Managed funds

[Stoploss]

Note it's not uncommon for a fund to close for new investment .
https://www.piefunds.co.nz/Market-Insights/Article/australasian-dividend-growth-fund-to-close

[Basil]

Was about 100 odd of us who attended. Mark and Chris both spoke about how disappointed they were on the recent performance of the fund. They made the point that the fund is still up 15 percent ytd. They have used the volatility to increase positions and are still very positive.

I personally spend a bit of time with both of them and tried to find out what percentage of the fund 360 was and if they had a rule on taking profits. My questions unfortunately did not get answered and I was told it was confidential and wouldn't be disclosed. I also asked with this recent volatility had there been many withdrawals and I was told no ,so I guess that says that most people are happy with the way things are going.

Also spoke to some other investors who were not fazed re the performance.

A very good night was had.

I knew what I was getting into but the lack of disclosure and transparency is ringing alarm bells.

Summing up the situation.
No financial statements ever
No annual report ever,
No copy of the audit report ever.
No report from the Trustees, ever.
No disclosure of all investment positions and sizes other than max 10% cost at the time of acquisition, (which is meaningless if a stock goes up by 500% as it could become massively overweight in the portfolio)  How would anyone know if they exceeded that original undertaking of 10% max at cost price limit anyway ?
No disclosure of policy around profit taking
No questions taken after speeches at the annual get-together
No private disclosure of policy even to a long time original investor, (I knew full well there was no point in me ringing up and asking)
No accountability when the fund underperforms, (they are happy to take a whopping 20% performance fee when there's outperformance but repay none of it when the fund massively underperforms)

In the last 4 months they have underperformed by 2.6%, 2.5%, 4.6% and 8%.  Note the accelerating trend.  Not much contrition shown in the latest monthly newsletter as to why they have underperformed to a record ever extent but there was assurances in the previous monthly report that the past underperformance was behind them and changes had been made and words to the effect we are very confident going forward.  With the benefit of hindsight this was a clear display of hubris.

They don't want any checks and balances of any kind whatsoever, other than from the auditor and trustee that they actually own what they say they own.
Trust us we're experts and know what we're doing.  What could possibly go wrong...  Are they experts with sufficient experience to handle a bear market ?

During their years at PIE, I did some research with the assistance of Gemini to ask when they started and finished, PIE historical unit price data and a CAGR calculator to determine that their long term performance there delivered a 12.17% CAGR for the PIE Growth fund and a 11.0% CAGR for the PIE Growth 2 fund.  I don't think their historical performance in the funds management field is anything special considering the bull market prevailing at the time.

As I see it, they took in a lot of money in the first 2 years of their fund which supported the share prices of their stock selections over time.  They got very lucky with 360 and GDG and earned huge performance fees in the first 2 years which they are not repaying any part thereof despite 11% index underperformance in the last year.

Here's an interesting point.  Since they closed the fund to new investment in Sept 2024, they have underperformed the index by 0.5% by my own calculations.

To me, they are chasing high growth stocks and hold them on mega high metrics.  That's a very, very high risk strategy.  Together with the woeful lack of disclosure, their underperformance since the fund closed and their very modest performance before they started their own fund I have drawn the conclusion they simply got lucky with GDG and 360 and the way they run this fund and what they're invested in and the lack of disclosure all makes me quite uncomfortable so my time as a Discovery investor has come to an end.

Best wishes to holders.  I hope it works out well for you.  I am happy to paddle my own canoe going forward.

I think those who have been in for quite a long time might want to consider a partial withdrawal, i.e. withdrawing their original capital invested so they are just playing with their profits and getting a "free ride" going forward.  Discovery is a VERY high risk fund.

[Stoploss]

Basil note re the performance fees .
They have a high water mark so investors won't be paying any for a while ......
At least you got a Xmas drink ... no invites or functions anywhere else in NZ .

[Basil]

I didn't go.  Just reporting what I was told that they didn't even take questions after their speeches which is surprising given their recent woeful underperformance

In the last 4 months they have underperformed by 2.6%, 2.5%, 4.6% and 8%.  Note the accelerating trend. 

Interesting that PIE funds Australian funds weathered the tumultuous month of November a heck of a lot better than Discovery which was down a whopping 9.5% https://www.piefunds.co.nz/Performance
PIE funds taking a lower risk and / or more balanced and diversified approach to Australian growth stocks ?

[Dolcile]

It is all very interesting, Basil. It seems like Discovery were way to exposed to 360 / and or didn't take profits on the way through.

[Basil]

Discovery were way to exposed to 360 / and or didn't take profits on the way through.

The fund was down an incredible 15% at one point in November.  My gut feel is It feels like the fund is being run in such a manner as to amount to "reckless endangerment" which is why I got out, not following my gut feel is usually a mistake.  Young guns chasing big performance fees have come and gone before.  Its the steady players that make it through the bear markets.  PIE have been around for quite a while now.  I might throw them a bone in due course but at this stage I am really enjoying buying very high quality growth companies myself on ludicrously low multiples and not paying fund managers any fees for managing my money. 

