Managed Funds Navra performance on recent market drop

Spoke to Serey at Navra yesterday late - the fund outperformed yesterday too.

Jenny

 

"Outperformed" by losing less:
26 Feb - 12.98% unit price $1.1823
27 Feb - 12.46% - $1.1769
28 Feb - 10.33% - $1.1545
1 Mar - 10.15% - $1.1526

!!!!

 

(...because I'm out at 1.1629 redemption price and looking at buying back in when it all settles down a bit)

Not every fall is bad news!

Now if only the ASX would break its 5700 support levels and see the Navra unit price drop back to around 1.12-1.13. Now THAT would be happy days!! Well it has closed yet another 1/2% lower today, down 23.1 points to 5775.2. That's already a better result than I was hoping for when I traded out at 6000.

Cheers,
Michael.

 

Michael

I know a few people that bought in at the $1.17/1.18 level so I dont think they are particularly happy. Your timing has been great in your initial entry and your decision to cut loose when you did, but there are few oldies out there feeling a bit queezy by now. Basically down about $15K in the last few days and more if it drops as far as you suggest. Even if they get some distribution after March it really will only be their own money back on a lower capital base, but as it is in the form of income it is taxable so they will have a fair bit of ground to make up to get back to level pegging!!

 

Redrover,

You have enough evidence by now to determine if this fund suits your requirements or not. Why continue to invest in the fund, yet continue to criticise it?

 

I have to say that I completely understand redrover's criticism based on the assumption that this fund was designed/advertised/expected to provide a constant income stream to supplement -'ve cash flow from IPs. I recently analysed funds in order to neutralise my cash flow and immediately this fund didn't make sense. I don't mean to offend anyone or their decisions, I'm just saying how the decision unfolded for me.

Firstly, how can a fund that is focussed on relative returns possibly be expected to provide a stable income stream? I think this is a fundamental flaw in the whole idea of this fund supplementing -'ve cash flow IPs.

Secondly, the DCT method apparently outperforms the market in any conditions. This would be a nice consolation to the fund being unfit for its original purpose. However, it doesn't actually seem to outperform the market, let alone to the degree proposed. I think it's unrealistic to insist that a fund out-performs the market anyway, but as I said, we're onto consolations here.

Thirdly, I still think it's a good fund. I like the fee structure (of course), its returns have been ok and volatility is reasonable. But the fact that it isn't even designed for absolute returns means that it's simply not fit to supplement -'ve cash flow IPs (in my opinion).

Now... I realise it has probably been serving its purpose for investors over the past few years, but we all know that rising tides float all boats. Again, I don't have any other agenda here; I was sincerely interested in this fund. Statistically, structurally and instinctively, I cannot see how this fund would meet its objectives. So based on what I believe is pretty conclusive proof, I see where redrover is coming from. The only thing undoing this analysis is if the purpose isn't to provide a constant income stream, in which case, it still isn't the fund for me (and maybe many others).

Anyway, back to the drawing board for my income strategy.

 

Ouch, a little touchy there Sim.

I thought I explained my theory relatively well and I explained this was just my analysis based on needing a stable income. There's no need to take it personally, it's only a fund and it's only my analysis.

Sleeping at night isn't the problem, but I think you already know that. Just like direct shares, there is no need to invest in a fund if it doesn't perfectly satisfy your criteria; there are 10 000 odd other local funds available. So why would I take the risk with what I believe is an inferior fund (against my requirements)?

As you suggested, and I already advised, I won't be investing in this fund. Again, not because I can't sleep at night, but because it just doesn't suit. It's that simple.

Just out of curiosity, how do you expect the fund (with gearing) to supplement -'ve cash flow IPs in a sustained bear market? Are you just hoping that it will miraculously do it? I must admit, I don't handle my investments like that. The fund doesn't short, doesn't use derivatives, is equity-based and gearing is promoted. The DCT method doesn't even propose to do this, it admits it will make absolute losses in a bear market and won't make enough in a sideways market. I just don't get why no one has discussed this up before. Please forgive me if I've missed something vital in the mandate.

 

probably enough with the loaded comments and snide remarks, we would probably all benefit a bit more if we kept it an intelligent discussion!
It is definitely worthwhile discussing though, to get different perspectives and allow people to make up their own minds.

My understanding of the fund is that it buys on the way down and sells on the way up. It seems to me that it would be an effective-ish strategy in a band trading type scenario, overall sideways movement with volatility.
I have been wary of the fund only because I am not sure it is line with my own beliefs about trading, but 2 people can have completely opposing beliefs and still profit from the market so that isnt a big drama.
It seems to go against the Golden Rule: Cut your losses short and let your profits run. My understanding of the fund is that as share prices are going down, the fund progressively invests more in the share (thus in a bear market with little volatility it would progressively perform worse and worse), then on the way back up it takes its profit at some set margin (thus cutting its profits short so it would underperform in a bull market).
To me (and this is not a negative comment in any way, simply my own perspective) it makes almost as much sense as the portfolio rebalancing offered by many fund managers - sell your top performers to buy your dogs.
So that leaves the only time the fund could perform exceptionally (in my understanding) is when the market is trending sideways on shares with volatility. Some have estimated that the market spends as much as 70% or more in sideways movement, which means that it could possibly perform well for a lot of the time. However, the stocks selected seem to be well known for not having excessive volatility which kind of seems to chop the legs off DCT.

