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PartnerSelect Equity Fund MSEFX

Seeking superior long-term growth relative to the overall U.S. stock market.

Overview

PartnerSelect Equity Fund, formerly known as Litman Gregory Masters Equity Fund, seeks superior long-term growth relative to the overall U.S. stock market. Each of the managers separately runs a portion of the fund's portfolio, and each represents a different stock-picking approach or market cap segment. Working independently, each manager runs a portfolio composed of no fewer than 5 or more than 15 of their most compelling stock picks. Because of the mix of managers, we expect 50% to 85% of the fund's portfolio, in normal conditions, to be invested in mid- and large-cap stocks. The fund is primarily invested in the U.S. market, although the managers have limited flexibility to invest in the stocks of foreign companies. We expect typical overseas exposure to be less than 15% of total assets. The multimanager structure results in a broadly diversified portfolio in terms of styles, industries, and stocks. Typically, the fund holds between 75 and 105 stocks.

This fund is appropriate for investors who:

  • Want a core equity investment with exposure to a broad slice of the market
  • Seek strong market-cycle performance but are less concerned about short-term returns
  • Understand the short-term risks associated with the stock market

DUE DILIGENCE TOOLKIT

Managers

Davis Selected Advisors

Target Manager Allocation: 15%

Stock-Picking Style: Blend

Christopher Davis

Portfolio Manager
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Christopher C. Davis joined Davis Advisors in 1989. He has more than 30 years of experience in investment management and securities research. He is a portfolio manager for the Davis Large Cap Value Portfolios and a member of the research team for other portfolios. Davis received his M.A. from the University of St. Andrews in Scotland.

Davis Advisors is a privately owned investment firm founded in 1969 with more than $25 billion of assets under management. Utilizing rigorous bottom-up fundamental research, Davis specializes in equity investing and does so according to our time-tested investment philosophy of buying durable businesses at value prices and holding them for the long term. Our commitment to stewardship and our alignment with clients is demonstrated by our lower than average fees and portfolio turnover as well as our more than $2 billion of co-investment by Davis Advisors, the Davis family and Foundation, and our employees, invested in similarly managed accounts and strategies as of June 30, 2019.

 

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Fiduciary Management Inc.

Target Manager Allocation: 15%

Stock-Picking Style: Blend

Pat English

Chairman, CEO, CIO
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Pat English, CFA, joined Fiduciary Management, Inc. in 1986. He is Chairman, CEO and Chief Investment Officer, and is a partner and member of the Portfolio Management Committee. English works with Jonathan Bloom, Director of Research, vetting new ideas and discussing portfolio strategy, as well as working with the research analysts. Prior to joining FMI, English was a research analyst with Dodge & Cox (1985-1986).

Jonathan Bloom

Director of Research
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Jonathan Bloom, CFA, joined Fiduciary Management, Inc. in 2010 as a Research Analyst, became Director of International Research in 2015, and since 2017, has served as Director of Research, working with Pat English and the firm’s analysts on portfolio strategy and vetting new ideas. He is a partner and member of the Portfolio Management Committee. Prior to joining FMI, Bloom completed the Columbia Business School Applied Value Investing Program (2008-2009).

Fiduciary Management, Inc. (“Fiduciary” or “FMI”), founded in 1980, is an independent money management firm based in Milwaukee, Wisconsin. Fiduciary seeks to buy companies that have durable franchises (those that can survive difficult times), and whose common stock is trading below FMI’s estimated intrinsic value of the company. Their investment process has always focused on evaluating three attributes of a company: the quality of the business model, the valuation, and the quality of management.

Assessing the quality of a business is the primary research focus. Fiduciary defines a good business model as one that has a defensible niche and can survive the ups and downs of a business cycle. FMI looks for a high degree of recurring revenue, a well-established customer base, and/or a sustainable competitive advantage. Typically, businesses that meet these characteristics are well-established with modest growth profiles. The FMI investment team seeks to understand a company’s business model, and, where necessary, adjust a company’s investment capital base for write-offs (due to bad acquisitions, for example) to get a reliable picture of a company’s historical return on invested capital (ROIC). The team will then conduct a deeper analysis of the drivers of a company’s ROIC, such as revenue growth, margins, and capital expenditure over longer time periods.

FMI’s work on a company’s business model and quality helps identify which valuation metrics, e.g., Enterprise Value (EV)-to-EBITDA, EV/Sales, and Price/Earnings, should be utilized for estimating a company’s intrinsic value. This work is also valuable in assessing whether or not the business model has changed significantly over time, making historical comparisons irrelevant. FMI is not looking for a specific discount to their estimate of intrinsic value, but if their valuation work suggests that a stock is undervalued, in absolute terms and/or in relation to its future profitability, and downside risks are limited, then a stock is a strong candidate for purchase.

