PhillyDeals: Morningstar is high on W. Chester-based fund

Investment tracker Morningstar Inc. has named the nerdy team that picks small-cap stocks - some to purchase, hoping they'll go up, and some to short-sell, betting they will go down - at West Chester-based, $1.8 billion-asset TFS Market Neutral investment fund, as Morningstar's first "Alternatives Fund Manager of the Year."

The fund, managed by Eric Newman, Chao Chen, and Yan Liu, and by Larry Eiben and brothers Kevin and Richard Gates, who founded owner TFS Capital in 1997, returned 7.8 percent last year, after fees.

That trailed the S&P 500, but beat other "market-neutral" funds, whose practice of holding some stocks while short-selling others is supposed to protect investors when prices go down.

The two-way strategy has worked over the years for TFS Market Neutral clients,   which gives the fund its top backward-looking five-star rating, says Morningstar analyst Nadia Papagiannis. "It's unusual for a quantitative fund to have such consistent, positive performance."

It costs extra for algorithm-based funds this complex. Yearly fees total almost 2.5 percent of assets, several times what index funds charge. TFS requires its staff to eat its own cooking, investing more than half their net worth in the firm's funds.

At year's end, the fund's largest holdings - all less than 1 percent of its total - included Health Management Associates, Alon USA Energy, AECOM Technology, Old Republic International, and Tenet Healthcare Corp., which operates Hahnemann University Hospital and St. Christopher's Hospital for Children in Philadelphia, among others.

The fund shorted stocks including Polypore International, Deckers Outdoor, Vivus Inc., McEwen Mining, and Philadelphia-based home-title insurer Radian Group.

"2013 will be a year of continued challenges" for South Jersey corporate employment and office landlords, says Wolf Commercial Real Estate L.L.C. in its fourth-quarter market report.

"Lockheed Martin plans to vacate 75,000 square feet in Cherry Hill, Catalent Pharma will be vacating 85,000 square feet in Mount Laurel on Commerce Parkway, and many other midsize users have announced additional downsizing. [Horizon] Blue Cross/Blue Shield is also rumored to vacate their Mount Laurel facility in 2014," owner Jason Wolf added in his report.

"We have no plans to vacate," says Horizon spokesman Thomas Vincz.

 Wolf also noted good news, such as recent new or expanded leases for loan processors Freedom Mortgage Corp. and PHH Mortgage, as home lending recovers.

Generally, Burlington County offices have fewer vacancies than those in Camden County. Private buyers such as Tequesta Properties, Keystone Property Group, Somerset Properties and Mackshacks L.L.C. (Hill Properties) have been buying South Jersey office parks as institutional investors including Liberty Property Trust, Brandywine Realty Trust and Mack-Cali pull out.

Bloomberg Philanthropies, a charity funded by New York Mayor and billionaire financial data mogul Michael Bloomberg, and Living Cities' Cities for Financial Empowerment Fund, funded by a coalition of charities, said Tuesday that they will give $3.3 million to Philadelphia over the next three years to staff and equip "Financial Empowerment Centers" at the Municipal Services Building and five neighborhood sites.

Counselors will be hired and managed by Clarifi, a nonprofit credit and housing counseling agency that negotiates longer payments at lower rates for people who fall behind on their bank loans.

The new centers won't just target people with problem loans, but also people "entering the financial system" who are trying to establish credit and save money, for example, Clarifi chief Patricia Hasson told me.