Managed Funds Navra Introduce Management Fee

Discussion in 'Shares & Funds' started by Alan__, 30th Mar, 2007.

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  1. -T-

    -T- Well-Known Member

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    The fee structure has changed for one very simple reason, which I believe we all understand (even if some choose not to acknowledge it). The fund is simply not doing what the manager claimed it would do. If it was, then there would be no need for change. It's really that simple.

    What was claimed? 1. 10% absolute returns 2. Outperform the market in all instances 3. Do all of this with more certainty than is available for similar investments. You can argue with this assessment, but I really don't care, I'm just saying it how it is. If you believe different, great. Investment 101 people. These claims are just not possible from one investment. You can kid yourself till you turn blue, but this is how it is and this is why the fee structure is changing.

    As for alternatives, it depends if you really want absolute returns or really want to beat the market. These are ENTIRELY DIFFERENT objectives. If you want income while beating the market, hold a growth fund for 12 months and sell the units. The tax will be lower and it may actually BEAT THE MARKET. If you want absolute returns, then it depends on how absolute and how high you expect returns to be. Only a bit absolute: get into warrants on high-div companies. Very absolute: then you have to look to securitised debt or debentures. If you are too apathetic to look into these investments, well good for you.

    But you guys want an alternative that will beat the market anbd return 10% absolute with less risk like this fund claims to. Do you know why there are no alternatives? Because it's NOT POSSIBLE (on a large scale, over the long term and for a public fund). Even if it did happen, no serious investment manager would make these claims. The only way you could sell the fund is to novice investors through a financial planning company. Arrrrggggg! I really don't mean to be rude, but isn't there anyone here who gets this?
     
  2. Andrew Allen

    Andrew Allen Well-Known Member Business Member

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    T, all seems spot on to me.

    It's been an ideal buy n hold market since mid 03. As an absolute return trader I'm lagging all the people who simply plugged their money into an Aussie MF and leveraged up. Though my strategy is to be removed from concern about market direction (make money at all times and in all conditions), which is something I'm working on. I would like to mention we are in a bull market... And repeat... Strong Bull Market!! Not the strongest ever but then who said that would have to be the case? One thing I can absolutely promise you is that.... there will be a bear market again.. Which is something that needs to be thought about. Then you will more clearly see the value in the person entrusted to manage your money, I mean how incredibly difficult is to know which of the market leading managers who threw their money in the BHP's, WPL's and RIO's are savvy and alert investors or simply woodchucks? I have no way of telling, but gee their results have all been good.

    I think the key though is to have an investing strategy, improve and refine, then keep going! So in a sense about this thread, so what! Right.... back to work for me. Ciao :)
     
  3. TryHard

    TryHard Well-Known Member

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    Sorry - T - you'll have to lump me in with those that don't 'get it'. My recollection of the sales spiel at the Steve Navra presentation I attended was that the 'expectation' was 10% and anything else was a bonus. Then the disclaimer "read the PDS".

    Since I invested it has killed 10% and done 20%, and it still, in these times of suggested 'sky is falling', is generating better than 10% -possibly 15% (Sim'?) this year.

    Where that qualifies as 'not doing what the manager claimed it would do' must be dependent on what conversations you've had and exactly what was said.

    The change in fee structure might be a good reason to cast doubt on the fund's ability to survive, but it doesn't sound any more valid than similar doubts some people expressed on another forum (when NI had less than $48M FUM and just before I was the fortunate recipient of 20% p.a compounded for 2 years).

    Personally I'd rather see them change their fee structure as permitted in the PDS if this is what's required to continue to have them managing my investment. What is the nett difference people honestly expect versus what was anticipated under the old structure ? If it consistently beat the index there'd be returns less a performance fee. As it stands now there will be returns less a management fee. Its just a lot of people have been enjoying the ride of returns and no fee. No such thing as a free lunch.