FMI focuses on the background of the company management teams, which may involve assessing their experience and track record; reviewing proxy statements to determine whether management compensation and incentives are in line with shareholder interests; evaluating past management decisions to ascertain whether or not those decisions enhanced shareholder value; and, discussing with management their strategy and execution plan, to evaluate their likelihood of meeting stated goals and objectives.

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Harris Associates

Target Manager Allocation: 15%

Stock-Picking Style: Value

Clyde McGregor

Partner, Portfolio Manager
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Clyde McGregor, CFA®, has been a manager of the Oakmark Equity and Income Fund since 1995 and the Oakmark Global Fund since 2003. He joined Harris Associates in 1981 and is also a vice president of the Oakmark Funds.
In 2011, McGregor became the first recipient of the Lipper Award for Fund Excellence, presented to investment managers for achievements over their career. He holds an M.B.A. in finance from the University of Wisconsin (1977) and a B.A. in economics and religion from Oberlin College (1974).

McGregor employs Harris’ value investment philosophy and process. This investment philosophy is based upon the belief that, over time, a company’s stock price converges with the company’s intrinsic or true business value. By “true business value,” Harris means an estimate of the price a knowledgeable buyer would pay to acquire the entire business. In making its investment decisions, Harris uses a “bottom-up” approach focused on individual companies, rather than focusing on specific economic factors or specific industries.

The chief consideration in the selection of stocks is the size of the discount of a company’s stock price compared to the company’s perceived true business value. In addition, Harris looks for companies with the following characteristics, although not all companies will have all of these attributes: free cash flows and intelligent investment of excess cash, earnings that are growing and are reasonably predictable, and a high level of management ownership in the company. Once Harris determines that a stock is selling at a significant discount and that the company has some of the aforementioned attributes, Harris generally will consider buying that stock for a strategy. Harris usually sells a stock when the price approaches its estimated worth. This means Harris sets specific “buy” and “sell” targets for each stock held in its clients’ discretionary accounts. Harris also monitors each holding and adjusts those price targets as warranted to reflect changes in a company’s fundamentals. Harris attempts to manage some of the risks of investing in stocks of companies by purchasing stocks whose prices it considers low relative to the companies’ intrinsic value. In addition, Harris seeks companies with solid finances and proven records and continuously monitors each portfolio holding.

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Harris Associates

Target Manager Allocation: 15%

Stock-Picking Style: Value

Bill Nygren

Partner, Portfolio Manager, CIO-U.S. Equities
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Bill Nygren has been a manager of the Oakmark Select Fund (OAKLX) since 1996, Oakmark Fund (OAKMX) since 2000 and the Oakmark Global Select Fund (OAKWX) since 2006. He is also the Chief Investment Officer for U.S. Equities at Harris Associates, which he joined in 1983; he served as the firm’s Director of Research from 1990 to 1998.
Nygren has received many accolades during his investment career, including being named Morningstar’s Domestic Stock Manager of the Year for 2001. He holds an M.S. in Finance from the University of Wisconsin’s Applied Security Analysis Program (1981) and a B.S. in Accounting from the University of Minnesota (1980).

Approximately 15% of the Equity Fund’s assets are managed by Nygren, who employs Harris’ value investment philosophy and process. This investment philosophy is based upon the belief that, over time, a company’s stock price converges with the company’s intrinsic or true business value. By “true business value,” Harris means an estimate of the price a knowledgeable buyer would pay to acquire the entire business. In making its investment decisions, Harris uses a “bottom-up” approach focused on individual companies, rather than focusing on specific economic factors or specific industries.

The chief consideration in the selection of stocks is the size of the discount of a company’s stock price compared to the company’s perceived true business value. In addition, Harris looks for companies with the following characteristics, although not all companies will have all of these attributes: free cash flows and intelligent investment of excess cash, earnings that are growing and are reasonably predictable, and a high level of management ownership in the company. Once Harris determines that a stock is selling at a significant discount and that the company has some of the aforementioned attributes, Harris generally will consider buying that stock for a strategy. Harris usually sells a stock when the price approaches its estimated worth. This means Harris sets specific “buy” and “sell” targets for each stock held in its clients’ discretionary accounts. Harris also monitors each holding and adjusts those price targets as warranted to reflect changes in a company’s fundamentals. Harris attempts to manage some of the risks of investing in stocks of companies by purchasing stocks whose prices it considers low relative to the companies’ intrinsic values. In addition, Harris seeks companies with solid finances and proven records and continuously monitors each portfolio holding.

