Key takeaways
– The Vice Fund (ticker: VICEX), managed by USA Mutuals, invests primarily in companies that derive most of their revenue from so‑called “vice” industries: alcohol, tobacco, gaming/casinos, and defense.
– It was launched in 2002, has undergone name changes (Barrier Fund, Vitium Global Fund) and reverted to the Vice Fund in Aug. 2021.
– The Fund emphasizes dividend‑paying, cash‑flow positive companies with perceived barriers to entry and a broadly diversified international equity portfolio across market caps.
– As of mid‑2022 the fund’s investor‑class returns, fees, top holdings, AUM, and yield were: five‑year annualized 0.74% (through 6/30/2022), 10‑year annualized 6.79%, net expense ratios roughly 1.24%–2.24% depending on share class, AUM ≈ $79.2M (9/9/2022), dividend yield 0% (9/9/2022). (See full sources at end.)
Understanding the Vice Fund
Background and name history
– Launched in 2002, the fund was at various times called the Barrier Fund and the Vitium Global Fund. It returned to the Vice Fund name on Aug. 4, 2021.
– “Vice fund” had previously been a general industry term for funds concentrating in “sin stocks”; USA Mutuals’ Vice Fund is a single registered open‑end mutual fund following that strategy.
Investment objective and strategy
– Focus: companies whose primary revenue comes from alcohol, tobacco, gaming (casinos, gaming equipment), and defense contractors.
– Holdings: domestic and international equities across small‑cap to mega‑cap. The fund seeks high-quality, dividend‑paying firms that generate positive cash flow and face high industry barriers to entry.
– Philosophy: the fund manager argues that demand for vice goods and services tends to be stable across cycles, potentially making the portfolio more market‑neutral (resilient in up and down markets). Broad international diversification is intended to reduce volatility.
Typical holdings and portfolio characteristics
– Examples of top holdings (as of 6/30/2022): Galaxy Entertainment, Northrop Grumman, Raytheon Technologies, Philip Morris International.
– Portfolio emphasis on dividend income historically contributed meaningfully to total returns (though yield can vary over time).
Share classes, fees, and trading
– The Vice Fund is an open‑end mutual fund with multiple share classes: A, C, Investor, and Institutional.
– Fees: base management fee was ~0.95%; total annual fund operating expenses (net) ranged from ≈1.24% to 2.24%, depending on share class.
– Sales charges: Institutional and Investor classes generally have no sales loads. A‑shares often carry a front‑end load (example: 5.75%) and a small contingent back‑end load; C‑shares usually carry a contingent deferred sales charge if sold within a year. Check the current prospectus for exact figures.
– Trading: traded via full‑service or discount brokerages that offer mutual fund purchases.
Performance and assets under management
– Performance (Investor Class, through 6/30/2022): five‑year annualized 0.74%; 10‑year annualized 6.79%; since inception annualized 7.82%. Benchmark used: MSCI All Country World Index (8.32% annualized since inception through that date).
– AUM: approximately $79.2 million (reported 9/9/2022).
– Dividend yield: reported at 0% on 9/9/2022 (yields can fluctuate; check the latest data).
Risks and considerations
– Concentration risk: industry concentration (alcohol, tobacco, gaming, defense) increases sensitivity to regulatory, litigation, public sentiment, and policy risks affecting those industries.
– Ethical/Socially Responsible Investing (SRI) conflict: investors who avoid “sin” stocks for ethical or ESG reasons will find this fund incompatible with SRI screens.
– Market risk: although managers argue for defensiveness, the fund remains an equity fund subject to market volatility and sector‑specific shocks.
– Liquidity and size: relatively modest AUM can affect trading costs and manager flexibility.
– Fees: net expense ratios are higher than many passive index funds; consider fee impact on long‑term returns.
How to evaluate whether the Vice Fund fits your portfolio — practical steps
1. Clarify your investment objective and constraints
– Ask: Do you want sector‑concentrated exposure to vice industries? Are higher fees acceptable? Do ethical or ESG constraints prohibit these industries?
– Determine the role: core holding, satellite diversification, income‑seeking, or speculative play?
2. Check the latest fund facts and prospectus
– Obtain the current prospectus and statement of additional information (SAI) from the fund sponsor or SEC EDGAR. Key items: updated expense ratios, holdings, sales loads, distribution policy, and turnover. (See sources below.)
