KL Allocation Fund

 


Fund Description and Objective:
The KL Allocation Fund seeks long-term capital appreciation with an emphasis on capital preservation.
The fund invests in the equities of Knowledge Leaders, those companies that possess deep reservoirs of intangible capital as a result of their history of investing in knowledge-intensive activities like R&D, brand development and employee education. Academic research has proven highly innovative companies have a tendency to generate excess returns in the stock market, and it is these excess returns the investment team aims to capture in the portfolio.
The fund employs an allocation strategy, investing in three asset classes depending on market factors: equities, fixed income and cash. As a result of highly active stock selection and asset allocation decisions, the fund has established a long history of avoiding major market drawdowns. May be recommended for portfolio performance, portfolio efficiency and downside protection.

Key Facts

Inception Date:
Morningstar Category:
I-share/A-share:
I-share CUSIP:
A-share CUSIP:
Total Operating Expenses:
Distribution Frequency:
Benchmark:

Portfolio Managers:
9/30/2010
World Allocation
GAVIX/GAVAX
461418659
461418667
1.24%/1.49%
Annually
Morningstar Developed Markets
Large-Mid Cap Index
Steven Vannelli, CFA
Bryce Coward, CFA

Performance
(as of 9/30/2020)

As of 9/30/2020, the 1-year, 5-year, 10-year and since inception annualized total returns for the KL Allocation Fund Advisor Class were 16.37%, 7.14%, 7.65% and 7.65% and Institutional Class were 16.59%, 7.42%, 7.94% and 7.94%, respectively. The Morningstar Developed Markets Large-Mid Cap Index 1-year, 5-year, 10-year and since inception annualized total returns as of 9/30/2020 were 10.24%, 10.40%, 9.37% and 9.37%. The total annual operating expenses of the Fund are 1.49% and 1.24% for the Advisor and Institutional Classes, respectively. The inception date for the KL Allocation Fund is 09/30/10.

The performance data quoted here represents past performance. Past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information quoted. To obtain performance information current to the most recent month-end please call 888.998.9890 or visit our website at www.KnowledgeLeadersFunds.com

The Advisor has contractually agreed to waive its fees and/or pay for operating expenses of the Fund to ensure that the total annual fund operating expenses (excluding any taxes, leverage interest, brokerage commissions, dividend and interest expenses on short sales, acquired fund fees and expenses (as determined in accordance with Form N-1A), expenses incurred in connection with any merger or reorganization, and extraordinary expenses such as litigation expenses) do not exceed 1.50% and 1.25% of the average daily net assets of Advisory Class and Institutional Class shares of the Fund, respectively. This agreement is in effect until December 31, 2020, and it may be terminated before that date only by the Trust’s Board of Trustees.

Past performance is no guarantee of future results. Ratings may reflect fee waivers in effect; in their absence, ratings may have been lower. Ratings for other share classes may vary. As of 9/30/20, the KL Allocation Fund was rated against the following numbers of U.S.-domiciled World Allocation funds over the following time periods: 394 funds in the last three years, 338 funds in the last five years and 394 funds overall. With respect to these World Allocation funds, the KL Allocation Fund received a Morningstar Rating of 5 stars for the three-year, five-year and overall periods, respectively. Please note: Morningstar ratings reflect the 3- and 5-year time periods but will not reflect greater time periods in the World Allocation category before the fund’s strategy added a secondary objective of capital preservation and a targeted fixed income allocation. The Morningstar ratings highlighted here reflect the time period since that update.

Moneyball Investing 2020: Winning the Loser’s Game
Oakland A’s Coach Billy Beane’s genius was transforming professional baseball from a Winner’s Game, in which the actions of a few superstars dictated the outcome, to a Loser’s Game, where the team that made the fewest errors won. Legendary investor Charles Ellis has declared that active money management also has turned from a Winner’s Game to a Loser’s Game. Today, when over 90% of active managers are underperforming*, success may be as much about selling the wrong stocks as buying the right ones. In the KL Allocation Fund, we apply a Moneyball approach: seeking to outperform by making fewer mistakes than the overall market. Of the 19 five percent plus market drawdowns since inception of the fund, the fund has outperformed in all 19 (as of 9/30/20).

We first published “Moneyball Investing, Winning the Loser’s Game” in January 2018, and it quickly became our most popular white paper ever. The COVID-19 crisis of 2020 and its impacts on the markets remind us that years of accumulated investor capital can disappear in the blink of an eye. As such, we revisited our Moneyball analysis to explore how the philosophy stands up to new data. Download our updated white paper here: Moneyball Investing 2020: Winning the Loser’s Game.


Risk Metrics
(as of 9/30/2020 - Trailing 5 Years)

 

Risk Metrics
GAVIX
Morningstar DM Large-Mid Cap Index
Alpha (%)
3.14
0.00
Beta
0.32
1.00
Max Drawdown (%)
-15.62
-21.25
Up/Down Capture Ratio
2.13
1.00
Treynor Ratio
19.49
9.23
Sharpe Ratio
0.84
0.68
Sortino Ratio
1.43
0.99
Standard Deviation (%)
7.39
14.39

Past performance does not guarantee future results.

Diversification Analysis
(as of 9/30/2020)

The KL Allocation Fund had a low correlation to benchmark indexes compared to the Morningstar World Allocation category average and a high tracking error, indicating a high level of active management and conviction. A fund with a high active share means the fund’s holdings are significantly different from the benchmark. Studies show high active share may be a significant predictor of performance.

Active Share is a term introduced by Martijn Cremers and Anti Petajisto in a March 31, 2009 paper, “How Active Is Your Fund Manager? A New Measure That Predicts Performance.” They defined the term as the “fraction of the portfolio that is different from the benchmark index” and found in a study of domestic equity funds from 1980-2003, “funds with the highest Active Share significantly outperformed their benchmarks, both before and after expenses, and they exhibited strong performance persistence.”

