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Fishy business

Friday, February 29th 2008, 10:37AM 33 Comments

by Philip Macalister

With all the goings-on at Fisher Funds the company is finding that when you reach the heights of being the market darling, it can be a long fall back down to earth. While many of the company’s funds are taking a battering at the hands of the sharemarket, the company is causing its own waves with internal changes. Firstly on the market front, the risks of taking large, concentrated bets on small and mid-sized companies is becoming clear. When a call goes wrong, like Barramundi's investment in ASX-listed Credit Corp then the damage is painful. While investors in this fund must be wondering what to do, so must those holding Kingfish warrants. The last exercise date for the warrants issued with the IPO is looming, and what looked like a handy investment is looking far less attractive now the market (and the fund) have fallen. Then we move to the messy departure of former chief investment officer Warren Couillault. I have a couple of observations here. One, and no doubt this will annoy some, is that every time I have seen Couillault and Carmel Fisher together over the years they never appeared to be close. There is no questioning their professional skills, rather this is an observation about how they worked as a team. Something was missing. Secondly, there is a story circulating that last year Couillault wanted to float the funds management company rather than doing the Marlin global share fund. He may have lost that debate (if ever it was held), but by selling his 27% stake to Fisher I guess he has achieved his exit. Finally, I struggle to believe the company line there was no rift between Fisher and Couillault. Messy splits like this can't be called an amicable divorce.
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Comments from our readers

On 29 February 2008 at 4:14 pm roberto simoni said:

<p><p>If one was being harsh one would see Fisher funds as simply another example of wealth transfer from retail mum and dad investors to a small group of ticket clippers (no different in many ways from Bridgecorp).</p><br />

<p>Fisher Funds rode an equity boom and pocketed enormous performance fees from investors. During a downturn their supposed value has disappeared it seems. What a surprise the downside seems to be worn by the investors rather than Ms Fisher who has pocketed her bounty.</p><br />

<p>Such a divergence of risk is clearly a one-sided asymmetry - the poor investors have all the downside and Ms Fisher has the largesse of the upside only.</p><br />

<p>The Mums and Dads are enticed by agressive advertising (refer recent KiwiSaver adverts) promoting headline large returns.</p><br />

<p>One rumour doing the rounds is that Mr Couillant found religion and has developed a conscience.</p><br />

<p>What is sad is these are real financial losses and ince again mum and dad investors suffer from a wealth transfer at their expense.</p></p>

On 29 February 2008 at 4:53 pm roberto simoni said:
Dear Moderartor

Could you please change my submission - I was a bit hard and want it changed. APologies for hassle.

Please change to

If one was being harsh one would see Fisher funds as simply another example of wealth transfer from retail mum and dad investors to a small group of ticket clippers (no different in many ways from Bridgecorp).

Fisher funds rode an equity boom and pocketed high performance fees from investors. During a downturn their supposed value add has disappeared it seems.
On 29 February 2008 at 7:36 pm Barrington Smythe said:
I think it's extremely harsh comparing Fisher Funds to Bridgecorp!! I don't think Fisher has ever traded on being 'guaranteed' by Lloyds, or 'good financial sense', 'secure', 'safe' or anything else.

These are equity funds we're talking about, so investors will know that they are volatile, and the value can go down as well as up. The current value is a mark to market value - you only lose money if you a) invested at a higher pice than today's price AND b) need to sell.

Over the long term (and investors should ONLY invest in equities for the longer term) they will deliver good returns for both investors and fund managers. 6 months of results are almost irrelevant in equities.

Look back 3 to 5 years and see what returns Fisher has generated for investors, and I think you'll see that they have been somewhat better than those of Bridgecorp.

Smart investors who understand and trust the Fisher aproach will probably be buying at these levels, not selling.

As for Couillault leaving, people's priorities change and they move on. Maybe he just wants to take life a bit easier?
On 29 February 2008 at 8:17 pm Brian Lenehan said:
I do not have sufficient information to comment on Fisher Funds nor is it appropriate to do so.

The nature of equities is they have volatility and any investor has the benefits and risk of equities explained in offer documents.

