Managed funds

[Dolcile]

Thanks for sharing Dolcile. Interesting fund.  Do you mid me asking what percentage of your portfolio is in there ?  I might throw them a bone in due course.

Of course, Basil.

It is only a very small allocation. Just some skin in the game, while I see how it performs.  I'm viewing it as an equity diversifier. My current allocation at the end of September is:


Cash and fixed income: 10%  [higher than I'd like but funds are set aside for a home upgrade, plus I have some nervousness around current valuations]

Alternates (Salt Long Short Fund): 3%

Australian equities (PIE Funds Australasian Dividend Fund): 9.5%

NZ equities (Turners, HLG, Tower): 6%

International equities (index funds): 71.5%

[Basil]

Thanks for sharing.

[entrep]

Thanks Dolcile for Posting this. Interesting comments re HGH and Tower.

I agree. I have just had to read myself and like what they have to say.

Just on SALT, will this acquisition presumably have any effect on their strategies and team and investments etc?

https://www.saltfunds.co.nz/post/alvarium-acquires-100-of-salt-funds-management

Also, there's no difference in investing in these funds via InvestNow (where available) as opposed to going directly, right?

[Dolcile]

Also, there's no difference in investing in these funds via InvestNow (where available) as opposed to going directly, right?

That's right.  I'm going through InvestNow.

[Basil]

I made the decision to expand my own GARP investment program with more HLG and more TRA than chase 47% one year return in the PIE dividend growth fund or invest in any international fund.
International metrics look highly elevated to me and risk abounds e.g. Nasdaq as a whole trading on 31 times next year's earnings v 10 year average of 19, (source CNBC). Sure, you can argue that with A.I. its different this time but I think there's a very real risk this is a bubble and "this time it's different" is the most dangerous phrase that exists when it comes to investment.

[Shareguy]

I made the decision to expand my own GARP investment program with more HLG and more TRA than chase 47% one year return in the PIE dividend growth fund or invest in any international fund.
International metrics look highly elevated to me and risk abounds e.g. Nasdaq as a whole trading on 31 times next year's earnings v 10 year average of 19, (source CNBC). Sure, you can argue that with A.I. its different this time but I think there's a very real risk this is a bubble and "this time it's different" is the most dangerous phrase that exists when it comes to investment.

I share your concerns Basil regarding the international markets which is why I've sold all my US stocks. However there is plenty who will argue that the current impetus is going to continue, specially with AI.

With Interest rates declining and the economy hopefully turning a corner I see the New Zealand market as a very safe bet. However the Australian small cap space is still offering plenty of opportunities in my opinion and have invested in the belief that the Australian small caps will continue to outperform the NZX over the short to medium term.


The latest update has Pies 1 year return as

Growth.    48.5 percent
Emerging.  31.9
Div growth 27.2
Growth 2.  18.3

It's not really a fair comparison but I have included the ASX small ordinaries and the NZX50 as follows.

ASX  1 year return 15.96 percent. 3 year 13.23 percent
NZX50 1 year 0.83 percent. 3 year 3.98 percent

https://www.spglobal.com/spdji/en/indices/equity/sp-nzx-50-index/


https://www.spglobal.com/spdji/en/indices/equity/sp-asx-small-ordinaries-select-index/


I'm not expecting another 48 percent return BUT I'm expecting another good year. If I don't like the performance or feel that I have better opportunities elsewhere 10 working days to get my funds is not long to wait, well it's how I see it anyway. We will see.

[Basil]

With Interest rates declining and the economy hopefully turning a corner I see the New Zealand market as a very safe bet. However the Australian small cap space is still offering plenty of opportunities in my opinion and have invested in the belief that the Australian small caps will continue to outperform the NZX over the short to medium term.

Fair enough mate.  I'm a bit older so I am happy to take a lower risk approach on high quality stocks on the NZX.  I also like the dividend yield. 

[Shareguy]

A tough month for Discovery. ZIP not playing ball. November has not started well either.

https://discoveryfunds.co.nz/assets/Newsletters/Discovery-Oct-25.pdf

[Basil]

I suspect Life 360 has become a huge position for them over the years.  You'll recall their max position of the fund is 10% but that's based on the cost price not the current one.  If Mark and Chris bought this when they first formed the fund they've made approx ten times their money from where it was in Sept 2022 in the late $4 range so its anyone's guess how big a percentage this is of their fund.  The non disclosure of all holdings and their size and no financial statements or annual reports is really unusual and does not make me feel quite uncomfortable.

