2019 Semi-Annual Shareholder Letter

Dear Fellow Shareholder,

The first half of 2019 saw robust gains across most asset classes, but it certainly wasn’t a smooth ride. Global stock markets got a jump start on the year thanks to progress in U.S.-China trade negotiations and a newly “patient” Fed, but an abrupt breakdown in the trade talks (announced via Presidential tweet) spurred a sharp market selloff in May. Then in June, stock markets shook off their swoon, rebounding on expectations of Fed rate cuts later in the year and (tentative) signs of re-engagement on the U.S.-China trade front.

The S&P 500 index hit a new high near the end of June, shooting up 7.1% for the month—its best June since 1955The index was up 4.3% for the second quarter, and a remarkable 18.5% for the first six months of the year—the market’s best first half in 22 years.

Developed international stocks gained 5.9% in June, 3.7% for the second quarter, and 14.0% for the year to date. European stocks have done a bit better, gaining 15.6% on the year so far. In April, the “Brexit can” was kicked down the road at least until October 31, but the risk of a disruptive “no-deal” exit remains. Emerging-market (EM) stocks posted a first-half gain of 10.58%. The dollar was roughly flat versus EM and developed market currencies over the six-month period.

In the bond markets, the 10-year Treasury yield continued to plunge from its multi-year high of 3.2% last October, dipping below 2% following the Federal Reserve’s June meeting. This was a near three-year low, and among its lowest levels ever. The 10-year yield ended the month at 2.0%. Bond prices rise as yields fall, driving the core bond index to an impressive 6.1% return so far this year. High-yield bonds gained an even more impressive 10.2%.

For the first half of the year, all five of the Litman Gregory Masters funds had strong performance. The Litman Gregory Masters International Fund gained 18.08%, outperforming the MSCI ACWI ex USA Index, which was up 13.60%. The Litman Gregory Masters Equity Fund gained 19.11%, ahead of the S&P 500 Index’s 18.54% return and the Russell 3000 Index’s 18.71% return. The Litman Gregory Masters Smaller Companies Fund gained 21.31%, outperforming the 16.98% gain of the Russell 2000 Index. The Litman Gregory Masters Alternative Strategies Fund returned 5.85%, compared to a 1.42% return for 3-month LIBOR and a 5.17% return for the Morningstar Multialternative category. Finally, our newest fund, the Litman Gregory High Income Alternatives Fund rose 5.70%, compared to a 6.11% gain for the Bloomberg Barclays U.S. Aggregate Bond Index and 10.16% for the BofA Merrill Lynch US High Yield Cash Pay Index.

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.mastersfunds.com.

We believe the Litman Gregory Masters Funds can perform a valuable role within a diversified investment portfolio. Each of the Masters Funds is sub-advised by a group of highly disciplined, experienced, and skilled investors who we believe can outperform their benchmark over a market cycle. On our three equity funds, each manager runs a distinctive, concentrated, high-conviction stock portfolio, with the objective to materially outperform their respective market index over the long term. Our Alternative Strategies Fund can serve as a core, lower-risk, all-weather holding that provides access to proven managers and strategies, differentiated sources of return, and beneficial diversification relative to traditional stock and bond investments. 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 always, we thank you for your confidence in the Litman Gregory Masters 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, 2019.


Jeremy DeGroot, President and Portfolio Manager
Jeremy DeGroot Signature

Jack Chee, Portfolio Manager
Jack Chee Signature

Rajat Jain, Portfolio Manager
Rajat Jain Signature

Jason Steuerwalt, Portfolio Manager
Rajat Jain Signature