A comparison with fixed interest debentures is less than helpful.
On 29 February 2008 at 8:29 pm Red Dog The Pirate Guy said:
Alot of greedy inept financial planners placed a substantial amount of money in Bridgecorp on behalf of a huge number of unfortunate suckers.
The planners[I'd call them commission salesmen] got above average commissions.
The suckers who thought they were investing in a company where they would not lose their capital and get a higher rate on interest than in a bank,have found themselves in a spider's web of having their funds advanced to borrowers on a basis which I would call risky in the extreme[reckless would be a better word].
Fisher funds is a different kettle of fish.Here the investment is quite clearly in the sharemarket,which all of the public knows is not a fixed interest investment.
You can lose the shirt off your back.
The markets can fluctuate quite severely,but in the long term the general trend is always upwards.
I have substantial amounts invested with the Fisher Aussie and International funds.
I've sent them a couple of strong emails about Creditcorp and ABC in the Aussie Fund,both which have taken a bath.
The value of my Aussie investment is much less than when I entered.
I think they are good pickers in a Bull market,but their stocks tend to suffer more than the market in general in a Bear.
The International fund is still substantially in cash,yet to be invested.
I am reluctant to pull out from Int at under a dollar,and if the two guys they have appointed to this area cannot pick a few winners with the way the equity markets are at the moment,they should give up and get a job at one of those terrible USA food franchises.
I'm not convinced that Fisher's general policy of buy and hold is the correct one.
I would rather they be more aggressive and pay income tax as a trader.
Look at how much unit holders could have made if they had cashed up when the signs were there to do so.
I will hang in there meantime,but having gone through the late 80's sharemarket,if I can get my capital plus a fixed interest return I might pull the pin.
I suspect I will not be alone.
Optimism turns to conservatism very quickly.
On 1 March 2008 at 8:01 am lambton said:
I was right. Ed will know what I mean. He he
On 1 March 2008 at 10:25 am Anthony Edmonds said:
Just a point for Red Dog, a PIE fund that invests in NZ shares (and certain Australian shares) can now trade as much as it likes without paying capital gains tax. There is no longer any capital gains tax for funds that are PIEs.

Interestingly , an individual can be required to pay tax on capital gains if investing directly.

Furthermore, global equity funds (that are PIEs) don't pay tax on capital gains. Tax is based on the FDR methodology.
On 1 March 2008 at 3:02 pm admin said:
I can't agree with Roberto's opening comments. I think the Fisher investment style was well documented and discussed before the listed trusts, and that the fee structure and incentives were well-disclosed to all investors.

Sure they made big bonuses (all disclosed) when time were good. In those same times investors did very well too.

I have no problem with any of that.

As others have mentioned putting Fisher in the same sentence and Bridgecorp is way out of line and unwarranted.

As for the parting of the ways - there is plenty of other comment agreeing with the proposition that it wasn't a clean cut as is being portrayed.

Sometimes I think corporates should fess up and say what happened and move on. That stops rumour dead in its tracks. The communication of the split hasn't been well handled and people just don't believe the spin.
On 3 March 2008 at 12:52 pm Maurizio Piglia said:
I do agree that the comparison with Bridgecorp is harsh and unwarranted...but the rest of the comments of Roberto (which I am not defending for nationality reasons!) and Red Dog bring us to a very interesting point.

Long only positions in a limited number of small and midsize capitalized companies carry a very great deal of risk.
Fisher Funds strategy was good only on sunshine days, but that would appear evident only to professionals in the business.
They had an interesting story of returns...but i did one of the things that in NZ is rarely done, I compared them to the benchmarks.
If you held an NZX 50 ETF for the same period of time you could have better returns at a substantially lower cost.

Which in the end makes the existence of the manager questionable, if what you get are lower returns plus hefty fees plus increased risks.

Fees are justified if you can have a well managed risk OVER THE ENTIRE CYCLE of bull and bear markets, and if the net of fee returns are above a reasonably selected benchmark.

One thing I have to agree, they disclosed both the fee structure and the Investments strategy, and this is why an accomplished advisor MUST HAVE HAD detected the flaws, and acted accordingly.

I'm sorry Red Dog, about your predicament, but if for the Oz structure you mean the was written on the blackboard. Having a share market fund based on 10 names only, and all of them midsized or small caps. means that when a rainy day comes, and ONLY ONE of your holdings takes a bloodbath, you wipe out 10% of the value of the fund..if it happens to TWO of them..Houston, we have a problem, to quote a famous sentence.

I also notice in the replies above that the common myth of "Hold for the long run" if you are in the sharemarket is perpetuated in a blind and acritical fashion.
I beg to differ Barrington, on the ground that the "buy and hold" approach has been demonstrated statistically and mathematically to be outdated and flawed. The destruction of capital that a bear market can bestow upon ordinary investors is such that the period to recovery might well become what Lord Keynes tought abiut "the long run" such a long run we might all be dead.

