Letter to shareholders of the Smead International Value Fund Q2 2022

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Average annualized total returns as of June 30, 2022

A month



One year

Three years

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Since creation (1/12/2015)


One class of shares (with charge)









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Share class Y
























A-share gross expense ratio 1.42% C-share gross expense ratio 2.00% I1-share gross expense ratio 1.15% Y-share gross expense ratio 1.00% Investor gross expense ratio 1.25%

Performance quoted represents past performance; Past performance does not guarantee future results. Investment returns and the principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

The current performance of the Fund may be lower or higher than the cited performance. Current performance data through the end of the most recent month can be obtained by calling 877-807-4122. SVXAX performance (with load) reflects peak sales 5.75% fee. Performance for SVXAX (no load) does not reflect the maximum subscription charge of 5.75%. If reflected, the load would reduce the performance amount shown. SVXAX charges a deferred sales charge of 1.00% on purchases of $1,000,000 or more that are repaid within 18 months of purchases.

Performance data does not reflect deferred acquisition costs. If so, yields would be reduced.

Smead Capital Management, Inc., the adviser, has agreed to waive its fees and/or absorb the expenses of the Fund to ensure that total annual operating expenses do not exceed 1.42% for the shares of Class A shares, 2.00% for Class C shares, 1.15% for Class I1 shares and 1.00% for Class Y shares respectively, until March 31, 2023. This expenditure limitation agreement of operation may only be terminated by or with the consent of the board of directors. See the prospectus for more details.

Dear shareholder

Although the Fund’s short-term decline has been frustrating, we still like the volatility and the opportunities it gives us in terms of lower stock prices.

During Q2 2022, the Smead International Value Fund fell 9.05% against a 14.51% decline in the MSCI EAFE Net Index and a 13.73% decline in the MSCI ACWI ex Index. -US Net. We were pleased to see that the Fund produced better relative results, but we hate to see our stock values ​​drop (largely in June alone). The carnage of 2022 continues to unfold.

Our holdings in Interfor (OTCPK:IFSPF), Porsche Automobil (OTCPK:POAHY) and Assicurazioni Generali (OTCPK:ARZGF) were the main detractors in the quarter.

Cenovus Energy (CVE), Occidental Petroleum (OXY) and Frontline (FRO) were the biggest contributors to performance.

Although the Fund’s short-term decline has been frustrating, we still like the volatility and the opportunities it gives us in terms of lower stock prices.

The Rhythm Of The Night

Corona’s 1995 classic “The Rhythm of the Night” rings in our ears as we watch the circumstances that could expose the darkness of the 2020s. 2020. Our goal for this letter is to get investors to understand the pace of what we are likely to see on the road ahead.

Thisis the rhythm of the night

At night, oh yeah

The rhythm of the night

The rising cost of capital is the pace we need to think about as investors. Below is the 10-year Treasury yield since 1962. Humans eat, sleep and extrapolate, according to Jim Grant. We’ve extrapolated low rates as an end to everything over the past three to five years. In reality, it was a take-off period for the rising cost of money. Thus, mean reversion takes the drum to bring the beat back to where normalized levels of interest rates have been for decades. The rising cost of silver hurts all assets, but for some assets it could be a bad end in the night.


Source: Bloomberg. Data from 03/30/1962 to 07/08/2022.

This is the rhythm of my life

My life, Oh Yes

The rhythm of my life

Given that we have millennials on our investment team, we know the pace of their lives has been pretty basic. Low inflation, cheap delivery, whatever goods they want and a shared economy. It was the rhythm of their life. What we are seeing now is persistent inflation, delivery costs that rise with energy and labor prices, a shortage of goods available to consumers, and property values ​​that is increasing day by day.

This property value increases on tangible assets like homes or in asset-heavy businesses. It’s hard to compete with buying a home when you don’t already own one. It will be difficult to compete in the automotive sector when others already have the assets to build cars in a scalable way. Asset-intensive companies could gain on the stock market for the first time in “my life, oh yeah”.

You could put some joy on my Face

Oh sunshine in a empty square

Take me at round at

And baby I’m going Craft you stay

What might make investors happy are companies that profit from inflation. Some have dubbed these “inflation proxies”. Below is a chart showing an Indirect Inflation Index (SGI) against the FTSE Developed Index, a composition of stocks in developed equity markets around the world.


Source: Bloomberg. Data from 07/10/2017 to 07/08/2022.

Companies benefiting from higher inflation were penalized in the last month of the 2nd quarter. We’ve seen it firsthand in the businesses we own. UK banking, forestry, oil and housing companies all fell rapidly over the same period. We are ready to ride out this volatility as investors have fewer things to turn to. Rich households are getting poorer as we write this. We don’t want to take the risks that most institutional and individual investors take. Instead, we want to take the kind of risks that could “keep you” rich.

Oh I can take your pain away

Feel you give me love again

We turn arround

Every time I hear you say

Once investors finally accept inflation in their hearts and minds, its rigidity will be very problematic for central bankers. The zeitgeist this causes could spark a big shift in the companies investors want to own to “take your pain off your feet.” Asset-heavy, inflation-oriented companies could become the most popular segments of the global stock market.

For example, energy as a sector reached 11.49% of the MSCI All Country World ex-US index on 06/30/2008, while oil prices sprinted towards $150 a barrel and the price of silver plummeted. At recent Brent prices of $120 and silver becoming more expensive with every word spoken by central bankers, that same index stands at 6.11% as of May 31, 2022. That weight has retreated in the last month , but as the song says, “we go around in circles.

While some posit that central bankers could “take your pain off your hands,” all we know is that stock market investors who were underholding these energy stocks might need to feel to give them some love back. .

It seems contrary to say that a world overwhelmed by ESG and carbon fears would want these energy companies so soon after avoiding them at all costs. It would be strange if a world in love with small-cap companies wanted asset-heavy companies. It would be crazy to see a world that believed we would never see inflation again love inflation proxy stocks. These vast price and psychology moves are moving right under our noses. After all, “It’s the rhythm of the night.”

Fear of stock market failure!

Cole Smead, CFA, Senior Portfolio Manager

Bill Smead, Co-Portfolio Manager

Original post

Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.

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