The great thing about the fund is that they have a firm strategy and are prepared to back it with performance based fees. This probably means on an ethical level they are better than 90% of other funds out there!

I definitely stand to be corrected on the above, it is only my own understanding and reason for choosing other funds, certainly not meant negatively and purely for discussion.

 

Redrover,

Your posts seem to indicate to me that you are not taking a long term view of the fund. You criticise it for underperforming in a rising market and then criticise it for outperforming in a falling market! This is the nature of the fund; it thrives on volatility. Unfortunately for the trading mechanism of the fund, there has not been an abundance of significant volatility over the last few years (the market has experienced boom conditions trending upwards with few major dips). As the market continues to reach new highs and shares become fully valued (if not overvalued) the fund will hold more in cash. Therefore the return will start to fall behind the index. However, and this is a big however, when the market does dip or undergoes a major correction, everyone will be glad that it operates in a conservative fashion and was holding a lot of cash. It will thus outperform the market and allow it to purchase shares at lower prices.

Interestingly, even in these less than ideal conditions, the fund has performed very well in my opinion. It is a conservative fund that aims to bring in cashflow on a regular basis. I think the facts would show that to be the case. Yes, there will always be funds that outperform the Navra fund, however, there will always be funds that underperform it as well.

Redrover, many of the funds that have outperformed the Navra fund over the last few years may not do so well over the next few years. There are no guarantees. However, if you do know a couple of funds that are guaranteed to do so, please post them here so we can all follow their results in the same detailed fashion that the Navra fund is analysed.

Cheers,

Steve P

 

Hi gang.

Have only been investing in these funds (Aust. & US) for just on a year now and freely admit to not knowing a lot about how markets work etc so take my comments with a grain of salt.

When I invest into an income fund, I expect an income, which to date has been ok-good.

Whilst I agree with Sim that we have to give this fund a bit more time to see how it performs in different conditions, I also expect it to deliver in all conditions. From my observations, it appears to do well when the market is rising BUT also lose value when the market slides ( like most funds). Even if it outperforms in a falling market, a loss is a loss. Sort of sounds like a footy coach saying ' todays loss by 50 points was a good result because we expecting to lose by 70 points'.

Please dont take my comments as negative, as I am continuing to invest in these funds and sincerely like what I have seen from Steve and my comments are more directed at the US fund.

I realize that in very adverse conditions most funds would head south and maybe my expectations are/were a bit high.

As mentioned, I don't fully understand how this fund operates (understand the basics) or what drives market conditions but that can also be a blessing as it saves me from over analyzing.

Hope I haven't offended anyone, as I am staying put. Just want to make $$$$

 

iiiinvestor,

Why do you think it is focussed on relative returns? From my reading, it is not focussed on tracking indexes, but rather it is focussed on returning positive returns in different market conditions. I quote from the website:

"The objective is to generate positive annual returns in a variety of market conditions. The Navra Funds are not designed to track an index."

Once again, your facts seem lacking. My reading of the fund's objectives seem to indicate that it is in fact designed to bring a minimum absolute return. Once again, from the website:

"The investment objective for the Navra Funds is to generate in excess of 10% pa income in a variety of market conditions, as a result of active funds management. Income is calculated and paid on a quarterly basis"

Just because you can't see how it would meet its objectives, doesn't mean that it can't. I try not to assume too many things, but prefer to base my decisions on facts. The facts so far seem to indicate that the fund is perfoming its stated objectives (in fact, its outperforming those objectives! )Only time will tell how it performs in other market conditions - you may be right or you may be wrong - either way, I don't think it is helpful to try predicting future results in untested markets.

It is also important to remember that this particular fund should generally be just one part of an overall investment strategy.

Cheers,

Steve P

 

Yep, that was my understanding Sim, I do want good returns over the long term as well as regular income.

Think you're right re ignoring the day to day fluctuations.

I must learn to try and NOT look at the prices/values everyday .

As I said previously, I believe in Steve ( that would sound good if he were running for politics, wouldn't it. "Believe in Steve, Believe in Steve". Sorry about that) and beieve he is very ethical as is his fund and am staying put. Probably just my inexperience showing (re mgd funds) when things go a little wierd, and I also agree that the last couple of days are probably just a blip on the screen in the big scheme of things.

 

Hi iiinvestor,

It is a rare skill to speak so confidently of things you appear to know little about. I once again quote from the fund website...

"Active management using the proprietary NavTraDE system makes it possible to generate positive returns over time, even when share prices are falling."

Now, read your comment above and then read the quote from the website again. Can you see where your comments seem lacking (if not misleading)?

iiinvestor, the conditions you speak so confidently of have not occurred so far. You must remember that the fund is share based and will therefore decrease with the overall market in the short term during a correction, however, due to its trading strategies, should still manage to provide an income during this time. Only time will tell...Let's not assume too much.

Cheers,

Steve P