There are protections mechanisms that should be used to preserve the capital of the investors and a professional Fund Manager cannot just get away saying that bear markets cannot be forecasted, yes, they cannot be forecasted, but they can be pinpointed early enough to be able to protect your investors capital with simple and accessible hedging techniques.
I repeat, simple and accessible, not rocket science. And you have a fiduciary duty to protect what has been entrusted to your custody above and beyond the disclosure of your approach.

About how to pinpoint bear and bull market with simple trend following techniques, be my guest in reading a pure research paper I wrote the 10th of January, in which a (relatively) simple indicator would have pulled you out, or warned of the NZ Sharemarket entering a bear market phase by 30th of November (7th December, if you wanted a further confirmation).
The same indicator, at that date (10th of January) would have pronounced the Australian market not YET in a bear phase, but forewarned you to monitor closely since ALL major pancontinental indexes are strictly correlated on the downside.
Just go to the underlisted website and download and read "The increasing growl of the Bear" paper.
It's free and no one will trace you to bother you any further.

Acting swiftly to neutralize your portfolio against the sharemarket index drops would have yielded you two results:

1) If they were the good operators that Barrington sustains, their portfolio would have continued to generate a positive "alpha" i.e. returns above the index benchmark, and be immunized against the "beta" i.e. sharemarket index variations. Final result ? small but POSITIVE returns in December, January, February. And, I repeat, THIS IS THE ONLY ACCEPTABLE UNBIASED MEASUREMENT OF HOW GOOD A SHARES FUND MANAGER IS.

2) if they weren't ( and I subscribe to this hypothesis, as they dropped more than the benchmark), they would have limited their losses to the negative "alpha" of their portfolio, but would have avoided the compounding of the losses of the "beta" of the index variations.
Final result, much smaller losses, although still losses.

Said and accepted so, also Roberto harsh attack comes in a different light. The International Fund is still in cash just for a pure accident of luck, having been raised already in a falling market (but when everyone was still saying" oh It's just a correction"...). She says on their websites that major corrections and bear markets CANNOT be I said, not completely true, i do not predict, I am an early trend follower.
saying so is the equivalent to say publicly you manage a Fund with basically flipping a coin on the direction of the market..but as someone siad here, she plays head and tales with the punters money and she plays "Head, I win. Tales You loose."
And this is unfair...but she's definitely not alone in NZ.
On 3 March 2008 at 2:56 pm Maurizio Piglia said:
And beware...the bear market has just arrived. I cannot forecast how long it will last..but past experiences tell us takes time to deploy.

Last time it took from February 2000 to March 2003.

Fasten your seat belts. Or hedge your portfolio.
On 5 March 2008 at 5:58 pm Kimble said:
"saying so is the equivalent to say publicly you manage a Fund with basically flipping a coin on the direction of the market"

Well no. Saying you cannot predict the direction of the market is like not even bothering to flip a coin and just accepting that they will go up eventually. If you had to flip a coin you would be deciding whether to be long or short/neutral.

Are you able to short the NZ market ETF?
On 5 March 2008 at 6:06 pm Kimble said:
I should add that picking the direction of the market is something that SHOULDN'T work, but "momentum" investing has appeared to have be a solid strategy for a too many years to dismiss.
On 6 March 2008 at 6:28 pm Red Dog The pirate Guy said:
Hi Maurizio,

