By David Schassler, Portfolio Manager and Head of Portfolio and Quantitative Investment Solutions, VanEck

VanEck NDR Managed Allocation Fund (NDRMX) tactically adjusts its asset class exposures each month across global stocks, U.S. fixed income and cash. It utilizes an objective, data-driven process driven by macroeconomic, fundamental, and technical indicators developed by Ned Davis Research (NDR). The Fund invests based on the weight-of-the-evidence of its objective indicators, removing human emotion and decision making from the investment process. The expanded PDF version of this commentary can be downloaded here.

Overview

The VanEck NDR Managed Allocation Fund (the “Fund”) returned +9.16% in November versus +7.69% for its blended 60/40 benchmark.

The Fund’s top-level asset allocation positioning was the primary driver of its outperformance in November. The Fund started the month with an 80% allocation to stocks and then gradually reduced its equity exposure as the market rallied. Being overweight stocks at the beginning of the month led to the Fund’s outperformance because the majority of the equity market’s “up move” was experienced as the month started. The equity reduction was due to some technical weakness leading into the U.S. presidential election. More specifically, the market was experiencing defensive leadership within global equities, declining equity country breadth and negative price trends within global corporate high yield.

Average Annual Total Returns (%) as of November 30, 2020
1 MoYTD1 Year3 YearSince
Inception
Class A: NAV
(Inception 5/11/16)
9.164.546.732.495.83
Class A: Maximum 5.75% load2.88-1.470.590.484.46
60% MSCI ACWI/
40% Bloomberg Barclays USAgg.
7.6910.6012.948.319.53
Morningstar Tactical Allocation
Category (average)2
7.835.647.744.245.96
Average Annual Total Returns (%) as of September 30, 2020
1 MoYTD1 Year3 YearSince
Inception
Class A: NAV
(Inception 5/11/16)
-2.58-2.682.141.134.34
Class A: Maximum 5.75% load-8.18-8.28-3.73-0.852.95
60% MSCI ACWI/
40% Bloomberg Barclays USAgg.
-1.914.3710.067.098.47
Morningstar Tactical Allocation
Category (average)2
-2.38-0.423.923.304.77

The tables present past performance which is no guarantee of future results and which may be lower or higher than current performance. Returns reflect applicable fee waivers and/or expense reimbursements. Had the Fund incurred all expenses and fees, investment returns would have been reduced. Investment returns and Fund share values will fluctuate so that investor’s shares, when redeemed, may be worth more or less than their original cost. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value (NAV). An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made. Index returns assume that dividends of the Index constituents in the Index have been reinvested.

† Returns less than a year are not annualized. 

Expenses: Class A: Gross 2.03%; Net 1.32%. Expenses are capped contractually until 05/01/21 at 1.15% for Class A. Caps excluding acquired fund fees and expenses, interest, trading, dividends, and interest payment of securities sold short, taxes, and extraordinary expenses.

The Fund’s equity regional allocations generated mixed results relative to the impressive +12.33% returns for the MSCI All Country World Index. The largest overweight positions were in the U.S. and the Emerging Markets. The Russell 3000 Index, a widely used measure of returns for U.S. stocks, returned +12.17% and the MSCI Emerging Markets Index returned +9.25%. The largest regional equity underweights were in Japan and the U.K. The MSCI Japan Index returned +12.59% and the MSCI U.K. Index returned +16.70%.

Within the U.S., the Fund was overweight all major style and market capitalization categories, including growth, value, large-cap and small-cap. In November, value stocks, as measured by the Russell 3000 Value Index, returned +13.8%, and growth stocks, as measured by the Russell 3000 Growth Index, returned +10.67%. Small-cap stocks, as measured by the Russell 2000 Index significantly outperformed large-cap stocks, as measured by the Russell 1000 Index, returning +18.43% and 11.78%, respectively.

Weight-of-the-Evidence

Going into December, the Fund reestablished its equity overweight, with an 80% allocation to stocks, due to bullish technical and fundamental indicators. These indicators are responding to less political uncertainty post-election and, more importantly, the fantastic news on the vaccine for COVID-19.

Below is a chart of the NDR stock/bond composite. Scores above 55 are bullish, scores between 45 and 55 are neutral and scores below 45 are bearish. As you can see, this composite transitioned from bullish, with a score of 72 at the beginning of October, to neutral, with a score of 50 in November. This occurred because market price action began to caution of potential near-term volatility. However, everything changed with positive news on the vaccine. The model responded by increasing its score from 50 to 72 because of improved market breadth, positive price momentum in the high yield corporate fixed income markets and cyclical versus defensive leadership.