3. Compare costs and alternatives
– Compare net expense ratio by share class to similar active funds and relevant ETFs (e.g., sector ETFs or “sin” ETFs if available).
– Assess tax efficiency; mutual fund distributions can create taxable events.
4. Evaluate performance and risk metrics
– Look at multi‑period returns (1, 3, 5, 10 years) and risk statistics: standard deviation, beta, maximum drawdown, and Sharpe ratio versus bench.
– Review how much of returns came from dividends versus capital appreciation.
5. Review portfolio composition and top holdings
– Examine country allocation, market‑cap breakdown, and top 10 holdings to understand concentration.
– Check turnover rate to estimate trading activity and potential tax drag.
6. Consider share class and platform
– Choose the appropriate share class (Investor vs. Institutional vs. A/C) based on investment amount and distribution channel to minimize fees.
– Ensure your brokerage offers the share class you want and confirm purchase minimums and trading procedures.
7. Understand distribution policy and tax implications
– Confirm how and when dividends and capital gains are distributed and the historical frequency/amount. Strategize tax harvesting or account placement (taxable vs. tax‑advantaged account).
8. Monitor ongoing suitability
– Reassess periodically (quarterly or annually) for changes in strategy, management, fees, or material shifts in holdings or performance.
Step‑by‑step: How to buy shares in the Vice Fund (practical checklist)
1. Identify the fund ticker and share classes
– Confirm current ticker and which share classes your chosen platform supports (example ticker historically: VICEX for the Vice Investor class). Always verify current tickers on the fund prospectus or sponsor website.
2. Read the fund prospectus and shareholder reports
– Review fees, sales loads, minimum investments, redemption policies, and risk disclosures.
3. Decide the account type
– Choose taxable brokerage account, IRA, Roth IRA, or other tax‑advantaged account based on tax objectives.
4. Open or use your brokerage account
– If you don’t already have an account, open one with a broker that offers the fund and supports the desired share class. Some brokerages waive load fees or offer no‑load institutional shares.
5. Fund the account and place the order
– Transfer funds into the account, then purchase by specifying the fund name, ticker, share class, and dollar amount or number of shares. Mutual funds transact at end‑of‑day NAV.
6. Recordkeeping and tax preparation
– Track purchase dates and cost basis. Expect dividend and capital gain 1099s or consolidated tax documents each year.
7. Ongoing monitoring and rebalancing
– At regular intervals, review performance, distributions, and whether the fund still fits your allocation and objectives. Rebalance as necessary.
Alternatives and complements
– If you like the “vice” theme but prefer lower costs or ETF liquidity, look for ETFs focused on alcohol, tobacco, gaming, or general “sin” strategies (compare holdings and fees).
– If you’re seeking income with broad diversification, consider high‑quality dividend ETFs or diversified income mutual funds.
– If ethical concerns matter, consider ESG funds that actively exclude these industries.
Due diligence checklist (one‑page)
– Latest prospectus and net expense ratio by share class.
– Current AUM, top 10 holdings, and sector/country allocation.
– Historical returns vs. benchmark and peers (1/3/5/10 years).
– Turnover rate, dividend history, and distribution schedule.
– Manager tenure and team experience.
– Share class minimums and sales loads.
– Tax considerations and typical realized capital gains.
– Liquidity and trading restrictions (if any).
Conclusion
The Vice Fund is a concentrated, actively managed mutual fund that provides targeted exposure to historically stable but controversial industries (alcohol, tobacco, gaming, defense). It may appeal to investors seeking dividend income and sector‑specific exposure. However, its industry concentration, higher fees compared with passive alternatives, and potential ethical conflicts mean investors should perform careful due diligence and consider where it fits within their broader allocation and objectives.
Sources
– USA Mutuals. “Vice Fund (Symbol: VICEX).” USA Mutuals website.
– USA Mutuals. “The Vice Fund (Symbol: VICEX) Goes Back to Its Roots.” USA Mutuals press release.
– U.S. Securities and Exchange Commission. Form N‑CSR: USA Mutuals Fund Semiannual Report 9‑30‑19.
– U.S. Securities and Exchange Commission. N‑CSR and 485BPOS filings for USA Mutuals funds.
– Investopedia. “Vice Fund” (article summarizing the fund and data).
(For the latest figures—holdings, NAV, expense ratios, yield, AUM and any ticker changes—consult the fund’s most recent prospectus or the SEC filings. This article is based on data reported through mid/late 2022 in the cited documents.)
