to a Fund’s investments in certain jurisdictions may be higher if a significant portion of the Fund is held by non-U.S. shareholders. Each Fund may be subject to taxation on realized capital gains, repatriation proceeds and other transaction-based charges imposed by certain countries in which it invests. Taxes related to capital gains realized during the period ended June 30, 2020, if any, are reflected as part of net realized gain (loss) in the Statements of Operations.
Changes in tax liabilities related to capital gain taxes on unrealized investment gains, if any, are reflected as part of change in net unrealized appreciation (depreciation) in the Statements of Operations. Transaction-based charges are generally calculated as a percentage of the transaction amount.
The Funds may have previously filed for and/or may file for additional tax refunds with respect to certain taxes withheld by certain countries. Generally, the amount of such refunds that a Fund reasonably determines are collectible and free from significant contingencies are reflected in a Fund’s net asset value and are reflected as foreign tax reclaims receivable in the Statements of Assets and Liabilities. In certain circumstances, a Fund’s receipt of such refunds may cause the Fund and/or its shareholders to be liable for U.S. federal income taxes and interest charges.
Foreign taxes paid by each Fund may be treated, to the extent permissible by the Code (and other applicable U.S. federal tax guidance) and if that Fund so elects, as if paid by U.S. shareholders of that Fund.
Q | Security Transactions, Dividend and Interest Income and Expenses. Security transactions are accounted for on the trade date. Realized gains and losses on securities transactions are reported on an identified cost basis. Dividend income and, where applicable, related foreign tax withholding expenses are recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Purchase discounts and premiums on fixed-income securities are accreted and amortized to maturity using the effective interest method and reflected within interest income on the Statements of Operations. Many expenses of the Trust can be directly attributed to a specific Fund. Each Fund is charged for expenses directly attributed to it. Expenses that cannot be directly attributed to a specific Fund are allocated among the Funds in the Trust in proportion to their respective net assets or other appropriate method. Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses. Class specific expenses, such as 12b-1 expenses, are directly attributed to that specific class. |
R | Restricted Cash. At June 30, 2020, the Alternative Strategies Fund and the High Income Alternatives Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Alternative Strategies Fund’s and the High Income Alternatives Fund’s Custodian as well as with brokers and is reflected in the Statements of Assets and Liabilities as deposits at brokers for securities sold short, futures, options, and swaps. Restrictions may include legally restricted deposits held as compensating balances against short-term borrowing arrangements or contracts entered into with others. |
The Funds consider their investment in an Federal Deposits Insurance Corporation (“FDIC”) insured interest bearing savings account to be cash. The Funds maintain cash balances, which, at times, may exceed federally insured limits. The Funds maintain these balances with a high quality financial institution.
S | Restricted Securities. A restricted security cannot be resold to the general public without prior registration under the Securities Act of 1933. If the security is subsequently registered and resold, the issuers would typically bear the expense of all registrations at no cost to the Fund. Restricted securities are valued according to the guidelines and procedures adopted by the Funds’ Board of Trustees. As of June 30, 2020, there were no restricted securities held in the Funds. |
T | Illiquid Securities. Each Fund may not invest more than 15% of the value of its net assets in illiquid securities, including restricted securities that are not deemed to be liquid by the Sub-Advisors. The Advisor and the Sub-Advisors will monitor the amount of illiquid securities in a Fund’s portfolio, under the supervision of the Board, to ensure compliance with a Fund’s investment restrictions. In accordance with procedures approved by the Board, these securities may be valued using techniques other than market quotations, and the values established for these securities may be different than what would be produced through the use of another methodology or if they had been priced using market quotations. Illiquid securities and other portfolio securities that are valued using techniques other than market quotations, including “fair valued” securities, may be subject to greater fluctuation in their value from |
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one day to the next than would be the case if market quotations were used. In addition, there is no assurance that a Fund could sell a portfolio security for the value established for it at any time, and it is possible that a Fund would incur a loss because a portfolio security is sold at a discount to its established value. |
U | Indemnification Obligations. Under the Trust’s organizational documents, its current and former officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties that provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred or that would be covered by other parties. |
Note 3 – Investment Advisory and Other Agreements
The Trust, on behalf of the Funds, entered into an Investment Advisory Agreement (the “Agreement”) with Litman Gregory Fund Advisors, LLC (the “Advisor”). Under the terms of the Agreement, each Fund pays a monthly investment advisory fee to the Advisor at the annual rate below of the respective Fund’s average daily net assets before any fee waivers:
Contractual Management Rate | ||||||||||||||||||||||||||||||||||||||||||||
Fund | First $450 million | Excess of $450 million | First $750 million | Excess of $750 million | First $1 billion | Excess of $1 billion | Between $1 and $2 billion | First $2 billion | Between $2 and $3 billion | Between $3 and $4 billion | Excess of $4 billion | |||||||||||||||||||||||||||||||||
Equity | — | — | 1.10 | % | 1.00 | % | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
International | — | — | — | — | 1.10 | % | 1.00 | % | — | — | — | — | — | |||||||||||||||||||||||||||||||
Smaller Companies | 1.14 | % | 1.04 | % | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Alternative Strategies | — | — | — | — | — | — | — | 1.40 | % | 1.30 | % | 1.25 | % | 1.20 | % | |||||||||||||||||||||||||||||
High Income Alternatives | — | — | — | — | 0.95 | % | — | 0.925 | % | — | 0.90 | % | 0.875 | % | 0.85 | % |
The Advisor engages sub-advisors to manage the Funds and pays the sub-advisors from its advisory fees.
Through April 30, 2021, the Advisor has contractually agreed to waive a portion of its advisory fees effectively reducing total advisory fees to approximately 0.99% of the average daily net assets of the Equity Fund, 0.87% of the average daily net assets of the International Fund, 0.72% of the average daily net assets of the Smaller Companies Fund, 1.12% of the average daily net assets of the Alternative Strategies Fund, and 0.80% of the average daily net assets of the High Income Alternatives Fund. Additionally, the Advisor has voluntarily agreed to waive its management fee on the daily cash values of the Funds not allocated to Managers. For the six months ended June 30, 2020, the amount waived, contractual and voluntary, was $134,262, $352,559, $45,177, $2,261,294, and $237,795 for Equity Fund, International Fund, Smaller Companies Fund, Alternative Strategies Fund, and High Income Alternatives Fund, respectively. The Advisor has agreed not to seek recoupment of such waived fees. Through April 30, 2021, the Advisor has contractually agreed to waive a portion of its advisory fees and/or reimburse a portion of the High Income Alternatives Fund’s operating expenses (excluding any taxes, interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, borrowing costs, (including commitment fees), dividend expenses, acquired fund fees and expenses and extraordinary expenses such as but not limited to litigation costs) to ensure that the total annual fund operating expenses after fee waiver and/or expense reimbursement for the Institutional and Investor Classes will not exceed 0.98% and 1.23% of the average daily net assets, respectively. During the six months ended June 30, 2020, the amount waived contractually pursuant to an Expense Limitation Agreement was $172,765 for the High Income Alternatives Fund. The Advisor may be reimbursed by the Fund no later than the end of the third fiscal year following the year of the waiver provided that such reimbursement does not cause the Fund’s expenses to exceed the expense limitation. The Advisor is waiving its right to recoup these fees and any fees waived in prior years.
State Street Bank and Trust Company (“State Street”) serves as the Administrator, Custodian and Fund Accountant to the Funds.
DST Asset Manager Solutions, Inc. (“DST”) serves as the Funds’ Transfer Agent. The Funds’ principal underwriter is ALPS Distributors, Inc.
An employee of the Advisor serves as the Funds’ Chief Compliance Officer (“CCO”). The CCO receives no compensation from the Funds for his services, however, the Funds reimbursed the Advisor $34,120 for the six months ended June 30, 2020 for the services of the CCO.
Loomis Sayles & Company, L.P. used their respective affiliated entity for purchases and sales of the Alternative Strategies Fund’s portfolio securities for the six months ended June 30, 2020. There was no commissions paid for these transactions.
Wells Capital Management, Inc. used their respective affiliated entity for purchases of the Equity Fund and Smaller Companies Fund’s portfolio securities for the six months ended June 30, 2020. There was no commissions paid for these transactions.
Notes to Financial Statements | 131 |
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NOTES TO FINANCIAL STATEMENTS – (Unaudited) – (Continued)
During the six months ended June 30, 2020, each independent Trustee, within the meaning of the 1940 Act, was compensated by the Trust in the amount of $50,000.
Certain officers and Trustees of the Trust are also officers of the Advisor.
Note 4 – Distribution Plan
Certain Funds have adopted a Plan of Distribution (the “Plan”) dated February 25, 2009, as amended, pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Investor Classes of the Alternative Strategies Fund and High Income Alternatives Fund will compensate broker dealers or qualified institutions with whom each Fund has entered into a contract to distribute Fund shares (“Dealers”). Under the Plan, the amount of such compensation paid in any one year shall not exceed 0.25% annually of the average daily net assets of the Investor Classes, which may be payable as a service fee for providing recordkeeping, subaccounting, subtransfer agency and/or shareholder liaison services. For the six months ended June 30, 2020, the Alternative Strategies, and High Income Funds’ Investor Classes incurred $141,111, and $1,364, respectively, pursuant to the Plan.
The Plan will remain in effect from year to year provided such continuance is approved at least annually by a vote either of a majority of the Trustees, including a majority of the non-interested Trustees, or a majority of each Fund’s outstanding shares.
Note 5 – Investment Transactions
The cost of securities purchased and the proceeds from securities sold for the six months ended June 30, 2020, excluding short-term investments and U.S. government obligations, were as follows:
Fund | Purchases | Sales | ||||||
Equity Fund | $ | 67,391,013 | $ | 97,603,086 | ||||
International Fund | 127,424,896 | 157,900,499 | ||||||
Smaller Companies Fund | 11,926,528 | 14,325,350 | ||||||
Alternative Strategies Fund | 1,035,760,371 | 1,152,174,894 | ||||||
High Income Alternatives Fund | 58,105,362 | 54,945,571 |
During the six months ended June 30, 2020, there were several sales transactions made in accordance with the established procedures pursuant to Rule 17a-7 (the exemption of certain purchase or sale transactions between an investment company and certain affiliated persons thereof), arranged by DCI, LLC, on behalf of the Alternative Strategies Fund. The total of such sales transactions were $24,036,385.
During the six months ended June 30, 2020, there were several purchases and sales transactions made in accordance with the established procedures pursuant to Rule 17a-7 (the exemption of certain sale transactions between an investment company and certain affiliated persons thereof), arranged by Guggenheim Partners Investment Management, LLC, on behalf of the High Income Alternatives Fund. The total of such purchases transactions were $88,088, and sales transactions were $449,175.
Note 6 – Fair Value of Financial Investments
The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of each Fund’s investments and are summarized in the following fair value hierarchy:
Level 1 – | Quoted prices in active markets for identical securities. |
Level 2 – | Other significant observable inputs (including quoted prices for similar securities, interest rates, foreign exchange rates, and fair value estimates for foreign securities indices). |
Level 3 – | Significant unobservable inputs (including the Funds’ own assumptions in determining fair value of investments). |
Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. Treasury obligations, U.S. Treasury inflation protected securities, sovereign issues, bank loans, convertible preferred securities and non-U.S. bonds are normally valued on the basis of quotes obtained from brokers and dealers or independent pricing services or sources. Independent pricing services typically use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. The service providers’ internal models use inputs that are observable such as, among other things, issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Mortgage and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These securities are also normally valued by pricing service providers that use broker dealer quotations or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche-level attributes, estimated cash flows and market-based yield spreads for each tranche, current market data and incorporates deal collateral performance, as available.
132 | Litman Gregory Funds Trust |
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Stripped mortgage-backed securities are usually structured with two different classes: one that receives substantially all interest payments (interest-only, or “IO” and/or high coupon rate with relatively low principal amount, or “IOette”), and the other that receives substantially all principal payments (principal-only, or “PO”) from a pool of mortgage loans. Little to no principal will be received at the maturity of an IO; as a result, periodic adjustments are recorded to reduce the cost of the security until maturity. These adjustments are included in interest income.
Mortgage and asset-backed securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Shares of the unregistered Underlying Funds are valued at their closing net asset value (“NAV”) as reported on each business day, as a practical expedient for fair value. Each of the unregistered Underlying Funds is daily valued and offer daily liquidity and hold no unfunded commitments. The shares of the open-end registered Underlying Funds are valued at NAV each business day. If the Underlying Funds’ designated representative to the Trustee determines, based on its own due diligence and investment monitoring procedures, that the reported NAV per share does not represent fair value, Underlying Funds’ designated representative to the Trustee shall estimate the fair value of the Underlying Funds in good faith and in a manner that it reasonably chooses.
Financial derivative instruments, such as foreign currency contracts, options contracts, futures, or swap agreements, derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. These contracts are normally valued on the basis of broker dealer quotations or pricing service providers at the settlement price determined by the relevant exchange. Depending on the product and the terms of the transaction, the value of the derivative contracts can be estimated by a pricing service provider using a series of techniques, including simulation pricing models. The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest rates, curves, dividends and exchange rates. Derivatives that use similar valuation techniques and inputs as described above are categorized as Level 1 or Level 2 of the fair value hierarchy.
