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Brethren Foundation Funds offers tactical investment options that provide its constituent organizations (clients) with the opportunity to have the asset allocation of their investment portfolios actively managed using the strategic investment options offered by BFI.
Tactical Funds are BFFI Funds whose assets are invested in a mix of BFFI Strategic Funds according to asset allocation targets set by an investment adviser within asset allocation ranges established by the BFFI Board. Because BFFI Tactical Funds are actively managed by the investment adviser, an additional fee is charged to BFFI clients for assets invested in BFFI Tactical Funds.
Strategic Funds, in comparison, are the current BFFI investment options (e.g., Domestic Stock Fund, Bond Core Fund, and Balanced Fund) whose assets are invested with investment managers or in mutual funds selected by the BFFI Board.
Tactical Funds are blended investment funds that are fully invested in various BFFI Strategic Funds. The Tactical Funds are managed to address client questions like —
The five Tactical Funds allow for a range of risk and return profiles.
The chart below lists the five Tactical Funds across the top and the Strategic Funds in which each Tactical Fund may invest along the left.
|Conservative||Income||Income and Growth||Growth||Aggressive|
|Short Term Fund||•||?||?||?||?|
|Bond Core Fund||?||•||•||•||?|
|Bank Loans Fund||?||?||?||?||?|
|High Yield Bond Fund||?||?||?||?||?|
|Global Aggregate Fund||?||?||?||?||?|
|Multi-Strategy Hedge Fund||?||?||?|
|Domestic Stock Value Fund||?||?||?||?|
|Domestic Stock Core Fund||?||•||•||•|
|Domestic Stock Growth Fund||?||?||?||?|
|Small Cap Fund||?||?||?|
|International Stock Core Fund||?||•||•||•|
|Public Real Estate Fund||?||?||?||?|
|Emerging Markets Fund||?||?||?|
The five Tactical Funds allow for a range of risk and return profiles. The chart below shows the five Tactical Funds and the relationship between expected return and risk.
Detailed information about the Tactical Funds is available in the 2020 Information Statement. Copies are available upon request.
The Balanced Fund is a Strategic Fund that is invested in the Domestic Stock Fund and the Bond Fund. Although the Balanced Fund allows a range of between 30 percent and 70 percent in the Domestic Stock Fund and the Bond Fund, historically, the fund has been invested 60 percent in the Domestic Stock Fund and 40 percent in the Bond Fund and rebalanced on a fixed schedule.
The Tactical Funds may invest in a wider range of Strategic Funds, as indicated above, and which Strategic Funds and how much is invested in those Strategic Funds, within the limits of policy, are at the discretion of the investment adviser of the Tactical Funds. Changes can occur when the adviser deems it important, rather than on a specific schedule, as is true for the Balanced Fund.
The Tactical Funds use a tactical asset allocation model — a dynamic investment strategy that actively adjusts a portfolio's asset allocation, with the goal being to improve the risk-adjusted returns of passive management or strategic investing.
The chart to the right illustrates that the Tactical Funds are expected to provide additional return over the return provided by the Strategic Funds, which is the sum of the asset class return and the manager return.
The Tactical Funds, once selected, relieve organizations from the duty of managing asset allocation and rebalancing on a meeting-to-meeting basis. The organization’s duty remains in selecting and monitoring the Tactical Funds.
Any investment strategy that diverges from a stated benchmark for the purpose of enhancing performance is taking some measure of investment risk, as it could fail in its attempt. In addition, these funds may invest in certain Strategic Funds that traditionally have not been used by BFFI clients. While there is an expectation that inclusion of additional asset classes should lower the long-term risk of the portfolio, the short-term return could vary from historic client benchmarks.
The Tactical Funds may invest in Strategic Funds that may not comply with BFFI’s socially responsible investing guidelines; therefore, the Tactical Funds may not comply with BFFI’s socially responsible investing guidelines.
The Tactical Funds have an additional level of expense over and above the expenses of the Strategic Funds in which they are invested. The additional fee, which is charged directly to the client account on a quarterly basis, is based on the total BFI client assets invested in any of the Tactical Funds. Following is the fee schedule for assets invested in Tactical Funds —
Annual Service Fee, Percent of Assets
0.250% or 25.0 basis points
From $10,000,000 to $20,000,000
0.125% or 12.5 basis points
From $20,000,000 to $50,000,000
0.075% or 7.5 basis points
0.050% or 5.0 basis points
These comments and information are for reference and benchmarking purposes. Consult the 2014 Information Statement for further description of each offering. Consult a qualified capital market professional for capital market advice. The analysis is based on information which the author believes is reliable, but no warranty, expressed or implied, is granted. The material presented is of a general nature and does not constitute the provision of investment or economic advice to any person, or a recommendation to buy or sell any security or adopt any investment strategy. Opinions and forecasts expressed herein are subject to change without notice. Information is not guaranteed as to its accuracy.
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