Managed Funds NavraInvest - 1st Quarter Performance Fee?

Hi all,

Just a ponderin' if there was any mention at the recent AGM as to whether any income (i.e performance fee) was garnered during the first quarter of this current financial year?

Anyone?

BsB

 

BSB,

They under-performed the ASX200 index on both the Aus funds so wouldn't have accrued any from that side. For the current quarter, as at 1st Dec, they are just under-performing the ASX200 as follows:

NTR Open 1.0816 Current 1.1287 Growth 4.35%
XJO Open 5184.3 Current 5427.9 Growth 4.70%

Under-performance 0.34%

I've been in the Aus retail fund for over a year now and they haven't matched the index in a single quarter of that time and don't look like doing so again this quarter although its a close one.

Since I invested in the Aus Retail fund on 14Oct2005, the fund has returned 18.43% cumulatively and the ASX200 has returned 23.08% (not even considering the accumulation index XJOAI). This represents a cumulative under-performance for me of 4.65% over the last year and a bit, or an opportunity cost of about $25K. Still, I haven't paid a single cent in management fees in the last year and a bit either!

Just some numbers FYI.

Cheers,
Michael.

 

I believe there is talk that after the 06/07 financial year, there may be a change from a performance fee to a fixed management fee.

 

If the current performance of the fund is causing problems in generating enough revenue to run the business, then what is the benefit to unitholders to switch to a fixed management fee which might run the business better financially, but would potentially eat into distributions even more! Why would you stay invested at all if that scenario arose. Of course if the fund starts to generate bumper returns then the performance fee would stay! How come all this was not factored in at the time of inception?

 

A modest fixed fee is acceptable, the way I see it I've had a few years of no fees at all

Shareholder hat on....

It's not good the company running at a loss all the time, as it may stop running at all

 

I guess the big one is that it allows the Company to remain in a position to keep on paying Distributions.

I agree though, I think it could create an interesting situation.

If you a make a few assumptions like a) average interest rate of 8.5% between LOC and Margin Loans b) capital growth as a bonus so assume zero for now c) annual Distribution of 10% minimum and d) a Fixed Fee of 1.5%, you would have to weigh up your risk/reward situation fairly closely.

Now interest rate rises obviously haven't helped this 'gap' of late and it's ackowledged that Unit Price growth has occurred since the Fund inception but it's probably also fair to say that growth has been minimal over the last 2 years which while not 5 years is an extended period.

Interest and Fixed Fee cost could be 10%(8.5 + 1.5) with that being offset by a 10% (hopefully minimum) Distribution but with the investor carrying the can in the case of a market correction. Assuming a minimum 2-4% risk premium for investing in this asset class, most would probably be expecting a bigger return gap over costs.

I think as a general comment, investors would be happier to pay 1.5% in outperformance than as a fixed fee but then this may not be a choice that is open at the time. Again, time will tell.

Sim did raise the point at the meeting that more input on sites such as InvestEd may be an efficient medium for distributing information and possibly education. However personally I didn't get the impression that this was likely in the immediate future. I may be wrong.

It's obviously up to the Company if and how they choose to distribute this information but I tend to agree it would be nice if more could be done in this area. For example, Steve made the simple point at the AGM that the average performance difference between Bluechips and Small Caps. at the moment would be impacting on this Fund type. Probably a fair point but this type of information often doesn't seem to get out even to the wider Unitholder base let alone other potential investors evaluating the Fund.

If Sites such as InvestEd are not to be used then I would think publications such as the Quarterly Update Newsletter could at least be better used in conveying this type of additional comment. At the moment the Quarterly Updates appear more like a standard form letter to the point that there is only a couple of items I now find relevant.

 

"For example, Steve made the simple point at the AGM that the average performance difference between Bluechips and Small Caps. at the moment would be impacting on this Fund type."


As a shareholder/unitholder reading all reference to the AGM with great interest.
Could someone expand or explain the above for a novice please.

thanks
Jenny

 

Blue Chips ..... Blue chip - Wikipedia, the free encyclopedia
Small cap ..... Small-Cap Stock -- A complete definition

 

Fund does not seem to have grown much in the last quarter, probably only by distributions being reinvested whereas it seemed to grow quite quickly before that and in a rising market which is not supposed to be the optimum one for the fund to perform well! Also dropped out of Morningstar tables lately. Raised the question of tax implications on the fund which is something I believe Morningstar is looking at putting in their tables. Some funds that seem to have a high return actually are not very tax advantageous so your net returns are not all that good. I think they wanted to try to quote returns based on this formula to give a net figure!?! Have not found anyone who can give me an answer to this one yet, either on Morningstar's approach or as regards Navra specifically. Maybe someone out there understands all this.

I think as someone raised before, an income fund is just that, and one has to set a minimum acceptable return - you cannot afford to sit around and wait for the market timing to be right! The meter keeps ticking.

 

And here's the chart of the NavTrade Retail fund relative the ASX200 over the last 13.5months. Underperformance as indicated in my first post currently running at 4.77% as at yesterday.

Cheers,
Michael.

 

All irelevant if the company that runs the fund continually fails to make money. It's no good saying that the current market doesn't suit the funds. What if it's another 5 years before the market suits the funds? Can a new company afford to run that long with no profits?

My questions are how much longer can the company operate without making money and what is to be done about it before we get to the point where it can't operate anymore?

Hopefully these points where covered at the AGM and shareholders will receive information covering the financial health of the company soon.

Sorry to sound so glum but the situation seems to be serious to me. Please tell me otherwise.

 

Going back more than 5 years now I remember attending a presentation Steve gave in Sydney using a chart of either Lend Lease or Leighton as an example where the stock started off the 12 months at $16 and ended at $16 and illustrating that a buy and hold approach would only have yielded you the dividends less entry and exit costs, but if you had used the Navtrade system it traded something like 25 trades plus during the 12 month period and showed a return in excess of 20% on a go nowhere market. Also the system was backtested over Steve's 20 years of personal trading. Now if all the above checked out in up, down and sideways markets to show consistent performance I cannot understand how we are now bogged down in the current market. It would also have been very obvious with that backtesting that large caps do underperform at times when mid caps are running and if you want to have an income generating fund that aspect would have to be factored in and then allow for trading profits to be realised in order to generate income!.

To equal things up perhaps the system should incorporate short selling as well so a portion of the portfolio is always in the market rather than sitting in cash waiting for an opportunity. Not for the inexperienced I know but these guys are the pros.