The following tables provide the fair value measurements of applicable Fund assets and liabilities by level within the fair value hierarchy for each Fund as of June 30, 2020. These assets and liabilities are measured on a recurring basis.
Equity Fund
Description | Level 1 - Quoted prices in active markets for identical assets | Level 2 - Significant other observable inputs | Level 3 - Significant unobservable inputs | Total | ||||||||||||
Equity(a) | ||||||||||||||||
Common Stocks | $ | 214,900,440 | $ | — | $ | — | $ | 214,900,440 | ||||||||
Preferred Stock | 3,285,946 | — | — | 3,285,946 | ||||||||||||
|
| |||||||||||||||
Total Equity | 218,186,386 | — | — | 218,186,386 | ||||||||||||
|
| |||||||||||||||
Short-Term Investments | ||||||||||||||||
Repurchase Agreements | — | 6,566,000 | — | 6,566,000 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 218,186,386 | $ | 6,566,000 | $ | — | $ | 224,752,386 | ||||||||
|
|
(a) | See Fund’s Schedule of Investments in Securities for sector classifications. |
Notes to Financial Statements | 133 |
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International Fund
Description | Level 1 - Quoted prices in active markets for identical assets | Level 2 - Significant other observable inputs | Level 3 - Significant unobservable inputs | Total | ||||||||||||
Equity | ||||||||||||||||
Common Stocks | ||||||||||||||||
Australia | $ | — | $ | 3,581,916 | $ | — | $ | 3,581,916 | ||||||||
Austria | — | 5,113,450 | — | 5,113,450 | ||||||||||||
Belgium | — | 5,965,940 | — | 5,965,940 | ||||||||||||
Bermuda | 5,517,439 | 4,747,140 | — | 10,264,579 | ||||||||||||
Canada | 3,723,095 | — | — | 3,723,095 | ||||||||||||
Cayman Islands | 6,151,360 | — | — | 6,151,360 | ||||||||||||
Denmark | — | 3,448,272 | — | 3,448,272 | ||||||||||||
Finland | — | 5,999,569 | — | 5,999,569 | ||||||||||||
France | 1,598,676 | 46,714,291 | — | 48,312,967 | ||||||||||||
Germany | — | 10,799,068 | — | 10,799,068 | ||||||||||||
Ireland | 3,129,855 | — | — | 3,129,855 | ||||||||||||
Israel | — | 5,714,958 | — | 5,714,958 | ||||||||||||
Japan | — | 35,960,096 | — | 35,960,096 | ||||||||||||
Mexico | 4,731,437 | — | — | 4,731,437 | ||||||||||||
Monaco | 2,491,211 | — | — | 2,491,211 | ||||||||||||
Netherlands | — | 18,679,522 | — | 18,679,522 | ||||||||||||
Norway | — | 2,266,388 | — | 2,266,388 | ||||||||||||
South Africa | — | 3,194,798 | — | 3,194,798 | ||||||||||||
South Korea | — | 1,015,930 | — | 1,015,930 | ||||||||||||
Spain | — | 6,906,686 | 1,805,397 | ** | 8,712,083 | |||||||||||
Sweden | — | 14,948,604 | — | 14,948,604 | ||||||||||||
Switzerland | — | 17,306,707 | — | 17,306,707 | ||||||||||||
United Kingdom | — | 41,345,301 | — | 41,345,301 | ||||||||||||
United States | 2,093,042 | — | — | 2,093,042 | ||||||||||||
|
| |||||||||||||||
Total Equity | 29,436,115 | 233,708,636 | 1,805,397 | ** | 264,950,148 | |||||||||||
|
| |||||||||||||||
Short-Term Investments | ||||||||||||||||
Repurchase Agreements | — | 3,559,000 | — | 3,559,000 | ||||||||||||
|
| |||||||||||||||
Total Short-Term Investments | — | 3,559,000 | — | 3,559,000 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 29,436,115 | $ | 237,267,636 | $ | 1,805,397 | ** | $ | 268,509,148 | |||||||
|
| |||||||||||||||
Other Financial Instruments* | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | $ | (3,015 | ) | $ | — | $ | — | $ | (3,015 | ) |
* | Other financial instruments are derivative instruments, such as futures, forward foreign currency exchange, swaps contracts and written options. Futures, forward foreign currency exchange and swap contracts are valued at the unrealized appreciation (depreciation) on the instrument, while written options are valued at fair value. |
** | Significant unobservable inputs were used in determining the value of portfolio securities for the International Fund. |
Smaller Companies Fund
Description | Level 1 - Quoted prices in active markets for identical assets | Level 2 - Significant other observable inputs | Level 3 - Significant unobservable inputs | Total | ||||||||||||
Equity(a) | ||||||||||||||||
Common Stocks | $ | 17,465,327 | $ | — | $ | — | $ | 17,465,327 | ||||||||
|
| |||||||||||||||
Total Equity | 17,465,327 | — | — | 17,465,327 | ||||||||||||
|
| |||||||||||||||
Short-Term Investments | ||||||||||||||||
Repurchase Agreements | — | 1,511,000 | — | 1,511,000 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 17,465,327 | $ | 1,511,000 | $ | — | $ | 18,976,327 | ||||||||
|
|
(a) | See Fund’s Schedule of Investments in Securities for sector classifications. |
134 | Litman Gregory Funds Trust |
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Alternative Strategies Fund
Description | Level 1 - Quoted prices in active markets for identical assets | Level 2 - Significant other observable inputs | Level 3 - Significant unobservable inputs | Total | ||||||||||||
Equity(a) | ||||||||||||||||
Common Stocks | $ | 417,096,158 | $ | 5,808,026 | $ | 2,766,380 | ** | $ | 425,670,564 | |||||||
Limited Partnerships | — | — | 896,626 | ** | 896,626 | |||||||||||
Preferred Stocks | 1,835,808 | — | 213,350 | ** | 2,049,158 | |||||||||||
|
| |||||||||||||||
Total Equity | 418,931,966 | 5,808,026 | 3,876,356 | ** | 428,616,348 | |||||||||||
|
| |||||||||||||||
Rights/Warrants | 427,871 | 21,227 | — | 449,098 | ||||||||||||
Fixed Income | ||||||||||||||||
Asset-Backed Securities | — | 134,932,872 | 273,470 | ** | 135,206,342 | |||||||||||
Bank Loans | — | 27,235,829 | 3,500,741 | ** | 30,736,570 | |||||||||||
Convertible Bonds | — | 10,135,092 | — | 10,135,092 | ||||||||||||
Corporate Bonds | — | 413,626,465 | — | 413,626,465 | ||||||||||||
Government Securities & Agency Issue | — | 8,997,913 | — | 8,997,913 | ||||||||||||
Mortgage-Backed Securities | — | 271,340,652 | 1,160,507 | (1) | 272,501,159 | |||||||||||
Municipal Bonds | — | 3,304,926 | — | 3,304,926 | ||||||||||||
|
| |||||||||||||||
Total Fixed Income | — | 869,573,749 | 4,934,718 | ** | 874,508,467 | |||||||||||
|
| |||||||||||||||
Short-Term Investments | ||||||||||||||||
Treasury Bills | — | 43,882,884 | — | 43,882,884 | ||||||||||||
Repurchase Agreements | — | 115,969,000 | — | 115,969,000 | ||||||||||||
|
| |||||||||||||||
Total Short-Term Investments | — | 159,851,884 | — | 159,851,884 | ||||||||||||
|
| |||||||||||||||
Purchased Options | 38,663 | — | — | 38,663 | ||||||||||||
|
| |||||||||||||||
Investments Valued at NAV(2) | — | — | — | 1,707,999 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 419,398,500 | $ | 1,035,254,886 | $ | 8,811,074 | ** | $ | 1,465,172,459 | |||||||
|
| |||||||||||||||
Fixed Income | ||||||||||||||||
Unfunded Loan Commitments | — | 292,530 | — | 292,530 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities in Assets | $ | 419,398,500 | $ | 1,035,547,416 | $ | 8,811,074 | ** | $ | 1,465,464,989 | |||||||
|
| |||||||||||||||
Short Sales | ||||||||||||||||
Common Stocks | (62,135,800 | ) | — | — | (62,135,800 | ) | ||||||||||
Exchange-Traded Funds | (3,375,505 | ) | — | — | (3,375,505 | ) | ||||||||||
Corporate Bonds | — | (2,262,904 | ) | — | (2,262,904 | ) | ||||||||||
|
| |||||||||||||||
Total Short Sales | (65,511,305 | ) | (2,262,904 | ) | — | (67,774,209 | ) | |||||||||
|
| |||||||||||||||
Total Investments in Securities in Liabilities | $ | (65,511,305 | ) | $ | (2,262,904 | ) | $ | — | $ | (67,774,209 | ) | |||||
|
| |||||||||||||||
Other Financial Instruments* | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | $ | (175,256 | ) | $ | — | $ | — | $ | (175,256 | ) | ||||||
Futures | (352,719 | ) | — | — | (352,719 | ) | ||||||||||
Swaps - Credit Default | — | (2,342,988 | ) | — | (2,342,988 | ) | ||||||||||
Swaps - Total Return | — | 3,340,202 | — | 3,340,202 | ||||||||||||
Written Options | (21,838 | ) | — | — | (21,838 | ) |
(a) | See Fund’s Schedule of Investments in Securities for sector classifications. |
* | Other financial instruments are derivative instruments, such as futures, forward foreign currency exchange, swaps contracts and written options. Futures, forward foreign currency exchange and swap contracts are valued at the unrealized appreciation (depreciation) on the instrument, while written options are valued at fair value. |
** | Significant unobservable inputs were used in determining the value of portfolio securities for the Alternative Strategies Fund. |
(1) | These securities were priced by a pricing service; however, the Advisor/Sub-Advisor used their fair value procedures based on other available inputs which more accurately reflected the current fair value of these securities. |
(2) | As of June 30, 2020, certain of the Portfolio’s investments were valued using net asset value per unit as practical expedient (“NAV”) and have been excluded from the fair value hierarchy. |
Notes to Financial Statements | 135 |
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NOTES TO FINANCIAL STATEMENTS – (Unaudited) – (Continued)
In Alternative Strategies Fund, securities valued at $103,730 were transferred from Level 1 to Level 3 because prices were not available from approved pricing sources.
In Alternative Strategies Fund, securities valued at $427,205 were transferred from Level 2 to Level 3 due to application of a liquidity discount to vendor provided prices.
In Alternative Strategies Fund, securities valued at $2,139 were transferred from Level 2 to Level 3 because prices were not available from approved pricing sources.
In Alternative Strategies Fund, securities valued at $269,820 were transferred from Level 3 to Level 1 as prices from approved vendors became available.
High Income Alternatives Fund
Description | Level 1 - Quoted prices in active markets for identical assets | Level 2 - Significant other observable inputs | Level 3 - Significant unobservable inputs | Total | ||||||||||||
Equity(a) | ||||||||||||||||
Common Stocks | $ | 9,182,686 | $ | — | $ | — | $ | 9,182,686 | ||||||||
Preferred Stocks | 800,843 | — | — | 800,843 | ||||||||||||
Closed-End Funds | 455,061 | — | — | 455,061 | ||||||||||||
|
| |||||||||||||||
Total Equity | 10,438,590 | — | — | 10,438,590 | ||||||||||||
|
| |||||||||||||||
Fixed Income | ||||||||||||||||
Asset-Backed Securities | — | 18,775,588 | — | 18,775,588 | ||||||||||||
Bank Loans | — | 11,815,664 | 96,030 | ** | 11,911,694 | |||||||||||
Corporate Bonds | — | 19,692,732 | — | 19,692,732 | ||||||||||||
Government Securities & Agency Issue | — | 15,570,503 | — | 15,570,503 | ||||||||||||
Mortgage-Backed Securities | — | 5,298,413 | — | 5,298,413 | ||||||||||||
Municipal Bond | — | 4,904 | — | 4,904 | ||||||||||||
|
| |||||||||||||||
Total Fixed Income | — | 71,157,804 | 96,030 | ** | 71,253,834 | |||||||||||
|
| |||||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Fund | 466,353 | — | — | 466,353 | ||||||||||||
Repurchase Agreements | — | 1,611,000 | — | 1,611,000 | ||||||||||||
Treasury Bills | — | 59,927 | — | 59,927 | ||||||||||||
|
| |||||||||||||||
Total Short-Term Investments | 466,353 | 1,670,927 | — | 2,137,280 | ||||||||||||
|
| |||||||||||||||
Interest Rate Swaptions | — | 80,750 | — | 80,750 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 10,904,943 | $ | 72,909,481 | $ | 96,030 | ** | $ | 83,910,454 | |||||||
|
| |||||||||||||||
Fixed Income | ||||||||||||||||
Unfunded Loan Commitments | — | 30,001 | — | 30,001 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities in Assets | $ | 10,904,943 | $ | 72,939,482 | $ | 96,030 | ** | $ | 83,940,455 | |||||||
|
| |||||||||||||||
Reverse Repurchase Agreements | — | (2,290,668 | ) | — | (2,290,668 | ) | ||||||||||
|
| |||||||||||||||
Total Investments in Securities in Liabilities | $ | — | $ | (2,290,668 | ) | $ | — | $ | (2,290,668 | ) | ||||||
|
| |||||||||||||||
Other Financial Instruments* | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | $ | 211,212 | $ | — | $ | — | $ | 211,212 | ||||||||
Futures | (7,354 | ) | — | — | (7,354 | ) | ||||||||||
Swaps - Interest Rate | — | (137,225 | ) | — | (137,225 | ) | ||||||||||
Swaps - Credit Default | — | (17,292 | ) | — | (17,292 | ) | ||||||||||
Swaps - Total Return | — | 61,475 | — | 61,475 | ||||||||||||
Written Options | (194,078 | ) | — | — | (194,078 | ) |
(a) | See Fund’s Schedule of Investments in Securities for sector classifications. |
* | Other financial instruments are derivative instruments, such as futures, forward foreign currency exchange, swaps contracts and written options. Futures, forward foreign currency exchange and swap contracts are valued at the unrealized appreciation (depreciation) on the instrument, while written options are valued at fair value. |
** | Significant unobservable inputs were used in determining the value of portfolio securities for the High Income Alternatives Fund. |
136 | Litman Gregory Funds Trust |
Table of Contents
Litman Gregory Funds Trust
NOTES TO FINANCIAL STATEMENTS – (Unaudited) – (Continued)
In High Income Alternatives Fund, securities valued at $96,030 were transferred from Level 2 to Level 3 when pricing from approved pricing sources became unavailable.