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Nuance Investments

Target Manager Allocation: 10%

Stock-Picking Style: Value

Scott Moore

President, CIO
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Scott Moore is the President and Chief Investment Officer of Nuance. He founded the firm in November, 2008 and is also the Lead Portfolio Manager for all products within Nuance. Moore has over 28 years of investment experience, more than 26 years of value investment analyst experience and more than 20 years of portfolio management experience using a classic value approach.
For the decade before co-founding Nuance, Moore managed more than $10 billion in institutional, intermediary and mutual fund assets for American Century Investments (ACI). Prior to becoming a Portfolio Manager, he spent three years as an Investment Analyst at ACI, specializing in the telecommunications, utility and industrial sectors. He also worked as an Investment Analyst at Boatmen’s Trust Company in St. Louis, Missouri, and at ACI as a Fixed Income Investment Analyst. Moore holds a Bachelor of Science (BS) in finance from Southern Illinois University, and a Masters of Business Administration (MBA) with an emphasis in finance from the University of Missouri. He is a CFA® charterholder.

Chad Baumler

Vice President, Co-CIO
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Chad is the Vice President & Co-Chief Investment Officer of Nuance and is a co-owner of the firm. Chad is the Co-Portfolio Manager for Nuance Concentrated Value and Nuance Mid Cap Value, and he is the lead Portfolio Manager on Nuance Concentrated Value Long Short. Chad also focuses his analytical skills on the Energy, Financial, and Real Estate sectors. He has over 13 years of investment analyst experience and 6 years of portfolio management experience using a classic value approach.

Before joining Nuance, Chad was a Portfolio Manager for ACI, where he co-managed the American Century Value fund and the American Century Market Neutral Value Fund. Prior to becoming a Portfolio Manager at ACI, he spent six years as an Investment Analyst specializing in the energy and finance sectors. Chad also has experience working in the commercial real estate industry at CB Richard Ellis, Inc. in Kansas City, Missouri.

Chad graduated from the University of Northern Iowa with a Bachelor of Arts (BA) in finance. He has an MBA with a concentration in finance from the University of Texas, McCombs School of Business. He is a CFA® charterholder and a member of the CFA Institute.

Nuance is a classic value investment firm headquartered in Kansas City, Missouri and is 100% employee owned. Nuance has been managing portfolios for individuals and institutions using the same classic value investment philosophy since first registering as an investment advisor in 2008. Nuance was formed on the belief that the ability to outperform the broad stock market is predicated on a consistent and disciplined value investing approach. The Nuance Investment Team’s sole focus is generating investment returns for clients by diligently reviewing one company at a time on its own investment merits. Through long-term study of each company and thorough analysis of financial statements, management strategy and competitive position, our Investment Team becomes familiar with each company bought and sold in the portfolios over time. This familiarity allows for consistent and prompt execution with the sole focus being the generation of excess returns over the long-term. Further, we are intensely focused on ensuring that we manage the appropriate amount of assets to allow future performance that has the opportunity to mirror that of the historical performance. We aim to outperform our primary and secondary benchmarks on an absolute and risk-adjusted basis over the long-term.

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Sands Capital Management

Target Manager Allocation: 17%

Stock-Picking Style: Growth

Michael Sramek

Research Analyst, Sr. Portfolio Manager, Managing Director
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Michael Sramek, CFA®, is a Research Analyst, Sr. Portfolio Manager, and Managing Director. Sramek joined Sands Capital in 2001 as a Research Analyst, and from 2006 to 2014, led the firm’s research efforts on energy businesses. Sramek has been a Portfolio Manager on the Sands Capital Focus 15 strategy since its inception in 2008. Prior to joining Sands Capital, Sramek was a Research Analyst at Mastrapasqua & Associates and an Associate at BARRA RogersCasey. Sramek earned an AB from Princeton University and a MBA from the Owen Graduate School of Management at Vanderbilt University.

Sands Capital is an active, long-term investor in leading growth businesses globally. Our approach combines rigorous fundamental analysis with inspired thinking to seek innovative, high-quality businesses that are creating the future. Through strategies designed to concentrate investment in these businesses, we serve the long-term growth objectives of institutions and fund sponsors in more than 40 countries. An independent, staff-owned firm based in the Greater Washington, DC area, Sands Capital managed more than $40 billion USD in client assets as of September 30, 2019.

