Discussion in 'Managed Funds & Index Funds' started by Insight, 6th Mar, 2008.
Any predictions for the distribution this quarter?
Earlier in the thread 3% was mentioned.
It will be interesting to find out as the fund is in a significant draw down.
Compounding is like magic, or like a horror when you are in draw down. The reality of assymetric leverage keeps you awake at night if you trade for a living.
For example.. If you are in a 15% draw down and add an extra 3% to it, you then need to recover an extra 4.3% (!) to see your old equity high (= make at least a nominal break even).
Recovery from 85% to 100% = 17.65%
Recovery from 82% to 100% = 21.95%
** edit.. cash in hand is different to capital lost in a trade it's true, but the issue of diminishing working capital to generate a return is still a large one.
Steve said at the presentation on Tuesday night in Brisbane that they were down to 7% cash and had been out buying NAB that day, which he thought was a bargain.
He said the fund has great potential to outperform on the upside should the general market start to recover. Yes 3% distribution pretty much locked in at this stage as they have already made this much. He's very pleased that he has proved that the fund can still produce 12-15% in any market.
Lorrimer -15% does not mean +15%. The present draw down has been around the -15% level, probably less now I expect.
It's a pretty simple idea, if you are lagging an index (AOAI) that does approx 12% a year over 5+ decades by a hefty chunk of basis points then that is your performance, not what you think you should make, it's actually what you are making. So a reasonable expectation I predict would be to take your AOAI expectation and subtract drag from fees and underperformance and tax and voila. Not -ve mind you but not 12-15% either in my understanding of how life, the markets and everything work.
We all have potential to outperform, the only way you do that if the stocks you purchased lead the market on the way up.
I'd like to keep posting on this as I see it as a gap in people's understanding that I know and who post on here and Ssoft. It's all about reasonable expectations, and the best expectations are to look at your results if you have a nice sample size.
Starbucks is a solid business (imo) that pays out a nice dividend. Recently however for matters I know not what their share price has gone from $50 to $20 or so, I wouldn't be worried about my SBUX dividend because of this and might expect it to keep on increasing even regardless of underlying share price moves.
As a trader If my account goes from $50 to $20, my ability to pay myself a dividend has been devastated.
Don't want to come over as too combative.
Will play the advocate here.
Lichello invented AIM in the 1970's and it was the right system for the right time in the US, large moves in range bound markets lend themselves to trading the extremes of moves in your time frame and milking mean reversion for all it's worth. It was a terrible time for the buy n holders in equities and the shake out was so extreme that you would not believe it if you saw some of the P/E ratios on great companies by the time the super bull was ready to launch in 82. Some smart people are predicting similar things to the 1970's for the US market in particular at the moment, based on P/E expectations with the E side being historically high and a wicked mean reverter some very smart billionaires are saying mid to low single figures going forward for the next decade for the buy n holders.
12-15% might be entirely achievable going into the future if the markets are willing, good luck and keep on investing!
Yes I am aware of all this. I think in times such as these the importance of cashflow should not be underestimated, especially if one is holding negatively geared property.
One of the strengths of the fund is that they avoid the Starbucks of this world or stocks of any company that holds large debt levels. This is probably how they have managed to outperform the index by around 6% during the downturn. Whether the fund is trading at $95 or $115 is of no consequence to me. If in 20 years time the fund is still trading at $95 I may be a little upset. At some stage it's highly likely that the price will hit $120 again, at which stage the choice can be made to cash out or keep taking the income. However in the meantime I'll take my 10%, invest the extra 2-5% and continue to build a property portfolio from which I hope the capital gains will come.
No more trading for me, no more Australian Unity etc. From now on it will be Navra, index funds and property.
6% is peanuts, I did 100% outperformance during the downturn on the ASX. I held more cash though.
I'm not sure how much debt SBUX has, I do believe C (Citigroup) has a dollar or two in debt last time I checked and it's held in the US retail fund.
Lorrimer I don't believe you do understand the points I raised, though you have an investing plan and are moving towards goals so should do very well I'd say.
With the retail fund down 18% odd I'm going to be interested to see the dividend this quarter, no doubt it will be in the expected 'forecast' range. I am very reluctant to 'draw' from my account when I'm losing money, it's a very brave practice as you have the stress of compounding maths working against you.
I'm posting best ever results at the moment with my trading and am pretty happy with how things are going, wonderful markets for me. Should open my own fund.
Anyway good luck and good trading to all
Steve tells me to count on 3%.
Is that 3% of original unit purchase price?
3% of current unit price?
cents per unit would br clearer but thanks for the advice much appreciated.
I always times the number of units by %. Unit price should not affect dividend payment.
But number of units * % distribution doesn't give you anything meaningful at all - especially since the % distribution is determined by the unit price which varies daily!
Number of units * c/unit distribution is the only accurate measure
... or I suppose you could use holdings value * % distribution provided that you take the value and the % from the same day's unit price (doesn't matter what the unit price is - so long as it is the same for both).
Sim - you are correct !
I meant holdings value * % distribution.
Might be 2percent
Info - distribution
Expected distribution 2%.......subject to auditing and final close.
3% realised profit at the time of the cocktail parties, however since then we have transfered many clients into instalment warrants as a defensive risk protection mechanism. This has meant selling some units at a low (yes buying back at the same low), but in this case a loss is realised against the previous realised profit. I thus expect the net to be about 2%.
The index is currently -15.55 for the quarter.
The fund is currently -10.53 for the quarter.
A realised profit (distribution) of 2% is good in the circumstances.
To date then: 2.5% + 3% + say 2% = 7.5% for this year.
We are thus on track for at least 10% distribution for this year and probably more as the last quarter is usually higher. (Includes all the add-backs)
Should we end the year on a 10% distribution, the average will still be 15%+ since inception.
Is my understanding incorrect that NFS and the Nav fund are distinct and seperate entities and managed this way?
If decisions made in the best interests of clients of NFS were impacting profitability of the fund then I would want to know that as an investor.
Yes this concerns me, why do I take a loss because of people selling out of the fund?
A 1% distridution loss can be a lot of money, especially as I may have made that loss for other peoples protection?
My sentiment exactly. I chose not to go the way of instalment warrants and find a distribution downgrade disappointing. I thought they where transfering units not selling them.
These are all investors in Navrainvest who have chosen a position of safety.
Coincidently they might also be clients of NFS.
However, if investors choose to sell / transfer units at any time it effects only themselves.
The net result is that the 1% less income is still in the fund - just held in capital. Any investor can at anytime redeem the 1% of capital, should they for example wish to have a 3% cashflow for this quarter. (Which would be exactly the same as if they received a 3% distribution.)
It is clear that no unit holder can be effected by any other unit holder....see PDS
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