Jill Schramm/MDN Josh Larson, Mike Morey and Shannon Radke, from left, along with Trey Welstad, not pictured, manage Integrity Viking Fund’s Integrity Dividends Harvest Fund, which has outperformed much larger funds to rank among the top investment funds in the Large Value category.

A team of investment fund managers in downtown Minot have developed a strategy that outperforms the major stock market players, and it hasn’t gone unnoticed.

The success of Integrity Viking Funds’ Integrity Dividend Harvest Fund in recent years has brought multiple major media outlets calling, giving the fund managers opportunities to highlight Minot on the national stage.

At the end of the third quarter in September, the Harvest Fund was in the top 1% of funds in the Morningstar Large Value category. The category includes about 1,300 funds that invest in large companies expected to provide value rather than rapid growth, and the Harvest Fund focuses on well established companies that pay dividends.

“We’re in a very competitive industry,” said Brock Teets, senior regional manager for Integrity Viking Funds, North Dakota’s only mutual fund company. “But we are beating some of the major players in the marketplace within our category.”

According to Morningside data, the Harvest Fund’s total one-year return, ending Sept. 30, was 35.94%, and the three-year annualized return was 14.31%. Total return includes share price appreciation and cash paid out or reinvested.

Some of the major players in the fund category — American Funds Vanguard, JP Morgan and Schwab — saw total returns of 24% to 29% in one-year data. Their three-year annualized total return ranged from 8.23% to 11.14%. Those funds have assets of $46.7 billion to $104.26 billion, while the Harvest Fund is much smaller, with $432 million in assets.

The Harvest Fund also saw the second highest yield of the five funds, with 2.95%, trailing only Schwab’s 3.31%. Yield is the income generated by an investment relative to its price. As an example, a fund that paid dividends of $3 a share, and the share price was $100, the yield would be 3%.

Harvest Fund managers are Minot State University graduates Trey Welstad, Josh Larson and Mike Morey, who is chief investment officer for Viking Fund Management, and Shannon Radke, the chief executive officer at Integrity Viking Funds and graduate of the University of North Dakota in Grand Forks. All have been managing the fund since inception in 2012 except Welstad, who came on in 2014.

“Any decisions that are made, we need to come to a consensus. Three out of the four portfolio managers need to agree on any buy/sell transactions that are made within the portfolio. We feel this adds a lot to the process,” Morey said. “That’s another important part of the fund is having a process, being disciplined and sticking with that process, knowing that it has worked historically and it’s going to work on a going-forward basis. But the meetings that we have and the idea generation that is created by the four people need to be tested. They need to explain their ideas to the rest of the managers. It needs to go through some back and forth.”

Working together for so long, the team members say they are in touch with each other’s stance on investing.

“It’s been pretty fluid so far, and only a couple times where you want to pull your hair out. But we come back together and we get through it and figure it out,” Morey said.

“Usually when the meeting ends, we’re still friends,” Radke joked.

“But we definitely like to challenge each other from time to time,” Larson added.

Larson and Morey attended MSU during the same period and both joined Integrity Viking Funds in 2010.

Larson said he enjoyed picking stocks for fun in high school, but when he went off to college, he questioned whether there was a career opportunity in the field in North Dakota. While at MSU, he discovered the extent of the opportunity during an internship at Integrity Viking Funds.

“To be able to stay in North Dakota and be able to do what you really want to do was a great opportunity,” he said.

Morey said MSU is blessed to have an instructor with the financial intelligence of Jerry Stai, who also serves on the Integrity Viking Funds board.

“I’ve always been passionate about the stock market, finances, investing,” Morey said. “It always piqued my interest, but it was definitely him that pushed me to pursue a degree in finance.”

After graduating from UND, Radke returned to Minot. He joined Integrity Mutual Funds in 1988, a year after Bob Walstad started the company. He left in 1998 and formed Viking Fund Management, which came together with Integrity Mutual Funds in 2009.

The Harvest Fund is the largest of a dozen funds managed by Integrity Viking Funds, which is approaching $1 billion in assets under management, Radke said.

The Harvest Fund’s strategy of investing in quality companies with histories of strong dividends has helped ease the ups and downs of a volatile stock market. For instance, when the stock market hit a rough spot in 2022, the S&P 500 Index dropped 18.11%. The Morningstar Large Value category as a whole dropped 5.9%, but the Harvest Fund rose 3.18%.

Because of the conservative management, the fund can underperform during bull markets but outperforms when markets fall, according to the Harvest Fund team.

“The fact that it pays an above average dividend yield, and that it’s grown its dividend every single year since inception, allows investors to kind of remove the emotion of tracking the principal,” Morey said.

“When you look at how we’ve created alpha – or our outperformance since inception – a lot of it is the risk aversion of the fund. But the other is our top down approach toward sector allocation — how much we’re putting into each sector, and the rotation of how we have our assets allocated into most sectors — has greatly contributed to the fund’s performance longer term,” he added.

“Creating alpha is kind of what it’s all about,” Radke said. “But it’s very difficult to do. Most fund managers have negative alpha versus the market because mutual funds have inherent expenses, expense ratios, costs of managing the fund, and you’re going up against indices like the S&P 500. On a risk adjusted basis, to outperform an index over time is pretty difficult to do, and we’ve done that with this fund long term. We’ve generated alpha. When (financial) advisers hear that, they get more interested in your product right away.”

The Harvest Fund is sold through a network with coverage in about 35 states. Most of the fund’s investors come from outside North Dakota.

Teets said the Minot location is an advantage for Integrity Viking Funds because it is far from the investment “noise” created in the major hubs. The Harvest Fund management team can stick to its game plan without the distractions, he said.

“What we’re trying to do is kind of get people to look at this fund from a value perspective and own it when things aren’t looking as good, because the full cycle returns are absolutely superior, particularly when you’re risk adjusted,” Morey said. “So it’s getting people committed to this fund and owning it for the longer term.”