In High Income Alternatives Fund, securities valued at $206,510 were transferred from Level 3 to Level 2 because pricing from approved pricing sources became available.
Note 7 – Other Derivative Information
At June 30, 2020, the Funds are invested in derivative contracts which are reflected in the Statements of Assets and Liabilities as follows:
International Fund | ||||||||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||||||
Risk | Statements of Assets and Liabilities Location | Fair Value Amount | Statements of Assets and Liabilities Location | Fair Value Amount | ||||||||||||||||
Currency | Unrealized gain on forward foreign currency exchange contracts | $ | — | Unrealized loss on forward foreign currency exchange contracts | $ | (3,015 | ) | |||||||||||||
|
| |||||||||||||||||||
Alternative Strategies Fund | ||||||||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||||||
Risk | Statements of Assets and Liabilities Location | Fair Value Amount | Statements of Assets and Liabilities Location | Fair Value Amount | ||||||||||||||||
Currency | Unrealized gain on forward foreign currency exchange contracts | $ | 296,553 | Unrealized loss on forward foreign currency exchange contracts | $ | (471,809 | ) | |||||||||||||
Interest rate | Unrealized gain on futures contracts* | 22,943 | Unrealized loss on futures contracts* | (375,662 | ) | |||||||||||||||
Credit | Unrealized gain on swap contracts** | 24,052,093 | Unrealized loss on swap contracts** | (26,395,081 | ) | |||||||||||||||
Equity | Unrealized gain on swap contracts | 3,340,202 | Unrealized loss on swap contracts | — | ||||||||||||||||
Investments in securities(1) | 38,663 | Written options | (21,838 | ) | ||||||||||||||||
|
| |||||||||||||||||||
Total | $ | 27,750,454 | $ | (27,264,390 | ) | |||||||||||||||
|
| |||||||||||||||||||
| * Includes cumulative appreciation/depreciation on futures contracts described previously. Only
** Includes cumulative appreciation/depreciation on centrally cleared swaps.
(1) The Statements of Assets and Liabilities location for “Purchased Options” is “Investments in |
|
Notes to Financial Statements | 137 |
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Litman Gregory Funds Trust
NOTES TO FINANCIAL STATEMENTS – (Unaudited) – (Continued)
High Income Alternatives Fund | ||||||||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||||||
Risk | Statements of Assets and Liabilities Location | Fair Value Amount | Statements of Assets and Liabilities Location | Fair Value Amount | ||||||||||||||||
Currency | Unrealized gain on forward foreign currency exchange contracts | $ | 249,048 | Unrealized loss on forward foreign currency exchange contracts | $ | (37,836 | ) | |||||||||||||
Interest rate | Unrealized gain on swap contracts | — | Unrealized loss on swap contracts** | (137,225 | ) | |||||||||||||||
Unrealized gain on futures contracts* | 310 | Unrealized loss on futures contracts* | (7,664 | ) | ||||||||||||||||
Investments in securities(1) | 80,750 | Written options | — | |||||||||||||||||
Credit | Unrealized gain on swap contracts | — | Unrealized loss on swap contracts** | (17,292 | ) | |||||||||||||||
Equity | Unrealized gain on swap contracts | 61,475 | Unrealized loss on swap contracts | — | ||||||||||||||||
Investments in securities(1) | — | Written options | (194,078 | ) | ||||||||||||||||
|
| |||||||||||||||||||
Total | $ | 391,583 | $ | (394,095 | ) | |||||||||||||||
|
| |||||||||||||||||||
| ** Includes cumulative appreciation/depreciation on centrally cleared swaps.
* Includes cumulative appreciation/depreciation on futures contracts described previously. Only
(1) The Statements of Assets and Liabilities location for “Interest Rate Swaptions” is “Investments |
|
For the six months ended June 30, 2020, the effect of derivative contracts in the Funds’ Statements of Operations were as follows:
International Fund | ||||||||||||||||||
Statements of Operations | ||||||||||||||||||
Risk | Derivative Type | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Notional Amount | ||||||||||||||
Currency | Forward foreign currency exchange contracts | $ | (543,048 | ) | $ | 793,827 | 971,948 | (a) |
(a) | Average notional values are based on the average of monthly end contract values for the period ended June 30, 2020. |
Alternative Strategies Fund | ||||||||||||||||||
Statements of Operations | ||||||||||||||||||
Risk | Derivative Type | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Notional Amount | ||||||||||||||
Currency | Forward foreign currency exchange contracts | $ | 566,706 | $ | 438,238 | 101,122,719 | (a) | |||||||||||
Interest rate | Future contracts | (6,501,617 | ) | (865,023 | ) | 300,138,417 | (b) | |||||||||||
Credit | Swap contracts | 18,744,314 | 1,970,603 | 1,606,810,408 | (b)(c) | |||||||||||||
Equity | Swap contracts | 9,338,570 | 4,322,673 | 158,040,236 | (b)(c) | |||||||||||||
Future contracts | 1,993,159 | — | 4,273,748 | (b) | ||||||||||||||
Purchased option contracts | (123,058 | ) | 115,504 | 1,270 | (d) | |||||||||||||
Written option contracts | 10,051 | (1,233 | ) | 143 | (d) | |||||||||||||
|
| |||||||||||||||||
Total | $ | 24,028,125 | $ | 5,980,762 | ||||||||||||||
|
|
(a) | Average notional values are based on the average of monthly end contract values for the period ended June 30, 2020. |
138 | Litman Gregory Funds Trust |
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NOTES TO FINANCIAL STATEMENTS – (Unaudited) – (Continued)
(b) | Average notional values are based on the average of monthly end notional balances for the period ended June 30, 2020. |
(c) | Notional amount is denoted in local currency. |
(d) | Average contracts are based on the average of monthly end contracts for the period ended June 30, 2020. |
High Income Alternatives Fund | ||||||||||||||||||
Statements of Operations | ||||||||||||||||||
Risk | Derivative Type | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Notional Amount | ||||||||||||||
Currency | Forward foreign currency exchange contracts | $ | 54,886 | $ | 185,786 | 5,308,376 | (a) | |||||||||||
Interest rate | Swap contracts | (25,728 | ) | (48,275 | ) | 2,950,000 | (b)(c) | |||||||||||
Future contracts | 17,241 | (5,464 | ) | 2,635,842 | (b) | |||||||||||||
Interest rate swaption contracts | — | 41,263 | 29,000,000 | (b) | ||||||||||||||
Credit | Swap contracts | (47,706 | ) | 63,319 | 1,951,067 | (b)(c) | ||||||||||||
Equity | Swap contracts | 30,452 | 60,962 | 452,903 | (b)(c) | |||||||||||||
Written option contracts | (1,371,811 | ) | 160,856 | 71 | (d) | |||||||||||||
|
| |||||||||||||||||
Total | $ | (1,342,666 | ) | $ | 458,447 | |||||||||||||
|
|
(a) | Average notional values are based on the average of monthly end contract values for the period ended June 30, 2020. |
(b) | Average notional values are based on the average of monthly end notional balances for the period ended June 30, 2020. |
(c) | Notional amount is denoted in local currency. |
(d) | Average contracts are based on the average of monthly end contracts for the period ended June 30, 2020. |
The Funds are subject to various Master Netting Arrangements, which govern the terms of certain transactions with select counterparties. The Master Netting Arrangements allow the Funds to close out and net their total exposure to a counterparty in the event of a default with respect to all the transactions governed under a single agreement with a counterparty. The Master Netting Arrangements also specify collateral posting arrangements at pre-arranged exposure levels. Under the Master Netting Arrangements, collateral is routinely transferred if the total net exposure to certain transactions (net of existing collateral already in place) governed under the relevant Master Netting Arrangement with a counterparty in a given account exceeds a specified threshold depending on the counterparty and the type of Master Netting Arrangement.
At June 30, 2020, Equity Fund, International Fund, Smaller Companies Fund, Alternative Strategies Fund, and High Income Alternatives Fund had investments in repurchase agreements with a gross value of $6,566,000, $3,559,000, $1,511,000, $115,969,000, and $1,611,000, respectively, which are reflected as repurchase agreements on the Statements of Assets and Liabilities. The value of the related collateral exceeded the value of the repurchase agreements at June 30, 2020.
For the period ended June 30, 2020, the High Income Alternatives Fund had outstanding reverse repurchase agreement balance for 63 days. The average amount of borrowings was $1,675,025 and the average interest rate was 1.63% during the 63 day period.
The following table summarizes open reverse repurchase agreements by counterparty which are subject to offset under MRA on a net basis as of June 30, 2020:
Counterparty | Reverse Repurchase Agreement | Collateral Pledged(1) | Net Amount(2) | |||||||||
Barclays Capital Plc | $ | (1,022,250 | ) | $ | 1,205,948 | $ | 183,698 | |||||
BMO Capital Markets Corp. | (626,778 | ) | 583,253 | (43,525 | ) | |||||||
BNP Paribas | (641,640 | ) | 641,280 | (360 | ) | |||||||
|
| |||||||||||
$ | (2,290,668 | ) | $ | 2,430,481 | $ | 139,813 | ||||||
|
|
(1) | Collateral with a value of $2,430,481 has been pledged in connection with open reverse repurchase agreements |
(2) | Net amount represents the net amount payable due to the counterparty in the event of default. |
Notes to Financial Statements | 139 |
Table of Contents
Litman Gregory Funds Trust
NOTES TO FINANCIAL STATEMENTS – (Unaudited) – (Continued)
The following table provides a breakdown of transactions accounted for as secured borrowings, the gross obligations by the type of collateral pledged, and the remaining contractual maturities of those transactions.