Active Share is the percentage of stock holdings in the portfolio that differ from the benchmark, the Morningstar Developed Markets Large-Mid Cap Index.

Allocations
(as of 9/30/2020)

Asset Allocations

Asset
Percent
Equity
45.11
Cash
31.17
Fixed Income
13.49
Precious Metals
10.24

Equity Allocations by Sector

Sector
Percent
Health Care
27.04
Consumer Discretionary
18.72
Materials
18.27
Consumer Staples
11.71
Information Technology
11.01
Industrials
8.65
Communication Services
4.60

Equity Allocations by Country

Country
Percent
United States
38.35
Japan
24.14
Canada
7.75
France
4.83
United Kingdom
4.25
Germany
3.57
Netherlands
3.27
Sweden
2.99
Israel
2.37
Switzerland
2.32
Denmark
1.67
Ireland
1.30
South Korea
1.19
Taiwan
1.09
Australia
0.91

Top 20 Equity Holdings
(as of 9/30/2020)

Company
% Weight in Portfolio
CHUGAI PHARM CO
1.91
AGNICO-EAGLE MINES LTD
1.75
L’OREAL
1.51
KONINKLIJKE DSM NV
1.48
ROYAL GOLD INC
1.42
FRANCO NEVADA CORP
1.31
BEST BUY CO INC
1.29
DAIKIN INDUSTRIES LTD
1.07
NICE SYSTEMS LTD
1.07
SYMRISE AG
1.03
SMC CORP
1.00
BIO-TECHNE CORP
0.99
ALPHABET INC CAP STK CL A
0.93
UNI-CHARM CORP.
0.91
RECKITT BENCK GRP
0.89
SWEDISH ORPHAN BIO
0.88
DANAHER CORP DEL COM
0.87
NISSIN FOOD HOLDINGS CO LTD
0.81
PANDORA A/S
0.75
TAKARA HOLDINGS INC
0.71

PDF View Entire Portfolio Holdings

Quarterly Strategy Report

Q3 2020 Slides:
The COVID Shocks and Asset Allocation

Fund Materials & Commentary

Quarterly analysis and updatedownload

A complete guide to the KL Allocation Funddownload

Everything you need to know to invest in GAVIXdownload

An overview of our investment strategy & productsdownload

What is the Knowledge Effect?

The Knowledge Effect is the tendency of highly innovative companies to generate excess returns in the stock market. It is a market anomaly based on decades of academic research. To learn more, read our white paper, The Knowledge Effect: Excess Returns of Highly Innovative Companies.

See Terms and Conditions

Please consider the Fund’s investment objectives, risks, charges and expenses before investing. The prospectus or summary prospectus that contains this and other information about the Fund, is available by calling 888.998.9890 and should be read carefully.

The value of the securities held by the Fund will change due to general market and economic conditions and industry perceptions. Investments in non-US issuers may involve unique risks. Currency fluctuation, adverse political, economic or social developments could undermine the value of the Fund’s investments. The securities of mid-cap companies may be subject to more abrupt or erratic market movements and may have lower trading volumes. Many of the risks with respect to foreign investments are more pronounced for investments in issuers in developing or emerging market countries. An investment in a fund that is less diversified across countries or geographic regions is generally riskier than an investment in a more geographically diversified fund.

Portfolio composition will change due to ongoing management of the Fund. References to specific securities or sectors should not be construed as recommendations by the Fund, its Advisor or Distributor.

The Fund’s primary performance benchmark is the Morningstar Developed Markets Large-Mid Cap Index. The index is a subset of large-cap and mid-cap stocks in the Morningstar Developed Markets Index, a broad market Index representing 97% of Developed Markets equity market capitalization.

The fund’s secondary benchmark is comprised of a 60% weighting in the Morningstar Developed Markets Large-Mid Cap Index and a 40% weighting in the Bloomberg Barclays U.S. Treasury Bond Index. The Bloomberg Barclays U.S. Treasury Bond Index is a market capitalization weighted index that is often used to represent investment grade bonds being traded in the United States.

Effective June 30, 2020, the Fund changed its primary performance benchmark to the Morningstar Developed Markets Large-Mid Cap Index because the Fund’s advisor believes this benchmark is more transparent, has a clearer set of objective rules and represents a better equity benchmark with which to compare performance of the fund.

Market Turbulence Resulting from COVID-19. The outbreak of COVID-19 has negatively affected the worldwide economy, individual countries, individual companies and the market in general. The future impact of COVID-19 is currently unknown, and it may exacerbate other risks that apply to the Fund.

The KL Allocation Fund is distributed by IMST Distributors, LLC.

© 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.

Morningstar RatingTM
The Morningstar RatingTM 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 product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. 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 star 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.

Knowledge Leaders Funds are not sponsored, endorsed, sold or promoted by Morningstar, Inc. or any of its affiliates (all such entities, collectively, “Morningstar Entities”). The Morningstar Entities make no representation or warranty, express or implied, to the owners of the Knowledge Leaders Funds or any member of the public regarding the advisability of investing in mutual funds or ETFs generally or in the Knowledge Leaders Funds in particular or the ability of the Knowledge Leaders Funds to track mutual fund or ETF market performance. THE MORNINGSTAR ENTITIES DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE KNOWLEDGE LEADERS FUNDS OR ANY DATA INCLUDED THEREIN AND MORNINGSTAR ENTITIES SHALL HAVE NO LIABILITY FOR ANY ERRORS OMISSIONS, OR INTERRUPTIONS THEREIN.

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