Managed Funds Navra Fund - Qtr 1

But volatility is meant to be good for the fund (or so everyone keeps telling me). So therefore we should all be expecting a bumper distribution, shouldn't we?
I still suspect that somehow they had low cash reserves and could not take advantage of all that volatility, or perhaps cannot realize gains by selling into such a low priced market?

Before you tell me again that I am wrong, please explain why the distribution would not be high during such a volatile quarter.
I am quite happy to be wrong, and am certainly not an expert on how the sharemarket or Navra system works. I only believed what I was told at Navra seminars: that the fund would perform very well in volatile markets (and my definition of performing well is not "losing less than the rest of market", it is "producing income").
I really would like to get to the bottom of why / how it all works and sorry but no-one has given a believable explanation yet.
Thanks
Seaview

 

Thanks Sim. This clarifies it for me.
Simply put, the fund makes money in a fluctuating market that is bullish in its trend line. The current bear fluctuations are not condusive to realised profits.

Given the market fund value at the moment, its hard to see a distribution occuring - mainly because any distribution would reflect as a unit price drop & its very low at the moment.

Makes me think that in this bear market, Aurora Dividend Distribution Fund would be appropriate. Its numbers are attractive.

As always, I'm open to opinions.

 

Mark,
This is a very interesting point that hadn't occured to me. So if you draw down cash for personal spending from your margin loan, you are contaminating the tax deductability of the whole loan?
If so how can you work around this? What about setting up a CMA linked to the margin loan and drawing the cash from the CMA. Would that work?
I agree about using money held in a LOC as a buffer. This is what I've been doing as my margin LVR gets into buffer territory. I figure that I am being forced to buy more units as the market gets near to the bottom. Buying additional Navra units from a LOC means that they should be self funding with good capital growth potential. An added bonus is the additional income they may produce going forward.

 

All US sites tonight pointing to a "GIANT" rally.

We need a few days straight of these next week and perhaps we could see a decent distribuition this qrtr. Things are looking good ... finally ... some hope !

 

Hi lorrimer, my understanding is that holding cash in a CMA account liked to your margin loan works in a similar way to an offset account. Having said that, PLEASE confirm so with your accountant/financial adviser. However, if you have a non-deductible debt (such as a PPOR loan) you might be better off with the money being in an LOC or offset account against this loan. But again, check this with your accountant.

Mark

 

Had a chat to Steve on the weekend about this quarter's distribution amongst other things. He mentioned that the distribution has been badly affected by the realised losses incurred when the fund had to sell its Toll shares.It was forced to offload those when Toll was no longer an ASX200 company, something to do with Toll offloading its Virgin holdings Under the rules of the fund , it can only hold ASX200 companies.

 

Thanks for mentioning this gazza . . .

Correction: When Toll split from its holdings in Virgin, we were left holding Virgin shares; NOT an ASX 200, so in terms of the fund constitution we had to get rid of these Virgin shares immediately . . . incurring a loss.

Regards,
Steve

 

almost got it right

 

How can you have made a loss on VBA when the shares went from 55-60c. to $1.20 after the distribution was announced - must have held too long after the TOL divestment!!! but even after they fell back they traded around 55-60c. again for a while.

What about the investment in Great Southern - what a disaster of a stock and was it ever an ASX200 company??

Got to love GTP's recent letter to "growers" offering to take over their tree lots maturing next year for a fraction of their worth and valuing their shares at $1.10 when they were trading at 51c. Directors said the market had undervalued the company - give us a break. They have gone even lower. Anyone interested in reading more on this topic go over to the hotcopper forum and bring up discussion on GTP.

 

The VBA shares soared to $1.20 in the week leading to the distribution pay date. The poor VBA annual results were announced the day before the distribution pay date, sending the share price back to 50c. The cost base for VBA distribution was calculated using the 5-day VWAP prior to the distribution pay date - I.E a lot higher than the 50c they were on the pay date (5-day VWAP was about 78c from memory). So any selling of VBA on or after distribution date resulted in a realised capital loss (from a tax perspective).

 

I read something recently in the Smart Investor editorial which said "The S&P ASX 300, has moved up or down this year more than 1% on more than 50% of trading days"

This compares with something like 30% in 2007, 20% in 2006 and much lower in the years preceding that

Sounds like it should be Navra Nirvana to me

Why was I reading it...the cute chick caught my eye, so i read what she had to say

 

"The S&P ASX 300, has moved up or down this year more than 1% on more than 50% of trading days"
This compares with something like 30% in 2007, 20% in 2006 and much lower in the years preceding that


And that is a basic difference between bear and bull market.
It’s a good time to take a break (I am just about to take off).
Have a good one.

 

But the Navra system was designed to benefit from volatility, so we should get better distributions during these times shouldn't we?

 

Look dudes, take a step back and look at the bigger picture, okay? Let's use BHP as an example (this is not a real example of actual trading conditions).

Let's say BHP is trading at $40. Then it drops to $37. The fund buys some. It goes back to $40. The fund sells *a little*. The stock then goes back to $35. The fund buys more. Then it goes to $42. The fund then sells *a little more*. Then it goes up, then it goes down.

There's a lot of volatility there, but not a lot of taking profit. When the stock goes up to say, $50, that's when the big returns will be around (maybe, I don't know how the algorithm works). You can't expect huge returns when the market is essentially not really going anywhere, even though there is a lot of up and down in a *relatively* narrow band.

Mark

Edit: have a look at this graph .AXJO - S&P/ASX 200 - Google Finance - it's the ASX/200, then click on the last 3 months and have a look at where it's been trading. There's a lot of up and down, but it's in a relatively narrow band.

The market in that timeframe has done -7.5% or whatever. The fund has done -0.72% (according to the site). If you're not happy with a 7% outperformance compared to the index, then... I dunno what to tell ya.

 

I'm very happy with this performance. However this outperformance compared to the index would likely be due to Navra's trading, wouldn't it?
In which case, I thought that any trading profit has to be distributed.
So we should be looking forward to a 7% distribution this quarter then!

 

Why was Mark's post deleted? Unnecessary? For real? Come on dude, what was 'unnecessary' about it?

Mark

 

Hmmmmmmm . . .

Maybe I best post an in depth explanation on the Navra Forum and you can read it there.

Meanwhile the 'Short Explanation'
Yes we are trading very well at the moment because of the volatility. However please understand that managed funds trade and sell on a FIFO (first in - first out) principle.

What this means is that when we trade out of a stock (sell) we sell from the earliest purchased batches first. So the parcels that we are currently selling were purchased August - October 2007, when the market was at a high! As such, there aren't huge profits to be gained just yet from the volatility. We are certainly moving stocks and we realise profit against the average stock prices (Average price over the past 12 months) . . . but it will not reflect the 7% out-performance yet. In a few months when we start selling the stock purchased (very cheaply) in Nov 2007 to feb 2008 - then we will accrue the huge realise profits that you are waiting for!

The Navtrade systems best trading year was the 12 months after the 2001 correction . . . but the bulk of the huge realised profits occured 8 to 12 months AFTER the event. You will see a similar result from the current market conditions where I expect realised distributions this financial year to be in the 15%+ range.

I am suggesting then that the big distributions based on current trading will occur in the March 09 and June 09 quarters.

At the end of Oct 07, the fund was 40% in cash and we used this cash to buy into the current market lows.......before we can realise the huge realised profits from these very cheap purchases, we first have to trade out of the purchases made up to the end of Oct 07.

Hope that clears up some of the confusion!

Regards,
Steve Navra