Managed Funds Navra Unit Price

Discussion in 'Shares & Funds' started by ActiveTrade, 13th Jun, 2008.

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  1. Up- Beat

    Up- Beat Member

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    Thanks Active Trade, I didn't know about the new product and I try not to worry about the way the market is at the moment but its difficult to put a positive spin on the future outlook especially the dow taking a huge drop of 358 points last night.

    Tasmo, so I gather from your post that if I get a margin call I will have to pay down the loan to 70%. I can't find my terms and conditions at the moment, so it might be worth a call to leveraged equities to clarify their conditions.

    I have been advised that we are looking at an 8% distribution for the year, so we can expect between 1 and 2% this quarter?

    Have a good day everyone.
     
    Up- Beat, 27th Jun, 2008
    #21
  2. Alan__

    Alan__ Well-Known Member

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    I think Steve has said in the past that he's never made less than 10% in a year. If 8% is true, I'm sure he(and many others) will be very disappointed.

    In addition, the 10% minimum is an important historical marketing point when making assumptions about future returns for other products such as the proposed Growth Fund, Agri Products etc. Mind you 8% is looking good compared to some returns at present. :eek:

    DOW down 358 overnight. Looks like we'll be heading south at least another 100+ in a bit under two hours which will take us back near(or beyond?) the March 2008 lows that shook people so badly.

    A very interesting morning coming up.......I know what I'll be viewing at 10.15am.
     
    Alan__, 27th Jun, 2008
    #22
  3. Simon Hampel

    Simon Hampel Founder Staff Member

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    Actually ... reinvesting units and paying down the loan will have largely the same result. This is because the distribution is already represented in the unit price immediately before it is paid.

    Eg. if the unit price rose 5% for the quarter (thus lowering the LVR) and there is a distribution of 3%, then once the distribution is paid, the unit price will effectively drop by that 3% (raising the LVR again).

    If you take the distribution as cash, your LVR will be 3% higher than it was immediately before the end of the quarter.

    If you reinvest the distribution, your LVR won't change from where it was before the end of the quarter.

    If you use the distribution to pay down the margin loan, you will actually improve your LVR slightly because cash helps your LVR more than managed fund units does. Assuming you get a 70% LVR from your margin lender, then reinvesting the units will only drop your LVR by 70% of the possible 3% drop you'd get by paying down the margin loan. (In other words, your LVR will drop by 30% more if you pay down the margin loan than if you reinvested the distribution). Of course, this does not take additional interest costs, or future growth into account - it is merely a point-in-time comparison.

    I'm not saying that paying down the margin loan is necessarily the best course of action (although if you don't need the cash and don't think we'll see great returns in the next couple of quarters, then you'll probably be better off minimising your margin loan as much as possible!)
     
    Simon Hampel, 27th Jun, 2008
    #23
  4. Smartypants

    Smartypants Well-Known Member

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    Hi all.

    Just after a bit of clarification here.

    When Steve (or anyone else for that matter) says we can expect X% return for the year, is that figure based on current holdings OR initial investment?

    My initial investment has fallen quite a bit, albeit I have received some healthy distributions along the way thus far.

    Thanks
     
    Smartypants, 27th Jun, 2008
    #24
  5. Simon Hampel

    Simon Hampel Founder Staff Member

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    That's an income distribution return figure - roughly based on cents per unit divided by unit price (which gets a bit complicated when you consider that there are four separate distributions, all with their own unit price).

    Total returns (income + growth) will likely be around -12% or so.

    Retail fund unit price July 2: 1.1202 ... June 25: 0.9093 = -21.09 cents per unit
    Distribution so far this year = 2.8 + 3.4 + 2 = 8.2 cents per unit

    Net return = -12.89 cents per unit, or -11.5% down on the unit price at the start of the fin year.

    By comparison, STW ETF (tracks the ASX200): closing price July 2: 60.38 ... June 25: 48.96 = -$11.42 down for the year
    Distributions for the year = 89.355 + 257.8478 = 347.2028 cents per unit

    Net return = -$7.95, or -13.2% down for the year.

    (EDIT: June distribution figures are now available for STW, which is already trading ex-dividend as of the 24th June ... figures above now reflect this)

    Navra's not doing too badly by this measure.
     
    Last edited by a moderator: 27th Jun, 2008
    Simon Hampel, 27th Jun, 2008
    #25
  6. Simon Hampel

    Simon Hampel Founder Staff Member

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    Put another way, if you invested $10,000 in Navra Retail on July 1st 2007 and reinvested the distributions - then as of the end of June 25, you would have $8758, a -12.4% return (in a falling market reinvesting distributions hurts your short term returns, but should improve returns overall when the market recovers)

    If you invested $10,000 in STW and reinvested the December distribution, then as of the end of June 25, you would have $8227, a -17.7% return. However, given you hold units on June 24, you will be entitled to the final distribution of 257.8478 cents per unit, which gives you an extra $433 return ... taking the net result to $8660 or -13.4% for the year to June 25th.