Remaining Contractual Maturity of the Agreements as of June 30, 2020 | ||||||||||||||||||
Overnight and Continuous | Up to 30 Days | 31- 90 Days | Greater than 90 Days | Total | ||||||||||||||
Reverse Repurchase Agreements | $ | (1,852,463 | ) | $ | (438,205 | ) | $ | (2,290,668 | ) | |||||||||
Gross amount of recognized liabilities for secured borrowing transactions |
| $ | (2,290,668 | ) |
The following tables represent the disclosure for derivative instruments related to offsetting assets and liabilities for each of the Funds as of June 30, 2020:
International Fund | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Counterparty | Purchased Options | Futures | Swaps | Forward Currency Contracts | Total | Futures | Swaps | Forward Currency Contracts | Written Options | Total | Net Derivative Asset (Liabilities) | Collateral (Received) Pledged | Net Amount | |||||||||||||||||||||||||||||||||||||||||||
State Street Bank and Trust Company | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (3,015 | ) | $ | — | $ | (3,015 | ) | $ | (3,015 | ) | $ | — | $ | (3,015 | ) | ||||||||||||||||||||||||||
|
|
Alternative Strategies Fund | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Counterparty | Purchased Options | Futures(1) | Swaps(2) | Forward Currency Contracts | Total | Futures(1) | Swaps(2) | Forward Currency Contracts | Written Options | Total | Net Derivative Asset (Liabilities) | Collateral (Received) Pledged | Net Amount | |||||||||||||||||||||||||||||||||||||||||||
Bank of America N.A. | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (378,264 | ) | $ | (75,336 | ) | $ | — | $ | (453,600 | ) | $ | (453,600 | ) | $ | — | $ | (453,600 | ) | |||||||||||||||||||||||||
Barclays Bank Plc | — | — | — | — | — | — | — | (18,661 | ) | — | (18,661 | ) | (18,661 | ) | — | (18,661 | ) | |||||||||||||||||||||||||||||||||||||||
Citigroup Global Markets, Inc. | — | 22,943 | — | — | 22,943 | (374,912 | ) | — | — | — | (374,912 | ) | (351,969 | ) | — | (351,969 | ) | |||||||||||||||||||||||||||||||||||||||
Deutsche Bank AG | — | — | — | 2,702 | 2,702 | — | — | — | — | — | 2,702 | — | 2,702 | |||||||||||||||||||||||||||||||||||||||||||
Goldman Sachs & Co. | 38,663 | — | — | 95,190 | 133,853 | — | — | (3,386 | ) | — | (3,386 | ) | 130,467 | — | 130,467 | |||||||||||||||||||||||||||||||||||||||||
HSBC Holdings Plc | — | — | — | — | — | — | — | (6,854 | ) | — | (6,854 | ) | (6,854 | ) | — | (6,854 | ) | |||||||||||||||||||||||||||||||||||||||
JPMorgan Chase Bank N.A. | — | — | 4,194,768 | 53,502 | 4,248,270 | (750 | ) | (239,486 | ) | (1,220 | ) | — | (241,456 | ) | 4,006,814 | — | 4,006,814 | |||||||||||||||||||||||||||||||||||||||
Morgan Stanley & Co. | — | — | — | 13,809 | 13,809 | — | (63,899 | ) | (134,584 | ) | (21,838 | ) | (220,321 | ) | (206,512 | ) | 206,512 | — | ||||||||||||||||||||||||||||||||||||||
Standard Chartered Bank | — | — | — | 4,658 | 4,658 | — | — | (55,609 | ) | — | (55,609 | ) | (50,951 | ) | — | (50,951 | ) | |||||||||||||||||||||||||||||||||||||||
UBS AG | — | — | — | 126,692 | 126,692 | — | — | (176,159 | ) | — | (176,159 | ) | (49,467 | ) | — | (49,467 | ) | |||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 38,663 | $ | 22,943 | $ | 4,194,768 | $ | 296,553 | $ | 4,552,927 | $ | (375,662 | ) | $ | (681,649 | ) | $ | (471,809 | ) | $ | (21,838 | ) | $ | (1,550,958 | ) | $ | 3,001,969 | $ | 206,512 | $ | 3,208,481 | |||||||||||||||||||||||||
|
|
(1) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Notes to Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilites. |
(2) | Does not include the unrealized appreciation (depreciation) of centrally cleared swaps as reported in the Notes to Schedule of Investments. Only the variation margin is reported within the Statement of Assets and Liabilities. |
140 | Litman Gregory Funds Trust |
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NOTES TO FINANCIAL STATEMENTS – (Unaudited) – (Continued)
High Income Alternatives Fund | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Counterparty | Purchased Options | Futures(1) | Swaps(2) | Forward Currency Contracts | Total | Futures(1) | Swaps(2) | Forward Currency Contracts | Written Options | Total | Net Derivative Asset (Liabilities) | Collateral (Received) Pledged | Net Amount | |||||||||||||||||||||||||||||||||||||||||||
Bank of America N.A. | $ | 33,487 | $ | — | $ | — | $ | 1,495 | $ | 34,982 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 34,982 | $ | — | $ | 34,982 | ||||||||||||||||||||||||||||||
Citibank N.A. | — | — | — | 138,825 | 138,825 | — | — | (20,664 | ) | — | (20,664 | ) | 118,161 | — | 118,161 | |||||||||||||||||||||||||||||||||||||||||
Goldman Sachs & Co. | — | 310 | — | — | 310 | (7,664 | ) | — | — | — | (7,664 | ) | (7,354 | ) | — | (7,354 | ) | |||||||||||||||||||||||||||||||||||||||
Goldman Sachs International | 19,864 | — | 61,475 | 80,413 | 161,752 | — | — | — | — | — | 161,752 | — | 161,752 | |||||||||||||||||||||||||||||||||||||||||||
JPMorgan Chase Bank N.A. | — | — | — | 26,873 | 26,873 | — | — | (10 | ) | — | (10 | ) | 26,863 | — | 26,863 | |||||||||||||||||||||||||||||||||||||||||
Morgan Stanley & Co. | 27,399 | — | — | 1,442 | 28,841 | — | — | (17,162 | ) | — | (17,162 | ) | 11,679 | — | 11,679 | |||||||||||||||||||||||||||||||||||||||||
UBS Securities LLC | — | — | — | — | — | — | — | — | (194,078 | ) | (194,078 | ) | (194,078 | ) | — | (194,078 | ) | |||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 80,750 | $ | 310 | $ | 61,475 | $ | 249,048 | $ | 391,583 | $ | (7,664 | ) | $ | — | $ | (37,836 | ) | $ | (194,078 | ) | $ | (239,578 | ) | $ | 152,005 | $ | — | $ | 152,005 | ||||||||||||||||||||||||||
|
|
(1) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Notes to Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilites. |
(2) | Does not include the unrealized appreciation (depreciation) of centrally cleared swaps as reported in the Notes to Schedule of Investments. Only the variation margin is reported within the Statement of Assets and Liabilities. |
Note 8 – Income Taxes and Distributions to Shareholders
As of December 31, 2019, the components of accumulated earnings (losses) for income tax purposes were as follows:
Equity Fund | International Fund | Smaller Companies Fund | Alternative Strategies Fund | High Income Alternatives Fund | ||||||||||||||||
Tax cost of investments and derivatives | $ | 190,137,872 | $ | 360,898,068 | $ | 27,375,334 | $ | 1,700,025,333 | $ | 93,122,783 | ||||||||||
Gross Tax Unrealized Appreciation | 99,557,660 | 64,085,060 | 3,400,353 | 215,318,986 | 1,715,134 | |||||||||||||||
Gross Tax Unrealized Depreciation | (3,830,040 | ) | (23,379,680 | ) | (2,063,255 | ) | (128,978,449 | ) | (854,769 | ) | ||||||||||
|
| |||||||||||||||||||
Net Tax unrealized appreciation (depreciation) on investments and derivatives | 95,727,620 | 40,705,380 | 1,337,098 | 86,340,537 | 860,365 | |||||||||||||||
Net Tax unrealized appreciation (depreciation) on foreign currency | (9,927 | ) | (7,243 | ) | — | 12,768 | 343 | |||||||||||||
|
| |||||||||||||||||||
Net Tax unrealized appreciation (depreciation) | 95,717,693 | 40,698,137 | 1,337,098 | 86,353,305 | 860,708 | |||||||||||||||
|
| |||||||||||||||||||
Undistributed Ordinary Income | — | 5,705,081 | — | — | — | |||||||||||||||
|
| |||||||||||||||||||
Undistributed Long-Term Capital Gains | 6,941,803 | — | — | — | 86,867 | |||||||||||||||
|
| |||||||||||||||||||
Capital Loss Carry Forward | — | (38,306,691 | ) | (88,569 | ) | (20,608,143 | ) | — | ||||||||||||
|
| |||||||||||||||||||
Current Year Ordinay Late Year Losses | — | — | — | (2,197,867 | ) | (45,315 | ) | |||||||||||||
|
| |||||||||||||||||||
Straddle Loss Deferral and Reversal | — | — | — | (842,831 | ) | — | ||||||||||||||
|
| |||||||||||||||||||
Other Accumulated Gains/(Losses) | — | (2 | ) | — | (14,830 | ) | 58 | |||||||||||||
|
| |||||||||||||||||||
Total accumulated earnings | $ | 102,659,496 | $ | 8,096,525 | $ | 1,248,529 | $ | 62,689,634 | $ | 902,318 | ||||||||||
|
|
The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to wash sales, forward foreign currency exchange contracts, futures contracts, options contracts, swap contracts, passive foreign investment company adjustments, partnership basis adjustments, organizational expenses, and constructive sales.
For the year ended December 31, 2019, capital loss carry over used in current year was as follows:
Fund | Capital Loss Carryover Utilized | |||
International Fund | $ | 4,721,435 | ||
Alternative Strategies Fund | 4,871,907 | |||
High Income Alternatives Fund | 1,190,910 |
Notes to Financial Statements | 141 |
Table of Contents
Litman Gregory Funds Trust
NOTES TO FINANCIAL STATEMENTS – (Unaudited) – (Continued)
The capital loss carry forwards for each Fund were as follows:
Equity Fund | International Fund | Smaller Companies Fund | Alternative Strategies Fund | High Income Alternatives Fund | ||||||||||||||||
Capital Loss Carryforwards | ||||||||||||||||||||
Perpetual Short-Term | $ | — | $ | (38,306,691 | ) | $ | (88,569 | ) | $ | (16,075,806 | ) | $ | — | |||||||
Perpetual Long-Term | — | — | — | (4,532,337 | ) | — | ||||||||||||||
|
| |||||||||||||||||||
Total | $ | — | $ | (38,306,691 | ) | $ | (88,569 | ) | $ | (20,608,143 | ) | $ | — | |||||||
|
|
Additionally, U.S. generally accepted accounting principles require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended December 31, 2019, the following table shows the reclassifications made:
Fund | Accumulated Earnings (Deficit) | Paid In Capital | ||||||
Equity Fund * | $ | (83,389 | ) | $ | 83,389 | |||
International Fund * | — | — | ||||||
Smaller Companies Fund * | (167,000 | ) | 167,000 | |||||
Alternative Strategies Fund * | 61 | (61 | ) | |||||
High Income Alternatives Fund * | (6,603 | ) | 6,603 |
* | The permanent differences primarily relate to net operating losses,equalization adjustments, and tax treatment of partnerships. |
The tax composition of dividends (other than return of capital dividends), for the six months ended June 30, 2020 and the year ended December 31, 2019 were as follows:
Six Months Ended June 30, 2020 | 2019 | |||||||||||||||||||
Fund | Ordinary Income | Long-Term Capital Gain | Ordinary Income | Long-Term Capital Gain | ||||||||||||||||
Equity Fund | $ | — | $ | — | $ | 1,231,485 | $ | 23,579,152 | ||||||||||||
International Fund | — | — | 11,877,156 | — | ||||||||||||||||
Smaller Companies Fund | — | — | 2,238,440 | 627,462 | ||||||||||||||||
Alternative Strategies Fund | 27,023,060 | — | 52,212,885 | — | ||||||||||||||||
High Income Alternatives Fund | 1,536,399 | — | 3,055,538 | 265,169 |
The Funds did not have any unrecognized tax benefits at December 31, 2019, nor were there any increases or decreases in unrecognized tax benefits for the year ended December 31, 2019. The Funds are subject to examination by the U.S. federal and state tax authorities for returns filed for the prior three and four fiscal years, respectively.
Note 9 – Line of Credit
The Trust has an unsecured, uncommitted $75,000,000 line of credit with the Custodian, for the Equity Fund, International Fund, Smaller Companies Fund and High Income Alternatives Fund (the “Four Funds”) expiring on April 30, 2021. Borrowings under this agreement bear interest at the higher of the overnight federal funds rate and daily one month LIBOR plus a spread of 1.00% per annum. There is no annual commitment fee on the uncommitted line of credit. The Trust also has a secured, uncommitted $125,000,000 line of credit for the Alternative Strategies Fund with the Custodian, expiring on July 22, 2021. There is no annual commitment fee but, a non-refundable up-front fee of $50,000. The line of credit is secured by a general security interest in substantially all of the Alternative Strategies Fund’s assets. Borrowings under this agreement bear interest at the higher of the overnight federal funds rate and one-month LIBOR plus a spread of 1.25% per annum.
Amounts outstanding to the Four Funds under the Facility at no time shall exceed in the aggregate at any time the least of (a) $75,000,000; (b) 10% of the value of the total assets of each Fund less such Fund’s total liabilities not represented by senior securities less the value of any assets of the Fund pledged to, or otherwise segregated for the benefit of a party other than the Bank and in connection with a liability not reflected in the calculation of the Fund’s total liabilities. Amounts outstanding for the Alternative Strategies Fund at no time shall exceed in the aggregate at any time the lesser of the (a) Borrowing Base, (b) the Facility amount of $125,000,000 and (c) should not have an aggregate amount of outstanding senior securities representing indebtedness the least of (i) 33 1/3% of the Alternative Strategies Fund’s net assets and (ii) the maximum amount that the Fund would be permitted to incur pursuant to applicable law.
142 | Litman Gregory Funds Trust |
Table of Contents
Litman Gregory Funds Trust
NOTES TO FINANCIAL STATEMENTS – (Unaudited) – (Continued)
For the six months ended June 30, 2020, the interest expense was $6,333 for International Fund, $161,634 for Alternative Strategies Fund, and $2,528 for High Income Alternatives Fund. For the six months ended June 30, 2020, there were no borrowings for the Equity Fund and Smaller Companies Fund, and there was no balance outstanding at the end of the period. There was no balance outstanding at June 30, 2020 for the International Fund, Alternative Strategies Fund, and High Income Alternatives Fund. The average borrowing for the six months ended June 30, 2020 for the International Fund for the period the line was drawn was $7,944,444, at an average borrowing rate of 1.5267%. The average borrowing for the six months ended June 30, 2020 for the Alternative Strategies Fund for the period the line was drawn was $49,050,847, at an average borrowing rate of 1.9080%. The average borrowing for the six months ended June 30, 2020 for the High Income Alternatives Fund for the period the line was drawn was $2,000,000, at an average borrowing rate of 1.9781%. During the six months ended June 30, 2020, the maximum borrowing was $9,500,000, $64,000,000, and $2,000,000 for the International Fund, Alternative Strategies Fund and High Income Alternatives Fund, respectively.
Note 10 – Principal Risks
Below are summaries of the principal risks of investing in one or more of the Funds, each of which could adversely affect a Fund’s net asset value, yield and total return. Each risk listed below does not necessarily apply to each Fund, and you should read a Fund’s prospectus carefully for a description of the principal risks associated with investing in a particular Fund.