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Wells Capital Management

Target Manager Allocation: 13%

Stock-Picking Style: Blend

Dick Weiss

Managing Director, Senior Portfolio Manager, Select Equity
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Dick Weiss is a managing director and senior portfolio manager for the Select Equity team at Wells Fargo Asset Management (WFAM). Weiss joined WFAM from Strong Capital Management in 2004. Prior to the merger, Weiss was vice chairman and CIO of Strong. He served as portfolio co-manager of the Strong Advisor Common Stock Fund and the Strong Opportunity Fund. Prior to this, he was a portfolio manager and partner at Stein Roe & Farnham in Chicago where he began his career, starting as a research analyst. Weiss earned a bachelor’s degree in business administration from the University of Southern California and a master’s degree in business administration, graduating with distinction, from Harvard Graduate School of Business Administration.

Weiss invests in stocks of small- and mid-sized companies that are undervalued either because they are not broadly recognized, are in transition, or are out of favor based on short-term factors. Weiss also has the flexibility to invest in the stocks of larger companies if in his opinion they offer the potential for better returns. In seeking attractively valued companies, Weiss focuses on companies with above-average growth potential that also exhibit some or all of the following: low institutional investor ownership and low analyst coverage, high-quality management, sustainable competitive advantage.

Weiss evaluates the degree of undervaluation relative to his estimate of each company’s private market value. This private market value approach is based on an assessment of what a private buyer would be willing to pay for the future cash flow stream of the target company. Based on his experience, Weiss believes that, except for technology and other high-growth stocks, most stocks trade at between 50% and 80% of the private market value. When trading at the low end of this range, companies take steps to prevent takeover, or they are taken over. The private market value estimate is applied flexibly, based on the outlook for the industry and the company’s fundamentals.

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Performance

AVERAGE ANNUAL TOTAL RETURN

1 Although Morningstar categorizes the Equity Fund as Large Growth, we believe it is better categorized as Large Blend.

AVERAGE ANNUAL TOTAL RETURN

1 Although Morningstar categorizes the Equity Fund as Large Growth, we believe it is better categorized as Large Blend.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that 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.

Returns less than one year are not annualized.

Prior to April 30, 2009, the fund’s Institutional Class was an unnamed share class.

Indexes are unmanaged, do not incur fees, and cannot be invested in directly. Click here for index definitions.

AVERAGE ANNUAL TOTAL RETURN

The first rolling 12 month-period is reached 12 months after each fund’s inception (based on month-end dates). The starting and ending periods then “roll” forward one month at a time to comprise a new 12-month period. The first rolling three-year period is reached 36 months after each fund’s inception (based on month-end dates). The starting and ending periods then “roll” forward one month at a time to comprise a new 36-month period. The first rolling five-year period is reached 60 months after each fund’s inception (based on month-end dates). The starting and ending periods then “roll” forward one month at a time to comprise a new 60-month period.

Fund Data

Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. The gross and net expense ratios can be found in the most recent Summary Prospectus (4/29/2020). There are contractual fee waivers in effect through 4/30/2021.

While the fund is no-load, management and other expenses still apply.

Portfolio Holdings

  • To view our most recent portfolio holdings, please click here.

Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.

Portfolio Composition (As Of 6.30.2020)

Market Capitalization
Small-Cap: < $5.0 Billion
Mid-Cap: $5.0 - $35.5 Billion
Large-Cap: > $35.5 Billion

Sector Allocation vs. Russell 3000 Index (as of 6.30.2020)

Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.

Stay Informed

The PartnerSelect Funds monthly email provides investors a way to stay in touch with us and receive information regarding the funds and investment principles in general. Topics may include updates on the funds and managers, further insights into Litman Gregoryʼs processes, and commentary on various aspects of investing.

DISCLOSURE

PartnerSelect Fundsʼ investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company, and it may be viewed here or by calling 1-800-960-0188. Read it carefully before investing.

Mutual fund investing involves risk. Principal loss is possible. 

Though not an international fund, the fund may invest in foreign securities. Investing in foreign securities exposes investors to economic, political, and market risks and fluctuations in foreign currencies. Though not a small-cap fund, the fund 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. 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.

Diversification does not assure a profit nor protect against loss in a declining market.

Small-cap, mid-cap, and large-cap companies have market capitalizations of less than $4.4b; from $4.4b to $29.4b; and greater than $29.4b, respectively. Market cap breakouts are based on the Russell index reconstitution as of June 30, 2017.

Index Definitions | Industry Terms and Definitions

References to other mutual funds should not be deemed an offer to sell or solicitation of an offer to buy shares of such funds.

The PartnerSelect Funds are distributed by ALPS Distributors, Inc.