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Commentary iMGP Funds 2020 Annual Shareholder Letter

Dear Fellow Shareholder,

The past year was tragic and turbulent in many ways. Yet, global stocks (MSCI ACWI Index) ended the year at all-time highs with a 16.3% gain. It hardly needs saying, but during the dark days of March, with pandemic fears rampant and the global economy falling off a cliff, very few if any market observers would have predicted this outcome. We wouldn’t have either, but then, we avoid short-term market predictions about any event. What we did write in concluding our first quarter client investment commentary was: “Stay the course.” This is generally wise (albeit clichéd) advice for long-term investors following a disciplined investment strategy. And it proved prescient once again.

In 2020, U.S. stocks led the major equity markets. The S&P 500 500 Index gained 18.4% and the Russell 2000 Index shot up 20.0% for the year. Growth stocks again crushed value stocks, with the Russell 1000 Growth Index beating the 1000 Value index by an astounding 35 percentage points. Developed international stocks (MSCI EAFE Index) gained 7.8% for the year. Emerging-market (EM) stocks (MSCI Emerging Markets Index) rose 18.3%.

In a reversal from the full-year results, foreign stock markets were particularly strong in the fourth quarter, with gains in the mid-teens, outperforming the S&P 500 by several percentage points. Value stocks also beat growth stocks and small caps trounced large caps. Riskier assets in general got a boost from the resolution of presidential election uncertainty and surprisingly positive Phase 3 COVID-19 vaccine results announced in early November.

The comforting full-year returns masked the incredible volatility and stress investors faced earlier in the year. Stock markets around the world were down between 30% and 40% from January 1 to the market bottom on March 23, in what was the quickest/sharpest bear market in history. From that low point, stocks skyrocketed into year-end. The S&P 500, developed international, and EM stock indexes all roared back more than 65%. Small-cap U.S. stocks soared nearly 100%.

Moving on to fixed-income, core bonds (Bloomberg Barclays Aggregate Bond Index) gained a strong 7.5% for the year, providing positive returns both during and after the market crisis period. The 10-year Treasury yield touched an all-time low of 0.5% in August and ended the year at 0.93%, roughly a full percentage point below where it started 2020.

In the credit markets, high-yield bonds (ICE BofAML U.S. High Yield TR USD Index ) posted a 6.2% gain, and materially outperformed core bonds during the last three quarters of the year. Credit markets in general still have some ground to make up from the tremendous dislocations in March before the Federal Reserve rode to the rescue.

The iMGP Funds posted very strong returns in the second half of 2020. The iMGP International Fund gained 36.1%, outperforming the 24.3% return for the MSCI ACWI ex USA Index and the 21.6% return for MSCI EAFE. The iMGP Equity Fund gained 29.2%, beating the 25.2% return for the Russell 3000 Index and the 22.2% return for the S&P 500 Index. The iMGP Alternative Strategies Fund gained 9.0%, compared to 0.1% for 3-Month Libor and 7.0% for the Morningstar Multialternative category. iMGP High Income Alternatives gained 11.2%, compared to 1.3% for the Bloomberg Barclays Aggregate Bond Index and 11.5% for the BofA Merrill Lynch U.S. High-Yield Cash Pay Index.

For the full year, the International Fund gained 5.0%, trailing its index benchmarks. The Equity Fund gained 19.5%, slightly behind the Russell 3000 Index but ahead of the S&P 500 Index. The Alternative Strategies Fund returned 6.3%, outgaining both the 0.7% return for 3-month LIBOR and the 1.2% return for the Morningstar Multialternative category. Finally, the High Income Alternatives Fund gained 5.6%, compared to a 7.5% return for the Bloomberg Barclays Aggregate Bond Index, 6.2% for the High-Yield 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

We are also excited about the recent launches of our two newest funds: iMGP SBH Focused Small Value Fund and iMGP Oldfield International Value Fund.

We believe the iMGP Funds can fill a valuable role within a diversified investment portfolio. Each of the funds is sub-advised by highly disciplined, experienced, and skilled investors who we believe can outperform their benchmark over a market cycle. On our equity funds, each manager runs a distinctive, concentrated, high-conviction stock portfolio, with the goal of materially outperforming their respective market index over the long term. Our Alternative Strategies Fund can serve as a core, all-weather, lower-risk yet opportunistic holding that provides access to proven managers and strategies, differentiated sources of return, and beneficial diversification relative to traditional bond and stock 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 flexibility.

As always, we thank you for your continued trust and confidence. 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 December 31, 2020.

We wish everyone a healthy, happy, and prosperous new year.


Jeremy DeGroot, President and Portfolio Manager

Jack Chee, Portfolio Manager

Rajat Jain, Portfolio Manager

Jason Steuerwalt, Portfolio Manager


Stay Informed

iMGP Funds emails provide investors a way to stay in touch with us and receive information regarding the funds and investment principles in general. Topics may include updates on the funds and managers, further insights into our investment team’s processes, and commentary on various aspects of investing.


Performance discussions for the Alternative Strategies Fund and the High Income Alternatives Fund are specifically related to the Institutional share class. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. Diversification does not assure a profit nor protect against loss in a declining market. Litman Gregory Fund Advisors, LLC has ultimate responsibility for the performance of the iMGP Funds due to its responsibility to oversee the funds’ investment managers and recommend their hiring, termination, and replacement. Mutual fund investing involves risk; loss of principal is possible. Multi-investment management styles may lead to higher transaction expenses compared to single investment management styles. Outcomes depend on the skill of the sub-advisors and advisor and the allocation of assets amongst them. Each of the funds may invest in foreign securities. Investing in foreign securities exposes investors to economic, political, and market risks and fluctuations in foreign currencies. The iMGP International Fund will invest in emerging-market countries, which involve additional risks such as government dependence on a few industries or resources, government-imposed taxes on foreign investment, or limits on the removal of capital from a country, unstable government, and volatile markets. Each of the funds may invest in the securities of small companies. Small-company investing subjects investors to additional risks, including security price volatility and less liquidity than investing in larger companies. Investments in debt securities typically decrease when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in mortgage-backed securities include additional risks that investor should be aware of including credit risk, prepayment risk, possible illiquidity, and default, as well as increased susceptibility to adverse economic developments. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management, and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. The funds may invest in master limited partnership units. Investing in MLP units may expose investors to additional liability and tax risks. The funds may make short sales of securities, which involves the risk that losses may exceed the original amount invested. Merger arbitrage investments risk loss if a proposed reorganization in which the fund invests is renegotiated or terminated. Some of the comments are based on current management expectation and are considered “forward-looking statements”. Actual future results, however, may prove to be different from our expectations. You can identify forward-looking statement by words such as “estimate”, “may”, “expect”, “should”, “could”, “believe”, “plan”, and similar terms. We cannot promise future returns and our opinions are a reflection of our best judgment at the time this report is compiled. Opinions expressed are subject to change, are not guaranteed, and should not be considered recommendations to buy or sell any security. The views herein are those of Litman Gregory Fund Advisors, LLC at the time the material is written and may not be reflective of current conditions. Leverage may cause the effect of an increase or decrease in the value of the portfolio securities to be magnified and the fund to be more volatile than if leverage was not used. Investments in absolute return strategies are not intended to outperform stocks and bonds during strong market rallies. Please click HERE for index definitions. For industry terms and definitions, click HERE. Effective July 31, 2020 the name of the Litman Gregory Masters Funds  was changed to iMGP  Funds. The iMGP Funds are distributed by ALPS Distributors, Inc.   LGM001045 exp.    7/31/2021