Managed Funds NavraInvest Performance Fee to 26-8-05

Discussion in 'Shares & Funds' started by Alan__, 29th Aug, 2005.

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  1. Rick__

    Rick__ Well-Known Member

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    Perky, I have been thinking about this too.

    It would still rate as a high risk investment given the short life of the company.

    And, you have to admit the trading system is something that challenges the thinking regarding the "normal" way share funds are operated.

    The fund has so far only been operating in a predominately rising market.

    So, ideal for the speculative investor, but others would probably still be sitting on the fence.

    I'm hoping it's going to be a case of those that accepted the higher risk will get the higher reward as I also have applied for more shares. :)

    Rick
     
  2. mikhaila

    mikhaila Member

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    Nothing is impossible it is always a question of time or money or both.

    Reasonably constant Index outperformance is a difficult task. There are very few managers out there who achieve this objective. NI demonstrates remarkable results for the last 4 months or so. The performance fee hardly went above 1% so far though. So, as I see it the 4% performance is just a theoretical figure and 1%-2% is more realistic. Based on the above calculations $500m FUM required achieving 2% performance fee. Sim is absolutely right by saying “it will just take a bit longer to achieve”. The big question is how much longer. FUM was around $60m at the beginning of July. It just hit $70m. It makes current fund inflow about $3.3m a month (which is a great figure as initial expectation was $1m a month as I remember). Now below is a time required to get from $70m to $500m with different inflow figures:

    $430m/FUM inflow per month/12 months = Years required

    $430m/$3.3m/12months = 11 years
    $430m/$5m/12months = 7 years
    $430m/$10m/12months = 3.5 years
    $430m/$15m/12months = 2 years

    I’d like to see NI profit in millions. There are however at least two things required for this to happen in the next 3 years:

    - Index outperformance increases sharply from the current levels to provide much higher performance fee than 1%;
    - FUM inflow increases sharply to about $10m-15m a months;

    M.
     
  3. Nigel Ward

    Nigel Ward Well-Known Member

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    Mikhaila

    You're correct. The comment I'd add though is that the currrent FUM are all sourced from "retail" investors. There's no institutional money in the fund so far... Once the fund has a long enough track record for some of the insto's and super funds, fund of funds etc to start investing some money it will be EASY to make those figures in even one injection! Altho $70m seems like a lot in one sense, it's a mere drop in the ocean compared with the money out there seeking a home :eek:

    I'm optimistic on the prospects, but the comments above about NI being at this stage still a speculative, illiquid investment are true. (but having said that it's a punt I'm taking :D )

    Each to their own risk level!
     
  4. Simon Hampel

    Simon Hampel Founder Staff Member

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    Ironically, one of the (several) things that has worked against NI achieving higher outperformance levels is exactly the market behaviour that fund holders desire - strongly rising market.

    The NavTrade system relies on market volatility for it to work at its best ... yet we really haven't had much in the way of volatility (other than a few short term anomolies in recent months) ... the market has basically gone straight up. Look at a chart of the last 2 years of ASX200 performance, it basically goes straight up with a small backwards step around March/April 2005, before picking back up where it left off to set continually new record highs. There's not much volatility there !

    If the market started bouncing between 4000 and 4500 (not just once down and back again, but continually) with a cycle over several months, I think you'll find the NavTrade system would start to produce much higher outperformance of the index.

    I don't think 10% above the index is unachievable - although I would think it very difficult to do in this strongly rising market.

    Try this scenario as an alternative though:

    The ASX200 was just under 4300 points around July 1st. It's now around 4500 points. Let's say the market trends downwards to around 4000 points by the end of the financial year. That means the overall performance of the ASX200 has been about -7% for the year.

    Say during the course of the year, the market shows quite a bit of volatility, rising to 4500 points as it is now, dropping down to below 4000 points, before rising strongly again by the end of the financial year (to 4000 points). During this period, the NavraInvest system might be able to generate overall net returns of around, let's say, 3%.

    Now, given the market has performed -7%, and the NavraInvest funds have returned +3%, they have successfully outperformed the index by 10%, and earn their 4% management fee. That's not an unreasonable scenario I don't think !?!

    This strongly rising market, sustained for over 2 years now, is quite an anomoly. While I'm happy to enjoy the increases - I don't expect it to last forever.
     
  5. mikhaila

    mikhaila Member

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    I am cautiously optimistic too. I took a punt previously and now trying to decide if to top up a bid or not. ;)

    M.
     
  6. mikhaila

    mikhaila Member

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    I think, if this scenario isn’t unreasonable it is definitely stretched. Why? Simply because I am talking about reasonably constant outperformance of the index (lets say 7 out of 10 years). 10% outperformance 7 out of 10 - to me it is unreasonable assumption. It is just me of course.

    M.
     
  7. Simon Hampel

    Simon Hampel Founder Staff Member

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    Ahh yes, I was talking about a single instance, and I agree that this exact scenario is unlikely to repeat each year.

    I was just trying to show that 10% outperformance isn't necessarily that difficult to achieve in the right circumstances, and a strongly rising market like we have now, is possibly one of the least likely circumstances that it will actually occur.
     
  8. Gameboy

    Gameboy Member

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    To my thinking 4% performance fee seems very achievable. As mentioned earlier consider market conditions have been less than ideal for NI and they’ve still achieved 1% in 3 months. If out performance like this can be achieved in this type of market and they get 1 quarter a year of favourable conditions then things look very positive indeed.

    A happy share holder :)