Who has $1M in a single fund?

A quick Poll.

Who has invested a large sum in a single managed fund. Navra or otherwise?

Alright - how do I start a poll?

 

Why do you want to know?

 

I guess because I am thinking of doing it myself and am looking for some reassurance ...

Research madly and then put my money where my mouth is.

Sure I have done OK over the years but have now come to see why some people use the term diworsification.

I actually wasn't after people naming themselves - was trying to do an anonymous poll but got stuck.

No hidden agendas on my part...

 

I guess the key question, which I suspect you're driving at, is "who has most or all of their managed funds with one fund manager?"

The point being to what extent is your managed funds allocation exposed to "manager risk" i.e. the risk that the manager underperforms.

If $1m were to be just a small proportion of your managed funds then putting that much into one manager wouldn't matter.

I think spreading your managed funds around a bit - but not too much - is prudent. To some extent you should be using different managers to access different asset classes and sub-classes.

E.g. one manager may do large cap Aussie companies, another may do small companies, another may expose you to australian and international property etc etc.

To answer the question then, I have my funds spread amongst several managers. Whilst there is a small degree of overlap between their holdings, and indeed some overlap with my direct share holdings, the reason is more to access the underlying assets they invest in than to merely spread my bets between two managers who play in the same asset sandpit

My hope is that I've picked managers who will always be in the top finishers in their field...

Cheers
N

 

Some say "Don't put all your eggs in one basked".

My thinking is ... "fine to put all your eggs in one basket ... just watch the basket !"

We only stick to one MF. Primary purpose is income. That is the Navra wholesale fund. So far so good. It has delievered well above the 10% we rely on for shortfall of IP interest.

We know how it works and feel comfortable with the management of the company running it. We rely on IP's for capital growth.

When I find a comparable fund that :

1) Pays dividends quarterly.
2) Has a track record for delivering at least a 10% p.a in income
3) Is willing to run a session explaining how the fund works as well as strategies (ie - selection criteria of stocks ).
4) Can match the small peformance fee NI now charges
5) Has no penalty for exiting early

I will perhaps consider diversifying. No doubt there are funds that are comparable. I have not however seen one yet. Happy to hear others' comments.

 

Simon,

Just one fund (I think you all know which one it is) and almost the magic $1M invested...

So far I have no issue with that approach. In effect that one fund is actually invested across 20 odd blue chip stocks as well as cash. I'm happy with the risk profile and manage my margin loan LVR so that I've got a correction buffer before a margin call.

Its all about managing within your own risk tolerance and building an appropriate buffer somehow for the investment vehicle you've chosen.

Cheers,
Michael.

 

I do, but not for long.

 

gad- did you find a better MF ?

 

I should state that I am a NavraInvest client......... these days.

30% Dep & costs from fund to pay for next IP. (Low doc loan on balance).

50% of Navra funds will then be spread over 4 high growth funds with the distributions reinvested (recommended by my NavraInvest Financial planner so won't name those funds, though I don't suppose it matters, there are so many out there).
50% of the Navra fund distributions will be reinvested & the other 50% taken as cash to help with holding costs ect.

I have a lot going on at the moment & it's very exciting, unlike (investing) most of the time.

Take care.

 

The amount you invest in 1 fund will ultimately depend on your risk profile. Investing in NI (which i have - no where near $1M) and then investing in other Aussie blue chip managed funds does not really spread your risk, except it spreads the management of your risk across the same sector.

If you spread across int property & int shares then at least you will be subject to fluctuations across the board.

I have plenty of clients in the NI boat and all have done exceptionally well over the past couple of years. Being the conservative accountant then i suggest a spread

 

It's not about the $$ but the %%

One further issue is the liquidity of your investment, I like the idea of a lock in date for a fund, eg: you can phone before 5pm and lock in that date for a withdrawal, this is from someone who has been burnt by this particular issue. Though I accept in the long run these things will balance out it doesn't make you feel better when you roll the dice once and lose.

 

Yeah I appreciate that $1M is meaningless as a figure. I should have asked about people having 100% in a single fund. A large figure though as opposed to someone starting out who hasn't enough to diversify...

I guess $1M is a figure I am looking at placing later this year so I posted that without thinking.

At this stage I will invest in $100K amounts with no second thoughts but feel $1M is a lot to risk.

Hopefully it won't be too long until my $1M investments are more frequent and I am considering placing $10M ...

Thanks for the dicussions and the PM's. All are appreciated.

keep them coming!

 

Hi All

Well I have to put up my hand and confess that I have (within our structure) Multi Millions in MF's

I have commented previously on my approach and why but I will repeat myself and try not to contradict what I have previously mentioned .

I invest in MF's for cash flow.