I am not in Barramundi but the Australian Growth Fund.
The 2007 annual report had a portfolio of 22 companies plus 16.49% in cash.
ABC was 4.16% and Creditcorp 10.90%.
This fund started on 5 August 2005 at $1.4966 and today is $1.7901.
That is equivalent to a fixed interest return if you invested at the start.
Otherwise after 942 days the investment return can only be described as a disaster.
A glance at the chart on the website will confirm this.
I entered the fund in september 2006 at $1.96 and made futher purchases with my last being in May 2007 at $2.44.
I have not as yet talked to a tax consultant,however if as is being suggested by anthony Edmonds there is no income tax to be paid by the fund if it acts as a dealer,that is all the more reason to show some entrepeneurial skills.
The fund topped out at $2.70.
I believe that an astute fund manager should try to focus on timing rather than long term holds.
There is no point being a fund manager if you do not have the talent to be able to add more value than the man in the street.
I would guess that the parting of the ways was because of the poor performance of the portfolios,and perhaps debate over the philosophy in regard to how the funds are operated.
If I extend Admin's comments,the investors in any Fisher Funds Fund should not hold for the long term,but should have sold out of the fund when it was on a high.
This is the only way in which a good return could have been made from investing.
But this is contrary to the fund philosophy.
Maurizio has quite correctly ignored the hype and benchmarked the Fisher returns.
As I suspected,they are not flattering.
On 6 March 2008 at 8:21 pm Red Dog The pirate Guy said:
Maurizo I have read your website.
I agree with everything you say in your post on this blog.
My neighbour's son has been working in futures in London for the past ten years,very successfully it seems,and is coming back to Auckland to start up his own business.
I have told Fisher funds that this is the type of person they need to employ.
They need some lateral thinking within their staff.
If they have met with the management of 150 Aussie companies,and have managed to produce the dismal results which this fund has produced so far,they need to desperately rethink their stragegy.
I have before me a portfolio with a number of ING products.
The PPS Australian Equities Fund had a unit price of $1.9537 as at 30 june 2007.
The unit price today is $1.7794.
That is only a 9% drop in value.
The Fisher Aussie fund at 30 June 2007 had a unit price of $2.5469.
The unit price today is $1.7901.
That is a drop in value of 30%.
The prosecution rests.
It can be compared to letting the bully beat you up with no defence being mounted.
You are absolutely correct that the International Fund is where it is only because the time at which it commenced.
I know a person who nearly finished a PHD in maths before deciding to return to the family farm.
He was involved in the sharemarket during the 1980's and through computer modelling quit 100% of his equities in December 2006 right at the high.
This is the type of thinking needed at Fisher Funds.
I predict that if the Fisher Portfolios manage to recover,there will be a mass exodus of client base due to lack of confidence.
There have been many people in NZ since the intruduction of Rogernomics who have sold an image.
It has not always been justified.
On 6 March 2008 at 8:33 pm Red Dog The pirate Guy said:
TEll Me Maurizo,would you stay in Their International Fund or bail out with a small loss while you can,and look for a more enlightened approach to funds management ?
On 6 March 2008 at 10:39 pm Red Dog The pirate Guy said:
December 2006 should read 1986.
Which reminds me of my own experiences in that era,as with much of the NZ public.
Fortunately I subscribed to the A letter,and I have kept their issue of 15 May 1987 which said ''Sell all NZ Shares''."We are now in a Bear Market which may last Years."
So I immediately phoned Forsyth Barr to sell all my shares.
They were astonished.
I specifically recall telling them to sell my Wilson Neill shares.
''Oh No'' they said---"They are a buy,not a sell''.
Look what happened to that company !
On 6 March 2008 at 11:21 pm Red Dog The pirate Guy said:
Unfortunately,Fisher Funds to date have proven no more successful for me than dealing with a sharebroker.
As I said to Fisher Funds recently,it seems odd that I know a very large number of people who have made substantial profits from all classes of land and buildings,yet I am struggling to think of anyone who has made substantial returns from equities.
They tell me there are hundreds of them.
They must travel in different circles to me.
Just looking at three portfolios this evening,which include two trusteeships for nephews and nieces.
The covering letter from the planner notes ''It was very unfortunate that your portfolios were caught up in the Bridgecorp receivership."
Inside,of course I find portfolios with the same template[where does the planners' individual skill come in,despite him having a university degree ?]and his car is too flash for my liking[probably leased though].
I also note MFS Pacific Finance.
Not bad--only two dodgy finance companies when I am used to seeing a minimum of three and maximum of six.
18% of the portfolio is in an International Equities Fund which has a unit price which is less than what it was when the funds were invested in 1999.
Why would you invest somewhere for nine years for zero return ?
Well for the investor I mean,not the ''planner or the fund manager ''.
Interesting how the clients didn't realise that until I showed them how you could look up historical unit prices on the internet.
A fool and his money are soon parted.
We should have bought a couple of cribs in 1999 they said.
Yes I said,but remember that book we all received in the mail in 1998 called ''The Real Story'' edited by Mary Holm,with Don Brash, Tony Alexander,Tore Hayward and Frank Pearson''.
The book said that NZers have wrongly gone on assuming that by borrowing as much as possible,and investing in physical assets,they can keep making inflation-driven capital gains indefinitely.''
And Don Brash said in the foreward''In reality,the inflation-driven gains of the past have come to an end''.
"AAH yes they said".that's why we didn't buy some houses in 1998 and ten years later sell them for four times as much.
''We thought these experts could provide wise advice for NZers''
Maybe that is why National didn't win the last election.
''We read page 31 where it said that NZers tend to underinvest in shares and overinvest in property''
''So we followed the advice of our family lawyer and went to a financial planner.''
''It has really been a waste of time,hasn't it''
''We are going to take all our funds out and put them in a bank''
I point out that as trustees for not even their children but nephews and nieces,they have a responsibility to preserve capital,and I advise them to get the funds out of Hanover Finance ASAP.
''But where should we go for financial advice?'' they say
That is a real tricky question,I reply.
''We heard Gareth Morgan on the radio and what he said made sense,they said''
Well,I said,I've never met of anyone in the investment industry I have confidence in,so if that is an idea,maybe you should pursue it.
On 6 March 2008 at 11:25 pm Red Dog The pirate Guy said:
Note,the Portfolios above are not through Vestar,which helps explain the low number of non-financial finance companies.
On 7 March 2008 at 12:15 am Peanut H said:
American Multi Billionaire Warren Buffett made this point in the 1997 Berkshire Hathaway annual report:

