Over the past year, we made the decision to gradually convert away from blend funds, and we have now begun that process.

In the past, New Capital has regularly utilized “blended” mutual funds for clients, funds where multiple asset classes are held within a single fund.  For example, a fund might hold both stocks and bonds (such as DGSIX, the DFA Global 60/40 fund).  Or a fund might hold both US and international stocks (such as DREIX, the DFA World Core Equity fund).  These funds have done their jobs well and delivered market results as they were intended to do.

As our internal trading and rebalancing technology has evolved and grown, however, these blend funds have become less optimal for New Capital to utilize because the asset allocations are established within the blend funds, which makes it more difficult for asset allocation trading software to analyze them from the outside.  As a result, over the past year, we made the decision to gradually convert away from blend funds, and we have now begun that process.  If you hold blend funds in your tax-deferred qualified accounts (such as an IRA) our general intention is to trade out your blend funds and replace them with non-blend funds.  However, if you hold blend funds in non-qualified taxable accounts (such as an individual or joint account), and the fund is highly appreciated, we will retain the blend fund in order to avoid generating capital gains taxes.

Please note that there is an added benefit to this conversion: we estimate fund management fees will be further reduced as we convert them to regular, standard funds.  Also please note that you will not experience any meaningful difference in the performance of your portfolio from this conversion, as the non-blend funds that replace the blend funds are similarly constructed to the blend funds.  Some of the blend funds that we will be trading include:

If you have any questions at all, please do not hesitate to ask, we will be happy to help address and clarify any concerns you may have.

Leonard Golub, CFA
Fiduciary Financial Advisor

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