• | Asset-Backed Securities Risk. This is the risk that the impairment of the value of the collateral underlying a security in which the High Income Alternatives Fund invests, such as the non-payment of loans, will result in a reduction in the value of the security. The value of these securities may also fluctuate in response to the market’s perception of the value of issuers or collateral. |
• | Below Investment-Grade Fixed Income Securities Risk. This is the risk of investing in below investment-grade fixed income securities (also known as “junk bonds”), which may be greater than that of higher rated fixed income securities. These securities are rated Ba1 through C by Moody’s Investors Service (“Moody’s”) or BB+ through D by Standard & Poor’s Rating Group (“S&P”) (or comparably rated by another nationally recognized statistical rating organization), or, if not rated by Moody’s or S&P, are considered by the sub-advisors to be of similar quality. These securities have greater risk of default than higher rated securities. The market value of these securities is more sensitive to corporate developments and economic conditions and can be volatile. Market conditions can diminish liquidity and make accurate valuations difficult to obtain. There is no limit to the Alternative Strategies Fund’s ability to invest in below investment-grade fixed income securities; however, under normal market conditions, it does not expect to invest more than 50% of its total assets in below investment-grade fixed income securities. |
• | Capital Structure Arbitrage Risk. The perceived mispricing identified by the sub-advisor may not disappear or may even increase, in which case losses may be realized. |
• | Collateral Risk. If the Alternative Strategies Fund and High Income Alternatives Fund’s financial instruments are secured by collateral, the issuer may have difficulty liquidating the collateral and/or the Fund may have difficulty enforcing its rights under the terms of the securities if an issuer defaults. Collateral may be insufficient or the Fund’s right to the collateral may be set aside by a court. Collateral will generally consist of assets that may not be readily liquidated, including for example, equipment, inventory, work in the process of manufacture, real property and payments to become due under contracts or other receivable obligations. There is no assurance that the liquidation of those assets would satisfy an issuer’s obligations under a financial instrument. Non-affiliates and affiliates of issuers of financial instruments may provide collateral in the form of secured and unsecured guarantees and/or security interests in assets that they own, which may also be insufficient to satisfy an issuer’s obligations under a financial instrument. |
• | Collateralized Loan Obligations and Collateralized Debt Obligations Risk. Collateralized loan obligations (“CLOs”) bear many of the same risks as other forms of asset-backed securities, including interest rate risk, credit risk and default risk. As they are backed by pools of loans, CLOs also bear similar risks to investing in loans directly. CLOs issue classes or “tranches” that vary in risk and yield. CLOs may experience substantial losses attributable to loan defaults. Losses caused by defaults on underlying assets are borne first by the holders of subordinate tranches. The Alternative Strategies Fund and High Income Alternatives Fund’s investment in CLOs may decrease in market value when the CLO experiences loan defaults or credit impairment, the disappearance of a subordinate tranche, or market anticipation of defaults and investor aversion to CLO securities as a class. |
Collateralized debt obligations (“CDOs”) are structured similarly to CLOs and bear the same risks as CLOs including interest rate risk, credit risk and default risk. CDOs are subject to additional risks because they are backed by pools of assets other than loans including securities (such as other asset-backed securities), synthetic instruments or bonds and may be highly leveraged. Like CLOs, losses incurred by a CDO are borne first by holders of subordinate tranches. Accordingly, the risks of CDOs depend largely on the type of underlying collateral and the tranche of CDOs in which the Fund invests. For example, CDOs that obtain their exposure through synthetic investments entail the risks associated with derivative instruments.
• | Communications Services Sector Risk. A Fund may invest a portion of its assets in the communications services sector. Media and communications companies may be significantly affected by product and service obsolescence due to technological advancement or development, competitive pressures, substantial capital requirements, fluctuating demand and changes in regulation. |
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• | Consumer Discretionary Sector Risk. A Fund may invest a portion of its assets in the consumer discretionary sector. The success of consumer product manufacturers and retailers is tied closely to the performance of the overall domestic and international economy, interest rates, competition and consumer confidence. Success depends heavily on disposable household income and consumer spending. Changes in demographics and consumer tastes can also affect the demand for, and success of, consumer products and services in the marketplace. |
• | Convertible Arbitrage Risk. Arbitrage strategies involve engaging in transactions that attempt to exploit price differences of identical, related or similar securities on different markets or in different forms. A Fund may realize losses or reduced rate of return if underlying relationships among securities in which investment positions are taken change in an adverse manner or a transaction is unexpectedly terminated or delayed. Trading to seek short-term capital appreciation can be expected to cause the Fund’s portfolio turnover rate to be substantially higher than that of the average equity-oriented investment company, resulting in higher transaction costs and additional capital gains tax liabilities. |
• | Convertible Securities Risk. This is the risk that the market value of convertible securities may fluctuate due to changes in, among other things, interest rates; other general economic conditions; industry fundamentals; market sentiment; the issuer’s operating results, financial statements, and credit ratings; and the market value of the underlying common or preferred stock. |
• | Credit Risk. This is the risk that a Fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty of a derivatives contract or other transaction, is unable or unwilling (or is perceived to be unable or unwilling) to make timely payment of principal and/or interest, or to otherwise honor its obligations. |
• | Currency Risk. This is the risk that investing in foreign currencies may expose the Fund to fluctuations in currency exchange rates and that such fluctuations in the exchange rates may negatively affect an investment related to a currency or denominated in a foreign currency. The Alternative Strategies Fund may invest in foreign currencies for investment and hedging purposes. All of the Funds may invest in foreign currencies for hedging purposes. |
• | Cybersecurity Risk. Information and technology systems relied upon by the Funds, the Advisor, the sub-advisors, the Funds’ service providers (including, but not limited to, Fund accountants, custodians, transfer agents, administrators, distributors and other financial intermediaries) and/or the issuers of securities in which a Fund invests may be vulnerable to damage or interruption from computer viruses, network failures, computer and telecommunication failures, infiltration by unauthorized persons, security breaches, usage errors, power outages and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes. Although the Advisor has implemented measures to manage risks relating to these types of events, if these systems are compromised, become inoperable for extended periods of time or cease to function properly, significant investment may be required to fix or replace them. The failure of these systems and/or of disaster recovery plans could cause significant interruptions in the operations of the Funds, the Advisor, the sub-advisors, the Funds’ service providers and/or issuers of securities in which a Fund invests and may result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to investors (and the beneficial owners of investors). Such a failure could also harm the reputation of the Funds, the Advisor, the sub-advisors, the Funds’ service providers and/or issuers of securities in which a Fund invests, subject such entities and their respective affiliates to legal claims or otherwise affect their business and financial performance. |
• | Debt Securities Risk. This is the risk that the value and liquidity of debt securities may be reduced under certain circumstances. The value of debt securities can fluctuate in response to issuer activity and changes in general economic and credit market conditions, including changes in interest rates. In recent years, dealer capacity in the debt and fixed income markets appears to have undergone fundamental changes, including a reduction in dealer market-making capacity. These changes have the potential to decrease substantially liquidity and increase volatility in the debt and fixed income markets. |
• | Derivatives Risk. This is the risk that an investment in derivatives may not correlate completely to the performance of the underlying securities and may be volatile and that the insolvency of the counterparty to a derivative instrument could cause the Fund to lose all or substantially all of its investment in the derivative instrument, as well as the benefits derived therefrom. |
• | Options Risk. This is the risk that an investment in options may be subject to greater fluctuation than an investment in the underlying instruments themselves and may be subject to a complete loss of the amounts paid as premiums to purchase the options. |
• | Futures Contracts Risk. This is the risk that an investment in futures contracts may be subject to losses that exceed the amount of the premiums paid and may subject the Fund’s net asset value to greater volatility. |
• | P-Notes Risk. This is the risk that the performance results of P-Notes will not replicate exactly the performance of the issuers or markets that the P-Notes seek to replicate. Investments in P-Notes involve risks normally associated with a direct investment in the underlying securities as well as additional risks, such as counterparty risk. |
• | Swaps Risk. Risks inherent in the use of swaps include: (1) swap contracts may not be assigned without the consent of the counterparty; (2) potential default of the counterparty to the swap; (3) absence of a liquid secondary market for any particular swap at any time; and (4) possible inability of the Fund to close out the swap transaction at a time that otherwise would be favorable for it to do so. |
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• | Distressed Companies Risk. A Fund may invest a portion of its assets in securities of distressed companies. Debt obligations of distressed companies typically are unrated, lower rated, in default or close to default and may be difficult to value accurately or may become worthless. |
• | Emerging Markets Risk. A Fund may invest a portion of its assets in emerging market countries. Emerging market countries are those with immature economic and political structures, and investing in emerging markets entails greater risk than in developed markets. Such risks could include those related to government dependence on a few industries or resources, government-imposed taxes on foreign investment or limits on the removal of capital from a country, unstable government, and volatile markets. |
• | Equity Securities Risk. This is the risk that the value of equity securities may fluctuate, sometimes rapidly and unpredictably, due to factors affecting the general market, an entire industry or sector, or particular companies. These factors include, without limitation, adverse changes in economic conditions, the general outlook for corporate earnings, interest rates or investor sentiment; increases in production costs; and significant management decisions. This risk is greater for small- and medium-sized companies, which tend to be more vulnerable to adverse developments than larger companies. |
• | Event-Driven Risk. Event-driven strategies seek to profit from the market inefficiencies surrounding market events, such as mergers, acquisitions, asset sales, restructurings, refinancings, recapitalizations, reorganizations or other special situations. Event-driven investing involves attempting to predict the outcome of a particular transaction as well as the optimal time at which to commit capital to it. Event-driven opportunities involve difficult legal as well as financial analysis, as some of the principal impediments to the consummation of major corporate events are often legal or regulatory rather than economic. In addition, certain of the securities issued in the context of major corporate events include complex call, put and other features, and it is difficult to precisely evaluate the terms and embedded option characteristics of these securities. A Fund may take both long and short positions in a wide range of securities, derivatives and other instruments in implementing its event-driven strategies. |
• | Financial Sector Risk. A Fund may invest a portion of its assets in the financial services sector and, therefore, the performance of the Fund could be negatively impacted by events affecting this sector, including changes in interest rates, government regulation, the rate of defaults on corporate, consumer and government debt and the availability and cost of capital. |
• | Foreign Investment and Emerging Markets Risks. This is the risk that an investment in foreign (non-U.S.) securities may cause the Funds to experience more rapid and extreme changes in value than a fund that invests exclusively in securities of U.S. companies, due to factors such as currency conversion rate fluctuations, currency blockages, political and economic instability, differences in financial reporting, accounting and auditing standards, nationalization, expropriation or confiscatory taxation, and smaller and less-strict regulation of securities markets. These risks are greater in emerging markets. There is no limit to the Alternative Strategies Fund’s ability to invest in emerging market securities; however, under normal market conditions, it does not expect to invest more than 50% of its total assets in emerging market securities; however, some Funds may invest a portion of their assets in stocks of companies based outside of the United States. |
• | Healthcare Sector Risk. A Fund may invest a portion of its assets in the healthcare sector. The profitability of companies in the healthcare sector may be adversely affected by government regulations and government healthcare programs, increases or decreases in the cost of medical products and services and product liability claims, among other factors. Many healthcare companies are heavily dependent on patent protection, and the expiration of a company’s patent may adversely affect that company’s profitability. Healthcare companies are subject to competitive forces that may result in price discounting, and may be thinly capitalized and susceptible to product obsolescence. |
• | Industrial Sector Risk. A Fund may invest a portion of its assets in the industrial sector. Companies in the industrial sector could be affected by, among other things, government regulation, world events and global economic conditions, insurance costs, and labor relations issues. |
• | Interest Rate Risk. This is the risk that debt securities will decline in value because of changes in interest rates. A Fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a Fund with a shorter average portfolio duration. |
• | Investment Selection Risk. The specific investments held in the Fund’s investment portfolio may underperform other funds in the same asset class or benchmarks that are representative of the general performance of the asset class because of a portfolio manager’s choice of securities. |
• | Investment in Investment Companies Risk. This is the risk that investing in other investment companies, including ETFs, CEFs, BDCs, unit investment trusts and open-end funds, subjects the Fund to those risks affecting the investment vehicle, including the possibility that the value of the underlying securities held by the investment vehicle could decrease or the portfolio becomes illiquid. Moreover, the High Income Alternatives Fund and its shareholders will incur its pro rata share of the underlying vehicles’ expenses, which will reduce the Fund’s performance. In addition, investments in an ETF are subject to, among other risks, the risk that the ETF’s shares may trade at a discount or premium relative to the net asset value of the shares and the listing exchange may halt trading of the ETF’s shares. BDCs may carry risks similar to those of a private equity or venture capital fund. BDC company securities are not redeemable at the option of the |
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shareholder and they may trade in the market at a discount to their net asset value. BDCs usually trade at a discount to their net asset value because they invest in unlisted securities and have limited access to capital markets. Shares of CEFs also frequently trade at a discount to their net asset value for those and other reasons. |