“A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices?

These questions, of course, answer themselves. But now for the final exam:

If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the “hamburgers” they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”

This approach to investing has made Warren Buffett one of the three richest people in the world. Maurizio and Red Dog would have you sell quality assets when they drop by 30% in value, me I'll be buying. I will also be buying some more if they fall by another 30%.
On 7 March 2008 at 9:41 am Red Dog The pirate Guy said:
Peanut H makes no specific reference to the topic in this thread,which is Fisher Funds.
Warren Buffett obviously has some exceptional skills which have led him to where he is today.
I would invite Peanut H to name any financial planners,sharebrokers or fund managers in New Zealand who have the ability to provide advice to investors in a similar[but acceptingly less successful fashion]
More directly,does Peanut H have confidence that Fisher Funds can provide equity returns for investors which exceed benchmarks as noted by Maurizio?
In regard to Warren Buffett's 1997 comment,over the long term the price of beef always goes up--inflation ensures this--there are peaks and troughs depending on world supply and demand,normally due to drought/feed shortages.
As for the price of cars,the model I am driving has a new price only 6% more than 20 years ago.
The price of cars of course relates to changes in govt policy.
Many NZers expect to be net savers during the next five years.
The question is who to trust for investment advice.
Peanut H does not address this issue.
There are many other situations where capital portfolios are invested,with no expected increment to that capital.
As I noted,when I see equity fund investments whose unit price is the same as nine years ago,while there are fixed interest investments which have gone belly up,there tends to be low confidence in investment advisors.
Unlike you Peanut H,not everyone is an Einstein completely capable of being a successful entrepeneur.
In the 1980's as I discovered,investment advisors did not follow the much maligned Rob Muldoon's advice and advise clients to invest in companies that actually did something.
Rather,they gave advice to invest in paper-shufflers,and we know too well what the result of that was.
I know sharebrokers who were caught with the folly of their own advice,and had to sell major assets and down trade houses.
These events ensured many Nzers never re-entered the equities market.
At present,we have a massive lack of confidence in those who provide investment advice.
Who can we trust,I am often asked.
The problem is,I do not know the answer to that question.
It is logical if you can predict market trends,to sell before a downturn in value,and the buy back when the dust has settled.
Peanut H suggests that holding is the only solution.
I prefer the expertise of Maurizo.
And as for quality assets,Is Peanut H confirming for me that Fisher Funds' portfolios are quality assets ?
On 7 March 2008 at 5:16 pm Kimble said:
Red Dog, so when the Fisher Aussie growth fund had added value DOUBLE that of the benchmark, does that mean they were the best manager in the world? Or were they just taken large risks?

In this country there seems to be a fundamental misunderstanding of RISK.

People will nod their heads and smile when asked if the understand what risk means (indeed these people will probably read this and think I am not talking about them).

Look, if you think you can find some investment that will always make a great huge profit, or a manager that always makes the right calls, or a debt security that pays above the risk free rate without any risk of default, then good luck to you.