Stock Signal Changes to Bullish from Neutral – NDR Stock/Bond Composite Indicator

Stock Signal Changes to Bullish from Neutral - NDR Stock/Bond Composite Indicator

Data as of November 30, 2020. Copyright 2020, Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/.

One indicator that we are watching closely in the NDR Global PMI Composite, which just turned bearish. It measures trends in PMI data by comparing the 3-month moving average to the 6-month moving average. As you can see below, PMI activity surged during the recovery, but that momentum is turning. This, by itself, is not enough evidence for us to take action, but it contributes to the model more materially if other indicators also begin to show signs of weakness.

Activity Surged But Momentum Turning – NDR Global PMI Composite

Activity Surged But Momentum Turning - NDR Global PMI Composite

Data as of November 30, 2020. Copyright 2020, Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/.

The Fund will remain overweight equities and continue to measure the risks in the market while seeking to balance both risks and rewards. While we are excited and positioned for a continuation of the market rally, we are also cognizant of the risks and will remain nimble in case the tides turn.

NDR Indicator Summary, December 2020

Macro/FundamentalTechnicalOverall
Stocks, Bonds, or CashStocks (vs. Bonds)BullishBullishBullish
Bonds (vs. Cash)BullishBullishBullish
Global Regional EquityU.S.BullishNeutralNeutral
CanadaBullishBearishNeutral
U.K.BearishNeutralNeutral
Europe ex. U.K.NeutralNeutralNeutral
JapanBearishBearishBearish
Pacific ex. JapanNeutralBullishBullish
Emerging MarketsBullishNeutralBullish
U.S. Cap & StyleLarge-CapNeutralBearishNeutral
Small-CapNeutralBullishNeutral
GrowthNeutralNeutralNeutral
ValueNeutralNeutralNeutral

Allocations Since Inception

Allocations Since Inception

Asset Class Positioning vs. Neutral Allocation, December 2020

Asset Class Positioning vs. Neutral Allocation, December 2020

Asset Class Positioning Changes from Prior Month

Asset Class Positioning Changes from Prior Month

Originally published by VanEck, 12/18/20


IMPORTANT DISCLOSURES

*All weighting comparisons are relative to the blended benchmark (60% MSCI ACWI/40% Bloomberg Barclays US Agg.) or neutral allocation. This represents the starting allocation point absent an alternative recommendation once the model takes into consideration the indicators that yield the global tactical allocation model.

1The Fund’s benchmark is a blended unmanaged index created by the Van Eck Associates Corporation (the “Adviser”) consisting of 60% MSCI All Country World Index (ACWI) and 40% Bloomberg Barclays US Aggregate Bond Index. The MSCI ACWI captures large- and mid-cap representation across both developed and emerging markets countries and covers approximately 85% of the global investable equity opportunity set. The Bloomberg Barclays US Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. This includes treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and collateralized mortgage-backed securities.

2Morningstar category averages are equal-weighted category (total) returns. The calculation is the average of the total returns for all funds in a given category. The standard category average calculation is based on constituents of the category at the end of the period. Total return reflects performance without adjusting for sales charges or the effects of taxation, but is adjusted to reflect all actual ongoing fund expenses and assumes reinvestment of dividends and capital gains. If adjusted, sales charges would reduce the performance quoted.

The Morningstar Tactical Allocation category includes portfolios that seek to provide capital appreciation and income by actively shifting allocations across investments. These portfolios have material shifts across equity regions, and bond sectors on a frequent basis. To qualify for the tactical allocation category, a fund must have minimum exposures of 10% in bonds and 20% in equity. Next, a fund must historically demonstrate material shifts in sector or regional allocations either through a gradual shift over three years or through a series of material shifts on a quarterly basis. Within a three-year period, typically the average quarterly changes between equity regions and bond sectors exceeds 15% or the difference between the maximum and minimum exposure to a single equity region or bond sector exceeds 50%. As of June 30, 2020, the Fund ranked 147 out of 244 funds for the 1 month period; 110 out of 244 funds for the YTD period; 105 out of 243 funds for the 1 Year period; 154 out of 226 funds for the 3 Year period; and 133 out of 220 funds since inception. As of November 30, 2020, the Fund ranked 71 out of 245 funds for the 1 month period; 119 out of 243 funds for the YTD period; 116 out of 241 funds for the 1 Year period; 163 out of 231 funds for the 3 Year period; and 130 out of 217 funds since inception.