Continuing from the earlier description, below is an expanded, practical guide to the Vice Fund (formerly Vitium Global Fund) with additional sections, examples, and a concise concluding summary.
Introduction
The Vice Fund (ticker: VICEX for Investor class) is an open-end mutual fund managed by USA Mutuals that concentrates on so-called “vice” industries—primarily alcohol, tobacco, gaming/casinos, and defense. It seeks high‑quality, dividend‑paying equities across market caps and geographies that derive most of their revenue from these industries. The fund’s strategy emphasizes perceived barriers to entry and steady demand that historically can make such businesses cash‑generative and defensive in varied market environments.
Fund snapshot (key facts, paraphrased)
– Investment focus: Companies deriving the majority of revenue from alcohol, tobacco, gaming/casinos, and defense.
– Geography & caps: Domestic and international equities; small-cap through mega-cap.
– Share classes: A, C, Investor, Institutional (fees and loads vary by class).
– Management fee: ~0.95% (net expense ratio range reported ~1.24%–2.24% depending on share class and fee waivers).
– Inception/History: Operating since 2002; renamed several times (Barrier Fund 2014–2016; Vitium 2019; reverted to Vice Fund 2021).
– Reported AUM and returns: As of mid‑2022, AUM around $79.2M; long‑term annualized returns since inception and over multi‑year periods tracked near relevant benchmarks with dividend contributions to total return (see referenced filings for exact figures and dates).
Investment strategy and rationale
– Dividend orientation: Prefers companies with positive cash flows that pay dividends, providing income to investors and signaling financial resilience.
– Barrier-to-entry thesis: Argues that regulatory barriers, brand strength, licensing, and scale can protect incumbents in vice industries.
– Market-neutral narrative: Management contends that demand for vice products tends to be steady across cycles, potentially offering defensive characteristics in downturns.
– Diversification: International holdings and mix across industries intend to reduce correlation with any single market or sector shock.
Holdings and sector examples
Typical holdings include:
– Casino operators and gaming equipment manufacturers (e.g., Asian and U.S. operators).
– Tobacco multinationals (e.g., major international cigarette and next‑generation product companies).
– Alcohol producers (global beer, spirits, and wine companies).
– Defense contractors (large prime contractors, aerospace and systems manufacturers).
(Exact holdings change over time; consult the fund’s most recent prospectus or monthly holdings report for up‑to‑date positions.)
Practical steps to evaluate and invest in the Vice Fund
1. Define your objective and role for the fund:
• Income: If seeking dividends, verify yield history and payout sustainability.
• Diversifier: Determine whether vice exposure helps diversify your current portfolio.
• Thematic/speculative exposure: Decide if you want targeted exposure to vice industries.
2. Review the fund’s materials:
• Read the prospectus and most recent shareholder report (Form N‑CSR or similar).
• Check the fund’s fact sheet for top holdings, sector weights, turnover, and yield.
3. Compare fees and share classes:
• Understand load structure: A‑shares often carry a front‑end sales load; C‑shares typically have higher ongoing expenses but lower upfront costs; Investor and Institution classes may have lower/no loads.
• Compare net expense ratios (after waivers) and the management fee (≈0.95% as reported).
4. Assess performance metrics:
• Look at multi‑period returns (1-, 3-, 5-, 10‑year), alpha, beta, Sharpe ratio, and drawdown history.
• Compare performance versus appropriate benchmarks (e.g., MSCI ACWI) and relevant sector indices.
5. Evaluate risk exposures:
• Concentration: How much exposure is in one industry, geography, or single holding?
• Regulatory risk: Tobacco, gambling, and defense companies face policy and regulatory changes.
• ESG/reputational risk: Vice industries often face investor and consumer activism.
6. Tax considerations:
• Dividend taxation: Determine whether dividends are qualified (subject to lower long‑term capital gains rates) or nonqualified.
• Capital gains distributions: Mutual funds may distribute realized gains annually.
• Consider sheltering in tax‑advantaged accounts (IRAs/401(k)s) if appropriate.
7. Purchase steps:
• Select a brokerage or advisor that offers the desired share class.
• Verify minimum investment, sales loads, and whether the broker imposes any additional fees.
• Place the trade and document the purchase date (for tax basis and holding‑period calculations).