But I would make more money betting that you can't.
On 7 March 2008 at 8:53 pm Red Dog The Pirate Guy said:

The fact that Fisher Funds were able to add value double that of the benchmark shows their ability to pick stocks which do very well in a Bull market.
I do not believe that they considered themselves to be taking large risks,as is evidenced by their stated investigation and visits to 150 companies,and their stated intention to buy and hold.
Unfortunately I believe that the risks they have taken in not having a policy of moving substantially into cash when the signs are there to the experts to do so, means that the risks they have taken are too great for the investing public they have attracted as clientele.
That is probably why a well known financial commentator said to me that he would invest a maximum of 5% of a portfolio with them.
In fact the reality is that through their portfolio selection and management policy they were taking large risks.
This is evidenced by the fact that the Aussie fund price is one third off its peak.
I believe that I have underestimated the risk of involvement with these people,and I am far from alone.
It is a considerable time since I have seen the local sharebrokers advising their clients to exit Kingfish and Barramundi from their portflios.
As our Italian friend has demonstrated,there are safer ways of investing which will produce better returns.
I am not looking for investments which make a huge profit.
An obvious example of investment funds which have been very successful and consistently shine in investment portflios are the OMIP Funds.
For them,the principle of locking a portion away and playing with the rest has produced consistently positive results.
I do not expect a fund manager to make the right call all of the time---But it would be helpful when there are the signs for a great crisis.
In NZ,today's golden boy can be tommorow's hack.
I believe that the present world financial crisis will linger much longer and be considerably worse in its effects than that of the 80"s.
That means lateral thinking will be necessary to ride through it and to emerge in the best position for the future.
I am pleased that Fisher Funds finally removed their advertisement for the Aussie Fund from the front of their website where it had been since august 2007[as it showcased historical returns no longer relevant],and took Creditcorp off the front page as one of their companies.
Shortly before this happened,I had drawn their attention to both points.
I await their next newsletter with keen interest.
Indeed I will be intrigued to see the composition of the portfolio when the March 2008 report is released.
On 8 March 2008 at 10:22 pm Peanut H said:
Red Dog chastised me for not mentioning Fisher Funds, here is my mention. Warren Couillault leaving, who cares? I don't, Fisher Funds is not just one or two people, it is a disciplined investment approach which will over time reward the investors who are prepared to stick with Fisher Funds. If you are invested in Fisher Funds, accept the inevitable ride of volatility, if you don't like the ride get off at the next stop, accept your loss and start writing to blog sites moaning about your stupid decision. Red Dog you said it "I’ve never met of anyone in the investment industry I have confidence in", the answers simple for you, do it of for yourself.
On 9 March 2008 at 12:39 pm Red Dog The Pirate Guy said:
Peanut H
'You are absolutely correct.To do it yourself is the only solution for investors,as was commented to me yesterday by someone who had received an apologetic letter from their sharebroker in regard to the sharebroker's advice to invest in MacQuarie Fortress notes.
The continuing flight of NZers from financial planners bears witness to your words of wisdom.
On 10 March 2008 at 10:15 am Kimble said:
Peanut H, I would disagree with you about the impact on Fishers of Warren leaving. Fishers is a relatively concentrated portfolio with a lot of active risk. They aren't "asset class" investors, they are active stock pickers. Which means they live or die by the few stocks they pick.

In the short run Warren leaving doesnt make much difference (the portfolio may not change much in the weeks and months ahead), but the departure should prompt people to keep a closer eye on their investments. This doesnt mean they should sell out straight away, only that they should keep a closer eye on things.

If a new manager comes in and sells the entire portfolio to buy a different collection of stocks, treat the question of keeping your money in the fund as you would investing in a brand new fund.

A new manager may be just as good (or even better than) Warren, so you may not want to sell just in case. And a panicy sell off wouldnt make much sense, as you would be selling the same companies you were happy to hold before simply because the person that bought them has left.
On 10 March 2008 at 11:55 am Maurizio Piglia said:
I am, somehow, surprised but happy about the participation to this debate. A good debate is always good to the overall spread of knowledge.

Red Dog, about telling you what to do with the International Equity Fund...well, actually, the Fund is not in cash. So there are no elements to judge it. By accident of fate, now they have the possibility to gradually commit the Fund to buying quality shares in International markets at low and descending price, i.e. again by accident of fate, they should be able to buy low.Maybe is not a Fund you should exit, as you will be left with the problem of where to invest the money, and as I don't want to take advantage of a blog, for etiquette, to peddle my products, I will advise to stay the course on the International.
Just remember Red, I do not PREDICT the trend, I spot it after it is already there, but when there is still time to haul the boat dry...before the big storm.