    Will be interesting to see what happens over the next couple of days.
     
    Simon Hampel, 27th Jun, 2008
    #26
  7. Up- Beat

    Up- Beat Member

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    Sim you are right, after going over the figures, paying down the margin loan does improve the LVR slightly and this is what I'm going to do for the time being.
    I will also look at buying more units in the fund at these prices shortly.
    Market is taking a hiding so far today so hopefully the unit price won't drop too much. Fingers crossed for a bounce this arvo.

    cheers Up Beat
     
    Up- Beat, 27th Jun, 2008
    #27
  8. tasmo

    tasmo Well-Known Member

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    No you will not get the same result refer to your own comments further down

    Your point here is that distributions are a component of the unit price and don't come free, very basic concept that investors in managed funds need to understand.

    yes yes

    yes
    all of this is confirms my original statement
    again confirming my statement tha paying down the loan with the distribution will reduce your LVR and reinvesting your distribution in more units will have no effect on your lvr
     
    tasmo, 27th Jun, 2008
    #28
  9. tasmo

    tasmo Well-Known Member

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    No what I was trying to say is that your margin call person will 'normally' only require you to be no greater than your MGR 70% + buffer 10% limit of 80% LVR. So you can probably reduce to about 79%, and more if you can as the market could move further down.

    Although when you get the call they will state that you are in call by the full amount you are above your 70% limit.

    Cheers
     
    tasmo, 27th Jun, 2008
    #29
  10. Simon Hampel

    Simon Hampel Founder Staff Member

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    They may well require you to drop your LVR down to below the buffer (eg 70% LVR) - depends on the lender and the market conditions.
     
    Simon Hampel, 27th Jun, 2008
    #30
  11. Up- Beat

    Up- Beat Member

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    Understand Tasmo Thanks.
    At this stage I would prefer anyway to keep the LVR below 70%, I don't want that phone call.

    Thank you all for your thoughts on this.

    cheers Up Beat
     
    Up- Beat, 27th Jun, 2008
    #31
  12. jrc77

    jrc77 Well-Known Member

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    For those who have been margin called - do you actually get a call when you enter the "buffer" or just when you run out of buffer?

    JR
     
    jrc77, 27th Jun, 2008
    #32
  13. Simon Hampel

    Simon Hampel Founder Staff Member

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    When you run out of buffer (eg 70% LVR + 10% buffer = margin call at around 80% LVR ... as per tasmo's previous example)
     
    Simon Hampel, 27th Jun, 2008
    #33
  14. Redwing

    Redwing Well-Known Member

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    Don't they usually work on income of at least 10% + :D backtesting yada yada yada...

    Be interesting to see what happens in a few days, curious times in the markets
     
    Redwing, 28th Jun, 2008
    #34
  15. Simon Hampel

    Simon Hampel Founder Staff Member

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    I've heard figures in the media suggesting this is the worst end to the financial year for 50+ years ... haven't confirmed that though.
     
    Simon Hampel, 28th Jun, 2008
    #35
  16. Alan__

    Alan__ Well-Known Member

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    Hi Sim.

    This article today confirms exactly what you say.

    Wild ride in sharemarket not over yet | smh.com.au

    Basically, for the year it's the worst market performance since 1981-82 and the worst June for about 50 years.
     
    Alan__, 30th Jun, 2008
    #36
  17. Smartypants

    Smartypants Well-Known Member

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    Was just thinking again about the expected return for the quarter.

    I thought that with all the volatility the market has had that the fund would have done a bit better (as it is supposed to thrive on volatility).

    Perhaps it (the fund) was low on cash at certain times?

    Anyway, was just expecting a better return than 1-2%.
     
    Smartypants, 30th Jun, 2008
    #37
  18. ActiveTrade

    ActiveTrade Well-Known Member

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    I think we will be lucky with 1 - 2 % return. Anyone know when Navra will know exact return ? A few days ?

    Can't remember how long it took last year to find out.
     
    ActiveTrade, 30th Jun, 2008
    #38
  19. Simon Hampel

    Simon Hampel Founder Staff Member

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    The fund buys when the market drops. But to realise a profit on those buys which it can then distribute, the market needs to go up again.

    You won't see the benefit of this volatility until the market starts to recover closer to its highs earlier in the year - then the profitability will really kick in.
     
    Simon Hampel, 30th Jun, 2008
    #39
  20. Simon Hampel

    Simon Hampel Founder Staff Member

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    Will generally take a couple of days past the end of the financial year (eg later this week) for them to calculate the distribution and final unit pricing. Payment is usually somewhere around the 10th - 15th July.
     
    Simon Hampel, 30th Jun, 2008
    #40
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