    If 1.5% can turn your world upside down, better strap yourself in for the Tower of Terror.

    :eek:
     
  4. Simon Hampel

    Simon Hampel Founder Staff Member

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    Pretty much spot on I think Insight.

    Have a plan - stick to it and refine as required - rinse, and repeat.
     
  5. TPI

    TPI Well-Known Member

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    Thanks for that post -T-, don't worry you are not alone! I get what you are saying, and tried to convey similar thoughts recently with no success. iiinvestor also appears to understand this, but few else. It's good to get another alternative point of view on board.

    GSJ
     
  6. -T-

    -T- Well-Known Member

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    Lack of tact on my part TryHard as usual. Steve has said this on many occasions and someone said his website says a similar thing using an example. He's said the same thing on this forum.

    Also, if they didn't expect to outperform the market, why run the company on outperformance fees? They obviously expected 10% absolute AND to beat the market, or they wanted the company to collapse from making no money.

    I really don't mean any disrespect. But I think if the market returned -10% and the fund did -9%. We'd still here the fund is doing well because it's beating the market. The 10% absolute return claim is convenient now because that's one thing it's actually doing.
     
  7. Simon Hampel

    Simon Hampel Founder Staff Member

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    I honestly think that the move to a flat fee will end up favouring the unitholders ... with the increase in market volatility lately, I think we could potentially see a much larger fee based on "performance" than we will be paying using a flat rate going forward. Time will tell.
     
  8. perky

    perky Well-Known Member

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    Totally agree Sim - I think the next 12 months are going to be more volatile and they have jumped the gun by moving to a flat fee.
    Anyway time will tell.
     
  9. TryHard

    TryHard Well-Known Member

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    Hi - T -

    I don't think you're disrespecting anyone :D I think its good to question. I just don't get the issue. The fee structure changed. As someone else said, "so what ?"

    When the fund starts returning less than the costs of me having dough in there I'll take it out. My dumbar** assessment of NI is that its good that it MIGHT still make me money in a falling market. It surprises me that it made so much money in a rising market. I'm also extremely unlikely to lose all my capital. But besides that its only a small part of our investment activity so if it all disappears in a puff of smoke, I'll live. I'm just not going to panic at a relatively minor change in the structure of the fund manager (agreed it means Steve Navra can no longer use the point of difference as a selling point, but it's still a 'so what' issue to me while I am making money)

    I really couldn't care less what we all 'hear' the fund is doing because whether the NavTrade system is better than some individuals at picking when to buy and sell is completely beyond me and the vast majority of people who invest in the fund. When I 'heard' the Navra Invest fund was doomed in the approaching bull market I stuck with it and thank god I did. But I agree time will tell, and I might look back on this thread in a different light. But five bucks less my 1.5% handling fee says I won't ;)

    Have fun
    Carl
     
  10. Simon Hampel

    Simon Hampel Founder Staff Member

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    I have posted information from Steve that explains some of the rationale behind the change in fee structure in a new thread.
     
  11. Andrew G

    Andrew G Well-Known Member

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    I have posted my goals on more than one occasion. In any case, for me, I will be seriously looking into the BT Imputation Fund, as soon as the finances are organised. I believe the returns for the risk associated sit well with me. Once I weigh up returns and management costs it appears a nicer option for my situation.

    Andrew.
     
  12. Andrew G

    Andrew G Well-Known Member

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    No. I make my own mind up.

    Andrew.
     
  13. Simon Hampel

    Simon Hampel Founder Staff Member

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    Forgive me if I don't remember what they are :rolleyes:

    I think that's completely reasonable - only you know what is best for your situation.

    Imputation funds can be quite tax effective, and generally invest in good quality shares that pay regular franked dividends. Nothing wrong with that.

    I haven't looked at that BT fund, so I can't comment about specifics.
     