From Jarden's website 360 trades on 390 times trailing earnings.   For context that's about 7 times the super high growth Nvida's trailing earnings !  I know its growing strongly BUT if something looks like a duck, quacks like a duck and waddles like a duck, guess what, its probably a duck.  What I am getting at here is I think Life 360 is a tech bubble and many, many. many years of future growth has already been well and truly baked into the price.  360 is down approx 13.5% since its all time high in the mid $50's on 10 October and the Discovery fund is down approx 9.5% from that point too.  Coincidence ?  I don't think so and I think 360 has become too large a position in their fund and the metrics are too stretched.  Trailing PE's on a couple of their other holdings, GDG 59 and ZIP 60 are also expensive but not in the "looney tunes" stratospheric range.

Anyway...I hope the party keeps going but since March when I withdrew quite a lot of my holding from Discovery this is just a modest 6% portfolio position for me and reflects my concerns that tech is quite possibly, maybe even probably in a bubble. 

My musing is that I think all investors have to find their own unique place of ease with their investment strategy and I feel more comfortable with my GARP approach where prices are well supported by earnings and growth, both of which are at very reasonable metrics which is why I have such a significant portfolio allocation to my two favorite stocks in that sector TRA and HLG, combined worth 37% of my portfolio now.  Not having to pay annual management fees of 1.2% and 20% bonus fees for outperformance is frankly, other very pertinent factors as well, especially the 20% performance fee which is right at the very extreme top of the industry range.

Sometimes in a quiet moment I wonder if managers who are incentivsed really handsomely with huge 20% performance fees, deliberately take on board high risk strategies to try and get more of those extremely lucrative fees, (huge money can be like a drug), knowing that if they get it badly wrong going forward they don't have to pay back any previous performance fees paid.  Maybe I'm just old and cynical these days but gosh those performance fees paid in 2023 and 2024 must have been mind blowing and huge money can do strange things to young guys brains.   Maybe I'm wrong and just a boring old cautious fart these days lol...time will tell I guess.

If it goes down another 10% to be a major 20% correction, I'm going to reevaluate where I stand with Discovery.

[Shareguy]

Great post Basil. Caution is a good thing and I do think that as you get older less risk is warranted. So you make good sense. It's not just 360, a number of the small caps in general have been weak recently. I do agree though that 360 seems highly valued.

However from my point of view Discovery is still up over 250 percent since inception and on a One year basis 35 percent is not to shabby. If I could put more money in I would. I do agree the lack of disclosure is not for everyone, but that's wholesale funds for you. It also allows Mark and Chris to build up/down positions without disclosure which has benefits.

I have been with Discovery for a long time so I feel grateful to be part of it, but can understand that others may have different goals/risk tolerances.

[Basil]

Thanks Shareguy.  Congrats on doing so well with Discovery. You've done very well getting in so early.

Fair point about the wholesale nature of the fund.

For what its worth KW has recently sold most of her tech / momentum / small cap's.

[Dolcile]

I quite enjoy theses updates from Salt

https://www.saltfunds.co.nz/_files/ugd/9b51d8_5e7cb91a4fac405fb2cac16cc8a1a7c2.pdf

[entrep]

I quite enjoy theses updates from Salt

https://www.saltfunds.co.nz/_files/ugd/9b51d8_5e7cb91a4fac405fb2cac16cc8a1a7c2.pdf

I like the cut of these guys' gib. Intend to invest shortly.

[Dolcile]

I like the cut of these guys' gib. Intend to invest shortly.

Yeah I was a little concerned about the level of fees - but they seems to be outperforming the benchmark quite consistently and it like it as diversifier from my other investments.

[Basil]

Substantial correction with Discovery from the peak in early October its down ~ 15% which coincides with a substantial correction in Life 360's share price.  I'd love to know what percentage of their fund is in 360. 

Frankly, I feel a bit nervous their position in that company has been allowed to grow too big and maintaining an outsized position may not be prudent from a risk management perspective going forward.   I know its a wholesale fund and they are within their rights to do what they like without disclosure, but nevertheless I would like to know the level of risk our money is being managed with.

I don't have a huge amount in there so am pretty sure they would fob me off with a "we don't disclose that" sort of statement.

Does anyone feel brave enough to ask ?