Managed Funds Navra fund outperformance of the S&P200 - #2

Sim,
You are SPOT ON !!!!.
This is always THE case.... ( unfortunately ).

 

OK this hedging lurk is done on a fund basis..............whew.

I had the idea that each investor had to be up to speed in making an individual decision and had an individual policy or something.

This is much easier - leave it to the experts. Cool.

Tropo - hope you're clear headed this morning

Jenny

 

Thanks Jenny... I am getting better !!!.

You are right .....we should leave hedging to those who know what they are doing (I hope!!!).

YOU do the hedging only if you are trading individually for yourself not through the fund.

I had another problem this morning = I could not connect to the forum today for the last 2 hours...
Maybe computer got sick this time???? I hate Mondays....

 

....."I believe that NavraInvest will be running two US funds - one hedged and one unhedged.
It will be up to you to choose the one that suits your strategy best.
At least you won't have to do the hedging yourself (unless you choose to!)".

Sim,
Very interesting concept !!.

 

{Note: this thread split from original: http://www.invested.com.au/forums/showthread.php?t=441 - Sim'}

Hard question brought on:

OK, still tracking performance of the fund relative the index and its still underperforming significantly and costing me a lot of money. We're now well above the pre-October crash high and closing at record highs daily so I was wondering WHEN I can expect that "unrealised value" to be realised?

To paint the picture in detail:

I bought in as follows:

Date: 14/10/2005
Unit price: 1.0723
Funds invested: $559,000
ASX200: 4410

Current performance is as follows:

Date: 10/01/2006 (almost three months on)
Unit price: 1.1302 (Dec dividend of 2.7 cents added to current unit price)
Value of units held: $589,183
ASX200: 4830
Profit over period: $30,184
Percentage profit over period: 5.40%
ASX200 performance over period: 9.52%
ASX200 comparison profit over period: $53,238
Opportunity cost of buying Navra instead of index: -$23,054

So, my question is a relatively simple one now. Can I expect to receive the $23,054 in under-performance relative the index or is that money never going to be realised? i.e. Is this under-performance locked in, or is there still the potential for this "unrealised value" to emerge and for Navra to beat the index?

I think Steve was going to give us a face-to-face session soon on the trading mechanism of the fund so that we could better understand the way the unit price tracks so look forward to that one.

Sorry for the hard question. Its just that $23K in under-performance is no small amount and I'm still optimistic that this is waiting to be realised somewhere?

Help?

Thanks,
Michael.

** bump **

A week on and still waiting for a response so thought I'd bump it...

 

Michael

I think the answer lies in a couple of threads : one where I posted Steve's explanation of when you can expect to see great out performance and secondly where people where talking about shares held by the fund and how they have performed relative to the total index. I don't believe your underperformance is locked in but to realise the major outperformance you and I are hoping for, the shares that Navra hold have to all return to their pre October highs and beyond, for them to be sold off and the profit realised. At the moment quite of few of the shares eg BSL are still trading around their October lows and these will drop the fund's performance down while the index powers upwards. Also as Steve said, the fund was around 38% in cash prior to the October correction, bought on the way down and started selling on the way up. According to their website at the start of January they were about 16% in cash, so have a way to go to get back to the 38% and Steve reckons it is that last third were the money is to be made but for that to happen the shares they hold have to move back past their previous highs.

Gazza

 

Thanks Gazza,

OK, so my underperformance isn't "locked in" so to speak. We just need the companies traded in Navra to catch up to their previous highs and try and catch the weighted performance of the index. Or, in other words, the fund has picked the under-performers over the last 3 months within the index family. No worries, that happens...

I'm not looking for "great outperformance" of the index. Just matching the index would be nice.

I've charted performance of the fund relative the ASX200 over the last three months in excel as attached. It shows a pretty constant under-performance and a widening spread between the index and the fund. The plot of the spread (yellow line showing difference in % performance in the two) is an almost straight line growing to about 3.5% today. That means that the index has returned 3.5% more than the fund over the last three months and the gap is consistently widening over the whole history to get to this point.

I'm looking forward to that gap to start closing and eventually get back to zero. i.e. the fund performance matches the index. Heaven forbid that it should actually outperform it!

Not sour at all, just intrigued.

Cheers,
Michael.

PS Chart attached...

 

ASX200 down 70 points one day, up 54 the next.

You'd think the Fund should be loving this volatility. Of course it will depend on the actual stocks in the portfolio.......

 

Can't say i would buy the hidden 'unrealised potential story'.

Yes it has underperformed the index. no debate about that.

But waiting for this hidden value or realise itself i think is a long stretch.

So if this was the case, a new investor could buy in today and get an extra with the "hidden unrealised potential".

In my opinion,i just think at the moment the market is not suited to a fund with this style. I MAY BE WRONG but it would seem the fund would be better suited to market which doesnt keep going up in almost a straight line.

