Litman Gregory Alternative Strategies Fund Reduces Fees
The Litman Gregory Masters Alternative Strategies Fund has always maintained a competitive expense ratio. That expense ratio will now be even more competitive, as we are lowering the net operating expense ratio of the fund to 1.36% from 1.54%. Excluding interest and dividend expenses and acquired fund fees and expenses, our fund’s net expenses have declined to 1.28% from 1.46%. (Gross expenses remain the same at 1.64%.)
As a category, multi-alternative mutual funds continue to charge relatively high expenses compared to most other fund categories, despite generating low absolute returns over the past decade. The academic case for including alternatives in diversified portfolios is compelling, but the majority of funds in the liquid alternative space have not delivered.
While we are very pleased that our fund has produced the highest risk-adjusted returni among its Morningstar multi-alternative peers since inception, we felt it would be that much more compelling and beneficial to our shareholders to make a meaningful fee cut.
We Have Worked to Lower MASFX Expenses Since Inception
Recent Change in the Presentation of Fund Expense Ratios
FINRA disclosure requirements dictate that certain investment-related expenses be included in all presentations of total operating expense.
Specific to the Alternative Strategies Fund, interest expenses from the use of leverage and dividend/borrowing expenses related to short positions are both now included in its statutory expense ratio. Any mutual fund that participates in these investment activities has been affected.
Yet we consider these expenses to be among the regular costs of implementing the strategies managed by our sub-advisors, similar for example to traditional trading commissions. It’s important to note that the management fees and normal operating costs of managing the fund have gone down since we launched the fund (reflecting economies of scale). And now we are lowering expenses more.
Our Philosophy on Expenses
Expenses shouldn’t be the most important consideration when selecting a fund. Investors should be willing to pay for strong risk-adjusted performance or a truly diversifying, high-value strategy. But expenses should be commensurate with the benefits a strategy provides as fees can have a negative compounding impact on the actual returns realized by investors.
When we first conceived the Alternative Strategies Fund, we were determined to build a core liquid alternatives fund that could act as a diversifier and all-weather ballast for traditional investment portfolios—at a highly competitive cost to its shareholders. As significant shareholders ourselves, we have a vested interest in the continued success of the fund.
In addition to our ongoing due diligence work and monitoring of the fund’s sub-advisors, we will continue to work toward lowering expenses where possible to improve returns for our shareholders. This has been a consistent goal for Litman Gregory since we launched the fund. The decline in the fund’s expenses since its inception is evidence of that effort.