Managed Funds Navra performance on recent market drop

Actually now that I'm thinking about it that might not be quite right re: income payments.

I had the street tracks ASX 200 index fund in mind, which actually does pay distributions, 6 monthly I think..

Perhaps there is an ASX index fund that doesn't pay distributions? There must be one out there like that I suspect.

 

Wow, things have really heated up here while I was gone

Steve:

Most of your comments have been following the same path. That is, "the website says so". If we are truly to pin all of our investment goals on these marketing blurbs, then maybe we should also consider the empirical/regression chart (ironically on the Navra website) that shows the fund would post negative returns over a year after a single drop. I actually prefer to rely on neither (the blurbs or the historic charts) and this is why I've chosen to make up my own mind.

Being an absolute or relative fund is more than just the manager saying so. An easy test (I think) is: if the manager is 100% certain the market will drop and never return, can he profit from this forewarning? In the case of this fund, I don't believe so. So in my opinion, this is not an absolute return fund. Does that mean it's a bad fund, of course not!

Now, to your comment that in a sustained bear market the capital may drop but the trading income may still flow: well that doesn't constitute absolute returns. It may lead to positive income, but you could be losing more in capital, which isn't cool. However, in my opinion (I have to keep adding that in case someone doesn't realise it), for this reason I think the fund could support -'ve cash flow IPs.

So where does that leave MY analysis? I arrive at the question: is this fund the best choice to supplement my IPs (within reason)? That is, is it the most likely fund to return what I need to supplement my IPs (let's say 10%) and will the cash flow be reliable. In reality, I don't expect to choose the best fund for this purpose, but I want to have a least a little confidence.

This is where my journey swiftly ended. I simple didn't have the confidence that the structure of the fund, the strategy or its past performance supported what I needed. Have I found the perfect alternative? No, not yet, but I am looking. Could I end up coming back to this fund? It's possible.

I can go more into the reasons why I didn't have the confidence, but that's enough for now. I invite anyone to discuss the technical issues here, but let's concentrate on the theory or our opinions rather than what’s advertised.

 

I'm sure he's talking about the coupons having no volatility, not the face value of the security itself. Even CGSs have some form of risk. Default risk is the problem with debt securities, so you don't get something for nothing. But I think GSJ assumed we knew that.

 

And I guess the other question is, does it need to be absolute return based to supplement IPs? I think it would be nice for some and vital for others; so maybe the answer is more subjective. You said earlier that you are prepared for falls because you have a sizable cash buffer. I guess that's where nuances in our circumstances mould our views.

I haven't worked for a while and my mind is more set on the returns being very reliable. Whereas in your case you may welcome additional returns in good times to make up for uncertainty.

I've said in most posts that I think it's a great fund, but I've admittedly been focussed on the reliability of the returns more than anything.

 

Woohoo!

Down another percent today and testing those 5700 support levels I mentioned above. If it settles around the mid 5000's then I'll have done very well exiting at 6000 and will have a great base to come back in at given I think 7000 is still on the cards by the end of 2008.

Sorry to keep waving this in the face of those that are still holding in this falling market, but remember that this is probably in line with your "long term" strategy so you'll no doubt do well when you weather this little storm. But I think its also important to show that there are different approaches which can be more profitable if executed well. I got a bit lucky here, but a large part of that luck was self-made by tracking the trading channel so closely and keeping an eye on market sentiment.

Happy days,
Michael.

 

Michael, you are a "star" performer. Any idea what your percentage return for the YTD is so far? I am sure it exceeds the distributions to date. You have quite clearly demonstrated the intelligence of monitoring the position and acting accordingly (not suited to the hold for the long term investors perhaps, but each has their own scenario). Well done.

 

Mate, where do we get tickets to MichaelWhyte, or do you have them all?

 

Sorry, I tried very carefully to try and not come across as arrogant. I just thought it was important to showcase successes as well as failures on an investment forum. My comments specifically state this in the post. I got lucky with my timing but the concept of timing your entry and exit from a market is an important one. Not everyone applies a time-in set and forget strategy to their investments. I identified an opportunity to exit the market at an all time peak and potentially bank some profits on a pull-back. It paid off, and I am sorry if that comes across as cocky.