Just as an index fund such as vanguard could be outperformed by an active asset manager, using a variety of methods, one of which may be steve's methodology, in a flat or sideways market

It is a long stretch also to expect a fund, any fund, with a defined strategy to outperform the market each month, each quarter, each year etc

If i was chasing income from a managed fund which invests in shares, this fund would be high on my list, realising profits to turn into income. Certainly better than 5% offer by several others. I do not believe you can have your cake and eat it tho (full capital growth, full income)

OSS

 

I think it's simply a case of Navrainvest buying shares that haven't risen as much as the index has. The resource sector has pulled the entire index skyward, yet Navrainvest has a diversified portfolio that has done so-so.

Are we to expect these underperformers to suddenly rise skywards? I don't think so. Are we to expect the resource sector to continue to outperform other sectors? Who knows, but if you think so, you might want to put money into a resource fund instead/as well.

 

If my understanding is correct the individual shares in the fund could basically track sideways forever as long as there was a lot of volatility involved. The fund would then outperform the index even with the index rising as it has been?

So maybe more emphasis needs to be placed on volatility during stock selection.

An example of this type of stock which was in the fund early on but hasn't been of late is Sims Group. A very healthy company but with a lot of share price volatility.

Of course, it's great to be an armchair expert. I'm sure a lot of work goes into the selection process as stated on the Navrainvest website.

I hate to sound like a broken record but I wouldn't mind hearing Steve's comments on some of this.

 

I checked the charts of the 20 stocks a few days ago - and around 10 of them were still below the price they were at the start of October. When you chart these, you can see that many are on a downward trend. When they pick up is anyones guess - although BSL (for example) is definitely showing some positive signs - having broken through the $7 barrier this week and showing some nice volatility in the last 3 days. Its is currently trading at $7.40.
I wouldnt mind if NavraInvest checked out HDR (another armchair expert ) as in the next 6 to 12 months they turn from Oil explorer into producer. But then this stock (at the moment) has no dividends.

 

"In my opinion,i just think at the moment the market is not suited to a fund with this style. I MAY BE WRONG but it would seem the fund would be better suited to market which doesn't keep going up in almost a straight line.

It is a long stretch also to expect a fund, any fund, with a defined strategy to outperform the market each month, each quarter, each year etc".

Ol School Scata,

You are correct !!.That is what I said long time ago.

 

"Are we to expect these underperformers to suddenly rise skywards? I don't think so. Are we to expect the resource sector to continue to outperform other sectors? Who knows, but if you think so, you might want to put money into a resource fund instead/as well."

Glebe,

This may be a good idea....
Resources will go up as long as China and India need this stuff...
Problem is that fund (by definition) can not build whole portfolio based on the one sector (private investors/traders can).
In every fund portfolio you will find some lagging stock which holds whole portfolio back.
It's not possible to build portfolio containing stocks which (any one of them) are moving in the right direction.

 

You mean Navra's fund? Yeah I know that. But for the record, there are other funds that are resource sector specific:

http://www.investsmart.com.au/funds/FundDetails.asp?APIRCode=FSF0041AU

1 Mth 8.41%
3 Mth 18.55%
6 Mth 36.7%
1 Yr 48.9%

Not bad eh? Pity I don't own 'em

Uh well, yes it is but it has alot to do with how many companies you own, which comes back to risk management and I'm not suggesting Navrainvest should be owning fewer companies.

 

Outperfomance ?

I'm far from an expert on this stuff, but my recollection of Steve's presentation/s is that the fund loves volatility. If there's steady growth in the index, there's less buying and selling opportunities for NI, therefore less opportunity to make profit for all of us ?

I guess if you're comfortable the current trends will continue, you'd bail out now and take the capital growth and the income earned to date from NI, and stick the proceeds in the index ? Personally I wouldn't be comfortable with the uncertainty and the work involved in periodically needing to sell some shares to generate some income to pay the vultures.

What I love about NI is the low maintenance aspect and relatively low risk (from my layman's point of view).

Someone with more money, knowledge and time might get better returns elsewhere ? Not for me though

 

Yes......"Invest Smart" = they send me their bulletin all the time, but I do not read it.
1 Mth 8.41%
3 Mth 18.55%
6 Mth 36.7%
1 Yr 48.9%
Yep ... not bad ... but I think it would be very interesting to see their performance during the bear market....
Unfortunately you can not owe' em all.....Life is NOT meant to be easy !!.
Are they income funds like NI???.

Resource sector funds are doing well in the current climate, and they may do well for quite some time.
If you are looking for gain only, consider funds with exposure to international markets ( high risk ! ).

Yep. Question is, how many companies you can have in your portfolio but the most important is how effectively you can control the risk. This is dilemma which face not only fund managers but private traders/investors as well.

 

Maybe once the company (NavraInvest) grows they will be able to open a number of other funds such as Resources etc.

I'd like to see one that chose volatility as its main criteria. The risk level would obviously be higher but but so would the rewards, theoretically.