• | Investments in Loan Risk. Investments in loans, including loan syndicates and other direct lending opportunities, involve special types of risks, including credit risk, interest rate risk, counterparty risk and prepayment risk. Loans may offer a fixed or floating interest rate. Loans are often generally below investment grade and may be unrated. The High Income Alternatives Fund’s investments in loans can also be difficult to value accurately and may be more susceptible to liquidity risk than fixed-income instruments of similar credit quality and/or maturity. The Fund is also subject to the risk that the value of the collateral for the loan may be insufficient or unavailable to cover the borrower’s obligations should the borrower fail to make payments or become insolvent. Participations in loans may subject the Fund to the credit risk of both the borrower and the issuer of the participation and may make enforcement of loan covenants, if any, more difficult for the Fund as legal action may have to go through the issuer of the participations. Transactions in loans are often subject to long settlement periods, thus potentially limiting the ability of the Fund to invest sale proceeds in other investments and to use proceeds to meet its current redemption obligations. In addition, many banks have been weakened by the recent financial crisis, and it may be difficult for the Fund to obtain an accurate picture of a lending bank’s financial condition. |
• | Large Shareholder Purchase and Redemption Risk. This is the risk that a Fund may experience adverse effects when certain large shareholders purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell its securities at times when it would not otherwise do so, which may negatively impact the Fund’s net asset value and liquidity. Similarly, large share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. |
• | Leverage Risk. This is the risk that leverage may cause the effect of an increase or decrease in the value of the Alternative Strategies Fund’s portfolio securities to be magnified and the Fund to be more volatile than if leverage was not used. Leverage may result from certain transactions, including the use of derivatives and borrowing. Under normal circumstances, the Alternative Strategies Fund may borrow amounts up to one third of the value of its total assets except that it may exceed this limit to satisfy redemption requests or for other temporary purposes. |
• | LIBOR Risk. LIBOR is used extensively in the U.S. and globally as a “benchmark” or “reference rate” for various commercial and financial contracts, including corporate and municipal bonds, bank loans, asset-backed and mortgage-related securities, interest rate swaps and other derivatives. For example, debt securities in which a Fund invests may pay interest at floating rates based on LIBOR or may be subject to interest caps or floors based on LIBOR. A Fund’s derivative investments may also reference LIBOR. In addition, issuers of instruments in which a Fund invests may obtain financing at floating rates based on LIBOR, and a Fund may use leverage or borrowings based on LIBOR. In July 2017, the head of the United Kingdom Financial Conduct Authority announced the intention to phase out the use of LIBOR by the end of 2021. There is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement reference rate. Abandonment of or modifications to LIBOR could have adverse impacts on newly issued financial instruments and existing financial instruments that reference LIBOR. |
• | Market Risk. As with all mutual funds that invest in common stocks, the value of an individual’s investment will fluctuate daily in response to the performance of the individual stocks held in a Fund. The stock market has been subject to significant volatility recently, which has increased the risks associated with an investment in a Fund. |
• | Market Volatility Associated with COVID-19. The financial markets have recently been impacted by the outbreak of an infectious respiratory illness caused by a novel coronavirus known as COVID-19, which was first detected in China in December 2019 and has spread internationally. This coronavirus has resulted in international border closings, enhanced health screenings, expanded healthcare services and expenses, quarantines and other restrictions on business and personal activities, cancellations, disruptions to supply chains and consumer activity, as well as general public concern and uncertainty. The impact of this outbreak has negatively affected the worldwide economy, as well as the economies of individual countries, the financial health of individual companies and the market in general in significant and unforeseen ways. The future impact of COVID-19 is currently unknown and it may exacerbate other risks that apply to the Fund, including political, social and economic risks. Any such impact could adversely affect the Fund’s performance, the performance of the securities in which the Fund invests and may lead to losses on your investment in the Fund. |
• | Materials Sector Risk. A Fund may invest a portion of its assets in the materials sector. Many companies in this sector are significantly affected by the level and volatility of commodity prices, the exchange value of the U.S. dollar, import controls, worldwide competition, environmental policies and consumer demand. At times, worldwide production of industrial materials has exceeded demand as a result of over-building or economic downturns, leading to poor investment returns or losses. Other risks may include liabilities for environmental damage and general civil liabilities, depletion of resources, and mandated expenditures for safety and pollution control. The materials sector may also be affected by economic cycles, technical progress, labor relations, and government regulations. |
• | Merger Arbitrage Risk. This is the risk that a proposed reorganization in which the Alternative Strategies Fund invests may be renegotiated or terminated. |
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• | MLP Risk. Investing in MLP units involves some risks that differ from an investment in the equity securities of a company. Holders of MLP units have limited control and voting rights on matters affecting the partnership. Holders of units issued by a MLP are exposed to a remote possibility of liability for all of the obligations of that MLP in the event that a court determines that the rights of the holders of MLP units to vote to remove or replace the general partner of that MLP, to approve amendments to that MLP’s partnership agreement, or to take other action under the partnership agreement of that MLP would constitute “control” of the business of that MLP, or a court or governmental agency determines that the MLP is conducting business in a state without complying with the partnership statute of that state. Holders of MLP units are also exposed to the risk that they will be required to repay amounts to the MLP that are wrongfully distributed to them. |
• | Mortgage-Backed Securities Risk. This is the risk of investing in mortgaged-backed securities, which includes interest rate risk, prepayment risk and the risk of defaults on the mortgage loans underlying these securities. |
• | Mortgage REIT Risk. Investing in mREITs involves certain risks related to investing in real property mortgages. In addition, mREITs must satisfy highly technical and complex requirements in order to qualify for the favorable tax treatment accorded to REITs under the Internal Revenue Code of 1986 (the “Code”). No assurances can be given that a mREIT in which the High Income Alternatives Fund invests will be able to continue to qualify as a REIT or that complying with the REIT requirements under the Code will not adversely affect such REIT’s ability to execute its business plan. |
• | Multi-Style Management Risk. Because portions of a Fund’s assets are managed by different portfolio managers using different styles, the Fund could experience overlapping security transactions. Certain portfolio managers may be purchasing securities at the same time other portfolio managers may be selling those same securities, which may lead to higher transaction expenses compared to a Fund using a single investment management style. |
• | Municipal Securities Risk. Municipal securities can be significantly affected by litigation, political or economic events, as well as uncertainties in the municipal market related to taxation, legislative changes or the rights of municipal security holders. Municipal securities backed by current or anticipated revenues from specific projects or assets can be negatively affected by the inability of the issuer to collect revenues for the projects or from the assets. |
• | Portfolio Turnover Risk. This is the risk that a Fund may experience high portfolio turnover rates as a result of its investment strategies. High portfolio turnover rates may indicate higher transaction costs and may result in higher taxes when shares of a Fund are held in a taxable account as compared to shares in investment companies that hold investments for a longer period. High portfolio turnover involves correspondingly greater expenses to a Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities, which may result in adverse tax consequences to a Fund’s shareholders as compared to shares in investment companies that hold investments for a longer period. |
• | Short Sale Risk. This is the risk that the value of a security the Alternative Strategies Fund sells short does not go down as expected. The risk of loss is theoretically unlimited if the value of the security sold short continues to increase. In addition, short sales may cause the Alternative Strategies Fund to be compelled, at a time disadvantageous to it, to buy the security previously sold short, thus resulting in a loss. To meet current margin requirements, the Alternative Strategies Fund is required to deposit with the broker additional cash or securities so that the total deposit with the broker is maintained daily at 150% of the current market value of the securities sold short. |
• | Smaller Companies Risk. A Fund may invest a portion of its assets in the securities of small- and mid-sized companies. Securities of small and mid-cap companies are generally more volatile and less liquid than the securities of large-cap companies. This is because smaller companies may be more reliant on a few products, services or key personnel, which can make it riskier than investing in larger companies with more diverse product lines and structured management. |
• | Special Situations Risk. Investments in special situations (undervalued equities, merger arbitrage situations, distressed companies, etc.) may involve greater risks when compared to other investments a Fund may make due to a variety of factors. For example, mergers, acquisitions, reorganizations, liquidations or recapitalizations may fail or not be completed on the terms originally contemplated, and expected developments may not occur in a timely manner, if at all. |
• | Technology Investment Risk. A Fund may invest a portion of its assets in the technology sector, which is a very volatile segment of the market. The nature of technology is that it is rapidly changing. Therefore, products or services that may initially look promising may subsequently fail or become obsolete. In addition, many technology companies are younger, smaller and unseasoned companies which may not have established products, an experienced management team, or earnings history. |
• | Unfavorable Tax Treatment Risk. This is the risk that a material portion of the Alternative Strategies Fund’s return could be in the form of net investment income or short-term capital gains, some of which may be distributed to shareholders and taxed at ordinary income tax rates. Therefore, shareholders may have a greater need to pay regular taxes than compared to other investment strategies that hold investments longer. Due to this investment strategy, it may be preferable for certain shareholders to invest in the Fund through pre-tax or tax-deferred accounts as compared to investment through currently taxable accounts. Potential shareholders are encouraged to consult their tax advisors in this regard. |
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• | Value Stock Risk. Value stocks are stocks of companies that may have experienced adverse business or industry developments or may be subject to special risks that have caused the stocks to be out of favor and, in the opinion of the manager, undervalued. The value of a security believed by a manager to be undervalued may never reach what is believed to be its full (intrinsic) value, or such security’s value may decrease. |
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OTHER INFORMATION – (Unaudited)
Proxy Voting Policies and Procedures
The sub-advisors of the Funds vote proxies relating to portfolio securities in accordance with procedures that have been approved by the Board of Trustees of the Funds. You may obtain a description of these procedures, without charge, by calling toll-free, 1-800-960-0188. This information is also available through the Securities and Exchange Commission’s website at http://www.sec.gov.
Proxy Voting Record
Information regarding how the sub-advisors of the Funds voted proxies relating to portfolio securities during the 12-month period ended June 30 is available, without charge, by calling toll-free, 1-800-960-0188. This information is also available through the Securities and Exchange Commission’s website at http://www.sec.gov.
Portfolio Holdings Information
Each Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. You can find the filings on the Securities and Exchange Commission’s website at http://www.sec.gov. This information is also available, without charge, by calling toll-free, 1-800-960-0188 or by visiting the Funds’ website at http://www.partnerselectfunds.com.
Householding Mailings
To reduce expenses, the Trust may mail only one copy of the Funds’ prospectus and each annual and semi-annual report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please call us at 1-800-960-0188 (or contact your financial institution). The Trust will begin sending you individual copies thirty days after receiving your request.
Review of Liquidity Risk Management Program
Pursuant to Rule 22e-4 under the 1940 Act, the Trust, on behalf of the Funds, has adopted a liquidity risk management program (the “Program”) to govern the Trust’s approach to managing liquidity risk. The Program is overseen by the Trust’s Liquidity Committee, and the Program’s principal objectives include assessing, managing and periodically reviewing each Fund’s liquidity risk, based on factors specific to the circumstances of the Fund.
At a meeting of the Board held on June 1, 2020, the Trustees received a report from the Trust’s Chief Liquidity Officer, who serves as chair of the Trust’s Liquidity Committee, addressing the operations of the Program and assessing its adequacy and effectiveness of implementation. The Liquidity Committee determined, and the Chief Liquidity Officer reported to the Board, that the Program is reasonably designed to assess and manage each Fund’s liquidity risk and has operated adequately and effectively to manage each Fund’s liquidity risk since the Program was implemented in August 2018. The Chief Liquidity Officer reported that, during the period covered by the report, there were no liquidity events that impacted the Funds or their ability to timely meet redemptions without dilution to existing shareholders. The Chief Liquidity Officer further noted that no material changes have been made to the Program since its implementation.
There can be no assurance that the Program will achieve its objectives in the future. Please refer to the Trust’s prospectuses for more information regarding a Fund’s exposure to liquidity risk and other principal risks to which an investment in the Funds may be subject.
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The ABX Indexes serve as a benchmark of the market for securities backed by home loans issued to borrowers with weak credit. The ABX 2006-2 AAA is an asset-backed index that tracks AAA-rated bonds issued prior to the second half of 2006. The ABX 2007-1 AAA is an asset-backed index that tracks AAA-rated bonds issued prior to the first half of 2007.
BofA Merrill Lynch U.S. High Yield Master II Index tracks the performance of below investment grade, but not in default, US dollar-denominated corporate bonds publicly issued in the US domestic market.
Bloomberg Barclays U.S. Aggregate Bond Index is a market capitalization-weighted index, meaning the securities in the index are weighted according to the market size of each bond type. Most U.S. traded investment grade bonds are represented. The index includes U.S. treasury securities (non TIPS), government agency bonds, mortgage backed bonds, corporate bonds, and a small amount of foreign bonds traded in the U.S.
The CBOE Russell 2000 PutWrite Index (PUTR) is designed to track the performance of a hypothetical strategy that sells a monthly at-the-money (ATM) Russell 2000 Index put option.
The CBOE Russell 2000 Volatility Index (RVX) is a key measure of market expectations of near-term volatility conveyed by Russell 2000® Index (RUT) option prices. The RVX Index measures the market’s expectation of 30-day volatility implicit in the prices of near-term RUT options traded at CBOE.
The CBOE S&P 500 PutWrite Index (ticker symbol PUT) is a benchmark index that measures the performance of a hypothetical portfolio that sells S&P 500 Index (SPX) put options against collateralized cash reserves held in a money market account.
The CBOE S&P 500 2% OTM PutWrite Index (PUTYSM Index) is designed to track the performance of a hypothetical passive investment strategy that collects option premiums from writing a 2% Out-of-the Money (OTM) SPX Put option on a monthly basis and holds a rolling money market account invested in one-month T-bills to cover the liability from the short SPX Put option position.
