Managed Funds Navra fund performance

Yes Sim, but I bought just after a distribution and I think 5% down is quite a lot.
Many trading systems would effect a stop loss before you lost 5%. Even allowing for a distribution.

Also, Sim, your statement that
"Rickson, work out the current dollar value of your units at todays price, add on all distributions you're received since purchase, now subtract the original purchase price.

If this number is positive, you've still made money - so don't sweat it too much!!" - is not factual.
We must always remember the time cost of money/capital - and for those of us Living off Equity - this is the crucial equation.

We have to make more than what it costs us - say 7.5% overall.

Sorry (2nd edit because I am thinking about this) - the fundamental nature of equity is that to use it you must borrow against it. So yes sometimes Navra might return 15%+ - but the funds you have utilised are borrowed at say 7.5%.

 

Yes, but in my case - and I thought in the LOE theory - you take equity from property that has increased in value, borrow it, then margin loan against it, at say 50%.

Therefore the whole of the invested funds are borrowed against property or shares.

 

Sim,

The point I was making is a relatively simple one leaving the semantics aside for a second. I'll try and couch the argument using your terms but might get it wrong, but the argument is still true. Lets try:

The fund will pay a distribution made by trading profits. This distribution will reduce the equity in the fund by the size of the distribution. If the unit price of the fund at the beginning of the period is higher than the pre-distribution unit price at the end of the period, then the fund will reduce its equity base as a result of the distribution.

Or, in laymans terms: The trading profits ARE ALREADY REFLECTED in the current unit price (sorry Gazza, I think you got that one wrong in your post). So, if the unit price today is lower than it was at the beginning of the period, then the fund is going backwards. I agree that there will still be a distribution paid based on the trading profits, but this does not change the fact that those trading profits HAVE NOT OFFSET the capital loss for the period on the underlying assets. So, the net impact of growth and trading profits is a negative return for the period. Once those trading profits are distributed the unit price drops further.

My key point, in case its still not clear, is that the unit price has to increase during the period to allow for a distribution to be paid without reducing the residual value of your holdings. As at today this hasn't happened. As at today, the fund is losing money for its investors this quarter. Yes, I'll say that again, its losing money for its investors pure and simple. I'm not even factoring opportunity cost of capital or holding costs. In simple profit terms:

Closing unit price - Opening unit price = profit to investors over the period

That equation above is independent of whether the closing unit price reflects a degree of trading profits or not. In Navra's case this quarter the Closing Unit Price is lower than the Opening Unit Price so in reality, the fund is losing money this period. Sure, they'll pay a dividend, but that doesn't change the fact that the fund is losing money.

Let me illustrate it another way:

I put $1000 in the bank at the beginning of the period. At the end of the period its worth $990. I withdraw $100 and call it a dividend. I'm now left with $890.

This is the equivelant of what Navra will do this period. I think its still clear that to go from $1000 at the beginning of the period to $990 at the end of the period before the distribution is paid is clearly a loss. I called it a "trading loss" which semantically is probably incorrect, but its a loss nonetheless.

Cheers,
Michael.

 

Gazza,

This is where I think you need to be careful. In your example you suggest that if you start the period at $1 and close the period at $1 then it is still possible to get an income distribution and somehow hang onto that $1 closing price. That can't happen. In fact, all the "trading profits" are reflected in the current unit price. So for Navra to be negative this quarter means their trading profits are LESS than the CAPITAL LOSS during the period.

In your example your $1 closing price might become $0.95 after a 5c distribution is paid representing the trading profits during the period.

Cheers,
Michael.

 

This is what I was trying to get at.

Most here seem to use unit price as an indicator. I tend to look at capital invested or "holdings" instead of unit price, as the unit price constantly changes. It makes it easier for me anyway.

E.g. If I invested $100K into the fund, I'm interested in seeing my holdings stay at or above that initial investment irrespective of distributions.

Obviously after a distribution, my "holdings" will decrease. My concern is that, lets say due to market conditions my $100K has decreased in value to $95K then I get a distribution of $2K. My holdings are now $93K and it is going to take some good capital growth to get my holdings back to its initial $100K.

It's been a long day and I think I'm getting lost in my ramblings here, but I hope I'm making some sort of sense.

 

I only bought in to the fund this year (May), so to date have obviously only received one distribution.

So........my holdings are down to the tune of what my distribution was (give or take), which sounds ok, but................I've had to foot interest payments along the way.

 

Accepted, but I take the distribution in cash which goes to paying the interest on Monies invested (into NI) & paying the shortfall into neg. geared I/P's which was one of the reasons being touted to get into the fund.

 

Smartypants,

Did the distribution cover your interest costs for that quarter?

 

I have made two seperate purchases into the fund. Both were approx 12 months ago. One pre distribution, one post distribution. All the money is borrowed.

Dividend percentages have been 15.6% and 14.3% so both have well and truly covered my interest costs of about 7.5% and returned me some good cash after tax.
The pre-distribution investment is still down over 9% on yesterdays unit price but I have still locked in those distributions so to me all is good.

I wouldn't be game to try this with direct shares as you would have to rely on growth for that sort of return.
This is all about income though.

 

Sim & Rick.

Yes, the June distribution more than covered my quarter interest payment, but I believe that the June distribution was a significantly higher one than in the past (I could be wrong on that point).

After re-reading my last two posts, it may have appeared I am being negative or looking for an arguement so to speak. That is not my intention.

Guess I'm just trying to say that I want capital growth (doesn't have to be much) and distributions . Who doesn't.

As pointed out, I am only new to this fund (any fund actually), and although I have done the seminar and read the PDS, it is a little different when you actually put a fair bit of built up equity into play.

Still getting my head around a few of the finer points, and yes, I bought in to the fund with a long term outlook, so hopefully, in 5 or so years from now, my initial investment will have increased and I would have received many great distributions ( gotta think positive eh)