Changes Approved to Several UPAL Pooled Funds

At the June 2020 meeting of the UPAL Financial Management Committee, approval was given to making  changes to the underlying funds of the UPAL Large Cap Value Pooled Fund, UPAL US Small Cap Pooled Fund, UPAL International Pooled Fund, UPAL Global Public Real Estate Pooled Fund, and UPAL Alternative Investment Fund.  Approval was given based on the recommendations of the Strategic Investment Advisory Group of independent investment advisors to the UPAL Retirement Program.

Removal of Several DFA Funds

UPAL Large Cap Value Pooled Fund – The DFA Large Cap Value will be removed from this pooled Fund.

UPAL Small Cap Pooled Fund – The DFA US Small Cap Fund will be removed from this pooled Fund.

These Funds have been underperforming and contributing to greater tracking error versus their respective benchmarks. They are experiencing greater volatility and greater downside in market declines. They are no longer additive to their respective UPAL Pooled Funds given their investment objectives.

Replacement of Several DFA Funds

UPAL International Pooled Fund – The DFA Emerging Markets Fund will be replaced with the Fidelity Emerging Markets Index Fund. The DFA Emerging Markets Fund has been underperforming in recent periods. A true index fund will have the ability to track the index better and at a lower cost than the DFA fund. The Fidelity fund has demonstrated these characteristics.

UPAL Global Public Real Estate Pooled Fund – The DFA International Real Estate Fund will be replaced by the Vanguard Global ex-US Real Estate Index Fund. While both funds have historically performed in-line with its index, the Vanguard fund has provided better risk-adjusted results at a lower cost.

UPAL Alternative Investment Pooled Fund – The Hancock Horizon Quant Long/Short Fund will be replaced by the Neuberger Berman Long Short Fund. The Hancock fund has not done a good job of managing downside risk during the past two market declines relative to the S&P 500 and long/short equity peer group. One of the reasons the fund has failed to perform well on the downside, has been the fund’s lack of short exposure. The fund has not provided the protection we would have hoped for during the previous two bear markets. The Neuberger fund has demonstrated that it is better at managing market declines.

A long/short fund is a type of mutual fund or hedge fund that takes both long and short positions in investments. These funds use an investment strategy that seeks to hold underpriced stocks while selling short overpriced shares.

Implementation of these changes became effective August 13, 2020. Should you have any questions or concerns, please do not hesitate to contact UPAL at 918-747-5585.