CDX is a series of credit default swap indexes, used to hedge credit risk or to take a position on a basket of credit entities.
The Citigroup Economic Surprise Indices are objective and quantitative measures of economic news. They are defined as weighted historical standard deviations of data surprises.
FTSE Emerging Markets Index – ETF Tracker. The Index is a market capitalization index, adjusted based on the free-float of potential index constituents, and designed to measure the performance of large-, medium- and small-capitalization companies located in emerging market countries throughout the world.
The FTSE Emerging Markets All Cap China A Inclusion Index is a market-capitalization weighted index representing the performance of large, mid and small cap stocks in emerging markets.
The FTSE Global All Cap ex U.S. Index is part of a range of indices designed to help U.S. investors benchmark their international investments. The index comprises large, mid and small cap stocks globally excluding the U.S. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.
The HFRI Event Driven Index: Consists of investment managers who maintain positions in companies currently or prospectively involved in corporate transactions of a wide variety including but not limited to mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments. Security types can range from most senior in the capital structure to most junior or subordinated, and frequently involve additional derivative securities. Event driven exposure includes a combination of sensitivities to equity markets, credit markets and idiosyncratic, company specific developments.
The HFRI Event Driven Merger Arbitrage Index: Consists of merger arbitrage strategies which employ an investment process primarily focused on opportunities in equity and equity related instruments of companies which are currently engaged in a corporate transaction. Merger arbitrage involves primarily announced transactions, typically with limited or no exposure to situations which pre-, post-date or situations in which no formal announcement is expected to occur. Opportunities are frequently presented in cross border, collared and international transactions which incorporate multiple geographic regulatory institutions, with typically involve minimal exposure to corporate credits. Merger arbitrage strategies typically have over 75% of positions in announced transactions over a given market cycle.
The HFRX Fixed Income – Credit Index is an unmanaged index that includes strategies with exposure to credit across a broad continuum of credit sub-strategies, including Corporate, Sovereign, Distressed, Convertible, Asset Backed, Capital Structure Arbitrage, Multi-Strategy and other Relative Value and Event Driven sub-strategies.
The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies; including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage.
ICE BofAML 0-3 Year U.S. Treasury Index tracks the performance of U.S. dollar denominated sovereign debt publicly issued by the U.S. government in its domestic market with maturities less than three years.
ICE BofA Merrill Lynch 1-3 US Year Treasury Index is an unmanaged index that tracks the performance of the direct sovereign debt of the U.S. Government having a maturity of at least one year and less than three years.
The ICE BofAML U.S. High Yield Cash Pay TR USD Index is an unmanaged index that measures the performance of short-term U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market.
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INDEX DEFINITIONS – (Continued)
The S&P/LSTA U.S. Leveraged Loan Index is a market-weighted index that tracks the performance of institutional leveraged loans, and represents the 100 largest and most liquid issues of the institutional loan universe.
LIBOR stands for London Interbank Offered Rate. It’s an index that is used to set the cost of various variable-rate loans.
Morningstar Category Averages: Each Morningstar Category Average is representative of funds with similar investment objectives.
The MSCI All Country World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.
The MSCI All Country World ex U.S. Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the United States.
The MSCI All Country World ex U.S. Growth Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the United States. It includes companies with higher price-to-book ratios and higher forecasted growth values.
The MSCI All Country World ex U.S. Value Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the United States. It includes companies with lower price-to-book ratios and lower forecasted growth values.
The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. As of May 27, 2010 the MSCI EAFE Index consisted of the following 22 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index captures large and mid-cap representation across 23 Emerging Markets (EM) countries. With 836 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.
The MSCI World ex U.S. Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, excluding the United States.
The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1000 of the largest
securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market.
The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index.
The Russell 2000 Value Index measures the performance of small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2500 Index measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as “smid” cap. The Russell 2500 Index is a subset of the Russell 3000 Index. It includes approximately 2500 of the smallest securities based on a combination of their market cap and current index membership.
The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies as measured by total market capitalization, and represents about 98% of the U.S. stock market.
The Russell 3000 Value Index is a broad based index that measures the performance of those companies within the 3,000 largest U.S. companies, based on total market capitalization, that have lower price-to-book ratios and lower forecasted growth rates.
The S&P 500 Index is widely regarded as the standard for measuring large-cap stock performance, and consists of 500 stocks that represent a sample of the leading companies in leading industries.
The SPDR S&P 500 ETF consists of 500 of the largest U.S. companies, and it is one of the most heavily traded securities in the world. It tracks the S&P 500 Index, and fund follows a full replication strategy, holding every stock in the index.
The SPDR Financials Sector Index seeks to provide an effective representation of the financial sector of the S&P 500 Index. The Index includes companies from the following industries: diversified financial services; insurance; banks; capital markets; mortgage real estate investment trusts (“REITs”); consumer finance; and thrifts and mortgage finance.
The Vanguard 500 Index Fund invests in 500 of the largest U.S. companies, which span many different industries and account for about three-fourths of the U.S. stock market’s value. This fund tracks the S&P 500 Index as closely as possible.
VIX is a trademarked ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market’s expectation of stock market volatility over the next 30 day period.
Index Definitions | 151 |
Indices are unmanaged, do not incur fees, and cannot be invested in directly.
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Litman Gregory Funds Trust
INDUSTRY TERMS AND DEFINITIONS
1. | Active Share measures the degree of difference between a fund portfolio and its benchmark index. |
2. | Alpha is an annualized return measure of how much better or worse a fund’s performance is relative to an index of funds in the same category, after allowing for differences in risk. |
3. | Alt-A, or Alternative A-paper, is a type of U.S. mortgage that, for various reasons, is considered riskier than A-paper, or “prime”, and less risky than “subprime,” the riskiest category. |
4. | The Basel Accords are three sets of banking regulations (Basel I, II and III) set by the Basel Committee on Bank Supervision (BCBS), which provides recommendations on banking regulations in regards to capital risk, market risk and operational risk. |
5. | A basis point is a value equaling one one-hundredth of a percent (1/100 of 1%). |
6. | Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. |
7. | Book value is the net asset value of a company, calculated by subtracting total liabilities and intangible assets from total assets. |
8. | Brexit is an abbreviation of “British exit”, which refers to the June 23, 2016 referendum by British voters to exit the European Union. |
9. | Business development company (BDC) is an organization that invests in and helps small- and medium-size companies grow in the initial stages of their development. |
10. | Cash flow measures the cash generating capability of a company by adding non-cash charges (e.g., depreciation) and interest expense to pretax income. |
11. | Cash flow yield (or free cash flow yield) is a financial solvency ratio that compares the free cash flow per share a company is expected to earn against its market value per share. The ratio is calculated by taking the free cash flow per share divided by the current share price. |
12. | Capex (capital expenditures) are expenditures creating future benefits. |
13. | Collateralized Loan Obligation (CLO) is a security backed by a pool of debt, often low-rated corporate loans. Collateralized loan obligations (CLOs) are similar to collateralized mortgage obligations, except for the different type of underlying loan. |
14. | Combined ratio is a formula used by insurance companies to relate premium income to claims, administration and dividend expenses. It is used in the annual statement filed by an insurer with the state insurance department. It is calculated by dividing the sum of incurred losses and expenses by earned premium. |
15. | Compound annual growth rate (CAGR) is the rate of growth of a number, compounded over several years. |
16. | Conditional pre-payment rate is a loan prepayment rate that is equal to the proportion of the principal of a pool of loans that is assumed to be paid off prematurely in each period. |
17. | The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. Changes in the CPI are used to assess price changes associated with the cost of living; the CPI is one of the most frequently used statistics for identifying periods of inflation or deflation. |
18. | Correlation is a statistical measure of how two securities move in relation to each other. |
19. | A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. |
20. | Credit default swaps are swaps designed to transfer the credit exposure of fixed income products between parties. A credit default swap is also referred to as a credit derivative contract, where the purchaser of the swap makes payments up until the maturity date of a contract. Payments are made to the seller of the swap. In return, the seller agrees to pay off a third party debt if this party defaults on the loan. |
21. | Discounted cash flow is calculated by multiplying future cash flows by discount factors to obtain present values. |
22. | Diversification is the spreading of risk by putting assets in several categories of investments. |
23. | Dividend yield is the return on an investor’s capital investment that a company pays out to its shareholders in the form of dividends. It is calculated by taking the amount of dividends paid per share over the course of a year and dividing by the stock’s price. |
24. | Drawdown is the peak-to-trough decline during a specific record period of an investment, fund or commodity. |
25. | Dry powder refers to cash reserves kept on hand to cover future obligations or purchase assets, if conditions are favorable. |
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INDUSTRY TERMS AND DEFINITIONS – (Continued)
26. | Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices. |
27. | Earnings per share (EPS) is calculated by taking the total earnings divided by the number of shares outstanding. |
28. | EBIT is a company’s earnings before interest and taxes, and measures the profit a company generates from its operations, making it synonymous with “operating profit”. |
29. | EBITDA is a company’s earnings before interest, taxes, depreciation, and amortization. |
30. | E-Mini Futures Are an electronically traded futures contract on the Chicago Mercantile Exchange that represents a portion of the normal futures contracts. |
31. | Enterprise value is a measure of a company’s total value, calculated by adding a corporation’s market capitalization, preferred stock, and outstanding debt together and then subtracting out the cash and cash equivalents. |
32. | Enterprise value/adjusted target operating profit (or Enterprise Value/adjusted target EBIT) is a financial ratio that compares the total valuation of the company with its profitability, adjusting for various special circumstances. |
33. | EV/EBITDA is the enterprise value of a company divided by earnings before interest, taxes, depreciation, and amortization. |
34. | EV/Sales is the ratio of enterprise value of a company divided by the total sales of the company for a particular period, usually one year. |
35. | Floating interest rate, also known as a variable or adjustable rate, refers to any type of debt instrument, such as a loan, bond, mortgage, or credit, that does not have a fixed rate of interest over the life of the instrument. |
36. | Forex (FX) is the market in which currencies are traded. |
37. | Free cash flow is the amount of cash a company has after expenses, debt service, capital expenditures, and dividends. |
38. | Futures are financial contracts obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. |
39. | The G20 (or G-20 or Group of Twenty) is an international forum for the governments and central bank governors from 20 major economies. It was founded in 1999 with the aim of studying, reviewing, and promoting high-level discussion of policy issues pertaining to the promotion of international financial stability. |
40. | Gross merchandise volume or GMV is a term used in online retailing to indicate a total sales dollar value for merchandise sold through a particular marketplace over a certain time frame. |
41. | “Growth” stocks are generally considered to be stocks of companies with high expected earnings growth compared to “value” stocks. Because of this higher expected growth, growth stocks tend to be priced at a higher multiple of their current earnings than value stocks. However, the premium paid for growth stocks compared to value stocks can vary dramatically depending on the market environment. |
42. | Industry cost curve is the standard microeconomic graph that shows how much output suppliers can produce at a given cost per unit. As a strategic tool, the cost curve applies most directly to commodity or near commodity industries, in which buyers get roughly the same value from a product regardless of who produces it. |
43. | An interest rate future is a financial derivative (a futures contract) with an interest-bearing instrument as the underlying asset. It is a particular type of interest rate derivative. Examples include Treasury-bill futures, Treasury-bond futures and Eurodollar futures. |
44. | An interest rate swap is a forward contract in which one stream of future interest payments is exchanged for another based on a specified principal amount. |
45. | Internal Rate of Return (IRR) is the discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. |
46. | Inverse floater (or inverse floating rate note) is a bond or other type of debt whose coupon rate has an inverse relationship to a benchmark rate. |
47. | Inverse interest-only security is a security that pays a coupon inversely related to market rates (i.e., it moves in the opposite direction of interest rates), instead of paying a coupon corresponding to the interest payments homeowners (mortgagors) actually make. |
48. | An Investment Grade bond is a bond with a rating of AAA to BBB; a Below Investment Grade bond is a bond with a rating lower than BBB |
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INDUSTRY TERMS AND DEFINITIONS – (Continued)
49. | A Leveraged Buyout (LBO) is the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. |
50. | Loss adjusted yields are those that already reflect the impact of assumed economic losses. |
51. | Margin of safety is a principle of investing in which an analyst only purchases securities when the market price is below the analyst’s estimation of intrinsic value. It does not guarantee a successful investment. |
52. | Market capitalization (or market cap) is the total value of the issued shares of a publicly traded company; it is equal to the share price times the number of shares outstanding. MBA Refinance index is a weekly measurement put together by the Mortgage Bankers Association, a national real estate finance industry association, to predict mortgage activity and loan prepayments based on the number of mortgage refinance applications submitted. |