Kimble, as an institutional investor, and as a hedge fund manager, yes, you can short the NZ market ETF, as your prime broker will lend you, at a rate, the securities you want to short, that are held long in someone else's portfolio who intends to keep them.
Kimble, again, about the flipping of a coin, you evidently did not take the pain to read my paper on the website link, otherwise that comment surprises me. I have clearly published i DO NOT flip a coin, I do run my numbers. Following them you would have exited the NZ sharemarket at the 7th of December. You can make your calculations.
It seems to me, as reflected by your statements, that you belong to the "buy and hold" crowd. It has some merit, only that, buying and holding forever, you'll be better off buying indexes and avoiding the hassle to have to select a manager that may ( or may the majority of cases!) beat that index. I just contend that that approach has the problem of riding the downside, i.e. being subject to what technically is called draw downs of the equity line of your investments. If you are happy with the draw downs because you have the serenity that "in the long run" you'll come out fine, well, you're right, in the past 94 years ( a real long term) shares buy and hold yielded just above 6% against a just above 4% of bonds. These are the real buy and hold results.
All the investments I consider, were able to achieve averages of 10% returns for the past 15 years with a volatility well below half the one of sharemarkets and have no correlations with shares and bond markets, i.e. they keep delivering those returns regardless of those makets directions.
To be precise all the numbers I am quoting regard U.S. $ returns. The Kiwi has the great advantage that if you hedge your currency make better returns and sleep well.So, as you can see, if Red had choosen any of my type of investments for the past...15 years, a reasonably long term, he would have a pretty rich , lazy and tranquil retirement...that extra return obtained mainly avoiding draw downs would have swelled his nest egg a lot.

Peanut H, I will avoid tackling the Oracle of Omaha. HIS results speak by themselves. Just remember that good ole Warren knows how and when to sell...he is not a blind faith holder forevever. In this way he always has capital to put back at work when prices drop. He's a shrewd buyer...but he's a good seller. He manages his equity line in an admirable way.Red Dog has already replied you partially, we are both glad you still have capital to average down after a 30% drop, and more to still buy after another 30% , when we whimpers would have been out.
But just think about the poor fellow that put , say 40% of his savings in the Fund that Red mentioned, and now is contemplating having had a third of them wiped out, and having to wait a 60% upside before getting where he was...his long term to be well off again becomes such that he may contemplate dying before...and after having had a miserable retirement.
Peanut h, when I still was a young lion heading a Bank trading desk, we were used to say that dollar average down was the refuge of losers...or extremely rich persons. I insist, look into the telescope, i.e. read my paper, before deciding to burn me at stake since I am against conventional wisdom. Galileo ended up being right...and oh, he WAS against conventional wisdom.
I agree strongly with Red Dog...lateral thinking may be a required quality for managing other people's money. And a strong sense of what your fiduciary duties, and not only what is written in prospectuses and all the disclaimers, are.
On 10 March 2008 at 2:36 pm Maurizio Piglia said:
P.S. Red, thinking twice, about the International. Stay the course, since they will be buying on the downside, but since they do it quite out a good bit of luck....have an exit plan, down the road, at cumulated profit, maybe with a trailing stop technique (difficult, with a monthly NAV...but not impossible mate!)
On 13 March 2008 at 9:51 am Kimble said:
"Kimble, again, about the flipping of a coin, you evidently did not take the pain to read my paper on the website link, otherwise that comment surprises me."

My only point was that flipping a coin helps you decide between two different options. A mandate requiring that the manager stay fully-invested, maintain a benchmark focus and invest long only does not need to make any decisions regarding the direction of the market.
On 13 March 2008 at 10:56 am Maurizio Piglia said:
Now is more clear Kimble, Thanks.

It is true that a mandate so construed is something that allows you only to pick your portfolio, and fasten your seat belts.
Beside the fact that such a mandate is questionable from a conceptual point of view...then your measure of how good and bad the manager is becomes the benchmark...the index against which you pit yourself against.

There are indexes and subsets of indexes that Fisher could be compared to, they didn't do that in their ads, they just gave you naked, sexy returns.
But they were under the common usable and published benchmarks returns on the way up and lost more than the common published used benchmarks on the way down.
Nevertheless, they were the darlings of the market, subperforming in a fierce bull market that lasted from March 2003 to November 2006 (I am using my indicators for a bull/bear change Kimble).

That beats me. And beats me even the fact that there can exist mandates that constrain you such that you fail the primary fiduciary duty to protect the capital that you had entrusted to yourself.

Again, I favour a quantitative, emotionless, less expensive approach to stockpicking; when someone tells me he travelled all over Australia to meet the management of 150 companies, I just see unnecessary expenses. Meeting the management..I am a very bad judge of people, I will never detect a lie, the manager can get run over by a bus tomorrow...I will favour such an approach, a strategy you can denominate "momentum" :

*Current Price / 52 Week High >= .80
(This make sure the stocks are trading within 20% of their 52 week highs. In both bull and bear markets – this is a great way of finding strength).