[Mos]

A managed fund I invest in is Te Ahumairangi (Nov 25 Fund Update below)

Te Ahumairangi Nov 25 Fund Update

It is my preferred managed fund for the following reasons...
- run by Nicholas Bagnall who had a stellar record over 26 years at ACC
- track record of 17.98% p.a. return over four years since inception albeit in a buoyant global equity market
- 100% global equities providing easy exposure to international shares (I invest directly in NZ shares so don't want NZ shares in a fund)
- reasonable fees for active management 0.62% p.a. and no performance fees
- value investor type approach focused on lower risk reasonably priced stocks with decent visibility of future cash flows and strong balance sheets
- good disclosure in monthly fund updates
- the insights on the web site indicate an intelligent approach to investing in my view

I don't have a barrow to push on this and recommend everyone DYOR but I have found it a good fit for me - easy to sleep at night, good returns to date, no FIF complexity that comes with direct investment in global shares.

You can access directly through Te Ahumairangi for $50k plus investments or alternatively through Investnow for lower amounts and KiwiSaver (no difference in fees either way).

I welcome others views on this.


 

[Raven]

As a fellow investor in Te Ahumairangi my view on your comments is "I agree". My only real wish is that rather than being a primarily unhedged fund they utilized a bit more hedging from time to time.

[Mos]

Thanks Raven. I don't mind unhedged myself to get more exposure to the growth and success of international economies. But it does bring more volatility and risk (upside and downside) in NZD terms. 

[Shareguy]

I knew what I was getting into but the lack of disclosure and transparency is ringing alarm bells.

Summing up the situation.
No financial statements ever
No annual report ever,
No copy of the audit report ever.
No report from the Trustees, ever.
No disclosure of all investment positions and sizes other than max 10% cost at the time of acquisition, (which is meaningless if a stock goes up by 500% as it could become massively overweight in the portfolio)  How would anyone know if they exceeded that original undertaking of 10% max at cost price limit anyway ?
No disclosure of policy around profit taking
No questions taken after speeches at the annual get-together
No private disclosure of policy even to a long time original investor, (I knew full well there was no point in me ringing up and asking)
No accountability when the fund underperforms, (they are happy to take a whopping 20% performance fee when there's outperformance but repay none of it when the fund massively underperforms)

In the last 4 months they have underperformed by 2.6%, 2.5%, 4.6% and 8%.  Note the accelerating trend.  Not much contrition shown in the latest monthly newsletter as to why they have underperformed to a record ever extent but there was assurances in the previous monthly report that the past underperformance was behind them and changes had been made and words to the effect we are very confident going forward.  With the benefit of hindsight this was a clear display of hubris.

They don't want any checks and balances of any kind whatsoever, other than from the auditor and trustee that they actually own what they say they own.
Trust us we're experts and know what we're doing.  What could possibly go wrong...  Are they experts with sufficient experience to handle a bear market ?

During their years at PIE, I did some research with the assistance of Gemini to ask when they started and finished, PIE historical unit price data and a CAGR calculator to determine that their long term performance there delivered a 12.17% CAGR for the PIE Growth fund and a 11.0% CAGR for the PIE Growth 2 fund.  I don't think their historical performance in the funds management field is anything special considering the bull market prevailing at the time.

As I see it, they took in a lot of money in the first 2 years of their fund which supported the share prices of their stock selections over time.  They got very lucky with 360 and GDG and earned huge performance fees in the first 2 years which they are not repaying any part thereof despite 11% index underperformance in the last year.

Here's an interesting point.  Since they closed the fund to new investment in Sept 2024, they have underperformed the index by 0.5% by my own calculations.

To me, they are chasing high growth stocks and hold them on mega high metrics.  That's a very, very high risk strategy.  Together with the woeful lack of disclosure, their underperformance since the fund closed and their very modest performance before they started their own fund I have drawn the conclusion they simply got lucky with GDG and 360 and the way they run this fund and what they're invested in and the lack of disclosure all makes me quite uncomfortable so my time as a Discovery investor has come to an end.

Best wishes to holders.  I hope it works out well for you.  I am happy to paddle my own canoe going forward.

I think those who have been in for quite a long time might want to consider a partial withdrawal, i.e. withdrawing their original capital invested so they are just playing with their profits and getting a "free ride" going forward.  Discovery is a VERY high risk fund.

Discovery is a wholesale fund and is not for retail investors or anyone with a short term horizon. Yes it's high risk, yes it has had a "rough" patch lately, any yes not a lot of information is disclosed. At this stage I will be putting more in when or if the fund opens again. Only time will tell if it's a good move or not, but I'm prepared to take the risk and prepared for any volatility that will occur as part of investing long term.

Disc/ Just to be clear I have nothing to do with Discovery or any other fund and am not recommending it to anyone.