Example portfolio allocations (illustrative only)
– Income‑oriented investor (conservative tilt):
• 20% Vice Fund (income/dividend focus)
• 50% Investment‑grade bonds
• 20% Large‑cap dividend equities
• 10% Cash/equivalents
• Core allocation (balanced):
• 10% Vice Fund (thematic allocation)
• 40% U.S. total market equity
• 20% International equity
• 25% Fixed income
• 5% Alternatives (real assets/REITs)
• Aggressive thematic investor (higher concentration):
• 30% Vice Fund
• 50% Growth equities (domestic/international)
• 10% Small‑cap/value exposure
• 10% Emerging markets
Practical monitoring and rebalancing steps
– Quarterly: Review fund performance versus benchmark and peers; check distributions and any changes in strategy or management.
– Annually: Rebalance to target allocation to manage drift (e.g., if Vice Fund outperforms and exceeds target percentage).
– On material change: If the fund changes its mandate, management, or fee structure, reassess position promptly.
Risks specific to vice funds
– Regulatory/political risk: Policy shifts (e.g., stricter tobacco regulation, gambling restrictions, defense budget cuts) can materially impact revenues.
– Reputation & divestment risk: ESG‑focused funds and institutional investors may divest from vice industries, affecting liquidity and valuations.
– Concentration risk: Heavy weightings in a few sectors increase vulnerability to sector cycles.
– Product substitution and technology risk: For tobacco, shifting consumer preferences and alternatives (vapes, nicotine replacement) can change profit dynamics.
– Currency and country risk: International holdings introduce FX fluctuations and country‑specific political risks.
Environmental, Social, and Governance (ESG) considerations
– Vice funds are typically excluded from ESG or socially responsible investing (SRI) universes. Investors with ethical mandates should be aware.
– Some investors view vice stocks as “sin stocks” that can be mispriced because of exclusion from ESG‑heavy indices—this is a structural argument sometimes used in support of vice investing.
– Engage with your own values and any institutional constraints (pension policies, endowment guidelines) before investing.
Alternatives and complements
– Sin ETFs: Exchange‑traded funds that target vice industries can offer similar exposures with intraday trading flexibility.
– Sector ETFs: Conservative investors might prefer broader sector funds (e.g., consumer staples, aerospace & defense) to capture part of vice exposure while lowering concentration.
– Individual stocks: For experienced investors, buying select dividend‑paying companies within these industries is an alternative, though it increases company‑specific risk.
Due diligence checklist (quick)
– Read the latest prospectus and semiannual/annual report.
– Confirm current holdings and their weightings.
– Check expense ratios and any fee waiver expirations.
– Verify performance over multiple market cycles.
– Understand share‑class specific fees and loads.
– Consider tax implications and account type (taxable vs. tax‑advantaged).
– Review manager tenure and any recent personnel changes.
Illustrative case study (hypothetical)
– Jane, age 55, seeks income and modest growth. She adds a 10% allocation to the Vice Fund in a taxable account to boost yield and diversify away from broad market risk. She prefers Investor class (no load), checks the fund’s recent dividend history, and decides to rebalance annually. She also limits allocation to 10% to manage reputational/ethical discomfort.
Comparing Vice Fund to peers and benchmarks
– Compare to:
• Global equity benchmarks (e.g., MSCI ACWI) to see relative performance.
• Industry or sector peer funds (alcohol/tobacco/defense ETFs and mutual funds).
• Vice/sin ETFs for cost and liquidity comparisons.
– Key metrics for comparison: expense ratio, turnover, dividend yield, 3/5/10‑year returns, downside capture, and tracking error.
Concluding summary
The Vice Fund offers thematic exposure to industries often excluded by ESG‑oriented investors, focusing on dividend‑paying companies with perceived barriers to entry and steady demand. It can serve as an income source, a diversifier, or a higher‑conviction thematic allocation depending on investor goals and risk tolerance. Before investing, perform careful due diligence: read the prospectus, compare fees and share classes, assess regulatory and reputational risks, consider tax implications, and decide an appropriate allocation size within your overall portfolio. Monitor performance and re‑evaluate if there are material changes in strategy, management, or the regulatory landscape.
References and further reading
– USA Mutuals — Vice Fund (fund page and press releases)
– U.S. Securities and Exchange Commission — Fund filings (Form N‑CSR, prospectus, shareholder reports)
– Investopedia — “Vice Fund” (background and overview)