*PEG Ratio
On 13 March 2008 at 11:06 am Maurizio Piglia said:
ooops cut in bad!

*PEG Ratio
On 13 March 2008 at 11:08 am Maurizio Piglia said:
It's not my day...some symbols are rejected, sorry

*PEG Ratio minor or equal to 1
(This makes sure the investor isn’t overpaying for future growth).

*Price to Sales Ratio minor/equal 3

* % Change in Price over 12 Weeks – Top # 7
(In other words, after all of the other items have been met, we are narrowing the list down to the top 7 with the best % price change over the last 12 weeks).

This is a simple strategy that rebalanced each 4 weeks has beaten the S&P 500 by far for the past 6 years!!

And you don't need to meet anybody, good computer power and good databases, that's all....and a good number cruncher. And this works in bull and bear markets too! i.e. you can stay long the portfolio...and you'll kill the index all the same! (meaning you loose far less than the index losses, and you make far more than index gains.)

There IS another way Kimble, there is...believe me.
On 19 March 2008 at 12:53 am Red Dog The pirate Guy said:
The Fisher Aussie Fund is now at $1.6233 compared to $1.4966 on 2 August 2005.
The March newsletter I received in today's mail had the 29 Feb 2008 price at $1.9213.
The April newsletter will be very interesting reading.
Contrary to right wing theory,Rob Muldoon hadn't completely lost his marbles when he advocated compounding fixed interest as an investment.
Peanut H needs to remember that most of NZ,unlike him,do not have large wads of hoarded cash with which to chuck into equities at various times when the market is on the way down.
The average Joe Public tends to be boots and all invested when a downturn comes,as either their financial planner has gotten all their funds under his care,or there is an interesting and heavily borrowed exposure to the residential property market.
The same happened in the 87 crash,and because the brokers had put everyone into papershufflers,there was nothing left.
A guy from MoneyManagers wrote to the local paper and stated that those who were invested in NZ shares lost bigtime after 87,but those invested offshore recovered their position.
I don't know what portfolios he was looking at, in the 80's,as in the many portfolios I saw the only overseas shares the average punter[as opposed to the long term equity investor] had in his portfolio were papershufflers linked to the likes of Judge or Brierley.
If Joe public at present had hoards of uninvested capital,we would not be seeing the start of a period of mortgagee property sales.
Maurizo,I will take your advice on board in regard to the Int Fund.
I consider it is well worth giving yourself a bit of publicity on the blog.
It is about time the wheat was separated from most of the chaff that comprises the financial planning industry in this country.
We need people who can see trends happening and take action in the best interest of their clients,not the invest and hold and go down with the ship mentality.
There are scores of ticketclippers doing that in NZ.
You are quite correct in your advice to buy index funds rather than give capital to a clipper.
If I can get out of this mess,I will make contact.
I can tell you there are hundreds of people in the area I live in who are looking for someone who can think laterally.
If someone travels around Aussie meeting the managers of 150 companies
all they will see in most cases is an image that is presented to them.
And as we have seen with the AllBlacks,image means nothing when the going gets tough.
I had two sharebrokers in to see me recently.
Both wore suits,one with a tie,and the other having the current ''trendy'' appearance of no tie.
I give all my business to the guy with the tie,not the trendy dude.
I note in the latest newsletter that the 5 year return to 28 Feb 2008 for the NZ Growth Fund is 12.5%,which is below their figure for the NZ50G of 13.7%.
The Aussie Fund has a two year return of 2.55% to 28 Feb 2008.
Their figure for the ASX300 is 12.9% for the same period.
I think marmite sandwiches are in order for Carmel and the team.
On 29 April 2008 at 10:40 pm Red Dog The pirate Guy said:
Roberto Simoni's opening gambit on this thread,[apart from the unfortunate comparison with Bridgecorp,which will turn out to be a 20% return of capital for the average investor,]is absolutely correct.
He correctly states that what has been achieved is a transfer of wealth from retail investors to Carmel's bank account.
How else do you explain the acquisition of an $8 million dollar house.
The only reason that there has not been a mass exodus of investors so far is that most would lose vast sums of capital in doing so.
She is no longer a guru, and will never be so again,but has made enough money to never work again.
The homework in Australia in particular,has not been done properly.
Commenting is closed



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