Frequently Asked Questions - Litman Gregory's Role
Some of the ways we put shareholders’ interests first include:
- In all that we do with respect to Litman Gregory Masters Funds, our overriding decision criteria focuses on the benefit to shareholders.
- We communicate thoroughly and honestly with our shareholders.
- We work hard to continue to reduce fund expenses.
- We pass through all cost savings to shareholders.
- We have introduced meaningful fee breakpoints on the portion of the management fees we are paid, of our own volition.
- We have committed to “soft closing” our funds (in which we stop accepting new shareholder relationships) at relatively low asset levels, and we have followed through when individual funds have reached these levels.
- We and our independent trustees have invested significant amounts of our personal assets in the Litman Gregory Masters Funds. These amounts are disclosed in our shareholder reports.
Litman Gregory Fund Advisors, LLC, was founded in 1996 and is the Advisor to the Litman Gregory Masters Funds and is an affiliate of three other Litman Gregory Companies:
- Litman Gregory Asset Management, LLC was founded in 1987 and manages money for high net worth individuals and families as well as foundations, endowments and company retirement plans.
- Litman Gregory Research Inc. was founded in 1989, publishes the No-Load Fund Analyst investment research publication.
- Litman Gregory Analytics, LLC was founded in 2000 and operates Advisor Intelligence, a web-based investment research service for financial advisors.
Since 1987 Litman Gregory and its affiliates have researched, analyzed and written about hundreds of stock picking teams and mutual funds and put their ideas to the test by designing and successfully investing in portfolios of funds. Drawing on insights gained from years of evaluating and analyzing mutual funds, Litman Gregory Fund Advisors, LLC was formed in 1996 to oversee the Litman Gregory Masters Funds' operations.
Ken Gregory and Jeremy DeGroot share responsibility at Litman Gregory for overseeing the Litman Gregory Masters Funds. Ken Gregory is a Trustee of the Trust. He is also co-founder of Litman Gregory and Chief Investment Strategist of Litman Gregory Asset Management. Jeremy DeGroot, CFA, is Chief Investment Officer of Litman Gregory Asset Management and joined the firm in 1999.
First and foremost we select the sub-advisors for board approval. Beyond that we have six primary areas of responsibility:
- On an ongoing basis we monitor and evaluate the sub-advisors. We evaluate the managers’ stock picks, attentiveness, and clarity of thinking with respect to Litman Gregory Masters Funds. We also pay attention to developments in each sub-advisor’s organization as well as the manager’s performance.
- When necessary we replace managers. With more than 20 sub-advisors across four funds there are occasionally going to be instances where a change must be made.
- We are responsible for monitoring the overall fund portfolios. On a day-to-day basis we pay attention to what the sub-advisors are buying and selling. We don’t second-guess their decisions however, because each sub-advisor works independently and is unaware of the overall fund portfolio, it is important for us to watch for unintended fund-level concentrations in specific industries or stocks. This is rarely a problem, though there was one instance where three of the managers in Litman Gregory Masters Funds International owned the same stock. Stock overlap is not a concern to us unless the holding becomes an unusually large percentage of the fund’s portfolio. In this case a particular stock was performing very well and grew to 10% of the overall portfolio. Prior to that point we conferred with the three sub-advisors. After its portfolio allocation continued to grow through appreciation up to 10%, we asked each sub-advisor to trim their holding to help us reduce the allocation in the portfolio to 7%.
- We oversee expense management. This includes negotiating and overseeing expenses, including all vendor relationships. We take this job very seriously and are always looking for opportunities to reduce expenses. We pass along one hundred percent of all cost savings to shareholders.
- Tax management is another area we pay attention to. When a fund has a big loss in a holding we make sure the sub-advisor is aware of the tax-selling opportunity in case there is another stock that may be equally attractive that he may want to hold in its place. We leave this decision up to the managers and view our role as limited to making sure they are aware of tax-selling opportunities.
- Finally, we are responsible for shareholder communications. We take our responsibility to communicate with shareholders very seriously. Our mission in all of our shareholder communications is to be honest and open about everything impacting our fellow shareholders. In addition to the required annual and semi-annual reports we also post on-line and mail out letters in the off-quarters (some fund supermarkets won’t mail this “non-required” correspondence) and update our website on a frequent basis.