Its all fine and good thinking that you are going to live of the rents but at the end of the day the income tends to be variable with lots of expenses. The thing property does provide is a relatively inflation proof investment vehicle. So by owning property (very low lvr) and then redrawing and utilising the equity to generate income I feel that I have all bases covered.

Specificly we have LOC's (or in one case bank bills) on all properties which is are then partially drawn (the ones with the best rate) and used in MF's. The bank bill is a fixed loan over 3/5 years reviewable by me as to whether to let it run for a further 2 years.

We then arrange a further margin loan, staying within the 50%lvr, to be fully invested to the full value of the property (or there abouts) but still having a substantial buffer in the form of undrawn LOC.

I have a friend who has 8 townhouses purchased for $800k (pre boom) loan of $600k current value $2.8 mil. For about 2 years now I have been try to encourage him to do something with all that equity.

With my concept he could take his LVR up to 80% giving him $1.64 mil to invest. But rather than use the whole LOC he takes 800k for the LOC and then a further margin loan of 800k arriving at $1.6mil invested with 800k remaining in the LOC for emergency use. The investment would have earned him 7% net before tax over the last 2 years using NI as the vehicle giving him an additional income of $114k. Even at a net return of 5% ( my expected rate) it would still have been $82k.

The post that I previously used this example

http://www.invested.com.au/7/navra-no-longer-income-fund-10214/index7.html#post23132

So be it that a million dollars sounds a lot, as all ready mentioned, its all relative.

Obviously I started my strategy when the stock market was fairly low and certainly was in no way over heated. This is very different to where it is now. This does not mean that the strategy does not work now but just that more caution is required.

My exit strategy is to liquidate all my MF's holdings when the market gets really overheated, which I see as happening within the next 18 months.

In some ways this exit strategy will be hard as it will mean liquidating my holdings when everything is going gang busters. The bottom line is that although the income is good I don't want to risk my capital.

Cheers

 

Given that the Navra investing philosophy works well in a volatile market does that still mean you need to sell out of an overheated market? Is it worth considering leaving some of your millions in it to ride that voltility a bit further?

Genuinely interested in your reply as I am looking at placing my $1M towardsthe end of 07 which may be the worst time according to your concept of where the market is now and then.

Thanks for your post - I find this stuff quite inspiring.

 

G'day Simon. You still have to determine what you are trying to achieve with your investments.

We are playing with the same amount as you will be and we have half in the Navra fund and half in direct shares.

The fund is purely for the income, the shares are for growth, and the bonus income that comes with most of them.

It's what fits with what we are trying to achieve at the moment.

If we hadn't come across the fund we would be fully invested in direct shares but probably more skewed to good dividend payers.

PS. Don't let the dollar value of your investments get to you. $1 million can be a lot in some circumstances or not much in the big scheme of things. To me a mil in shares sounds a lot but a mil in property doesn't sound so huge.

 

Simon,

I'm wondering the same thing a bit. By tracking the funds performance over the last 18 months its clear it obviously does lose value when the market goes backwards. However, if this rebounds to previous levels then the fund does outperform. So the question becomes: "Is this a collapse with no short to medium sign of recovery, or is it just volatility whereby it will recover?" The answer to that question would dictate your investment strategy with this vehicle.

I've just bought back in at a stretched margin to 60% LVR and am happy with that decision. Since buying back in I'm already up $20K in unit price growth when I add back the distribution.

NI should still pay a distirbuted income regardless of the underlying unit price or "growth" so as an income vehicle its a good option. If you're willing to ride out any correction over the long term then that's a good thing. However, if you think you're smarter than the masses and can spot a real peak then by all means bail. I'm not sure I'm that smart so might just ride this beastie for all its worth...

Cheers,
Michael.

 

Thanks Michael,

Given that I am investing for the long term - 20 years! I should leave it to enjoy the coming volatility as long as I don't get a margin call. But as I am looking at a 50% LVR this should be manageable.

Someone also quite rightly pointed out that through Navra I will be investing in a spread of blue chip shares not just the one. So it is diversifying to an extent. Just a single management style.

We are building a new PPOR then I will be drawing on the equity and doubling it up via LE so I will be able to manage the LVR well.

I love it when a plan starts to come together ...

 

I know the feeling ... it's great isn't it ?

 

You guys are all great inspiration. My current stock portfolio is about 55k with 35% margin loan. The other day my wife went out on a limb and said, 'I know you want to invest more in shares, how does $10k sound?' I could easily bump the portfolio over $100k and still keep the lvr reasonable, but hey, she's trying.

I can't wait until the day when she says, 'money's tight this month, you can only invest $1M.'

MMMMMMMMMM. Drool.

BR