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Article iMGP Funds 2020 Semi-Annual Shareholder Letter

Dear Fellow Shareholder,

Investors have been on quite a roller-coaster ride so far this year. After a dramatic decline in the first quarter, financial markets delivered an equally surprising rebound in the second quarter. Against all odds, financial markets seemed to defy grim economic news, the continued spread of COVID-19, and worldwide protests over racial injustice.  

Unprecedented global money printing and government spending were key to the sharp turnaround in the markets. Driven by massive, coordinated monetary and fiscal policy actions, the S&P 500 Index soared nearly 40% from its March 23 low, notching its best return over any 50-day period in market history.

For the second quarter overall, the S&P 500 gained 21%, cutting its year-to-date loss to just 3.1%. However, beneath the surface, and continuing a trend that has played out over the past 13 years, growth stocks –  technology stocks in particular — were the engine driving the market index higher. The Russell 1000 Growth index is up 10% on the year, while its Russell 1000 Value counterpart is down 16% — a stunning 26 percentage point divergence in only six months.

Source: Morningstar Direct as of 6/30/2020. Indexes are unmanaged and cannot be invested into directly.

Among smaller company stocks, the Russell 2000 Index surged 25% in the second quarter, but still sported a 13% loss for the first half. Here again, growth dominated value, with a 20 percentage point spread between the two segments.

The MSCI EAFE Index gained 14.9% in the second quarter, and are down 11% on the year. The MSCI EAFE Growth Index is beating the MSCI EAFE Value index by 16 percentage points over this period. The FTSE Emerging Markets All Cap China A Inclusion Index gained 19% for the quarter, and declined 10% on the year. The U.S. dollar depreciated slightly during the second quarter, providing a modest tailwind to foreign market returns for dollar-based (unhedged) investors. We see potential for more significant dollar declines looking out over the next several years.

Turning to the fixed income markets, the Bloomberg Barcalys Aggregate Bond Index returned 6% for the first half of the year. The 10-year Treasury yield dropped sharply during the crisis period, ending the first half near an all-time low at 0.65%. After suffering swift and severe losses in March, credit-sensitive sectors of the fixed income market sharply rebounded in the second quarterThe ICE BofA Merrill Lynch US High-Yield Cash Pay Index and S&P/LSTA Leverage Loan Index gained 10%, leaving both sectors down just under 5% on the year.

All five of the iMGP funds had strong absolute returns in the second quarter, and four funds outperformed their primary benchmark index. However, the positive second quarter performance was not enough to make up for the funds’ underperformance in the first quarter. For the first half of the year, all five of the iMGP funds trail their benchmarks. The iMGP Equity fund was down 7.52% versus a 3.48% loss for the Russell 3000 Index. After an extremely strong 2019, the International Fund dropped 22.83%, compared to an 11.00% decline for the MSCI ACWI ex-U.S. Index. The Smaller Companies Fund fell 18.66% versus a 12.98% loss for the Russell 2000 Index. The Alternative Strategies Fund had a 2.43% loss, compared to a 0.94% gain for 3-Month LIBOR. And the High Income Alternatives Fund lost 5.05%, compared to a 6.14% gain for the Aggregate Bond Index and a 4.78% loss for the High-Yield Bond 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 believe the Funds can perform a valuable role within a diversified investment portfolio. Each fund is sub-advised by highly disciplined, experienced, and skilled investors who we believe can outperform their benchmark over full market cycles. As noted above, this has been an extraordinary 13-year cycle (so far) of Growth hugely outperforming Value. Our equity funds have suffered in relative terms given this backdrop. The Alternative Strategies Fund can serve as a core, lower-risk holding that seeks to provide access to proven managers and strategies, differentiated sources of return, and diversification relative to traditional stock and bond investments. Finally, 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 we turn to the second half of the year we have two new developments to share. First, effective July 31, we have changed the name of our fund family to iMGP Funds. We believe this name better represents our mission to partner with high-quality managers running distinctive strategies who we believe possess a clear investment edge. Bringing strategies to the U.S. mutual fund marketplace that are not otherwise available also creates a partnership with our shareholders seeking attractive long-term performance. As an independent advisor, Litman Gregory focuses on launching funds that we believe deserve to exist based on their investment merits and that can deliver notable results. We are strongly aligned with other shareholders in the funds, being significant investors of our own and our clients’ capital in these funds.

Second, we are excited to announce the first new fund offering under the iMGP name. The iMGP SBH Focused Small Value Fund is a focused portfolio in an inefficient market space. The fund is sub-advised by Segall Bryant & Hamill’s Mark Dickherber and Shaun Nicholson, two skilled portfolio managers who specialize in small-company value investing. What differentiates this strategy is the managers’ ability to identify the building blocks of potential higher profitability for a company before they are recognized by the market consensus. This strategy is unique, and an example of the value iMGP Funds intends to bring to the mutual fund marketplace. The fund opened for investment on July 31 and is available on most trading platforms in the Institutional share class.

Stay tuned for further new iMGP offerings in the months to come.

As always, we thank you for your continued confidence and investment in the iMGP 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, 2020.


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.   LGM000985 exp.    2/28/2021