The Merk Absolute Return Currency Fund (MABFX) seeks to generate positive absolute returns by investing in currencies.
The Merk Absolute Return Currency Fund is a pure play on currencies, aiming to profit regardless of the direction of the U.S. dollar or traditional asset classes.
To help give investors a better understanding of the Fund’s currency allocations, please consider the allocation chart below. To allow us to communicate the Fund’s currency allocations in as timely a manner as possible, we depict approximate currency exposure bands. This chart was most recently updated on May 1, 2012. For the most recent month end allocation, please click here.
Please note that currency exposure bands shown above are as of May 1, 2012 and may change without notice.
Model Explained
The discussion below is intended for those interested in details on how the Fund's investment process is implemented. For a more general discussion, please see the Adviser's process and prospectus.
The quantitative factors employed are grouped into different sub-strategies that we call Absolute Valuation; Absolute Momentum; Absolute Carry; and Absolute Resources. Below is a discussion of how these groups, as well as the Macro Overlay, influence the Fund’s currency allocation as of May 1, 2012:
Absolute Valuation is an analysis of purchasing power differentials across regions. Currencies favored (long positions) include: Swedish krona, British pound; disfavored currencies (short positions) include: Japanese yen.
Absolute Momentum is based on a trend following methodology. Currencies favored (long positions) include: British pound; disfavored currencies (short positions) include: U.S. dollar.
Absolute Carry is based on an analysis of interest rate differentials. Currencies favored (long positions) include: Canadian dollar, British pound; disfavored currencies (short positions) include: Australian dollar.
Absolute Resources is based on an analysis of commodities and natural resources, as well as world trade and their impact on currencies. Currencies favored (long positions) include: Swiss Franc; disfavored currencies (short positions) include: U.S. dollar.
Macro Overlay is based on an analysis of qualitative factors, such as monetary policies pursued by central banks, economic environments and a proprietary analysis on the outlook of a country’s currency. Currencies favored (long positions) include: Canadian dollar, New Zealand dollar; disfavored currencies (short positions) include: Norwegian krone, Japanese yen.
Note that different models may offset currency exposures; as an example, a disfavored (short) currency exposure generated by the Merk Absolute Momentum model may be more than offset by a positive (long) currency exposure generated by the Merk Absolute Carry model, or the Macro Overlay. Also note that the above discussion may not list all currencies that are favored (long) or disfavored (short). Currency exposure may change without notice.
Below is a discussion of the Fund’s key currency exposures for the month of April 2012.†
The Fund’s largest long position during the month of April was the Swedish krona (SEK). The Absolute Valuation favored this position. The SEK declined 1.61% during April. Thus, the long position detracted from overall Fund performance.
The Fund also held long positions in the Australian dollar (AUD) and Canadian dollar (CAD). The Absolute Carry and the Macro Overlay favored these currencies, respectively. Both positions contributed positively to returns, as the AUD and the CAD appreciated 0.80% and 1.15%, respectively.
The Fund’s largest short position during April was the Japanese yen (JPY). This position detracted to overall Fund performance, as the JPY gained 3.82%. The Absolute Momentum, Absolute Valuation and Macro Overlay strategies disfavored the currency.
The Fund also held a short position in the British pound (GBP) during the month. The Macro Overlay disfavored the currency. The GBP short position detracted from overall Fund performance, as the GBP appreciated 1.41% during April.
For an updated general discussion of the Fund’s currency exposures, please see the Currency Allocation section.
The Fund publishes its net open forward contracts on a monthly basis. Net open forward contracts as of April 30, 2012 are shown below2:
Currency
Settlement
Percent
AUD
05/23/12
22.6%
CAD
05/23/12
17.5%
CHF
05/23/12
8.7%
EUR
05/23/12
17.4%
GBP
05/23/12
-8.7%
JPY
05/23/12
-90.4%
NOK
05/23/12
-1.4%
NZD
05/23/12
2.6%
SEK
05/23/12
28.5%
The Fund publishes its security holdings on a monthly basis. Security holdings as of April 30, 2012 are shown below:
Holding
Currency
Maturity
Percent
U.S. T-Bill
USD
08/23/12
10.4%
U.S. T-Bill
USD
09/20/12
31.2%
U.S. T-Bill
USD
10/18/12
22.9%
U.S. T-Bill
USD
11/15/12
16.7%
U.S. T-Bill
USD
12/13/12
16.6%
The Fund accepts investments in the following minimum amounts:
Minimum Initial Investment
Minimum Additional Investment
Standard Accounts
$2,500
$100
Traditional and
Roth IRA Accounts
$1,000
$100
To allow investors to understand the currency contribution to overall Fund performance, please consider the performance attribution chart. The chart was most recently updated on April 30, 2012. It depicts individual currency contribution to performance for each currency invested in, along with a description of the average allocation to individual currencies (long, short, or neutral) during each specified time period. Currencies are listed in descending order, from greatest contributor to largest detractor.
Blue shaded currencies contributed to performance; grey shaded currencies detracted from performance; white shaded currencies neither contributed nor detracted.
*These zipped files are in the Extensible Business Reporting Language format and can only be viewed using an XBRL viewer. If you do not have access to an XBRL reader, please visit the SEC website.
Click here to download the Adobe® Reader® to view and print the PDF version of the Fund Fact Sheet.
Currency symbols: AUD Australian dollar; CAD Canadian dollar; CHF Swiss Franc; EUR euro; GBP British pound; JPY Japanese yen; NOK Norwegian krone; NZD New Zealand dollar; SEK Swedish krona; USD U.S. dollar
†Source for all currency data: Bloomberg. All performance figures versus U.S. dollar, unless otherwise stated.
1Assets reflect investor and institutional shares combined.
2The Fund may invest substantially in forward foreign currency contracts or other derivative instruments. Because delivery and settlement of forward contracts takes place in the future, the Fund will retain the assets it intends to use to settle the contracts and invest these assets in various U.S. fixed income instruments that the Adviser expects will generate income for the Fund. Under such circumstances, the Fund may not have a material portion of its assets invested in the securities of issuers located in markets outside of the U.S. The value of the Fund’s investments in U.S. fixed income instruments (to the extent used to cover the Fund’s net exposure under the forward foreign currency contracts and similar instruments) and forward contracts and other instruments that provide investment exposure tocurrencies will be counted for purposes of the Fund’s 80% policy.
As with any mutual fund product, there is no guarantee that the fund will achieve its goals. Investment return and principal value will vary and shares may be worth more or less at redemption than at original purchase; the Fund is not a substitute for a money market fund. Investors should consider the investment objectives, risks and charges and expenses of the Merk Absolute Return Currency Fund carefully before investing. The prospectus contains this and other information about the Merk Absolute Return Currency Fund. To obtain a prospectus, please download it now or call (866) MERK FUND. The prospectus should be read carefully before investing.
Since the Fund primarily invests in foreign currencies, changes in currency exchange rates will affect the value of what the Fund owns and the price of the Fund’s shares. Investing in foreign instruments bears a greater risk than investing in domestic instruments for reasons such as volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. The Fund is subject to interest rate risk which is the risk that debt securities in the Fund’s portfolio will decline in value because of increases in market interest rates. The Fund may also invest in derivative securities which can be volatile and involve various types and degrees of risk. For a more complete discussion of these and other Fund risks please refer to the Fund’s prospectus.
Fact Sheet
XBRL*
