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Fund name: Northern Multi-Manager International Equity (NIEWX)
Objective: The fund seeks long-term capital appreciation through a diversified portfolio of non-U.S. securities. Income is “incidental.” It’s willing to invest in companies of any size, though primarily in the developed markets. The portfolio is allocated among four independent, outside managers.
Adviser: Northern Trust. The parent company was founded in 1889 and has about $650 billion in assets under management. Northern Trust Global Advisors (NGTA) has been managing money for institutional investors for about a quarter century.
Manager: Andrew Smith, Senior Vice President and Chief Investment Officer for NTGA since 2000. Before that, he managed about a billion dollars in asset allocation funds for Spectrum Investments. Smith’s task here is primarily to select and monitor the fund’s sub-advisers. The four current sub-advisers are:
- Altrinsic Global Advisors – A Connecticut-based firm with about $3 billion under management. They focus on large, high quality companies. Northern describes them as having a “relative value style: expected to protect capital in negative markets.”
- Nicholas-Applegate Capital Management – A California-based adviser with about $15 billion under management. These folks provide an aggressive-growth element to the portfolio.
- Oechsle International Advisors – A Boston firm which oversees about $18 billion. This is a fairly GARP-y, conservative growth group. Oechsle was subject to a disciplinary action by the SEC in 1998 for failing to adequately supervise one of its private portfolio managers, who has since left the firm. Oechsle subsequently reimbursed its clients for the monetary losses they suffered.
- Tradewinds NWQ Global Investors – This is a wholly-owned subsidiary of Nuveen Investments with about $23 billion under management. These folks pursue an “absolute value” style which is “distinguished by deep specialization, fundamental analysis and transparency.” In theory they’ll provide the best down-side protection for the portfolio.
Inception: June 22, 2006.
Minimum investment: $2,500 for regular accounts, $500 for IRAs and $250 with an automatic investment plan.
Expense ratio: 1.45% after waivers, although only 1.59% even without the waivers. There’s also a 30-day, 2% redemption fee to discourage active traders.
Comments: The argument for Northern’s various multi-manager funds is pretty straightforward. Northern has been selecting investment managers for really rich people for 125 years. They’ve done it well enough that Northern has been entrusted with assets that are starting to creep up on the trillion dollar mark. They sorted through a set of 500 managers before selecting these four.
And, in general, they seem to be getting it right. Collectively Morningstar awards four-stars to Northern’s international fund line-up and praises their “very low” expense ratios. Nicholas-Applegate runs a bunch of pretty solid international funds, but their investment minimums are typically around a quarter million dollars. Tradewinds has only a few funds, but they’re solid, disciplined performers. Altrinsic and Oechsle’s public records are mostly with funds for sale to Canadian investors. In the US, they seem to serve mostly high net-worth individuals.
Northern positions this as a fairly aggressive choice. On their risk-reward spectrum, it occupies the fourth spot from the top behind the emerging markets, international real estate and international growth funds and next to their international index fund.
Bottom line: This fund is a calculated risk, in some ways more than most. You’re basically betting on Northern’s ability to assemble a group of superior investors whose services are not generally available. Mr. Smith has been doing this for better than 20 years and seems to be rising steadily within his profession. And Northern has been doing it, to the apparent satisfaction of “a well-heeled client” for better than a century. This seems to create a fair presumption in their favor, especially at a time when compelling choices in international funds are few.
Company link: http://www.northernfunds.com
November 1, 2006