53. | The Merrill Option Volatility Expectations Index (MOVE©) reflects a market estimate of future Treasury bond yield volatility. The MOVE index is a yield curve weighted index of the normalized implied volatility on 1-month Treasury options. The MOVE Index reports the average implied volatility across a wide range of outstanding options on the two-year, five-year, 10-year, and 30-year U.S. Treasury securities. |
54. | Net operating profit after tax (NOPAT): A company’s potential cash earnings if its capitalization were unleveraged (that is, if it had no debt). |
55. | Normalized earnings are earnings adjusted for cyclical ups and downs of the economy. Also, on the balance sheet, earnings adjusted to remove unusual or one-time influences. |
56. | Operating cash flow is calculated by summing net profit, depreciation, change in accruals, and change in accounts payable, minus change in accounts receivable, minus change in inventories. |
57. | Options are financial derivatives that represent a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date). |
58. | Pair-wise correlation is the average of the correlations of each managers’ performance with each of the other managers on the fund. |
59. | Personal consumption expenditure is the measure of actual and imputed expenditures of households, and includes data pertaining to durable and non-durable goods and services. It is essentially a measure of goods and services targeted towards individuals and consumed by individuals. |
60. | Present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return. |
61. | Price to book ratio is calculated by dividing the current market price of a stock by the book value per share. |
62. | Price to earnings (P/E) ratio is a common tool for comparing the prices of different common stocks and is calculated by dividing the current market price of a stock by the earnings per share. Similarly, multiples of earnings and cash flow are means of expressing a company’s stock price relative to its earnings per share or cash flow per share, and are calculated by dividing the current stock price by its earnings per share or cash per share. Forecasted earnings growth is the projected rate that a company’s earnings are estimated to grow in a future period. |
63. | Price to sales (P/S) ratio is a tool for calculating a stock’s valuation relative to other companies, calculated by dividing a stock’s current price by its revenue per share. |
64. | Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard, or tangible, book value as reported in the company’s balance sheet. The tangible book value number is equal to the company’s total book value less the value of any intangible assets. |
65. | Prime is a classification of borrowers, rates, or holdings in the lending market that are considered to be of high quality. |
66. | Principal only securities are a type of fixed-income security where the holder is only entitled to receive regular cash flows that are derived from incoming principal repayments on an underlying loan pool. |
67. | Private market value is the value of a company if each of its parts were independent, publicly traded entities. |
68. | Prospective earnings growth ratio (PEG ratio): The projected one-year annual growth rate, determined by taking the consensus forecast of next year’s earnings, less this year’s earnings, and dividing the result by this year’s earnings. |
69. | Put writing is a family of options trading strategies that involve the selling of put options to earn premiums. One can either write a covered put or a naked put. Utilizing a combination of covered puts and naked puts, one can also implement the ratio put write, which is a neutral strategy. |
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INDUSTRY TERMS AND DEFINITIONS – (Continued)
70. | Quantitative Easing (QE) is a monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply. |
71. | Return on capital (ROC) is a measure of how effectively a company uses the money (borrowed or owned) invested in its operations. It is calculated by dividing net income by invested capital. |
72. | Return on equity (ROE) is a measure of how well a company used reinvested earnings to generate additional earnings. Expressed as a percentage, it is calculated by dividing net worth at the beginning of the period into net income for the period after preferred stock dividends but before common stock dividends. |
73. | Return on investment capital (ROIC) is calculated by subtracting dividends from net income and dividing by total capital. |
74. | Sequential growth is a measure of a company’s short-term financial performance that compares the results achieved in a recent period to those of the period immediately preceding it. |
75. | Sharpe ratio is the measure of a fund’s return relative to its risk. The Sharpe ratio uses standard deviation to measure a fund’s risk-adjusted returns. The higher a fund’s Sharpe ratio, the better a fund’s returns have been relative to the risk it has taken on. Because it uses standard deviation, the Sharpe ratio can be used to compare risk-adjusted returns across all fund categories. |
76. | Short (or short position) is the sale of a borrowed security, commodity, or currency with the expectation that the asset will fall in value. |
77. | Sortino Ratio is a modification of the Sharpe ratio that differentiates harmful volatility from general volatility by taking into account the standard deviation of negative asset returns, called downside deviation. |
78. | A sovereign bond is a debt security issued by a national government. |
79. | A special situation is a particular circumstance involving a security that would compel investors to trade the security based on the special situation, rather than the underlying fundamentals of the security or some other investment rationale. A spin-off is an example of a special situation. |
80. | Spot price is the current price at which a particular security can be bought or sold at a specified time and place. |
81. | Standard deviation is a statistical measure of the historical volatility of a mutual fund or portfolio, usually computed using 36 monthly returns. |
82. | Subprime refers to the credit quality of particular borrowers, who have weakened credit histories and a greater risk of loan default than prime borrowers. The market for lenders and borrowers of subprime credit includes the business of subprime mortgages, subprime auto loans and subprime credit cards, as well as various securitization products that use subprime debt as collateral. |
83. | Swaps, traditionally, are the exchange of one security for another to change the maturity (bonds), quality of issues (stocks or bonds), or because investment objectives have changed. Recently, swaps have grown to include currency swaps and interest rate swaps. |
84. | Swaption (swap option): The option to enter into an interest rate swap. In exchange for an option premium, the buyer gains the right but not the obligation to enter into a specified swap agreement with the issuer on a specified future date. |
85. | Tangible Book Value Per Share – TBVPS is a method of valuing a company on a per-share basis by measuring its equity after removing any intangible assets. |
86. | Tracking error is the monitoring the performance of a portfolio, usually to analyze the extent to which its price movements conform or deviate from those of a benchmark. |
87. | Upside/downside capture is a statistical measure that shows whether a given fund has outperformed—gained more or lost less than--a broad market benchmark during periods of market strength and weakness, and if so, by how much. |
88. | Yield Curve: A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year U.S. Treasury debt. The curve is used to predict changes in economic output and growth. |
89. | Yield to Maturity is the rate of return anticipated on a bond if it is held until the maturity date. |
90. | Yield to Worst is the lowest potential yield that can be received on a callable bond without the issuer actually defaulting. |
91. | Z Bonds, or Z Tranches, are the final tranche in a series of mortgage-backed securities, that is the last one to receive payment. Used in some collateralized mortgage obligations (CMO), Z-bonds pay no coupon payments while principal is being paid on earlier bonds. |
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Litman Gregory Funds Trust
TRUSTEE AND OFFICER INFORMATION
Background information for the Trustees and Officers of the Trust is presented below. All Trustees oversee the PartnerSelect Funds. The SAI includes additional information about the Trust’s Trustees and is available, without charge, by calling 1-800-960-0188.
Independent Trustees*
Name, Address and Year Born | Position(s) Held with the Trust | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | #of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During Past Five Years | |||||
Julie Allecta 1676 N. California Blvd., | Independent Trustee | Open-ended term; served since June 2013 | Member of Governing Council and Policy Committee, Independent Directors Council (education for investment company independent directors) since 2014; and Retired Partner, Paul Hastings LLP (law firm) from 1999 to 2009. | 6 | Forward Funds (4 portfolios); Salient MS Trust (4 portfolios); Salient Midstream & MLP Fund (1 portfolio) | |||||
Frederick A. Eigenbrod, Jr., Ph.D. 1676 N. California Blvd., Suite 500, Walnut Creek, California 94596 (born 1941) | Independent Trustee | Open-ended term; served since inception | Vice President, RoutSource Consulting Services (organizational planning and development) since 2002. | 6 | None | |||||
Harold M. Shefrin, Ph.D. 1676 N. California Blvd., Suite 500, Walnut Creek, California 94596 (born 1948) | Independent Trustee | Open-ended term; served since February 2005 | Professor, Department of Finance, Santa Clara University since 1979. | 6 | SA Funds – Investment Trust (10 portfolios) |
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Litman Gregory Funds Trust
TRUSTEE AND OFFICER INFORMATION
Interested Trustees & Officers
Name, Address and Year Born | Position(s) Held with the Trust | Term of Office and Length of Time Served | Principal Occupation(s) During Past Five Years | #of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee/ Officer During Past Five Years | |||||
Jeremy DeGroot** 1676 N. California Blvd., Suite 500, Walnut Creek, California 94596 (born 1963) | Chairman of the Board, Trustee and President | Open-ended term; served as Chairman since March 2017, Trustee since December 2008 and President since 2014 | Chief Investment Officer of Litman Gregory Asset Management, LLC since 2008; and Co-Chief Investment Officer of Litman Gregory Asset Management, LLC from 2003 to 2008. | 6 | None | |||||
Stephen Savage 1676 N. California Blvd., Suite 500, Walnut Creek, California 94596 (born 1961) | Secretary | Open-ended term; served since 2014 | Chief Executive Officer of the Advisor since 2015; Managing Partner of the Advisor since 2010; Partner of the Advisor since 2003. | N/A | None | |||||
John Coughlan 1676 N. California Blvd., Suite 500, Walnut Creek, California 94596 (born 1956) | Treasurer and Chief Compliance Officer | Open-ended term; served as Treasurer since inception, and as Chief Compliance Officer since September 2004 | Chief Operating Officer and Chief Compliance Officer of the Advisor since 2004. | N/A | None |
* | Denotes Trustees who are not “interested persons” of the Trust, as such term is defined under the 1940 Act (the “Independent |
Trustees”). |
** | Denotes Trustees who are “interested persons” of the Trust, as such term is defined under the 1940 Act, because of their |
relationship | with the Advisor (the “Interested Trustees”). |
In addition, Jack Chee, Rajat Jain and Jason Steuerwalt, each a Portfolio Manager and Senior Research Analyst at the Advisor, are
each an Assistant Secretary of the Trust.
Trustee and Officer Information | 157 |
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The Funds may collect non-public personal information about you from the following sources:
• | Information we receive about you on applications or other forms; |
• | Information you give us orally; and |
• | Information about your transactions with us. |
We do not disclose any non-public personal information about our shareholders or former shareholders without the shareholder’s authorization, except as required or permitted by applicable law or in response to inquiries from governmental authorities. We restrict access to your personal and account information to our employees who need to know that information to provide products and services to you and to the employees of our affiliates. We also may disclose that information to non-affiliated third parties (such as to brokers or custodians) only as permitted or required by applicable law and only as needed for us to provide agreed services to you.
We maintain physical, electronic and procedural safeguards to guard your non-public personal information.
If you hold shares of the Funds through a financial intermediary, such as a broker-dealer, bank, or trust company, the privacy policy of your financial intermediary would govern how your non-public personal information would be shared with non-affiliated third parties.
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Advisor:
Litman Gregory Fund Advisors, LLC
1676 N. California Blvd., Suite 500
Walnut Creek, CA 94596
Distributor:
ALPS Distributors, Inc.
1290 Broadway, Suite 1100
Denver, CO 80203
Transfer Agent:
DST Asset Manager Solutions, Inc.
P.O. Box 219922
Kansas City, MO 64121-9922
1-800-960-0188
For Overnight Delivery:
PartnerSelect Funds
C/O DST Asset Manager Solutions, Inc.
330 W. 9th Street
Kansas City, MO 64105
Investment Professionals:
Registered Investment Advisors, broker/dealers, and other investment professionals may contact Fund Services at 1-925-254-8999.
Prospectus:
To request a current prospectus, statement of additional information, or an IRA application, call
1-800-960-0188.
Shareholder Inquiries:
To request action on your existing account, contact the Transfer agent, DST Asset Manager Solutions, Inc., at 1-800-960-0188, from 9:00 a.m. to 6:00 p.m. eastern time, Monday through Friday.
24-Hour Automated Information:
For access to automated reporting of daily prices, account balances and transaction activity, call
1-800-960-0188, 24 hours a day, seven days a week. Please have your Fund number (see below) and account number ready in order to access your account information.
Information:
Fund | Symbol | CUSIP | Fund Number | |||||||||
Equity Fund | MSEFX | 53700T108 | 305 | |||||||||
International Fund | MSILX | 53700T207 | 306 | |||||||||
Smaller Companies Fund | MSSFX | 53700T306 | 308 | |||||||||
Alternative Strategies Fund | ||||||||||||
Institutional Class | MASFX | 53700T801 | 421 | |||||||||
Investor Class | MASNX | 53700T884 | 447 | |||||||||
High Income Alternatives Fund | ||||||||||||
Institutional Class | MAHIX | 53700T876 | 1478 | |||||||||
Investor Class | MAHNX | 53700T868 | 1479 |
Website:
www.partnerselectfunds.com
Table of Contents
Item 2. | Code of Ethics. |
Not applicable for semi-annual reports.
Item 3. | Audit Committee Financial Expert. |
Not applicable for semi-annual reports.
Item 4. | Principal Accountant Fees and Services. |
Not applicable for semi-annual reports.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).
Item 6. | Investments. |
(a) The complete Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form N-CSR.
(b) Not applicable.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable to open-end investment companies.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable to open-end investment companies.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable to open-end investment companies.
Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees since the registrant last provided disclosure in response to this Item 10.
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Item 11. | Controls and Procedures. |
(a) The registrant’s President/Principal Executive Officer and Treasurer/Principal Financial Officer have reviewed the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Exchange Act. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported timely and made known to them by others within the registrant and by the registrant’s service provider.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not applicable to open-end investment companies.
Item 13. | Exhibits. |
(a)(1) Not applicable for semi-annual reports.
(a)(3) Not applicable to open-end investment companies.
(a)(4) Not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LITMAN GREGORY FUNDS TRUST
By: | /s/ Jeremy L. DeGroot | |
Jeremy L. DeGroot | ||
President and Chief Executive Officer | ||
Date: | September 1, 2020 |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Jeremy L. DeGroot | |
Jeremy L. DeGroot | ||
President and Chief Executive Officer | ||
Date: | September 1, 2020 | |
By: | /s/ John M. Coughlan | |
John M. Coughlan | ||
Treasurer and Principal Financial Officer | ||
Date: | September 1, 2020 |