Global stocks are measured by the MSCI ACWI and U.S. bonds are measured by the Bloomberg Barclays US Aggregate Bond Index. Large-cap stocks are measured by the Russell 1000 Index, an index of the largest 1,000 companies in the Russell 3000 Index. The Russell 1000 Index comprises over 90% of the total market capitalization of all listed U.S. stocks. Small-cap stocks are measured by the Russell 2000 Index, an index which measures the performance of the smallest 2,000 companies within the Russell 3000 Index. Value stocks are measured by the Russell 3000 Value Index, a market-capitalization weighted equity index based on the Russell 3000 Index, which measures how U.S. stocks in the equity value segment perform. Included in the Russell 3000 Value Index are stocks from the Russell 3000 Index with lower price-to-book ratios and lower expected growth rates. Growth stocks are measured by the Russell 3000 Growth Index, a market capitalization weighted index based on the Russell 3000 Index. The Russell 3000 Growth Index includes companies that display signs of above average growth. Companies within the Russell 3000 Index that exhibit higher price-to-book and forecasted earnings are used to form the Russell 3000 Growth Index. U.S. stocks are measured by the Russell 3000 Index which is a capitalization-weighted stock market index that seeks to be a benchmark of the entire U.S stock market. It measures the performance of the 3,000 largest publicly held companies incorporated in America and is based on market capitalization. The MSCI Europe ex UK Index captures large and mid cap representation across developed markets (DM) countries in Europe. The MSCI Canada Index is designed to measure the performance of the large and mid cap segments of the Canada market. The MSCI Pacific ex Japan Index captures large and mid cap representation across developed markets (DM) countries in the Pacific region (excluding Japan). Emerging Markets stock are measured by the MSCI Emerging Markets Index which captures large and mid cap representation across emerging markets (EM) countries. The MSCI United Kingdom Index is designed to measure the performance of the large and mid cap segments of the UK market. The S&P 500® Index consists of 500 widely held common stocks, covering four broad sectors (industrials, utilities, financial and transportation). International stocks are measured by the MSCI EAFE captures large and mid cap representation across developed markets countries around the world, excluding the US and Canada. U.S. Dollar Index (DXY) indicates the general international value of the U.S. dollar. The DXY does this by averaging the exchange rates between the U.S. dollar and six major world currencies: Euro, Japanese yen, Pound sterling, Canadian dollar, Swedish kroner, and Swiss franc. Please note that the information herein represents the opinion of the author, but not necessarily those of VanEck, and these opinions may change at any time and from time to time. Non-VanEck proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Historical performance is not indicative of future results. Current data may differ from data quoted. Any graphs shown herein are for illustrative purposes only. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.

All indices are unmanaged and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. Certain indices may take into account withholding taxes. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made. Results reflect past performance and do not guarantee future results.

You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program rather than a complete program. Because the Fund is a “fund-of-funds,” an investor will indirectly bear the principal risks of the exchange-traded products in which it invests, including but not limited to, risks associated with cash and cash equivalents, debt securities, exchange traded products, exchange traded products’ underlying investments, below investment grade securities, commodities and commodity-linked derivatives, commodities and commodity-linked derivatives tax, common stock, concentration, derivatives, emerging markets, investment style, small- medium and large-capitalization companies, limited number of holdings, market, model and data, operational, portfolio turnover and regulatory risks. The Fund will bear its share of the fees and expenses of the exchange-traded products. Consequently, an investment in the Fund entails more direct and indirect expenses than a direct investment in an exchange-traded product. Because the Fund invests in exchange-traded products, it is subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of an exchange-traded product’s shares may be higher or lower than the value of its underlying assets, there may be a lack of liquidity in the shares of the exchange-traded product, or trading may be halted by the exchange on which they trade. Principal risks of investing in foreign securities include changes in currency rates, foreign taxation and differences in auditing and other financial standards. Debt securities may be subject to credit risk and interest rate risk. Investments in debt securities typically decrease in value when interest rates rise.

Please call 800.826.2333 or visit vaneck.com for performance information current to the most recent month end and for a free prospectus and summary prospectus. An investor should consider the Fund’s investment objective, risks, charges and expenses carefully before investing. The prospectus and summary prospectus contain this as well as other information. Please read them carefully before investing.

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