What is your competitive edge over other mutual fund portfolio managers?
We believe there are many factors that give us a competitive advantage over other managers. TFS utilizes a team approach,
which we believe greatly reduces the chance of irrational decision-making and limits dependence on a single individual. We
also have a stated principle to limit growth because we believe that managing a smaller pool of capital generally permits more attractive investment opportunities. We believe that our innovative quantitative techniques expedite our
evaluation of securities, which allows us to make faster adjustments to the portfolios being managed. Finally, our
portfolio managers do not have traditional “Wall Street backgrounds" which we believe helps us to avoid overused analysis
methods that may be losing their utility.
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How do you make your investment decisions?
We utilize a quantitative and objective investment decision-making process. As part of this process, TFS performs
trading simulations so that we can evaluate a strategy's historical performance before utilizing it for the funds that
we manage.
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Why is it important to be objective rather than subjective when making investment decisions?
We believe objective decision-making helps to avoid emotional reactions that can erode investment performance. We also find
that an objective process allows us to more quickly evaluate securities.
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Have you had any changes in fund management?
No portfolio managers have left the portfolio management team. Moreover, the three original
founders of TFS continue to play an integral role in managing the funds.
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How long has the firm managed alternative investments?
The firm has utilized alternative investment strategies since its inception in 1997 and the portfolio management team has over
thirty years of combined experience developing proprietary strategies.
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Why does it matter to me that TFS is independent?
Independence is important because it mitigates conflicts of interest that can adversely affect investors. TFS is entirely
employee-owned. This structure allows the firm to work to achieve its clients objectives without being subjected to potential
competing interests of an affiliated company.
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Why does it matter to me that the board of TFSMX and TFSSX is independent?
TFSMX and TFSSX are overseen by a board of trustees that is comprised of a majority of independent members. A trustee is
considered independent when he/she is not employed or otherwise compensated by one of the funds' service providers
(e.g., the portfolio manager), but rather by the fund itself. Independence ensures that the funds serve the best interest of
shareholders and not that of the portfolio manager.
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Are the fees for the TFS Market Neutral Fund high in comparison to other mutual funds?
The expense ratio for TFSMX is high relative to most traditional long-only mutual funds. However, the expense ratio is not inconsistent with the fees of other long-short mutual funds and has actually been less expensive than many comparable hedge funds. The fee is
higher than traditional mutual funds because long-short funds are more operationally intensive to manage.
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How much do the managers have invested in the funds?
The firm's ethics policy requires that all owners have at least fifty percent of their liquid net worth invested in the funds
managed by TFS. For the specific dollar ranges invested in the mutual funds by the managers and trustees, please refer to the
mutual funds' Statement of Additional Information located on the TFS Market
Neutral Fund page.
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What are the weaknesses of your investment style?
Because positions are usually not held for long periods of time, the most significant weakness for the funds managed by
TFS is that they are generally tax inefficient. As a result, they may be better suited for tax-deferred assets. There are
many other factors to consider, however, so one should read the prospectus before investing.
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Why would someone invest in your Huntrise hedge funds rather than your long-short mutual fund?
While the strategies utilized in the different investment vehicles are generally similar, there are many distinct differences.
For instance, the TFS Market Neutral Fund has daily liquidity, which is convenient for investors but can hinder performance because it limits
the manager's ability to invest in less liquid securities. In addition, there are fewer restrictions on the investment manager
in the hedge funds so, if successful, a manager will generally realize better performance in the less restrictive hedge fund
vehicle. Also noteworthy is that the hedge funds pay the manager a performance-based incentive fee, which is attractive to many investors.
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