[Shareguy]

A managed fund I invest in is Te Ahumairangi (Nov 25 Fund Update below)

Te Ahumairangi Nov 25 Fund Update

It is my preferred managed fund for the following reasons...
- run by Nicholas Bagnall who had a stellar record over 26 years at ACC
- track record of 17.98% p.a. return over four years since inception albeit in a buoyant global equity market
- 100% global equities providing easy exposure to international shares (I invest directly in NZ shares so don't want NZ shares in a fund)
- reasonable fees for active management 0.62% p.a. and no performance fees
- value investor type approach focused on lower risk reasonably priced stocks with decent visibility of future cash flows and strong balance sheets
- good disclosure in monthly fund updates
- the insights on the web site indicate an intelligent approach to investing in my view

I don't have a barrow to push on this and recommend everyone DYOR but I have found it a good fit for me - easy to sleep at night, good returns to date, no FIF complexity that comes with direct investment in global shares.

You can access directly through Te Ahumairangi for $50k plus investments or alternatively through Investnow for lower amounts and KiwiSaver (no difference in fees either way).

I welcome others views on this.


 

Looks good Mos. Diversified with not over weight positions in Ai. Returns have been good.

[Basil]

Thanks for sharing Mos. I agree with Shareguy it looks good, well diversified, proper disclosure with top ten holdings and noting also the very low fees for a managed fund of only 0.6% per annum.  Also its decent sized fund with no performance fees.  As you mention, fund manager has a highly credible long term track record.

Other Alternatives:- Smart Shares total world fund achieved very similar returns for the 3 year period to the end of November at 21.84%, has lower fees, 0.4% per annum and even better diversified.   https://www.smartinvest.co.nz/funds-and-performance/etfs/international-shares/smart-total-world-etf
Smart shares S&P500 had even better growth, up 24.51% per annum over the last 3 years and even lower fees at 0.34% https://www.smartinvest.co.nz/funds-and-performance/etfs/us-shares/smart-us-500-etf and then there's the large growth US ETF up 33.5% per annum over the last 3 years  https://www.smartinvest.co.nz/funds-and-performance/etfs/us-shares/smart-us-large-growth-etf

Maybe a good idea to spread one's international portfolio allocation around amongst a number of different funds.

[Mos]

Thanks for your comments Shareguy and Basil. Some good points to consider. If I was looking for a Smartshares type index fund I would be inclined towards Simplicity's total world unhedged (0.15% p.a.fee) or Investnow Foundation series (0.06% p.a. fee but 0.5% entry/exit fees detract).

However, I am not comfortable with the index composition including NVDIA at almost 7% and Tesla at almost 2% along with ritzy valuations for many AI and other "growth" stocks with no earnings to speak of at this point. I am personally more comfortable with the Te Ahumairangi fund's composition and primary focus on value stocks underpinned by earnings and I am prepared to pay the 0.6% active management fee on this basis. It will be interesting to see how the fund goes in absolute terms and relative index over my time horizon of the next 10+ years.
 

[Dolcile]

Thanks for your comments Shareguy and Basil. Some good points to consider. If I was looking for a Smartshares type index fund I would be inclined towards Simplicity's total world unhedged (0.15% p.a.fee) or Investnow Foundation series (0.06% p.a. fee but 0.5% entry/exit fees detract).

However, I am not comfortable with the index composition including NVDIA at almost 7% and Tesla at almost 2% along with ritzy valuations for many AI and other "growth" stocks with no earnings to speak of at this point. I am personally more comfortable with the Te Ahumairangi fund's composition and primary focus on value stocks underpinned by earnings and I am prepared to pay the 0.6% active management fee on this basis. It will be interesting to see how the fund goes in absolute terms and relative index over my time horizon of the next 10+ years.
 

Thanks Mos.   I could go look - but I'm on mobile only at the moment - do you know:

1. Whether there is a buy / sell spread?
2. What the redemption period is? Id be using the invest now platform

Thanks again

[Mos]

Hi Dolcile,

Re Te Ahumairangi per PDS on Investnow...
1. buy/sell spread 0.1%
2. redemption wording below

"You may request redemption of some or all of your investment at any time. Payment will normally be made within 5 business days of our receiving a redemption request from you. However, we may either defer or suspend Fund redemptions.
Fund redemptions may be deferred if:
• within 60 Business Days, we receive one or more redemption requests totalling more than 10% of Fund units on issue, and
• we consider deferral to be in the general interests of all Fund investors.
Fund redemptions may be suspended if we believe allowing investors to take their money out would not be workable or would prejudice investors generally. For instance, suspension could apply if we decide to wind up the Fund or if we are unable to realise underlying fund holdings. If redemptions are suspended and you submit a redemption request, we will not process it until the suspension is lifted.
In the case of either a deferral or suspension, investors will receive the redemption price applicable at the end of the deferral or suspension period (or redemption prices, in the case of deferred redemptions which are paid out over a period of time). In the case of either a deferral or suspension, it also means that there may be a delay in you getting your money out of the investment.
More information about deferrals and suspensions can be found in the OMI document for the Fund and in the Trust Deed.
When you redeem all or part of your investment from the Fund, we will redeem your investment at the unit price for the Fund, adjusted for the applicable sell spread for the Fund."