  14. Andrew G

    Andrew G Well-Known Member

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    A very detailed of this is located here:
    http://www.invested.com.au/7/where-you-where-do-you-want-9219/

    The BT details are in this thread I posted:
    http://www.invested.com.au/7/income-fund-query-10125/

    I really did like the idea of the Navra Retail Fund. I thought the belief system of the operators (Steve), showed how much he believed in his own product in terms of the performance fee only. As far as I am aware, no-one else does this, CFS, BT, etc. To me, this element put this fund in a gold star category for me.

    Remember that from my point of view, a newbie, and having just received a PDS about performance fees - I now have to accept that this feature is not one that I will be able to invest in. By the time I invest, it will be just like every other MF and will attract an annual percentage fee. While I accept that this is in fact "standard" for MFs, it was this very fact that made this fund stick out for me, in other words, there is now nothing about this fund that really sticks its head up over the rest for me. I therefore have to look at the returns, and I have found that the BT offers similar returns but there will be less of a tax implication for me.

    Andrew.
     
  15. Simon Hampel

    Simon Hampel Founder Staff Member

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    That's great Andrew - you have developed your own strategy, and you are following through and actually investing (something I find many people don't actually do !!). I sincerely hope it works well for you.

    Perhaps you could let us know what you think of the BT fund once you have more experience with how it operates and how it reacts to various market conditions. I'm sure there are plenty of people interested in imputation funds !
     
  16. kevinb

    kevinb Active Member

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    Hi Sim

    How do you find the CFS Geared Share Fund compared to Navra after fees etc- I notice that it has only returned an income of 1.64% and growth of 28.81 for the past 6 months (dont know what the last quarter was?)

    However the last 5 years are very impressive. I have just ordered the PDS myself.

    Rgds

    Kevinb
     
    Last edited by a moderator: 4th Apr, 2007
  17. Simon Hampel

    Simon Hampel Founder Staff Member

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    only 28.81 in 6 months ??? How much were you hoping for ? :D :D :D

    The CFS Geared Share fund is one of the top performing funds over the past few years because of it's use of internal gearing to magnify returns. It far outperforms the Navra funds in raw returns.

    Income is a lot lower, since CFS is a growth fund - and most income is spent servicing the gearing.

    However, the CFS fund is far more volatile ... in the recent correction, the CFS W/S Geared Share fund dropped over 11% in a week ... while the Navra AUS W/S fund only dropped 4.5% in the same period.

    It took 24 days for the Navra fund to get back to it's previous highs, while it took the CFS fund 28 days to recover.

    In an extended market downturn - I expect the Navra fund to significantly outperform the geared share fund ... which would likely have some severely negative growth.

    So - it's a matter of risk profile ... Navra, nice and safe, but unspectacular ... CFS Geared great returns - but potential for big losses over a short timeframe.

    All comes down to how comfortable you are with the nature of the fund.

    To a certain extent, I am only happy to hold the CFS fund, because I also hold Navra to help smooth out the volatility in returns.
     
  18. kevinb

    kevinb Active Member

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    Hi Sim

    I was mainly looking at the income of 1.64% using an equity loan say 8% leaves a negative figure, unless you sell of the shares and use the % growth to pay off the loan.

    Alternatively like you say, can use Navra funds to service the loan.

    Rgds

    Kevinb
     
  19. Simon Hampel

    Simon Hampel Founder Staff Member

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    You could do that - but it would probably be better in this case to capitalise the interest on the margin loan ... no capital gains implications from selling shares.

    Naturally this leads to an increasing loan balance over time, but your LVR should drop assuming your growth rate is high enough.
     
  20. Andrew G

    Andrew G Well-Known Member

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    Sim, I was wondering what your strategy would be if the market did drop consistantly over a several-month-timeframe? If this was to occur, then both those funds would drop. Are you in the for long haul with these funds, and prepared to ride out even several months of downturn, or would you look to sell and re-invest elsewhere? Just curious on your strategy if/when times turn sour?

    Andrew.
     

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