Managed Funds Navra Unit Price

from another site

 

1 to 2% distribution really sucks! Remember how Steve used to say 1987 was his best year....
First big bounce (I pray there is one) and I am out of here. I can find better ways to cover my negative gearing.

 

Come on now. Many investors like me bought into Navra a few years ago when 15% regular INCOME was touted, even in volatile markets.
Steve has since revised that down to 10% which makes the fund less attractive as an income fund for those using borrowed funds.

Since I am not into share trading, shorting etc I will go back to doing property deals to make some cash flow: very small low budget subdivisions and developments which is the long slow path, but is far less perilous and much easier to preserve capital than the sharemarket.... and I won't have to stay up late each night watching Lateline to see what the stinking American market is doing.
Still, I cannot sell out now without losing a lot of capital, so I have to ride it a bit longer, hoping for a bounce.

Re margin calls, you can claw back an extra 5% buffer by refinancing to St. George (LVR=75%). They also do not currently make you paydown to 75% if you are margin called, just into the buffer (below 85%).

 

Yes I am, but don't want to go into details.

 

Funny how very few complain during GOOD TIMES.

 

Why would they!

 

Point I am trying to make is that if someone is serious about investing it's important to take a long term view (ie- 3 - 5 years). Not complain when you have had a bad qrtr or year.

 

Why can't you complain when you have a bad quarter (not that performance is just bad for the quarter, more like the year)? I thought this forum was to discuss pros and cons of various investments, and surely underperformance is a definite con.
And just for the record I DO have a long term view of investments, especially my growth investments, however Navra was used by me (and many others) for short term INCOME to cover negative gearing. When it fails to regularly meet this criteria, and when capital value keeps falling, it may be time to review its suitability for certain portfolios.
Of course, other people may be quite happy with its performance.
Cheers
Seaview

 

Hasnt Navra outperformed the market, not underperformed as you suggest?

 

Seems like a pretty good time to be BUYING into the Navra fund. The cash reserves are (almost) fully invested and, once the market starts to do it’s thing and move up, the Narva system will decide when and how much to move into cash.

I’m currently drip feeding my spare IP equity into Navra.

 

By "underperform" I am referring to its failure to reliably produce income for some time now, not how it performs relative to the market. I do not really care about that (although I realize that some investors do).
As for it being low in cash, I see that as cause for concern (especially if market keeps going down or sideways for a long period)

 

Hello all,

I wanted to know how other people were handling their margin loans. I see a few options.

1) ML is under margin call territory and you will receive the distribution in cash
2) ML is under margin call territory and you will reinvest the distribution
3) ML is under margin call territory, you think the unit price being low is a good buying oppurtunity, or a good time to further reduce lvr, so you buy more units in the fund
4) ML is under margin call territory, however you think that with current ML interest rates it is not worth having the ML as the fund may not cover the interest
5) You have a margin call, and you pay down the loan to bring LVR to lender's acceptable levels
6) You have a margin call, and you sell down units to bring LVR to lender's acceptable levels

Please add if there are more scenarios i have missed.

I personally am trying to decide between option 3 and 4. I am a long term investor so can see merit in buying units while they are cheap compared to recent years and also a good measure to keep LVR low. However, i am also conscious that the ML was always sold as a way to increase returns, so if for the short term the fund can't cover the interest expense, i feel one could reduce loan by instructing them to sell units albeit it at a loss and enter again when the fund is showing signs of making better returns.

Looking forward to seeing other people's thoughts.

 

Hi Leandro

I am in a similiar position. My LVR is currently around 74%, I still have around 12% buffer but am a bit nervous especially given the last few days.

My plan is 1)to use any distribution from the last quarter to pay down some of the margin loan. 2)As well I have some unused LOC against my IP's. I will be using a high percentage of that to also reduce my margin loan. Not only does it reduce the LVR, the interest rate is 1.23% less so I make a small saving there and 3)hopefully points 1 and 2 will get me to to the 56% LVR I need to be at to swap over to the Navra hybrid warrants without having to sell some of my units.If this is this case I will swap over to the warrants which, given the way it works will end up with me having more units at an LVR of around 66% (but with an increase loan of course at a slightly higher interest rate than my margin loan which is offset against it being a non recourse loan and the LVR having to go to 90% before triggering a stop loss event).

Would be interested in the views of forumites on this plan.

cheers
Gazza

 

Hey Gazza,

So your initial approach is to pump more money into the equation. Are you not concerned that maybe for the short term, you will be losing more money if the unit price drops further, and if the fund returns less than your interest costs.

I don't know all the details about the warrant scheme, but all it is doing really is giving you a bigger buffer and less chance of having to foot a loan bill, but it is more expensive, and you still have the potential to lose more money.

I always assumed that if the fund produced less than the interest cost of the ML, one should reduce it completely, until the situation improves. Am i missing something?

Leandro

 

Hopefully the end of year result will be a bit better than most of us are expecting?

I've been back through the OLI archives and found a very interesting comment made by Steve a couple of years ago:

Now I could debate the risk upside / downside of whether the volatility will / won't be at sufficient levels to achieve a DCT distribution of 10% or greater until I am blue in the face (and still not satisfy the doomers amongst us). Suffice to say, I have been personally trading this way for over 20 years and have always achieved realized profits of 10% or greater. This includes the BEST and WORST years on the stock market and more importantly the WORSE the year the greater the volatility! The reason for this is that the market “goes up in steps and comes down with the lift (elevator)” meaning that it usually takes a chaotic event to crash the market, in which case the volatility is extremely high.

I expect the distributions to be 10% at the low end and 18% at the high end as per normal long term volatility. 10% to 14% should be the norm.

 

Interesting quote Oli.

Negative returns for this year would be some way outside normal expectations if the worst year was always >10% in the past.

What went so wrong?

 

I guess Steve would be one of the few that could answer that question and we're still waiting on the official distribution anyway.

However, given this year was apparently the worst market performance since 1981-82 and the worst June for about 50 years, maybe this combination of events was even a new situation for Steve's 20 year trading history? Don't know....