In future I"ll only post my stuff-ups if that makes you more comfortable. You can no doubt learn as much from those as you can from my successes.

Personally I believe in the law of abundance and celebrate other people"s successes...

Happy investing!
Michael.

 

iiinvestor,

There is a huge difference between giving your opinion and stating things as facts. As I have stated, I have no idea how the fund will actually perform during a prolonged downward period: It may or may not perform well; it may or may not give a positive return; it may or may not return the 10% aimed for. Your opinion about how the fund may perform during these untested situations is as valid as anyone elses, and in fact, I value hearing alternative thoughts. We will only know for sure once the fund has experienced that situation.

The issue however, is when you state things as fact, when they are not. This is why I quoted from the fund website (not because I blindly follow any marketing hype). What you said contradicted what the fund's aims actually are. Whether they will attain their aims or not we do not know yet (although they have so far). For example, you stated that the fund only aimed for a relative return and;

which clearly is not correct.

Additionally, you stated as fact that...

...when clearly this was once again incorrect. Can you show us where it "admits it will make absolute losses in a bear market and won't make enough in a sideways market." It may be there somewhere, I just can't find it.

And that's fair enough. This is based on your analysis which is naturally what should guide you.

My only concern during the previous discussion is when things are stated as facts, when they are not. This may mislead other readers. For example, they may actually have believed that the fund managers stated that the fund will not make enough in a sideways market. This needed to be corrected.

As far as your opinions regarding the possible performance during other market conditions - you may be correct. I don't know yet.

Cheers

Steve P

 

All Ords down 5.5% so far but Navra is only down 2.5% so far, so on a 500k investment were only talking about a out at the top and in again gain of 12.5K aren't we?

MJK

 

Michael,

Well done on having a strategy and sticking to it. I like to hear of sucesses. I also felt that your timing was appropriate.

Please keep us informed of your progress.

Cheers.

Steve P

 

Hi Michael.

Sounds like you've done well in your timing.

Was wondering how you would have fared if you held your units and we'll assume that the market reaches 7000 in 08. I.e, would you have been a lot lot worse off by holding and not having to pay CGT?

 

<sincere post>

Congratulations Michael, whether it be luck, *rse or class its good to make a decison that is later validated

 

MJK,

Its a bit more than that I think. Here's the impact so far using my case as an example:

I exited the fund at 1.1624 redemption price on 13-Feb-07, banking a profit of $82,911 odd after interest costs for my 15 month investment period. (From 14-Oct-2005). That's a return on my $559,000 invested of 15% for that period or 12% annually, and that's NET of interest costs of another 8% pa odd. So my gross return is around 20% pa.

As at close of business on Friday the redemption unit price was 1.1475 representing a net profit after interest for me of $71,392 or a drop of over $10,000. On Monday the market closed down another 2.3% to 5653.6 for the ASX200. If I interpolate the drop in Navra that shaves another $10,000 odd off my net profits. That's $20,000 of my $82,000 or 25% of my margin would have been erased had I decided to ride this one out instead of exiting before it happened.

The attached graph gives you an idea of how my net profit position is tracking. I've added a callout box showing when I exited the market and you can see from the plotted profit line what has happened since.

Cheers,
Michael.

 

Hi Micheal

Congreats on your timing.

In your figures are you taking into account the distributions? I can't seem to see where.

Cheers

 

Sorry, should have clarified...

Yes, I assume dividends form part of the total return and just add them back to get the aggregated total return. So my unit price is the sum of current unit price and distributions over the period.

I personally don't re-invest my distributions, but you still need to count them as part of the overall return of the fund. Its return is equal to capital growth (represented in current unit price) plus paid out distributions (which I add back at the time they are paid out).

Cheers,
Michael.

 

Yes - well done Michael on your deft not to mention profitable, manoeuvring. I'm keen to see an updated version of your other regular graph - the one comparing ASX200 performance against that of the Navvi Funds. Be interesting to see if the lines have crossed or are near to doing so. It's always with mixed feelings that I watch these 'corrections' from the position of being both a unit-holder as well as a NI shareholder. Certainly, from the latter's perspective one sees potential for the eventual outperformance thus the income/dividends from the performance fee.